<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 1998
REGISTRATION NO. 333-38853
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TOM'S FOODS INC.
(Exact name of registrant as specified in its charter)
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<TABLE>
<C> <C> <C>
DELAWARE 2096 58-1516963
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
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900 8TH STREET
COLUMBUS, GEORGIA 31902
(706) 323-2721
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------
ROLLAND G. DIVIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TOM'S FOODS INC.
900 8TH STREET
COLUMBUS, GEORGIA 31902
(706) 323-2721
(Name, address, including area code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
Bernard S. Kramer, Esq.
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the Exchange Offer described herein.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS A COMPLIANCE
WITH GENERAL INSTRUCTION G, CHECK THIS BOX. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION ACTING PURSUANT
TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION
FEBRUARY 9, 1998
TOM'S LOGO TOM'S FOODS INC.
OFFER TO EXCHANGE UP TO $60,000,000 AGGREGATE PRINCIPAL AMOUNT OF ITS 10 1/2%
SENIOR SECURED NOTES DUE NOVEMBER 1, 2004.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON MARCH 17,
1998, UNLESS EXTENDED.
------------------------
Tom's Foods Inc. ("Tom's Foods" or the "Company") hereby offers, upon the
terms and conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange up to
$60.0 million aggregate principal amount of 10 1/2% Senior Secured Notes due
2004 of the Company (the "Exchange Notes") for any and all of the issued and
outstanding 10 1/2% Senior Secured Notes due 2004 of the Company (the "Old
Notes," and together with the Exchange Notes, the "Notes") from the holders
thereof. As of the date of this Prospectus, there is $60.0 million aggregate
principal amount of the Old Notes outstanding. On or after January 1, 1999 and
conditioned upon the Company having reached a certain Consolidated Fixed Charge
Coverage Ratio (as defined), up to an additional $10.0 million aggregate
principal amount of Exchange Notes may be issued in exchange for the Class A
Preferred Stock (as defined). See "Description of Capital Stock -- Preferred
Stock".
The terms of the Exchange Notes are identical in all material respects to
the Old Notes, except that the Exchange Notes have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and therefore will
not bear legends restricting their transfer and will not contain provisions
providing for payment of liquidated damages under certain circumstances relating
to the Registration Rights Agreement (as defined herein), which provisions will
terminate as to all of the Notes upon the consummation of the Exchange Offer.
Interest on the Exchange Notes will accrue from the date of original issuance
and will be payable commencing on May 1, 1998 and thereafter semi-annually in
arrears on each November 1 and May 1. The Exchange Notes will mature on November
1, 2004. Except as described below, the Company may not redeem the Notes prior
to November 1, 2001. On or after such date, the Company may redeem the Exchange
Notes, in whole or in part, at the redemption prices set forth herein, together
with accrued and unpaid interest, if any, to the date of redemption. Upon
certain Public Equity Offerings (as defined) on or prior to November 1, 2000,
the Company may redeem up to 30.0% of the Exchange Notes then outstanding at a
price equal to 110.5% of the principal amount thereof, together with accrued and
unpaid interest thereon; provided, that after giving effect to such redemption
at least $45.0 million principal amount of Exchange Notes remain outstanding.
Upon the occurrence of a Change of Control (as defined), each holder of an
Exchange Note will have the right to require the Company to make an offer to
purchase all or a portion of such holder's Exchange Notes at a price equal to
101.0% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of purchase. In addition, under certain
circumstances the Company will be obligated to offer to purchase the Exchange
Notes at 100.0% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase with the net proceeds from certain
asset sales. See "Description of the Notes."
The Exchange Notes will be senior obligations of the Company and will rank
pari passu with any existing or future indebtedness of the Company other than
any indebtedness that is expressly subordinated to the Exchange Notes. The
Exchange Notes, including up to $10.0 million of Exchange Notes which may be
issued in exchange for the Class A Preferred Stock, will be secured by a first
priority lien on and security interest in the assets and properties owned by the
Company excluding its receivables (at September 6, 1997, $18.9 million),
inventory (at September 6, 1997, $9.6 million) (and certain assets and rights
relating thereto), certain funds (at September 6, 1997, $1.4 million) held in
escrow for the benefit of the holders of the Industrial Development Revenue
Bonds (as defined), the Company's real property, buildings, improvements and
fixtures located at its plant in Knox County, Tennessee (at September 6, 1997,
$2.8 million) the Company's property, plant and equipment located at its plant
in Taylor County, Florida (at September 6, 1997, $4.7 million) and certain other
parcels of real property (at September 6, 1997, approximately $300,000), (such
excluded collateral, collectively, the "Excluded Collateral"). As of September
6, 1997, the assets and properties of the Company, other than the Excluded
Collateral (which as of September 6, 1997 constituted 27.3% of the total assets
and properties of the Company), had a net book value of $100.3 million (the
"Collateral"). The Indenture (as defined) permits the Company to incur
additional indebtedness, including indebtedness under the Working Capital
Facility (as defined), subject to certain limitations. As of September 6, 1997,
as adjusted to give effect to the sale of the Old Notes on October 14, 1997 (the
"Old Note Offering"), the application of the net proceeds therefrom, the
repayment and exchange of the TFH Debt (as defined), and the satisfaction of the
STI Debt (as defined), the aggregate amount of the Company's outstanding
indebtedness, including the Class A Preferred Stock was $77.3 million (not
including unused commitments of $14.0 million under the Working Capital
Facility). See "Use of Proceeds" and "Description of the Notes -- Ranking."
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY , 1998.
<PAGE> 3
(continued from previous page)
The Old Notes were not registered under the Securities Act in reliance upon
an exemption from the registration requirements thereof. In general, the Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exception from, or in a transaction not subject to, the
Securities Act. The Exchange Notes are being offered hereby in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement (as defined). Based on interpretations by the staff of the Securities
and Exchange Commission (the "Commission") set forth in no-action letters issued
to third parties, the Company believes that the Exchange Notes issued pursuant
to the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold or otherwise transferred by any holder thereof (other than a holder that
is an "affiliate" of the Company with the meaning of Rule 405 promulgated under
the Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business, such holder has
no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, and neither such holder nor any such person
is engaging in or intends to engage in a distribution of such Exchange Notes.
Notwithstanding the foregoing, each broker-dealer that receives Exchange Notes
for its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with any resales of Exchange Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, they will make this
Prospectus available to any broker-dealer for use in connection with any such
resale, provided that such broker-dealer acquired the Old Notes as a result of
market-making activities or other trading activities and not directly from the
Company. See "Plan of Distribution."
The Old Notes are currently eligible for trading in the Private Offerings.
Resales and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the Exchange Notes. The Company does not
currently intend to list the Exchange Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Exchange Notes.
The Company will not receive any cash proceeds from the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. Tenders of
Old Notes pursuant to the Exchange Offer may be withdrawn as provided herein at
any time prior to the Expiration Date (as defined). The Exchange Offer is
subject to certain customary conditions.
<PAGE> 4
SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information, financial statements
and notes thereto included elsewhere in this Prospectus. Unless the context
otherwise requires, references in this Prospectus to "Tom's Foods" or "the
Company" refer to Toms Foods Inc., a Delaware corporation. All references in
the Prospectus to fiscal year refer to the Company's fiscal year, which is the
52- or 53- week period ending the Saturday nearest to December 31. For example,
"fiscal 1996" refers to the fiscal year ended December 28, 1996.
THE COMPANY
Tom's Foods is a regional snack food manufacturing company with a primary
market focus in the southeastern and southwestern United States, regions in
which the Company believes the population and snack food consumption are growing
more rapidly than in the United States overall. The Company has manufactured and
sold snack food products since 1925 and currently manufactures over 250 and
sells over 300 ready-to-eat snack food products, primarily under the widely
recognized "Tom's" brand name. Management believes that the Company has one of
the most diversified distribution networks in the snack food industry. The
Company's distribution network serves a variety of customers, including
independent retailers, vending machines, retail supermarket chains, convenience
stores, mass merchandisers, food service companies and military bases.
Management believes that the Company's competitive advantages include the
strength of its distribution network, which services independent retailers in
various markets, and its vending machine network, which management believes,
based on revenues, is one of the largest single-label, snack food vending
machine networks in the United States. The Company's products are distributed in
43 states by 943 independent distributors, which operate approximately 2,127
sales routes, and Company employees, who operate approximately 221 routes.
The Company packages its products in single-serve and multi-serve sizes
("Single-Serve Sizes" and "Multi-Serve Sizes", respectively) to meet the demands
of its market niches. Single-Serve Sizes, which accounted for 52.6% of the
Company's net sales in fiscal 1996, are primarily distributed through vending
machines, small or independent retail outlets and national chain convenience
stores. The Company's distribution network is well situated to serve these
channels, which are not a primary focus of the larger national industry
participants. Multi-Serve Sizes, which accounted for 25.6% of the Company's net
sales in fiscal 1996, are positioned as an alternative to national brands and
marketed to supermarkets and larger retail outlets, such as those operated by
Winn Dixie Stores, Inc., Kmart Corporation, Hannaford Brothers Co., The Circle K
Corporation, Diamond Shamrock, Inc., The Kroger Co. and Wal-Mart Stores Inc.
For the 52-week period ended September 6, 1997, the Company had net sales
of $213.8 million and Adjusted EBITDA (as defined) of $12.6 million.
The Company sells a wide variety of products in five snack food categories:
chips, sandwich crackers, baked goods, nuts and candy. The chip category, which
includes corn, tortilla and potato chips, pretzels and popcorn, accounted for
$105.9 million or 51.4% of the Company's net sales in fiscal 1996. The sandwich
cracker category, which includes peanut butter and cheese-filled crackers and
cream-filled cookies, accounted for $29.2 million or 14.2% of the Company's net
sales in fiscal 1996. The baked goods category, which includes cookies, snack
crackers, fig and apple bars and a line of cakes and pastries, accounted for
$26.1 million or 12.7% of the Company's net sales in fiscal 1996. The nut
category, which includes toasted and flavored peanuts, cashews, pistachios and
sunflower seeds, accounted for $19.4 million or 9.4% of the Company's net sales
during the same period. The candy category, which includes candy bars, hard and
roll candies, gum and coated nuts, accounted for $14.9 million or 7.3% of the
Company's net sales in fiscal 1996. The Company's distributors also sell
products of other food manufacturing companies which complement the Company's
own product lines (the "Affiliated Products"). In fiscal 1996, sales of
Affiliated Products accounted for $10.4 million or 5.0% of the Company's net
sales.
Management believes the domestic snack food industry consists of 21 product
sub-categories generating retail sales of approximately $54.3 billion in 1996,
an increase of 2.7% over the prior year. The 14 product sub-categories in which
the Company competes generated industry retail sales of approximately $40.4
billion in
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<PAGE> 5
1996, a 2.3% increase over 1995 and a compound annual growth rate of 4.6% since
1992. The Company believes that in 1996, no manufacturer other than Frito-Lay
Co. ("Frito-Lay") had more than a 1.0% market share in the 14 product
sub-categories in which the Company competes.
During the first half of the 1990's, several large industry participants
initiated a period of intense potato chip price competition within the snack
food industry. Such price competition significantly reduced profit margins for
the industry and ultimately led to the withdrawal or curtailment of the
operations of a number of snack food companies. The Company believes that potato
chips, the largest salty snack sub-category and the Company's largest product
line, generated industry retail sales in 1996 of $5.3 billion, an increase of
9.2% over 1995 sales.
Since early 1996, the Company believes that gross margins in the industry
have improved and market participants now generally can be characterized as
either national or regional. The Company believes that national snack food
companies, the largest of which generated approximately $6.6 billion in domestic
sales in fiscal 1996, generally serve supermarket chains, mass merchandisers,
warehouse clubs and national convenience store chains. The Company believes that
the major regional snack food companies, including Tom's Foods, generally serve
distribution, product or geographic niches which are not a primary focus of the
larger national industry participants.
During the late 1980's and the first half of the 1990's, the Company had
limited financial flexibility, largely as a residual effect of prior ownership
changes. Consequently, the Company was more vulnerable to increased competition
and reduced margins which affected the industry as a whole. In addition, the
Company took various steps to conserve cash flow, including reducing marketing
and product development programs, which ultimately resulted in reduced
profitability. During this period, the Company also departed from its prior
multi-route distribution strategy, which encouraged each distributor to operate
more than one route, and franchised a number of routes on a one route per
distributor basis. These initiatives contributed to a decrease in net sales from
$224.6 million in fiscal 1992 to $198.3 million in fiscal 1995 and a decline in
EBITDA from $25.6 million in fiscal 1992 to a $1.2 million loss (or an Adjusted
EBITDA of $8.4 million) in fiscal 1995.
BUSINESS STRATEGY
In 1995, the Company hired a new senior management team, which developed
and implemented a business strategy designed to increase profitability. The
components of the business strategy include: (i) developing and expanding
markets; (ii) strengthening the Company's distribution network; (iii) increasing
introductions of new and updated products; (iv) expanding distribution channels
and outlets; and (v) increasing operating efficiencies. In part as a result of
this new business strategy, for the 52 weeks ended September 6, 1997, Adjusted
EBITDA increased 53.2% over the same period in the previous year.
The key elements of the Company's business strategy are as follows:
Developing and Expanding Markets. The Company traditionally has had a
strong presence in the southeastern and southwestern United States, areas in
which the Company believes the population and snack food consumption are growing
more rapidly than in the United States overall. In order to capitalize on the
growth in those markets, the Company intends to continue to strengthen its
presence in the southeastern and southwestern United States. The Company also
intends to strengthen its presence in metropolitan markets where the Company
believes it can (i) achieve higher overall gross profits through higher product
volume and local economies of scale, and (ii) increase its access to National
Accounts (as defined). The Company intends to strengthen its core markets and
develop additional markets through implementation of the other elements of its
business plan.
Strengthening the Company's Distribution Network. The Company has
undertaken a number of initiatives to strengthen and upgrade its distribution
network and continue to improve its relationship with its independent
distributors. First, the Company has developed a set of objective criteria by
which it evaluates the performance of its independent distributors and has held
its distributors accountable to such criteria since late 1995. Second, through
training programs, field sales support and marketing and merchandising
activities, the Company will continue to assist distributors in the development
of more efficient multi-route operations. Third, the Company will reassign
underperforming and/or underdeveloped distributor territories to more
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capable independent distributors or incorporate them into the Company-owned
route network. Fourth, the Company will continue to develop the Company-owned
and independently-owned multi-route strategy in metropolitan markets, which
management believes will allow the Company to increase market share and improve
margins in these markets. Finally, by broadening the services available to
distributors, such as its new centralized customer service center, increased
training programs and improved technical support, the Company will continue to
enhance its frequent interactions with its distributors.
Increasing Introductions of New and Updated Products. The Company intends
to continue to develop and introduce new products and update existing products
and packaging, an effort which the new senior management team initiated in late
1995. The Company believes that the introduction of new and updated products is
necessary to meet changing consumer preferences and to attract new customers. As
part of this effort, the Company has and will continue to introduce new flavors,
redesign its packaging and modify packaging sizes and weights, all of which are
intended to update and unify the brand image.
Since 1995, the Company has introduced 61 new and 35 updated products, a
significant majority of which have been packaged and sold in Single-Serve Sizes.
Approximately 33.0% of the Company's manufactured products are new or have been
updated since 1995, and the Company plans to complete updating all of its
products by the end of 1998. For the 36-week period ended September 6, 1997,
these new or updated products represented 27.9% of total sales to distributors.
In addition, 51 of the 61 new product introductions have been successfully
integrated into the Company's product lines, a rate which management believes
exceeds the industry average.
For the 36-week period ended September 6, 1997, the Company's comprehensive
product updating process has contributed to a net sales increase of 19.0% for
those stock keeping units ("SKU's") which have been updated. Net sales from new,
updated or repositioned products have increased from less than 2.0% of fiscal
1995 net sales to 4.0% of fiscal 1996 net sales, and 9.0% of net sales for the
36-week period ended September 6, 1997. The Company's objective is to derive
approximately 13.0% of its annual net sales from new, updated and repositioned
products.
Expanding Distribution Channels and Outlets. The Company intends to
increase its presence in a number of distribution channels. The vending machine
channel continues to grow rapidly and the Company's newly-hired team of
experienced vending senior managers has and will continue to increase the
Company's penetration in this area. The Company intends to place particular
focus on developing metropolitan vending routes with an emphasis on full-line
vending accounts. Full-line vending accounts require the provision of other food
items, in addition to the snack food products manufactured by the Company, such
as coffee, cold beverages, cold foods and microwaveable products. In order to
address the additional requirements of full-line vending, the Company intends to
extend existing and develop new business arrangements with manufacturers of
these products.
The Company believes it can increase gross profit without expanding or
overextending its existing distributor network. The Company intends to achieve
this in part through introduction of a limited product line under a brand name
other than "Tom's" to provide the Company with access to national wholesale
distribution companies and retail trade accounts. This second brand will neither
require nor conflict with the merchandising services of the Company's
distributor network. The Company also intends to continue the expansion of its
successful contract packaging program, under which the Company manufactures and
packages snack food products for other snack food manufacturers ("Contract
Sales"), which permits the Company to make efficient use of its excess
manufacturing capacity.
Increasing Operating Efficiencies. The Company intends to continue its
initiatives to reduce the Company's expenses and, consequently, to improve its
operating margins. For example, the Company has reduced its general and
administrative expenses from 5.7% of net sales for fiscal 1995 to 5.1% of net
sales for fiscal 1996. Similarly, distribution costs as a percent of net sales
have been reduced from 7.5% for fiscal 1995 to 6.9% for fiscal 1996. Over the
same period of time, marketing and merchandising expenses have remained
unchanged as a percent of net sales while total distributor sales and sales to
National Accounts have increased. The Company attributes this to the development
of more efficient marketing and merchandising programs and intends to continue
such programs.
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Many of the Company's financial objectives have been achieved in part due
to a new philosophy of providing financial incentives to line managers, whose
compensation is now directly related to the financial performance of their areas
of responsibility. The Company also has begun to develop and implement more
sophisticated information systems to assist managers in achieving their
objectives. Additionally, the Company has established a sophisticated risk
management program which monitors the cost of raw materials, packaging, energy
and other commodities, enabling the Company to lower its costs and minimize the
impact of market price fluctuations on the Company's major expense categories.
THE 1996 REFINANCING
The Company refinanced its long-term debt obligations in August 1996 (the
"1996 Refinancing"). As a part of the 1996 Refinancing, the Company entered into
a $29.0 million senior loan facility (the "Congress Loan Facility") with
Congress Financial Corporation ("Congress"). At September 6, 1997, $8.5 million
of the Congress Loan Facility was outstanding (the "Congress Debt"). In
addition, TFH Corp. ("TFH") was formed by certain of the Company's investors to,
among other things, purchase: (i) the $52.3 million outstanding debt under a
certain loan agreement agented by the Canadian Imperial Bank of Commerce (the
"CIBC Debt"); and (ii) a certain subordinated obligation originally held by
Massachusetts General Life Insurance Company of $8.8 million, which included
$1.3 million in accrued interest thereon which was subsequently paid to TFH (the
"MassGeneral Debt"; together with the CIBC Debt, the "TFH Debt"). The terms of
the TFH Debt were modified to subordinate this debt to Congress, defer payments
of principal and interest owing thereon and increase the interest rate to 13.0%
per annum. The stockholders of TFH (the "TFH Stockholders") also caused letters
of credit to be posted in the aggregate original face principal amount of $10.0
million (the "TFH Stockholders' Letters of Credit") to replace a letter of
credit the Company originally caused to be posted in the same amount (the
"Company's Letter of Credit") to support certain of its obligations with respect
to the Industrial Development Revenue Bonds (as defined). The TFH Stockholders
assigned all reimbursement obligations against the Company to TFH and waived
their rights to reimbursement from the Company in connection with the TFH
Stockholders' Letters of Credit. TFH subordinated its right to reimbursement to
the Company's obligation to Congress under the Congress Loan Facility. In
exchange for these actions, TFH received 80.0% of the Company's outstanding
common stock ("Common Stock"). The remaining 20.0% of the Common Stock is held
by Tom's Foods Capital Corporation ("TFCC"). See "Certain Transactions."
THE 1997 REFINANCING
The Company used the net proceeds of the Old Note Offering ($56.8 million
after deduction of discounts and commissions to the Initial Purchaser and other
expenses of the Old Note Offering) plus certain of the Company's operating cash
(approximately $1.5 million at the consummation of the Old Note Offering) to:
(i) repay the Congress Debt (approximately $8.3 million at the time of the Old
Note Offering) and accrued interest thereon; (ii) repay $40.0 million of the
outstanding TFH Debt; and (iii) pay $10.0 million to STI Credit Corporation
("STI") in full satisfaction of the Company's outstanding and contingent
obligations to STI (the "STI Debt"). Upon the issuance of the Old Notes, the
Company exchanged: (i) $7.0 million of the TFH Debt for the Company's Class A
Preferred Stock; and (ii) the remainder of the TFH Debt (which was approximately
$21.7 million at the time of the Old Note Offering) for the Company's Class B
Preferred Stock (as defined). Under certain circumstances, including meeting a
2.25:1.0 Consolidated Fixed Charge Coverage Ratio, up to $10.0 million of the
Class A Preferred Stock may be exchanged for Exchange Notes at the option of the
Company. See "Use of Proceeds," "Description of Capital Stock" and "Description
of the Notes."
USE OF PROCEEDS
There will be no cash proceeds to the Company from the exchange pursuant to
the Exchange Offer.
EXECUTIVE OFFICE
The Company's executive office is located at 900 8th Street, Columbus,
Georgia 31902 and its telephone number is (706) 323-2721.
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<PAGE> 8
THE EXCHANGE OFFER
Registration Rights
Agreement..................... The Old Notes were sold by the Company on
October 14, 1997 (the "Issue Date") to
PaineWebber Incorporated (the "Initial
Purchaser"), which placed the Old Notes with
institutional investors. In connection
therewith, the Company and the Initial
Purchasers executed and delivered for the
benefit of the holders of the Old Notes an
exchange and registration rights agreement (the
"Registration Rights Agreement") providing,
among other things, for the Exchange Offer.
The Exchange Offer............ Exchange Notes are being offered in exchange
for a like principal amount of Old Notes. As of
the date hereof, $60.0 million aggregate
principal amount of Old Notes are outstanding.
The Company will issue the Exchange Notes
promptly following the Expiration Date. See
"Risk Factors -- Consequences of Failure to
Exchange."
Expiration Date............... 5:00 p.m., Eastern Standard Time, on March 17,
1998, unless the Exchange Offer is extended as
provided herein, in which case the term
"Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
The maximum period of time that the Exchange
Offer will remain in effect will be from the
date hereof through March 30, 1998.
Interest...................... Interest on the Exchange Notes will be payable
semi-annually in arrears on May 1 and November
1 of each year, commencing on June 15, 1997.
The Exchange Notes will mature on November 1,
2004.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. The Company reserves the right to
amend, terminate or extend the Exchange Offer
at any time prior to the Expiration Date upon
the occurrence of any such condition. See "The
Exchange Offer -- Conditions."
Procedures for Tendering Old
Notes......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes and any
other required documentation to the exchange
agent (the "Exchange Agent") at the address set
forth herein. By executing the Letter of
Transmittal, each holder of Old Notes will
represent to the Company, among other things,
that (i) the Exchange Notes acquired pursuant
to the Exchange Offer by the holder and any
beneficial owners of Old Notes are being
obtained in the ordinary course of business of
the person receiving such Exchange Notes, (ii)
neither the holder nor such beneficial owner
has an arrangement or understanding with any
person to participate in the distribution of
such Exchange Notes, (iii) neither the holder
nor such beneficial owner nor any such other
person is engaging in or intends to engage in a
distribution of such Exchange Notes and (iv)
neither the holder nor such beneficial owner is
an "affiliate," as defined under Rule 405
promulgated under the Securities Act, of the
Company. Each broker-dealer that receives
Exchange Notes
5
<PAGE> 9
for its own account in exchange for Old Notes,
where such Old Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities (other
than Old Notes acquired directly from the
Company), may participate in the Exchange Offer
but may be deemed an "underwriter" under the
Securities Act and therefore, must acknowledge
in the Letter of Transmittal that it will
deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. See "The Exchange Offer --
Procedures for Tendering" and "Plan of
Distribution."
Special Procedures for
Beneficial Owners............. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such beneficial owner's own
behalf, such beneficial owner must, prior to
completing and executing the Letter of
Transmittal and delivering his or her Old
Notes, either make appropriate arrangements to
register ownership of the Old Notes in such
beneficial owner's name or obtain a properly
completed bond power from the registered
holder. The transfer of registered ownership
may take considerable time. See "The Exchange
Offer -- Procedures for Tendering.
Guaranteed Delivery
Procedures.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures."
Withdrawal Rights............. Tenders of Old Notes may be withdrawn as
provided herein at any time prior to 5:00 p.m.,
Eastern Standard Time, on the Expiration Date.
See "The Exchange Offer -- Withdrawal of
Tenders."
Acceptance of Old Notes and
Delivery of New Notes......... The Company will accept for exchange any and
all Old Notes which are properly tendered in
the Exchange Offer prior to 5:00 p.m., Eastern
Standard Time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange
offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer --
Terms of the Exchange Offer."
Use of Proceeds............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Federal Income Tax
Consequences.................. The Exchange of Old Notes for Exchange Notes
should not be a taxable exchange for Federal
income tax purposes. See "Certain Federal
Income Tax Considerations."
6
<PAGE> 10
Exchange Agent................ IBJ Schroder Bank & Trust Company is serving as
Exchange Agent in connection with the Exchange
Offer. The address and telephone numbers of the
Exchange Agent are set forth under the caption
"The Exchange Offer -- Exchange Agent."
Consequences of Failure to
Exchange...................... Holders of Old Notes who do not exchange their
Old Notes for Exchange Notes pursuant to the
Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Notes
as set forth in the legend thereon as a
consequence of the issuance of the Old Notes
pursuant to exemptions from, or in transactions
not subject to, the registration requirements
of the Securities Act and applicable state
securities laws. In general, Old Notes may not
be offered or sold unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws.
7
<PAGE> 11
SUMMARY DESCRIPTION OF THE NOTES
The Exchange Offer relates to $60.0 million aggregate principal amount of
Old Notes. The terms of the Exchange Notes are identical in all material
respects to the terms of the Old Notes, except that the Exchange Notes will be
registered under the Securities Act and therefore, will not bear legends
restricting their transfer and will not contain certain provisions providing for
payment of liquidated damages under certain circumstances related to the
Registration Rights Agreement, which provisions will terminate as to all of the
Notes upon the consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Old Notes and except as set forth in the
immediately preceding sentence, will be entitled to the benefits of the
Indenture, under which both the Old Notes were, and the Exchange Notes will be,
issued. See "Description of Notes."
Issuer........................ Tom's Foods Inc.
Securities Offered............ $60.0 million aggregate principal amount of
10 1/2% Senior Secured Notes due November 1,
2004.
Maturity...................... November 1, 2004.
Interest Payment Dates........ The Exchange Notes will bear interest at a rate
of 10 1/2% per annum. Interest on the Notes
will accrue from the date of issuance and will
be payable commencing on May 1, 1998 and
thereafter semi-annually in arrears on each
November 1 and May 1.
Optional Redemption........... Except as described below, the Company may not
redeem the Exchange Notes prior to November 1,
2001. On or after such date, the Company may
redeem the Exchange Notes, in whole or in part,
at the redemption prices set forth herein,
together with accrued and unpaid interest, if
any, to the date of redemption. Upon certain
Public Equity Offerings on or prior to November
1, 2000, the Company may redeem up to 30.0% of
the Exchange Notes then outstanding at a price
equal to 110.5% of the principal amount
thereof, together with accrued and unpaid
interest thereon, provided, that after giving
effect to such redemption at least $45.0
million principal amount of Exchange Notes
remain outstanding. See "Description of the
Notes -- Optional Redemption."
Change of Control............. Upon the occurrence of a Change of Control,
each holder of the Exchange Notes will have the
right to require the Company to purchase all or
a portion of such holder's Exchange Notes at a
purchase price in cash equal to 101.0% of the
principal amount thereof, together with accrued
and unpaid interest, if any, to the date of
purchase. There can be no assurance that in the
event of a Change of Control the Company will
have available funds sufficient to make any
purchase required by the holders of the
Exchange Notes. Neither the Company's Board of
Directors nor the trustee under the Indenture
(as defined) is permitted to waive the right of
the holders of the Notes to require the Company
to purchase the holders' Notes upon a Change of
Control. See "Description of the Notes --
Change of Control."
Ranking....................... The Exchange Notes will be senior obligations
of the Company and, as such, will rank pari
passu with all existing and future indebtedness
of the Company (other than indebtedness that is
expressly subordinated to the Exchange Notes)
including: (i) indebtedness under the Working
Capital Facility; and (ii) the $10.0 million
Industrial Development Revenue Bonds issued on
8
<PAGE> 12
the Company's behalf. As of September 6, 1997
and as adjusted to give effect to the Old Note
Offering and the application of the net
proceeds therefrom, the repayment of a portion
of the TFH Debt, the exchange of the remaining
TFH Debt into Class A Preferred Stock and Class
B Preferred Stock and the satisfaction of the
STI Debt, the aggregate amount of outstanding
indebtedness, including the Class A Preferred
Stock, was $77.3 million (not including unused
commitments of $14.0 million under the Working
Capital Facility). See "1997 Refinancing" and
"Description of Other Senior Indebtedness."
Security...................... The Exchange Notes will be secured by a first
lien on and security interest in the assets and
properties owned by the Company excluding its
receivables (at September 6, 1997, $18.9
million) and inventory (at September 6, 1997,
$9.6 million) (and certain assets and rights
relating thereto), certain funds (at September
6, 1997, $1.4 million) held in escrow for the
benefit of the holders of the Industrial
Development Revenue Bonds, the Company's real
property, buildings, improvements and fixtures
located at its plant in Knox County, Tennessee
(at September 6, 1997, $2.8 million), the
Company's property, plant and equipment located
at its plant in Taylor County, Florida (at
September 6, 1997, $4.7 million) and certain
other parcels of real property (at September 6,
1997, approximately $300,000). As of September
6, 1997, the assets and properties owned by the
Company, other than the Excluded Collateral,
had a book value of $100.3 million. See
"Description of the Notes -- Security."
Restrictive Covenants......... The Indenture contains certain covenants,
including, but not limited to, covenants with
respect to the following matters: (i)
limitation on additional indebtedness; (ii)
limitation on restricted payments; (iii)
limitation on transactions with affiliates;
(iv) limitation on liens; (v) limitation on
sale of assets; (vi) limitation on issuances of
guarantees of and pledges for indebtedness;
(vii) restriction on transfer of assets; and
(viii) restriction on consolidations, mergers
and the sale of assets. See "Description of the
Notes -- Certain Covenants."
Registration Rights........... The Company entered into the Registration
Rights Agreement with the Initial Purchaser for
the benefit of all holders of Old Notes, in
which it agreed to consummate the Exchange
Offer within 195 days after the original
issuance of the Old Notes. If the Company does
not comply with certain covenants set forth in
the Registration Rights Agreement, the Company
will be obligated to pay additional interest to
holders of the Notes.
Absence of a Public Market for
the Notes..................... The Exchange Notes generally will be freely
transferable (subject to the restrictions
discussed elsewhere herein) but will be new
securities for which initially there will not
be a market. Accordingly, there can be no
assurance as to the development or liquidity of
any market for the Exchange Notes. The Company
does not intend to apply for listing of the
Exchange Notes on any national securities
exchange or for quotation through the National
Association of Securities Dealers Automated
Quotation System. See
9
<PAGE> 13
"Risk Factors -- Lack of Public Market;
Restrictions on Transferability."
Risk Factors.................. Prior to tendering Old Notes in the Exchange
Offer, holders of Old Notes should carefully
consider all of the information set forth in
this Prospectus and, in particular, should
evaluate the specific factors set forth under
"Risk Factors" beginning on page for risks
involved with an investment in the Notes.
Certain statements contained in this Prospectus
which are not historical facts are
forward-looking statements that involve risks
and uncertainties that could cause actual
results to differ materially from those in such
forward-looking statements. See "Risk Factors
-- Forward-Looking Statements" and
"Management's Discussion and Analysis of
Financial Condition and Results of Operations
-- Cautionary Statements Related to
Forward-Looking Statements."
\
10
<PAGE> 14
SUMMARY OF HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
Set forth below are certain summary historical financial data for the
Company as of December 31, 1994, December 30, 1995, December 28, 1996, September
7, 1996 and September 6, 1997 and for fiscal years 1994, 1995 and 1996 and for
the 36-week periods ended September 7, 1996 and September 6, 1997. Also set
forth below are certain pro forma financial data for the Company for fiscal 1996
and the 36-week period ended September 6, 1997. The summary historical financial
information for the Company as of and for the full fiscal years indicated were
derived from the financial statements of the Company which were audited by
Arthur Andersen LLP, independent public accountants. The data for the 36-week
periods ended and as of September 7, 1996 and September 6, 1997 are unaudited,
but in the opinion of the Company's management, reflect all adjustments (which
comprise only normal and recurring accruals) necessary for a fair presentation
of the results of operations for such period. The results for the 36-week period
ended September 6, 1997 may not be indicative of the results to be expected for
fiscal 1997. The summary historical financial information set forth below should
be read in conjunction with the financial statements of the Company and the
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus. The as
adjusted balance sheet data are based on the historical financial information of
the Company, adjusted to give effect to the Offering as if it occurred on
September 6, 1997. The pro forma income statement data and pro forma other data
are based on the summary historical financial data adjusted to give effect to
the Old Note Offering as if it occurred at the beginning of the periods
indicated. The unaudited pro forma and as adjusted data do not purport to
represent what the Company's financial position or results of operations
actually would have been if the Old Note Offering in fact had occurred at the
beginning of the periods indicated or as of the specified date, or purport to
project the Company's results of operations or financial position for any future
period or at any future date.
See summary historical and unaudited pro forma financial data on following page.
11
<PAGE> 15
The unaudited pro forma data reflect: (i) the elimination of interest
expense on the TFH Debt ($7.8 million for the year ended December 28, 1996 and
$5.5 million for the 36-week period ended September 6, 1997), the Congress Debt
($300,000 for the year ended December 28, 1996 and $700,000 for the 36-week
period ended September 6, 1997) and the STI Debt ($400,000 for the year ended
December 28, 1996 and the 36-week period ended September 6, 1997); (ii)
additional interest expense on the Notes and the Class A Preferred Stock ($7.1
million for the year ended December 28, 1996 and $4.9 million for the 36-week
period ended September 6, 1997); and (iii) the amortization of debt issuance
costs ($400,000 for the year ended December 28, 1996 and $300,000 for the
36-week period ended September 6, 1997). The as adjusted data reflect: (i) the
receipt of the gross proceeds from the sale of the Notes ($60.0 million) and the
payment of fees and expenses associated with the Old Note Offering ($3.2
million); (ii) the retirement of the Congress Debt ($8.5 million) and accrued
interest thereon ($100,000); (iii) the exchange of $27.8 million of TFH Debt and
accrued interest thereon for $7.0 million of Class A Preferred Stock and $20.8
million of Class B Preferred Stock, the latter of which is included in
shareholders' equity; (iv) the repayment of the remaining $40.0 million of TFH
Debt; and (v) the full satisfaction of the STI Debt and accrued interest thereon
($10.0 million).
<TABLE>
<CAPTION>
PRO FORMA
------------
FISCAL YEAR ENDED 36-WEEK PERIOD ENDED FISCAL YEAR
------------------------------------------ --------------------------- ENDED
DECEMBER 31, DECEMBER 30, DECEMBER 28, SEPTEMBER 7, SEPTEMBER 6, DECEMBER 28,
1994 1995 1996 1996 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales..................... $ 215,650 $ 198,340 $ 205,856 $141,369 $149,337 $ 205,856
Cost of goods sold............ (130,774) (125,396) (133,624) (91,249) (92,529) (133,624)
--------- --------- --------- -------- -------- ---------
Gross profit................ 84,876 72,944 72,232 50,120 56,808 72,232
Expenses and other income:
Selling and administrative
expenses.................. (78,937) (75,783) (69,735) (47,364) (52,757) (69,735)
Amortization of goodwill and
intangible assets......... (1,678) (1,678) (1,678) (1,161) (1,161) (1,678)
Other income, net........... 1,890 3,296 1,309 285 1,130 1,309
Restructuring and
nonrecurring charges...... -- (9,570)(a) (3,793)(b) (3,493)(b) -- (4,293)(b)(c)
--------- --------- --------- -------- -------- ---------
(78,725) (83,735) (73,897) (51,733) (52,788) (74,397)
--------- --------- --------- -------- -------- ---------
Income (loss) from
operations................ 6,151 (10,791) (1,665) (1,613) 4,020 (2,165)
Interest expense, net......... (6,405) (7,870) (9,402) (6,271) (7,181) (8,443)(d)
--------- --------- --------- -------- -------- ---------
Loss before income taxes.... (254) (18,661) (11,067) (7,884) (3,161) (10,608)
Provision (benefit) for income
taxes....................... 500 (400) -- 342 346 --
--------- --------- --------- -------- -------- ---------
Net loss.................... $ (754) $ (18,261) $ (11,067) $ (8,226) $ (3,507) $ (10,608)
========= ========= ========= ======== ======== =========
OTHER DATA:
Operating cash flow........... $ 9,372 $ (4,825) $ 8,829 $ 808 $ 3,124 $ 9,788
Investing cash flow........... $ (8,570) $ (7,304) $ (5,376) $ (3,879) $ (3,231) $ (5,376)
Financing cash flow........... $ 1,765 $ 7,115 $ (3,047) $ 1,814 $ 858 $ 48
EBITDA(e)..................... $ 15,588 $ (1,196) $ 6,291 $ 4,206 $ 10,174 $ 5,791
Adjusted EBITDA(f)............ 15,588 8,374 10,084 7,699 10,174 10,084
Cash interest expense(g)...... 7,002 6,765 2,512 752 1,947 7,247(h)
Depreciation and
amortization................ 9,437 9,595 7,956 5,819 6,154 7,956
Capital expenditures.......... 9,006 7,304 5,798 4,001 3,265 5,798
Ratio of Adjusted EBITDA to
net interest expense(i)..... 2.43x 1.06x 1.07x 1.23x 1.42x 1.19x
Ratio of Adjusted EBITDA to
cash interest expense(i).... 2.23 1.24 4.01 10.24 5.23 1.39
Ratio of earnings to fixed
charges(j)(k)............... -- -- -- -- --
Pro forma ratio of earnings to
fixed charges(l)............ --
<CAPTION>
PRO FORMA
-------------
36-WEEK
PERIOD ENDED
SEPTEMBER 6,
1997
-------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C>
INCOME STATEMENT DATA:
Net sales..................... $149,337
Cost of goods sold............ (92,529)
--------
Gross profit................ 56,808
Expenses and other income:
Selling and administrative
expenses.................. (52,757)
Amortization of goodwill and
intangible assets......... (1,161)
Other income, net........... 1,130
Restructuring and
nonrecurring charges...... (500)(c)
--------
(53,288)
--------
Income (loss) from
operations................ 3,520
Interest expense, net......... (5,843)(d)
--------
Loss before income taxes.... (2,323)
Provision (benefit) for income
taxes....................... 346
--------
Net loss.................... $ (2,669)
========
OTHER DATA:
Operating cash flow........... $ 5,115
Investing cash flow........... $ (2,618)
Financing cash flow........... $ (20)
EBITDA(e)..................... $ 9,674
Adjusted EBITDA(f)............ 10,174
Cash interest expense(g)...... 5,565(h)
Depreciation and
amortization................ 6,154
Capital expenditures.......... 3,265
Ratio of Adjusted EBITDA to
net interest expense(i)..... 1.74x
Ratio of Adjusted EBITDA to
cash interest expense(i).... 1.83
Ratio of earnings to fixed
charges(j)(k)...............
Pro forma ratio of earnings to
fixed charges(l)............ --
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF SEPTEMBER 6, 1997
------------------------------------------ -----------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28, AS
1994 1995 1996 HISTORICAL ADJUSTED(M)
------------ ------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................... $ 13,161 $(11,565) $ 7,362 $ 13,912 $ 14,028
Total assets....................................... 162,403 138,500 139,790 138,013 139,868
Total debt......................................... 70,054 75,297 88,516 95,127 70,333
Class A Preferred Stock............................ -- -- -- -- 7,000
Total shareholders' equity......................... 45,130 27,586 16,519 13,012 33,845
</TABLE>
Footnotes on following page.
12
<PAGE> 16
Footnotes from previous page.
- ---------------
(a) During 1995, the Company recorded restructuring and nonrecurring charges
totaling $9.6 million. The charges included the following: (i) a
nonrecurring charge related to the reorganization of and workforce reduction
in the administrative and sales functions ($4.2 million); (ii) a
nonrecurring charge related to the write-off of certain impaired assets
($8.6 million); (iii) a restructuring charge related to its distribution
system ($6.5 million) and; (iv) the reversal of the remainder of a prior
restructuring reserve originally established in 1991 ($9.7 million). See
Note 2 of "Notes to Financial Statements" included elsewhere in this
Prospectus and "Risk Factors -- History of Losses".
(b) In 1996, the Company recorded a nonrecurring charge ($3.8 million) for
expenses associated with the refinancing, $3.5 million of which was recorded
in the 36-week period ended September 7, 1996. See Note 4 of Notes to
financial statements included elsewhere in this Prospectus and "Risk Factors
-- History of Losses".
(c) Includes a $500,000 one-time nonrecurring compensation charge to management
of the Company upon consummation of the Offering. TFH will contribute
$500,000 to the Company to fund the payment of this compensation charge. See
"Management -- Incentive Compensation Plans -- Executive Incentive Plan."
(d) The pro forma interest expense reflects: (i) the elimination of interest
expense on the TFH Debt ($7.8 million for the year ended December 28, 1996
and $5.5 million for the 36-week period ended September 6, 1997), the
Congress Debt ($300,000 for the year ended December 28, 1996 and $700,000
for the 36-week period ended September 6, 1997), and the STI Debt ($400,000
for the year ended December 28, 1996 and the 36-week period ended September
6, 1997); (ii) additional interest expense on the Notes and Class A
Preferred Stock ($7.1 million for the year ended December 28, 1996 and $4.9
million for the 36-week period ended September 6, 1997), and; (iii) the
amortization of debt issuance costs ($400,000 for the year ended December
28, 1996 and $300,000 for the 36-week period ended September 6, 1997).
(e) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
represents the sum of income (loss) before income taxes plus interest
expense, depreciation and amortization. EBITDA is a widely accepted measure
of a Company's ability to incur and service debt, undertake capital
expenditures, and to meet working capital requirements. EBITDA is not a
measure of financial performance under generally accepted accounting
principles ("GAAP") and should not be considered an alternative either to
net income as an indicator of the Company's operating performance or as an
indicator of the Company's liquidity.
(f) "Adjusted EBITDA" is EBITDA excluding restructuring and nonrecurring charges
of $9.6 million for fiscal 1995 and $3.8 million for fiscal 1996, $3.5
million for the 36-week period ended September 7, 1996 and on a pro forma
basis, the $500,000 nonrecurring compensation charge for both pro forma
periods presented.
(g) Cash interest expense is net interest expense less amounts not paid in cash
for the period indicated including, among other things, interest accrued on
the TFH Debt of $7.8 million in fiscal 1996 and $5.5 million for the 36-week
period ended September 6, 1997.
(h) Pro forma cash interest expense is historical cash interest expense adjusted
to include the interest on the Notes ($6.3 million for the year ended
December 28, 1996 and $4.4 million for the 36-week period ended September 6,
1997) and elimination of the cash paid for interest on the Congress Debt and
the STI Debt ($1.7 million for the year ended December 28, 1996 and $1.1
million for the 36-week period ended September 6, 1997).
(i) Ratio of Adjusted EBITDA to net interest expense or cash interest expense
represents Adjusted EBITDA divided by net interest expense or cash interest
expense.
(j) For purpose of computing the ratio of earnings to fixed charges, "earnings"
consists of operating income (loss) before income taxes plus fixed charges,
and "fixed charges" consists of net interest expense and the portion of
rental expense deemed representative of the interest factor of approximately
$1.0 million, $900,000 and $800,000 for fiscal 1994, 1995 and 1996,
respectively, and $650,000 and $950,000 for the 36-week periods ended
September 7, 1996 and September 6, 1997, respectively.
(k) The deficiency of the earnings to fixed charges was $700,000, $18.3 million,
$11.1 million, $8.2 million and $3.5 million for the years ended December
31, 1994, December 30, 1995 and December 28, 1996 and for the 36-week
periods ended September 7, 1996 and September 6, 1997, respectively.
(l) Pro forma ratio of earnings to fixed charges is calculated using the ratio
of earnings to fixed charges, adjusted to give effect to the Offering by
decreasing interest expense ($1.0 million and approximately $1.7 million for
the year ended December 28, 1996 and the 36-week period ended September 6,
1997, respectively), increasing amortization of debt issuance costs
($400,000 and $300,000 for the year ended December 28, 1996 and the 36-week
period ended September 6, 1997, respectively) and including as a component
of fixed charges the pre-tax earnings that would be required to cover the
Class B Preferred Stock dividends ($4.4 million and $3.3 million for the
year ended December 28, 1996 and the 36-week period ended September 6, 1997,
respectively). The deficiency of pro forma earnings to fixed charges was
$11.1 million and $2.3 million for the year ended December 28, 1996 and the
36-week period ended September 6, 1997, respectively.
(m) The as adjusted data reflect: (i) the receipt of the gross proceeds from the
sale of the Notes ($60.0 million) and the payment of fees and expenses
associated with the Old Note Offering ($3.2 million); (ii) the retirement of
the Congress Debt ($8.5 million) and accrued interest thereon ($100,000);
(iii) the exchange of $27.8 million of TFH Debt and accrued interest thereon
for $7.0 million of Class A Preferred Stock and $20.8 million of Class B
Preferred Stock, the latter of which is included in shareholders' equity;
(iv) the repayment of the remaining $40.0 million of TFH Debt; and (v) the
full satisfaction of the STI Debt and accrued interest thereon ($10.0
million).
(n) Excludes the Class A Preferred Stock of $7.0 million.
13
<PAGE> 17
RISK FACTORS
In evaluating a decision to tender Old Notes in the Exchange Offer, holders
of Old Notes should carefully consider the following risk factors as well as the
other information set forth elsewhere in this Prospectus.
CONSEQUENCES OF FAILURE TO EXCHANGE.
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. Based interpretations
by the Staff of the Commission set forth in no-action letter issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by any holder thereof (other than any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 promulgated under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business, such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes and neither such holder nor any such other person is
engaging in or intends to engage in a distribution of such Exchange Notes.
Notwithstanding the foregoing, each broker-dealer that receives Exchange Notes
for its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with any resale of Exchange Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities (other than Old Notes
acquired directly from the Company.) The Company has agreed that, for a period
of 180 days from the date of this Prospectus, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES.
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Old Notes, holders of Old Notes must transmit a properly
completed Letter of Transmittal, including all other documents required by such
Letter of Transmittal, to the Exchange Agent at the address set forth below
under "The Exchange Offer -- Exchange Agent" on or prior to the Expiration Date.
In addition, either (i) certificates from such Old Notes must be received by the
Exchange Agent along with a Letter of Transmittal or (ii) a timely confirmation
of a book-entry transfer of such Old Notes, if such procedure is available, into
the Exchange Agent's account at The Depository Trust Company pursuant to the
procedure for book-entry transfer described herein, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described herein. See "The Exchange Offer."
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT; RESTRICTIVE COVENANTS
The Company has a significant amount of indebtedness. As of September 6,
1997, on a pro forma basis, after giving effect to the Old Note Offering and the
application of the net proceeds therefrom, the repayment or exchange for
Preferred Stock of the TFH Debt, the repayment of the Congress Debt and the full
satisfaction of the STI Debt, the Company had $77.3 million of indebtedness
outstanding (including the Class A Preferred Stock and not including unused
commitments of $14.0 million under the Working Capital Facility). See "1997
Refinancing" and "Description of Other Senior Indebtedness." In addition, the
Company's indebtedness may increase in the future due to, among other things,
exchange of Class A Preferred
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Stock for Exchange Notes. The Company's ability to satisfy its financial
obligations under the Notes and under its other financing arrangements will
depend upon its future operating performance, which is subject to prevailing
economic conditions, the cost of borrowing and financial, business and other
factors, many of which are beyond the Company's control. Although the Company
believes that cash flow from operations and its available financing will provide
adequate resources to satisfy its working capital, anticipated capital
expenditure and liquidity requirements for at least the next four fiscal
quarters, there is no assurance that this will be the case. Additionally, the
Company anticipates that it will be required to refinance the Exchange Notes at
maturity. No assurance can be given that the Company will be able to refinance
the Exchange Notes on terms acceptable to it, if at all.
If the Company is unable to service its indebtedness, it will be forced to
adopt an alternative strategy that may include actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on satisfactory terms, if at all.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
The Company's current and future debt service obligations restrict certain
activities which may result in significant consequences to holders of the
Exchange Notes. The consequences of these restrictions could include the
following: (i) the Company's ability to obtain financing for future working
capital needs or acquisitions, or other purposes, may be limited; (ii) a
significant portion of the Company's cash flow from operations will be dedicated
to the payment of principal and interest on its indebtedness, thereby reducing
funds available for operations; and (iii) the Company may be more vulnerable to
adverse economic conditions than less leveraged competitors and, thus, may be
unable to withstand competitive pressures.
The Indenture contains restrictive covenants, including, among others,
covenants restricting additional liens, incurrence of additional indebtedness,
sale of assets, payment of dividends, transactions with affiliates, making
investments and certain other fundamental changes. See "Description of Notes --
Certain Covenants." In addition to these covenants, the Working Capital Loan
Agreement contains other restrictive covenants, including, among others, working
capital and tangible net worth tests. See "Description of Other Senior
Indebtedness." These restrictions could limit the Company's ability to conduct
its business. A failure to comply with the obligations contained in the Working
Capital Facility or the Indenture could result in an event of default under such
agreements, which could permit acceleration of the related debt and acceleration
of debt under other agreements that may contain cross-acceleration or
cross-default provisions.
HISTORY OF LOSSES
The Company has undertaken several operational and financial restructurings
in the past several years, and has incurred restructuring and nonrecurring
charges of $9.6 million and $3.8 million in fiscal 1995 and 1996, respectively.
In addition, the Company recorded net losses in fiscal 1992, 1993, 1994, 1995
and 1996. In fiscal 1991, the Company adopted a plan to restructure a portion of
its distribution system. The plan included a process of supplementing its core
multi-route distribution system with single route distributors. In conjunction
with this plan, the Company recorded a restructuring charge of $29.8 million
(the "1991 Reserve") for costs and expenses related to the assumption of certain
distributor liabilities, losses from the temporary operation of Company-owned
routes and additional expenses.
During the third quarter of fiscal 1995, the Company shifted the focus from
the single-route distribution strategy to an emphasis on a multi-route
distribution system. As a result, the remaining 1991 Reserve of $9.6 million was
reversed. Management estimated that the Company would incur expenses of
approximately $6.5 million to restructure the distribution system and recorded a
new restructuring reserve in that amount. In addition to the $6.5 million
restructuring reserve charge, the Company recorded nonrecurring charges of
approximately $12.8 million associated with severance and other benefit costs
related to changes in the administrative and sales functions and the write-off
of certain assets.
The Company expects to continue to incur losses for the next several years
as it implements its new business strategy. There can be no assurance that the
Company's business strategy will be successful or that
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the Company will generate net income in the future. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business --
Business Strategy."
COMPETITION
The snack food industry is highly competitive. During the first half of the
1990's, several large industry participants contributed to significant price
competition within the snack food industry. Such price competition significantly
reduced profit margins for the industry and ultimately led to the withdrawal or
curtailment of operations of a number of snack food companies. Similar
competitive pressures or other factors could cause the Company's products to
lose market share or result in significant price erosion, which would have a
material adverse effect on the Company's results of operations.
The Company's principal products compete against food and snack products
manufactured and sold by numerous national and regional companies, some of which
are substantially larger and have greater resources than the Company, including
Frito-Lay, the Procter & Gamble Company and Nabisco Inc. ("Nabisco"). The
Company may be at a disadvantage compared to other companies which have greater
financial and operational resources than the Company. There can be no assurance
that the Company will be able to successfully compete for future business. See
"Business -- Competition."
The Company's net sales and unit volume could be negatively affected by its
inability to maintain or increase prices, changes in geographic or product mix,
a general decline in snack food consumption or the decision of its wholesale
customers, retailers, distributors or consumers to purchase competitors'
products instead of the Company's products. Wholesaler, retailer, distributor
and consumer purchasing decisions are influenced by, among other things, the
perceived absolute or relative overall value of the Company's products,
including their quality or pricing, compared to competitive products. Unit
volume and net sales could also be affected by pricing, purchasing, financing,
operational, advertising or promotional decisions made by wholesalers and
retailers which could affect the supply, or consumer demand for, the Company's
products.
RELIANCE ON DISTRIBUTOR NETWORK
Sales to the Company's network of independent and Company-owned
distributors accounted for approximately 62.6% of the Company's net sales in
fiscal 1996. Additionally, the distribution network warehouses consigned
inventory, makes deliveries and services National Accounts. Approximately 25.6%
of the Company's total net sales in fiscal 1996 were attributed to National
Accounts net sales. As of September 6, 1997, independent distributors operated
approximately 90.6% of the routes in the Company's distribution network. Because
the Company's distributors market the Company's products directly to retailers,
recruiting, developing and retaining qualified distributors who will perform
their work in accordance with the Company's specifications and quality standards
is extremely important to the Company's performance and there can be no
assurance that the distributors will comply with the Company's specifications
and standards. The Company must continually identify and evaluate new
distributors and re-evaluate existing ones. There can be no assurance that the
Company will continue to be able to identify, develop and retain sufficient
numbers of qualified distributors. In addition, the distributors, while
independent, are the representatives of the Company in their markets, and thus a
weak distributor can negatively impact the perception of the Company and hurt
the Company's performance.
The Company's independent distributors are independent contractors and are
responsible for securing their own financing for their distribution and
marketing costs. In the past, certain of the Company's distributors have been
unable to secure additional financing and have had to cease operations. There
can be no assurance that the Company's distributors will be able to meet their
future financing requirements, and thus be able to continue to distribute the
Company's products.
As of September 6, 1997, 33 distributors have entered into the 1997
Distributor Agreement, 346 of the distributors operate distributorships under
previous agreements with other terms and conditions and 564 of the distributors
operate under informal agreements or have not entered into any written
distribution agreement with the Company. Consequently, a significant number of
distributors are not contractually bound to continue their relationships with
the Company. See "Business -- Distribution."
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DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large part on the efforts and
abilities of its executive officers and there can be no assurance that the
Company will be able to retain such officers. In particular, the loss of Mr.
Divin, the Company's President and Chief Executive Officer, Mr. Gaston, the
Company's Senior Vice President and Chief Financial Officer or Mr. Barker, the
Company's Senior Vice President -- Marketing, could have a material adverse
effect on the Company's operations. The Company does not maintain key-person
life insurance policies on any of its executives. See "Management."
LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY
The Exchange Notes will constitute a new issue of securities with no
established trading market. Although the Initial Purchaser has informed the
Company that it currently intends to make a market in the Exchange Notes, it is
not obligated to do so and any such market making may be discontinued at any
time without notice. The Company does not intend to apply for listing of the
Exchange Notes on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System. Accordingly, there
can be no assurance as to the continuity or liquidity of any market for the
Notes and the Exchange Notes.
The liquidity of, and trading market for the Old Notes or the Exchange
Notes may also be adversely affected by general declines in the market for
similar securities. Such a decline may adversely affect such liquidity and
trading markets independent of the financial performance of, and prospects for,
the Company.
LIMITATIONS ON SECURITY INTEREST
The Exchange Notes will be secured by a first priority lien and security
interest in the Collateral, subject to certain rights and interests of Congress
in intellectual property, contract rights, books and records and products and
proceeds thereof (including insurance proceeds) and certain assets of the
Company under an intercreditor agreement (the "Congress Intercreditor
Agreement") between Congress and the Trustee (as defined). The Congress
Intercreditor Agreement provides that Congress shall have a security interest in
such assets for the limited purpose of exercising its remedies on the inventory
and receivables. See "Description of the Notes -- Security." As of September 6,
1997, the net book value of the Collateral was approximately $100.3 million;
however, the Company has not conducted an appraisal of the Collateral. Some or
all of the Collateral will be illiquid and may have no readily ascertainable
market value. Accordingly, there can be no assurance that the Collateral could
be sold or, if sold, that the value of the Collateral will be sufficient to
repay obligations under the Notes. The Collateral release provisions of the
Indenture permit the release of Collateral without substituting collateral of
equal value under certain limited circumstances. See "Description of the Notes
- -- Security," and "-- Possession, Use and Release of Collateral."
In addition, the Class A Preferred Stock may in certain instances be
exchanged into Exchange Notes. Such exchange would increase the principal amount
of Exchange Notes outstanding up to a maximum of $10.0 million, and in turn
would dilute the collateral coverage of the Exchange Notes. See "Description of
Capital Stock."
The right of the Trustee (as defined) under the Indenture and the Security
Documents (as defined in the Indenture) to foreclose upon the Collateral upon
the occurrence of an event of default on the Exchange Notes is likely to be
significantly impaired by applicable bankruptcy law if a bankruptcy or
reorganization case were to be commenced by or against the Company. Under
applicable bankruptcy law, secured creditors such as the holders of the Exchange
Notes are prohibited from foreclosing upon or disposing of a debtor's property
without prior bankruptcy court approval. Moreover, applicable bankruptcy law
permits the debtor to continue to retain and to use collateral even though the
debtor is in default under the applicable debt instruments, provided that the
secured creditor is given "adequate protection." The meaning of the term
"adequate protection" may vary according to circumstances, but it is intended in
general to protect the value of the secured creditor's interest in the
collateral. In view of the lack of a precise definition of the term "adequate
protection" and the broad discretionary powers of a bankruptcy court, it is
impossible to predict when the Trustee could obtain or dispose of the Collateral
or whether or to what extent holders of the Exchange Notes
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<PAGE> 21
would be compensated for any delay in payment or loss of value of the Collateral
through the requirement of "adequate protection." If a bankruptcy court were to
determine that the value of the Collateral were insufficient to repay all
amounts due in respect of the Exchange Notes, the holders of Exchange Notes
would become holders of "under secured claims" and, as such, would be unable to
receive payments of accruals of interest, costs and attorneys' fees during the
debtor's bankruptcy proceeding.
Certain of the Collateral is located in California, which has various legal
restrictions regarding the disposition of real property collateral, including
the following restrictions. Under California law and case law interpretations,
following a foreclosure sale of real property the right of a secured party to
obtain a deficiency judgment against an obligor (i.e., the difference between
the amount realized on foreclosure and the fair market value thereof) is
limited. No deficiency judgment is permitted under California law following a
non-judicial sale under the power of sale provision in a California deed of
trust. Other California statutes require that a secured party exhaust the
security afforded under the deed of trust by foreclosure before bringing a
contract claim against the obligor for recovery of the debt.
DISTRIBUTOR FINANCING ARRANGEMENTS WITH STI
Approximately 390 of the Company's distributors have financing arrangements
with STI. In the event these distributors default and STI subsequently
forecloses on some or all of the collateral pledged by such distributors, STI
will control certain of the Company's distribution assets and routes. STI will
have the ability to resell any assets and routes on which it forecloses. The
Company will have a first-option to purchase any such assets or routes at 40.0%
of the outstanding obligation to which such assets or routes relate. There can
be no assurance that the Company will have the ability to purchase such assets
or routes or that the Company will choose to do so. In the event the Company
cannot or does not purchase such assets or routes, STI can retain ownership or
sell the assets or routes to any other person, including a competitor of the
Company. The loss by the Company of the ability to control such assets or routes
could have a material adverse effect on the Company. In addition, in certain
circumstances STI can maintain deficiency claims against a distributor even
after foreclosing on the assets and routes pledged by such distributor to STI.
In such event, (a) the Company's relationship with its distributors generally
may suffer or (b) the Company may be subject to counterclaims by such
distributor.
COMPANY REPURCHASE REQUIREMENT
Subject to certain conditions, the Company is obligated to repurchase, for
either cash or a note, distributorships and distributorship assets from certain
independent distributors at a multiple of 3.5 times the amount of the average
annual Net Free Cash Flow (as defined in the 1997 Distributor Agreement) of the
distributorship, measured over the preceding three years. Net Free Cash Flow is
calculated by the Company in accordance with limitations and exclusions set
forth in the 1997 Distributor Agreement (as defined) and excludes debt service,
income taxes, dividends, owner withdrawals (other than reasonable management
compensation) and any receipts arising from service to the Company as a delivery
agent to National Accounts. This repurchase requirement is conditioned upon a
distributor's full compliance with all of the terms and conditions of the 1997
Distributor Agreement during the three full years preceding the date of the
request. As of September 6, 1997, 33 of the Company's distributors have entered
into the 1997 Distributor Agreement, the first of which became effective in
early 1997. Consequently, the Company will not be required to repurchase
distributorships, if so requested, pursuant to the 1997 Distributor Agreement
until the first distributors become eligible in 2000. In the event a significant
portion of the Company's distributors were to request and then qualify for the
benefits of the Company's repurchase obligation, there can be no assurance that
the Company would have funds available to make such repurchases. The inability
to repurchase the routes could have a material adverse effect on the Company.
See "Business -- Distribution."
FOOD PRODUCT INDUSTRY OPERATIONS
The Company's continued success depends on the timely introduction of
successful new products. The Company generally does not develop new types of
snack foods, but instead creates products designed to meet existing consumer
demand based on proven product concepts already in the market. The
manufacturing,
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marketing and sale of either existing or newly developed food products involve
many risks and are subject to numerous factors outside of the Company's control.
There can be no assurance that the Company will realize profits from any of its
current product lines or from new products which may be either developed or
acquired by the Company in the future.
Food products companies are subject to a number of risks, including without
limitation: adverse changes in general economic conditions; evolving consumer
preferences; nutritional and health-related concerns; shortages in supply of and
fluctuations in raw materials prices; changes in food distribution dynamics such
as the increasing buying power of large supermarket chains and other retail
outlets; federal, state and local food processing and labeling controls;
consumer product liability claims; risks of product tampering or other quality
assurance concerns; and the availability and expense of liability insurance.
CHANGE OF CONTROL OFFER
If a Change of Control shall occur at any time, then each holder of the
Exchange Notes shall have the right to require that the Company purchase such
holder's Exchange Notes for cash in an amount equal to 101.0% of the principal
amount of such Exchange Notes plus accrued and unpaid interest, if any, to the
date of purchase pursuant to procedures set forth in the Indenture. There can be
no assurance that, in the event of a Change of Control, the Company will have
available funds sufficient to make any such purchases. The failure of the
Company upon a Change of Control to offer to purchase the Exchange Notes or to
consummate the purchase requested by the holders of the Exchange Notes would
constitute an event of default under the Indenture. Such event of default would
permit acceleration of indebtedness under other indebtedness agreements that
contain cross-acceleration or cross-default provisions. See "Description of
Other Senior Indebtedness" and "Description of the Notes -- Events of Default."
TFH STOCKHOLDERS' LETTERS OF CREDIT
In connection with the 1988 Acquisition (as defined), the Company
indemnified its predecessor for the latter's obligations with respect to the
Industrial Development Revenue Bonds. The Company supported such indemnification
by posting the Company's Letter of Credit. As a part of the 1996 Refinancing,
the TFH Stockholders replaced the Company's Letter of Credit with the TFH
Stockholders' Letters of Credit. In connection with the 1996 Refinancing, the
TFH Stockholders assigned their reimbursement rights against the Company to TFH
and TFH agreed to subordinate its rights to Congress. TFH has waived any rights
or claims to reimbursement by the Company in connection with such TFH
Stockholders' Letters of Credit through December 31, 2005 and has subordinated
its rights to reimbursement to the Notes. Thereafter, subject to the terms of
the subordination, the Company will be obligated to reimburse TFH for any draws
which have been or are subsequently made on the TFH Stockholders' Letters of
Credit. There can be no assurance that, in the event of a draw on any of the TFH
Stockholders' Letters of Credit after 2005, the Company will have available
funds sufficient to reimburse TFH. The inability of the Company to so reimburse
TFH or the TFH Stockholders could have a material adverse effect on the Company.
See "Description of Other Senior Indebtedness -- Description of Industrial
Development Revenue Bonds" and "Certain Transactions."
ENVIRONMENTAL CONCERNS
Real property pledged as security to a lender may be subject to known and
unforeseen environmental risks. Under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), under certain
limited circumstances, a lender may be considered a current owner or operator of
a property who can be held liable under CERCLA for certain response costs and
damages in the event of a release of hazardous materials from or on property.
There may be similar risks under various state laws and common law theories.
Under the Indenture, the Trustee may, prior to taking certain actions and
exercising certain remedies on behalf of the holders of the Notes, request that
the holders provide an indemnification against the Trustee's costs, expenses and
liabilities. It is possible that CERCLA or other cleanup costs could become a
liability of the Trustee and cause a loss to any holders that provided an
indemnification. In addition, holders may act directly rather than through the
Trustee, in specified circumstances,
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in order to pursue a remedy under the Indenture. If the holders exercise that
right, they could be deemed lenders that are subject to the risks discussed
above. See "-- Government Regulation."
AVAILABILITY AND PRICE OF RAW MATERIALS
The availability and cost of raw materials for the manufacture of the
Company's products, including potatoes, nuts, corn, flour and oils, are subject
to crop size and yield fluctuations caused by factors beyond the Company's
control, such as weather conditions and plant diseases. Additionally, the supply
of potatoes, nuts and other raw materials used in the Company's products could
be reduced by a determination of the United States Department of Agriculture
(the "USDA") or other government agency that certain pesticides, herbicides or
other chemicals used by growers have left harmful residues on portions of the
crop or that the crop has been contaminated. Shortages in the supply of and
increases in the prices of raw materials used by the Company in its products
could have an adverse impact on the Company's profitability. Occasionally, the
Company makes advance purchase commitments of raw materials significant to its
business in order to lock in what is perceived to be favorable pricing. In some
cases, the Company also seeks to protect itself from basic market price
fluctuations of products through hedging transactions. See "Business -- Sources
and Availability of Raw Materials."
The Company currently purchases its supply of peanuts indirectly from
approximately 175 independent farmers. The Company finances such purchases
through an arrangement with the Golden Peanut Company ("Golden Peanut"). If the
arrangement with Golden Peanut were terminated, the Company would have to seek
another source for financing its purchase of peanuts. There is no assurance that
the Company could find such a source. Delays or increased costs resulting
therefrom or from having to purchase peanuts in the open market could have a
material adverse effect on the Company.
The Company purchases all of its requirements for non-agricultural raw
materials, including packaging, on the open market. Although the Company has not
experienced any difficulty in obtaining adequate supplies of such items,
occasional periods of short supply of certain raw materials may occur. See
"Business -- Sources and Availability of Raw Materials."
SEASONALITY; CASH NEEDS
The Company has greater cash needs in its first and second fiscal quarters
due to purchases of peanuts and the payment of distributor and trade account
bonuses and management incentives and to a lesser extent, seasonal sales
increases. Although management believes that the availability under the new
Working Capital Facility and its arrangement with Golden Peanut, together with
the cash generated from operations, will be adequate to provide for its cash
requirements, there can be no assurance that such funds will be adequate in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
GOVERNMENT REGULATION
The Company's production facilities and products are subject to numerous
federal, state and local laws and regulations concerning, among other things,
health and safety matters, food manufacturing, food regulation, product
labeling, advertising and the environment. Compliance with current federal,
state and local laws and regulations is not expected to have a material adverse
effect upon the earnings or competitive position of the Company. However, the
Company cannot predict the effect, if any, of laws and regulations that may be
enacted in the future, or of changes in the enforcement of existing laws and
regulations that are subject to extensive regulatory discretion. See "Business
- -- Government Regulation."
FRAUDULENT TRANSFER CONSIDERATIONS
Under relevant federal and state fraudulent transfer and similar laws, if a
court were to find, in a bankruptcy or reorganization case or similar proceeding
or in a lawsuit by or on behalf of creditors of the Company, that the Company
received less than fair consideration or reasonably equivalent value for
incurring the indebtedness represented by the Notes, and, at the time of such
incurrence or issuance, as applicable, the
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Company (i) was insolvent or was rendered insolvent by reason of such
incurrence, (ii) was engaged or about to engage in a business or transaction for
which its remaining property constituted unreasonably small capital or (iii)
intended to incur, or believed it would incur, debts beyond its ability to pay
as such debts mature, such court could, among other things, (a) void all or a
portion of the Company's obligations to the holders of the Notes and/or (b)
subordinate the Company's obligations to the holders of the Notes to other
existing and future indebtedness of the Company the effect of which would be to
entitle such other creditors to be paid in full before any payment could be made
on the Notes. The measure of insolvency for purposes of determining whether a
transfer is avoidable as a fraudulent transfer varies depending upon the law of
the jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all of its liabilities were greater than the
value of its property at a fair valuation, or if the present fair salable value
of the debtor's assets were less than the amount required to repay its probable
liability on its debts as they become absolute and mature. There can be no
assurance as to what standard a court would apply in order to determine
solvency.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Offering Memorandum which are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
set forth in such forward-looking statements. These forward-looking statements
are based on assumptions which the Company believes are reasonable. However,
there can be no assurance that any forward-looking statement will be realized or
that actual results will not be significantly higher or lower than set forth in
such forward-looking statement. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Cautionary Statements Related
to Forward-Looking Statements."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on October 14, 1997 to the Initial
Purchaser, which placed the Old Notes with institutional investors. In
connection therewith, the Company and the Initial Purchaser entered into the
Registration Rights Agreement, pursuant to which the Company agreed that it
would, at its cost, for the benefit of the holders of the Old Notes (the
"Holders"), (i) within 60 days after the date of original issuance of the Old
Notes (the "Filing Date"), file with the Commission the Registration Statement
(of which this Prospectus forms a part) under the Securities Act with respect to
the Exchange Offer to exchange the Old Notes for Exchange Notes of the Company
terms substantially identical in all material respects to the Old Notes (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions) and (ii) cause such Registration Statement to be declared
effective under the Securities Act within 150 days following the date of
original issuance of the Old Notes. Upon the Registration Statement being
declared effective, the Company will offer the Exchange Notes in exchange for
surrender of the Old Notes. The Company will keep the Exchange Offer open for
not less than 30 days (or longer if required by applicable law) after the date
notice of the Exchange Offer is mailed to the Holders. For each of the Old Notes
surrendered to the Company pursuant to the Exchange Offer, the Holder who
surrendered such Old Notes will receive an Exchange Note having a principal
amount equal to that of the surrendered Notes. Interest on each Exchange Note
will accrue (A) from the later of (i) the last interest payment date on which
interest was paid on the Old Note surrendered in exchange therefor, or (ii) if
the Old Note is surrendered for exchange on a date in a period which includes
the record date for an interest payment date to occur on or after the date of
such exchange and as to which interest will be paid, the date of such interest
payment date or (B) if no interest has been paid on the Old Notes, from the date
of original issuance of the Old Notes.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the
Exchange Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for sale, resold or otherwise transferred by any holder with
compliance with the registration and prospectus deliver provisions of the
Securities Act. Instead, under existing interpretations of the Commission
contained in several no-action letters to third parties, management of the
Company believes the Exchange Notes will be freely transferable by holders
thereof (other than affiliates of the Company) after the Exchange Offer without
further registration under the Securities Act; provided, however, that each
Holder that wishes to exchange its Old Notes for Exchange Notes will be required
to represent (i) that any Exchange Notes to be received by it will be acquired
in the ordinary course of its business, (ii) that at the time of the
commencement of the Exchange Offer it has no arrangement or understanding with
any person to participate in the distribution (within the meaning of Securities
Act) of the Exchange Notes in violation of the Securities Act, (iii) that it is
not an "affiliate" (as defined in Rule 405 promulgated under the Securities Act)
of the Company, (iv) if such Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, the distribution of Exchange Notes
and (v) if such Holder is a broker-dealer (a "Participating Broker-Dealer") that
will receive Exchange Notes for its own account in exchange for Old Notes that
were acquired as a result of market-making or other trading activities, that it
will deliver this Prospectus in connection with any resale of such Exchange
Notes. The Company will agree to make available, during the period required by
the Securities Act, this Prospectus for use by Participating Broker-Dealers and
other persons, if any, with similar prospectus delivery requirements for use in
connection with any resale of Exchange Notes.
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company is not permitted to
effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 195
days of the date of the original issuance of the Old Notes, (iii) in certain
circumstances, certain holders of unregistered Exchange Notes so request, or
(iv) in the case of any Holder that participates in the Exchange Offer, such
Holder does not receive Exchange Notes on the date of the exchange that may be
sold without restriction under state and federal securities laws (other than due
solely to the status of such Holder as an affiliate of the Company or within the
meaning of the Securities Act), then in each case, the Company will (x) promptly
deliver to the Holders and the Trustee written notice thereof and (y) at their
sole expense, (a) as promptly as practicable, file a shelf registration
statement covering resales of
22
<PAGE> 26
the Old Notes (the "Shelf Registration Statement"), (b) use their best efforts
to cause the Shelf Registration Statement to be declared effective under
Securities Act and (c) use their best efforts to keep effective the Shelf
Registration Statement until the earlier of three years after its effective date
or such time as all of the applicable Old Notes have been sold thereunder. The
Company will, in the event that a Shelf Registration Statement is filed, provide
to each Holder copies of the prospectus that is a part of the Shelf Registration
Statement, notify each such Holder when the Shelf Registration Statement for the
Old Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the Old Notes. A Holder that sells Old Notes
pursuant to the Shelf Registration Statement will be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
Securities Act in connection with such sales and will be bound by the provisions
of the Registration Rights Agreement that are applicable to such a Holder
(including certain indemnification rights and obligations).
If the Company fails to comply with the above provision or if the
Registration Statement or the Shelf Registration Statement fails to become
effective, then, as liquidated damages, additional interest (the "Additional
Interest") shall become payable in respect of the Old Notes as follows:
(i) if (A) neither the Registration Statement nor the Shelf
Registration Statement is filed with the Commission on or prior to the
Filing Date or (B) notwithstanding that the Company has consummated or will
consummate an Exchange Offer, the Company is required to file a Shelf
Registration Statement and such Shelf Registration Statement is not filed
on or prior to the date required by the Registration Rights Agreement, then
commencing on the day after either such required filing date, Additional
Interest shall accrue on the principal amount of the Old Notes at a rate of
0.50% per annum for the first 90 days immediately following each such
filing date, such Additional Interest rate increasing by an additional
0.50% per annum at the beginning of each subsequent 90-day period; or
(ii) if (A) neither the Registration Statement nor the Shelf
Registration Statement is declared effective by the Commission on or prior
to 150 days after the applicable filing date or (B) notwithstanding that
the Company has consummated or will consummate an Exchange Offer, the
Company is required to file a Shelf Registration Statement and such Shelf
Registration Statement is not declared effective by the Commission on or
prior to the 90th day following the date such Shelf Registration Statement
was filed, then, commencing on the day after the required effectiveness
date, Additional Interest shall accrue on the principal amount of the Old
Notes at a rate of 0.50% per annum for the first 90 days immediately
following such date, such Additional Interest rate increasing by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Company has not exchanged Exchange Notes for all Old
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 45th day after the date on which the Registration
Statement was declared effective or (B) if applicable, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
third anniversary from the date such Shelf Registration Statement was
declared effective (other than after such time as all Old Notes have been
disposed of thereunder), then Additional Interest shall accrue on the
principal amount of the Old Notes at a rate of 0.50% per annum for the
first 90 days commencing on (x) the 46th day after such Exchange Offer
effective date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective in the case of (B) above,
such Additional Interest rate increasing by an additional 0.50% per annum
at the beginning of each subsequent 90-day period; provided, however, that
the Additional Interest rate on the Notes may not exceed in the aggregate
1.00% per annum; provided, further, however, that (1) upon the filing of
the Registration Statement or a Shelf Registration Statement (in the case
of clause (i) above), (2) upon the effectiveness of the Registration
Statement or a Shelf Registration Statement (in the case of clause (ii)
above), or (3) upon the exchange of Exchange Notes for all Old Notes
tendered (in the case of clause (iii) (A) herein), or upon the
effectiveness of the Shelf Registration Statement which had ceased to
remain effective (in the case of clause (iii) (B) herein), Additional
Interest on the Old Notes as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
23
<PAGE> 27
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash on May 15 and November 15 of each year to
the Holders of record on the preceding May 1 or November 1, respectively.
The Old Notes are designated for trading in the PORTAL market. To the
extent Old Notes are tendered and accepted in the Exchange Offer, the principal
amount of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, Holders who were eligible to participate in the Exchange Offer but who
did not tender their Old Notes will not be entitled to certain rights under the
Registration Rights Agreement and such Old Notes will continue to be subject to
certain restrictions on transfer. Accordingly, the liquidity of the market for
the Old Notes could be adversely affected.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which will be available upon request to the Company.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m. Eastern Standard Time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the Exchange Notes
have been registered under the Securities Act and therefore will not bear
legends restricting their transfer and will not contain certain provisions
providing for payment of liquidated damages under certain circumstances relating
to the Registration Rights Agreement, which provisions will terminate upon the
consummation of the Exchange Offer. The Exchange Notes will evidence the same
debt as the Old Notes and will be entitled to the benefits of the Indenture
under which the Old Notes were, and the Exchange Notes will be, issued.
As of the date of this Prospectus, $60.0 million aggregate principal amount
of the Old Notes are outstanding. The Company has fixed the close of business on
February 10, 1998, as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will be sent. As of such date, there was one registered Holder.
Holders do not have any appraisal or dissenters' rights under the Delaware
General Corporation Law (the "DGCL") or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral notice (confirmed in writing) or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering Holders for the purpose of the exchange of Old Notes.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, without expense, to
the tendering Holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
24
<PAGE> 28
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., Eastern Standard Time, on
March 17, 1998, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral notice (confirmed in writing) or written notice
and will make a public announcement thereof prior to 9:00 a.m., Eastern Standard
Time, on the next business day after each previously scheduled expiration date.
The Company reserves the right, in its sole discretion: (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under "-- Conditions" shall not have been satisfied,
to terminate the Exchange Offer, by giving oral notice (confirmed in writing) or
written notice of such delay, extension or termination to the Exchange Agent; or
(ii) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by a public announcement thereof. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment by means of a Prospectus
supplement that will be distributed to the registered Holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the amendment and the manner of disclosure to
the registered Holders, if the Exchange Offer would otherwise expire during such
five-to-ten business-day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcements, other than by making a timely release
to the Dow Jones News Service.
PROCEDURES FOR TENDERING
The tender of Old Notes by a Holder thereof pursuant to one of the
procedures set forth below and the acceptance thereof by the Company will
constitute a binding agreement between such Holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the letter
of Transmittal. This Prospectus, together with the Letter of Transmittal, will
first be sent on or about February 13, 1998, to all Holders of Old Notes known
to the Company and the Exchange Agent.
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer.
A Holder who wishes to tender any Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, including any other required documents, to
the Exchange Agent prior to 5:00 p.m., Eastern Standard Time, on the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with the letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company, (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the Holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Old Notes, Letter of Transmittal and other required documents
must be received by the Exchange Agent at the address set forth below under "--
Exchange Agent" prior to 5:00 p.m., Eastern Standard Time, on the Expiration
Date.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder and delivery will be deemed made only when actually received by the
Exchange Agent. Instead of delivery by mail, it is recommended that Holders use
an overnight or hand delivery service. If such delivery is by mail, it is
recommended that registered mail, return receipt requested, be used and proper
insurance be obtained. In all cases, sufficient time should be allowed to assure
timely delivery to the Exchange Agent before the Expiration Date. No Letter of
Transmittal or Old Notes should be sent to the Company.
25
<PAGE> 29
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered Holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined) unless the
Old Notes tendered pursuant thereto are tendered (i) by a registered Holder who
has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal, or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 promulgated under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered Holder as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that the Company
determines are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
By tendering, each Holder will represent to the Company, among other
things, that (i) the Exchange Notes acquired by the Holder and any beneficial
owners of Old Notes pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such Exchange Notes, (ii)
neither the Holder nor such beneficial owner has an arrangement or understanding
with any person to participate in the distribution of such Exchange Notes, (iii)
neither the Holder nor such beneficial owner nor any such person is engaging in
or intends to engage in a distribution of such Exchange Notes, and (iv) neither
the Holder nor any such other person is an "affiliate," as defined under Rule
405 promulgated under the Securities Act, of the Company. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Old Notes,
where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities (other than Old Notes
acquired directly from the Company), may participate in the
26
<PAGE> 30
Exchange Offer but may be deemed an "underwriter" under the Securities Act and,
therefore, must acknowledge in the Letter of Transmittal that it will deliver a
Prospectus in connection with any re-sale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a Prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities act. See "Plan of Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedure for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimiles thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Deliver (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof), together with the certificates(s)
representing the Old Notes, or a Book-Entry Confirmation, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within three New York Stock Exchange
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender the Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., Eastern Standard Time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the name
of the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes
27
<PAGE> 31
into the name of the persons withdrawing the tender, and (iv) specify the name
in which any such Old Notes are to be registered, if different from that of the
Depositor. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company in
its sole discretion, which determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be issued
with respect thereto unless the Old Notes so withdrawn are validly re-tendered.
Properly withdrawn Old Notes may be re-tendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Boo-Entry Transfer Facility pursuant to
the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for the
Old Notes).
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or
(b) any action or proceeding is instituted or threatened in any court
or by any governmental agency that might materially impair the ability of
the Company to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect
to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall deem necessary for the consummation of the Exchange
Offer.
If the Company receives an opinion of counsel that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering Holders (or, in the case of Old Notes
tendered by book-entry transfer provisions described above, such Old Notes will
be credited to an account maintained with such Book-Entry Transfer Facility),
(ii) extend the Exchange Offer and retain all Old Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of Holders to
withdraw such Old Notes (see "-- Withdrawal of Tenders"), or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change in the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered Holders, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon the significance
of the waiver and the manner of disclosure to the registered Holders, if the
Exchange Offer would otherwise expire during five-to-ten-business-day period.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of
28
<PAGE> 32
Transmittal and requests for Notice of Guaranteed Delivery should be directed to
the Exchange Agent addressed as follows:
<TABLE>
<C> <C>
Via Mail: By Facsimile:
IBJ Schroder Bank & Trust Company (212) 858-2611
P.O. Box 84
Bowling Green Station Confirm by Telephone:
New York, NY 10274-0084 (212) 858-2103
Attn: Reorganization Operations Dept.
By Hand/Overnight Delivery:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attn: Securities Processing Window,
Subcellar One, (SC-1)
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting fees and legal fees, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value less accrued original issue discount, as reflected in
the Company's accounting records on the date of the exchange. Accordingly, no
gain or loss for accounting purposes will be recognized as a result of
consummation of the Exchange Offer. The expenses of the Exchange Offer and the
unamortized expenses related to the issuance of the Old Notes will be amortized
over the term of the Exchange Notes.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the Exchange Offer. The
net proceeds from the Old Notes Offering were approximately $56.8 million (after
deduction of discounts to the Initial Purchaser and other expenses). Such net
proceeds, plus certain of the Company's operating cash were used to (i) repay
the Congress Debt and accrued interest thereon; (ii) repay $40.0 million of the
outstanding TFH Debt; and (iii) pay $10.0 million in full satisfaction of the
STI Debt.
29
<PAGE> 33
CAPITALIZATION
The following table sets forth the historical short-term debt and
capitalization of the Company as of September 6, 1997 and the capitalization of
the Company to give effect to the Old Note Offering and the application of the
net proceeds therefrom, as if it occurred on September 6, 1997. This table
should be read in conjunction with the historical and pro forma financial
statements and the related notes appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 6, 1997
--------------------------
AS
HISTORICAL ADJUSTED(A)
----------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Short-term debt:
Current portion of Congress Debt.......................... $ 1,803 $ --
Current portion of capital lease and other debt
obligations............................................ 26 26
-------- --------
Total short-term debt.................................. $ 1,829 $ 26
======== ========
Long-term debt:
TFH Debt.................................................. $ 59,828 $ --
Accrued interest due to TFH............................... 8,004 --
Senior Secured Notes...................................... -- 60,000
Congress Debt............................................. 6,684 --
Industrial Development Revenue Bonds...................... 10,000 10,000
Note payable to STI....................................... 8,475 --
Capital lease and other debt obligations.................. 307 307
-------- --------
Total long-term debt................................... 93,298 70,307
Exchangeable Preferred Stock, $.01 par value -- 7,000 shares
authorized, Class A, 7,000 shares issued and
outstanding............................................... -- 7,000
Shareholders' equity:
Preferred Stock, $.01 par value -- 21,737 shares
authorized, Class B, 21,737 shares issued and
outstanding............................................ -- 20,832
Common Stock, $.01 par value -- 10,000 shares authorized,
5,000 shares issued and outstanding.................... -- --
Additional paid-in capital................................ 42,725 43,725
Accumulated deficit....................................... (29,713) (30,712)
-------- --------
Total shareholders' equity............................. 13,012 33,845
-------- --------
Total capitalization........................................ $106,310 $111,152
======== ========
</TABLE>
- ---------------
(a) The Company used the net proceeds from the Old Note Offering to repay the
Congress Debt and accrued interest thereon, to repay a portion of the TFH
Debt and accrued interest thereon, and to fully satisfy the STI Debt and
accrued interest thereon. The TFH Debt not otherwise repaid from the
proceeds of the Old Note Offering were exchanged for Class A Preferred Stock
and Class B Preferred Stock. See "1997 Refinancing."
30
<PAGE> 34
SELECTED HISTORICAL FINANCIAL DATA
Set forth below are certain summary historical financial data for the
Company as of and for the 36-week periods ended September 6, 1997 and September
7, 1996, fiscal years 1996, 1995 and 1994, and for the period from April 25,
1993 through January 1, 1994, as well as selected historical financial data for
the Company prior to the 1993 Refinancing (the "Predecessor") as of April 24,
1993 and January 2, 1993 and for the period from January 3, 1993 through April
24, 1993 and fiscal 1992. The selected historical financial information for the
Company and the Predecessor as of and for the full fiscal years and periods
indicated were derived from the financial statements for the Company which were
audited by Arthur Andersen LLP, independent public accountants. The data as of
and for the 36-week periods ended September 6, 1997 and September 7, 1996 are
unaudited, but in the opinion of the Company's management, reflect all
adjustments (which comprise only normal and recurring accruals) necessary for a
fair presentation of the financial position of the results of operations for
such periods. The results for the 36-week period ended September 6, 1997 may not
be indicative of the results to be expected for the 1997 fiscal year. The
summary historical financial information set forth below should be read in
conjunction with the financial statements of the Company and the notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus. Financial data of the Company
subsequent to the 1993 Refinancing reflect the purchase accounting treatment of
the 1993 Refinancing. Accordingly, the financial data of the Predecessor and the
Company are not comparable in all material respects, since such data reflect the
financial positions and results of operations of these two separate entities.
Selected historical financial data on following page.
31
<PAGE> 35
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------
FOR THE FOR THE
PERIOD FROM PERIOD FROM
JANUARY 3, APRIL 25,
FISCAL YEAR 1993 1993 FISCAL YEAR ENDED
ENDED THROUGH THROUGH ---------------------------------------------
JANUARY 2, APRIL 24, JANUARY 1, DECEMBER 31, DECEMBER 30, DECEMBER 28,
1993 1993 1994 1994 1995 1996
(DOLLARS IN THOUSANDS) ----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $ 224,553 $ 67,073 $ 149,730 $ 215,650 $ 198,340 $ 205,856
Costs of goods sold..... (132,455) (39,675) (88,391) (130,774) (125,396) (133,624)
----------- ----------- ----------- ------------ ------------ ------------
Gross profit.......... 92,098 27,398 61,339 84,876 72,944 72,232
Expenses and other
income:
Selling and
administrative
expenses............ (77,875) (25,165) (52,060) (78,937) (75,783) (69,735)
Amortization of
goodwill and
intangible assets... (2,385) (835) (1,051) (1,678) (1,678) (1,678)
Other income, net..... 1,207 379 1,958 1,890 3,296 1,309
Restructuring and
nonrecurring
charges............. (1,000) (1,945) -- -- (9,570)(a) (3,793)(b)
----------- ----------- ----------- ------------ ------------ ------------
(80,053) (27,566) (51,153) (78,725) (83,735) (73,897)
----------- ----------- ----------- ------------ ------------ ------------
Income (loss) from
operations.......... 12,045 (168) 10,186 6,151 (10,791) (1,665)
Interest expense, net... (15,696) (5,362) (3,859) (6,405) (7,870) (9,402)
----------- ----------- ----------- ------------ ------------ ------------
Income (loss) before
provision (benefit)
for income taxes.... (3,651) (5,530) 6,327 (254) (18,661) (11,067)
Provision for (benefit
from) income taxes.... -- -- 2,541 500 (400) --
----------- ----------- ----------- ------------ ------------ ------------
Net income (loss)..... $ (3,651) $ (5,530) $ 3,786 $ (754) $ (18,261) $ (11,067)
=========== =========== =========== ============ ============ ============
OTHER DATA:
Operating cash flow..... $ 11,230 $ 932 $ 3,242 $ 9,372 $ (4,825) $ 8,829
Investing cash flow..... (6,642) (1,138) 5,259 (8,570) (7,304) (5,376)
Financing cash flow..... (639) (64) 1,654 1,785 7,115 (3,047)
EBITDA(c)............... 25,646 4,091 15,849 15,588 (1,196) 6,291
Adjusted EBITDA(d)...... 26,646 6,036 15,849 15,588 8,374 10,084
Cash interest
expense(e)............ 11,777 3,323 5,365 7,002 6,765 2,512
Depreciation and
amortization.......... 13,601 4,259 5,663 9,437 9,595 7,956
Capital expenditures.... 5,661 1,794 4,625 9,006 7,304 5,798
Ratio of Adjusted EBITDA
to net interest
expense(f)............ 1.70x 1.13x 4.11x 2.43x 1.06x 1.07x
Ratio of Adjusted EBITDA
to cash interest
expense(f)............ 2.26 1.82 2.95 2.23 1.24 4.01
Ratio of earnings to
fixed charges(g)(h)... -- -- 1.85 -- -- --
BALANCE SHEET DATA (AS
OF END OF PERIOD):
Working capital
(deficit)............. $ (125,132)(i) $ (129,374)(i) $ 14,455 $ 13,161 $ (11,565) $ 7,362
Total assets............ 147,360 145,559 161,629 162,403 138,500 139,790
Total debt.............. 136,872 136,845 72,906 70,054 75,297 88,516
Class A Preferred
Stock................. -- -- -- -- --
Total shareholders'
(deficit) equity...... (52,642) (57,652) 46,601 45,130 27,586 16,519
<CAPTION>
36-WEEK PERIOD ENDED
------------------------------
SEPTEMBER 7, SEPTEMBER 6,
1996 1997
(DOLLARS IN THOUSANDS) ------------ ------------
(UNAUDITED)
<S> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $ 141,369 $ 149,337
Costs of goods sold..... (91,249) (92,529)
------------ ------------
Gross profit.......... 50,120 56,808
Expenses and other
income:
Selling and
administrative
expenses............ (47,364) (52,757)
Amortization of
goodwill and
intangible assets... (1,161) (1,161)
Other income, net..... 285 1,130
Restructuring and
nonrecurring
charges............. (3,493)(b) --
------------ ------------
(51,733) (52,788)
------------ ------------
Income (loss) from
operations.......... (1,613) 4,020
Interest expense, net... (6,271) (7,181)
------------ ------------
Income (loss) before
provision (benefit)
for income taxes.... (7,884) (3,161)
Provision for (benefit
from) income taxes.... 342 346
------------ ------------
Net income (loss)..... $ (8,226) $ (3,507)
============ ============
OTHER DATA:
Operating cash flow..... $ 806 $ 3,124
Investing cash flow..... (3,879) (3,231)
Financing cash flow..... 1,814 856
EBITDA(c)............... 4,206 10,174
Adjusted EBITDA(d)...... 7,699 10,174
Cash interest
expense(e)............ 752 1,947
Depreciation and
amortization.......... 5,819 6,154
Capital expenditures.... 4,001 3,265
Ratio of Adjusted EBITDA
to net interest
expense(f)............ 1.23x 1.42x
Ratio of Adjusted EBITDA
to cash interest
expense(f)............ 10.24 5.23
Ratio of earnings to
fixed charges(g)(h)... -- --
BALANCE SHEET DATA (AS
OF END OF PERIOD):
Working capital
(deficit)............. $ 6,804 $ 13,912
Total assets............ 143,372 138,013
Total debt.............. 89,500 87,123
Class A Preferred
Stock................. -- --
Total shareholders'
(deficit) equity...... 19,360 13,012
</TABLE>
Footnotes on following page.
32
<PAGE> 36
Footnotes from previous page.
- ---------------
(a) During 1995, the Company recorded restructuring and nonrecurring charges
totaling $9.6 million. The charges included the following: (i) a
nonrecurring charge related to the reorganization of and reduction in
workforce and the administrative and sales functions ($4.2 million); (ii)
write-off of certain impaired assets ($8.6 million); (iii) a restructuring
charge related to its distribution system ($6.5 million); and (iv) the
reversal of the remainder of a prior restructuring reserve originally
established in 1991 ($9.7 million). See Note 2 to Notes to financial
statements included elsewhere in this Prospectus and "Risk Factors --
History of Losses".
(b) In 1996, the Company recorded a nonrecurring charge ($3.8 million) for
expenses associated with the refinancing of the Company's debt, $3.5 million
of which was recorded in the 36-week period ended September 7, 1996. See
Note 4 of notes to financial statements included elsewhere in this Offering
Memorandum and "Risk Factors -- History of Losses".
(c) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
represents the sum of income (loss) before income taxes plus interest
expense, depreciation and amortization. EBITDA is a widely accepted measure
of a Company's ability to incur and service debt, to undertake capital
expenditures, and to meet working capital requirements. EBITDA is not a
measure of financial performance under generally accepted accounting
principles ("GAAP") and should not be considered an alternative either to
net income as an indicator of the Company's operating performance or as an
indicator of the Company's liquidity.
(d) "Adjusted EBITDA" is EBITDA excluding restructuring and nonrecurring charges
of $1.0 million for fiscal 1992, $1.9 million for the period from January 3,
1993 through April 24, 1993, $9.6 million for fiscal 1995, $3.8 million for
fiscal 1996 and $3.5 million for the 36-week period ended September 7, 1996.
(e) Cash interest expense is net interest expense less amounts not paid in cash
for the period indicated including, among other things, interest accrued on
the TFH Debt of $7.8 million in fiscal 1996 and $5.5 million for the 36-week
period ended September 6, 1997.
(f) Ratio of Adjusted EBITDA to interest expense or cash interest expense
represents Adjusted EBITDA divided by net interest expense or cash interest
expense.
(g) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" consists of operating income (loss) before income taxes plus
fixed charges, and "fixed charges" consists of net interest expense and the
portion of rental expense deemed representative of the interest factor of
approximately $600,000 for fiscal 1992, $300,000 for the period from January
3, 1993 through April 24, 1993, $600,000 for the period from April 25, 1993
through January 1, 1994, $1.0 million for fiscal 1994, $900,000 for fiscal
1995, $800,000 for fiscal 1996, $650,000 for the 36-week period ended
September 7, 1996 and $950,000 for the 36-week period ended September 6,
1997.
(h) The deficiency of the earnings to fixed charges was $3.7 million, $5.5
million, $700,000, $18.3 million, $11.1 million, $8.2 million and $3.5
million for the year ended January 2, 1993, for the period from January 3,
1993 through April 24, 1993, for the years ended December 31, 1994, December
30, 1995 and December 28, 1996 and for the 36-week periods ended September
7, 1996 and September 6, 1997, respectively.
(i) Includes debt classified in current liabilities of $136.0 million and $136.1
million at January 2, 1993 and April 24, 1993, respectively.
33
<PAGE> 37
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The unaudited pro forma financial data of the Company as of and for the
36-week period ended September 6, 1997 and for the year ended December 28, 1996
are based on the historical financial information of the Company, adjusted to
give effect to the Offering as if it had occurred at the beginning of the
periods indicated. The pro forma data do not purport to represent what the
Company's financial position or results of operations actually would have been
if the Old Note Offering in fact had occurred at the beginning of the periods
indicated, or purport to project the Company's results of operations for any
future period or at any future date.
The pro forma data reflect: (i) the elimination of interest expense on the
TFH Debt ($7.8 million for the year ended December 28, 1996 and $5.5 million for
the 36-week period ended September 6, 1997), the Congress Debt ($300,000 for the
year ended December 28, 1996 and $700,000 for the 36-week period ended September
6, 1997), and the STI Debt ($400,000 for the year ended December 28, 1996 and
for the 36-week period ended September 6, 1997); (ii) additional interest
expense on the Notes and the Class A Preferred Stock ($7.1 million for the year
ended December 28, 1996 and $4.9 million for the 36-week period ended September
6, 1997); and (iii) the amortization of debt issuance costs ($400,000 for the
year ended December 28, 1996 and $300,000 for the 36-week period ended September
6, 1997).
<TABLE>
<CAPTION>
FISCAL YEAR 36-WEEK
ENDED PERIOD ENDED
DECEMBER 28, SEPTEMBER 6,
1996 1997
------------ ------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................... $ 205,856 $149,337
Cost of goods sold.......................................... (133,624) (92,529)
--------- --------
Gross profit.............................................. 72,232 56,808
Expenses and other income:
Selling and administrative expenses....................... (69,735) (52,757)
Amortization of goodwill and intangible assets............ (1,678) (1,161)
Other income, net......................................... 1,309 1,130
Restructuring and nonrecurring charges.................... (4,293)(a)(b) (500)(b)
--------- --------
(74,397) (53,288)
--------- --------
Income (loss) from operations............................. (2,165) 3,520
Interest expense, net(c).................................... (8,443) (5,843)
--------- --------
Loss before income taxes.................................. (10,608) (2,323)
Provision for income taxes.................................. -- 346
--------- --------
Net loss.................................................. $ (10,608) $ (2,669)
========= ========
OTHER DATA:
Operating cash flow......................................... $ 9,788 $ 5,115
Investing cash flow......................................... (5,376) (2,618)
Financing cash flow......................................... 48 (20)
EBITDA(d)................................................... 5,791 9,674
Adjusted EBITDA(e).......................................... 10,084 10,174
Cash interest expense(f).................................... 7,247 5,565
Depreciation and amortization............................... 7,956 6,154
Capital expenditures........................................ 5,798 3,265
Ratio of Adjusted EBITDA to net interest expense(g)......... 1.19x 1.74x
Ratio of Adjusted EBITDA to cash interest expense(g)........ 1.39 1.83
Pro forma ratio of earnings to fixed charges(h)(i).......... -- --
</TABLE>
Footnotes on following page.
34
<PAGE> 38
Footnotes from previous page.
- ---------------
(a) The Company recorded a nonrecurring charge ($3.8 million) for expenses
associated with the 1996 Refinancing, $3.5 million of which was recorded in
the 36-week period ended September 7, 1996. See Note 4 of notes to financial
statements included elsewhere in this Prospectus and "Risk Factors --
History of Losses."
(b) Includes a $500,000 one-time nonrecurring compensation charge to management
of the Company upon consummation of the Old Note Offering. TFH will
contribute $500,000 to the Company to fund the payment of this compensation
charge. See "Management -- Incentive Compensation Plans -- Executive
Incentive Plan."
(c) The pro forma interest expense reflects: (i) the elimination of interest
expense on the TFH Debt ($7.8 million for the year ended December 28, 1996
and $5.5 million for the 36-week period ended September 6, 1997), the
Congress Debt ($300,000 for the year ended December 28, 1996 and $700,000
for the 36-week period ended September 6, 1997), and the STI Debt ($400,000
for the year ended December 28, 1996 and the 36-week period ended September
6, 1997); (ii) additional interest expense on the Notes and the Class A
Preferred Stock ($7.1 million for the year ended December 28, 1996 and $4.9
million for the 36-week period ended September 6, 1997); and (iii) the
amortization of debt issuance costs ($400,000 for the year ended December
28, 1996 and $300,000 for the 36-week period ended September 6, 1997).
(d) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
represents the sum of income (loss) before income taxes plus interest
expense, depreciation and amortization. EBITDA is a widely accepted measure
of a Company's ability to incur and service debt, to undertake capital
expenditures, and to meet working capital requirements. EBITDA is not a
measure of financial performance under generally accepted accounting
principles ("GAAP") and should not be considered an alternative either to
net income as an indicator of the Company's operating performance or as an
indicator of the Company's liquidity.
(e) "Adjusted EBITDA" is EBITDA excluding restructuring and nonrecurring charges
of $3.8 million for fiscal 1996 and on a pro forma basis, the $500,000
nonrecurring compensation charge for both pro forma periods presented.
(f) Pro Forma cash interest expense is historical cash interest expense adjusted
to include the interest on the Notes ($6.3 million for the year ended
December 28, 1996 and $4.4 million for the 36-week period ended September 6,
1997) and elimination of the cash paid for interest on the Congress Debt and
the STI Debt ($1.7 million for the year ended December 28, 1996 and $1.1
million for the 36-week period ended September 6, 1997).
(g) Ratio of Adjusted EBITDA to net interest expense or cash interest expense
represents Adjusted EBITDA divided by net interest expense or cash interest
expense.
(h) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" consists of operating income (loss) before income taxes plus
fixed charges, and "fixed charges" consists of net interest expense and the
portion of rental expense deemed representative of the interest factor.
(i) Pro forma ratio of earnings to fixed charges is calculated using the ratio
of earnings to fixed charges, adjusted to give effect to the Old Note
Offering by decreasing interest expense ($1.0 million and approximately $1.7
million for the year ended December 28, 1996 and the 36-week period ended
September 6, 1997, respectively), increasing amortization of debt issuance
costs ($400,000 and $300,000 for the year ended December 28, 1996 and the
36-week period ended September 6, 1997, respectively) and including as a
component of fixed charges the pre-tax earnings that would be required to
cover the Class B Preferred Stock dividends ($4.4 million and $3.3 million
for the year ended December 28, 1996 and the 36-week period ended September
6, 1997). The deficiency of pro forma earnings to fixed charges was $11.1
million and $2.3 million for the year ended December 28, 1996 and the
36-week period ended September 6, 1997, respectively.
35
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained herein includes certain forward-looking
statements. The Company desires to take advantage of the "safe harbor" which is
afforded such statements under the Private Securities Litigation Reform Act of
1995 when they are accompanied by meaningful cautionary statements identifying
important factors that could cause results to differ materially from those in
the forward-looking statements. See "Risk Factors -- Forward-Looking
Statements."
GENERAL
Tom's Foods manufactures over 250 and sells over 300 ready-to-eat snack
food products. The Company's products include chips, cracker sandwiches, baked
goods, nuts and candy. The Company markets its products through a distributor
network utilizing a variety of distribution channels such as convenience stores,
supermarkets and vending machines.
In 1995, the Company hired a new senior management team, which developed
and implemented a new business strategy designed to increase profitability. Net
sales for the 36-week period ended September 6, 1997 increased 5.6% over the
comparable 1996 period, and sales for fiscal 1996 increased 3.8% over fiscal
1995. For the 36-week period ended September 6, 1997, EBITDA increased 141.9% to
$10.2 million from $4.2 million for the comparable 1996 period. The $10.2
million EBITDA for the 36-week period ended September 6, 1997 increased 32.1%
after giving effect to a $3.5 million restructuring charge bringing Adjusted
EBITDA for the comparable 1996 period to $7.7 million. For fiscal 1996, Adjusted
EBITDA increased 20.4% to $10.1 million after giving effect to a $3.8 million
restructuring charge from an Adjusted EBITDA of $8.4 million after giving effect
to a restructuring charge of $9.6 million for fiscal 1995.
The Company records net sales as its products are delivered to its direct
customers which include independent distributors (wholesalers), National
Accounts, and Contract Sales customers. The Company refers to the wholesale
price level as Distributor Price List. The industry, however, generally
recognizes revenues as sales at the retail level because virtually all of the
Company's competitors operate company-owned distribution systems. Consequently,
the Company's sales and gross profits, by comparison, will appear lower for
comparable volume levels. However, the Company does not incur the additional
distribution costs or capital investment in assets which are incurred by
competitors with company-owned distribution. Such distribution costs are
reported as selling expense.
RESULTS OF OPERATIONS
36-Week Period Ended September 6, 1997 Compared to 36-Week Period Ended
September 7, 1996
The following table sets forth certain historical income statement data for
the periods indicated derived from the Company's statements of operations
expressed in dollars and as a percentage of net sales.
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
-----------------------------------------------
SEPTEMBER 7, 1996 SEPTEMBER 6, 1997
-------------------- --------------------
(UNAUDITED; DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales......................................... $141,369 100.0% $149,337 100.0%
Cost of goods sold................................ (91,249) (64.5) (92,529) (62.0)
-------- -------- -------- --------
Gross profit.................................... 50,120 35.5 56,808 38.0
Selling and administrative expenses............... (47,364) (33.5) (52,757) (35.3)
Amortization of goodwill and intangible assets.... (1,161) (0.8) (1,161) (0.8)
Other income (expense)............................ 285 0.2 1,130 0.8
Restructuring and non-recurring charges........... (3,493) (2.5) 0 0.0
-------- -------- -------- --------
Income (loss) from operations................... (1,613) (1.1) 4,020 2.7
Interest expense, net............................. (6,271) (4.5) (7,181) (4.8)
-------- -------- -------- --------
Loss before income taxes........................ (7,884) (5.6) (3,161) (2.1)
Provision (benefit) for income taxes.............. 342 0.2 346 0.2
-------- -------- -------- --------
Net loss........................................ $ (8,226) (5.8)% $ (3,507) (2.3)%
======== ======== ======== ========
Adjusted EBITDA................................... $ 7,699 5.4% $ 10,174 6.8%
Depreciation and amortization..................... 5,819 4.1 6,154 4.1
</TABLE>
36
<PAGE> 40
Net Sales
Net sales for the 36-week period ended September 6, 1997 were $149.3
million, an increase of $7.9 million or 5.6%, compared to $141.4 million
reported for the 1996 comparable period. The new marketing team assembled in
late 1995 continued to develop successful new products, packaging, and marketing
and merchandising programs, which combined with improved execution by the field
sales force, contributed to the sales increase. Sales to independent
distributors and through Company-owned routes increased $1.5 million, or 1.7%,
to $91.4 million for the 36-week period ended September 6, 1997 from $89.9
million for the 1996 comparable period in spite of the failure of a number of
independent single route distributors. The Company has taken over and either
sold, closed or begun to rebuild these routes by incorporating them into its
network of approximately 221 Company-owned and operated routes. Sales to
National Accounts increased $2.3 million, or 6.3% to $39.3 million for the
36-week period ended September 6, 1997 from $37.0 million in for the comparable
1996 fiscal period as the Company's new product, marketing and merchandising
programs are being well received by distributors and retail accounts. Contract
Sales, while a smaller piece of overall sales volume, were $17.3 million for the
36-week period ended September 6, 1997, an increase of $5.1 million compared to
$12.2 million in sales for the 1996 comparable period. The increase in Contract
Sales reflects the Company's strategy to increase volume through non-branded as
well as branded products to allow for more efficient plant operation and
increased fixed cost coverage. Management believes that Contract Sales sales
volume of 11.5% for the 36-week period ended September 6, 1997 is in an
acceptable range to support fixed overhead absorption without danger of
over-reliance on non-branded volume.
Gross Profit
Higher net sales contributed to an increase in gross profit to $56.8
million, or 38.0% of net sales, for the 36-week period ended September 6, 1997
from $50.1 million, or 35.5% of net sales, for the comparable 1996 period.
Contributing to the improved gross profit was a reduction in package weights
(while maintaining prices), lower raw material and packaging costs, and
increased sales of higher margin products. Also contributing to improved gross
profit were the beneficial results of manufacturing process changes that have
resulted in better control of product packaging weight. Lastly, the higher level
of sales has resulted in production efficiencies through better scheduling and
higher absorption of overhead costs.
Selling and Administrative Expenses
Selling and administrative expenses increased $5.4 million, or 11.4%, for
the 36-week period ended September 6, 1997 compared to the comparable 1996
period. This increase is due to: (i) higher promotion expenses consistent with
the higher sales volume, however as a percent of net sales, promotional expenses
decreased from 5.2% to 5.0%; (ii) higher selling and administrative expenses,
primarily relating to increased incentive-based compensation and an enlarged
marketing staff; (iii) lower Affiliated Supplier commission income as the
Company de-emphasized this business segment; and (iv) increased route operating
expenses as the average number of Company-owned and operated routes increased to
approximately 219 routes from approximately 140 routes for the respective
periods. This increase in the number of owned and operated routes is consistent
with the Company's strategy to redevelop market areas not adequately serviced by
the Company's current independent distributors. As noted earlier, the cost of
operating Company-owned routes is recorded as a selling expense.
Amortization of Goodwill and Intangible Assets
Goodwill and intangible assets arose during the acquisition of the Company
in May 1993. The Company has attributed the goodwill and intangible assets to
its distribution system, an assembled staff, various trademarks and goodwill.
These items are being amortized using the straight-line method over their
estimated composite life of 35 years. The amortized expense for each of the
36-week periods ended September 6, 1997 and September 7, 1996 was $1.2 million.
37
<PAGE> 41
Other Income (Expense)
Other income (expense) increased $800,000 for the 36-week period ended
September 6, 1997 over the comparable period in 1996 due to a decrease in
expenses associated with the vending machine rental program.
Adjusted EBITDA
EBITDA for the 36-week period ended September 6, 1997 was $10.2 million, or
6.8% of net sales, an increase of 32.1% from $7.7 million, or 5.4% of net sales,
for the comparable period in 1996. There were no restructuring charges in either
period, consequently, no adjustment was necessary for comparative purposes.
Interest Expense
Interest expense, net of interest income, increased to $7.2 million for the
36-week period ended September 6, 1997 from the $6.3 million for the comparable
1996 period as a result of higher outstanding loan balances and an increase in
interest rates on certain debt obligations refinanced in August 1996. See
"Certain Transactions" and "Description of Other Senior Indebtedness." Average
outstanding borrowings for the 36-week period ended September 6, 1997 were $93.9
million, with an average effective interest rate of 11.2%, an increase of $15.5
million and a decrease of 0.6 percentage points, compared to $78.4 million in
average outstanding borrowings and an average effective interest rate of 11.8%
for the comparable 1996 period.
Provision for Federal and State Income Taxes
As of September 6, 1997 and September 7, 1996, the Company estimated that
it would have no Federal tax obligation due to loss carryforwards from prior
years, however, the Company did provide for certain state income and franchise
tax obligations in both years. The Company has a net operating loss carryforward
of approximately $45.0 million which begins to expire in fiscal 2009.
Net Loss
As a result of the above, the Company recorded a net loss for the 36-week
period ended September 6, 1997 of $3.5 million, compared to a net loss of $8.2
million for the comparable 1996 period.
Fiscal Year Ended December 28, 1996 Compared to Fiscal Year Ended December 30,
1995
The following table sets forth for the periods indicated certain historical
income statement data derived from the Company's statements of operations
expressed in dollars and as percentage of net sales.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------
DECEMBER 30, 1995 DECEMBER 28, 1996
---------------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................... $ 198,340 100.0% $ 205,856 100.0%
Cost of goods sold.......................... (125,396) (63.2) (133,624) (64.9)
--------- --------- --------- ---------
Gross profit........................... 72,944 36.8 72,232 35.1
Selling and administrative expenses......... (75,783) (38.2) (69,735) (33.9)
Amortization of goodwill and intangible
assets.................................... (1,678) (0.9) (1,678) (0.8)
Other income (expense)...................... 3,296 1.7 1,309 0.6
Restructuring and nonrecurring charges...... (9,570) (4.8) (3,793) (1.8)
--------- --------- --------- ---------
Income (loss) from operations.......... (10,791) (5.4) (1,665) (0.8)
Interest expense, net....................... (7,870) (4.0) (9,402) (4.6)
--------- --------- --------- ---------
Loss before income taxes............... (18,661) (9.4) (11,067) (5.4)
Provision (benefit) for income taxes........ (400) (0.2) 0 0.0
--------- --------- --------- ---------
Net loss............................... $ (18,261) (9.2)% $ (11,067) (25.4)%
========= ========= ========= =========
Adjusted EBITDA............................. $ 8,374 4.2% $ 10,084 4.9%
Depreciation and amortization............... 9,595 4.8 7,956 3.9
</TABLE>
38
<PAGE> 42
Net Sales
Net sales increased 3.8%, or $7.6 million, to $205.9 million in fiscal 1996
from $198.3 million in fiscal 1995. This sales increase is net of the impact of
an approximate $1.2 million annualized price decrease implemented at the
beginning of fiscal 1996 mainly for Single-Serve Size products and the
elimination or loss of approximately $13.3 million in net sales, primarily from
discontinued business with certain unprofitable National Accounts and, to a
lesser degree, due to normal competitive activity. Sales to independent
distributors and through Company-owned and operated routes decreased $2.0
million or 1.5% to $128.9 million for fiscal 1996 compared to $130.9 million for
fiscal 1995. Contract Sales increased $9.8 million in fiscal 1996 to $21.2
million from $11.4 million in fiscal 1995 as the Company made a strategic
decision to pursue increased contract manufacturing volume to improve the
operating efficiency of its manufacturing facilities through volume driven fixed
overhead cost absorption and production scheduling. Contract Sales represented
10.3% of total fiscal 1996 volume which management feels is in an acceptable
range to achieve its strategic objectives without over emphasizing contract
manufacturing. National Account net sales decreased $600,000, or 1.0%, to $52.8
million in fiscal 1996 from $53.4 million in fiscal 1995 as a direct result of
initiatives already discussed. During 1996, the Company decided to discontinue
the sale of certain less profitable Affiliated Products. Consequently,
Affiliated Product net sales declined $1.7 million to $7.7 million in fiscal
1996 from $9.4 million in fiscal 1995.
Gross Profit
Gross profit for fiscal 1996 decreased slightly to $72.2 million, or 35.1%
of net sales, from $72.9 million, or 36.8% of net sales, for fiscal 1995. As
mentioned above, net sales and gross profit were both impacted by an annualized
$1.2 million in price reductions on selected products applied at the beginning
of 1996. Additionally, the increase in Contract Sales, which carry lower gross
margins than do sales of the Company's branded products, also reduced gross
profits. Contract Sales require minimal support costs, consequently, the
earnings impact of Contract Sales on income from operations is similar to that
of the Company's branded products.
Selling and Administrative Expenses
Selling and administrative expenses decreased by more than $6.0 million, or
8.0%, to $69.7 million in fiscal 1996 from $75.8 million in fiscal 1995. This
decrease was largely due to the reorganization of the sales and management
functions in 1995 and aggressive cost reduction programs in both 1996 and 1995.
The consolidation in sales regions from seven to three in fiscal 1995
contributed to substantial cost savings in 1996. Marketing expense was reduced
by $1.7 million, or 14.1%, in fiscal 1996 largely to eliminate unprofitable and
inefficient promotional spending. Costs associated with the Company's disposal
of obsolete and discontinued packaging materials was reduced by 90% in fiscal
1996 compared to the prior two fiscal years as the marketing and manufacturing
departments better coordinated the transition to new products and new packaging
designs. Distribution expense was reduced from 6.9% of net sales in fiscal 1995
to 6.6% of fiscal 1996 net sales. Administrative costs, primarily related to
salaries, were reduced by $800,000 in fiscal 1996 versus fiscal 1995.
Amortization of Goodwill and Intangible Assets
Goodwill and intangible assets arose during the acquisition of the Company
in May 1993. The Company has attributed the goodwill and intangible assets to a
distribution system, an assembled staff, various trademarks and goodwill. These
items are being amortized using the straight-line method over their estimated
composite life of 35 years. The amortized expense for both fiscal 1996 and 1995
was $1.7 million.
Other Income (Expense)
Other income (expense) decreased $2.0 million from $3.3 million in fiscal
1995 to $1.3 million in fiscal 1996. This decrease was primarily due to the drop
in franchise fees and related vending machine rental income that occurred with
the curtailment of the Company's single-route franchising program at the end of
1995.
39
<PAGE> 43
Restructuring and Nonrecurring Charges
In fiscal 1996, the Company recorded $3.8 million in nonrecurring
transaction costs directly associated with the refinancing of certain of its
long-term debt obligations and the securing of a senior loan facility which
included a working capital line of credit.
In recent years, the Company has twice modified its strategy with regard to
its distribution system. Traditionally, the Company's distribution system has
been a multi-route distribution system. In 1991, the Company began supplementing
its traditional multi-route distribution system with a single-route distribution
strategy. This strategy included the takeover of underperforming multi-route
distributors and implementing single-route distributors to fill voids and
supplement the traditional distribution system. The process did not include the
takeover of healthy multi-route distributors. In connection with the
supplemental single-route distribution strategy, the Company recorded a
restructuring reserve of $29,852,000 (the "1991 Reserve") which is discussed
more fully below. At no time did the Company actually have more than 360 of
these supplemental single-route distributors out of a total of approximately
2,400 routes, which represented less than 15% of the total routes in the
distribution system at any time.
In 1995, the Company assembled a new management team which determined that
the single-route distribution strategy was not a strategy the Company should
continue to pursue. At that time, new management determined that the Company
would abandon the single-route distribution strategy and encourage single-route
distributors to convert to multi-route distributors. As a result, in 1995, the
Company reversed the remainder of the 1991 Reserve (which at that time was
$9,645,000) and established a new reserve of approximately 6,500,000 (the "1995
Reserve") to convert the single-route distributors to multi-route distributors.
The 1995 Reserve is described more fully below. The Company anticipates that
none of the 1995 Reserve will be remaining at January 3, 1998 (the Company's
1997 fiscal year end).
In 1991 and in connection with the single-route distribution strategy, the
Company recorded the 1991 Reserve which represented the expenses related to the
assumption of certain distributor liabilities, bad debts, losses from the
temporary operation of Company owned routes, and additional expenses. In 1991,
the Company underestimated the costs of fully implementing the single-route
strategy. These costs included sales, accounting and administrative staff,
warehouse space, legal costs, and increased bad debt costs. As a result, the
Company utilized $20,207,000 of the 1991 Reserve in fiscal 1991, 1992, 1993,
1994 and 1995. In fiscal 1994 and 1995, the Company utilized approximately
$6,500,000 and $2,625,000, respectively, of the 1991 Reserve leaving a remaining
reserve of approximately $9,645,000 at December 30, 1995.
In 1995, the Company's new management team noted that the Company was
spending significant capital supporting the supplemental single-route
distributor program that represented a very small portion, in number of routes
and dollars contributed, of its distribution system. Therefore, in 1995, the
Company reversed the remainder of the 1991 Reserve of $9,645,000 and established
a new reserve of approximately $6,500,000 (the "1995 Reserve") to convert the
single-route distributors to multi-route distributors. Management determined
that the multi-route distributors would benefit the Company by reducing the
administrative sales staff necessary to support the single-route distributors,
decreasing needed warehouse space for the delivery of goods and decreasing bad
debt expense as a direct result of having larger, more stable distributors and
more qualified personnel available to run a multi-route business rather than a
single-route business. Management committed to eliminating the single-route
concept in 1995 and took steps to develop a specific plan involving the
identification of the routes to be converted or grown to multi-route
distributors in 1995, 1996 and 1997. Management determined that the only
substantial incremental cost of converting to multi-route distributors was the
exposure related to the receivables of the old single-route distributors.
Therefore, the costs included in the 1995 Reserve primarily related to legal and
bad debt costs associated with the takeover of the single-route distributors
which was required under its recourse provisions with the financial institution
to whom the Company had sold certain receivables. In fiscal 1996 and the 36 week
period ended September 6, 1997, the Company utilized approximately $3,091,000
and $524,000, respectively, of the 1995 Reserve resulting in an ending balance
of approximately $3,359,000 at December 28, 1996 and $2,035,000 at September 6,
1997, respectively. The Company anticipates that the restructuring will be
substantially complete by January 3, 1998 (the Company's 1997 fiscal year end)
and that there will be no reserve remaining at that time.
40
<PAGE> 44
In addition to the establishment of the 1995 Reserve, the Company recorded
several nonrecurring charges in 1995 totaling approximately $12,765,000. These
nonrecurring charges were associated with the changes made in the sales and
administrative staff as well as changes in certain product lines produced by the
Company. The nonrecurring items included the following:
1. The payment of early retirement and severance benefits of approximately
$3,700,000. The new management team determined that the sales and administrative
functions of the Company could be streamlined and simplified. As a result, the
Company offered an early retirement option to eligible employees and completed
severance agreements with others. Substantially all the payments were made to
individuals prior to December 30, 1995 and no reserves outstanding at December
30, 1995.
2. The write off of certain assets related to the restructuring of the
sales force of approximately $4,949,000. The new management team determined that
the sales function had outgrown the necessary levels to service the core
distribution system. Therefore, in addition to and as a result of reducing
headcount, the value of several assets was either impaired or eliminated. These
assets primarily related to a computer system of approximately $2,728,000
developed to track reporting for single-route distributors that was being
developed to track reporting for single-route distributors that was not
functional for multi-route distributors and consequently, further development
was curtailed and the system was never completed, and certain field assets
including sales office furniture and vehicles and warehouses of approximately
$2,221,000.
3. The write off of certain display equipment and packaging for a
discontinued "low-fat, no-fat" product line of approximately $4,116,000. In the
fourth quarter of 1995, the Company completed an analysis noting that these
product lines were not widely accepted among the Company's core customers.
Therefore, management made a decision to eliminate a significant number of these
products from its product line. The packaging write off of approximately
$1,487,000 related to pre-purchased inventory for certain "low-fat, no fat"
products that were not accepted by the market. The display equipment related
primarily to equipment purchased specifically for the discontinued products of
approximately $2,629,000.
The effects of the above nonrecurring items effectively matched the costs
of the actions taken to the period in which these actions were taken and
resulted in lower cost of sales in future periods from the packaging and asset
write offs, rather than carrying forward the expense of the impaired assets.
Adjusted EBITDA
Reported EBITDA for fiscal 1996 was $6.3 million including a nonrecurring
charge of $3.8 million for refinancing transaction costs which, if added back,
produces an Adjusted EBITDA (exclusive of the nonrecurring charge) of $10.1
million. Similarly, a nonrecurring restructuring charge of $9.6 million was
incurred in fiscal 1995 for the costs of the Company's reorganization efforts
which, if added back to the fiscal 1995 EBITDA loss of $1.2 million, produces an
Adjusted EBITDA of $8.4 million. Comparing the two years, fiscal 1996 Adjusted
EBITDA of $10.1 million increased 20.4% over fiscal 1995 Adjusted EBITDA of $8.4
million.
Interest Expense
Interest expense, net of interest income, increased to $9.4 million for
fiscal 1996 from $7.9 million for fiscal 1995 as a result of higher outstanding
loan balances and an increase in interest rates relative to certain debt
obligations refinanced in August 1996. Average outstanding borrowings for fiscal
1996 were $80.7 million, with an average effective interest rate of 11.7%, an
increase of $8.2 million and 0.8 percentage points, compared to $72.5 million of
average outstanding borrowings and an average effective interest rate of 10.9%
for fiscal 1995. See "Certain Transactions" and "Description of Other Senior
Indebtedness."
Provision for Federal and State Income Taxes
Due to net operating loss carryforwards from prior years, the Company
estimated that it would have no income tax liability for fiscal 1996. The
Company recorded an income tax benefit of $400,000 in fiscal 1995.
41
<PAGE> 45
Net Loss
As a result of the above, the Company recorded net loss of $11.1 million
(including $3.8 million in nonrecurring refinancing costs) for fiscal 1996 as
compared to a net loss of $18.3 million (including $9.6 million in nonrecurring
restructuring costs) reported in fiscal 1995.
Fiscal Year Ended December 30, 1995 Compared to Fiscal Year Ended December 31,
1994
The following table sets forth for the periods indicated certain historical
income statement data derived from the Company's statements of operations
expressed in dollars and as percentage of net sales.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------
DECEMBER 30, 1994 DECEMBER 28, 1995
--------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................................... $ 215,650 100.0% $ 198,340 100.0%
Cost of goods sold........................... (130,774) (60.6) (125,396) (63.2)
--------- --------- --------- ---------
Gross profit............................ 84,876 39.4 72,944 36.8
Selling and administrative expenses.......... (78,937) (36.6) (75,783) (38.2)
Amortization of goodwill and intangible
assets..................................... (1,678) (0.8) (1,678) (0.9)
Other income (expense)....................... 1,890 0.9 3,296 1.7
Restructuring and nonrecurring charges....... 0 0.0 (9,570) (4.8)%
--------- --------- --------- ---------
Income (loss) from operations........... 6,151 2.9 (10,791) (5.4)
Interest expense, net........................ (6,405) (3.0) (7,870) (4.0)
--------- --------- --------- ---------
Loss before income taxes................ (254) (0.1) (18,661) (9.4)
Provision (benefit) for income taxes......... 500 0.2 (400) (0.2)
--------- --------- --------- ---------
Net loss................................ $ (754) (0.3)% $ (18,261) (9.2)%
========= ========= ========= =========
Adjusted EBITDA.............................. $ 15,588 7.2% $ 8,374 4.2%
Depreciation and amortization................ 9,437 4.4 9,595 4.8
</TABLE>
General
Programs put into place in fiscal 1994 and prior continued to negatively
impact sales and earnings through fiscal 1995. New management, installed in
1995, developed and began the implementation of a new business strategy which
halted this decline and began to increase sales and overall profitability as
noted in the discussions of fiscal 1996 and for the 36-week period ended
September 6, 1997.
Net Sales
Net sales for fiscal 1995 decreased $17.3 million, or 8.0%, to $198.3
million from $215.7 million in fiscal 1994. Much of this decrease can be
attributed to unprofitable accounts and geographic areas as well as the
discontinuance of several failed business initiatives. Conversely, fiscal 1994
sales were boosted by strong promotional activities such as the "2 for $1.00"
nuts and the "2 free" cracker programs. While these and similar programs
contributed to increased sales volumes for fiscal 1994, they were not
necessarily profitable programs. Sales to distributors and through Company-owned
routes decreased $5.1 million, or 2.4%, for the reasons just noted. Similarly,
sales to National Account decreased $4.1 million, or 1.9%, as promotional
programs with certain less profitable accounts failed to meet newly instituted
standards and thus were discontinued. Contract Sales decreased $4.2 million, or
1.9%, as two customers curtailed business, one to shift volume to another
manufacturer and the other due to the discontinuance of its product line. The
Company had $3.2 million in net sales during fiscal 1994 under a second brand
name. These sales were generally unprofitable and the second brand was sold in
the later half of fiscal 1994.
42
<PAGE> 46
Gross Profit
Gross profit for fiscal 1995 decreased 14.1% to $72.9 million, or 36.8% of
net sales, from $84.9 million, or 39.4% of net sales, in fiscal 1994. The gross
profit decrease was driven by the decrease in sales volume which reduced fixed
cost absorption, a shift in product mix to lower margin products and shifts in
distribution channel mix which saw a decline in National Account business. Gross
profit was also negatively impacted by increased direct manufacturing costs for
materials, packaging and labor.
Selling and Administrative Expenses
Selling and administrative expenses decreased $3.1 million, or 4.0%, to
$75.8 million in fiscal 1995 from $78.9 million in fiscal 1994. The most
significant reduction in fiscal 1995 over fiscal 1994 occurred in variable
selling and promotional expenses due to lower volume and the curtailment of
unprofitable programs. Also contributing to the decrease were six months of
financial benefit from the Company's reorganization and cost reduction efforts
initiated in fiscal 1995.
Amortization of Goodwill and Intangible Assets
Goodwill and intangible assets arose during the acquisition of the Company
in May 1993. The Company has attributed the goodwill and intangible assets to a
distribution system, an assembled staff, various trademarks and goodwill. These
items are being amortized using the straight-line method over their estimated
composite life of 35 years. The amortized expense for each of the fiscal years
1994 and 1995 was $1.7 million.
Other Income (Expense)
Other income (expense) increased $1.4 million from $1.9 million in fiscal
1994 to $3.3 in fiscal 1995. This increase was primarily due to an increase in
franchise fee and related vending machine rental income that occurred with the
initiation of the Company's single-route franchising program at the beginning of
1995.
Nonrecurring Expenses
In connection with the implementation of the new business strategy, the
Company recorded nonrecurring charges of $9.6 million in fiscal 1995 as
previously discussed.
Adjusted EBITDA
Reported EBITDA for fiscal 1995 was a loss of $1.2 million including a
nonrecurring restructuring charge of $9.6 million which, if added back, produces
an Adjusted EBITDA (exclusive of the nonrecurring restructuring charge) of $8.4
million. There were no such charges in fiscal 1994. Comparing the two years,
fiscal 1995 Adjusted EBITDA of $8.4 million decreased 46.3% from fiscal 1994
EBITDA of $15.6 million.
Interest Expense
Interest expense, net of interest income, increased $1.5 million, or 22.9%,
to $7.9 million in fiscal 1995 from $6.4 million in fiscal 1994. The higher
interest expense was the result of an increase in revolving line of credit
borrowings in 1995 and, more significantly, several increases in the prime
lending rate. Average outstanding borrowings for fiscal 1995 were $72.5 million,
with an average effective interest rate of 10.9%, an increase of $1.2 million
and 1.9 percentage points, compared to $71.3 million of average outstanding
borrowings and an average effective interest rate of 9.0% for fiscal 1994.
Provision for Federal and State Income Taxes
The Company recorded an income tax benefit of $400,000 in fiscal 1995. In
fiscal 1994, the Company recorded a tax obligation of $500,000 primarily to
recognize state income and franchise tax liabilities.
43
<PAGE> 47
Net Loss
As a result of the above, the Company's net loss of $18.3 million for
fiscal 1995 increased from the net loss of $800,000 reported for fiscal 1994.
Liquidity and Capital Resources
The Company's cash flow requirements are for working capital, capital
expenditures and debt service. The Company has met its liquidity needs to date
through internally generated funds and a revolving line of credit established in
August 1996 with Congress. As of September 6, 1997, the Company had no
outstanding loans under the revolving line and had $10.8 million in borrowing
availability thereunder. Certain of the Company's long-term obligations were
repaid with the proceeds of the Offering. See "Use of Proceeds", "Description of
Other Senior Indebtedness" and "Certain Transactions."
In connection with the 1996 Refinancing, the Company substantially
refinanced its long-term debt obligations. In this transaction, the Company
entered into the $29.0 million senior Congress Loan Facility, which includes a
$9.0 million term loan facility, a $3.0 million equipment line of credit (loans
made under the term loan facility and the equipment line of credit are
collectively referred to herein as the "Congress Debt"), and a $17.0 million
revolving line of credit (loans made under the revolving line of credit are
collectively referred to herein as the "Congress Revolving Loans"). Interest
accrues on the Congress Debt and the Congress Revolving Loans at 1.625% and
1.375%, respectively, over the prime rate of interest (10.125% and 9.875%,
respectively, as of September 6, 1997). The Company borrowed $9.0 million of
Congress Debt and used other available cash to make a $10.0 million payment on
the CIBC Debt. The repayment reduced the outstanding balance under the CIBC Debt
from $62.3 million to $52.3 million. See "Certain Transactions."
In connection with the 1996 Refinancing, TFH was formed by certain of the
Company's investors to, among other things, acquire and refinance certain of the
Company's long term debt obligations, including; (i) the $52.3 million
outstanding of CIBC Debt; and (ii) the $8.8 million outstanding of MassGeneral
Debt, which included $1.3 million in accrued interest thereon which was
subsequently paid to TFH. The terms of the TFH Debt were modified to subordinate
this debt to Congress, defer payments of principal and interest owing thereon
and increase the interest rate to 13.0% per annum. In addition, the TFH
Stockholders provided the TFH Stockholders' Letters of Credit in the aggregate
original face amount of $10.0 million to replace the Company's Letter of Credit.
In exchange for these actions, TFH received 80.0% of the Company's outstanding
Common Stock. See "Certain Transactions."
In addition to the refinancing of the above noted obligations, as part of
the 1996 Refinancing, the Company reached an agreement with STI to limit
payments of interest and principal on the STI Debt to $600,000 annually through
August 1999. At the end of such period, any outstanding guarantee obligation of
the Company was to be amortized over 50 months plus interest. Interest accrued
on such indebtedness at the higher of 1.5% over the prime rate or 2.0% over
LIBOR.
The proceeds of the Old Note Offering allowed the Company to retire the
Congress Debt and a portion of the TFH Debt and fully satisfy the STI Debt. The
balance of the TFH Debt was exchanged for Preferred Stock. The retirement of
these obligations substantially reduced the Company's interest expense and
lengthened the maturities of its debt obligations. See "Use of Proceeds."
The Company's working capital improved to $13.9 million as of September 6,
1997 from $6.8 million in the same period in 1996. Additionally, as a result of
the 1996 Refinancing and the overall improvement in the Company's operations,
the Company's working capital improved to $7.4 million at December 28, 1996 from
$4.6 million at December 30, 1995 (after reclassification for fiscal 1995 of a
revolving loan of $8.0 million and the current portion of long-term debt of $8.1
million both due as part of the CIBC Debt, both of which were refinanced as
long-term debt in August 1996).
Net cash provided by operating activities was $3.1 million for the 36-week
period ended September 6, 1997 as compared to $800,000 for the 36-week period
ended September 7, 1996. This was primarily due to stronger operating
performance coupled with a progressive working capital management program and an
increase in accrued liabilities, primarily interest related to the TFH Debt. Net
cash provided (used) by
44
<PAGE> 48
operating activities was $8.8 million and ($4.8) million for fiscal 1996 and
1995, respectively. The improvement in 1996 operating cash flow was driven by
lower inventory of $300,000, a reduction in other assets of $2.7 million, an
increase in accounts payable of $4.7 million, and an increase in other
liabilities of $5.0 million. The reduction in other assets which included assets
such as route trucks and hand held computers previously held for resale was
driven by the reclassification of these assets as long-term. The $5.0 million
increase in other liabilities was primarily a result of accrued interest due
TFH. These improvements were partially offset by an increase in accounts
receivable of $4.5 million which is attributed to an increase in Contract Sales
and National Accounts business, which have longer payment terms than does
distributor business.
Capital expenditures for the 36-week period ended September 6, 1997 were
$3.3 million compared to $4.0 million in the comparable 1996 period. Capital
expenditures were $5.8 million and $7.3 million in fiscal 1996 and 1995,
respectively.
In fiscal 1996, the Company spent approximately $1.0 million to purchase
and install a pretzel manufacturing line which allowed the Company to bring
production of its branded pretzel products in-house. The remaining expenditures
for the 36-week period ended September 7, 1997 and for fiscal 1996 and 1995 were
primarily to fund the Company's capital expenditure program for its
manufacturing facilities and its acquisition of underperforming distributors.
For the 36-week period ended September 7, 1997 and for fiscal 1996 and 1995,
respectively, the Company spent $1.6 million, $3.7 million (including the
pretzel line) and $3.8 million on its manufacturing facilities and $1.1 million,
$2.1 million, and $3.5 million on distributor acquisitions. The Company also
utilizes operating leases for capital equipment, primarily for over the road
trucks and trailers, route delivery trucks used on Company-owned routes and
passenger vehicles. All operating leases are treated as operating expenses and
their cash flow impact is reflected in cash flows from operating activities.
Net cash provided (used) by financing activities was ($860,000), ($3.0)
million and $7.1 million for the 36-week period ended September 6, 1997 and in
fiscal 1996 and 1995, respectively. For the 36-week period ended September 6,
1997, the Company borrowed $800,000 under its equipment line with Congress to
fund the purchase of a pretzel manufacturing line. During the same period, the
Company made payments of $1.3 million on the Congress Debt. In fiscal 1996, as
part of the 1996 Refinancing, the Company borrowed $9.0 million in Congress Debt
to fund repayment of a portion of the CIBC Debt and also expended $2.1 million
to fund transaction costs relating to the refinancing. In fiscal 1995, the
Company borrowed $8.9 million of which $8.0 million came from its CIBC Debt,
made loan repayments of $4.2 million, and sold $2.4 million in recourse
receivables to STI under a program that was subsequently discontinued. The
Company did not pay dividends for the 36-week period ended September 6, 1997 nor
for fiscal years 1996, 1995, or 1994.
The Company believes that internally generated funds, financing
arrangements with Golden Peanut and amounts which will be available to it under
its new Working Capital Facility are and will continue to be sufficient to
satisfy its operating cash requirements and planned capital expenditures.
CAUTIONARY STATEMENTS RELATED TO FORWARD-LOOKING STATEMENTS
The statements contained in the foregoing "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and elsewhere in
this Prospectus which are not historical facts are forward-looking statements
that involve risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements. There can be
no assurance that any forward-looking statement will be realized or that actual
results will not be significantly higher or lower than set forth in such
forward-looking statement.
45
<PAGE> 49
BUSINESS
Tom's Foods is a regional snack food manufacturing company with a primary
market focus in the southeastern and southwestern United States, regions in
which the Company believes the population and snack food consumption are growing
more rapidly than in the United States overall. The Company has manufactured and
sold snack food products since 1925 and currently manufactures over 250 and
sells over 300 ready-to-eat snack food products, primarily under the widely
recognized "Tom's" brand name. Management believes that the Company has one of
the most diversified distribution networks in the snack food industry. The
Company's distribution network serves a variety of customers, including
independent retailers, vending machines, retail supermarket chains, convenience
stores, mass merchandisers, food service companies and military bases.
Management believes that the Company's competitive advantages include the
strength of its distribution network, which services independent retailers in
various markets, and its vending machine network, which management believes,
based on revenues, is one of the largest single-label, snack food vending
machine networks in the United States. The Company's products are distributed in
43 states by 915 independent distributors, which operate approximately 2,131
sales routes, and Company employees, who operate approximately 217 routes.
BUSINESS STRATEGY
In 1995, the Company hired a new senior management team, which developed
and implemented a new business strategy designed to increase profitability. The
components of the business strategy include: (i) developing and expanding
markets; (ii) strengthening the Company's distribution network; (iii) increasing
introductions of new and updated products; (iv) expanding distribution channels
and outlets; and (v) increasing operating efficiencies. In part as a result of
this new business strategy, for the 52 weeks ended September 6, 1997, Adjusted
EBITDA increased 53.2% over the same period in the previous year.
The key elements of the Company's business strategy are as follows:
Developing and Expanding Markets. The Company traditionally has had a
strong presence in the southeastern and southwestern United States, areas in
which the Company believes the population and snack food consumption are growing
more rapidly than the United States overall. In order to capitalize on the
growth in those markets, the Company intends to continue to strengthen its
presence in the southeastern and southwestern United States. The Company also
intends to strengthen its presence in metropolitan markets where the Company
believes it can (i) achieve higher overall gross profits through higher product
volume and local economies of scale on products and (ii) increase its access to
National Accounts. The Company intends to strengthen its core markets and
develop additional markets through implementation of the other elements of its
business plan.
Strengthening the Company's Distribution Network. The Company has
undertaken a number of initiatives to strengthen and upgrade its distribution
network and continue to improve its relationship with its independent
distributors. First, the Company has developed a set of objective criteria by
which it evaluates the performance of its independent distributors and has held
its distributors accountable to such criteria since late 1995. Second, through
training programs, field sales support and marketing and merchandising
activities, the Company will continue to assist distributors in the development
of more efficient multi-route operations. Third, the Company will reassign
underperforming and/or underdeveloped distributor territories to more capable
independent distributors or incorporate them into the Company-owned route
network. Fourth, the Company will continue to develop the Company-owned and
independently-owned multi-route strategy in metropolitan markets, which
management believes will allow the Company to increase market share and improve
margins in these markets. Finally, by broadening the services available to
distributors, such as its new centralized customer service center, increased
training programs, and improved technical support, the Company will continue to
enhance its frequent interactions with its distributors.
Increasing Introductions of New and Updated Products. The Company intends
to continue to develop and introduce new products and update existing products
and packaging, an effort which the new senior management team initiated in late
1995. The Company believes that the introduction of new and updated products is
necessary to meet changing consumer preferences and to attract new customers. As
part of this
46
<PAGE> 50
effort, the Company has and will continue to introduce new flavors, redesign its
packaging and modify packaging sizes and weights, all of which are intended to
update and unify the brand image.
Since 1995, the Company has introduced 61 new and 35 updated products, a
significant majority of which have been packaged and sold in Single-Serve Sizes.
Approximately 33.0% of the Company's manufactured products are new or have been
updated since 1995, and the Company plans to complete updating all of its
products by the end of 1998. For the 36-week period ended September 6, 1997,
these new or updated products represented 27.9% of total sales to distributors.
In addition, 51 of the 61 new product introductions have been successfully
integrated into the Company's product lines, a rate which management believes
exceeds the industry average.
For the 36-week period ended September 6, 1997, the Company's comprehensive
product updating process has contributed to a net sales increase of 19.0% for
those SKU's which have been updated. Net sales from new, updated or repositioned
products have increased from less than 2.0% of fiscal 1995 net sales to 4.0% of
fiscal 1996 net sales, and 9.0% of net sales for the 36-week period ended
September 6, 1997. The Company's objective is to derive approximately 13.0% of
its annual net sales from new, updated and repositioned products.
Expanding Distribution Channels and Outlets. The Company intends to
increase its presence in a number of distribution channels. The vending machine
channel continues to grow rapidly and the Company's newly-hired team of
experienced vending senior managers has and will continue to increase the
Company's penetration of this area. The Company intends to place particular
focus on developing metropolitan vending routes with an emphasis on full-line
vending accounts. Full-line vending accounts require the provision of other food
items, in addition to the snack food products manufactured by the Company, such
as coffee, cold beverages, cold foods and microwaveable products. In order to
address the additional requirements of full-line vending, the Company intends to
extend existing and develop new business arrangements with manufacturers of
these products.
The Company believes it can increase gross profit without expanding or
overextending its existing distributor network. The Company intends to achieve
this in part through introduction of a limited product line under a brand name
other than "Tom's" to provide the Company with access to national wholesale
distribution companies and retail trade accounts. This second brand will neither
require nor conflict with the merchandising services of the Company's
distributor network. The Company also intends to continue the expansion of its
successful Contract Sales program, which permits the Company to make efficient
use of its excess manufacturing capacity.
Increasing Operating Efficiencies. The Company intends to continue its
initiatives to reduce the Company's expenses and, consequently, to improve its
operating margins. For example, the Company has reduced its general and
administrative expenses from 5.7% of net sales for fiscal 1995 to 5.1% of net
sales for fiscal 1996. Similarly, distribution costs as a percent of net sales
have been reduced from 7.5% for fiscal 1995 to 6.9% for fiscal 1996. Over the
same period of time, marketing and merchandising expenses have remained
unchanged as a percent of net sales while total distributor sales and sales to
National Accounts have increased. The Company attributes this to the development
of more efficient marketing and merchandising programs and intends to continue
such programs.
Many of the Company's financial objectives have been achieved in part due
to a new philosophy of providing financial incentives to line managers, whose
compensation is now directly related to the financial performance of their areas
of responsibility. The Company also has begun to develop and implement more
sophisticated information systems to assist managers in achieving their
objectives. Additionally, the Company has established a sophisticated risk
management program which monitors the cost of raw material, packaging, energy
and other commodities, enabling the Company to lower its costs and minimize the
impact of market price fluctuations on the Company's major expense categories.
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<PAGE> 51
PRODUCTS AND PACKAGING
The Company sells a wide variety of products in five principal categories:
chips, sandwich crackers, baked goods, nuts and candy. The Company sells its
products under the "Tom's" brand name and also manufactures products for
delivery directly to National Accounts and for other manufacturers on a Contract
Sales basis. In addition, the Company derives revenue from sales of Affiliated
Products.
To meet the requirements of its diversified distribution channels, the
Company's products (excluding those packaged for Contract Sales) are packaged
primarily in two sizes: Single Serve Sizes and Multi-Serve Sizes. The Company's
Single-Serve Sizes address distribution channels, such as vending machines,
small or independent retail stores and national convenience store chains, which
are niche channels that the Company's distribution network is well situated to
serve effectively. The Company's Multi-Serve Sizes are positioned as a regional
alternative to national brands and typically are distributed through
supermarkets and similar large retail outlets.
In addition to Single-Serve Sizes and Multi-Serve Sizes, the Company
manufactures products for others on a Contract Sales basis. For example, the
Company currently produces sandwich crackers under contract for the Keebler
Corporation ("Keebler") and Bugles, a corn-based snack food product, for General
Mills Inc. In fiscal 1996, 10.5% of the Company's net sales were attributed to
Contract Sales. The table below sets forth the net sales and percentage of the
Company's net sales in fiscal 1996 by product category and packaging size or
contract packaging arrangement.
TOM'S FOODS FISCAL 1996 NET SALES BY CATEGORY AND PACKAGE SIZE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CUSTOM SIZES TOTAL
SINGLE-SERVE MULTI-SERVE (CONTRACT ----------------------------
CATEGORY SIZES SIZES SALES) $ %
-------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Chips............................ $ 39,091 $ 65,697 $ 1,106 $ 105,894 51.4%
Sandwich Crackers................ 10,506 6,529 12,144 29,179 14.2
Baked Goods...................... 18,430 206 7,415 26,051 12.7
Nuts............................. 18,460 400 509 19,369 9.4
Candy............................ 12,847 1,686 402 14,935 7.3
Affiliated Products.............. 10,428 -- -- 10,428 5.0
------------ ------------ ------------ ------------ ------------
Total..................... $ 109,762 $ 74,518 $ 21,576 $ 205,856 100.0%
============ ============ ============ ============ ============
</TABLE>
Chips. The chip category, which accounted for 51.4% of the Company's net
sales in fiscal 1996, consists of various flavors of potato chips, such as sour
cream n' onion, honey mustard and Texas barbecue, corn-based snacks, such as
tortilla chips in nacho, pizza and taco flavors, plain and barbecue corn chips,
pretzels, popcorn, pork skins and extruded snacks, such as cheese puffs. In
fiscal 1996, 62.0% of the Company's net sales in the chip category were
attributed to products packaged in Multi-Serve Sizes, 36.9% were attributed to
products packaged in Single-Serve Sizes and 1.1% were attributed to Contract
Sales.
Sandwich Crackers. The sandwich cracker category, which accounted for
14.2% of the Company's net sales in fiscal 1996, consists of peanut butter or
cheese-filled crackers and cream-filled cookies. The Company manufactures both
the crackers and the filling used in the sandwiches. In fiscal 1996, 41.6% of
the sandwich crackers sold by the Company were attributed to Contract Sales. In
this product category, products packaged in Single-Serve Sizes and Multi-Serve
Sizes represented 36.0% and 22.4% of net sales, respectively.
Baked Goods. The baked goods category, which accounted for 12.7% of the
Company's net sales in fiscal 1996, consists of various flavors of cookies,
snack crackers, fig and apple bars and a line of cakes and pastries. In fiscal
1996, 70.7% of the Company's net sales in the baked goods category were
attributed to products packaged in Single-Serve Sizes, 28.5% were attributed to
Contract Sales and 0.8% were attributed to products packaged in Multi-Serve
Sizes.
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<PAGE> 52
Nuts. The nut category, which accounted for 9.4% of the Company's net
sales in fiscal 1996, consists of toasted and flavored peanuts, cashews,
pistachios and sunflower seeds. In fiscal 1996, 95.3% of the Company's net sales
in this category were attributed to products packaged in Single-Serve Sizes. The
remaining 2.1% and 2.6% of net sales were attributable to products packaged in
Multi-Serve Sizes and Contract Sales, respectively.
Candy. The candy category, which accounted for 7.3% of the Company's net
sales in fiscal 1996, consists of candy bars, such as peanut rolls, hard and
roll candies and coated nuts. In fiscal 1996, 86.0% of the Company's net sales
in this category were attributed to products packaged in Single-Serve Sizes,
11.3% were attributed to products packaged in Multi-Serve Sizes and 2.7% of all
candy products were attributed to Contract Sales.
Affiliated Products. The Company has affiliate arrangements to purchase
and re-sell Affiliated Products, such as "Leaf" brand gum and candies and
Goodmark Foods Inc.'s line of meat snacks, through Company distributors. The
Company engages Affiliated Suppliers based upon market demand for food products
not manufactured by the Company. In fiscal 1996, Affiliated Products represented
5.0% of the Company's net sales.
The Company also promotes the sale of certain snack foods, confection
products and hot and cold beverages of certain companies, such as the Coca-Cola
Company, for which it receives promotional allowances.
DISTRIBUTION
The Company's products are primarily marketed by the Company's network of
distributors: (i) directly to the public through one of the largest,
single-label vending machine networks in the United States; and (ii) to retail
outlets through a direct store delivery system. The Company also sells its
products to National Accounts, mainly supermarkets, larger convenience stores
and mass merchandisers, with distributors acting as delivery agents.
Additionally, the Company manufactures products for other manufacturers on a
Contract Sales basis. The remainder of the Company's revenues are derived from
export sales, Direct Sales (as defined) and other miscellaneous sales.
Management believes that one of the Company's competitive advantages is
that it emphasizes different distribution channels relative to the industry as a
whole. For example, in 1996, 58.0% of the total sales in the snack food industry
were through supermarkets and mass merchandisers, while only 7.2% were through
vending machines. By comparison, for the same period, 52.6% of the Company's net
sales were through its distribution network, which reaches the customer through
vending machines and smaller retail outlets, while only 25.6% of the Company's
net sales were achieved directly through supermarkets, larger convenience stores
and mass merchandisers. The Company's business strategy emphasizes the smaller
outlets which are not a primary focus of the larger national industry
participants.
Below is a breakdown of the Company's net sales by channel of distribution
for the past two fiscal years and the first thirty-six weeks of 1997:
TOM'S FOODS NET SALES BY DISTRIBUTION CHANNEL
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
36-WEEK PERIOD
ENDED
FISCAL 1995 FISCAL 1996 SEPTEMBER 6, 1997
----------------- ----------------- -----------------
DISTRIBUTION CHANNEL $ % $ % $ %
-------------------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Distributor Network(a).................... $130.9 66.0% $128.9 62.6% $ 91.4 61.2%
National Accounts(b)...................... 53.4 26.9 52.8 25.6 39.3 26.3
Contract Sales, Direct Sales, and
Other(c)................................ 14.0 7.1 24.2 11.8 18.6 12.5
------ ----- ------ ----- ------ -----
Total................................ $198.3 100.0% $205.9 100.0% $149.3 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
- ---------------
(a) Distributors sell products through retail outlets and vending machines.
Certain distributors also serve as delivery agents for the Company with
respect to National Accounts, for which such distributors are paid a service
fee.
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<PAGE> 53
(b) Includes supermarkets, national chain convenience stores and mass
merchandisers.
(c) Includes fiscal 1996 net sales of $21.2 million attributed to Contract
Sales, export sales of $2.2 million, Direct Sales of $600,000 and
miscellaneous sales of $200,000.
DISTRIBUTOR NETWORK
Sales through the Company's network of distributors accounted for
approximately 62.6% of the Company's net sales in fiscal year 1996. The Company
ships freshly-made merchandise each day directly to its distributor network
located throughout the United States. The network of distributors, in turn,
delivers products to small or independent retail outlets and vending machines in
43 states through a total of approximately 2,348 sales routes. As of September
6, 1997, 943 independent distributors operated approximately 2,127 of these
sales routes. The remaining routes are operated by Company employees.
Distributors own or lease trucks and vending machines and market and distribute
the Company's products in specific geographic areas. The distributors control
the variety of items carried by the stores and in their vending machines and are
responsible for ensuring optimal shelf space, attractive display of the products
and product freshness. The Company-operated routes represent distributorships
which have been acquired by the Company: (i) to protect and develop a market
distribution base; (ii) due to the financial failure; or (iii) due to lack of
growth of an independent distributor. The Company plans to continue to operate
these routes where profitable, rehabilitate or close unprofitable routes and
remarket routes to other independent distributors where conditions warrant.
The Company's distributors may operate one or multiple sales routes.
Approximately 50.0% of the Company's distributors have multiple routes. The
Company's multi-route distributors operate up to 37 routes with an average of
3.7 routes per multi-route distributor. No single distributor accounts for more
than 1.5% of the Company's net sales.
Retail Outlets. Distributor sales to independent retail outlets are
primarily concentrated in the southeastern and southwestern United States. In
addition, the Company maintains a relatively small but rapidly growing retail
presence in the western, mid-Atlantic and northeast regions of the United
States. The Company believes its presence in the independent retail distribution
channel is one of Tom's Foods' competitive advantages.
Utilizing a direct store delivery system, route drivers bring product
directly into stores and provide merchandising services such as stocking and
rotating products and setting displays. The Company's broad range of products
and the distributors' ability to offer complete in-store merchandising and
product service are strong incentives for retailers to purchase the Company's
products.
Vending Machines. The Company is one of the largest single-label machine
vendors of snacks in the United States. Vending machines which dispense the
Company's products, the majority of which are owned by the Company's independent
distributors, are located principally in factories, schools, service stations,
office buildings, motels and rest areas, primarily in the southeastern and
southwestern United States.
In addition to its name brand products, the Company has authorized its
distributors to sell Affiliated Products, which are not produced by the Company
but are necessary from a distribution perspective to appropriately serve
customers. The Affiliated Products are largely sold through the vending channel,
although some of the Affiliated Products are sold through retail outlets.
NATIONAL ACCOUNTS
Sales of the Company's products to supermarket chains and larger retail
outlets, such as those operated by Winn Dixie Stores, Inc., Kmart Corporation,
Hannaford Brothers Co., The Circle K Corporation, Diamond Shamrock, Inc. and The
Kroger Co. and to military bases and mass merchandisers, such as Wal-Mart Stores
Inc., are handled under the Company's national accounts program ("National
Accounts"), which accounted for approximately 25.6% of the Company's net sales
in fiscal 1996. Delivery of products to National Accounts is made through the
Company's independent distributors, which are paid a service fee by the Company,
and the Company-owned and operated routes. Independent distributors are
consigned product inventory to make
50
<PAGE> 54
these deliveries and are paid a fee for warehousing the consigned inventory,
making the deliveries and servicing the account.
The National Accounts program has been developed to meet the special needs
of chains with outlets in areas serviced by more than one distributor and
requiring special handling, such as centralized billing, standardized
promotional offerings, disciplined merchandising policies and uniform pricing.
The Company believes that use of its internal sales organization allows it to
support its independent distributors and provide these services more
effectively.
CONTRACT SALES AND DIRECT SALES
To maximize the use of its manufacturing capacity, the Company manufactures
products for other snack food companies and large retail customers under
contract packaging agreements. Products manufactured for Contract Sales include
sandwich crackers, candy and some peanut and chip items. The Company also sells
and ships selected products directly to certain retailers' warehouses ("Direct
Sales"). Contract Sales and Direct Sales, along with certain other miscellaneous
sales, accounted for approximately 11.8% of the Company's net sales in fiscal
1996.
DISTRIBUTORSHIP ARRANGEMENTS
The Company currently enters into three types of arrangements with its
distributors: (i) vending distributorships, which grant the right to sell and
distribute the Company's products through vending machines or through purchasers
who resell the products solely for resale through vending machines; (ii) over-
the-counter ("OTC")/delivery agent distributorships, which grant the right to
sell Company products by direct store delivery and, for a fee, deliver products
to the Company's National Accounts customers; and (iii) combination
distributorships, which grant the rights of both the vending distributorship and
the OTC/delivery agent distributorship.
Pre-1997 Distributorship Arrangements. Of the Company's 915 independent
distributors, 563 operate under informal agreements or have not entered into any
written distributorship agreement with the Company. Of the remaining 352
distributors, 335 operate distributorships under previous agreements with other
terms and provisions, including without limitation, in certain agreements,
longer initial terms, the right of distributors to terminate such agreements
upon 90 days' notice and the right to request free consulting advice from the
Company and management assistance at the Company's cost for up to six months,
provided the distributor making such request is not in default under its
distributor agreement.
1997 Distributor Agreement. As of September 6, 1997, 33 distributors have
entered into a revised distributor agreement, which reflects the newly hired
senior management team's philosophy of working more closely with its
distributors and holding them accountable to certain performance standards (the
"1997 Distributor Agreement"). The Company will require new distributors, and,
as old agreements expire, existing distributors, to execute the 1997 Distributor
Agreement. The 1997 Distributor Agreement is for an initial term of seven years
and is renewable for five year terms, subject to certain conditions and unless
terminated earlier pursuant to its terms. Distributors must purchase a minimum
quantity of products at the prices and on the terms specified in the 1997
Distributor Agreement and may sell only merchandise approved by and purchased
from or approved for purchase by the Company. The 1997 Distributor Agreement
also sets minimum growth requirements depending on the volume generated by the
distributor.
Non-Exclusivity. Under the 1997 Distributor Agreement, distributors are
granted the right to distribute the Company's products through certain methods
in a precise geographic area (an "Area"). Except in cases of default under the
1997 Distributor Agreement, the Company will not designate another distributor
to sell products through the same methods of distribution in the same Area,
except that the Company or its designees may sell and distribute the Company's
products in certain circumstances, including where the products and services
being sold by the Company are not similar to the products distributed by a
distributor in that Area.
Continuing Services. Pursuant to the 1997 Distributor Agreement and
subject to certain limitations, the Company is required to provide certain
services to its distributors, including product delivery, provision of
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<PAGE> 55
training and marketing programs, limited management assistance in certain
circumstances, support with respect to vending machine repair and maintenance
services and continued development of new products.
Repurchase Requirement of the Company. In order to provide distributors
with an exit strategy, the Company has agreed that, upon request, it will
repurchase the distributorship assets of any distributor that has been in full
compliance with all of the terms and conditions of the 1997 Distributor
Agreement at all times for three years prior to the request. The 1997
Distributor Agreement is the only type of distributor agreement which contains
this repurchase obligation. As of September 6, 1997, 33 of the Company's
distributors signed the 1997 Distributor Agreement, the first of which was
effective in early 1997. Consequently, the Company will not be required to
repurchase distributorships, if so requested, pursuant to the 1997 Distributor
Agreement until the first distributors become eligible in 2000. Upon completion
of due diligence and market analysis, on the terms and conditions and subject to
the limitations set forth in the 1997 Distributor Agreement, the Company will be
required to purchase the distributorship and its assets for a price equal to 3.5
times the amount of the average annual Net Free Cash Flow of the
distributorship, measured over the past three years. Net Free Cash Flow is
calculated by the Company in accordance with limitations and exclusions set
forth in the 1997 Distributor Agreement and excludes debt service, income taxes,
dividends, owner withdrawals (other than reasonable management compensation) and
any receipts arising from service to the Company as a delivery agent to National
Accounts. With respect to assets that a distributor demonstrates are used
exclusively in the performance of such distributor's duties as a delivery agent
to National Accounts, the Company will repurchase those assets at a mutually
agreed upon value. If such agreement cannot be reached, the parties agree to
rely upon the assessment of an independent appraiser. The Company has the option
of paying for the distributorship and its assets in cash or by a promissory note
on mutually agreeable terms.
If a distributor requests that the Company purchase the assets of its
distributorship but the distributor has not been in compliance with its 1997
Distributor Agreement for the preceding three years, the Company then has 45
days in which it may, but is not required to, purchase all or a portion of the
assets of the distributorship making the request.
Underdeveloped Areas. The continuation of the distributor's right to
distribute and sell products in an Area depends upon certain contingencies,
including attainment of certain sales volume or revenue growth, market
penetration and development of channels of distribution. If the Company
determines that a distributor has not developed all regions or all authorized
channels of distribution within its Area and the Company and the distributor are
unable to reach a mutually acceptable plan of development for such Area (an
"Underdeveloped Area"), then the Company will have an option to purchase all or
a portion of the distributor's assets located within the Underdeveloped Area at
an amount equal to 5.0% of the distributor's annual gross over-the-counter sales
of products within the Underdeveloped Area over the preceding twelve months plus
the fair market value of the physical assets purchased. In the case of the
purchase of vending assets, the Company will pay 7.0% of the distributor's
annual gross vending sales of products within the Underdeveloped Area over the
preceding twelve months plus the fair market value of any physical assets
purchased.
Covenant Not to Compete. While acting as distributors and for a period of
two years thereafter, distributors agree not to engage in, or have any interest
in, any business engaged in the sale or distribution of prepackaged,
ready-to-eat snack food products to customers within the distributor's Area,
other than the Company. Distributors are also prohibited from disclosing trade
secrets and other confidential information.
DISTRIBUTOR FINANCING/STI DEBT
The Company no longer provides financing to distributors but maintains
strong relationships with vending machine manufacturers, financing companies and
other key providers of financing that result in substantial discounts and
financing programs for the Company's distributor network. Since 1990, a number
of the Company's distributors have had financing arrangements with STI, which
were generally collateralized with route distribution equipment (vending
machines, trucks, hand held computers, etc.) and routes. The Company's previous
practice of partially or fully guaranteeing this distributor financing gave rise
to the STI Debt. As of September 6, 1997, the Company had recognized an
obligation on its balance sheet of $8.5 million related primarily to defaulted
notes from failed distributors to STI.
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<PAGE> 56
On October 14, 1997, the Company paid STI $10.0 million of the proceeds
from the Old Note Offering in full satisfaction of the STI Debt. STI then
assigned all of its rights against distributors which defaulted on financing
arrangements with STI prior to August 1, 1997 and the collateral related thereto
to the Company. Approximately 390 of the Company's distributors still have
financing arrangements with STI, although these arrangements are no longer
guaranteed by the Company. In the event these distributors default and STI
subsequently forecloses on some or all of the collateral pledged by such
distributors, STI will control certain of the Company's distributor assets and
routes. The Company will have a first option to purchase any such foreclosed
collateral from STI at 40.0% of the outstanding obligation on which STI
foreclosed.
SALES AND MARKETING
The Company's field sales force, together with the Company's distributor
development department, are responsible for sourcing, selecting and training new
distributors. In addition, the field sales force assists independent
distributors in developing new routes, opening new accounts, running promotions
and is available to advise distributors on operational and management issues
that may arise. The Company also maintains a National Accounts sales
organization to manage sales relationships with its chain store customers.
The Company has a 19-person in-house marketing department. The marketing
department is dedicated to: (i) developing new products, improving existing
products and coordinating all packaging changes; (ii) developing and evaluating
the Company's trade and consumer promotions, National Accounts merchandising
programs, sales aids and display equipment and distributor programs; (iii)
assisting sales personnel with business reviews and forecasting; and (iv)
coordinating the sales and product activities with the Company's major contract
customers.
NEW PRODUCT DEVELOPMENT
The Company is committed to developing new products to meet changing
customer demands and attract new customers. The Company generally does not
develop new types of snack foods, but instead creates products designed to meet
existing customer demand based on proven product concepts already in the market.
The Company adds new products to its line only after considering the new
product's potential profitability, manufacturing feasibility and optimal
channels of distribution. The Company also reviews a new product's competitive
advantage in the marketplace and its fit with the Company's business strategy.
The Company has and will continue to introduce new flavors, redesign its
packaging and modify packaging sizes and weights, all of which are intended to
update and unify the brand image. Since 1995, the Company has introduced 61 new
products, 51 of which have been successfully integrated into the Company's
product lines, a rate which management believes exceeds the industry average. In
fiscal 1996 and for the 36-week period ending September 6, 1997, the Company
spent $600,000 and $700,000, respectively, developing, sampling and promoting
new products.
COMPETITION
The snack food industry is highly competitive. The Company competes on the
basis of overall customer satisfaction which includes price, flavor, freshness
and quality.
In the Company's principal geographic markets, the southeastern and
southwestern United States, the Company's major competitors include Frito-Lay
and Lance, Inc. ("Lance") both of which the Company views as "full-line" snack
food competitors in the salty snack segment. The Company defines a "full-line"
participant as a snack food company which has products in all the Company's
major snack categories, including nuts, candy, sandwich crackers, baked goods,
potato chips, corn/tortilla chips and extruded snacks, such as cheese puffs.
Other industry participants maintain a presence in a limited number of these
product categories, such as chips or baked goods. The Company believes that
Frito-Lay is the Company's major competitor and has been for over 20 years, with
domestic sales of $6.6 billion in 1996. Although the industry
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<PAGE> 57
has recently experienced significant industry consolidation, in 1996 no
manufacturer other than Frito-Lay had more than a 1.0% market share in the 14
product sub-categories in which the Company competes.
The Company's major competitors by product line include the following:
<TABLE>
<CAPTION>
PRODUCT LINE MAJOR COMPETITORS
------------ -----------------
<S> <C>
Chips.............. Frito-Lay, Golden Flake Snack Foods Inc., Wise Potato Chip
Co.
Sandwich
Crackers......... Frito-Lay, Golden Flake Snack Foods Inc., Keebler, Lance,
Nabisco, Wise Potato Chip Co.
Baked Goods........ Interstate Bakeries Corporation (Dolly Madison/Hostess
brands), Keebler, McKey Holdings Ltd., Nabisco
Nuts............... Fisher Nut Company, Frito-Lay, Lance, Nabisco (Planter's
brand), John B. Sanfilippo & Son, Inc., Sun-Diamond Growers
of California
Candy.............. Brach & Brock Confections, Inc., Favorite Brands
International, Inc., Hershey Foods Corporation, M&M/Mars,
Nabisco, Nestle USA Inc.
</TABLE>
The Company believes it enjoys several competitive advantages relative to
its competitors including a strong presence in distribution channels such as
vending machines, independent retail outlets and convenience stores, and its
extensive distributor network, which management believes is able to effectively
serve these distribution channels.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal raw materials used in the production of the Company's snack
food products are: packaging materials; potatoes, nuts and other agricultural
products; and flour, corn, oils, and other milled or refined products.
The Company has approximately 22 suppliers of packaging materials, such as
film, foil and cardboard used for product packaging as well as shipping and
display purposes. The Company has not experienced difficulty in satisfying its
requirements with respect to packaging materials and considers its sources of
supply to be adequate. In addition, there are readily available alternative
suppliers for the Company's packaging materials.
The Company has approximately 19 suppliers of potatoes, with none of the
suppliers providing more than 15.0% of the Company's annual potato requirement.
The Company believes it has adequate potato supply sources to meet its
requirements for fiscal 1997. In the event the demand for potatoes exceeds
requirements at any time, the Company could experience shortages. In addition,
the Company believes that what it considers to be normal fluctuations in the
price of potatoes from year to year have and will continue to impact the
Company's cost of manufacturing potato chips, its largest product category.
The Company currently purchases its supply of peanuts indirectly from
approximately 175 independent farmers and the Company has approximately four
primary suppliers of other agricultural products such as flour, corn and oil.
The Company finances its peanut purchases through an arrangement with Golden
Peanut. The prices of peanuts and other agricultural products used by the
Company have been subject to little fluctuation in the last three years. The
Company believes it has adequate sources of peanuts and other agricultural
products to meet its requirements for fiscal 1997. In addition, there are
readily available alternative suppliers for these products.
The Company believes that its ability to promote alternative products
within its diversified product line allows it to absorb most atypical
fluctuations which may impact the cost of products in any one category.
GOVERNMENT REGULATION
As a manufacturer and marketer of food items, the Company is subject to
regulation by various government agencies, including the USDA and the United
States Food and Drug Administration. Under various statutes and regulations,
such agencies prescribe requirements and establish standards for quality and
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purity. The finding of a failure to comply with one or more regulatory
requirements can result in variety of sanctions, including monetary fines and/or
compulsory withdrawal of products from store shelves. The Company may also be
required to comply from time to time with state and local laws regulating food
handling and storage.
In addition to laws relating to food products, the Company is subject to
various federal, state and local environmental laws and regulations which limit
the discharge, storage, handling and disposal of a variety of substances. The
Company's operations are also governed by laws and regulations relating to
workplace safety and worker health, principally the Occupational Safety and
Health Administration Act and regulations and applicable state laws and
regulations thereunder.
The Company believes that it is in compliance in all material respects with
all presently applicable governmental laws and regulations and that the cost of
administration of compliance with existing laws and regulations does not have,
and is not expected to have, a material adverse impact on the Company's
financial condition or results of operations.
PROPERTIES
The Company owns and operates seven plants in five states. Sandwich
crackers, baked goods, nuts and candy products are produced in three plants
located in Columbus, Georgia, which is also the location of the Company's
headquarters. Chips are manufactured in four plants located in Fresno,
California; Perry, Florida; Knoxville, Tennessee; and Corsicana, Texas. The key
markets in the southeastern and southwestern United States are served by the
Perry, Columbus, Knoxville and Corsicana plants. The Fresno plant primarily
services Arizona, California and Nevada and to a lesser extent Oregon and
Washington. Products produced in Columbus are cross-docked through the Fresno
shipping facility. All of the Company's facilities have sufficient additional
capacity, some of which is used to package products on a contract basis for
other snack food manufacturers. The Company also leases certain properties in
connection with its field sales and Company-owned routes and owns two parcels of
property not reflected in the chart below. Set forth below is a list and
description of the material properties owned by the Company:
<TABLE>
<CAPTION>
LOCATION SQUARE FEET DATE BUILT EMPLOYEES(A) PRODUCTS/OTHER USE
- -------- ----------- ----------- ------------ ------------------
<S> <C> <C> <C> <C>
Columbus, GA......... 147,000 1950 - 1970 684(b) Headquarters
Columbus, GA......... 142,000 1950 - 1970 38 Warehouse
Columbus, GA......... 104,000 1967 225 Baked Goods and Sandwich Crackers
Columbus, GA......... 85,000 1926 - 1977 64 Peanuts
Columbus, GA......... 70,000 1929 - 1954 35 Candy
Knoxville, TN........ 116,000 1982 250 Chips
Perry, FL............ 111,000 1982 77 Chips
Corsicana, TX........ 84,000 1963 207 Chips
Fresno, CA........... 47,000 1974 50 Chips
</TABLE>
- ---------------
(a) Number of employees as of September 6, 1997.
(b) Includes field personnel.
INTELLECTUAL PROPERTY
The Company operates under the trademark, service mark and trade name
"TOM'S" and uses various marks and logos containing "TOM'S" (collectively, the
"Company Marks"). The Company's products are sold under a number of trademarks.
Most of these trademarks, including the widely recognized "TOM'S" brand name,
are owned by the Company.
Pursuant to the 1997 Distributor Agreement, distributors are granted a
non-exclusive license to use certain of the Company Marks. The 1997 Distributor
Agreement otherwise provides that distributors shall make no use of the Company
Marks, nor engage in any program or activity which makes use of or contains
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<PAGE> 59
any reference to the Company, its products or the Company Marks, except with
written consent of the Company.
The Company has and will continue to maintain and vigorously defend its
intellectual property rights, including policing its trademark rights by
pursuing trademark infringers.
EMPLOYEES
As of September 6, 1997 the Company had approximately 1,630 full-time
employees, including 966 in the manufacturing facilities, 417 in sales and
marketing and 247 in administration and support operations. None of the
Company's employees are subject to collective bargaining agreements. The Company
considers its employee relations to be good.
LEGAL PROCEEDINGS
The Company is subject to litigation from time to time in the ordinary
course of business. Although the amount of any liability with respect to any
such litigation cannot be determined, in the opinion of management, such
liability is not expected to have a material adverse effect on the Company's
financial condition or results of operations.
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<PAGE> 60
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Michael E. Heisley........................ 60 Chairman of the Board and Director
Rolland G. Divin.......................... 50 President, Chief Executive Officer and
Director
Stanley H. Meadows(a)..................... 52 Assistant Secretary and Director
Thomas C. Mattick......................... 57... Director
Emily Heisley Stoeckel.................... 33 Director
Andrew G. C. Sage II(a)................... 71 Director
S. Albert Gaston.......................... 38... Senior Vice President and Chief Financial
Officer
Gerald R. Barker.......................... 52... Senior Vice President -- Marketing
Wyatt F. Hearp............................ 50... Vice President -- Manufacturing
Paul C. Serff............................. 58... Senior Vice President -- Human Resources
</TABLE>
- ---------------
(a) Member of the Compensation Committee. Mark A. Bounds, a Director of TFH and
TFCC, is also a member of the Compensation Committee.
Michael E. Heisley. Mr. Heisley has been the Chairman of the Board of
Directors of the Company since May 1993. Since 1988, Mr. Heisley has been the
Manager, President and Chief Executive Officer of The Heico Companies, L.L.C., a
holding company in Chicago, Illinois which acquires or invests in and operates a
diverse group of businesses. Mr. Heisley also serves as the Chief Executive
Officer of various of The Heico Companies, L.L.C.'s subsidiaries and is a
Director of Robertson-Ceco Corp. and Environdyne Industries, Inc., both of which
are publicly-held companies. Mr. Heisley received a bachelor's degree in
business administration from Georgetown University in 1960. Mr. Heisley is the
father of Emily Heisley Stoeckel.
Rolland G. Divin. Mr. Divin has been the President, Chief Executive
Officer and a Director of the Company since January 1995. From December 1991 to
January 1995, Mr. Divin was the President and Chief Executive Officer of Chun
King, Inc., a national brand food business based in Cambridge, Maryland. Prior
to joining Chun King, Mr. Divin was the President, Chief Executive Officer and a
Director of Orange Co., Inc., a publicly-held national brand food company based
in Bartow, Florida from 1989 to 1991. Mr. Divin graduated from Kansas State
University in 1970 with a multi-discipline bachelor's of science degree in
business/pre-veterinary studies and has completed graduate studies in finance at
the University of Minnesota-St. Paul.
Stanley H. Meadows. Mr. Meadows has been the Assistant Secretary and a
Director of the Company since May 1993. Since 1980 he has been a partner
(through a professional corporation) of McDermott, Will & Emery, a law firm
based in Chicago, Illinois which provides legal services to the Company, TFH and
TFCC. Mr. Meadows is also a Director of Robertson-Ceco Corp., a publicly-held
company. Mr. Meadows received a bachelor of science degree from the University
of Illinois in 1966 and a law degree from the University of Chicago in 1970.
Thomas C. Mattick. Mr. Mattick has been a Director of the Company since
May 1993. Mr. Mattick is a CPA and has been Managing Director of Heico
Acquisitions, Inc. an acquisition company in Chicago, Illinois, since January
1992. Mr. Mattick received a bachelor's degree in business administration from
the University of Wisconsin in 1962.
Emily Heisley Stoeckel. Ms. Stoeckel has been a Director of the Company
since August 1996. She has held various positions with Heico Acquisitions, Inc.
in Chicago, Illinois since January 1989 and has been Vice President since
January 1996. Ms. Stoeckel received a bachelor of arts degree in economics from
Northwestern University in 1987 and a master's degree in business administration
from the University of Chicago in 1991. Ms. Stoeckel is the daughter of Michael
E. Heisley.
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<PAGE> 61
Andrew G. C. Sage II. Mr. Sage has been a Director of the Company since
1993. Mr. Sage held various positions with Shearson Lehman Brothers, Inc. and
its predecessors, Lehman Brothers and Lehman Brothers Kuhn Loeb, Inc., since
joining the investment bank in 1948, including General Partner from 1960-1970,
President from 1970-1973, Vice Chairman from 1973-1977, Managing Director from
1977-1987, and Senior Consultant from 1987-1990. Since 1990, Mr. Sage has been a
consultant in general business and financial management. Mr. Sage is a Director
of Robertson-Ceco Corp. and Computervision Corporation, both of which are
publicly-held companies.
S. Albert Gaston. Mr. Gaston has been the Senior Vice President and Chief
Financial Officer of the Company since April 1995. From November 1989 to April
1995, Mr. Gaston was the Vice President and Chief Financial Officer of Apache
Products Company, a building materials manufacturer and distributor
headquartered in Meridian, Mississippi. Mr. Gaston is a CPA and received his
bachelor's degree in business administration from Millsaps College in 1981 and
his masters degree in business administration from Southern Methodist University
in 1987.
Gerald R. Barker. Mr. Barker has been the Senior Vice President --
Marketing of the Company since August 1995. Prior to joining the Company, Mr.
Barker served as a marketing officer for Borden Inc., a national brand food
company, in Atlanta, Georgia from September 1987 through June 1995. Mr. Barker
has a bachelor's degree in economics degree from State University of New York in
1969 and a masters degree in business administration from Arizona State
University in 1974.
Wyatt F. Hearp. Mr. Hearp has been Vice President -- Manufacturing of the
Company since 1995. Prior to becoming an officer, Mr. Hearp held various
positions with the Company or its predecessor businesses since 1972, including
manager of the Company's chip division from 1990 to 1995. Mr. Hearp received a
bachelor's degree in biology from High Point University in 1969 and a master's
of science degree in food technology from Auburn University in 1977.
Paul C. Serff. Mr. Serff has been the Senior Vice President -- Human
Resources of the Company or its predecessor businesses since August 1987. Mr.
Serff received a bachelor's degree in industrial management from the Georgia
Institute of Technology in 1961 and a master's degree in business administration
from Emory University in 1964.
TERM OF OFFICE
Each member of the Board of Directors of the Company is elected annually.
All officers serve at the pleasure of the Board of Directors.
DIRECTOR COMPENSATION
All directors may be reimbursed for certain expenses in connection with
attendance at Board and committee meetings. Other than with respect to
reimbursement of expenses, directors do not receive additional compensation for
service as a director.
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<PAGE> 62
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all compensation
paid or earned for services rendered to the Company in 1997 by the Company's
chief executive officer and the Company's next four most highly compensated
executive officers (each, a "Named Officer"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------
NAME PRINCIPAL POSITION SALARY BONUS(A)(1)
- ---- ------------------ -------- -----------
<S> <C> <C> <C>
Rolland G. Divin........... President, Chief Executive Officer and Director $300,000 $300,000
S. Albert Gaston........... Senior Vice President and Chief Financial Officer 150,000 100,000
Gerald R. Barker........... Senior Vice President -- Marketing 140,000 100,000
Paul C. Serff.............. Senior Vice President -- Human Resources 133,300 0
Wyatt F. Hearp............. Vice President -- Manufacturing/Distribution 111,000 0
</TABLE>
- ---------------
(a) Bonus amounts reflect amounts paid pursuant to the Executive Incentive Plan.
(1) In addition, the individuals are entitled to a bonus in respect of 1997
pursuant to the Management Incentive Plan, but such amounts are not yet
calculable; however, such amounts paid in 1997 in respect of services
rendered in 1996 were as follows: Rolland G. Divin, $212,012; S. Albert
Gaston, $63,322; Gerald R. Barker, $58,444; Paul C. Serff, $58,890; Wyatt F.
Hearp, $47,831.
DEFINED BENEFIT RETIREMENT PLANS
The Company has two noncontributory defined benefit retirement plans (the
"Hourly Plan" and the "Salaried Plan") which cover substantially all full-time
employees who are at least 21 years of age. The Company also has an unqualified
pension plan ("Unqualified Plan") covering only certain salaried employees. The
plans provide for payment of monthly benefits to participants upon their
reaching normal retirement dates. Benefit amounts are determined by a benefit
formula which considers length of service and average salary for the Salaried
Plan and the Unqualified Plan and length of service multiplied by a fixed rate,
as determined by the Company, for the Hourly Plan.
Salaried Plan. For those employees participating in the Salaried Plan, the
Company estimates that the following annual benefits would be payable upon
retirement at or after age 60 to persons at the following compensation and
year-of-service classifications, less amounts received as social security
benefits:
TOM'S FOODS INC. PENSION PLAN FOR SALARIED EMPLOYEES
SUPPLEMENTAL RETIREMENT PLAN TABLE
Annual Pension Payable at Age 65
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------------------
COMPENSATION(A) 5 10 15 20 25 30 OR MORE
--------------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
$100,000............................. $ 6,767 $13,535 $20,302 $27,070 $33,837 $40,604
125,000............................. 8,642 17,285 25,927 34,570 43,212 51,854
150,000............................. 10,517 21,035 31,552 42,070 52,587 63,104
200,000............................. 11,267 22,535 33,802 45,070 56,337 67,604
300,000............................. 11,267 22,535 33,802 45,070 56,337 67,604
500,000............................. 11,267 22,535 33,802 45,070 56,337 67,604
</TABLE>
- ---------------
(a) Compensation is assumed to be constant. Table is based on covered
compensation of $27,540 for a participant turning 65 in 1997. The IRC
Section 401(a)(17) limit on compensation is assumed constant at the 1997
level of $160,000.
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<PAGE> 63
The compensation used to determine a person's benefits under the Salaried
Plan and the Unqualified Plan includes such person's salary and annual bonus,
whether or not deferred. The current compensation for each of the Named Officers
is identical to the amounts listed in the Summary Compensation Table. The
estimated credited years of service at the end of fiscal 1996 for each of the
Named Officers are 2.0 years for Mr. Divin, 1.7 years for Mr. Gaston, 1.3 years
for Mr. Barker, 9.3 years for Mr. Serff and 23.6 years for Mr. Hearp.
Unqualified Plan. The Supplemental Employee Retirement Plan of Tom's Foods
Inc. (the "SERP") provides employees designated by the Company with certain
pension benefits upon retirement on or after age 58 (55 for certain employees)
in order to supplement benefits provided under the Company's qualified plans and
Social Security. The SERP generally provides for lifetime benefits of 50.0% of
average monthly compensation less 50.0% of primary Social Security, reduced for
service less than 30 years and receipt prior to age 62 1/2, and further offset
by the actuarial value of prior cash payments. Of the five Named Officers, only
Mr. Serff participates in the SERP. The Company estimates that the annual
benefits payable to Mr. Serff at normal retirement age pursuant to the SERP
would be $20,518.
Hourly Plan. The Hourly Plan provides hourly employees with certain
pension benefits upon retirement on or after age 55 if the employees worked five
or more years prior to termination. Generally, the plan provides for monthly
pension benefits based only on a participant's years of service. None of the
Named Officers participate in this plan.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Mr. Divin, the
Company's President and Chief Executive Officer, and Mr. Serff, the Company's
Vice President -- Human Resources. The employment agreement with Mr. Divin
provides for an ongoing 12-month term and is terminable by the Company upon 60
days prior notice. If the Company terminates the agreement without cause, if Mr.
Divin resigns because of a material breach by the Company or if Mr. Divin's
responsibilities are materially diminished after a change in control of the
Company, the Company will be required to pay Mr. Divin severance payments of up
to a maximum of 12 months of salary. The employment agreement with Mr. Serff
provides for an ongoing 24-month term. Should the Company terminate Mr. Serff's
employment without cause, the Company is required to pay Mr. Serff severance
payments for the remainder of the term, or a minimum of 24 months based on his
then-current salary. Each of Mr. Divin's and Mr. Serff's employment agreements
contains a covenant not to compete with the Company within certain geographic
areas for up to one year following the respective officer's resignation or
termination. Mr. Gaston and Mr. Barker also are entitled to severance payments
of up to a maximum of 12 months salary in certain circumstances.
INCENTIVE COMPENSATION PLANS
Management Incentive Compensation Plan. The Company's Management Incentive
Compensation Plan (the "Management Incentive Plan") is administered by the
Compensation Committee of the Board of Directors and applies to those key
employees designated by the President and Chief Executive Officer. The terms and
conditions upon which awards become payable are determined by the Compensation
Committee and subject to approval by the Board of Directors. Target incentive
amounts are expressed as a percentage of the key employees' salary and actual
incentive amounts are provided based on the Company's achievement of certain
criteria, including manufacturing profit and sales performance objectives. Each
of the Named Officers, as well as other key employees, participated in the
Management Incentive Plan in fiscal 1996.
Executive Incentive Plan. In addition, the Company's Executive Incentive
Plan (the "Executive Incentive Plan") applies to Mr. Divin, Mr. Gaston and Mr.
Barker (collectively, the "Participants"). Each of the Participants has an
option to acquire his allocated share of 20.0% of the Preferred Stock (including
any liquidation preferences accruing thereon) issued to TFH in satisfaction of
the TFH Debt. The options, which are allocated 60.0% to Mr. Divin, 20.0% to Mr.
Gaston and 20.0% to Mr. Barker, will expire if not exercised by December 31,
2002. The options to acquire Preferred Stock will vest, for those Participants
then employed by the Company, upon: (i) a sale of the Company or substantially
all its assets; (ii) an exchange of the outstanding Preferred Stock for Common
Stock of the Company; (iii) a Public Equity Offering; or (iv) a
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<PAGE> 64
redemption of or sale to a third party of the Preferred Stock (collectively, the
"Exercise Events"). In addition, the options to acquire Class A Preferred Stock
may be exercised at any time prior to December 31, 2002 if the Class A Preferred
Stock becomes exchangeable for Exchange Notes. The options to acquire Preferred
Stock shall apply to any partial exchanges under clause (ii) above, to partial
redemptions or sales under clause (iv) above and partial exchangeability of the
Class A Preferred Stock, to the extent of 20.0% of the amount exchanged,
redeemed, sold or exchangeable. The aggregate exercise price for the options
will be $1,000. The options vest as follows: (i) 33.33%, one year after
consummation of the Old Note Offering; (ii) 66.67%, two years after consummation
of the Old Note Offering; and (iii) 100.0%, three years after consummation of
the Old Note Offering. The grant of the options described herein will result in
a charge to compensation expense upon an Exercise Event equal to the dollar
amount of such options less the amount paid by Mr. Divin, Mr. Gaston and Mr.
Barker.
The Executive Incentive Plan further provided the Participants with a cash
payment in an aggregate amount of $1.0 million. 50.0% of such amount was paid
upon consummation of the Old Note Offering and 50.0% will be paid on December
31, 1998 to Participants then employed by the Company. TFH has an obligation to
pay $1.0 million to the Participants in cash from such amount, with $500,000
paid at consummation of the Old Note Offering and $500,000 due on December 31,
1998, subject to continued employment by the Company. The first payment resulted
in a $500,000 charge to compensation expense of the Company upon consummation of
the Old Note Offering. A similar charge will be recorded upon the $500,000
payment to be made on December 31, 1998.
All obligations to the Participants pursuant to the Executive Incentive
Plan are obligations solely of TFH, not of the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation (the "Certificate") contains
provisions eliminating the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the Delaware General Corporation Law (the "DGCL"). These provisions in the
Certificate do not eliminate the duty of loyalty and, in appropriate
circumstances, equitable remedies such as an injunction or other forms of
non-monetary relief would remain available under DGCL. Each director will
continue to be subject to liability for breach of a director's duty of loyalty
to the Company or its stockholders, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the director derived an improper personal benefit and for
improper distributions to stockholders. These provisions also do not affect a
director's responsibilities under any other laws, such as federal securities
laws or federal environmental laws.
The Company's By-Laws provide that the Company will indemnify its directors
and officers to the fullest extent permitted by law. The Company's By-Laws also
permit it to secure insurance on behalf of any person it is required to or
permitted to indemnify for any liability arising out of his or her actions in
such capacity, regardless of whether the By-Laws would permit indemnification.
The Company maintains liability insurance for its directors and officers.
At present, there is no pending litigation or proceeding involving any
director or officer of the Company where indemnification would be required or
permitted. The Company is not aware of any threatened litigation or proceeding
that might result in a claim for such indemnification.
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<PAGE> 65
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The issued and outstanding Common Stock of the Company consists of 5,000
shares, 4,000 of which (80.0%) are held by TFH and 1,000 of which (20.0%) are
held by TFCC. All of the outstanding shares of Preferred Stock of the Company,
which are non-voting, are held by TFH. Under the terms of a Stockholders'
Agreement among all of the stockholders of TFH (the "TFH Stockholders'
Agreement"), Heico Holding, Inc. ("Heico Holding") is entitled to elect a
majority of the Boards of Directors of each of TFH and the Company. Michael E.
Heisley, Chairman of the Board and a Director of the Company, holds
substantially all of the voting securities of Heico Holding. Under the terms of
a Stockholders' Agreement among all of the Stockholders of TFCC (the "TFCC
Stockholders' Agreement"), Mr. Heisley is entitled to designate a majority of
the Board of Directors of TFCC. As a result of the foregoing, Mr. Heisley has
beneficial ownership of all of the outstanding capital stock of the Company.
Heico Holding holds 55.0% of the shares of common stock of TFH. The
remaining shares of common stock of TFH are held by Gerald D. Hosier ("Hosier")
(20.0%), Allstate Insurance Company ("Allstate") (15.0%) and TCW Shared
Opportunity Fund L.P. ("TCW") (10.0%). Pursuant to the TFH Stockholders'
Agreement, the consent of Heico Holding and one of Allstate, Hosier or TCW is
required in order to approve (a) a merger resulting in the sale of the Company,
(b) any sale of substantially all of the Company's assets, (b) asset sales, by
the Company in any fiscal year exceeding, in the aggregate, $7.5 million, (c)
acquisitions by the Company of assets in any fiscal year exceeding $7.5 million
in the aggregate, (d) capital expenditures by the Company in any fiscal year
exceeding $7.5 million in the aggregate, (e) certain issuance of capital stock
of the Company and (f) the incurrence by the Company of indebtedness for
borrowing money exceeding $7.5 million in the aggregate. In addition, each of
Allstate, TCW and Hosier has the right to designate one member of the Boards of
Directors of each of TFH and the Company.
The capitalization of TFCC consists of 30,750 shares of Class A 6%
Cumulative Convertible Preferred Stock (the "TFCC Class A Preferred Stock"), 867
shares of Class B Preferred Stock, 2,225.35 shares of Class C 6% Cumulative
Convertible Preferred Stock (the "TFCC Class C Preferred Stock"), 8,750 shares
of Class D 6% Cumulative Convertible Preferred Stock (the "TFCC Class D
Preferred Stock") and 410,734 shares of common stock (the "TFCC Common Stock").
Each share of TFCC Class A Preferred Stock, TFCC Class C Preferred Stock and
TFCC Class D Preferred Stock is convertible into 34.9895 shares of TFCC Common
Stock and has a liquidation preference of $1,000 plus unpaid dividends which
have accrued since May 13, 1993. TFCC Class A Preferred Stock and TFCC Class D
Preferred Stock rank pari passu and senior to all other TFCC preferred stock.
The TFCC Class A Preferred Stock and TFCC Class C Preferred Stock are entitled
to 34.9895 votes per share and vote together with TFCC Common Stock in all
matters upon which such holders are entitled to vote. TFCC Class B Preferred
Stock and TFCC Class D Preferred Stock are generally not voting. Allstate and
its affiliates hold 20,000 shares of TFCC Class A Preferred Stock with 44.7% of
the voting power of the outstanding voting securities of TFCC. Hosier holds
8,750 shares of TFCC Class A Preferred Stock with 19.6% of the voting power of
the outstanding voting securities of TFCC. Heico Holding holds 2,000 shares of
TFCC Class A Preferred Stock and 160,596 shares of TFCC Common Stock and TF
Partners, an affiliate of Mr. Heisley, holds 150,862 shares of TFCC Common
Stock. Heico Holding and TF Partners together hold voting securities with 24.4%
of the voting power of the outstanding voting securities of TFCC. In addition,
Allstate is entitled to designate two members of the Board of Directors of TFCC.
Of the Named Officers, each of Rolland G. Divin, S. Albert Gaston and Paul
C. Serff beneficially owns 48,664, 9,733 and 11,680 shares of TFCC Common Stock,
respectively, or 3.1%, 0.6% and 0.7%, respectively, of the voting power of the
outstanding voting securities of TFCC. In accordance with the Executive
Incentive Plan, each of Messrs. Divin, Gaston and Barker has the option to
acquire 12.0%, 4.0% and 4.0%, respectively, of the Preferred Stock issued to
TFH. See "Management -- Incentive Compensation Plans -- Executive Incentive
Plan."
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CERTAIN TRANSACTIONS
THE 1988 ACQUISITION
In June of 1988, TF Acquisition Corporation acquired the Company (the "1988
Acquisition") in a leveraged buy-out financed with (i) senior secured
indebtedness provided under the CIBC Debt, and (ii) certain subordinated
indebtedness. In connection with the 1988 Acquisition, the Company indemnified
its predecessor for its obligations with respect to the Industrial Development
Revenue Bonds (as defined). See "Description of Other Senior Indebtedness --
Description of Industrial Development Revenue Bonds." The Company supported such
indemnification by posting the Company's Letter of Credit and escrowing an
amount equal to one year's interest on the Industrial Development Revenue Bonds.
THE 1993 REFINANCING
In May of 1993, an investor group led by Michael E. Heisley, currently the
Chairman of the Board and a Director of the Company, acquired the existing
subordinated debt of the Company and exchanged it for preferred stock of TFCC
(the "1993 Refinancing"). In connection with the 1993 Refinancing, the Company
(i) borrowed the MassGeneral Debt and (ii) re-negotiated the terms of the CIBC
Debt. As a result of the 1993 Refinancing, the Company became a wholly-owned
subsidiary of TFCC.
THE 1996 REFINANCING
Prior to the 1996 Refinancing, Heico Holding, a 55.0% stockholder of TFH,
advised the Company in connection with the restructuring of the CIBC Debt and
the MassGeneral Debt, and, on behalf of the Company, negotiated with the holders
of such debt. In connection with these negotiations, Heico Holding paid a total
of $600,000 in fees to the holders of the CIBC Debt in consideration for such
holders agreeing to extend the maturity of the CIBC Debt for the period of time
required to complete the 1996 Refinancing. In addition, Heico Holding provided
the Company with services in connection with the negotiations with the holders
of the CIBC Debt and the Mass General Debt which ultimately led to such debt
being sold to TFH. The Company reimbursed Heico Holding for the fees at the
closing of the 1996 Refinancing. In consideration of Heico Holding providing the
foregoing services, the Company transferred to Heico Holding a parcel of its
real property located in Harris County, Georgia and reimbursed Heico Holding for
the fees paid to the holders of the CIBC Debt. Heico Holding is controlled by
Mr. Heisley, the Chairman of the Board and a Director of the Company.
As part of the 1996 Refinancing, the Company entered into the Congress Loan
Facility, which provided the Company with up to $12.0 million of term loans
under the Congress Debt and up to $17.0 million of availability under the
Congress Revolving Loans. Proceeds from the Congress Debt were used, among other
things, to repay certain indebtedness of the Company. The Congress Revolving
Loans have been available for general working capital purposes.
In connection with the 1996 Refinancing, TFH was formed to, among other
things, acquire and refinance certain of the Company's long-term debt
obligations, including: (i) the $52.3 million outstanding of CIBC Debt; and (ii)
the $8.8 million outstanding of MassGeneral Debt, which included $1.3 million in
accrued interest which was subsequently paid to TFH. The terms of the TFH Debt
were modified to subordinate this debt to Congress, defer payments of principal
and interest owing thereon and increase the interest rate to 13.0% per annum. In
addition, the stockholders of TFH caused the TFH Stockholders' Letters of Credit
to be posted in the aggregate original face amount of $10.0 million to replace
the Company's Letter of Credit. In connection with the 1996 Refinancing, the TFH
Stockholders assigned their reimbursement rights against the Company to TFH and
TFH agreed to subordinate its rights to Congress. TFH has waived any rights or
claims to reimbursement by the Company in connection with such TFH Stockholders'
Letters of Credit through December 31, 2005 and has subordinated its rights to
reimbursement to the Notes. Thereafter, subject to the terms of the
subordination, the Company will be obligated to reimburse TFH for any draws
which have been or are subsequently made on the TFH Stockholders' Letters of
Credit.
In consideration of TFH's participation in the 1996 Refinancing, the
Company issued 4,000 shares of the Company's Common Stock to TFH, which
represents 80.0% of the issued and outstanding shares of the Company's Common
Stock, and paid TFH accrued interest owing on the MassGeneral Debt of
approximately $1.3 million.
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OTHER
Beginning with fiscal 1994, the Company has entered into consulting
arrangements with Mr. Heisley and Thomas C. Mattick, a Director of the Company,
for provision of consulting services to the Company. In respect of such
consulting services, Mr. Heisley and Mr. Mattick each received $100,000 per
year.
As a result of TFH's ownership of 80.0% of the Common Stock of the Company,
TFH and the Company are required to file a consolidated return for federal
income tax purposes. As the common parent of the consolidated group, TFH is
responsible for the payment of any consolidated tax liabilities. TFH and the
Company have entered into a tax sharing agreement which provides that, in
connection with the filing of the consolidated federal income tax return and the
filing of state income tax returns in those states in which the operations of
the Company are consolidated or combined with TFH, the Company shall be required
to pay to TFH an amount equal to the Company's federal and state tax liabilities
that the Company and its subsidiaries would have had to pay had the Company and
its subsidiaries filed their own separate, consolidated or combined tax returns.
TFCC has entered into restricted stock purchase agreements with each of
Rolland G. Divin, the Company's President and Chief Executive Officer, S. Albert
Gaston, the Company's Senior Vice President and Chief Financial Officer and Paul
C. Serff, the Company's Senior Vice President -- Human Resources. Pursuant to
the agreements, each of Mr. Divin and Mr. Gaston were granted restricted stock
in TFCC which vests over time in increments upon the respective officer's
continuing employment with the Company. Mr. Serff's restricted stock awards were
granted subject to: (i) vesting for one-half of the shares based upon Mr.
Serff's continued employment with the Company; and (ii) vesting for one-half of
the shares based upon the Company's achievement of certain objectives, including
certain financial targets. Each of Mr. Divin, Mr. Gaston and Mr. Serff have
vested and non-vested shares in TFCC pursuant to these agreements. See "Security
Ownership of Management and Certain Beneficial Owners."
TFH received a portion of the proceeds from the Old Note Offering and all
of the shares of Class A Preferred Stock and Class B Preferred Stock. Up to
$10.0 million of the Class A Preferred Stock is exchangeable for Exchange Notes.
The Class A Preferred Stock, the Class B Preferred Stock and the Exchange Notes
held by TFH will be restricted securities and will not be transferable unless
such securities are registered or an exemption from such registration is
available. Accordingly, in connection with the exchange of TFH Debt, the Company
granted to TFH and its transferees the right to require the Company, at the
Company's expense, to file a registration statement for the purpose of
registering the resale of the Class A Preferred Stock, Class B Preferred Stock
and Exchange Notes held by TFH.
DESCRIPTION OF OTHER SENIOR INDEBTEDNESS
DESCRIPTION OF WORKING CAPITAL FACILITY
On October 14, 1997 the Company entered into an Amended and Restated Credit
Agreement (the "Working Capital Loan Agreement") with Congress.
General. Under the terms of the Working Capital Loan Agreement, Congress
will provide the Company with a $17.0 million revolving credit facility (the
"Working Capital Facility"). Borrowings under the Working Capital Facility are
available to the extent that a sufficient borrowing base is present or to the
extent otherwise made available by Congress. Unused availability under the
Working Capital Facility is available for the working capital needs of the
Company. The Working Capital Facility will terminate, and any outstanding
revolving credit loans must be repaid in full on August 30, 1999, unless the
agreement is extended as provided.
Fees. The borrowings under the Working Capital Loan Agreement bear
interest at the Prime Rate (as such term is defined in the Working Capital Loan
Agreement) plus 1.375% per annum, or plus 3.375% per annum when the Company is
in default under the Working Capital Loan Agreement. Interest on the loans under
the Working Capital Facility is payable monthly in arrears. The Company is
required to pay customary closing, commitment and servicing fees to Congress.
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Security. Substantially all of the receivables and inventory (and certain
assets and rights relating thereto) of the Company are pledged to Congress as
security for the borrowings under the Working Capital Loan Agreement.
Covenants. The Working Capital Loan Agreement contains customary
restrictive financial and other covenants of the Company, including without
limitation: (i) reporting requirements; (ii) restrictions on the incurrence of
indebtedness, leases, liens and contingent obligations; (iii) restrictions on
mergers, acquisitions, sales of assets, investments and transactions with
affiliates; (iv) a prohibition on distributions and dividends to its
stockholders; (v) restrictions on capital expenditures and distributor
financing; and (vii) working capital and tangible net worth tests.
Events of Default. The events of default under the Working Capital Loan
Agreement includes, among others: (i) any failure of the Company to pay
principal or interest thereunder when due; (ii) the breach by the Company of
covenants, representations or warranties contained in the Working Capital Loan
Agreement; (iii) any failure to pay amounts due under certain other indebtedness
of the Company or defaults that result in or permit the acceleration of certain
other indebtedness of the Company; (iv) the bankruptcy, insolvency or
dissolution of the Company; (v) the occurrence of a Change in Control (as
defined in the Working Capital Loan Agreement); and (vi) the occurrence of a
material adverse change in the business, assets or prospects of the Company.
DESCRIPTION OF INDUSTRIAL DEVELOPMENT REVENUE BONDS
In October of 1979 (i) The Industrial Development Board of the County of
Knox, Tennessee (the "Board") issued Industrial Development Revenue Bonds
(General Mills, Inc. Project) in an aggregate principal amount of $4.2 million
(the "Knox County Industrial Development Revenue Bonds") to, among other things,
finance the cost of acquiring, constructing and installing an industrial plant
in Knox County, Tennessee (the "Knox County Plant"), and (ii) the County of
Taylor, Florida ("Taylor County") issued Industrial Development Revenue Bonds
(CPG Products Corp. Project) in an aggregate principal amount of $5.8 million
(the "Taylor County Industrial Development Revenue Bonds"; together with the
Knox County Industrial Development Revenue Bonds, collectively, the "Industrial
Development Revenue Bonds") to among other things, finance the acquisition of
real property, the construction of a building thereon, the installation of
certain machinery equipment, all located in Taylor County, Florida
(collectively, the "Taylor County Property, Plant and Equipment"). The Knox
County Plant and the Taylor County Property, Plant and Equipment are owned and
operated by the Company.
In connection with the issuance of the Industrial Development Revenue
Bonds, the predecessor of the Company entered into certain obligations with the
Board and Taylor County pursuant to which it guaranteed the interest and
principal payments on the Industrial Development Revenue Bonds. In connection
with the 1996 Refinancing, the TFH Stockholders posted the TFH Stockholders'
Letters of Credit naming a previous owner of the Company as beneficiary in
respect of its guarantee of obligations relating to the Industrial Development
Revenue Bonds. See "Certain Transactions." In addition, the Company has
approximately $1.4 million (as of September 6, 1997) in escrow for the benefit
of the Company's predecessor on the Industrial Development Revenue Bonds. The
TFH Stockholders have assigned all rights to reimbursement in connection with
the TFH Stockholders' Letters of Credit to TFH and TFH has subordinated its
right to reimbursement in connection with its obligations to Congress. TFH has
waived any rights to reimbursement by the Company in connection with such TFH
Stockholders' Letters of Credit through December 31, 2005 and has subordinated
such rights to the Trustee in connection with the Notes. The Industrial
Development Revenue Bonds are due in various amounts through 2009 at fixed
interest rates ranging from 6 1/2% to 6 3/4% and are collateralized by the Knox
County Plant and the Taylor County Property, Plant and Equipment. The holders of
the Exchange Notes will not have a security interest in any of the Industrial
Development Revenue Bonds collateral.
DESCRIPTION OF THE NOTES
The Old Notes were, and the Exchange Notes will be, issued under an
indenture (the "Indenture"), dated as of October 14, 1997 by and between the
Company and IBJ Schroder Bank & Trust Company, as Trustee (the "Trustee"). Upon
the issuance of the Exchange Notes, if any, or the effectiveness of a Shelf
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Registration Statement (as defined), the Indenture will be subject to and
governed by the provisions of the Trust Indenture Act of 1939, as amended (the
"TIA"). The following summary of certain provisions of the Indenture, the Notes
and the Security Documents does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the TIA, and to all of the
provisions of the Indenture, the Notes and the Security Documents (copies of
which can be obtained from the Company upon request), including the definitions
of certain terms therein and those terms made a part of the Indenture by
reference to the TIA as in effect on the date of the Indenture. The definitions
of certain capitalized terms used in the following summary are set forth under
"-- Certain Definitions" below.
The Notes will be senior secured obligations of the Company, ranking senior
in right of payment to all future Indebtedness of the Company which is
subordinated to the Notes and pari passu in right of payment with all existing
and future unsubordinated Indebtedness of the Company.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as paying agent and registrar for the Notes. The Notes may be presented
for registration or transfer and exchange at the offices of the registrar, which
initially will be the Trustee's corporate trust office. The Company may change
any paying agent and registrar without notice to Holders of the Notes. The
Company will pay principal (and premium, if any) on the Notes at the Trustee's
corporate office in New York, New York. At the Company's option, interest may be
paid at the Trustee's corporate trust office or by check mailed to the
registered address of Holders. Any Notes that remain outstanding after the
completion of the Exchange Offer, together with the Exchange Notes issued in
connection with the Exchange Offer and any Exchange Notes issued in exchange for
the Class A Preferred Stock, will be treated as a single class of securities
under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes are limited in aggregate principal amount to $70.0
million. Up to $10.0 million of such amount may be issued from time to time in
exchange for the Class A Preferred Stock subject to the limitations set forth
under "-- Certain Covenants -- Limitation on Indebtedness." The Exchange Notes
will mature on November 1, 2004. The Exchange Notes will bear interest at the
rate of 10 1/2% per annum from October 14, 1997 or from the most recent interest
payment date to which interest has been paid, payable commencing on May 1, 1998
and thereafter semi-annually in arrears on each November 1 and May 1, to the
persons in whose name the Exchange Note is registered at the close of business
on the October 15 and April 15 immediately preceding the applicable interest
payment date. Interest on the Notes will accrue from and including the most
recent date to which interest has been paid or, if no interest has been paid,
from and including the date of issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole at any time
or in part from time to time, on and after November 1, 2001 at the following
redemption prices (expressed as percentages of the principal amount) if redeemed
during the 12-month period commencing on November 1 of the year set forth below,
plus, in each case, accrued interest thereon to the date of redemption:
<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
2001...................................................... 105.250%
2002...................................................... 102.625
2003 and thereafter....................................... 100.000
</TABLE>
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING
In the event that the Company consummates one or more Public Equity
Offerings (as defined) on or before November 1, 2000, the Company may, at its
option, redeem from the net cash proceeds of such Public Equity Offering, no
later than 60 days following the consummation of such offering, up to 30.0% of
the aggregate principal amount of the Notes then outstanding at a redemption
price equal to 110.5% of the
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aggregate principal amount so redeemed, plus accrued and unpaid interest thereon
to the date of redemption; provided, however, that at least $45.0 million
principal amount of Notes remain outstanding.
As used in the preceding paragraph, "Public Equity Offerings" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes, or portions thereof, for redemption will be made
by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed or, if such Notes
are not then listed on a national securities exchange, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be redeemed
in part. Notice of redemption shall be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each Holder of Notes to
be redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note shall state the portion
of the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the paying agent for the
Notes funds in satisfaction of the applicable redemption price pursuant to the
Indenture.
SECURITY
All of the obligations of the Company under the Notes and the Indenture
will be secured by a Lien on the Company's interests (whether fee or leasehold)
in all existing and future (i) real property (other than the real property on
which the Company's plants in Knox County, Tennessee and Taylor County, Florida
are located and certain other parcels of real property having an aggregate book
value of approximately $300,000 on September 6, 1997), in each case together
with all fixtures, additions, accessions, improvements, alterations,
replacements and repairs thereto, (ii) machinery and equipment (other than the
machinery and equipment located at and/or used in connection with the Company's
plant in Taylor County, Florida), together with all additions, accessions,
improvements, alterations, replacements and repairs thereto, (iii) intellectual
property including, without limitation, all trademarks, service marks, patents,
copyrights, trade secrets and other proprietary information, (iv) the assets
deposited or required to be deposited in the Collateral Account pursuant to the
Indenture, (v) shares of Capital Stock of each of the Company's Restricted
Subsidiaries, if any, (vi) other items or types of personal property (other than
(A) inventory and accounts and general intangibles related thereto, and other
related personal property, products and proceeds of inventory and accounts and
general intangibles related thereto, and other related personal property, (B)
the cash escrow account pledged for the benefit of the Industrial Revenue Bonds,
and (C) the assets subject to the Liens permitted by clause (xviii) of the
definition of Permitted Liens), (vii) general intangibles relating to any and
all of the foregoing, and (viii) proceeds and products of any and all of the
foregoing (the property and assets described in clauses (i) through (viii)
above, together with all other property and assets that may from time to time be
subject to the Lien of the Security Documents, the "Collateral"). The security
interest in the Collateral will be a first priority interest subject to certain
permitted encumbrances, which encumbrances, in the reasonable judgment of the
Company, will not materially adversely affect the value of the Collateral.
Collateral consisting of real property will be mortgaged by the Company and any
applicable Restricted Subsidiaries pursuant to mortgages or deeds of trust (the
"Mortgages"). Collateral constituting personal property will be pledged by the
Company and any applicable Restricted Subsidiaries pursuant to a security
agreement (the "Security Agreement"). The Working Capital Facility will be
secured by a Lien on the Company's inventory, accounts and general intangibles
and other related personal property. The Knox County Industrial Revenue Bonds
are secured by a Lien on the real property, buildings, improvements and fixtures
located at the Company's plant in Knox County, Tennessee and the Taylor County
Industrial Revenue Bonds
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are secured by the real property, plant and equipment located at, and/or used in
connection with, the Company's plant in Taylor County, Florida.
If the Notes become due and payable prior to the final stated maturity
thereof for any reason or are not paid in full at the final stated maturity
thereof and after any applicable grace period has expired, the Trustee has the
right, subject to the Intercreditor Agreement described below, to foreclose upon
the Collateral in accordance with instructions from the Holders of a majority in
aggregate principal amount of the Notes or, in the absence of such instructions,
in such manner as the Trustee deems appropriate in its absolute discretion. The
proceeds received by the Trustee will be applied by the Trustee first to pay the
expenses of such foreclosure and fees and other amounts then payable to the
Trustee under the Indenture and the Security Documents and, thereafter, to pay
all amounts owing to the Holders under the Indenture, the Notes and the Security
Documents (with any remaining proceeds to be payable to the Company or as may
otherwise be required by law).
No appraisals of any portion of the Collateral have been prepared by or on
behalf of the Company. By its nature, some or all of the Collateral will be
illiquid and may have no readily ascertainable market value. Accordingly, there
can be no assurance that the Collateral could be sold, or, if sold, that the
value of the Collateral will be sufficient to repay obligations under the Notes.
Moreover, to the extent saleable, there can be no assurance that the proceeds of
any sale of the Collateral in whole or in part pursuant to the Indenture and
Security Documents following an Event of Default would be sufficient to satisfy
payments due under the Notes. See "Risk Factors -- Limitations on Security
Interests." In addition, the ability of the Trustee (for the benefit of the
Holders) to realize upon the Collateral is subject to the Intercreditor
Agreement and may be subject to certain statutory Liens (including tax,
landlords', warehousemen's, and materialmen's Liens), certain Liens in favor of
holders of purchase money indebtedness and certain bankruptcy law limitations in
the event of a bankruptcy. See "Risk Factors -- Limitations on Security
Interests." The Class A Preferred Stock may in certain instances be exchanged
into Notes. Such exchange would increase the principal amount of Notes
outstanding (up to a maximum of $10.0 million) and in turn would dilute the
collateral coverage of the Notes purchased in the Offering.
The collateral release provisions of the Indenture permit the release of
Collateral without substitution of collateral of equal value under certain
limited circumstances. See "-- Possession, Use and Release of Collateral." As
described under "-- Certain Covenants -- Limitation on Sale of Assets," the Net
Cash Proceeds of certain Asset Sales may under specified circumstances be
required to be utilized to make an offer to purchase Notes. To the extent that
any such offer to purchase Notes is not fully subscribed to by Holders thereof,
the unutilized Net Cash Proceeds may, under certain circumstances, be retained
by the Company free and clear of the Lien of the Indenture and the Security
Documents.
INTERCREDITOR AGREEMENT
On October 14, 1997, the Trustee for itself (and in that capacity) and as
collateral agent on behalf of the holders of the Notes entered into an
intercreditor agreement (the "Intercreditor Agreement") with Congress, which
agreement was acknowledged and agreed to by the Company. The Intercreditor
Agreement provides, among other things, that for a period following the issuance
of a notice of enforcement by the Trustee, Congress may enter upon all or any
portion of the Company's premises, use the Collateral to the extent necessary to
complete the manufacture of inventory, collect accounts and sell or otherwise
generally deal with and dispose of the collateral securing the Indebtedness
under the Working Capital Facility.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, the
Company will be required to offer to repurchase all of the outstanding Notes
pursuant to the offer described below (the "Change of Control Offer"), at a
purchase price equal to 101.0% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase.
Within 30 days following the date upon which the Change of Control
occurred, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of
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the Change of Control Offer. Such notice will state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 45 days from
the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date") and the procedure which the Holder must follow
to exercise such right. The Change of Control Offer is required to remain open
for at least 20 Business Days or such longer period as may be required by law.
Holders electing to have a Note purchased pursuant to a Change of Control Offer
will be required to surrender the Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Note completed, to the paying agent for
the Notes at the address specified in the notice prior to the close of business
on the third Business Day prior to the Change of Control Payment Date.
There can be no assurance that, in the event of a Change of Control, the
Company would have sufficient funds to pay the repurchase price for all Notes
that the Company is required to repurchase. In the event that the Company were
required to repurchase outstanding Notes pursuant to a Change of Control Offer,
the Company expects that it would need to seek third-party financing to the
extent it does not have available funds to meet its repurchase obligations.
However, there can be no assurance that the Company would be able to obtain such
financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to the Company's obligation to make a Change of Control Offer.
Restrictions in the Indenture described herein on the ability of the Company and
its Restricted Subsidiaries to incur additional Indebtedness, to grant liens on
their property, to make Restricted Payments and to make Asset Sales may also
make more difficult or discourage a takeover of the Company, whether favored or
opposed by the management of the Company. Consummation of any such transaction
in certain circumstances may require repurchase of the Notes, and there can be
no assurance that the Company or the acquiring party will have sufficient
financial resources to effect such repurchase. Such restrictions and the
restrictions on transactions with Affiliates may, in certain circumstances, make
more difficult or discourage any leveraged buyout of the Company by the
management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants.
Limitation on Indebtedness
(a) The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness,
including, without limitation, any Acquired Indebtedness; provided, however,
that the foregoing will not prohibit (i) the Company from Incurring Permitted
Indebtedness and (ii) any Restricted Subsidiary from Incurring Indebtedness
pursuant to clauses (vi), (vii), and (viii) of the definition of Permitted
Indebtedness.
(b) Notwithstanding the foregoing limitations, (A) the Company may Incur
Indebtedness (including, without limitation, Acquired Indebtedness) if: (i) no
Default or Event of Default shall have occurred and be continuing on the date of
the proposed Incurrence thereof or would result as a consequence of such
proposed Incurrence and; (ii) immediately before and immediately after giving
effect to such proposed Incurrence, the Consolidated Fixed Charge Coverage Ratio
of the Company is at least equal to 2.0:1.0 and (B) after January 1, 1999, the
Company may issue additional Notes in exchange for the Class A Preferred Stock
if
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(i) no Default or Event of Default shall have occurred and be continuing on the
date of the proposed issuance thereof or would result as a consequence of such
proposed issuance and (ii) immediately before and immediately after giving
effect to such proposed issuance, the Consolidated Fixed Charge Coverage Ratio
of the Company is at least equal to 2.25:1.0; provided, however, that (I) the
aggregate principal amount of such additional Notes issued in all such exchanges
may not exceed $10.0 million, (II) at the time of issuance of any additional
Notes, the Company shall have delivered to the Trustee a certificate of an
Independent Financial Advisor certifying the Fixed Charge Coverage Ratio, (III)
any such issuance of additional Notes shall be in a minimum principal amount of
$1.0 million and (IV) no more than one such exchange may be effected in any
fiscal quarter.
(c) The Company will not, directly or indirectly, in any event Incur any
Indebtedness which by its terms (or by the terms of any agreement governing such
Indebtedness) is subordinated to any other Indebtedness of the Company unless
such Indebtedness is also by its terms (or by the terms of any agreement
governing such Indebtedness) made expressly subordinate to the Notes to the same
extent and in the same manner as such Indebtedness is subordinated pursuant to
subordination provisions that are most favorable to the holders of any other
Indebtedness of the Company.
Limitation on Restricted Payments
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or make
any distribution (other than dividends or distributions payable solely in
Qualified Capital Stock of the Company or through increases in the liquidation
preferences on such Qualified Capital Stock) on shares of the Company's Capital
Stock to holders of such Capital Stock, (b) purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company, or any warrants,
rights or options to acquire shares of any class of such Capital Stock, other
than through the exchange therefor solely of Qualified Capital Stock of the
Company or warrants, rights or options to acquire Qualified Capital Stock of the
Company, (c) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company that is subordinate or junior in right of payment to
the Notes or (d) make any Investment (other than Permitted Investments) in any
Person (each of the foregoing prohibited actions set forth in clauses (a), (b),
(c) and (d) being referred to as a "Restricted Payment"), if at the time of such
proposed Restricted Payment or immediately after giving effect thereto, (i) a
Default or an Event of Default has occurred and is continuing or would result
therefrom, or (ii) the Company is not able to Incur at least $1.00 of additional
Indebtedness in accordance with the Consolidated Fixed Charge Coverage Ratio
test of paragraph (b) of "-- Limitation on Indebtedness" above (as if such
Restricted Payment had been made as of the first day of the Four Quarter
Period), or (iii) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair market value
of such property as determined reasonably and in good faith by the board of
directors of the Company) exceeds or would exceed the sum of: (A) 50.0% of the
cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss, minus 100.0% of such loss) of the Company during the period
(treating such period as a single accounting period) earned after the Issue Date
and on or prior to the last day of the last fiscal quarter preceding the date of
the proposed Restricted Payment (the "Reference Date"); plus (B) 100.0% of the
aggregate net cash proceeds received by the Company from any Person (other than
a Restricted Subsidiary of the Company) from the issuance and sale subsequent to
the Issue Date and on or prior to the Reference Date of Qualified Capital Stock
of the Company; plus (C) without duplication of any amounts included in clause
(iii)(B) above, 100.0% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock; plus (D) an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, interest payments,
repayments of loans or advances, or other transfers of cash, in each case to the
Company or to any Restricted Subsidiary of the Company from Unrestricted
Subsidiaries (but without duplication of any such amount included in calculating
cumulative Consolidated Net Income of the Company), or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (in each case valued as
provided in "-- Limitation on Designation of Unrestricted Subsidiaries" below),
not to exceed, in the case of any Unrestricted Subsidiary, the
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amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary and which was treated as a Restricted
Payment under the Indenture; plus (E) without duplication of the immediately
preceding subclause (D), an amount equal to the lesser of the cost or net cash
proceeds received upon the sale or other disposition of any Investment made
after the Issue Date which had been treated as a Restricted Payment (but without
duplication of any such amount included in calculating cumulative Consolidated
Net Income of the Company); plus (F) $1.0 million.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph shall not prohibit: (1) the payment of any dividend or
redemption payment within 60 days after the date of declaration of such dividend
or the applicable redemption if the dividend or redemption payment, as the case
may be, would have been permitted on the date of declaration; (2) if no Default
or Event of Default shall have occurred and be continuing, the acquisition of
any shares of Capital Stock of the Company through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Restricted
Subsidiary of the Company) of shares of Qualified Capital Stock of the Company
or warrants, options or rights to acquire Qualified Capital Stock; (3) if no
Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes, either (A) solely in exchange for (I) shares of
Qualified Capital Stock of the Company or (II) Indebtedness of the Company which
has a Weighted Average Life to Maturity that is greater than the Weighted
Average Life to Maturity of the Indebtedness being acquired and is subordinate
to the Notes at least to the same extent and in the same manner as the
Indebtedness being acquired, or (B) through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Restricted Subsidiary of
the Company) of (I) shares of Qualified Capital Stock of the Company or (II)
Refinancing Indebtedness; (4) the issuance of additional Class A Preferred Stock
as dividends on the Class A Preferred Stock or an increase in the liquidation
preference thereon; and (5) the issuance of additional Notes in exchange for
Class A Preferred Stock to the extent permitted under clause (b)(B) under the
"Limitation on Indebtedness" covenant. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date in accordance with clause
(iii) of the immediately preceding paragraph, amounts expended pursuant to
clauses (1), (2) and (5) shall be included in such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations may
be based upon the Company's latest available internal quarterly financial
statements.
Limitation on Sale of Assets
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, consummate any Asset Sale unless (i) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of in such Asset Sale; (ii) at least 80.0% of
the consideration received by the Company or such Restricted Subsidiary, as the
case may be, from such Asset Sale shall be in the form of cash or Cash
Equivalents and is received at the time of such disposition; (iii) if such Asset
Sale involves Collateral, (x) such Asset Sale is not between the Company and any
of its Subsidiaries or between Subsidiaries of the Company and (y) the Company
shall cause the cash consideration received in respect thereof to be deposited
in the Collateral Account as and when received by the Company or by any
Subsidiary of the Company and shall otherwise be in compliance with the
provisions described under "-- Possession, Use and Release of Collateral --
Release of Collateral," and (iv) the Company or such Restricted Subsidiary shall
apply the Net Cash Proceeds of such Asset Sale within 270 days of receipt
thereof, as follows:
(a) first, to the extent such Net Cash Proceeds are received from an
Asset Sale not involving the sale, transfer or disposition of Collateral
("Non-Collateral Proceeds"), to repay any Indebtedness secured by the
assets involved in such Asset Sale or otherwise required to be repaid with
the proceeds thereof; provided that in the event any Net Cash Proceeds
received in respect thereof are used to repay indebtedness outstanding
under any revolving credit or other working capital type facilities (but
excluding the Working Capital Facility which does not have to be
permanently reduced) such facility is permanently reduced by the amounts
thereof;
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(b) second, with respect to any Non-Collateral Proceeds remaining
after application pursuant to the preceding paragraph (a) and any Net Cash
Proceeds received from an Asset Sale involving Collateral ("Collateral
Proceeds" and, together with such remaining Non-Collateral Proceeds, the
"Available Proceeds Amount"), the Company shall make an offer to purchase
(the "Asset Sale Offer") from all Holders, up to a maximum principal amount
(expressed as an integral multiple of $1,000) of Notes equal to the
Available Proceeds Amount at a purchase price equal to 100.0% of the
principal amount thereof plus accrued and unpaid interest thereon, if any,
to the date of purchase; provided that the Company will not be required to
apply pursuant to this paragraph (b) Net Cash Proceeds received from any
Asset Sale if, and only to the extent that, such Net Cash Proceeds are
applied to a Related Business Investment (other than an investment in
inventory or other property not constituting Collateral or a category of
Collateral), within 270 days of such Asset Sale and the property and assets
so acquired are made subject to the Lien of the Indenture and the
applicable Security Documents pursuant to the provisions thereof; provided,
that, any Non-Collateral Proceeds including the Available Proceeds Amount,
may be invested in inventory or other property not constituting Collateral
(or a category of Collateral) and any property so acquired need not be made
subject to the Lien under the Indenture. If at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash, then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the
Net Cash Proceeds thereof shall be applied in accordance with this
"Limitation on Sale of Assets" covenant. The Company may defer the Asset
Sale Offer until there is an aggregate unutilized Available Proceeds Amount
equal to or in excess of $3.5 million resulting from one or more Asset
Sales (at which time, the entire unutilized Available Proceeds Amount, and
not just the amount in excess of $3.5 million, shall be applied as required
pursuant to this paragraph). To the extent the Asset Sale Offer is not
fully subscribed to by Holders, the Company may obtain a release of the
unutilized portion of the Available Proceeds Amount from the Lien of the
Security Documents; and
(c) all Net Proceeds and all Net Awards required to be delivered to
the Trustee pursuant to any Security Document shall constitute Trust Moneys
and shall, to the extent received by the Company, be delivered by the
Company to the Trustee contemporaneously with receipt by the Company and
be deposited in the Collateral Account. Net Proceeds and Net Awards so
deposited that are required to be applied or may be applied by the Company
to effect a Restoration of the affected Collateral under the applicable
Security Document may be withdrawn from the Collateral Account under the
Indenture, only in accordance with the Indenture. Net Proceeds and Net
Awards so deposited that are not required to be applied to effect a
Restoration of the affected Collateral under the applicable Security
Document may only be withdrawn in accordance with the Indenture. See "--
Use of Trust Moneys." All Collateral Proceeds shall constitute Trust
Moneys and shall be delivered by the Company to the Trustee and shall be
deposited in the Collateral Account in accordance with the Indenture.
Collateral Proceeds so deposited may be withdrawn from the Collateral
Account pursuant to the Indenture as summarized in "-- Use of Trust
Moneys."
Notice of an Asset Sale Offer will be mailed to the Holders as shown on the
register of Holders not less than 30 days nor more than 60 days before the
payment date for the Asset Sale Offer, with a copy to the Trustee, and shall
comply with the procedures set forth in the Indenture. Upon receiving notice of
the Asset Sale Offer, Holders may elect to tender their Notes in whole or in
part in integral multiples of $1,000 principal amount at maturity in exchange
for cash. To the extent Holders properly tender Notes in an amount exceeding the
Available Proceeds Amount, Notes of tendering Holders will be repurchased on a
pro rata basis (based on amounts tendered). An Asset Sale Offer shall remain
open for a period of 20 Business Days or such longer periods as may be required
by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall
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comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the "Asset Sale" provisions of the
Indenture by virtue thereof.
Proceeds of sales of Collateral other than proceeds of Asset Sales will not
be applied to repurchase Notes and may be released to the Company and used for
Related Business Investments subject to the other provisions of the Indenture.
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on its Capital Stock; (b) make loans or advances or pay any
Indebtedness or other obligation owed to the Company or to any other Restricted
Subsidiary; (c) guarantee any Indebtedness or any other obligation of the
Company or any Restricted Subsidiary; or (d) transfer any of its property or
assets to the Company or to any other Restricted Subsidiary of the Company (each
such encumbrance or restriction, a "Payment Restriction"), except for such
encumbrances or restrictions existing under or by reason of: (1) applicable law;
(2) the Indenture and the Security Documents; (3) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of any
Restricted Subsidiary of the Company; (4) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to such
Restricted Subsidiary, or the properties or assets of such Restricted
Subsidiary, other than the Person or the properties or assets of the Person so
acquired; (5) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date; (6) customary
restrictions with respect to a Restricted Subsidiary of the Company pursuant to
an agreement that has been entered into for the sale or disposition of Capital
Stock or assets of such Restricted Subsidiary to be consummated in accordance
with the terms of the Indenture solely in respect of the assets or Capital Stock
to be sold or disposed of; (7) any instrument governing a Permitted Lien, to the
extent and only to the extent such instrument restricts the transfer or other
disposition of assets subject to such Permitted Lien; or (8) an agreement
governing Refinancing Indebtedness incurred to Refinance the Indebtedness
issued, assumed or incurred pursuant to an agreement referred to in clause (2),
(4) or (5) above; provided, however, that the provisions relating to such
encumbrance or restriction contained in any such Refinancing Indebtedness are no
less favorable to the Holders in any material respect as determined by the Board
of Directors of the Company in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in the
applicable agreement referred to in such clause (2), (4) or (5).
Limitation on Liens
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist or remain in effect any Liens (i) upon any item of Collateral
other than the Liens granted to the Trustee (for the benefit of the Holders)
pursuant to the Indenture and the Security Documents and the other Liens
expressly permitted by the applicable Security Documents and (ii) upon any other
properties or assets of the Company or of any of its Restricted Subsidiaries
whether owned on the Issue Date or acquired after the Issue Date, or on any
proceeds therefrom, or assign or otherwise convey any right to receive income or
profits thereon other than, with respect to this clause (ii), (A) Liens existing
on the Issue Date to the extent and in the manner such Liens are in effect on
the Issue Date and (B) Permitted Liens.
Merger, Consolidation and Sale of Assets
The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and the Restricted Subsidiaries) whether as
an entirety or substantially as an entirety to any Person unless: (i) either (1)
the Company shall be the surviving or continuing corporation or (2) the Person
(if other than the Company) formed by such
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consolidation or into which the Company is merged or the Person which acquires
by conveyance, transfer or lease the properties and assets of the Company and of
the Restricted Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, the due and
punctual payment of the principal of, and premium, if any, and interest on all
of the Notes and the performance of every covenant of the Notes, the Indenture,
the Security Documents and the Registration Rights Agreement on the part of the
Company to be performed or observed and the Company shall have taken all steps
necessary or reasonably requested by the Trustee to protect and perfect the
security interests granted or purported to be granted under the Security
Documents; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness Incurred or anticipated to be
Incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, (i) shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction and (ii) shall be able to Incur at least
$1.00 of additional Indebtedness pursuant to the Consolidated Fixed Charge
Coverage Ratio test of paragraph (b) of "-- Limitation on Indebtedness";
provided that in determining the "Consolidated Fixed Charge Coverage Ratio" of
the resulting transferee or surviving Person, such ratio shall be calculated as
if the transaction (including the Incurrence of any Indebtedness or Acquired
Indebtedness) took place on the first day of the Four Quarter Period; (iii)
immediately before and immediately after giving effect to such transaction and
the assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness Incurred
or anticipated to be Incurred and any Lien granted in connection with or in
respect of the transaction) no Default and no Event of Default shall have
occurred or be continuing; and (iv) the Company or the Surviving Entity shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, conveyance, transfer or
lease and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, comply with the applicable provisions
of the Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied; provided, however, that such counsel may
rely, as to matters of fact, on a certificate or certificates of officers of the
Company.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
Upon any such consolidation, merger, conveyance, lease or transfer in
accordance with the foregoing, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance, lease or
transfer is made will succeed to, and be substituted for, and may exercise every
right and power of, the Company under the Indenture with the same effect as if
such successor had been named as the Company therein, and thereafter (except in
the case of a sale, assignment, transfer, lease, conveyance or other
disposition) the predecessor corporation will be relieved of all further
obligations and covenants under the Indenture, the Notes and the Security
Documents.
Impairment of Security Interest
Neither the Company nor any of its Subsidiaries will take or omit to take
any action which action or omission would have the result of impairing the
security interest in the Collateral granted to the Trustee, for its benefit and
for the benefit of the Holders, and the Company shall not grant to any Person,
or suffer any Person to have (other than to the Trustee for the benefit of the
Trustee and the Holders) any interest whatsoever in the Collateral, except as
otherwise permitted by the Indenture and by the Security Documents. Neither the
Company nor any of its Subsidiaries will enter into any agreement or instrument
that by its terms requires the proceeds received from any sale of Collateral to
be applied to repay, redeem, defease or otherwise acquire or retire any
Indebtedness of any Person, other than Permitted Liens pursuant to the
Indenture, the Notes and the Security Documents.
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Limitation on Transactions with Affiliates
(a) The Company will not, and will not cause or permit any Restricted
Subsidiary to, conduct any business or enter into any transaction or series of
transactions with or for the benefit of any of their Affiliates (each an
"Affiliate Transaction"), except in good faith and on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than those that
could have been obtained in a comparable transaction on an arms'-length basis
from a Person not an Affiliate of the Company or such Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $1.0 million shall be approved by the
Board of Directors of the Company, such approval to be evidenced by a Board
Resolution stating that such board of directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Subsidiary of the Company enters into an Affiliate Transaction (or a series of
related Affiliate Transactions related to a common plan) that involves an
aggregate fair market value of more than $5.0 million, the Company or such
Subsidiary shall, prior to the consummation thereof, obtain a favorable opinion
as to the fairness of such transaction or series of related transactions to the
Company or the relevant Subsidiary, as the case may be, from a financial point
of view, from an Independent Financial Advisor and file the same with the
Trustee.
(b) The foregoing restrictions shall not apply to (i) reasonable fees and
compensation paid to and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary as determined in good
faith by the Company's Board of Directors or senior management; (ii)
transactions exclusively between or among the Company and any of its Wholly
Owned Restricted Subsidiaries or exclusively between or among such Wholly Owned
Restricted Subsidiaries, provided such transactions are not otherwise prohibited
by the Indenture; (iii) Restricted Payments permitted by the Indenture; (iv)
payments made under the Tax Sharing Agreement as in effect on the Issue Date or
any amendment thereto or replacement agreement thereto so long as any such
amendment or replacement is no less favorable to Holders than the original
agreement as in effect on the Issue Date; and (v) management fees payable to
Affiliates of the Company not to exceed $200,000 per annum in the aggregate.
Limitation on Sale and Leaseback Transactions
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, enter into any Sale and Leaseback Transaction. Notwithstanding
the foregoing, the Company may enter into a Sale and Leaseback Transaction
involving only the sale or transfer of assets acquired after the Issue Date and
not constituting Collateral if: (i) after giving pro forma effect to any such
Sale and Leaseback Transaction, the aggregate amount of Attributable Debt for
all Sale and Leaseback Transactions effected pursuant to this covenant is less
than $5.0 million; (ii) the net proceeds of such Sale and Leaseback Transaction
are at least equal to the fair market value of such property (as determined by
the Company's Board of Directors); (iii) the aggregate rent payable (exclusive
of the interest component thereof) by the Company in respect of such Sale and
Leaseback Transaction is not in excess of the fair market rental value of the
property leased pursuant to such Sale and Leaseback Transaction (as determined
by the Company's Board of Directors); and (iv) the Company shall apply the Net
Cash Proceeds of the sale as provided under "-- Limitation on Sale of Assets"
above, in the manner provided by the provisions of such covenant.
Limitation on Restricted and Unrestricted Subsidiaries
The Board of Directors of the Company may, if no Default or Event of
Default shall have occurred and be continuing or would arise therefrom,
designate an Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that (i) any such redesignation shall be deemed to be an incurrence as
of the date of such redesignation by the Company and its Restricted Subsidiaries
of the Indebtedness (if any) of such redesignated Subsidiary for purposes of "--
Limitation on Indebtedness" above and (ii) unless such redesignated Subsidiary
shall not have any Indebtedness outstanding, other than Indebtedness which would
be Permitted Indebtedness, no such designation shall be permitted if immediately
after giving effect to such redesignation and the incurrence of any such
additional Indebtedness the Company could not incur $1.00 of
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additional Indebtedness (other than Permitted Indebtedness) pursuant to "--
Limitation on Indebtedness" above.
The Board of Directors of the Company also may, if no Default or Event of
Default shall have occurred and be continuing or would arise therefrom,
designate any Restricted Subsidiary to be an Unrestricted Subsidiary if (i) such
designation is at that time permitted under "-- Limitation on Restricted
Payments" above and (ii) immediately after giving effect to such designation,
the Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to "-- Limitation on Indebtedness" above. Any such
designation by the Board of Directors shall be evidenced to the Trustee by the
filing with the Trustee of a certified copy of the resolution of the Board of
Directors giving effect to such designation or redesignation and an Officers'
Certificate certifying that such designation or redesignation complied with the
foregoing conditions and setting forth in reasonable detail the underlying
calculations.
For purposes of the covenant described under "-- Limitation on Restricted
Payments" above, (i) an "Investment" shall be deemed to have been made at the
time any Restricted Subsidiary is designated as an Unrestricted Subsidiary in an
amount (proportionate to the Company's equity interest in such Subsidiary) equal
to the net worth of such Restricted Subsidiary at the time that such Restricted
Subsidiary is designated as an Unrestricted Subsidiary; (ii) at any date the
aggregate amount of all Restricted Payments made as Investments since the Issue
Date shall exclude and be reduced by an amount (proportionate to the Company's
equity interest in such Subsidiary) equal to the net worth of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary, not to exceed, in the case of any such redesignation of
an Unrestricted Subsidiary as a Restricted Subsidiary, the amount of Investments
previously made by the Company and its Restricted Subsidiaries in such
Unrestricted Subsidiary (in each case (i) and (ii) "net worth" to be calculated
based upon the fair market value of the assets of such Subsidiary as of any such
date of designation); and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
Notwithstanding the foregoing, the Board of Directors may not designate any
Subsidiary of the Company to be an Unrestricted Subsidiary if, after such
designation, (a) the Company or any Restricted Subsidiary (i) provides credit
support for, or a guarantee of, any Indebtedness of such Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness) or (ii)
is directly or indirectly liable for any Indebtedness of such Subsidiary or (b)
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, any Restricted Subsidiary which is not a Subsidiary of the
Subsidiary to be so designated.
Subsidiaries of the Company that are not designated by the Board of
Directors as Restricted or Unrestricted Subsidiaries will be deemed to be
Restricted Subsidiaries. Notwithstanding any provisions of this covenant, all
Subsidiaries of an Unrestricted Subsidiary will be Unrestricted Subsidiaries.
Limitation on Guarantees by Subsidiaries
The Company will not permit any Restricted Subsidiary, directly or
indirectly, by way of the pledge of any intercompany note or otherwise, to
Incur, assume, guarantee or in any other manner become liable with respect to
any Indebtedness, unless, in any such case (a) such Restricted Subsidiary
executes and delivers a supplemental indenture to the Indenture, providing a
guarantee of payment of the Notes by such Restricted Subsidiary (the
"Guarantee") and (b) if such assumption, guarantee or other liability of such
Restricted Subsidiary is provided in respect of Indebtedness that is expressly
subordinated to the Notes, the guarantee or other instrument provided by such
Restricted Subsidiary in respect of such subordinated Indebtedness shall be
subordinated to the Guarantee pursuant to subordination provisions no less
favorable in all material respects to the Holders of the Notes than those
contained in the Indenture.
Notwithstanding the foregoing, any such Guarantee by a Restricted
Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Restricted Subsidiary from its liability in
respect of the Indebtedness in connection with which such Guarantee was executed
and delivered pursuant to the preceding paragraph; (ii) any sale or other
disposition (by merger or
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otherwise) to any Person which is not a Restricted Subsidiary of the Company, of
all of the Company's Capital Stock in, or all or substantially all of the assets
of, such Restricted Subsidiary; provided that (a) such sale or disposition of
such Capital Stock or assets is otherwise in compliance with the terms of the
Indenture and (b) such assumption, guarantee or other liability of such
Restricted Subsidiary has been released by the holders of the other Indebtedness
so guaranteed; or (iii) the redesignation of such Restricted Subsidiary as an
Unrestricted Subsidiary in compliance with the terms of the Indenture.
Limitation on Amendments to Certain Documents
The Company will not amend, supplement or modify any documents governing
the terms of the Class A Preferred Stock unless any such amendment, supplement
or modification is no less favorable to the Holders than the terms thereof on
the Issue Date.
Reports to Holders
The Company will deliver to the Trustee within 15 days after the filing of
the same with the Commission, copies of the quarterly and annual reports and of
the information, documents and other reports, if any, which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company will
also comply with the other provisions of 314(a) of the TIA.
Conduct of Business
The Company and its Restricted Subsidiaries will not engage in any business
which is not the same as or reasonably similar, ancillary or related to, or a
reasonable extension, development or expansion of, the businesses in which the
Company is engaged on the Issue Date.
Events of Default
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest (including any Additional Interest) on
any Note for a period of 30 days or more after such interest becomes due
and payable; or
(ii) the failure to pay the principal on any Note, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or an Asset Sale Offer); or
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture or any Security Document which
default continues for a period of 60 days after the Company receives
written notice specifying the default from the Trustee or from Holders of
at least 25.0% in principal amount of outstanding Notes (except in the case
of a default with respect to the "Change of Control," "Limitation on Asset
Sales" or "Merger, Consolidation and Sale of Assets" covenants, which will
constitute Events of Default with notice but without passage of time); or
(iv) (A) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness of the Company or of any Restricted Subsidiary of the Company
(or the payment of which is guaranteed by the Company or any Restricted
Subsidiary of the Company), whether such Indebtedness or guarantee now
exists, or is created after the Issue Date, which default (a) is caused by
a failure to pay at final maturity the principal of or premium, if any, on
such Indebtedness after any applicable grace period provided in such
Indebtedness on the date of such default (a "payment default"), or (b)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the
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principal amount of any other such Indebtedness under which there has been
a payment default or the maturity of which has been so accelerated,
aggregates at least $3.0 million; or
(v) one or more judgments in an aggregate amount in excess of $3.0
million (which are not covered by third-party insurance as to which the
insurer has not disclaimed coverage) being rendered against the Company or
any of its Material Subsidiaries and such judgments remain undischarged, or
unstayed or unsatisfied for a period of 60 days after such judgment or
judgments become final and non-appealable; or
(vi) certain events of bankruptcy, insolvency or reorganization
affecting the Company or any of its Material Subsidiaries; or
(vii) any Guarantee executed and delivered by a Restricted Subsidiary
providing a guarantee of the payment and performance of the Company's
obligations under the Indenture and the Notes ceases to be in full force
and effect (other than in accordance with its terms) or any of the Security
Documents cease to be in full force and effect (other than in accordance
with their respective terms), or any of the Security Documents cease to
give the Trustee the Liens, rights, powers and privileges purported to be
created thereby, or any such Guarantee or Security Document is declared
null and void, or the Company denies any of its obligations under any such
Guarantee or Security Document.
If an Event of Default (other than an Event of Default specified in clause
(vi) above relating to the Company) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25.0% in aggregate
principal amount of the then outstanding Notes may declare the unpaid principal
of, premium, if any, and accrued and unpaid interest on, all the Notes then
outstanding to be due and payable, by notice in writing to the Company (and to
the Trustee, if given by Holders) and upon such declaration such principal
amount, premium, if any, and accrued and unpaid interest will become immediately
due and payable. If an Event of Default specified in clause (vi) above relating
to the Company occurs, all unpaid principal of, and premium, if any, and accrued
and unpaid interest on, the Notes then outstanding will ipso facto become due
and payable without any declaration or other act on the part of the Trustee or
any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (a) if the rescission would not
conflict with any judgment or decree, (b) if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of such acceleration, (c) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (d) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (e) in the event of the cure or waiver of an
Event of Default of the type described in clause (f) of the description of
Events of Default above, the Trustee shall have received an officers'
certificate and an opinion of counsel that such Event of Default has been cured
or waived; provided, however, that such counsel may rely, as to matters of fact,
on a certificate or certificates of officers of the Company. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
The Indenture provides that, at any time prior to the declaration of
acceleration of the Notes, the Holders of a majority in principal amount of the
Notes may waive any existing Default or Event of Default under the Indenture,
and its consequences, except a default in the payment of the principal of or
interest on any Notes.
The Indenture provides that, Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture and under the TIA.
During the existence of an Event of Default, the Trustee is required to exercise
such rights and powers vested in it under the Indenture and use the same degree
of care and skill in its exercise thereof as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs. Subject to the
provisions of the Indenture relating to the duties of the Trustee, whether or
not an Event of Default shall occur and be continuing, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the
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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.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance.") Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for (i) the rights of Holders of the Notes to receive payments in
respect of the principal of, premium, if any, and interest on the Notes when
such payments are due, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payments,
(iii) the rights, powers, trust, duties and immunities of the Trustee and the
Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to have the obligations of the Company released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the Notes on the
stated date for payment thereof or on the applicable redemption date, as the
case may be; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the 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 of counsel shall confirm that, the holders of the Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal 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 Legal Defeasance had not occurred; provided, however, such opinion of
counsel shall not be required if all the Notes will become due and payable on
the maturity date within one year or are to be called for redemption within one
year under arrangements satisfactory to the trustee; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such 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 Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default with respect to the
Indenture resulting from the Incurrence of Indebtedness, all or a portion of
which will be used to defease the notes concurrently with such Incurrence) or
insofar as Events of Default from bankruptcy or insolvency events are concerned,
at any time in the period ending on the 91st day after the date of deposit; (v)
such Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under the Indenture or any other material
agreement or instrument to which the Company or any of its Restricted
Subsidiaries is a party or by which the Company or any of its Restricted
Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an
officers' certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over any other creditors of the Company or
defeating,
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hindering, delaying or defrauding any other creditors of the Company or others;
(vii) the Company shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent provided
for or relating to the Legal Defeasance or the Covenant Defeasance have been
complied with; provided, however, that such counsel may rely, as to matters of
fact, on a certificate or certificates of officers of the Company; (viii) the
Company shall have delivered to the Trustee an opinion of counsel to the effect
that (A) the trust funds will not be subject to any rights of holders of
Indebtedness of the Company other than the Notes and (B) assuming no intervening
bankruptcy of the Company between the date of deposit and the 91st day following
the deposit and that no Holder of the Notes is an insider of the Company, after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; provided, however, that such counsel may
rely, as to matters of fact, on a certificate or certificates of officers of the
Company; and (ix) certain other customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with; provided, however, that such counsel may rely, as to matters of fact, on a
certificate or certificates of officers of the Company.
POSSESSION, USE AND RELEASE OF COLLATERAL
Unless an Event of Default shall have occurred and be continuing, the
Company will have the right to remain in possession and retain exclusive control
of the Collateral securing the Notes (other than any cash, securities,
obligations and Cash Equivalents constituting part of the Collateral and
deposited or required to be deposited with the Trustee and other than as set
forth in the Security Documents), to freely operate the Collateral and to
collect, invest and dispose of any income therefrom.
Release of Collateral
The Company will have the right to sell, exchange or otherwise dispose of
any of the Collateral (other than Trust Moneys (but other than Trust Moneys
constituting Collateral Proceeds), which Trust Moneys are subject to release
from the Lien of the Security Documents as provided under "Use of Trust Moneys"
below) (a "Release Transaction"), upon compliance with the requirements and
conditions of the provisions described below, and the Trustee shall release the
same from the Lien of the Security Documents upon receipt by the Trustee (other
than in the case of paragraph (d) below) of a notice requesting such release and
describing the property to be so released, together with delivery of the
following, among other matters:
(a) If the property to be released has a net book value of at least
$5.0 million, a Board Resolution of the Company requesting such release and
authorizing an application to the Trustee therefor.
(b) An Officers' Certificate of the Company dated not more than 30
days prior to the date of the application for such release, and signed
also, in the case of the following clauses (ii) and (iv), by an
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Appraiser or, if such property consists of securities, by a Financial
Advisor, in each case stating in substance as to certain matters, including
the following: (i) that, in the opinion of the signers, the security
afforded by the Security Documents will not be impaired by such release in
contravention of the provisions of the Indenture, and that either (1) the
Collateral to be released is not Collateral Proceeds and is not being
replaced by comparable property, has a net book value of less than $750,000
and is not necessary for the efficient operation of the Company's and its
Subsidiaries' remaining property or in the conduct of the business of the
Company and its Subsidiaries as conducted immediately prior thereto or (2)
the Collateral to be released is Trust Moneys representing Collateral
Proceeds that are not required, or cannot possibly be required through the
passage of time or otherwise, to be used to purchase Notes under the
"Limitation on Asset Sales" covenant or (3) the Collateral to be released
is being released in connection with an Asset Sale of such Collateral and
the net proceeds (as defined in paragraph (d) below) from such Asset Sale
are being delivered to the Trustee (if required by the covenant "Limitation
on Asset Sales") in accordance with, and to the extent required by, the
provisions of paragraph (d) below; (ii) except in the case of a release
referred to in the preceding paragraph (b)(i)(2), that the Company has
either disposed of or will dispose of the Collateral so to be released in
compliance with all applicable terms of the Indenture and for a
consideration representing, in the opinion of the signers, its fair value,
which consideration may, subject to any other provisions of the Indenture,
consist of any one or more of the following: (A) cash or Cash Equivalents,
(B) obligations secured by a purchase money Lien upon the property so to be
released and (C) any other property or assets that, upon acquisition
thereof by the Company, would be subject to the Lien of the Security
Documents (except as provided in paragraph (d) below), and subject to no
Lien other than certain Liens which, under the applicable provisions of the
Security Documents relating thereto, are permitted to be superior to the
Lien of the Trustee therein, all of such consideration to be briefly
described in the certificate; (iii) that no Event of Default has occurred
and is continuing; (iv) the fair value, in the opinion of the signers, of
the property to be released at the date of such application for release;
provided that it shall not be necessary under this clause (iv) to state the
fair value of any property whose fair value is certified in a certificate
of an Independent Appraiser or Independent Financial Advisor under
paragraph (c) below; and (v) that all conditions precedent in the Indenture
and the Security Documents relating to the release of the Collateral in
question have been complied with.
(c) If (i) the fair value of the property to be released and of all
other property released from the Lien of the Security Documents since the
commencement of the then current calendar year is 10 percent or more of the
aggregate principal amount of the Notes outstanding on the date of the
application and (ii) the fair value of the Collateral to be so released is
at least $250,000 and at least 1 percent of the aggregate principal amount
of the Notes outstanding on the date of the application, a certificate of
an Independent Appraiser, or if such property consists of securities, a
certificate of an Independent Financial Advisor stating (1) the then fair
value, in the opinion of the signer, of the property to be released; and
(2) that such release, in the opinion of the signer, will not impair the
security interests under any of the Security Documents in contravention of
their terms.
(d) The net proceeds (excluding any Collateral Proceeds which are not
required, or cannot be required through the passage of time or otherwise,
to be used to purchase or redeem Notes under the covenant described under
"Limitation on Asset Sales" above) or, if the Collateral so to be released
is subject to a prior Lien permitted under the Security Documents, a
certificate of the trustee, mortgagee or other holder of such prior Lien
that it has received such net proceeds and has been irrevocably authorized
by the Company to pay over to the Trustee any balance of such net proceeds
remaining after the discharge of such Indebtedness secured by such prior
Lien; and, if any property other than cash, Cash Equivalents or obligations
is included in such net proceeds, such instruments of conveyance,
assignment and transfer, if any, as may be necessary, in the Opinion of
Counsel, to subject to the Lien of the Security Documents all the right,
title and interest of the Company or the relevant Guarantor in and to such
property. For purposes of this paragraph (d), "net proceeds" shall mean any
cash, Cash Equivalents, obligations or other property received on the sale,
transfer, exchange or other disposition of Collateral to be released, less
a proportionate share of (i) brokerage commissions and other reasonable
fees and
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expenses related to such transaction and (ii) any provision for Federal,
state or local taxes payable as a result of such sale, transfer, exchange
or other disposition.
(e) One or more Opinions of Counsel which, when considered
collectively, shall be substantially to the effect (i) that any obligation
included in the consideration for any property so to be released and to be
received by the Trustee pursuant to paragraph (d) above is a valid and
binding obligation enforceable in accordance with its terms, subject to
such customary exceptions regarding equitable principles, creditors' rights
generally and bankruptcy as shall be reasonably acceptable to the Trustee
in its sole judgment, and is effectively pledged under the Security
Documents, (ii) that any Lien granted by a purchaser to secure a purchase
money obligation is a fully perfected first priority Lien to the extent
obtainable by filing or possession and such instrument granting such Lien
is enforceable in accordance with its terms, (iii) either (x) that such
instruments of conveyance, assignment and transfer as have been or are then
delivered to the Trustee are sufficient to subject to the Lien of the
Security Documents all the right, title and interest of the Company in and
to any property, other than cash, Cash Equivalents and obligations, that is
included in the consideration for the Collateral so to be released and to
be received by the Trustee pursuant to paragraph (d) above, subject to no
Lien other than Liens permitted on Collateral by the covenant described
under "Limitation on Liens" above, or (y) that no instruments of
conveyance, assignment or transfer are necessary for such purpose, (iv)
that the Company has corporate power to own all property included in the
consideration for such release, (v) in case any part of the money or
obligations referred to in paragraph (d) above has been deposited with a
trustee or other holder of any prior Lien permitted by the Security
Documents, that the Collateral to be released, or a specified portion
thereof, is or immediately before such release was subject to such prior
Lien and that such deposit is required by such prior Lien and (vi) that all
conditions precedent provided in the Indenture and the Security Documents
relating to the release of the Collateral have been complied with.
Notwithstanding the foregoing, the Company may obtain a release of
Available Amounts required to purchase Notes pursuant to an Asset Sale Offer on
an Asset Sale Payment Date by directing the Trustee in writing to cause to be
applied such Available Amounts to such purchase in accordance with the covenant
described under "Disposition of Proceeds of Asset Sales" above.
In case an Event of Default shall have occurred and be continuing, the
Company, while in possession of the Collateral (other than cash, Cash
Equivalents and other personal property held by, or required to be deposited or
pledged with, the Trustee under the Indenture or under any Security Document or
with the trustee, mortgagee or other holder of a prior Lien permitted under the
Security Documents), may do any of the things enumerated in these "Release of
Collateral" provisions only if the Trustee, in its discretion, or the holders of
a majority in aggregate principal amount of the outstanding Notes shall consent
to such action, in which event any certificate filed under these "Release of
Collateral" provisions, shall omit the statement to the effect that no Event of
Default has occurred and is continuing.
All cash or Cash Equivalents received by the Trustee pursuant to the
provisions described under "Release of Collateral" will be held by the Trustee
as Trust Moneys under the Indenture subject to application as provided in
"Release of Collateral" (in the case of any Net Cash Proceeds from Asset Sales)
or in "Use of Trust Moneys" below. All purchase money and other obligations
received by the Trustee pursuant to these "Release of Collateral" provisions
shall be held by the Trustee.
Any releases of Collateral made in strict compliance with these "Release of
Collateral" provisions shall be deemed not to impair the security interests
created by the Security Documents in favor of the Trustee, for the benefit of
the Holders, in contravention of the provisions of the Indenture. The above
provisions shall also apply to the Restricted Subsidiaries with respect to any
Collateral pledged by such Restricted Subsidiaries.
Disposition of Collateral Without Release
Notwithstanding the provisions of "-- Release of Collateral" above, so long
as no Event of Default shall have occurred and be continuing, the Company may,
without any release or consent by the Trustee, do any number of ordinary course
activities in respect of the Collateral, in limited dollar amounts specified by
the TIA, upon satisfaction of certain conditions. For example, among other
things, subject to such dollar
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limitations and conditions, the Company would be permitted to sell or otherwise
dispose of any property subject to the Lien of the Indenture and the Security
Documents, which may have become worn out or obsolete; abandon, terminate,
cancel, release or make alterations in or substitutions of any leases or
contracts subject to the Lien of the Indenture or any of the Security Documents;
surrender or modify any franchise, license or permit subject to the Lien of the
Indenture or any of the Security Documents which it may own or under which it
may be operating; alter, repair, replace, change the location or position of and
add to its structures, machinery, systems, equipment, fixtures and
appurtenances; demolish, dismantle, tear down or scrap any Collateral or abandon
any thereof; grant a non-exclusive license of any intellectual property; abandon
intellectual property under certain circumstances; and grant leases in respect
of real property under certain circumstances.
The above provisions shall also apply to the Restricted Subsidiaries with
respect to any Collateral pledged by such Restricted Subsidiaries.
USE OF TRUST MONEYS
All Trust Moneys (including, without limitation, all Collateral Proceeds)
shall be held by the Trustee as a part of the Collateral securing the Notes and,
so long as no Event of Default shall have occurred and be continuing, may either
(i) be released in accordance with "Possession, Use and Release of Collateral --
Release of Collateral" above if such Trust Moneys represent Collateral Proceeds
in respect of an Asset Sale or (ii) at the direction of the Company be applied
by the Trustee from time to time to the payment of the principal of (at a
purchase price equal to 100.0% of the principal amount of the relevant Notes)
and interest on any Notes at maturity or upon redemption or to the purchase of
Notes upon tender or in the open market or at private sale or upon any exchange
or in any one or more of such ways, in each case in compliance with the
Indenture. The Company may also withdraw Trust Moneys constituting the proceeds
of insurance upon any part of the Collateral or an award for any Collateral
taken by eminent domain to reimburse the Company for repair or replacement of
such Collateral, subject to certain conditions.
The Trustee shall be entitled to apply any Trust Moneys to the cure of any
Default or Event of Default under the Indenture. Trust Moneys deposited with the
Trustee shall be invested in Cash Equivalents pursuant to the direction of the
Company and, so long as no Event of Default shall have occurred and be
continuing, the Company shall be entitled to any interest or dividends accrued,
earned or paid on such Cash Equivalents.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such change does not,
in the opinion of the Trustee, adversely affect the rights of any of the
Holders. In formulating its opinion on such matters, the Trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an Opinion of Counsel. Other modifications and amendments
of the Indenture may be made with the consent of the Holders of a majority in
principal amount of the then outstanding Notes issued under the Indenture,
except that, without the consent of each Holder of the Notes affected thereby,
no amendment may, directly or indirectly: (i) reduce the amount of Notes whose
Holders must consent to an amendment; (ii) reduce the rate of or change the time
for payment of interest, including defaulted interest, on any Notes; (iii)
reduce the principal of or change the fixed maturity of any Notes, or change the
date on which any Notes may be subject to redemption or repurchase, or reduce
the redemption or repurchase price therefor; (iv) make any Notes payable in
money other than that stated in the Notes; (v) make any change in provisions of
the Indenture protecting the right of each Holder to receive payment of
principal of and interest on such Note on or after the due date thereof or to
bring suit to enforce such payment, or permitting Holders of a majority in
principal amount of the Notes to waive Defaults or Events of Default; (vi)
amend, modify or change the obligation of the Company to make or consummate a
Change of Control Offer (including the definition of Change of Control), or,
after the Company's obligation to purchase the Notes arises thereunder, an Asset
Sale Offer or waive any default in the performance thereof or modify any of the
provisions or definitions with respect to any Asset Sale Offer; (vii) adversely
affect the ranking of Notes; or (viii) adversely affect the Liens on any
material portion of the Collateral.
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GOVERNING LAW
The Indenture provides that it and the Notes will 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
the application of the law of another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries (i) existing at the time such Person becomes a Restricted
Subsidiary or at the time it merges or consolidates with the Company or any of
its Restricted Subsidiaries or (ii) which becomes Indebtedness of the Company or
a Restricted Subsidiary in connection with the acquisition of assets from such
Person, in each case not incurred in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition, merger or consolidation.
"Affiliate" means, when used with reference to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, the referent Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct or cause the direction of management or 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 of the foregoing.
"Affiliate Transaction" has the meaning set forth in "-- Certain Covenants
- -- Limitation on Transactions with Affiliates."
"Appraiser" means a Person who in the ordinary course of its business
appraises property and, where real property is involved, who is a member in good
standing of the American Institute of Real Estate Appraisers, recognized and
licensed to do business in the jurisdiction where the applicable real property
is situated.
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or shall be merged
with the Company or any Restricted Subsidiary of the Company or (ii) the
acquisition by the Company or any Restricted Subsidiary of the Company of assets
of any Person comprising a division or line of business of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer for value by the Company or by any
of its Restricted Subsidiaries to any Person other than to the Company or to a
Wholly Owned Restricted Subsidiary of (i) any Capital Stock of any Restricted
Subsidiary or (ii) any other property or assets of the Company or of any
Restricted Subsidiary, other than with respect to this clause (ii) any such
sale, conveyance, transfer, lease, assignment or other transfer for value in the
ordinary
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course of business; provided, however, Asset Sale shall not include any
transaction for fair market value for which the Company or its Restricted
Subsidiaries receive consideration of less than $750,000.
"Asset Sale Offer" has the meaning set forth in "-- Certain Covenants --
Limitation on Asset Sales."
"Attributable Debt" means, with respect to any Sale and Leaseback
Transaction as of any particular time, the present value (discounted at the rate
of interest implicit in the terms of the lease) of the obligations of the lessee
under such lease for net rental payments during the remaining term of the lease
(including any period for which such lease has been extended or may, at the
option of the Company, be extended).
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the board of directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any day which
banking institutions in the City of New York are required or authorized by law
or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease that are required to be
classified and accounted for as capital lease obligations under GAAP and, for
purposes of this definition, the amount of such obligations at any date shall be
the capitalized amount of such obligations at such date, determined in
accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any commercial bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250.0 million and at the
time of purchase received one of the three highest ratings from the following
rating organizations: S&P and Moody's; and (v) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above.
"Change of Control" means the occurrence of one or more of the following
events (whether or not approved by the board of directors of the Company): (i)
the Company consolidates with or merges with or into another Person or any
Person consolidates with, or merges with or into, the Company (in each case,
whether or not in compliance with the terms of the Indenture), in any such event
pursuant to a transaction in which immediately after the consummation thereof
the Permitted Holders shall cease to have the power, directly or indirectly
(including by way of a general partnership interest), to vote or direct the
voting of securities having at least 51.0% of the ordinary voting power for the
election of the directors of the Company; provided, that a merger of TFH and
TFCC into the Company made in compliance with the covenant described in "--
Certain Covenants -- Merger, Consolidation and Sale of Assets" will not be
considered a merger for purposes of this clause (i); or (ii) the Company or any
of its Restricted Subsidiaries, directly or indirectly, sells, assigns, conveys,
transfers, leases or otherwise disposes of, in one transaction or a series of
related transactions, all or substantially all of the property or assets of the
Company and its Restricted Subsidiaries (determined on a consolidated basis) to
any Person or group (other than a wholly owned Subsidiary of the Company) of
related Persons for purposes of Section 13(d) of the Exchange Act (a "Group
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of Persons"); or (iii) the adoption of any plan of liquidation or dissolution of
the Company (whether or not in compliance with the provisions of the Indenture);
or (iv) any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act (other than the Company or the Permitted Holders))
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act)
of Capital Stock of the Company representing at least 35.0% of the voting power
of the Capital Stock of the Company and the Permitted Holders own or control
less than 35.0%; or (v) the replacement of a majority of the Board of Directors
of the Company over a two-year period from the directors who constituted the
Board of Directors of the Company at the beginning of such period with directors
whose replacement shall not have been approved (by recommendation, nomination or
election, as the case may be) by a vote of at least a majority of the Board of
Directors of the Company then still in office who either were members of such
Board of Directors at the beginning of such period or whose election as a member
of such Board of Directors was previously so approved. For purposes of the
foregoing, the transfer (by lease, assignment, sale or otherwise, in a single
transaction or series of transactions) of (a) all or substantially all of the
properties or assets of one or more Subsidiaries of the Company, the Capital
Stock of which constitutes all or substantially all of the properties and assets
of the Company shall be deemed to be the transfer of all or substantially all of
the properties and assets of the Company.
"Class A Preferred Stock" means the 7,000 shares of Exchangeable Preferred
Stock of the Company, $.01 par value per share, Class A.
"Class B Preferred Stock" means the 21,737 shares of Preferred Stock of the
Company, $.01 par value per share, Class B.
"Collateral" means, collectively, all of the property and assets
(including, without limitation, Trust Moneys) that are from time to time subject
to, or purport to be subject to, the Lien of the Indenture or any of the
Security Documents.
"Collateral Account" means the collateral account to be established
pursuant to the Indenture.
"Collateral Proceeds" has the meaning set forth in "-- Certain Covenants --
Limitation on Sale of Assets."
"Commodity Agreement" of any Person means any option or futures contract or
similar agreement or arrangement.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, for any period, the sum (without duplication)
of (a) Consolidated Net Income and (b) to the extent Consolidated Net Income has
been reduced thereby, (i) all income taxes of the Company and its Restricted
Subsidiaries paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary, unusual or nonrecurring gains or
losses or taxes attributable to sales or dispositions outside the ordinary
course of business), (ii) Consolidated Interest Expense, (iii) any amounts
excluded from the calculation of Consolidated Interest Expense pursuant to the
proviso of the definition thereof, (iv) the amount of any Preferred Stock
dividends paid in cash by the Company and its Restricted Subsidiaries and (v)
Consolidated Non-cash Charges, less any non-cash items increasing Consolidated
Net Income for such period, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Company, the ratio of (a) Consolidated EBITDA of the Company during the four
full fiscal quarters for which financial information in respect thereof is
available (the "Four Quarter Period") ending on or prior to the date of the
transaction giving rise to the need to calculate the Consolidated EBITDA
Coverage Ratio (the "Transaction Date") to (b) Consolidated Fixed Charges of the
Company for the Four Quarter Period. In addition to and without limitation of
the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect (without
duplication) on a pro forma basis for the period of such calculation to (a) the
incurrence or repayment of any Indebtedness of the Company or any of its
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Restricted Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (b) any Asset
Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of the
Company or one of its Restricted Subsidiaries (including any Person who becomes
a Restricted Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness, and also
including, without limitation, any Consolidated EBITDA attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale during the
Four Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. If the Company or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if the Company or the Restricted Subsidiary, as the
case may be, had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated EBITDA Coverage Ratio," (i) interest on outstanding Indebtedness
determined on a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate per annum equal to the rate of interest on such Indebtedness in
effect on the Transaction Date (other than the incurrence or repayment of
indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities); (ii) if interest on any Indebtedness
actually incurred on the Transaction Date may optionally be determined at an
interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Four Quarter
Period; (iii) notwithstanding clauses (i) and (ii) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to the Company for any
period, the sum, without duplication, of (a) Consolidated Interest Expense
(including any premium or penalty paid in connection with redeeming or retiring
Indebtedness of the Company and its Restricted Subsidiaries prior to the stated
maturity thereof pursuant to the agreements governing such Indebtedness), plus
(b) the product of (i) the amount of all cash dividend payments on any series of
Preferred Stock of the Company and its Restricted Subsidiaries paid, accrued or
scheduled to be paid or accrued during such period times (other than any payment
of a dividend to the Company) (ii) a fraction, the numerator of which is one and
the denominator of which is one minus the then current effective consolidated
federal, state and local income tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to the Company for any
period, the sum of, without duplication: (a) the aggregate of the interest
expense of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (i) any amortization of original issue discount, (ii) the net costs
under Interest Swap Obligations, (iii) all capitalized interest and (iv) the
interest portion of any deferred payment obligation; and (b) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company and its Restricted Subsidiaries during such
period, as determined on a consolidated basis in accordance with GAAP; provided,
however, Consolidated Interest Expense shall not include non-cash dividends on
the Series A Preferred Stock which are treated as interest expense in accordance
with GAAP.
"Consolidated Net Income" means, with respect to the Company for any
period, the aggregate net income (or loss) of the Company and its Restricted
Subsidiaries for such period on a consolidated basis,
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determined in accordance with GAAP; provided, however, that there shall be
excluded therefrom (a) after-tax gains from Asset Sales or abandonments or
reserves relating thereto, (b) after-tax items classified as extraordinary or
nonrecurring gains, (c) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Restricted
Subsidiary or is merged or consolidated with the Company or any Restricted
Subsidiary, (d) the net income (but not loss) of any Restricted Subsidiary to
the extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by charter, contract,
operation of law or otherwise, (e) the net income of any Person in which the
Company has an interest, other than a Restricted Subsidiary, except to the
extent of cash dividends or distributions actually paid to the Company or to a
Restricted Subsidiary by such Person, (f) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued) and (g) in the case of a successor to the Company by consolidation
or merger or as a transferee of the Company's assets, any net income (or loss)
of the successor corporation prior to such consolidation, merger or transfer of
assets.
"Consolidated Net Worth" of any Person as of any date means the
consolidated stockholders' equity of such Person, determined on a consolidated
basis in accordance with GAAP, less (without duplication) amounts attributable
to Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to the Company, for any
period, the aggregate depreciation, depletion, amortization and other non-cash
expenses of the Company and its Restricted Subsidiaries reducing Consolidated
Net Income of the Company for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charges constituting an extraordinary
item or loss or any such charge which requires an accrual of or a reserve for
cash charges for any future period).
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Disqualified Capital Stock" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof, in whole or in part, on or prior to
the final maturity date of the Notes, or (ii) is convertible into or
exchangeable for (whether at the option of the issuer or the holder thereof) (a)
debt securities or (b) any Capital Stock referred to in (i) above, in each case
at any time prior to the final maturity of the Notes.
"Events of Default" has the meaning set forth in "-- Events of Default."
"Exchange Act" means the Securities Exchange Act of 1934, as amended or any
successor statute or statutes thereto.
"Exchange Notes" means senior debt securities of the Company substantially
identical to the Notes except for the removal of transfer restrictions.
"Exchange Offer" means the Company's offer to exchange Exchange Notes for
the Notes.
"fair market value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arms'-length, free market
transaction, for cash, between an informed and willing seller and an informed
and willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction.
"Financial Advisor" means an accounting, appraisal or investment banking
firm of nationally recognized standing that is, in the reasonable and good faith
judgment of the board of directors of the Company, qualified to perform the task
for which such firm has been engaged.
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"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio." "GAAP" means generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States, which are in effect as of the Issue Date.
"Holder" means a Person holding a Note.
"Incur" means, with respect to any Indebtedness 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 Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness 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) any Indebtedness of a
Person existing at the time such Person becomes (after the Issue Date) a
Subsidiary (whether by merger, consolidation, acquisition or otherwise) of the
Company shall be deemed to be Incurred or issued, as the case may be, by such
Subsidiary at the time it becomes a Subsidiary of the Company and (B) any
amendment, modification or waiver of any document pursuant to which Indebtedness
was previously Incurred shall be deemed to be an Incurrence of Indebtedness
unless and to the extent such amendment, modification or waiver does not (i)
increase the principal or premium thereof or interest rate thereon (including by
way of original issue discount) or (ii) change to an earlier date the stated
maturity thereof or the date of any scheduled or required principal payment
thereon or the time or circumstances under which such Indebtedness shall be
redeemed.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and accrued liabilities arising
in the ordinary course of business that are not overdue by 90 days or more or
are being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted), (v) all Obligations for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) all Indebtedness of others (including all dividends of other
Persons for the payment of which is) guaranteed, directly or indirectly, by such
Person or that is otherwise its legal liability or which such Person has agreed
to purchase or repurchase or in respect of which such Person has agreed
contingently to supply or advance funds, (vii) net liabilities of such Person
under Interest Swap Obligations and Commodity Agreements, (viii) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
any asset or property (including, without limitation, leasehold interests and
any other tangible or intangible property) of such Person, whether or not such
Indebtedness is assumed by such Person or is not otherwise such Person's legal
liability; provided that if the Obligations so secured have not been assumed by
such Person or are otherwise not such Person's legal liability, the amount of
such Indebtedness for the purposes of this definition shall be limited to the
lesser of the amount such Indebtedness secured by such Lien or the fair market
value of the assets or property securing such Lien, and (ix) all Preferred Stock
issued by such Person with the amount of Indebtedness represented by such
Preferred Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends if any. For purposes hereof, the "maximum fixed repurchase
price" of any Preferred Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Preferred Stock as if such
Preferred Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture, and if such price is based
upon, or measured by, the fair market value of such Preferred Stock, such fair
market value shall be determined reasonably and in good faith by the board of
directors of the issuer of such Preferred Stock. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations at such date; provided that the amount
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outstanding at any time of any Indebtedness issued with original issue discount
is the full amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with GAAP.
"Independent" when used with respect to any specified Person means such a
Person who (a) is in fact independent, (b) does not have any direct financial
interest or any material indirect financial interest in the Company or any of
its Subsidiaries, or in any Affiliate of the Company or any of its Subsidiaries
and (c) is not an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions for the Company or any of its
Subsidiaries. Whenever it is provided in the Indenture that any Independent
Person's opinion or certificate shall be furnished to the Trustee, such Person
shall be appointed by the Company and approved by the Trustee in the exercise of
reasonable care, and such opinion or certificate shall state that the signer has
read this definition and that the signer is Independent within the meaning
thereof.
"Industrial Revenue Bonds" shall mean (i) the $4.2 million aggregate
principal amount of Industrial Revenue Bonds of the Industrial Development Board
of the County of Knox (General Mills, Inc. Project), Series 1979 (the "Knox
County Industrial Revenue Bonds") and (ii) the $5.8 million aggregate principal
amount of Industrial Revenue Bonds of Taylor County (the "Taylor County
Industrial Revenue Bonds").
"Intercreditor Agreement" means the intercreditor agreement dated as of
October 14, 1997 by and between the Trustee (in that capacity and as Collateral
Agent), for itself and on behalf of the Holders, and Congress, as such
Intercreditor Agreement is in effect on the Issue Date, other than any
amendment, alteration, modification, or waiver thereto to the extent not
materially adverse to the interests of the Company, the Trustee or the Holders,
and any substitute or replacement intercreditor agreement executed and delivered
as provided under the terms of the Intercreditor Agreement (or any such
substitute or replacement intercreditor agreement).
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect (i)
loan, advance or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property (valued at the fair market value thereof as of the date of transfer)
others or any payment for property or services for the account or use of
others), (ii) purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person (whether by merger, consolidation, amalgamation or otherwise and
whether or not purchased directly from the issuer of such securities or
evidences of Indebtedness), (iii) guarantee or assumption of the Indebtedness of
any other Person (other than the guarantee or assumption of Indebtedness of such
Person or a Restricted Subsidiary of such Person which guarantee or assumption
is made in compliance with the provisions of "-- Certain Covenants -- Limitation
on Incurrence of Additional Indebtedness" above), and (iv) other items that
would be classified as investments on a balance sheet of such Person prepared in
accordance with GAAP. Notwithstanding the foregoing, "Investment" shall exclude
extensions of trade credit by the Company and its Restricted Subsidiaries on
commercially reasonable terms in accordance with normal trade practices of the
Company or such Restricted Subsidiary, as the case may be. The amount of any
Investment shall not be adjusted for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment. If the
Company or any Restricted Subsidiary sells or otherwise disposes of any Capital
Stock of any Restricted Subsidiary such that, after giving effect to any such
sale or disposition, it ceases to be a Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Capital Stock of such
Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Old Notes.
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"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction other than to reflect ownership by a
third party of property leased to the referent Person or any of its Subsidiaries
under a lease that is not in the nature of a conditional sale or title retention
agreement).
"Material Subsidiary" means, at any date of determination, any Subsidiary
of the Company that, together with its Subsidiaries, (i) for the most recent
fiscal year of the Company accounted for more than 5.0% of the consolidated
revenues of the Company or (ii) as of the end of such fiscal year, was the owner
of more than 5.0% of the consolidated assets of the Company, all as set forth on
the most recently available consolidated financial statements of the Company and
its consolidated Subsidiaries for such fiscal year prepared in conformity with
GAAP.
"Net Award" has the meaning assigned to such term in the Security Documents
but generally means the proceeds, award or payment from any condemnation or
other eminent domain proceeding regarding all or any portion of the Collateral
less collection expenses.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents (including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents)
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale (except to the extent that such obligations are sold with recourse to the
Company or to any Restricted Subsidiary) net of (a) reasonable out-of-pocket
expenses and fees relating to such Asset Sale (including, without limitation,
brokerage, legal, accounting and investment banking fees and sales commissions),
(b) taxes paid or payable ((1) including, without limitation, income taxes
reasonably estimated to be actually payable as a result of any disposition of
property within two years of the date of disposition and (2) after taking into
account any reduction in tax liability due to available tax credits or
deductions and any tax sharing arrangements) and (c) appropriate amounts to be
provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve, in accordance with generally accepted accounting principles, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale (but excluding any
payments which, by the terms of the indemnities will not, be made during the
term of the Notes).
"Net Equity Proceeds" means (a) in the case of any sale by the Company of
Qualified Capital Stock of the Company, the aggregate net cash proceeds received
by the Company, after payment of expenses, commissions and the like (including,
without limitation, brokerage, legal, accounting and investment banking fees and
commissions) incurred in connection therewith, and (b) in the case of any
exchange, exercise, conversion or surrender of any outstanding Indebtedness of
the Company or any Subsidiary for or into shares of Qualified Capital Stock of
the Company, the amount of such Indebtedness (or, if such Indebtedness was
issued at an amount less than the stated principal amount thereof, the accrued
amount thereof as determined in accordance with GAAP) as reflected in the
consolidated financial statements of the Company prepared in accordance with
GAAP as of the most recent date next preceding the date of such exchange,
exercise, conversion or surrender (plus any additional amount required to be
paid by the holder of such Indebtedness to the Company or to any wholly owned
Subsidiary of the Company upon such exchange, exercise, conversion or surrender
and less any and all payments made to the holders of such Indebtedness, and all
other expenses incurred by the Company in connection therewith), in each case
(a) and (b) to the extent consummated after the Issue Date; provided that the
exchange, exercise, conversion or surrender of any Indebtedness which is
subordinated (whether pursuant to its terms or by operation of law) to the Notes
shall not be or be deemed to be included in Net Equity Proceeds.
"Net Proceeds" has the meaning assigned to such term in the Security
Documents but generally means the insurance proceeds paid as the result of the
destruction or condemnation of all or any portion of the Collateral less
collection expenses.
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"Non-Collateral Proceeds" has the meaning set forth in "-- Certain
Covenants -- Limitation on Asset Sales."
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by two officers of the
Company.
"Opinion of Counsel" means a written opinion from legal counsel which and
who are acceptable to the Trustee.
"payment default" has the meaning set forth in "-- Events of Default."
"Permitted Holders" means Mr. Michael E. Heisley, his spouse, direct lineal
descendants, any trust for the benefit of any of the foregoing.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Old Notes, the Exchange Notes and the
Indenture (other than any Old Notes or Exchange Notes issued pursuant to
clause (b)(ii) under the "Limitation on Indebtedness" covenant);
(ii) Indebtedness outstanding from time to time pursuant to the
Working Capital Facility in an aggregate principal amount not to exceed
$17.0 million outstanding at any time, plus interest, fees, costs and
expenses from time to time payable under or in connection with the Working
Capital Facility, reduced by any permanent repayments (which are
accompanied by a corresponding permanent commitment reduction) thereunder;
(iii) Commodity Agreements of the Company; provided, however, that
such Commodity Agreements are entered into to protect the Company from
fluctuations in the prices of commodities;
(iv) Interest Swap Obligations of the Company; provided, however, that
such Interest Swap Obligations are entered into to protect the Company from
fluctuations in interest rates on Indebtedness Incurred in accordance with
the Indenture to the extent the notional principal amount of such Interest
Swap Obligation does not exceed the principal amount of the Indebtedness to
which such Interest Swap Obligation relates;
(v) additional Indebtedness Incurred by the Company or any Restricted
Subsidiary in an aggregate principal amount not to exceed $5.0 million
outstanding at any time;
(vi) Indebtedness of a Restricted Subsidiary to the Company or to a
Wholly Owned Restricted Subsidiary for so long as such Indebtedness is held
by the Company or a Wholly Owned Restricted Subsidiary in each case subject
to no Lien held by a Person other than the Company or a Wholly Owned
Restricted Subsidiary; provided that if as of any date any Person other
than the Company or a Wholly Owned Restricted Subsidiary owns or holds any
such Indebtedness or holds a Lien in respect of such Indebtedness, such
date shall be deemed the Incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Refinancing Indebtedness;
(viii) guarantees by Restricted Subsidiaries of Indebtedness of the
Company permitted under the Indenture; provided, however, such Restricted
Subsidiaries have complied with the "Limitation on Guarantees by
Subsidiaries" covenant;
(ix) Indebtedness of the Company under Currency Agreements; provided,
however, that such Currency Agreements are entered into to protect the
Company from fluctuations in currency;
(x) the Class A Preferred Stock and the Class B Preferred Stock;
(xi) the Industrial Revenue Bonds; and
(xii) non-contingent Indebtedness of the Company in an aggregate
principal amount not to exceed $2.0 million which is incurred in any fiscal
year to purchase distributorships and distributorship assets.
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"Permitted Investments" means (a) investments in cash and Cash Equivalents;
(b) Investments by the Company or by any Restricted Subsidiary in any Person
that is or will become immediately after such Investment a Restricted Subsidiary
or that will merge or consolidate into the Company or a Restricted Subsidiary
that is not subject to any Payment Restriction; (c) any Investments in the
Company by any Restricted Subsidiary of the Company; provided that any
Indebtedness evidencing such Investment is unsecured and subordinated, pursuant
to a written agreement, to the Company's obligations in respect of the Notes and
the Indenture; (d) Investments made by the Company or by its Restricted
Subsidiaries as a result of an Asset Sale made in compliance with "-- Certain
Covenants -- Limitation on Sale of Assets" above and (e) additional Investments
in Unrestricted Subsidiaries or joint ventures not to exceed $2.0 million at any
one time.
"Permitted Liens" means, without duplication, each of the following:
(i) pledges or deposits by such Person under worker's compensation
laws, unemployment insurance laws or other types of social security and
similar legislation (other than the Employee Retirement Income Security Act
of 1974, as amended), or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases
to which such person is a party, or deposits to secure public statutory
obligations of such person or deposits to secure surety or appeal bonds to
which such person is a party, or deposits as security for contested taxes
or import duties or for the payment of rent;
(ii) Liens imposed by law, such as landlords', carriers',
warehousemen's and mechanics' Liens or bankers' Liens incurred in the
ordinary course of business for sums which are not yet due or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which the Company or any of its Restricted
Subsidiaries have set aside on its books such reserves as may be required
pursuant to GAAP;
(iii) Liens for taxes not yet subject to penalties for non-payment or
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, if adequate reserve, as may be
required by GAAP, shall have been made therefor;
(iv) Liens in favor of issuers of surety bonds or appeal bonds issued
pursuant to the request of and for the account of such person in the
ordinary course of its business;
(v) Liens to support trade letters of credit issued in the ordinary
course of business;
(vi) survey exceptions, encumbrances, easements or reservations of, or
rights of others for, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions
on the use of real property which do not in any case materially detract
from the value of the property subject thereto or do not interfere in any
material respect with the ordinary conduct of the Company or any of its
Subsidiaries;
(vii) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(viii) Liens in favor of the Company;
(ix) Liens to secure Capitalized Lease Obligations in respect of Sale
and Leaseback Transactions of property or assets not constituting
Collateral to the extent consummated in compliance with the Indenture and
the Security Documents; provided that such Liens do not extend to or cover
any property or assets of the Company or of any of its Restricted
Subsidiaries, other than the property or assets subject to such Capitalized
Lease Obligation;
(x) Liens in respect of Refinancing Indebtedness incurred to Refinance
any of the Indebtedness set forth in clause (ix) above; provided that such
Liens in respect of such Refinancing Indebtedness (I) are no less favorable
to the Holders and are not more favorable to the lienholders with respect
to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (II) do not extend to or cover any
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properties or assets of the Company or of any of the Company's
Subsidiaries, other than the property or assets that secured the
Indebtedness being Refinanced;
(xi) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment, or storage of such inventory or other
goods;
(xii) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(xiii) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company, including rights of offset and set-off;
(xiv) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xv) Liens securing Indebtedness under Currency Agreements;
(xvi) Liens securing any Indebtedness under the Working Capital
Facility; provided, however, that, such Liens extend solely to the
categories of collateral which were the subject of Liens securing the
Working Capital Facility as of the Issue Date;
(xvii) Liens securing any Indebtedness under the Industrial Revenue
Bonds; provided, however, that, such Liens extend solely to the collateral
which were the subject of Liens securing the Industrial Revenue Bonds as of
the Issue Date; and
(xviii) Liens securing Indebtedness permitted under clause (xii) of
the definition of Permitted Indebtedness; provided, however, that such
Liens extend solely to the distributorship assets acquired with such
Indebtedness.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means (A) any Refinancing by the Company of
Indebtedness of the Company initially Incurred in accordance with the "--
Certain Covenants -- Limitation on Indebtedness" (other than pursuant to clause
(ii), (iii), (iv), (v), (vi), (vii), (ix), (x) or (xii) of the definition of
Permitted Indebtedness) or (B) any Refinancing by any Restricted Subsidiary of
the Company of Indebtedness Incurred by such Subsidiary in accordance with
clause (v) of the definition of Permitted Indebtedness, in each case (A) and
(B) that does not (1) result in an increase in the aggregate principal amount
of Indebtedness of such Person as of the date of such proposed Refinancing
(plus the amount of any premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by the Company in connection with such Refinancing) or (2)
create Indebtedness with (A) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being Refinanced
or (B) a final maturity earlier than the final maturity of the Indebtedness
being Refinanced; provided that (x) if such Indebtedness being Refinanced is
Indebtedness of the Company, then such Refinancing Indebtedness shall be
Indebtedness solely of the Company, (y) if such Indebtedness being Refinanced
is subordinate or junior to the Notes, then such Refinancing Indebtedness shall
be subordinate to the Notes at least to the same extent and in the same manner
as the Indebtedness being
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Refinanced and (z) such Refinancing Indebtedness is not Incurred more than three
months prior to the complete retirement and defeasance of the Indebtedness being
Refinanced with the proceeds thereof.
"Related Business Investment" means any Investment, capital expenditure or
other expenditure by the Company which is related to the business of the Company
and its Restricted Subsidiaries as it is conducted on the date of the Asset Sale
giving rise to the Net Cash Proceeds to be reinvested.
"Restoration" has the meaning assigned to such term in each of the
Mortgages but generally means the restoration of all or any portion of the
Collateral in connection with any destruction or condemnation thereof.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a Board Resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with "-- Certain Covenants -- Limitation on Restricted and
Unrestricted Subsidiaries" above. Any such designation may be revoked by a Board
Resolution of the Company delivered to the Trustee, subject to the provisions of
such covenant.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such property.
"Security Documents" means, collectively, (i) the Security Agreement, (ii)
the Mortgages and (iii) all security agreements, mortgages, deeds of trust,
pledges, collateral assignments and other instruments evidencing or creating
security interests in favor of the Trustee (for its benefit and the benefit of
the Holders) in all or any portion of the Collateral, in each case as amended,
amended and restated, supplemented or otherwise modified from time to time in
accordance with their terms.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of August
30, 1996 between the Company and TFH.
"Trust Moneys" means all cash or Cash Equivalents received by the Trustee
(a) upon the release of property from the Lien of the Indenture and/or the
Security Documents, including all moneys received in respect of the principal of
all purchase money, governmental and other obligations; or (b) as compensation
for or proceeds of the sale of all or any part of the Collateral taken by
eminent domain or purchased by, or sold pursuant to any order of, a governmental
authority, or otherwise disposed of; or (c) pursuant to certain provisions of
the Mortgage; or (d) as proceeds of any other sale or other disposition of all
or any part of the Collateral by or on behalf of the Trustee or any collection,
recovery, receipt, appropriation or other realization of or from all or any part
of the Collateral pursuant to the Indenture or any of the Security Documents or
otherwise; or (e) for application under the Indenture as provided in the
Indenture or any Security Document, or disposition of which is not otherwise
specifically provided for in the Indenture or in any Security Document; provided
that Trust Moneys shall in no event include any property deposited with the
Trustee for any Change of Control Offer or redemption or defeasance of any
Notes.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to and in compliance with "-- Certain Covenants -- Limitation on
Restricted and Unrestricted Subsidiaries" above. Any such designation may be
revoked by a Board Resolution of the Company delivered to the Trustee, subject
to the provisions of such covenant.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into
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(b) the total of the product obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of
which all the outstanding voting securities which normally have the right to
vote in the election of directors are at the time owned directly or indirectly
by the Company or any Wholly Owned Restricted Subsidiary.
"Working Capital Facility" means the Amended and Restated Loan and Security
Agreement dated as of October 14, 1997, between the Company and Congress,
together with the other "Financing Agreements (as defined in therein) as the
same may be amended from time to time, and any agreement evidencing the
refinancing, modification, replacement, renewal, restatement, refunding,
deferral, extension, substitution, supplement, reissuance or resale thereof.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 10,000 shares of Common Stock, $.01 par
value per share and 100,000 shares of Preferred Stock, $.01 par value per share.
5,000 shares of the Common Stock are issued and outstanding and 28,737 shares of
the Preferred Stock are issued and outstanding. TFH is the holder of 80.0% of
the Common Stock and the remaining 20.0% of the Common Stock is held by TFCC.
TFH is the holder of all issued shares of the Preferred Stock.
The following description of the capital stock of the Company and certain
provisions of the DGCL, the Certificate, the Certificate of Designations,
Preferences and Rights with regard to each of the Company's Class A Exchangeable
Preferred Stock (the "Class A Preferred Stock") and the Company's Class B
Preferred Stock (the "Class B Preferred Stock") (respectively, the "Series A
Certificate" and the "Series B Certificate") is a summary and is qualified in
its entirety by the Certificate, the Series A Certificate and the Series B
Certificate.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders and to vote on all
matters on which a vote of stockholders is taken, except as otherwise provided
by statute. The shares of Common Stock do not have cumulative voting rights.
Therefore, the holders of a majority of shares voting for the election of
directors can elect all of the directors then standing for election, if they
choose to do so. Holders of Common Stock are entitled to receive such dividends
as may be declared by the Board of Directors out of funds legally available
therefor and, in the event of liquidation, dissolution or winding up of the
Company, are entitled to share ratably in all assets remaining after payment of
liabilities. The ability of the Company to pay dividends on its Common Stock is
limited by certain senior indebtedness of the Company. Furthermore, the
Company's Certificate of Incorporation prohibits the Company from paying
dividends on the Common Stock if the Company is not current in its dividend
payments on the Preferred Stock. The Preferred Stock ranks prior to the Common
Stock and any other class or series of common stock as to the payment of
dividends and distributions upon liquidation, dissolution or winding up. The
shares of Common Stock are not subject to liability for calls or assessments and
have no conversion rights, sinking fund privileges or preemptive rights.
PREFERRED STOCK
On October 14, 1997 the Company issued 7,000 shares of Class A Preferred
Stock and 21,737 shares of Class B Preferred Stock. The Class A Preferred Stock,
with an aggregate initial liquidation preference of $7.0 million, was issued to
TFH in exchange for $7.0 million of outstanding TFH Debt. The Class B Preferred
Stock with an aggregate initial liquidation preference of approximately $21.7
million, was issued to TFH in exchange for the remaining outstanding TFH Debt.
The Preferred Stock is non-voting except as required by law and except in
certain circumstances, including: (i) amending certain rights of the holders of
the Class A
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Preferred Stock or the Class B Preferred Stock, as applicable; and (ii) the
issuance of any class of equity securities of the Company that ranks on a parity
with or senior to the Class A Preferred Stock or the Class B Preferred Stock, as
applicable. The Class A Preferred Stock ranks senior to the Class B Preferred
Stock.
Dividends on the Class A Preferred Stock accrue at a rate of 10 1/2% and
dividends on the Class B Preferred Stock accrue at a rate of 9 1/2%. Dividends
on the Preferred Stock accrue on the then current liquidation preference of the
Preferred Stock and are payable commencing on May 1, 1998 and thereafter
semi-annually in arrears on each November 1 and May 1 . Dividends will be paid
from legally available funds, when, as and if declared by the Board of Directors
of the Company by increasing the liquidation preference of the Preferred Stock
or at the option of the Company, as permitted under the Indenture and the
Working Capital Facility, in cash.
Upon the occurrence of a Change of Control, holders of up to $10.0 million
of the Class A Preferred Stock will be entitled to require the Company to
purchase such holder's Class A Preferred Stock at a purchase price equal to
100.0% of the liquidation preference thereof, plus, without duplication,
accumulated and unpaid dividends to the purchase date.
The Preferred Stock is redeemable at the option of the Company, in whole or
in part, at a purchase price equal to the liquidation preference, plus accrued
and unpaid dividends thereon.
On or after January 1, 1999, up to an aggregate of $10.0 million in
liquidation preference of the Class A Preferred Stock may be exchangeable, at
the Company's option, for an equal principal amount of Exchange Notes; provided
however, that such exchange is conditioned upon the Company having a
Consolidated Fixed Charge Coverage Ratio (as defined under "Description of the
Notes") on a pro-forma basis of at least 2.25:1.0 for the 12-month period ended
on the last day of the most recent fiscal quarter assuming the exchange occurred
on the first day of such 12-month period.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The exchange of an Old Note for an Exchange Note pursuant to the Exchange
Offer should not be treated as an exchange for United States federal income tax
purposes. Therefore, an Exchange Note should be treated as a continuation of the
corresponding Old Note and, as a result, exchanging beneficial owners should not
recognize any gain or loss on the exchange, their holding period for the
Exchange Note should include their holding period for the Old Note and their
basis in the Exchange Note should be the same as his basis in the Old Note.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the management of the Company
believes that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than any such Holder that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business, such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes and neither such holder nor any such other person is
engaging in or intends to engage in a distribution of such Exchange Notes.
Accordingly, any holder who is an affiliate of the Company or any holder using
the Exchange Offer to participate in a distribution of the Exchange Notes will
not be able to rely on such interpretations by the staff of the Commission and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a resale transaction. Notwithstanding the
foregoing, each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with any resale of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any such
broker-dealer that resells Exchange Notes that were received by it for its own
account and any broker-dealer that participates in a distribution of such
Exchange Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus as required, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Old Notes) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Old Notes (including any
broker-dealers) participating in the Exchange Offer against certain liabilities,
including liabilities under the Securities Act.
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LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
McDermott, Will & Emery, Chicago, Illinois. Stanley H. Meadows, the Assistant
Secretary and a Director of the Company, TFH and TFCC, is a partner (through a
professional corporation) of McDermott, Will & Emery.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements included in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act, for the registration of
the securities offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain items of which are contained in exhibits and
schedules to the Registration Statement as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the securities offered hereby, reference is made to the Registration
Statement, including the exhibits thereto, and financial statements and notes
filed as a part thereof. Statements made in this Prospectus concerning the
contents of any document referred to herein are not necessarily complete. With
respect to each document filed with the Commission as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
The Company is not currently subject to the periodic reporting or other
information requirements of the Exchange Act. During such time as the Company is
not subject to such requirements, the Company has agreed that, so long as the
Old Notes or the Exchange Notes remain outstanding, it will file with the
Commission and distribute to holders of the Old Notes or the Exchange Notes, as
applicable, copies of the financial information that would have been contained
in the annual reports and quarterly reports that the Company would have been
required to file with the Commission pursuant to the Exchange Act. Such
financial information shall include annual reports containing consolidated
financial statements and notes thereto, together with an opinion thereon
expressed by an independent public accounting firm, management's discussion and
analysis of financial condition and results of operations as well as quarterly
reports containing unaudited condensed consolidated financial statements for the
first three quarters of each fiscal year. The Company will also make such
reports available to persons considering exchanging Old Notes for Exchange
Notes, securities analysts and broker-dealers upon their request. In addition,
the Company has agreed to furnish to holders of Notes and prospective purchasers
of the Notes designated by such holders, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act,
until such time as the Company has either exchanged the Notes for securities
identical in all material respects which have been registered under the
Securities Act or has registered the Notes for resale under the Securities Act
and at certain other times thereafter.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of the Indenture, the Registration Rights Agreement, and the Company's
Certificate of Incorporation and Bylaws. Requests should be directed to Tom's
Foods Inc., Attention: Lyn D. Anderson, Secretary, 900 8th Street, Columbus,
Georgia 31902; telephone number (706) 323-2721.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets as of December 30, 1995, December 28, 1996
and September 6, 1997 (unaudited)......................... F-3
Statements of Operations for the years ended December 31,
1994, December 30, 1995, December 28, 1996, and the
36-week periods ended September 7, 1996 (unaudited) and
September 6, 1997 (unaudited)............................. F-4
Statements of Changes in Shareholders' Equity for the years
ended December 31, 1994, December 30, 1995, December 28,
1996, and the 36-week period ended September 6, 1997
(unaudited)............................................... F-5
Statements of Cash Flows for the years ended December 31,
1994, December 30, 1995, December 28, 1996, and the
36-week periods ended September 7, 1996 (unaudited) and
September 6, 1997 (unaudited)............................. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 104
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Tom's Foods Inc.:
We have audited the accompanying balance sheets of TOM'S FOODS INC. (a
Delaware corporation) as of December 30, 1995 and December 28, 1996 and the
related statements of operations, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 28, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tom's Foods Inc. as of
December 30, 1995 and December 28, 1996 and the results of its operations and
its cash flows for each of the three years in the period ended December 28, 1996
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 14, 1997
(Except with respect to the
matter discussed in Note 10,
to which the date is
October 14, 1997)
F-2
<PAGE> 105
TOM'S FOODS INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28, SEPTEMBER 6,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments........................... $ 1,711 $ 2,117 $ 2,866
Accounts and notes receivable, net........................ 13,918 18,519 18,875
Inventories:
Raw materials........................................... 3,012 2,464 2,098
Packaging materials..................................... 3,068 2,643 2,246
Finished goods and work in progress..................... 4,056 4,751 5,231
Other current assets...................................... 2,346 2,250 2,627
-------- -------- --------
Total current assets.................................. 28,111 32,744 33,943
-------- -------- --------
Property, Plant, and Equipment:
Land and land improvements................................ 5,972 5,518 5,546
Buildings................................................. 14,972 14,143 14,346
Machinery, equipment and vehicles......................... 37,765 39,895 41,720
Vending and other distribution equipment.................. 6,955 8,792 9,852
Furniture and fixtures.................................... 7,910 8,191 8,644
Construction in progress.................................. 1,844 3,034 2,067
-------- -------- --------
Total property, plant and equipment................... 75,418 79,573 82,175
Accumulated depreciation.................................. (18,847) (24,610) (28,957)
-------- -------- --------
Net property, plant and equipment..................... 56,571 54,963 53,218
-------- -------- --------
Noncurrent accounts and notes receivable, net............... 555 433 381
Other assets................................................ 1,644 1,709 1,691
Goodwill and intangible assets, net......................... 51,619 49,941 48,780
-------- -------- --------
Total assets.......................................... $138,500 $139,790 $138,013
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 9,229 $ 14,270 $ 9,304
Accrued liabilities....................................... 10,383 8,273 8,270
Borrowings under the revolving line of credit............. 8,000 0 0
Current portion of restructuring reserves................. 3,516 1,152 628
Current portion of senior term loan....................... 8,125 0 0
Current portion of senior credit agreement................ 0 1,533 1,803
Current portion of capital lease and other debt
obligations............................................. 288 24 26
Current portion of other long-term obligations............ 135 130 0
-------- -------- --------
Total current liabilities............................. 39,676 25,382 20,031
-------- -------- --------
Long-Term Debt:
Senior credit agreement................................... 0 7,363 6,684
Senior term loan.......................................... 40,053 0 0
Term loan from TFH Corp................................... 0 59,828 59,828
Accrued interest due to TFH Corp.......................... 0 2,249 8,004
Subordinated loan......................................... 7,500 0 0
Industrial development revenue bonds...................... 10,000 10,000 10,000
Capital lease and other debt obligations.................. 1,331 327 307
Note payable.............................................. 0 7,192 8,475
-------- -------- --------
Total long-term debt.................................. 58,884 86,959 93,298
Other long-term obligations................................. 1,121 372 480
Restructuring reserves...................................... 2,934 2,207 2,207
Accrued pension cost........................................ 5,893 6,109 6,743
Accrued postretirement benefits other than pensions......... 2,406 2,242 2,242
Commitments and Contingencies (Notes 3, 7, 8 and 9)
Shareholders' Equity:
Common stock, $.01 par value; 10,000 shares authorized,
1,000, 5,000, and 5,000 shares issued and outstanding at
December 30, 1995, December 28, 1996, and September 6,
1997, respectively...................................... 0 0 0
Additional paid-in capital................................ 42,725 42,725 42,725
Accumulated deficit....................................... (15,139) (26,206) (29,713)
-------- -------- --------
Total shareholders' equity............................ 27,586 16,519 13,012
-------- -------- --------
Total liabilities and shareholders' equity............ $138,500 $139,790 $138,013
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 106
TOM'S FOODS INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED 36-WEEK PERIOD ENDED
-------------------------------------------- ----------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28, SEPTEMBER 7, SEPTEMBER 6,
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales......................... $ 215,650 $ 198,340 $ 205,856 $ 141,369 $ 149,337
Cost of goods sold................ (130,774) (125,396) (133,624) (91,249) (92,529)
--------- --------- --------- --------- ---------
Gross profit.................... 84,876 72,944 72,232 50,120 56,808
--------- --------- --------- --------- ---------
Expenses and other income:
Selling and administrative
expenses..................... (78,937) (75,783) (69,735) (47,364) (52,757)
Amortization of goodwill and
intangible assets............ (1,678) (1,678) (1,678) (1,161) (1,161)
Other income.................... 1,890 3,296 1,309 285 1,130
Restructuring and nonrecurring
charges...................... 0 (9,570) (3,793) (3,493) 0
--------- --------- --------- --------- ---------
(78,725) (83,735) (73,897) 51,733 (52,788)
--------- --------- --------- --------- ---------
Income (loss) from operations... 6,151 (10,791) (1,665) (1,613) 4,020
Interest expense, net............. (6,405) (7,870) (9,402) (6,271) (7,181)
--------- --------- --------- --------- ---------
Loss before income taxes........ (254) (18,661) (11,067) (7,884) (3,161)
Provision (benefit) for income
taxes........................... 500 (400) 0 342 346
--------- --------- --------- --------- ---------
Net loss........................ $ (754) $ (18,261) $ (11,067) $ (8,226) $ (3,507)
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 107
TOM'S FOODS INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
RETAINED MINIMUM
COMMON STOCK ADDITIONAL EARNINGS PENSION
---------------------------- PAID-IN (ACCUMULATED LIABILITY
SHARES AMOUNT CAPITAL DEFICIT) ADJUSTMENT
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994..... 1,000 $ 0 $ 42,725 $ 3,876 $ 0
Net loss..................... 0 0 0 (754) 0
Minimum pension liability
adjustment................ 0 0 0 0 (717)
-------- -------- -------- -------- --------
Balance at December 31, 1994... 1,000 0 42,725 3,122 (717)
Net loss..................... 0 0 0 (18,261) 0
Minimum pension liability
adjustment................ 0 0 0 0 717
-------- -------- -------- -------- --------
Balance at December 30, 1995... 1,000 0 42,725 (15,139) 0
Shares issued................ 4,000 0 0 0 0
Net loss..................... 0 0 0 (11,067) 0
-------- -------- -------- -------- --------
Balance at December 28, 1996... 5,000 0 42,725 (26,206) 0
Net loss (unaudited)......... 0 0 0 (3,507) 0
-------- -------- -------- -------- --------
Balance at September 6, 1997
(unaudited).................. 5,000 $ 0 $ 42,725 $(29,713) $ 0
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 108
TOM'S FOODS INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED 36-WEEK PERIOD ENDED
------------------------------------------ ---------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28, SEPTEMBER 7, SEPTEMBER 6,
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss............................... $ (754) $(18,261) $(11,067) $ (8,226) $(3,507)
-------- -------- -------- -------- -------
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization........ 9,437 9,595 7,956 5,819 6,154
Restructuring and nonrecurring
charges........................... 0 9,570 3,793 3,493 0
Provision (benefit) for income
taxes............................. 500 (400) 0 342 346
Loss (gain) on disposal of property,
plant, and equipment.............. 13 244 (121) 97 (17)
Net gain on sales of receivables..... (63) (22) 0 0 0
Changes in assets and liabilities:
Accounts and notes receivable..... 513 (2,263) (4,479) (5,648) (304)
Inventories....................... 477 1,648 278 (248) 283
Other assets...................... 508 1,600 2,661 1,067 (359)
Accounts payable.................. 1,617 (224) 4,731 1,226 (4,966)
Other liabilities................. (2,902) (6,730) 5,025 2,856 4,860
Prepaid and accrued pension
cost............................ 104 482 216 55 634
Accrued postretirement benefits
other than pensions............. (78) (64) (164) (27) 0
-------- -------- -------- -------- -------
Total adjustments............... 10,126 13,436 19,896 9,032 6,631
-------- -------- -------- -------- -------
Net cash provided by (used in)
operating activities................. 9,372 (4,825) 8,829 806 3,124
-------- -------- -------- -------- -------
Cash Flows from Investing Activities:
Additions to property, plant, equipment
and vending machines................. (9,006) (7,304) (5,798) (4,001) (3,265)
Proceeds from disposal of property,
plant and equipment.................. 436 0 422 122 34
-------- -------- -------- -------- -------
Net cash used in investing
activities................... (8,570) (7,304) (5,376) (3,879) (3,231)
-------- -------- -------- -------- -------
Cash Flows from Financing Activities:
Repayments of long-term debt........... (3,255) (4,218) (10,252) (10,112) (1,267)
Proceeds from long-term debt........... 0 8,931 9,000 13,721 2,123
Proceeds from sale of vending
machine leases....................... 5,040 2,402 300 300 0
Refinancing costs...................... 0 0 (2,095) (2,095) 0
-------- -------- -------- -------- -------
Net cash provided by (used in)
financing activities......... 1,785 7,115 (3,047) 1,814 856
-------- -------- -------- -------- -------
Increase (decrease) in cash and
short-term investments................. 2,587 (5,014) 406 (1,259) 749
Cash and short-term investments,
beginning of year...................... 4,138 6,725 1,711 1,711 2,117
-------- -------- -------- -------- -------
Cash and short-term investments,
end of year.......................... $ 6,725 $ 1,711 $ 2,117 $ 452 $ 2,866
======== ======== ======== ======== =======
Interest paid during the year............ $ 7,002 $ 6,765 $ 2,512 $ 752 $ 1,947
Income taxes paid during the year........ 363 0 0 0 0
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 109
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, DECEMBER 30, 1995, AND DECEMBER 28, 1996
(INFORMATION AS OF SEPTEMBER 6, 1997 AND FOR THE 36-WEEK PERIODS ENDED
SEPTEMBER 7, 1996 AND SEPTEMBER 6, 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Tom's Foods Inc. (the "Company") manufactures and distributes snack food
products. The principal markets for these products are the southeastern and
southwestern United States.
REFINANCING
On August 30, 1996, the Company refinanced its debt obligations (Note 4).
In connection with the debt refinancing, TFH Corp. ("TFH") was formed. TFH was
capitalized by various parties under common control with Tom's Foods Capital
Corporation ("TFCC"), the prior parent. TFH used the proceeds to purchase
outstanding senior and subordinated debt obligations of the Company. In return
for subordinating its purchased debt claims and a deferral of interest and
principal payments, TFH received 80% of the common stock of the Company, making
TFH the Company's new parent. This transaction was accounted for as a purchase
of entities under common control in accordance with paragraph 5 of Accounting
Principles Board No. 16, "Accounting for Business Combinations." Therefore, no
change in the basis of assets and liabilities was recorded.
FISCAL YEAR
The Company's fiscal year is the 52- or 53-week period ending the Saturday
nearest to December 31.
CASH AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investment instruments with an
original maturity of three months or less to be cash equivalents. These
investments are stated at cost, which approximates market value.
INTERIM UNAUDITED FINANCIAL INFORMATION
The financial statements as of September 6, 1997 and for the 36-week
periods ended September 7, 1996 and September 6, 1997 are unaudited; however, in
the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the unaudited
financial statements for these interim periods have been included. The results
of interim periods are not necessarily indicative of the results to be obtained
for a full year.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost and are depreciated using
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Land improvements........................................... 20 years
Buildings................................................... 32 years
Machinery, equipment and vehicles........................... 3 to 12 years
Vending machines and other distribution equipment........... 5 to 10 years
Furniture and fixtures...................................... 3 to 10 years
</TABLE>
F-7
<PAGE> 110
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the average cost for raw materials, packaging materials and work in
progress. Finished goods cost is determined using a standard costing system,
which approximates the first-in, first-out method. Market is defined as
replacement cost for raw materials and packaging materials and net realizable
value for finished goods and work in progress. Cost elements include the cost of
raw materials, direct labor and overhead incurred in the manufacturing process.
GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets arose during the acquisition of the Company
on May 13, 1993. The Company has attributed these to a distribution system, an
assembled staff, various trademarks and goodwill. These items are being
amortized using the straight-line method over their estimated useful lives as
follows.
<TABLE>
<S> <C>
Assembled staff............................................. 20 years
Trademarks.................................................. 40 years
Distribution system......................................... 35 years
Goodwill.................................................... 40 years
</TABLE>
The Company periodically reviews the value assigned to goodwill and
intangible assets to determine whether events and circumstances have occurred
which indicate that the remaining estimated useful life of goodwill may warrant
revision or that the remaining balance of goodwill may not be recoverable. The
Company uses an estimate of undiscounted net income over the remaining life of
the goodwill in measuring whether the goodwill is recoverable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and
short-term investments, trade receivables, notes receivable, accounts payable,
purchase commitments, senior loans, industrial development revenue bonds,
subordinated debt, other long-term obligations and capital lease obligations. In
management's opinion, the carrying amounts of these financial instruments
approximate their fair values at December 30, 1995 and December 28, 1996.
DISTRIBUTOR FRANCHISE REVENUE
The Company sells distributorships in the normal course of business. During
the third quarter of 1995, the Company changed its strategy for the sale of a
certain type of distributorship. Management determined that this type of
distributorship was not operating effectively, developed a strategy to
restructure the affected portion of the distribution network, and discontinued
the sale of these affected distributorships (Note 2). When the Company sold
these distributorships, the majority of the purchase price was financed by the
Company through the receipt of a note, usually bearing interest at 10%. The
revenues from the purchase of rights to the service area and the direct costs
associated with the selling of the distributor rights were deferred and were
recognized at the one-year anniversary of the sale of the distributorship, the
date on which the distributor could no longer terminate the related agreement
without obligation to the Company. The Company recognized revenue, net of direct
costs, of approximately $1,511,000, $3,613,000, and $50,000 for the years ended
December 31, 1994, December 30, 1995, and December 28, 1996, respectively,
related to the sale of the above routes.
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-8
<PAGE> 111
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the
current period presentation.
EFFECT OF ACCOUNTING PRONOUNCEMENTS
Effective December 30, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and For Long-Lived Assets to Be Disposed Of." This statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS No. 121 is not material to the financial
statements as of December 28, 1996.
In November 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation." The statement requires
all companies to disclose additional information about their employee
stock-based compensation plans. The Company adopted SFAS No. 123 effective
December 30, 1995 and has determined that the effect of this statement on its
financial statements is not material.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125
requires companies to use consistent standards for distinguishing between
transfers of assets classified as sales and transfers of assets classified as
secured borrowings. The Company is required to adopt SFAS No. 125 for the year
ending January 3, 1998 and has determined the effect of this statement on its
financial statements is not material as the Company no longer sells accounts and
notes receivables to financial institutions. See Note 3.
TRANSACTIONS WITH RELATED PARTIES
The Company has entered into consulting arrangements with the Chairman of
the Board and a Director of the Company for providing consulting services to the
Company. In respect of such consulting services, each received $100,000 for the
year ended December 28, 1996 and $67,000 for the 36-week period ended September
6, 1997.
In connection with the term loan from TFH (Note 4), the Company recognized
interest expense of $7,750,000 for the year ended December 28, 1996 and
$5,460,000 for the 36-week period ended September 6, 1997.
As part of the August 30, 1996 refinancing, the stockholders of TFH caused
letters of credit to be posted in the aggregate face amount of $10,000,000 to
replace the letters of credit posted by the Company to back the industrial
development revenue bonds discussed in Note 4. In connection with the 1996
refinancing, the stockholders of TFH assigned their reimbursement rights against
the Company to TFH and TFH agreed to subordinate its rights to Congress. After
the Offering, TFH will waive its rights to reimbursement through December 31,
2005 and thereafter, subject to the terms of the subordination, the Company will
be obligated to reimburse TFH for any draws which have been or are subsequently
made on the TFH stockholders' letters of credit.
2. RESTRUCTURING RESERVES AND NONRECURRING CHARGES
In recent years, the Company has twice modified its strategy with regard to
its distribution system. Traditionally, the Company's distribution system has
been a multi-route distribution system. In 1991, the
F-9
<PAGE> 112
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company began supplementing its traditional multi-route distribution system with
a single-route distribution strategy. This strategy included the takeover of
underperforming multi-route distributors and implementing single-route
distributors to fill voids and supplement the traditional distribution system.
The process did not include the takeover of healthy multi-route distributors. In
connection with the supplemental single-route distribution strategy, the Company
recorded a restructuring reserve of $29,852,000 (the "1991 Reserve") which is
discussed more fully below. At no time did the Company actually have more than
360 of these supplemental single-route distributors out of a total of
approximately 2,400 routes, which represented less than 15% of the total routes
in the distribution system at any time.
In 1995, the Company assembled a new management team which determined that
the single-route distribution strategy was not a strategy the Company should
continue to pursue. At that time, new management determined that the Company
would abandon the single-route distribution strategy and encourage single-route
distributors to convert to multi-route distributors. As a result, in 1995, the
Company reversed the remainder of the 1991 Reserve (which at that time was
$9,645,000) and established a new reserve of approximately 6,500,000 (the "1995
Reserve") to convert the single-route distributors to multi-route distributors.
The 1995 Reserve is described more fully below. The Company anticipates that
none of the 1995 Reserve will be remaining at January 3, 1998 (the Company's
1997 fiscal year end).
In 1991 and in connection with the single-route distribution strategy, the
Company recorded the 1991 Reserve which represented the expenses related to the
assumption of certain distributor liabilities, bad debts, losses from the
temporary operation of Company owned routes, and additional expenses. In 1991,
the Company underestimated the costs of fully implementing the single-route
strategy. These costs included sales, accounting and administrative staff,
warehouse space, legal costs, and increased bad debt costs. As a result, the
Company utilized $20,207,000 of the 1991 Reserve in fiscal 1991, 1992, 1993,
1994 and 1995. In fiscal 1994 and 1995, the Company utilized approximately
$6,500,000 and $2,625,000, respectively, of the 1991 Reserve leaving a remaining
reserve of approximately $9,645,000 at December 30, 1995.
In 1995, the Company's new management team noted that the Company was
spending significant capital supporting the supplemental single-route
distributor program that represented a very small portion, in number of routes
and dollars contributed, of its distribution system. Therefore, in 1995, the
Company reversed the remainder of the 1991 Reserve of $9,645,000 and established
a new reserve of approximately $6,500,000 (the "1995 Reserve") to convert the
single-route distributors to multi-route distributors. Management determined
that the multi-route distributors would benefit the Company by reducing the
administrative sales staff necessary to support the single-route distributors,
decreasing needed warehouse space for the delivery of goods and decreasing bad
debt expense as a direct result of having larger, more stable distributors and
more qualified personnel available to run a multi-route business rather than a
single-route business. Management committed to eliminating the single-route
concept in 1995 and took steps to develop a specific plan involving the
identification of the routes to be converted or grown to multi-route
distributors in 1995, 1996 and 1997. Management determined that the only
substantial incremental cost of converting to multi-route distributors was the
exposure related to the receivables of the old single-route distributors.
Therefore, the costs included in the 1995 Reserve primarily related to legal and
bad debt costs associated with the takeover of the single-route distributors
which was required under its recourse provisions with the financial institution
to whom the Company had sold certain receivables. In fiscal 1996 and the 36 week
period ended September 6, 1997, the Company utilized approximately $3,091,000
and $524,000, respectively, of the 1995 Reserve resulting in an ending balance
of approximately $3,359,000 at December 28, 1996 and $2,035,000 at September 6,
1997, respectively. The Company anticipates that the restructuring will be
substantially complete by January 3, 1998 (the Company's 1997 fiscal year end)
and that there will be no reserve remaining at that time.
In addition to the establishment of the 1995 Reserve, the Company recorded
several nonrecurring charges in 1995 totaling approximately $12,765,000. These
nonrecurring charges were associated with the
F-10
<PAGE> 113
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
changes made in the sales and administrative staff as well as changes in certain
product lines produced by the Company. The nonrecurring items included the
following:
1. The payment of early retirement and severance benefits of approximately
$3,700,000. The new management team determined that the sales and administrative
functions of the Company could be streamlined and simplified. As a result, the
Company offered an early retirement option to eligible employees and completed
severance agreements with others. Substantially all the payments were made to
individuals prior to December 30, 1995 and no reserves outstanding at December
30, 1995.
2. The write off of certain assets related to the restructuring of the
sales force of approximately $4,949,000. The new management team determined that
the sales function had outgrown the necessary levels to service the core
distribution system. Therefore, in addition to and as a result of reducing
headcount, the value of several assets was either impaired or eliminated. These
assets primarily related to a computer system of approximately $2,728,000
developed to track reporting for single-route distributors that was not
functional for multi-route distributors and consequently, further development
was curtailed and the system was never completed, and certain field assets
including sales office furniture and vehicles and warehouses of approximately
$2,221,000.
3. The write off of certain display equipment and packaging for a
discontinued "low-fat, no-fat" product line of approximately $4,116,000. In the
fourth quarter of 1995, the Company completed an analysis noting that these
product lines were not widely accepted among the Company's core customers.
Therefore, management made a decision to eliminate a significant number of these
products from its product line. The packaging write off of approximately
$1,487,000 related to pre-purchased inventory for certain "low-fat, no fat"
products that were not accepted by the market. The display equipment related
primarily to equipment purchased specifically for the discontinued products of
approximately $2,629,000.
The effects of the above nonrecurring items effectively matched the costs
of the actions taken to the period in which these actions were taken and
resulted in lower cost of sales in future periods from the packaging and asset
write offs, rather than carrying forward the expense of the impaired assets.
3. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable as of December 30, 1995, December 28, 1996,
and September 6, 1997 consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Notes receivable from distributors.............. $ 3,428 $ 3,772 $ 3,315
Trade accounts receivable....................... 20,394 23,860 22,363
Less allowance for doubtful accounts............ (9,349) (8,680) (6,422)
-------- -------- --------
14,473 18,952 19,256
Less current portion............................ (13,918) (18,519) (18,875)
-------- -------- --------
Noncurrent accounts and notes receivable,
net...................................... $ 555 $ 433 $ 381
======== ======== ========
</TABLE>
Notes receivable from distributors are due in varying amounts over periods
of up to ten years and bear interest at stated rates from 0% to 16.25%. The
interest rates on notes receivable related to distributorship financing were 10%
for 1994 and 1995 and 13.2% for 1996. The notes are payable over an eight-year
amortization schedule with a balloon payment at the end of year five. The notes
are secured by certain distributor assets and guarantees. The Company has an
agreement with a financial institution to sell receivables from distributors.
The proceeds under this agreement for the years ended December 31, 1994,
December 30, 1995, and December 28, 1996 were $12,336,000, $4,422,000, and
$335,000, respectively, and are included in cash flows from operating activities
in the accompanying statements of cash flows. In 1997, the
F-11
<PAGE> 114
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company did not sell receivables under this agreement. The Company has
guaranteed the repayment of certain amounts of these receivables. As noted
below, subsequent to December 31, 1996, the Company settled the guaranteed
amount by paying $10,000,000 in full satisfaction of the note payable under
guarantee obligations (Note 4) of approximately $8,500,000 and as a settlement
of the remaining guaranteed amount. This remaining settlement amount was
reserved for as of December 28, 1996. Therefore, the ultimate amount of the
Company's guaranteed repayment did not have a material effect on the financial
position or results of operations.
Previously, the Company guaranteed certain of the distributor financing
with the financial institution discussed above which gave rise to the note
payable discussed in Note 4. As of September 6, 1997, the Company has recognized
a note payable of $8,475,000 related primarily to defaulted notes from
distributors. The Company also has potential contingent liability to the
financial institution for guaranteed debt. Subsequent to September 6, 1997, the
Company has reached an agreement with the financial institution whereby the
Company will pay $10,000,000 in full satisfaction of the note payable and the
contingent liability.
Subject to certain conditions, the Company is obligated to repurchase, for
either cash or a note, distributorships or distributorship assets from certain
distributors at a multiple of 3.5 times the amount of the average annual net
cash flow of the distributorship, measured over the preceding three years. This
obligation relates only to those distributors who have signed the 1997
distributor agreement and have been in full compliance, as defined in the 1997
distributor agreement, for the previous three years. As of September 6, 1997, 33
of the Company's distributors had signed the new agreement. Consequently, the
Company will not be required to repurchase distributorships pursuant to this
agreement until 2000. The Company believes that the repurchase requirement in
the new distributor contract is an advantage to both the independent distributor
network and to the Company. The repurchase requirement allows the Company
greater control over its distribution network by providing the Company with a
first opportunity to buy the businesses of existing distributors should they
desire to sell, and provides these distributors with an orderly exit strategy.
This exit strategy will only be available to successful distributors who have
remained in full compliance with their contracts for a minimum of three years,
including meeting certain growth requirements, and thus enhances the value of
successful distributorships and the distribution network as a whole. Because the
Company does not know which distributors will avail themselves of this provision
and when they might do so after becoming eligible, the Company believes that it
is not possible to determine any future contingency requirement. Any potential
repurchase obligation is, however, based on a multiple of net cash flow. Any
repurchase is therefore funded primarily through the stream of future cash flows
of the purchased distributorship, which is enhanced by the capture of integrated
margins. Additionally, the Company has the option to require the selling
distributor to take part of the purchase price in the form of a note, further
supporting the potential "self-funding" nature of the acquisition.
F-12
<PAGE> 115
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. DEBT
Long-term debt as of December 30, 1995, December 28, 1996, and September 6,
1997 consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Senior credit agreement..................................... $ 0 $ 8,896 $ 8,487
Less current portion of senior credit agreement........... 0 (1,533) (1,803)
------- ------- -------
Long-term portion of senior credit agreement......... 0 7,363 6,684
Term loan from TFH.......................................... 0 59,828 59,828
Accrued interest due to TFH................................. 0 2,249 8,004
Subordinated loan; interest at 13%.......................... 7,500 0 0
Senior term loan............................................ 48,178 0 0
Less current portion of senior term loan.................. (8,125) 0 0
------- ------- -------
Long-term portion of senior term loan................ 40,053 0 0
6.75% Taylor County, Florida, industrial development revenue
bonds; payable in five annual installments beginning
September 1, 2000, secured by property with a net book
value of $5,419 and $4,968 in 1995 and 1996,
respectively.............................................. 5,800 5,800 5,800
6.5% Industrial Development Board of the County of Knox,
Tennessee, industrial development revenue bonds; payable
in five equal annual installments beginning October 1,
2005, secured by property with a net book value of $7,118
and $6,468 in 1995 and 1996, respectively................. 4,200 4,200 4,200
------- ------- -------
Long-term industrial development revenue bonds....... 10,000 10,000 10,000
Note payable under guarantee obligations.................... 0 7,192 8,475
Capital lease and other debt obligations; secured by
computers, office equipment, and vending machines......... 1,619 351 333
Less current portion of capital lease obligations......... (288) (24) (26)
------- ------- -------
Long-term portion of capital lease obligations....... 1,331 327 307
------- ------- -------
Long-term debt....................................... $58,884 $86,959 $93,298
======= ======= =======
</TABLE>
On August 30, 1996, the Company entered into a new senior credit agreement
(the "Senior Credit Agreement") providing for a revolving loan, letter-of-credit
accommodations, a term loan, and additional equipment loans. The Senior Credit
Agreement matures August 30, 1999 and contains a provision for the renewal of
the agreement from year to year thereafter, unless sooner terminated pursuant to
the terms of the agreement. According to the terms of the agreement, the
maturity date of all outstanding revolving loans, letter-of-credit
accommodations, term loans, or equipment loans is the earlier of the provision's
specific date or the maturity of the Senior Credit Agreement, as defined.
The revolving loan is based on 85% of all eligible accounts, plus 50% of
the value of eligible inventory, less any reserves determined to be appropriate
by the lender, all as defined. Interest is payable on the revolving loan at a
rate of 1.375% above the prime rate of interest. The maximum borrowing amount
under the revolving loan and the letter-of-credit accommodations is $17,000,000.
Standby letters of credit in the amount of $3,036,000 and $3,015,000 were
outstanding under the revolving loan as of December 28, 1996 and September 6,
1997, respectively. At December 28, 1996 and September 6, 1997, there were no
outstanding balances other than the letters of credit under the revolving loan.
At December 28, 1996, the term loan was evidenced by three promissory notes
in the total amount of $8,896,000. The promissory notes bear interest at a rate
of 1.625% above the prime rate of interest (9.875% at
F-13
<PAGE> 116
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 28, 1996). One promissory note matures July 31, 2001, and two
promissory notes mature September 30, 2003. All scheduled maturity dates are
subject to the August 30, 1999 maturity of the Senior Credit Agreement if not
extended.
The Senior Credit Agreement, as amended, requires the Company to maintain
certain financial ratios relating to working capital and tangible net worth, as
defined. The Senior Credit Agreement also restricts the Company in a number of
areas, including, but not limited to, paying dividends, incurring additional
indebtedness, certain investment activities, and capital expenditures. As of
December 28, 1996, the Company was in compliance with all financial ratios and
restrictive covenants.
In fiscal 1996, the Company recorded $3,800,000 in nonrecurring
transactions costs directly related to the refinancing of its long-term
obligations and equity refinancing discussed in Note 1. The nonrecurring
transaction costs recorded in 1996 related primarily to the payment of legal
fees of approximately $1,000,000, the payment of fees related to the new senior
debt agreement of approximately $700,000 and the payment of fees and costs
associated with the elimination of the old senior debt agreement of
approximately $2,050,000. The legal fees were primarily related to the drafting
and negotiations for the changes in the structure of the parent company of Tom's
Foods Inc. and the related equity interest (Note 1). The fees noted above did
not materially change the future amortization expense related to the new senior
debt agreement.
Until August 30, 1996, the Company had a senior term loan (the "Senior Term
Loan") pursuant to a credit agreement (the "Credit Agreement") dated June 3,
1988, as amended June 6, 1990, May 13, 1993, and December 31, 1994, between the
Company and a bank group. The interest on these loans was at either a base rate
plus 1.5% per annum or a Eurodollar rate, as defined (10.25% at December 30,
1995). At December 30, 1995, $8,000,000 in borrowings under the revolving line
of credit and standby letters of credit in the amount of approximately
$3,330,000 were outstanding under the Credit Agreement. In 1996, the Company
recorded a nonrecurring charge of $3,793,000 related to the restructuring.
The Company used the proceeds of the Senior Credit Agreement to pay down
the balance of the Senior Term Loan and revolving loans to approximately
$52,328,000, inclusive of accrued interest. As part of the restructuring, TFH
purchased the Senior Term Loan and revolving loans as well as the $7,500,000
subordinated loan. The Company will continue to carry both obligations as loans
from TFH at the face amount of each obligation. Under the terms of the agreement
with TFH, the Company will accrue, but not pay, interest at a rate of 13% on
these obligations. Principal and interest on the obligations will be due 30 days
after the maturity date of the Senior Credit Agreement, subject to any extension
of the Senior Credit Agreement. The debt to TFH is subordinate to all debt under
the Senior Credit Agreement.
The Company has an agreement with a financial institution to sell
receivables from distributors (Note 3) and receivables relating to vending
machine leases (Note 5). On August 30, 1996, the Company amended its agreement
with the financial institution relating to the Company's guaranty obligation for
receivables sold. The new agreement establishes a note payable (the "Note
Payable") for the Company's guaranty obligations related to failed distributors
or unpaid notes. When a sold receivable becomes the responsibility of the
Company, as defined by the agreement, the amount of the obligation is added to
the Note Payable balance carried on the Company's balance sheet. The Company
will make payments applied to interest on the Note Payable in the amount of
$50,000 per month through August 30, 1999. The Company will then begin making
principal payments on the balance of the Note Payable. The principal payments
will continue through October 31, 2003.
The scheduled maturities of all company debt obligations as of December 28,
1996 are $1,557,000 in 1997, $1,662,000 in 1998, $58,560,000 in 1999, $2,552,000
in 2000, $10,214,000 in 2001, and $11,722,000 in the years thereafter.
F-14
<PAGE> 117
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. SALE OF VENDING MACHINE LEASES
The Company supplies vending machines to certain distributors under
sales-type and operating leases. During December 1994, the Company entered into
an agreement to periodically sell to a financial institution, with limited
recourse, the revenue stream related to sales-type leases and to obtain
long-term financing secured by the revenue stream related to operating leases.
The proceeds under this agreement during 1994, 1995, and 1996 were $5,040,000,
$2,402,000, and $300,000, respectively, which represent the present value of the
future lease payments using a discount rate of 12.6% in 1994 and 13.2% in 1995
and 1996. This amount is included in cash flows from financing activities in the
accompanying statements of cash flows. The portion of the proceeds relating to
operating leases is classified as other long-term obligations and will be repaid
over the operating lease term or through the sale of the vending machines to the
distributors using sales-type lease arrangements. At December 30, 1995 and
December 28, 1996, there were approximately $220,000 and $331,000, respectively,
of other long-term obligations, which are securitized by operating lease
payments. Under the limited recourse provisions of the agreement, the Company is
contingently liable for 50% of the sales-type leases sold. See total contingent
liability for all receivables sold in Note 3.
6. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," and files a consolidated federal income tax
return with TFH.
The components of the deferred tax assets and liabilities as of December
30, 1995 and December 28, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Property, plant, and equipment......................... $ 6,373 $ 6,113
Other.................................................. 168 0
-------- --------
Total deferred tax liabilities.................... 6,541 6,113
-------- --------
Deferred tax assets:
Operating loss carryforwards........................... (12,012) (17,569)
Restructuring reserves................................. (2,516) (1,310)
Accounts and notes receivable.......................... (3,811) (4,280)
Pensions and employee benefits......................... (2,769) (2,819)
Workers' compensation.................................. (714) (601)
Discount on industrial development revenue bonds....... (712) (647)
Other.................................................. (2,839) (965)
-------- --------
Total deferred tax assets......................... (25,373) (28,191)
-------- --------
Net deferred tax assets.................................. (18,832) (22,078)
Less valuation allowance................................. 18,832 22,078
-------- --------
Net deferred tax assets............................. $ 0 $ 0
======== ========
</TABLE>
The Company has operating loss carryforwards of approximately $45,000,000
which begin to expire in 2009.
F-15
<PAGE> 118
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes consisted of the following as of December
31, 1994, December 30, 1995, and December 28, 1996 (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Federal income taxes:
Current....................................... $ 0 $ (400) $ 0
Deferred...................................... 436 0 0
State income taxes:
Current....................................... 0 0 0
Deferred...................................... 64 0 0
-------- -------- --------
Provision for income taxes...................... $ 500 $ (400) $ 0
======== ======== ========
</TABLE>
For the years ended December 31, 1994, December 30, 1995, and December 28,
1996, the provision for income taxes at the Company's effective rate differed
from the provision (benefit) for income taxes at the statutory rate, as follows
(in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Income tax benefit at federal statutory rate.... $ (86) $ (6,263) $ (3,763)
State income taxes, net of federal effect....... (9) (737) (443)
Change in valuation allowance................... 0 6,886 3,246
Alternative minimum tax carrybacks.............. 0 (500) 0
Intangibles amortization........................ 347 347 347
Other........................................... 248 (133) 613
-------- -------- --------
Benefit for income taxes...................... $ 500 $ (400) $ 0
======== ======== ========
</TABLE>
7. EMPLOYEE BENEFIT PLANS
The Company has two noncontributory defined benefit retirement plans (the
"Hourly Plan" and the "Salaried Plan") which cover substantially all full-time
employees who are at least 21 years of age. The Company also has an unqualified
pension plan ("Unqualified Plan") covering only certain salaried employees. The
plans provide for payment of monthly benefits to participants upon their
reaching normal retirement dates. Benefit amounts are determined by a benefit
formula which considers length of service and average salary for the Salaried
Plan and the Unqualified Plan and length of service multiplied by a fixed rate,
as determined by the Company, for the Hourly Plan. The pension cost for the
Hourly Plan and the Salaried Plan is funded at amounts equal to the minimum
funding requirements of the Employee Retirement Income Security Act of 1974.
Assets of the Hourly Plan and the Salaried Plan include common stocks, U.S.
government securities, and corporate bonds. The Unqualified Plan is not funded.
F-16
<PAGE> 119
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized in the Company's balance sheet as of December 28, 1996 (in
thousands):
<TABLE>
<CAPTION>
SALARIED HOURLY UNQUALIFIED
PLAN PLAN PLAN
----------- ----------- -----------
<S> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested...................................... $ 23,589 $ 16,749 $ 155
Nonvested................................... 339 138 55
-------- -------- --------
Accumulated benefit obligation................ 23,928 16,887 210
Effect of projected future compensation
levels...................................... 5,273 0 30
-------- -------- --------
Projected benefit obligation................ 29,201 16,887 240
Plan assets at fair value..................... (28,525) (17,145) 0
Unrecognized prior service costs.............. (2,459) 2,003 (50)
Unrecognized net gain......................... 3,576 1,496 884
-------- -------- --------
Accrued pension costs....................... $ 1,793 $ 3,241 $ 1,074
======== ======== ========
</TABLE>
Net periodic pension costs for the plans for the years ended December 31,
1994, December 30, 1995, and December 28, 1996 included the following components
(in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Service cost of benefits earned during the
period........................................... $ 1,250 $ 1,158 $ 1,077
Interest cost on projected benefit obligation...... 3,045 3,359 3,269
Actual return on assets............................ 703 (9,819) (4,798)
Amortization of prior service costs................ 50 0 880
Net amortization and deferral...................... (4,179) 6,342 464
Settlement gain.................................... 0 (166) 0
------- ------- -------
Net periodic pension costs....................... $ 869 $ 874 $ 892
======= ======= =======
</TABLE>
The rate of increase in future compensation levels and the expected
long-term rate of return on assets used in determining the actuarial present
value of the projected benefit obligation were 5% and 9%, respectively, as of
December 31, 1994, December 30, 1995, and December 28, 1996. The discount rates
used in determining the actuarial present value of the projected benefit
obligation for December 31, 1994, December 30, 1995, and December 28, 1996 were
7%, 7%, and 7.5%, respectively.
Pursuant to the provisions of SFAS No. 87, "Employers' Accounting for
Pensions," the Company recorded as accrued pension cost an additional minimum
pension liability adjustment of $717,000 as of December 31, 1994, representing
the amount by which the accumulated benefit obligation exceeded the fair value
of plan assets plus accrued amounts previously recorded. The amount in excess of
previously unrecognized prior service cost was recorded as a reduction of
shareholders' equity in the amount of $717,000 at December 31, 1994. There was
no additional minimum pension liability at December 30, 1995 and December 28,
1996.
The Company also has a defined contribution plan which covers substantially
all employees who have completed up to six months of service. The Company may
match a portion of an employee's contributions up to a maximum amount. For the
years ended December 31, 1994, December 30, 1995, and December 28, 1996, the
Company contributed approximately $141,000, $130,000, and $133,000,
respectively, to this plan.
During 1995, the Company offered an early retirement incentive plan to
certain members of the Hourly and Salaried Plans. Certain special benefits were
offered to eligible employees, and lump-sum payments were paid out of the
Salaried Plan. As a result, the Company recognized a pension settlement gain of
$166,000 in
F-17
<PAGE> 120
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
accordance with SFAS No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits."
There was no early retirement incentive plan subsequent to 1995.
8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits for
certain retired employees. The Company may provide certain health care and life
insurance benefits for employees electing early retirement in the future until
they reach normal retirement age. The liability for these benefits is not
funded. The Company accounts for these benefits in accordance with SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
The components of the accumulated benefit obligation as of December 30,
1995 and December 28, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Current retirees............................................ $1,939 $1,522
Active employees............................................ 394 392
------ ------
Accumulated benefit obligation............................ $2,333 $1,914
Unrecognized net gain....................................... 73 328
------ ------
Accrued postretirement benefit cost....................... $2,406 $2,242
====== ======
</TABLE>
Net costs of the plan for the years ended December 31, 1994, December 30,
1995, and December 28, 1996 included the following components (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Service cost of benefits earned during the period..... $ 7 $ 5 $ 4
Interest cost on projected benefit obligation......... 93 123 153
------ ------ ------
Net postretirement benefit costs.................... $ 100 $ 128 $ 157
====== ====== ======
</TABLE>
A 7% annual rate of increase in the per capita cost of covered health care
benefits is assumed for all future years for certain grandfathered retirees; for
all other current and future retirees, no increase was assumed due to a fixed
payment schedule. A 1% increase in the assumed health care cost trend rate year
would increase the accumulated postretirement benefit obligation by 4% as of
December 28, 1996 and would increase the 1996 expense by 4.2%. The weighted
average discount rates used in determining the accumulated postretirement
benefit obligation were 7%, 7%, and 7.5% as of December 31, 1994, December 30,
1995, and December 28, 1996, respectively.
F-18
<PAGE> 121
TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
The Company leases vehicles and warehouse space under noncancelable
operating leases. Noncancelable future minimum operating lease commitments as of
December 28, 1996 were as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $1,794
1998........................................................ 1,292
1999........................................................ 851
2000........................................................ 711
2001........................................................ 310
Thereafter.................................................. 64
------
$5,022
======
</TABLE>
The rental expense for all operating leases for the years ended December
31, 1994, December 30, 1995, and December 28, 1996 was approximately $3,711,000,
$3,389,000, and $2,914,000, respectively.
LITIGATION
The Company is a party to a number of claims and lawsuits incidental to its
business. In the opinion of management, after consultation with outside counsel,
the ultimate outcome of these matters, in the aggregate, will not have a
material adverse effect on the financial position or results of operations of
the Company.
10. SUBSEQUENT EVENT
On October 14, 1997, the Company issued 7,000 shares of Class A preferred
stock and 21,737 shares of Class B preferred stock. The Class A preferred stock
has an aggregate liquidation preference of $7,000,000 and was issued in exchange
for $7,000,000 of the outstanding term loan from TFH discussed in Note 4. The
Class B preferred stock has an aggregate liquidation preference of $21,700,000
and was issued in exchange for the remaining outstanding term loan from TFH
discussed in Note 4. The preferred stock is non voting except in certain
circumstances. The Class A preferred stock ranks senior to the Class B preferred
stock. Dividends of on the Class A preferred stock and the Class B preferred
stock accrue at a rate of 10.5% and 9.5%, respectively. Unpaid dividends
increase the liquidation preference of the respective shares. Upon a change in
control, holders of up to $10,000,000 of Class A preferred stock will be
entitled to require the Company to purchase these shares at 100% of the
liquidation preference at that date of purchase. On or after January 1, 1999, up
to an aggregate of $10,000,000 of Class A preferred stock may be exchangeable,
at the Company's option, for an equal amount of subordinated debt, only if the
Company meets certain financial targets, as defined.
F-19
<PAGE> 122
============================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................... 1
Risk Factors............................... 14
The Exchange Offer......................... 22
Capitalization............................. 30
Selected Historical Financial Data......... 31
Selected Unaudited Pro Forma Financial
Data..................................... 34
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 36
Business................................... 46
Management................................. 57
Security Ownership of Management and
Certain Beneficial Owners................ 62
Certain Transactions....................... 63
Description of Other Senior Indebtedness... 64
Description of the Notes................... 65
Description of Capital Stock............... 96
Certain United States Federal Income Tax
Consequences............................. 98
Plan of Distribution....................... 98
Legal Matters.............................. 99
Independent Public Accountants............. 99
Available Information...................... 99
Index to Financial Statements.............. F-1
</TABLE>
============================================================
============================================================
TOM'S LOGO
TOM'S FOODS INC.
OFFER TO EXCHANGE UP TO $60,000,000
AGGREGATE PRINCIPAL AMOUNT
OF ITS 10 1/2% SENIOR SECURED
NOTES DUE 2004 FOR ALL
OF ITS OUTSTANDING
10 1/2% SENIOR SECURED
NOTES DUE 2004
--------------------------------
PROSPECTUS
--------------------------------
------------------------
FEBRUARY , 1998
============================================================
<PAGE> 123
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law (Section 102) allows a corporation to
eliminate the personal liability of directors of a corporation to the
corporation or to any of its stockholders for monetary damage for a breach of
his/her fiduciary duty as a director, except in the case where the director
breached his/her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized the payment of a
dividend or approved a stock repurchase in violation of Delaware corporate law
or obtained an improper personal benefit. The Restated Certificate of
Incorporation of the Company contains a provision which eliminates directors'
personal liability as set forth above.
The Delaware General Corporation Law (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those of affiliated corporations against expenses incurred in the
defense of any lawsuit to which they are made parties by reason of being or
having been such directors or officers, subject to specified conditions and
exclusions; gives a director or officer who successfully defends an action the
right to be so indemnified; and authorizes the Company to buy directors' and
officers' liability insurance. Such indemnification is not exclusive of any
other right to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or otherwise.
The Company's By-Laws provide that the Company will indemnify its directors
and officers to the fullest extent permitted by law. The Company's By-Laws also
permit it to secure insurance on behalf of any person it is required to or
permitted to indemnify for any liability arising out of his or her actions in
such capacity, regardless of whether the By-Laws would permit indemnification.
The Company maintains liability insurance for its directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1 Purchase Agreement between PaineWebber Incorporated and
Tom's Foods Inc., dated October 8, 1997
3.1* Second Restated Certificate of Incorporation of Tom's Foods
Inc., as amended, and Certificate of Designations of the
Preferred Stock
3.2 By-Laws of Tom's Foods Inc.
4 Indenture
5.1* Opinion of McDermott, Will & Emery regarding legality
10.1 Registration Rights Agreement among PaineWebber Incorporated
and Tom's Foods Inc. dated October 14, 1997
10.2 Amended and Restated Loan and Security Agreement by and
between Congress Financial Corporation (Southern) as Lender
and Tom's Foods Inc. as Borrower dated as of October 14,
1997
10.3 Guarantee from Tom's Foods Capital Corporation to Congress
Financial Corporation (Southern), dated August 30, 1996
10.4 Confirmation and Acknowledgement of Guarantee and General
Security Agreement from Tom's Foods Capital Corporation to
Congress Financial Corporation (Southern), dated October 14,
1997
10.5* Industrial Revenue Bond Documents for Knox County, Tennessee
10.6* Industrial Revenue Bond Documents for Taylor County, Florida
10.7 Intercreditor Agreement between Congress Financial
Corporation (Southern) and IBJ Schroder Bank & Trust
Company, dated October 14, 1997
10.8 Form of Tom's Foods Inc. 1997 Distributor Agreement
10.9 Subordination Agreement between IBJ Schroder Bank & Trust
Company and TFH Corp., dated October 14, 1997
</TABLE>
II-1
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.10 Guarantee from TFH Corp. to Congress Financial Corporation
(Southern), dated August 30, 1996
10.11 Confirmation and Acknowledgement of Guarantee and General
Security Agreement from TFH Corp. to Congress Financial
Corporation (Southern) dated October 14, 1997
10.12 Employment Agreement between the Company and Rolland G.
Divin, dated January 6, 1995
10.13 Employment Agreement between the Company and Paul C. Serff,
dated May 16, 1991, as amended July 9, 1992
10.14 Employment Agreement between the Company and Gerald Barker,
dated October 14, 1997
10.15 Agreement between the Company and S. Albert Gaston, dated
October 14, 1997
10.16 Registration Rights Agreement by and among the Company and
TFH Corp., dated October 14, 1997
10.17 Executive Incentive Plan
10.18* Letters of Credit of TFH Shareholders
12 Statement Regarding Computation of Ratio of Earnings to
Fixed Charges
23.1* Consent of Arthur Andersen LLP
23.2 Consent of McDermott, Will & Emery (see Exhibit 5.1 above)
24 Power of Attorney (included with the signature page to the
Registration Statement)
25* Statement of Eligibility of Trustee
27.1 Financial Data Schedule
27.2 Financial Data Schedule
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
99.3* Form of Letter to Securities Brokers and Dealers, Commercial
Banks, Trust Companies and Other Nominees
99.4* Form of Letter to Clients
99.5 Report of Independent Public Accountants on Financial
Statement Schedule
99.6* Letter from Registered Holder
</TABLE>
- -------------------------
* Filed herewith.
(b) Financial Statement Schedule:
Schedule 1 -- Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registrant Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts of events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. (Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the change in
volume represents no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement); and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
II-2
<PAGE> 125
herein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(2) Prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration Statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the Registrant undertakes that such reoffering prospectus will
contain the information called for by an applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(3) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to this Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 20 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(5) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents as first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.
(6) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject to and
included in this Registration Statement when it became effective.
II-3
<PAGE> 126
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Columbus, Georgia on February 9, 1998.
TOM'S FOODS INC.
By /s/ ROLLAND G. DIVIN
------------------------------------
Rolland G. Divin
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROLLAND G. DIVIN President, Chief Executive Officer February 9, 1998
- --------------------------------------------- and Director (Principal Executive
Rolland G. Divin Officer)
* Senior Vice President and Chief February 9, 1998
- --------------------------------------------- Financial Officer (Principal
S. Albert Gaston Financial and Accounting Officer)
* Director February 9, 1998
- ---------------------------------------------
Michael E. Heisley
* Assistant Secretary and Director February 9, 1998
- ---------------------------------------------
Stanley H. Meadows
* Director February 9, 1998
- ---------------------------------------------
Thomas C. Mattick
* Director February 9, 1998
- ---------------------------------------------
Emily Heisley Stoeckel
* Director February 9, 1998
- ---------------------------------------------
Andrew C. G. Sage II
*By: /s/ ROLLAND G. DIVIN February 9, 1998
---------------------------------------
Rolland G. Divin
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 127
SCHEDULE 1
TOM'S FOODS INC.
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT
BALANCE AT CHARGED TO END OF
BEGINNING COST AND CHARGED TO THE
OF THE PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
------------- ---------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1994................................. 3,875 1,818 5,693
1995................................. 5,693 4,315 269(A) 928(B) 9,349
1996................................. 9,349 444 523(A) 1,636(B) 8,680
</TABLE>
- ---------------
(A) Represents amounts recovered.
(B) Represents the write-off of accounts previously reserved.
<PAGE> 128
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------
<S> <C> <C>
1 Purchase Agreement between PaineWebber Incorporated and
Tom's Foods Inc., dated October 8, 1997
3.1* Second Restated Certificate of Incorporation of Tom's Foods
Inc., as amended, and Certificate of Designations of the
Preferred Stock
3.2 By-Laws of Tom's Foods Inc.
4 Indenture
5.1* Opinion of McDermott, Will & Emery regarding legality
10.1 Registration Rights Agreement among PaineWebber Incorporated
and Tom's Foods Inc. dated October 14, 1997
10.2 Amended and Restated Loan and Security Agreement by and
between Congress Financial Corporation (Southern) as Lender
and Tom's Foods Inc. as Borrower dated as of October 14,
1997
10.3 Guarantee from Tom's Foods Capital Corporation to Congress
Financial Corporation (Southern), dated August 30, 1996
10.4 Confirmation and Acknowledgement of Guarantee and General
Security Agreement from Tom's Foods Capital Corporation to
Congress Financial Corporation (Southern), dated October 14,
1997
10.5* Industrial Revenue Bond Documents for Knox County, Tennessee
10.6* Industrial Revenue Bond Documents for Taylor County, Florida
10.7 Intercreditor Agreement between Congress Financial
Corporation (Southern) and IBJ Schroder Bank & Trust
Company, dated October 14, 1997
10.8 Form of Tom's Foods Inc. 1997 Distributor Agreement
10.9 Subordination Agreement between IBJ Schroder Bank & Trust
Company and TFH Corp., dated October 14, 1997
10.10 Guarantee from TFH Corp. to Congress Financial Corporation
(Southern), dated August 30, 1996
10.11 Confirmation and Acknowledgement of Guarantee and General
Security Agreement from TFH Corp. to Congress Financial
Corporation (Southern) dated October 14, 1997
10.12 Employment Agreement between the Company and Rolland G.
Divin, dated January 6, 1995
10.13 Employment Agreement between the Company and Paul C. Serff,
dated May 16, 1991, as amended July 9, 1992
10.14 Employment Agreement between the Company and Gerald Barker,
dated October 14, 1997
10.15 Agreement between the Company and S. Albert Gaston, dated
October 14, 1997
10.16 Registration Rights Agreement by and among the Company and
TFH Corp., dated October 14, 1997
10.17 Executive Incentive Plan
10.18* Letters of Credit of TFH Shareholders
12 Statement Regarding Computation of Ratio of Earnings to
Fixed Charges
23.1* Consent of Arthur Andersen LLP
23.2 Consent of McDermott, Will & Emery (see Exhibit 5.1 above)
24 Power of Attorney (included with the signature page to the
Registration Statement)
25* Statement of Eligibility of Trustee
27.1 Financial Data Schedule
27.2 Financial Data Schedule
99.1* Form of Letter of Transmittal
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------
<S> <C> <C>
99.2* Form of Notice of Guaranteed Delivery
99.3* Form of Letter to Securities Brokers and Dealers, Commercial
Banks, Trust Companies and Other Nominees
99.4* Form of Letter to Clients
99.5 Report of Independent Public Accountants on Financial
Statement Schedule
99.6* Letter from Registered Holder
</TABLE>
- -------------------------
* Filed herewith.
(b) Financial Statement Schedule:
Schedule 1 -- Valuation and Qualifying Accounts
<PAGE> 1
Exhibit 3.1
SECOND RESTATED
CERTIFICATE OF INCORPORATION
OF
TOM'S FOODS INC.
FIRST: The name of the Corporation is Tom's Foods Inc. (hereinafter, the
"Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1013 Center Road, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is Corporation Service
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under GCL.
FOURTH: The total number of shares of all classes and series of stock
which the Corporation shall have the authority to issue is 1,000 shares of
Common Stock, $.01 par value per share.
Each holder of record of shares of Common Stock shall be entitled to vote
at all meetings of the stockholders and shall have one vote for each share held
by such holder of record.
FIFTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors consisting of not less than
three nor more than fifteen directors, the exact number of directors to be
determined from time to time by resolution adopted by the affirmative vote of a
majority of the directors then in office.
B. Any vacancy on the Board of Directors that results from an increase in
the number of directors may be filled by a majority of the Board of Directors
then in office, provided that a quorum is present, and any other vacancy
occurring in the Board of Directors may be filled by a majority of the
directors then in
<PAGE> 2
office, even if less than a quorum, or by a sole remaining director.
C. Election of directors need not be by ballot unless the By-laws so
provide.
D. In addition to the powers and authority hereinabove or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation; subject, nevertheless, to the provisions of the statutes of
the State of Delaware, of this Second Restated Certificate of Incorporation,
and to any By-laws from time to time made by the stockholders; provided,
however, that no By-law so made shall invalidate any prior act of the directors
which would have been valid if such By-law had not been made.
E. The Board of Directors shall have the concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the By-laws of the
Corporation.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or receivers appointed for this Corporation
under the provisions of Section 291 of the GCL or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of the GCL, order a meeting of
the creditors or class of creditors, and/or of the stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths (3/4) in value of
the creditors or class of creditors, and/or of the stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or
on all the stockholders, of this Corporation, as the case may be, and also on
this Corporation.
SEVENTH: No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director
shall be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or it
-2-
<PAGE> 3
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the GCL, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article EIGHTH
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 omission of such
director occurring prior to such amendment.
-3-
<PAGE> 4
CERTIFICATE OF AMENDMENT
OF THE
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
TOM'S FOODS INC.
TOM'S FOODS INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware. DOES HEREBY CERTIFY
THAT:
FIRST: The Board of Directors of the corporation adopted a resolution
proposing and declaring advisable the following amendment to its Second
Restated Certificate of Incorporation;
RESOLVED, that ARTICLE FOURTH of the Second Restated Certificate of
Incorporation of this corporation be amended to read as follows
"FOURTH: The Total number of shares of all class and series of stock which
the Corporation shall have the authority to issue is 10,000 shares of Common
Stock, $.01 par value per share."
SECOND: The amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said TOM'S FOODS INC. has caused this certificate to be
executed by its Secretary/Treasurer this 28th day of August, 1996.
TOM'S FOODS INC.
By: /s/ Lyn D. Anderson
----------------------------
Lyn D. Anderson
Secretary/Treasurer
<PAGE> 5
CERTIFICATE OF DESIGNATIONS
PREFERENCES AND RIGHTS OF
THE PREFERRED STOCK
OF
TOM'S FOODS INC.
TO BE DESIGNATED
CLASS A EXCHANGEABLE PREFERRED STOCK
and
CLASS B PREFERRED STOCK
Tom's Foods Inc., a Delaware corporation (the "Corporation"), pursuant
to Section 151 of the General Corporation Law of the State of Delaware, hereby
certifies that the Board of Directors of the Corporation duly adopted the
following resolutions by unanimous written consent dated October 8, 1997,
providing for the authorization of two series of Preferred Stock; one series to
be designated "Class A Exchangeable Preferred Stock"; and another series to be
designated "Class B Preferred Stock".
RESOLVED, that an issue of a series of Class A Exchangeable Preferred
Stock of the Corporation, par value $.01 per share (the "Class A Exchangeable
Preferred Stock") consisting of Seven Thousand (7,000) shares is hereby
provided for, and the voting power, designations, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of such series shall be as described
in the Certificate of Designations, Preferences and Rights of the Preferred
Stock (the "Certificate of Designations"); and
FURTHER RESOLVED, that an issue of a series of Class B Preferred Stock of
the Corporation, par value $.01 per share (the "Class B Preferred Stock")
consisting of Twenty One Thousand Seven Hundred and Thirty Seven (21,737)
shares is hereby provided for, and the voting power, designations,
preferences and relative participating, optional or other special rights,
and the qualifications, limitations or restrictions thereof, of such series
shall be as described in the Certificate of Designations; and
FURTHER RESOLVED, that the Certificate of Designations, in the form
presented to and containing the specific terms agreed to by this committee is
hereby approved.
The terms of the Preferred Stock authorized by the foregoing resolutions
of the Board of Directors are hereinafter set forth:
CLASS A EXCHANGEABLE PREFERRED STOCK
(1) Designation: Number of Shares and Aggregate Initial
Liquidation Preference
-1-
<PAGE> 6
This series of preferred stock shall be designated as the "Class A
Exchangeable Preferred Stock" (hereinafter called the "Class A Preferred") and
the number of shares which shall constitute such series shall not exceed 7,000.
The Class A Preferred shall have an aggregate initial liquidation preference
of $1,000 per share.
(ii) Accumulation and Payment of Dividends
Dividends on the Class A Preferred shall accrue at a rate of 10.5%, and
shall be paid from legally available funds, when, as and if declared by the
Board of Directors of the Corporation by increasing the liquidation preference
of the Class A Preferred or at the option of the Corporation, as permitted
under the Indenture and the Working Capital Facility, in cash.
Such dividends shall accrue on the then current liquidation preference
of the Class A Preferred, semi-annually commencing May 1, 1998 and thereafter on
November 1 and May 1 of each year (hereinafter referred to as a "Dividend
Payment Date"). Such dividends shall be payable before any dividend or other
distribution may be declared or paid or set apart for payment on any shares of
any common or Class B Preferred Stock. Each such dividend on the Class A
Preferred will be payable to holders of record as they appear on the stock
books of the Corporation on the immediately preceding October 15 and April 15,
as the case may be (each a "Record Date"). Dividends with respect to any shares
of Preferred Stock shall accumulate (whether or not earned or declared) from
October 14, 1997.
(A) Such dividends on the Class A Preferred shall be cumulative, whether
or not earned or declared so that if at any time full cumulative dividends at
at the rate aforesaid on all shares of Class A Preferred then outstanding to
the end of the semi-annual dividend period next preceding such time shall not
have been paid or declared and set apart for payment, the amount of the
deficiency shall be paid or declared and set apart for payment before any sum
shall be set aside for or applied by the Corporation to the purchase,
redemption or other acquisition for value of any shares of common or Class B
Preferred stock or any dividend or other distribution shall be paid or declared
and set apart for payment on any common or Class B Preferred stock.
(B) When dividends are not paid in full upon the Class A Preferred and
upon any other stock ranking on a parity as to dividends with the Class A
Preferred, all dividends paid upon shares of the Class A Preferred and upon any
other stock ranking on a parity as to dividends with the Class A Preferred
shall be paid pro rata so that in all cases the amount of dividends paid per
share upon the Class A Preferred and upon such other stock shall bear to each
other the same ratio that accumulated dividends per share on the shares of
Class A Preferred and on the shares of such other stock bear to each other.
Except as provided in the preceding sentence, unless full cumulative dividends
on the Class A Preferred have been paid, no dividend shall be declared or paid
or set apart for payment upon any other stock of the Corporation ranking on a
parity with the Class A Preferred as to dividends.
(C) A semi-annual dividend period shall commence on the day following a
Dividend Payment Date and shall end on the next succeeding Dividend Payment
Date; and dividends shall be deemed to have been set apart for payment when so
authorized to be set apart by resolution of the Board of Directors.
-2-
<PAGE> 7
(iii) Preference on Liquidation
In the event that the Corporation shall be liquidated, dissolved or wound up,
whether voluntarily or involuntarily, after all creditors of the corporation
shall have been paid in full, the holders of the Class A Preferred shall be
entitled to receive, out of the assets of the Corporation legally available for
distribution to its shareholders, whether from capital, surplus or earnings,
before any amount shall be paid to the holders of any shares of common or Class
B Preferred Stock, an amount equal to the then liquidation preference on the
Class A Preferred plus, without duplication, accumulated and uppaid dividends
to the date of final distribution, and no more. If upon any liquidation,
dissolution or winding up of the Corporation, the net assets of the Corporation
shall be insufficient to pay the holders of all outstanding shares of Class A
Preferred and of any shares of stock ranking on a parity with the Class A
Preferred as to liquidation preference the full amounts to which they
respectively shall be entitled, such assets, or the proceeds thereof, shall be
distributed ratably among the holders of the Class A Preferred and the holders
of any shares of stock ranking on a parity with the Class A Preferred as to
liquidation preference in the same ratio that the aggregate liquidation
preference of the Class A Preferred and the aggregate liquidation preference of
such other stock bear to each other.
(A) Neither the purchase nor redemption by the Corporation of
shares of any class of stock in any manner permitted by the Certificate of
Incorporation or any amendment thereof, nor the merger nor the consolidation
of the corporation with or into any other corporation or corporations, nor a
sale, transfer or lease of all or part of the Corporation's assets shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
the purposes of this paragraph (iii).
(iv) Change of Control
Upon the occurrence of a Change of Control (as defined in the Indenture),
holders of Class A Preferred with a liquidation preference of up to $10.0
million will be entitled to require the Corporation to purchase such holder's
Class A Preferred at a purchase price equal to the then liquidation preference
thereof, plus, without duplication, accumulated and unpaid dividends to the
purchase date.
(v) Optional Redemption
The Class A Preferred may be redeemed from funds legally available
therefor, in whole or in part, at the election of the Corporation, expressed by
resolution of the Board of Directors, at a redemption price equal to the then
liquidation preference, plus accrued and unpaid dividends thereon.
All redemptions pursuant to this paragraph (v) shall be accomplished in
the manner and with the effect as set forth in paragraph (vi).
(vi) Redemption Procedure
-3-
<PAGE> 8
(A) Notice of every redemption of Class A Preferred shall be given by mail
or in such other manner as may be prescribed by resolution of the Board of
Directors to each holder of the Class A Preferred Stock not less than 30 days
and not more than 60 days prior to the date of redemption. If less than all the
Class A Preferred is to be redeemed, the selection of shares for redemption
shall be made pro rata or by lot as specified in the resolution of the Board of
Directors, and the notice of redemption to a holder shall state the amount of
Class A Preferred of such holder to be redeemed. The amount of the applicable
redemption price shall be deposited on or before the applicable date of
redemption in trust for the account of the holders of Class A Preferred
entitled thereto with a bank or trust company in good standing doing business
in the State of New York and having capital and surplus of at least $100,000,000
(the date of such deposit being hereinafter in this paragraph (v) referred to
as the "date of deposit")
(B) Notice of the date on which, and the name and address of the bank or
trust company with which, the deposit has been or will be made shall be
included in the notice of redemption. On and after the applicable date of
redemption (unless default shall be made by the Corporation in providing money
for the payment of the redemption price pursuant to the notice of redemption),
or if the Corporation shall make such deposit on or before the date specified
therefor in the notice of redemption, then on and after the date of deposit
(provided notice of redemption has been duly given), all dividends on the
Class A Preferred so called for redemption shall cease to accumulate (except
for such dividends as are included in the Redemption Price) and,
notwithstanding that any certificate for shares of Class A Preferred is not
surrendered for cancellation, the shares represented thereby shall no longer be
deemed outstanding and all rights of the holders thereof as stockholders of the
Corporation shall cease and terminate, except the right to receive the
redemption price (including dividends thereon included in the redemption price)
as hereinafter provided.
(C) At any time on or after the applicable date of redemption, the
holders of record of the Class A Preferred to be redeemed shall be entitled to
receive the redemption price upon actual delivery to the bank or trust company
with which such deposit shall be made of certificates for the shares to be
redeemed, such certificates, if required, to be duly endorsed in blank or
accompanied by proper instruments of assignment and transfer duly endorsed in
blank. The making of such deposit with any such bank or trust company shall
not relieve the Corporation of liability for payment of the redemption price.
(D) Any money so deposited which shall remain unclaimed by the holders of
such Class A Preferred at the end of two years after the date of redemption
shall be paid by such bank or trust company to the Corporation, which shall
thereafter, to the extent of the money so repaid, be liable for the payment of
the redemption price for so long as it shall hold such money. Any interest
accrued on money so deposited shall be paid to the Corporation from time to
time.
(vii) Exchange for Exchange Notes
-4-
<PAGE> 9
On or after January 1, 1998, up to an aggregate of $10.0 million in
liquidation preference of the Class A Preferred may be exchanged, at the
Corporation's election, for an equal principal amount of Exchange Notes (as
defined in the Indenture); provided, however, that such exchange is conditioned
upon the Corporation having a Consolidated Fixed Charge Coverage Ration (as
defined in the Indenture) on a pro-forma basis of at least 2.25 to 1.00 for
the 12-month period ended on the last day of the most recent fiscal quarter
assuming the exchange occurred on the first day of such 12-month period.
Any exchange pursuant to this paragraph (vii) shall be accomplished in the
manner and with the effect as set forth in paragraph (viii).
(viii) Exchange Procedures
(A) Notice of an exchange of Class A Preferred pursuant to paragraph
(vii) shall be given by mail or in such other manner as may be prescribed
by resolution of the Board of Directors to each holder of the Class A
Preferred not less than 30 days and not more than 60 days prior to
the Exchange Date.
(B) On and after the Exchange Date, all dividends on the shares of
Class A Preferred to be exchanged shall cease to accumulate and,
notwithstanding that any certificate for shares of Class A Preferred is
not surrendered for cancellation, shares represented thereby shall no
longer be deemed outstanding and all rights of the holders thereof as
stockholders of the Corporation shall cease and terminate, except the
right to receive Exchange Notes as herein provided.
(C) At any time on or after the Exchange Date, the holders of record
of the Class A Preferred to be exchanged shall be entitled to receive the
amount of Exchange Notes set forth herein upon actual delivery to the
Trustee of certificates for the shares of Class A Preferred held by such
holder of record, such certificates, if required, to be duly endorsed in
blank or accompanied by proper instrument of assignment and transfer duly
endorsed in blank. The Person or Persons entitled to receive the
Exchange Notes issuable upon exchange shall be treated for all purposes
as the registered holder or holders of such Exchange Notes.
(D) The Corporation shall not be required to honor any requests to
register a transfer or exchange of the Class A Preferred for the 15 days
prior to the Exchange Date. The Corporation will cause the date of
authentication of the Exchange Notes to be the Exchange Date.
(ix) Reissuance of Shares
Shares of Class A Preferred which have been redeemed or purchased shall
have the status of authorized and unissued shares of preferred stock and may be
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the Board of Directors or as part of any other series of
preferred stock other than the Class A Preferred, all subject to the conditions
or restrictions on issuance set forth in any resolution or resolutions adopted
by the Board of Directors providing for the issuance of any series of preferred
stock.
-5-
<PAGE> 10
(x) Voting
The holders of shares of the Class A Preferred shall have no voting rights
whatsoever except as required by law and except as provided herein.
Notwithstanding the foregoing, unless the holders of at least a majority
of the issued and outstanding shares of the Class A Preferred, voting
separately as a class, shall have authorized such action, the Corporation shall
not (a) make any change in the rights, privileges or preferences of the Class A
Preferred or waive the right to receive any accumulated or unpaid dividends, or
(b) create any class of equity securities ranking senior to or on a parity with
the Class A Preferred as to dividends or liquidation preference.
CLASS B PREFERRED STOCK
(i) Designation: Number of Shares and Aggregate Initial Liquidation
Preference
This series of preferred stock shall be designated as the "Class B
Preferred Stock" (hereinafter called the "Class B Preferred") and the number
of shares which shall constitute such series shall not exceed 21,737. The Class
B Preferred shall have an aggregate initial liquidation preference of $1,000
per share.
(ii) Accumulation and Payment of Dividends
Dividends on the Class B Preferred shall accrue at a rate of 9.5%, and
shall be paid from legally available funds, when, as and if declared by the
Board of Directors of the Corporation by increasing the liquidation preference
of the Class B Preferred or at the option of the Corporation, as permitted
under the Indenture and the Working Capital Facility, in cash.
Such dividends shall accrue on the then current liquidation preference
of the Class B Preferred, semi-annually commencing May 1, 1998 and thereafter
on November 1 and May 1 of each year (hereinafter referred to as a "Dividend
Payment Date"). Such dividends shall be payable before any dividend or other
distribution may be declared or paid or set apart for payment on any shares of
any common stock. Each such dividend on the Class B Preferred will be payable
to holders of record as they appear on the stock books of the Corporation on
the immediately preceding October 15 and April 15, as the case may be (each a
"Record Date"). Dividends with respect to any shares of Preferred Stock shall
accumulate (whether or not earned or declared) from October 14, 1997.
(A) Such dividends on the Class B Preferred shall be cumulative,
whether or not earned or declared so that if at any time full cumulative
dividends at the rate aforesaid on all shares of Class B Preferred then
outstanding to the end of the semi-annual dividend period next preceding
such time shall not have been paid or declared and set apart for payment,
the amount of the deficiency shall be paid or declared and set apart for
payment before any sum shall be set aside for or applied by the
Corporation to the purchase, redemption or other acquisition for value of
any shares of common stock (either pursuant
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<PAGE> 11
to any applicable sinking fund requirement or otherwise) or any dividend
or other distribution shall be paid or declared and set apart for payment
on any common stock.
(B) When dividends are not paid in full upon the Class B Preferred
and upon any other stock ranking on a parity as to dividends with the
Class B Preferred, all dividends paid upon shares of the Class B Preferred
and upon any other stock ranking on a parity as to dividends with the
Class B Preferred, all dividends paid upon shares of the Class B Preferred
and upon any other stock ranking on a parity as to dividends with the
Class B Preferred shall be paid pro rata so that in all cases the amount
of dividends paid per share upon the Class B Preferred and upon such other
stock shall bear to each other the same ratio that accumulated dividends
per share on the shares of Class A Preferred and on the shares of such
other stock bear to each other. Except as provided in the preceding
sentence, unless full cumulative dividends on the Class B Preferred have
been paid, no dividend shall be declared or paid or set apart for
payment upon any other stock of the Corporation ranking on a parity with
the Class B Preferred as to dividends.
(C) A semi-annual dividend period shall commence on the day
following a dividend Payment Date and shall end on the next succeeding
Dividend Payment Date; and dividends shall be deemed to have been set
apart for payment when so authorized to be set apart by resolution of the
Board of Directors.
(iii) Preference on Liquidation
(A) In the event that the Corporation shall be liquidated, dissolved or
wound up, whether voluntarily or involuntarily, after all creditors of the
Corporation shall have been paid in full, and the holders of the Class A
Preferred have received an amount equal to the then liquidation preference of
the Class A Preferred, the holders of the Class B Preferred shall be entitled
to receive, out of the assets of the Corporation legally available for
distribution to its shareholders, whether from capital, surplus or earnings,
before any amount shall be paid to the holders of any shares of common stock,
an amount equal to the then liquidation preference of the Class B Preferred
plus, without duplication, accumulated and unpaid dividends to the date of
final distribution, and no more. If upon any liquidation, dissolution or
winding up of the Corporation, the net assets of the Corporation shall be
insufficient to pay the holders of all outstanding shares of Class B Preferred
and of any shares of stock ranking on a parity with the Class B Preferred as to
liquidation preference the full amounts to which they respectively shall be
entitled, such assets, or the proceeds thereof, shall be distributed ratably
among the holders of the Class B Preferred and the holders of any shares of
stock ranking on a parity with the Class B Preferred as to liquidation
preference in the same ratio that the aggregate liquidation preference of the
Class B Preferred and the aggregate liquidation preference of such other
stock bear to each other.
(B) Neither the purchase nor redemption by the corporation of shares of
any class of stock in any manner permitted by the Certificate of Incorporation
or any amendment thereof, nor the merger nor the consolidation of the
corporation with or into any other corporation or corporations, nor a sale,
transfer or lease of all or part of the Corporation's assets shall be deemed
to be a liquidation, dissolution or winding up of the Corporation for the
purposes of this paragraph (iii).
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<PAGE> 12
(iv) Optional Redemption
The Class B Preferred may be redeemed from funds legally available
therefor, in whole or in part, at the election of the Corporation, expressed by
resolution of the Board of Directors, at a redemption price equal to the
liquidation preference, plus accrued and unpaid dividends thereon.
All redemptions pursuant to this paragraph (iv) shall be
accomplished in the manner and with the effect as set forth in paragraph (v).
(v) Redemption Procedure
(A) Notice of every redemption of Class B Preferred shall
be given by mail or in such other manner as may be prescribed by
resolution of the Board of Directors to each holder of the Class B
Preferred Stock not less than 30 days and not more than 60 days prior to
the date of redemption. If less than all the Class B Preferred is to be
redeemed, the selection of shares for redemption shall be made pro rata or
by lot as specified in the resolution of the Board of Directors, and the
notice of redemption to a holder shall state the amount of Class B
Preferred of such holder to be redeemed. The amount of the applicable
redemption price shall be deposited on or before the applicable date of
redemption in trust for the account of the holders of Class B Preferred
entitled thereto with a bank or trust company in good standing doing
business in the State of New York and having capital and surplus of at
least $100,000,000 (the date of such deposit being hereinafter in this
paragraph (v) referred to as the "date of deposit").
(B) Notice of the date on which, and the name and address of
the bank or trust company with which, the deposit has been or will be made
shall be included in the notice of redemption. On and after the
applicable date of redemption (unless default shall be made by the
Corporation in providing money for the payment of the redemption price
pursuant to the notice of redemption), or if the Corporation shall make
such deposit on or before the date specified therefor in the notice of
redemption, then on and after the date of deposit (provided notice of
redemption has been duly given), all dividends on the Class B Preferred so
called for redemption shall cease to accumulate (except for such
dividends as are included in the Redemption Price) and], notwithstanding
that any certificate for shares of Class B Preferred is not surrendered
for cancellation, the shares represented thereby shall no longer be deemed
outstanding and all rights of the holders thereof as stockholders of the
Corporation shall cease and terminate, except the right to receive the
redemption price (including dividends thereon included in the redemption
price) as hereinafter provided.
(C) At any time on or after the applicable date of
redemption, the holders of record of the Class B Preferred to be redeemed
shall be entitled to receive the redemption price upon actual delivery to
the bank or trust company with which such deposit shall be made of
certificates for the shares to be redeemed, such certificates, if
required, to be duly endorsed in blank or accompanied by proper
instruments of assignment and transfer duly endorsed in blank. The making
of such deposit with any such bank or trust
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<PAGE> 13
company shall not relieve the Corporation of liability for payment of the
redemption price.
(D) Any money so deposited which shall remain unclaimed by
the holders of such Class B Preferred at the end of two years after the
date of redemption shall be paid by such bank or trust company to the
Corporation, which shall thereafer, to the extent of the money so repaid,
be liable for the payment of the redemption price for so long as it shall
hold such money. Any interest accrued on money so deposited shall be paid
to the Corporation from time to time.
(vi) Reissuance of Shares
Shares of Class B Preferred which have been redeemed or purchased shall
have the status of authorized and unissued shares of preferred stock and may be
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the Board of Directors or as part of any other series of
preferred stock other than the Class B Preferred, all suject to the conditions
or restrictions on issuance set forth in any resolution or resolutions
adopted by the Board of Directors providing for the issuance of any series of
preferred stock.
(vii) Voting
The holders of shares of the Class B Preferred shall have no voting
rights whatsoever except as required by law.
Definitions
The following terms, when used herein, shall have the meanings set forth
below:
"Exchange Date" means the date fixed by resolution of the Board of
Directors pursuant to paragraph (viii) specified in the notice of exchange for
the exchange of Class A Preferred for the Exchange Notes.
"Indenture" means the indenture dated as of October 14, 1997, between
Tom's Foods Inc. as the issuer and IBJ Schroder Bank & Trust Company as the
trustee.
"Offering Memorandum" means the offering memorandum dated as of September
18, 1997, which sets forth the material terms of the 10.5% senior secured notes
due 2004 issued by the Corporation.
"Person" means any individual, partnership, corporation, unincorporated
corporation, trust or joint venture, government or any agency or political
subdivision thereof.
"Working Capital Facility" means the Amended and Restated Loan and
Security Agreement dated as of October 14, 1997, between the corporation and
Congress Financial Corporation (Southern), together with the other "Financing
Agreements" (as defined
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<PAGE> 14
therein) as the same may be amended from time to time, and any agreement
evidencing the refinancing, modification, replacement, renewal, restatement,
refunding, deferral, extension, substitution, supplement, reissuance or resale
thereof.
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<PAGE> 15
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by S. Albert Gaston, its Senior Vice President and Chief Financial
Officer, and attested by Stanley Meadows, its Assistant Secretary, this 14th
day of October 1997.
Tom's Foods Inc.
By:/s/ S. Albert Gaston
--------------------
S. Albert Gaston
Senior Vice President and
Chief Financial Officer
ATTEST:
/s/ Stanley H. Meadows
- ----------------------
Stanley H. Meadows,
Assistant Secretary
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<PAGE> 16
CERTIFICATE OF CORRECTION
FILED TO CORRECT A CERTAIN ERROR IN THE
CERTIFICATE OF DESIGNATIONS
OF
TOM'S FOODS INC.
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON
OCTOBER 14, 1997
________________
TOM'S FOODS INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY THAT:
1. The name of the corporation is TOM'S FOODS INC.
2. A Certificate of Designations was filed by the Secretary of
State of Delaware on October 14, 1997 and said Certificate requires correction
as permitted by Section 103 of the General Corporation Law of the State of
Delaware.
3. The inaccuracy or defect of said Certificate to be corrected is
as follows: The date in the first sentence in section (vii) Exchange for
Exchange Notes under Class A Exchangeable Preferred Stock, is corrected from
January 1, 1998 to January 1, 1999.
4. Section (vii) Exchange for Exchange Notes under Class A
Exchangeable Preferred Stock of the Certificate is corrected in its entirety to
read as follows:
On or after January 1, 1999, up to an aggregate of $10.0
million in liquidation preference of the Class A Preferred may be
exchanged, at the Corporation's election, for an equal principal amount
of Exchange Notes (as defined in the Indenture); provided, however,
that such exchange is conditioned upon the Corporation having a
Consolidated Fixed Charge Coverage Ratio (as defined in the Indenture)
on a pro-forma basis of at least 2.25 to 1.00 for the 12-month period
ended on the last day of the most recent fiscal quarter assuming the
exchange occurred on the first day of such 12-month period.
Any exchange pursuant to this paragraph (vii) shall be
accomplished in the manner and with the effect as set forth in
paragraph (viii).
IN WITNESS WHEREOF, the Corporation has caused this Certificate
to be signed by S. Albert Gaston, its Senior Vice President and Chief Financial
Officer, and attested by Stanley H. Meadows, its Assistant Secretary,
this _____ day of February, 1998.
TOM'S FOODS INC.
By /s/ S. Albert Gaston
---------------------------------
S. Albert Gaston,
Senior Vice President and
Chief Financial Officer
ATTEST:
/s/ Stanley H. Meadows
- -----------------------------
Stanley H. Meadows,
Assistant Secretary
<PAGE> 1
EXHIBIT 5.1
[MCDERMOTT, WILL & EMERY LETTERHEAD]
December 31, 1997
Tom's Foods Inc.
900 8th Street
Columbus, GA 31902
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
This opinion is furnished to you in connection with the above-referenced
registration statement on Form S-4 (the "Registration Statement") filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), for the registration of up to $60,000,000 aggregate
principal amount of 10-1/2% Senior Secured Notes due 2004 (the "Exchange
Notes") of Tom's Foods Inc., a Delaware corporation (the "Company"). The
Exchange Notes will be offered in exchange (the "Exchange") for any and all of
the issued and outstanding 10- 1/2% Senior Secured Notes due 2004 of the
Company (the "Old Notes").
The Old Notes were, and the Exchange Notes will be, issued in exchange for
Old Notes pursuant to an Indenture (the "Indenture") dated as of October 14,
1997 between the Company and IBJ Schroder Bank & Trust Company, as Trustee (the
"Trustee") and the related Registration Rights Agreement dated as of October
14, 1997 among the Company and PaineWebber Incorporated (the "Registration
Rights Agreement").
In arriving at the opinion expressed below, we have examined the Registration
Statement, the Indenture, the Registration Rights Agreement, the Exchange
Notes, and such other documents as we have deemed necessary to enable us to
express the opinion hereinafter set forth. In addition, we have examined and
relied, to the extent we deemed proper, on certificates of officers of the
Company as to factual matters, and on originals or copies certified or
otherwise identified to our satisfaction, of all such corporate records of the
Company and such other instruments and certificates of public officials and
other persons as we have deemed appropriate. In our examination, we have
assumed the authenticity of all documents submitted to us as originals, the
conformity to the original documents of all documents submitted to us as
copies, the genuineness of all signatures on documents reviewed by us and the
legal capacity of natural persons. We
<PAGE> 2
have further assumed that the Exchange Notes have been executed and delivered
by the officers of the Company authorized to execute and deliver the Exchange
Notes in the authorizing resolutions.
We express no opinion as to the applicability of, compliance with or effect
of, the law of any jurisdiction other than United States Federal law and the
laws of Delaware, New York and the District of Columbia.
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Notes, when executed and authenticated in accordance with the
terms of the Indenture, and delivered in exchange for Old Notes in accordance
with the terms of the Indenture, will be valid and legally binding obligations
of the Company and will be entitled to the benefits of the Indenture, except
that the enforceability thereof may be limited by or subject to bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium or other similar
laws now or hereafter existing which affect the rights and remedies of
creditors generally and equitable principles of general applicability.
We hereby consent to the references to our firm under the caption "Legal
Matters" in the Registration Statement and to the use of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not
hereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ McDermott, Will & Emery
<PAGE> 1
===============================================================================
CPG PRODUCTS CORP.
(Mortgagor)
THE FIRST NATIONAL BANK OF COLUMBUS
(Trustee)
For the Benefit of the Industrial Development
Board of the County of Knox (Tennessee) and
the Bondholders
_______________________________________________
DEED OF TRUST AND SECURITY AGREEMENT
_______________________________________________
Dated as of October 1, 1979
===============================================================================
<PAGE> 2
DEED OF TRUST
W I T N E S S E T H:
FOR AND IN CONSIDERATION Of One Dollar ($1.00) to it paid, the
receipt of which is acknowledged, and the other considerations hereinafter
mentioned, CPG Products Corp., a Delaware corporation hereinafter the
"Mortgagor"), has this day bargained and sold, and does hereby transfer and
convey to The First National Bank of Columbus, Columbus, Georgia, Trustee, and
its successors in trust (hereinafter the "Trustee"), certain property in the
State of Tennessee, Knox County, described in Exhibit "A" attached hereto and
Incorporated herein by reference, together with all buildings, improvements and
fixtures located thereon.
TO HAVE AND TO HOLD the property described in said Exhibit "A"
together with all buildings, improvements and fixtures located thereon
(hereinafter collectively referred to as the "Mortgaged Property") to the
Trustee, and its successors in trust forever. Mortgagor covenants that it is
lawfully seized of the Mortgaged Property, has a good right to convey it, and
that the same is unencumbered except for Permitted Encumbrances as hereinafter
defined.
Mortgagor further covenants and binds itself, its successors
and assigns, to warrant and defend the title to the
<PAGE> 3
Mortgaged Property to the Trustee, and its successors in trust, and its
assigns, forever, against the lawful claims of all parties.
But this conveyance is made IN TRUST for the following uses and trust,
and for no other purposes, to-wit:
To secure performance by Mortgagor of all obligations to be
performed by it under a Financing Agreement, dated as of October 1,
1979 (the "Agreement"), by and between The Industrial Development
Board of the County of Knox (the "Board") and Mortgagor, and a
Promissory Note, dated October 16, 1979 (the "Note"), from Mortgagor
to the Board, including, without limitation, all payments due from
Mortgagor under the Note.
This instrument is to secure the Agreement and the Note and
all attorney's fees, court costs and expenses whatever kind incident
to the collection of all sums due from Mortgagor under the Note and
the enforcement and protection of the lien of this conveyance. The
last payment required by the Note shall be October 1, 2004.
NOW, if the Mortgagor shall perform all obligations required
to be performed by it under the Agreement, then this trust conveyance shall be
of no further force or effect. But if Mortgagor shall default in any of its
obligations under the Agreement or the Note and such default shall not have
been remedied within the applicable period of time of remedy thereof, then this
conveyance in trust shall remain in full force and effect, and, at the option
of the Trustee, all remaining unpaid indebtedness of Mortgagor under the Note
shall become due and payable as provided in the Agreement and the Note. In
such event, the Trustee, or its successor in trust, is hereby authorized and
empowered, to the extent permitted by law, to take actual possession of the
Mortgaged Property as for condition broken, and the Trustee, with or without
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<PAGE> 4
force, and with or without process of law, may enter upon, take and maintain
possession of, all or any part of said Mortgaged Property, and he may hold,
manage and operate said Mortgaged Property and may collect the rents, issues
and profits therefrom, and lease the same in such parcels and for such time and
on such terms and conditions as he may see fit, and he may cancel any lease or
sublease for any cause or on any ground that would entitle the Mortgagor to
cancel the same. The Trustee shall have the right to proceed in a course of
equity to foreclosure of this Deed of Trust and shall be entitled to judgment
for the debt and any advances lawfully made by the Trustee or the Board under
the provisions of this Deed of Trust. The Trustee shall also be entitled to
the appointment of a receiver to collect rents, issues and profits while such
suit is pending and to judgment over for any difference between the amount paid
for the Mortgaged Property either at a trustee's sale or at a sale under order
of the court and the total indebtedness accrued under the provisions of the
Note.
In the event of a default, foreclosure and sale of the
Mortgaged Property by the Trustee, the proceeds of the sale shall be applied by
the Trustee as follows:
First, to the payment of the expense of this Deed of Trust and
its execution and all sums expended by the Trustee and all sums for
which the Trustee may become liable for on account of any provisions
of this Deed of Trust; and
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<PAGE> 5
Second, to the payment of the obligations secured by this Deed
of Trust. The Trustee will hold any balance subject to the order of
the Mortgagor, or to the holder of a junior lien, if any.
In lieu of, or in addition to, proceeding as above, so long as
there exists a default in the performance of any of the Mortgagor's covenants
or agreements contained in the Agreement or in this Deed of Trust, then the
Trustee may upon giving twenty (20) days' notice by three (3) publications in
any newspaper, daily or weekly, published in Knox County, Tennessee, sell the
Mortgaged Property at the door of the Knox County Court House to the highest
bidder for cash, at public outcry, free from the equity or redemption,
homestead, dower and all other exemptions of every kind, which are hereby
expressly waived by the Mortgagor; and the Trustee or his successor in trust,
is hereby authorized and empowered to execute and deliver a deed to the
purchaser. The Trustee or its assign may bid at any sale under this trust
conveyance. The Trustee shall apply the proceeds of such sale in the manner
specified in the preceding paragraph.
So long as there exists a default in the performance of any of
the Mortgagor's covenants or agreements contained in the Agreement, the Note or
in this Deed of Trust, the Trustee is hereby authorized to divide, parcel and
sell, and to retain and manage, all or any portion of the Mortgaged Property in
such portions or parcels as the Trustee may deem advisable in its sole
discretion;
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<PAGE> 6
provided that such sales, and retention for management, are at all times in
accordance with the preceding two paragraphs.
The Trustee is hereby authorized at any time prior to the
payment in full of the indebtedness hereby secured, to name and appoint a
successor trustee, to execute this trust, and the title herein conveyed to the
Trustee shall be vested in said successor upon recording of the writing
evidencing such appointment in the Register's Office of Knox County, Tennessee.
In the event of a sale of the Mortgaged Property under and by
virtue of this trust, the Mortgagor and all persons holding under it shall be
and become the tenants at will of the purchaser from and after the execution
and delivery of a deed of such purchaser, said tenancy to be determined at the
option of said purchaser upon five (5) days' written notice.
OTHER COVENANTS
1. RELATIONSHIP TO AGREEMENT. This Deed of Trust is
being executed to provide security for the obligations of the Mortgagor under
the Agreement and the Note. This Deed of Trust shall be construed and enforced
in light of the provisions of the Agreement and the Note in order to provide
additional security for the carrying out of the obligations and covenants
contained in the Agreement and the Note.
2. TAXES. The Mortgagor shall pay all taxes and special
assessments of every kind now or hereafter levied against the Mortgaged
Property as provided in the Agreement.
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<PAGE> 7
3. INSURANCE. The Mortgagor shall keep in force insurance
upon the Mortgaged Property as provided in the Agreement.
4. MAINTENANCE OF MORTGAGED PROPERTY. The Mortgagor shall
maintain buildings and other improvements and equipment on the Mortgaged
Property as provided in the Agreement.
5. CONTINUATION OF ABSTRACT. In the event of any default
herein by the Mortgagor, the Trustee may, at the expense of the Mortgagor,
procure an abstract of title, or continuation thereof for the Mortgaged
Property, with interest upon such expense at the highest legal rate applicable
to the Mortgagor.
6. ADVANCES OPTIONAL WITH TRUSTEE OR BOARD. It is expressly
understood and agreed that if the insurance above provided for is not promptly
effected, or if the taxes or special assessments assessed against the Mortgaged
Property shall become delinquent, either the Trustee or the Board (whether
electing to declare the whole Deed of Trust due and collectible or not) may
(but need not) effect the insurance above provided for, and need not, but may
and is hereby authorized to pay said taxes and special assessments
(irregularities in the levy or assessment of said taxes (irregularities in the
levy or assessment of said taxes being expressly waived), and all such payments
with interest thereon at the highest legal rate applicable to the Mortgagor
from time of payment shall be a lien against the Mortgaged Property.
7. EVENT OF DEFAULT. An "event of default" under the
Agreement shall be an Event of Default hereunder.
-7-
<PAGE> 8
8. OPTION TO RELEASE UNIMPROVED REAL ESTATE. At any time
during the term of the Agreement, the Mortgagor shall have the option to obtain
a release from this Deed of Trust of any unimproved real estate constituting a
portion of the Project otherwise subject to the lien of this Deed of Trust
(upon which no buildings or other facilities are located, although utility
facilities may be located thereon) upon satisfaction of the following
conditions:
(a) The Mortgagor delivers a written notice to the Board and
the Trustee containing (i) an adequate legal description of that
portion of the real estate with respect to which the option to release
is to be exercised, (ii) a statement that the Mortgagor intends to
exercise its option to release such portion of such real estate on a
date stated, which shall not be less than forty-five (45) nor more
than ninety (90) days from the date of such notice, and (iii) a
statement that the use to which the Mortgagor intends to devote such
portion of such real estate will promote the Mortgagor's commercial
activities.
(b) The Mortgagor shall deliver a certificate to the Board
and the Trustee of an engineer (which shall include an engineer
employed by the Mortgagor), acceptable to the Trustee, dated not more
than ninety (90) days prior to the date of the release, and stating
that in the opinion of the person signing such certificate (i) the
portion of the real
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<PAGE> 9
estate with respect to which the option to release is to be exercised
is not needed by the Mortgagor for the operation of the Project for
the purposes contemplated by the Agreement, and (ii) the release of
such real estate will not impair the usefulness of the Project as an
industrial facility and will not destroy the means of ingress thereto
and egress therefrom.
The Trustee agrees that, upon receipt of the notice and
certificate referred to above, it will promptly execute such instruments as may
be necessary to release from the lien of this Deed of Trust that portion of the
real estate with respect to which the Mortgagor shall have exercised the option
granted to it under this Section. In the event the Mortgagor shall exercise
the option granted to it under this Section, the Mortgagor shall not be
entitled to any postponement, abatement or diminution of payments payable under
the Note. If such option to release relates to real estate upon which
transportation or utility facilities are located, the Trustee and the Board
shall retain as easement to use such transportation or utility facilities.
9. DEFINITION OF TERMS. Unless otherwise expressly stated,
the word "Mortgagor" as used herein includes successors interest of the
Mortgagor and the word "Trustee" as used herein includes successors in interest
of the Trustee.
"Permitted Encumbrances" shall mean and include (a) liens for
taxes, assessments and other governmental charges not due and payable or which
can be paid without penalty; (b) unfiled, inchoate
-9-
<PAGE> 10
mechanics' and materialmen's lien for construction work in progress; (c)
workmen's, repairmen's, warehousemen's and carriers' liens and other similar
liens, if any, arising in the ordinary course of business; (d) all the
following, if they do not individually or in the aggregate materially impair
the use of the-Project or materially detract from the value thereof to the
Mortgagor; any easements, restrictions, mineral, oil, gas and mining rights and
reservations and zoning laws; and (e) certain utility easements currently
existing with respect to the Mortgaged Property.
10. AMOUNT SECURED. The amount secured by this Deed of Trust
and Security agreement is $4,200,000.00.
IN WITNESS WHEREOF, the Mortgagor has caused this instrument
to be duly executed as of this 1st day of October, 1979.
CPG PRODUCTS CORP.
By:
______________________________
Vice President
(SEAL)
Attest:
_____________________________
Assistant Secretary
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<PAGE> 11
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
On this __ day of October, 1979, before me, a Notary Public in
and for said County and State, personally appeared E. P. Preiss and B. L.
Rosenberg, to me personally known and known to me to be the same persons who
executed the within and foregoing instrument, who, being by me duly sworn, did
depose, acknowledge and say: that they are Vice President and Assistant
Secretary, respectively, of CPG Products Corp., the corporation described in
and which execute the foregoing instruments; that said instrument was signed on
behalf of said corporation by authority of all of its Board of Directors; and
that they acknowledged the execution of said instrument to be the voluntary act
and deed of the corporation by it voluntarily executed; and that the seal
affixed to said instrument is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal this ____ day of October, 1979.
________________________________________
Notary Public
My commission expires:
(SEAL)
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<PAGE> 12
EXHIBIT "A"
to
Deed of Trust and Security Agreement
REAL ESTATE DESCRIPTION
SITUATED in District Number Six (6) of Knox County, Tennessee,
and without the corporate limits of the City of Knoxville and containing twelve
acres, more or less, lying along the northern side of Byington-Solway Road and
being more particularly bounded and described as follows:
BEGINNING at an iron pin in the northern line of Byington-Solway Road, said
point being 1747 feet, more or less, westerly from the point of intersection of
the northern line of Byington-Solway Road with Beaver Ridge Road; thence from
said BEGINNING point and with the northern line of Byington-Solway Road south
85 degree 30 min. 55 sec. west, 432.05 feet to an iron pin in the northern line
of Byington-Solway Road; thence with the eastern line of property of Knox
County north 00 deg. 34 min. west, 880.8 feet to an iron pin; thence with the
eastern line of Byington-Solway Road; thence west feet to an iron pin in the
northern pin. west, 880.8 feet to an iron pin; thence with the eastern line of
property now or formerly owned by E. Butler, north 06 deg. 42 min. 21 sec.
east, 256.07 feet to an iron pin; thence with the southern line of property of
Schaad, south 82 deg. 49 min. 41 sec. east, 471.87 feet to an iron pin; thence
with the western line of property of Industrial Board of Knox County and
property of Schaad, south 03 deg. 45 min. west, 307.17 feet to an iron pin;
thence continuing with the Schaad line south 82 deg. 53 min. 51 sec. east,
54.68 feet to an iron pin and south 07 deg. 15 min. 30 sec. west, 735.0 feet to
an iron pin in the northern line of Byington-Solway Road to the point of
BEGINNING herein as shown by survey of Bender and LeMay, Consulting Engineers,
dated May 17, 1979, bearing drawing number 1-2-855.
TOGETHER with a perpetual nonexclusive easement for ingress and egress from
Byington-Solway Road over the following described easement tract:
BEGINNING at a point in the northern line of Byington-Solway Road, said point
being 1,772 feet, more or less, westerly from point of intersection of the
northern line of Byington-Solway Road with Beaver Ridge Road; thence from said
BEGINNING point, north 07 deg. 15 min. 30 sec. east, 740.2 feet to a point;
thence north 20 deg. 15 min. 30 sec. east, 66.68 feet to a point; thence south
82 deg.
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<PAGE> 13
53 min. 51 sec. east 50.03 feet to a point; thence south 20 deg. 15 min. 30
sec. west, 66.82 feet to a point; thence south 07 deg. 15 min. 30 sec. west,
729.8 feet to a point in the northern line of Byington-Solway Road; thence with
the northern line of said road south 85 deg. 30 min. 55 sec. west, 51.06 feet
to the point of BEGINNING.
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<PAGE> 14
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (The "Guaranty") made and entered into
as of September 1, 1979, by and between GENERAL MILLS, INC., a Delaware
corporation (the "Guarantor"), and THE FIRST NATIONAL BANK OF COLUMBUS, as
trustee, a banking association organized and existing under and by virtue of
the laws of the United States of America, and having its principal office in
the City of Columbus, Georgia, (herein together with any successor trustee or
trustees at the time serving as such under the Mortgage and Indenture of Trust
described below called the "Trustee");
WITNESSETH THAT:
WHEREAS, Taylor County, Florida, a political subdivision of
the State of Florida (the "County"), intends to issue its Taylor County,
Florida Industrial Development Revenue Bonds (CPG Products Corp. Project),
Series 1979, in the aggregate principal amount of $5,800,000 (the "Bonds"); and
WHEREAS, the Bonds are to be issued under and pursuant to a
Mortgage and Indenture of Trust, dated as of even date herewith, by and between
the County and the Trustee (the "Indenture"), a true and correct copy of which
has been delivered to the Guarantor, and the Bonds are more particularly
described in Articles II and III of the Indenture; and
WHEREAS, the proceeds derived from the issuance of the Bonds
are to be applied toward the acquisition, construction and installation of a
certain industrial facility in the County (the "Project"), to be sold to CPG
Products Corp., a Delaware corporation and a wholly-owned subsidiary
corporation of the Guarantor (the "Company"); and
WHEREAS, the Guarantor desires that the County issue the Bonds
and apply the proceeds derived therefrom as aforesaid and is willing to enter
into this Guaranty in order to enhance the marketability of the Bonds and
thereby achieve interest cost and other savings which will inure directly to
the benefit of the Guarantor and to induce the future purchasers and holders of
any of the Bonds to buy or acquire the same;
NOW THEREFORE, in consideration of the premises, the Guarantor
agrees with the Trustee, as follows:
<PAGE> 15
ARTICLE I.
RECITALS
Section 1.1. REPRESENTATIONS AND WARRANTIES OF GUARANTOR.
The Guarantor represents and warrants that:
(a) it is a corporation organized existing and in good
standing under the laws of the State of Delaware as each cause of
action arises. The Guarantor hereby waives (i) notice of the
acceptance hereof, of any action taken or omitted in reliance hereon
and of any defaults by the County in the payment of any such sums,
(ii) any presentment demand, notice or protest of any kind, and (iii)
any other act or thing or omission or delay to do any other act or
thing which might in any manner or to any extent vary the risk of the
Guarantor or which might otherwise operate as a discharge of the
Guarantor.
PAGE 2 IS MISSING
ARTICLE II.
_______________________
Section 2.1. ______________________.
Section 2.2. NATURE OF OBLIGATIONS. All obligations of the
Guarantor under this Guaranty shall be absolute, unconditional, continuing and
irrevocable and shall remain in full force and effect until the entire
principal of, redemption premium (if any) and interest on the Bonds and all
other amounts payable by the County pursuant to the terms of the Bonds and/or
the Indenture shall have been paid or shall be deemed to have been paid in
accordance with the Indenture and, until such payment, or the occurrence of
those conditions upon which payment shall be deemed to have occurred, shall not
be affected, modified, impaired or discharged upon the happening from time to
time of any event, including, without limitation, any of the following, whether
or not with notice to or the consent of the Guarantor:
(a) the compromise, settlement, release or termination of any
or all of the obligations, covenants or agreements of the County under
or contemplated by the Indenture;
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<PAGE> 16
(b) the failure to give notice to the Guarantor of the
occurrence of an event of default under the terms and provisions of
this Guaranty or the Indenture, except as may be otherwise
specifically provided in this Guaranty;
(c) the assigning or mortgaging or the purported assigning or
mortgaging of all or any part of the interest of the County in the
Project;
(d) the waiver of the payment, performance or observance by
the County of any of its obligations, covenants or agreements
contained in or contemplated by the Indenture;
(e) the extension of the time for payment of any principal of
or redemption premium (if any) or interest on any Bond or any part
thereof owing or payable on such Bond or of the time for performance
of any other obligation, covenant or agreement under, arising out of
or contemplated by the Indenture or the further extension or the
renewal thereof;
(f) the modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth in or
contemplated by the Indenture;
(g) the taking or the omission of any of the actions referred
to in or contemplated by the Indenture;
(h) any failure, omission, delay or lack on the part of the
Trustee to enforce, assert or exercise any right, power or remedy
conferred on the Trustee by this Guaranty or by the Indenture, or any
other act or acts on the part of the County, the Trustee or any of the
holders at any time or from time to time of the Bonds and any interest
coupons appertaining thereto;
THE ORIGINAL SCANNED PAGE HAD TEXT MISSING BECAUSE OF THE WAY IT WAS COPIED
(i) the voluntary or involuntary liquidation, dissolution,
sale or other disposition of all or substantially all of the assets,
marshalling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of organization, arrangement,
composition with creditors or readjustment, of proceedings affecting
the Guarantor or the County or any of the ______________________ of
them, or any allegation or contest of the validity of this Guaranty
______________________;
(j) to the extent permitted by law, any event or action that
would _____________________ clause, result in the release
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<PAGE> 17
or discharge of the Guarantor by the ___________________ from the
performance or observance of any obligation, covenant or contained in
this Guaranty;
(k) ______WORDS MISSING _____________________ right of
set-off, counterclaim, reduction, or diminution which the _____
_____________ have against the County or the Trustee;
(l) failure of the Guarantor fully to perform any of its
obligations set Guaranty; or
(m) other circumstances, occurrence or condition, whether
similar or ________________________ avoidance of the foregoing, that
might be raised in avoidance of, or in ________________________ an
action to enforce, the obligations of the Guarantor under this
_______________________.
ARTICLE III.
SPECIAL COVENANTS
BAD COPY AND WORDS ARE MISSING HERE ALSO
Section 3.1. MAINTENANCE OF CORPORATE EXISTENCE. The
Guarantor agrees to reserve its corporate existence and organization and it
will not without first discharging its obligations under this Guaranty, except
as under Section 3.2 hereof.
Section 3.2. MERGER, CONSOLIDATION OR SALE OF ASSETS. The
Guarantor any Bonds remain outstanding it will not merge or consolidate with
and will not transfer or convey all of its property, assets, licenses, tion
thereof, provided that the Guarantor may consolidate with or corporation a
corporation incorporated and existing of the states of the United States of
America or the District of one or more other domestic corporations to
consolidate with or transfer all or substantially all of its assets to another
domestic on the condition that (i) the assignee corporation or the corporation
giving such merger (if other than the Guarantor) or consolidation or such
transfer is made shall expressly assume in writing and agree all of the
Guarantor's obligations under this Guaranty, and (ii) in such consolidation,
merger or transfer there shall be filed with the -n the chief financing officer
of the Guarantor certifying that the consummation of such consolidation, merger
or transfer the from or surviving such consolidation or merger or the
corporation to made will have an aggregate stockholders' equity at least equal
to holders' equity of the Guarantor immediately prior to such or transfer. If
the Guarantor is the surviving corporation in such a referred to in (i)
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<PAGE> 18
above shall not be required but the letter officer of the Guarantor shall be
filed as indicated in (ii) above.
Section 3.3. FINANCIAL STATEMENTS. The Guarantor agrees to
furnish the Trustee either a copy of its annual audit made by its regular
independent certified public accountant (or firm thereof) promptly upon its
completion or a copy of the Guarantor's annual report to its stockholders which
contains financial statements of substantially similar detail and similarly
prepared and certified. The Guarantor also agrees to furnish the Trustee a
copy of each of the financial statements and reports which it customarily
furnishes to its stockholders at the same time as they are furnished to said
stockholders.
ARTICLE IV.
NOTICE AND SERVICE OF PROCESS, PLEADINGS AND OTHER PAPERS
Section 4.1. AGENT FOR SERVICE. The Guarantor designates and
appoints, without power of revocation, (i) any corporate officer of the
Guarantor, and (ii) the Secretary of State of the State of Florida, as the
respective agents of the Guarantor upon whom may be served all process,
pleadings, notices or other papers which may or must be served upon the
Guarantor as a result of any of its obligations under this Guaranty.
Section 4.2. CONSENT TO JURISDICTION. The Guarantor
further agrees, without power of revocation:
(a) that any civil suit or action brought against it as a
result of any of its obligations under this Guaranty may be commenced
against it in any court of competent jurisdiction, Federal or State,
by service of process upon any of the above designated agents with a
copy thereof forwarded as provided in Section 4.3 hereof;
(b) that service of process, pleadings, notices and other
papers upon any of said agents, as aforesaid, shall be taken and held
in all courts to be as valid and binding upon the Guarantor as if due
personal service thereof had been made upon it;
(c) that service upon any of said agents may be effected by
delivering copies of said process, pleadings, notices or other papers
to any of said agents, reciting that a copy of said process,
pleadings, notices or other papers was forwarded to the Guarantor as
provided in Section 4.3 hereof; and
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<PAGE> 19
(d) that in any civil suit or action brought (after notice as
provided herein) against it as a result of any of its obligations
under this Guaranty, it will not assert as a defense, counterclaim or
set-off (i) any default by the County or the Trustee, or (ii) any
cause of action, claim, or counterclaim which it may have against the
County or the Trustee. Failure to assert such matter shall not be
deemed to be a waiver by the Guarantor but the same may be asserted in
a separate action.
Section 4.3. NOTICES. Any process, pleadings, notices or
other payers served upon any of the foregoing agents shall, at the same time,
be sent by registered or certified mail to the Guarantor at the address
specified in Section 6.6 hereof, or to such other address as may be furnished
by the Guarantor to the Trustee in writing.
ARTICLE V.
EVENTS OF DEFAULT AND REMEDIES
Section 5.1. EVENTS OF DEFAULT. If any of the following
events occurs and is continuing, it is hereby defined and declared to be and
constitute an "event of default":
(a) failure by the Guarantor to make any payment required to
be made under Section hereof as and when the same shall become due and
payable;
(b) failure by the Guarantor to observe and perform any
condition or agreement of this Guaranty on its part to be observed or
performed, other than as referred to in subsection (a) of this
Section, for a period of thirty (30) days after written notice,
specifying such failure and requesting that it be remedied, given to
the Guarantor by the County or the Trustee, unless the Trustee shall
agree in writing to an extension of such time prior to its expiration;
provided, however, if the failure stated in the notice cannot be
corrected within the applicable period, the Trustee will not
unreasonably withhold its consent to an extension of such time if it
is possible to correct such failure and corrective action is
instituted by the Guarantor within the applicable period and
diligently pursued until the default is corrected;
(c) a receiver, liquidator or trustee (or other similar
official) of the Guarantor or any property of the Guarantor is
appointed by a court order and such order remains in effect for more
than ninety (90) days or the Guarantor is adjudicated bankrupt or
insolvent; or a petition is filed against the
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<PAGE> 20
Guarantor under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect, and is not
dismissed within ninety (90) days after such filing;
(d) the Guarantor (i) files a voluntary petition in bankruptcy
or seeks relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in
effect, or consents to the filing of any such petition against it
under such law, or (ii) makes an assignment for the benefit of its
creditors, or consents to the appointment of a receiver, trustee or
liquidator (or other similar official), for it or of all or any
substantial part of its property; or
(e) an "event of default" occurs and is continuing under the Indenture.
Section 5.2. REMEDIES. Whenever any event of default
referred to in Section 5.1 hereof shall have occurred and is continuing, the
Trustee may and, if requested so to do in writing by the holders of twenty-five
percent (25%) in aggregate principal amount of the Bonds then outstanding, and
if furnished indemnification as hereinafter provided, the Trustee shall be
obligated to proceed hereunder, and the Trustee shall have the right to proceed
first and directly against the Guarantor under this Guaranty without proceeding
against or exhausting any other remedies which it may have and without
resorting to any other security held by the Trustee. Before taking any action
hereunder, the Trustee may require that satisfactory indemnity be furnished for
the reimbursement of all expenses to which it may be put and to protect it
against all liability except liability which is adjudicated to have resulted
from its negligence or willful default, by reason of any action so taken.
The right to enforce this Guaranty is vested exclusively in
the Trustee for the equal and pro rata benefit of all holders at any time of
the Bonds and any interest coupon appertaining thereto, unless the Trustee
refuses or neglects to act within a reasonable time after being requested in
writing so to do by the holders of at least twenty- five percent (25%) in
aggregate principal amount of the Bonds then outstanding and after being
furnished satisfactory indemnity as aforesaid, in which event the holder of any
of the Bonds or any interest coupon appertaining thereto may thereupon so act
in the name and behalf of the Trustee or may so act in his own name in lieu of
action by or in the name and behalf of the Trustee; provided, however, that no
such holder shall be entitled to take any action to enforce this Guaranty if
and to the extent that the
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<PAGE> 21
taking of such action would under applicable law result in a surrender,
impairment, waiver or loss of the rights under this Guaranty of any other
holders of any of the Bonds or any interest coupon appertaining thereto.
Except to the extent allowed above, no holder of any of the Bonds or any
interest coupon appertaining thereto shall have the right to enforce this
Guaranty, and then only for the equal and pro rata benefit of the holders of
all the Bonds and the interest coupons (if any) appertaining thereto.
Section 5.3. NO REMEDY EXCLUSIVE. No remedy herein conferred
upon or reserved to the Trustee is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Guaranty or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any default, omission or
failure of performance hereunder shall impair any such right or power or shall
be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order
to entitle the Trustee to exercise any remedy reserved to it in this Guaranty,
it shall not be necessary to produce physically the Bonds in any proceedings
instituted by the Trustee or to give any notice, other than such notice as may
be herein expressly required. Nothing therein contained shall be deemed to
preclude any action or proceeding taken by any holder of any Bonds or any
interest coupons appertaining thereto against the Guarantor in the event of
nonpayment of the principal of, the redemption premium (if any) or the interest
on the Bonds of such holder, but any judgment or recovery so had by any holder
of any Bonds shall be deemed to thereby reduce the amount of any recovery
hereunder to which the Trustee may be entitled, and such holder shall
thereupon, to the extent of such recovery, be excluded from participating in
any amount so recovered by the Trustee.
Section 5.4. ATTORNEYS' FEES AND EXPENSES. The Guarantor
agrees to pay all costs, reasonable expenses and fees, including all reasonable
attorneys' fees, which may be incurred by the Trustee in enforcing or
attempting to enforce this Guaranty following any event of default hereunder
whether the same share shall be enforced by suit or otherwise.
Section 5.5. GUARANTY FOR BENEFIT OF TRUSTEE AND BONDHOLDERS.
This Guaranty is entered into by the Guarantor for the benefit of the Trustee
and the holders of the Bonds and any interest coupons appertaining thereto and
any successor trustee or co-trustee and their respective successors and assigns
under the Indenture, all of whom shall be entitled to enforce performance and
observance of this Guaranty (subject to the provisions of Section 5.2 hereof)
and of the guarantees and other provisions herein
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<PAGE> 22
contained to the same extent as if they were parties signatory hereto.
Section 5.6. REMEDIES CUMULATIVE. The terms of this Guaranty
may be enforced as to any one or more breaches, either separately or
cumulatively.
ARTICLE VI.
WAIVERS, AMENDMENTS AND MISCELLANEOUS
Section 6.1. WAIVERS, AMENDMENTS AND MODIFICATIONS. If
any provision contained in this Guaranty should be breached by the Guarantor
and thereafter waived by the Trustee, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. No waiver, amendment, release or modification of this Guaranty
shall be established by conduct, custom or course of dealing, but solely by an
instrument in writing duly executed by the Trustee. The Trustee shall not
consent to any amendment or modification of this Guaranty, or waive any of the
provisions hereof, unless such amendment, modification or waiver is in the
opinion of the Trustee or Independent Counsel (as defined in the Agreement)
purely a technical or formal change or is not material to this Guaranty without
publication of notice and the written approval or consent of the holders of (i)
not less than a majority in aggregate principal amount of the Bonds at the time
outstanding given as herein provided with respect to an amendment, modification
or waiver of any of the provisions of Article III hereof, or (ii) all of the
Bonds at the time outstanding given as herein provided with respect to any
other amendment, modification or waiver hereof. If at any time the Guarantor
shall request the consent of the Trustee to any such proposed amendment or
modification of this Guaranty or the waiver of any of the provisions hereof,
the Trustee shall, upon being satisfactorily indemnified with respect to
expenses, cause notice of such proposed amendment, modification or waiver to be
published in a newspaper or financial journal of general circulation among
dealers in municipal securities in The City of New York, New York, and mailed,
first class mail, postage prepaid, to all registered owners of outstanding
Bonds. Such notice shall briefly set forth the nature of such proposed
amendment, modification or waiver and shall state that copies of the instrument
embodying the same are on file at the principal office of the Trustee for
inspection by all holders of the Bonds. If all of the Bonds are registered as
to principal or both principal and interest, a copy of any proposed amendment,
modification or waiver of this Guaranty shall be mailed, first class mail,
postage prepaid, to all such registered owners and published notice of such
amendment, modification or waiver need not be given. If, within
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<PAGE> 23
sixty (60) days or such longer period as shall be prescribed by the Trustee
following the publication or mailing of such notice, the holders of not less
than the requisite percentage of outstanding Bonds as required in this Section
6.1 shall have consented to or approved the execution of such amendment,
modification or waiver of this Guaranty as herein provided, no holder of any
Bond or any interest coupon appertaining thereto shall have any right to object
to any of the terms and provisions contained therein, or the operation thereof,
or in any manner to question the propriety of the execution thereof, or to
enjoin or restrain the Trustee or the Guarantor from executing the same or from
taking any action pursuant to the provisions thereof.
Section 6.2. EFFECTIVE DATE. The obligations of the
Guarantor hereunder shall arise absolutely and unconditionally when any Bonds
shall have been initially issued, sold and delivered by the County as
contemplated in the Indenture.
Section 6.3. GOVERNING LAW. This Guaranty and the rights and
obligations of the parties hereto (including third-party beneficiaries) shall
be governed, construed and interpreted according to the laws of the State of
Florida.
Section 6.4. ENTIRE AGREEMENT; COUNTERPARTS. This Guaranty
constitutes the entire agreement, and supersedes all prior agreements, both
written and oral, between the parties with respect to the subject matter hereof
and may be executed simultaneously in several counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Section 6.5. SEVERABILITY. If any provision of this Guaranty
shall be held or deemed to be or shall, in fact, be invalid, inoperative or
unenforceable as applied in any particular case in any jurisdiction or
jurisdictions or in all jurisdictions, or in all cases because it conflicts
with any other provision or provisions hereof or any constitution or statute or
rule of public policy, or for any other reason, such circumstances shall not
have the effect of rendering the provision in question invalid, inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative or unenforceable
to any extent whatever.
Section 6.6. NOTICES. Any notice or notices which may be or
are required to be given to the Guarantor respecting any matter pertaining to
this Guaranty shall be deemed to have been sufficiently given if in writing and
forwarded in a sealed envelope by United States registered or certified mail,
postage prepaid, and if given to the Guarantor, addressed to the Guarantor at
General Mills, Inc., P.O. Box 1113, Minneapolis, Minnesota 55440,
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<PAGE> 24
Attention: General Counsel; or if given to the Trustee, addressed to the
Trustee at The First National Bank of Columbus, 101 Thirteenth Street, P.O. Box
40, Columbus, Georgia 31902, Attention: Corporate Trust Department. Either
party may, by notice given hereunder, designate any further or different
address to which subsequent notices shall be sent.
Section 6.7. HEADINGS. The headings of the several Articles
and Sections of this Guaranty are for convenience only and shall not be
construed to affect the meaning or construction of any of the provisions
hereof.
Section 6.8. SUCCESSOR. The Guaranty shall be binding upon
the undersigned Guarantor and its successors and assigns and shall inure to the
benefit of, and shall be enforceable by, the Trustee and its successors and
assigns and the holders of the Bonds and any interest coupons appertaining
thereto until payment in full of the Bonds as provided in Section 901 of the
Indenture.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be executed in its name and behalf and its corporate seal to be affixed hereto
and attested by its duly authorized officers as of the date first above
written.
GENERAL MILLS, INC.
(CORPORATE SEAL)
Attest:
By:___________________________
Title:
____________________________
Title:
(Acceptance by the Trustee follows on page 10.)
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<PAGE> 25
Accepted this 27th day of September, 1979, by
THE FIRST NATIONAL BANK
OF COLUMBUS,
Columbus, Georgia, as Trustee.
By_________________________________________________
Title: Senior Vice President
& Trust Officer
(CORPORATE SEAL)
Attest:
___________________________________________________
Title:
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<PAGE> 26
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "Guaranty"), made and entered
into as of October 1, 1979, by and between GENERAL MILLS, INC., a Delaware
corporation (the "Guarantor"), and THE FIRST NATIONAL BANK OF COLUMBUS, as
trustee, a banking association organized and existing under and by virtue of
the laws of the United States of America, and having its principal office in
the City of Columbus, Georgia, (herein together with any successor trustee or
trustees at the time serving as such under the Trust Indenture described below
called the "Trustee");
WITNESSETH THAT:
WHEREAS, The Industrial Development Board of the County of
Knox, a public body corporate and politic created and existing under the laws
of the State of Tennessee (the "Board"), intends to issue The Industrial
Development Board of the County of Knox Industrial Development Revenue Bonds
(General Mills, Inc. Project), Series 1979, in the aggregate principal amount
of $4,200,000 (the "Bonds"); and
WHEREAS, the Bonds are to be issued under and pursuant to a
Trust Indenture, dated as of even date herewith, by and between the Board and
the Trustee (the "Indenture"), a true and correct copy of which has been
delivered to the Guarantor, and the Bonds are more particularly described in
Articles II and III of the Indenture; and
WHEREAS, the proceeds derived from the issuance of the Bonds
are to be applied toward the acquisition, construction and installation of a
certain industrial facility in the County of Knox, Tennessee (the "Project")
for CPG Products Corp., a Delaware corporation and a wholly-owned subsidiary
corporation of the Guarantor (the "Company"), for the use and benefit of the
Company; and
WHEREAS, the Guarantor desires that the Board issue the Bonds
and apply the proceeds derived therefrom as aforesaid and is willing to enter
into this Guaranty in order to enhance the marketability of the Bonds and
thereby achieve interest cost and other savings which will inure directly to
the benefit of the Guarantor, and to induce the future purchasers and holders
of any of the Bonds to buy or acquire the same;
<PAGE> 27
NOW THEREFORE, in consideration of the premises, the Guarantor
agrees with the Trustee, as follows:
ARTICLE I.
RECITALS
Section 1.1. REPRESENTATIONS AND WARRANTIES OF GUARANTOR.
The Guarantor represents and warrants that:
(a) it is a corporation organized, existing and in good
standing under the laws of the State of Delaware;
(b) it is not in default under any provision of the laws of
said State or under its Certificate of Incorporation or By-Laws;
(c) it has the necessary corporate power under said laws and
under its Certificate of Incorporation and By-Laws to make the
agreements on its part herein contained;
(d) it has been authorized to enter into and to perform this
Guaranty by all necessary and proper corporate action and neither the
execution and delivery of this Guaranty, the consummation of the
transactions contemplated hereby nor the fulfillment of or compliance
with the terms or conditions of this Guaranty conflict with or result
in a breach of any of the terms, conditions or provisions of any
corporate restriction, Certificate of Incorporation or By-Law
provision or any agreement or instrument to which it is a party or by
which it is bound; and
(e) this Guaranty is made in furtherance of the purposes for
which the Guarantor was incorporated and is necessary to promote and
further the business of the Guarantor and the assumption by the
Guarantor of its obligations hereunder will result in direct financial
benefits to the Guarantor.
ARTICLE II.
GUARANTEES
Section 2.1. GUARANTEE OF BONDS. The Guarantor hereby
absolutely and unconditionally guarantees to the Trustee for the benefit of the
holders at any time and from time to time of the Bonds and any interest coupons
appertaining thereto the full and payment in accordance with the provisions of
the Indenture of: (a)
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the principal of any Bond when and as the same shall become due and payable,
whether at the stated thereof, by mandatory redemption pursuant to the sinking
fund provisions of the Indenture, by acceleration or call for redemption or
otherwise, (b) the redemption premium (if any) on any Bond when and as the same
shall become due and payable, and (c) the interest on any Bond when and as the
same shall become due and payable. If the holder of any Bond shall fail to
receive any such payment as and when said payment has become due and payable,
the Guarantor shall immediately pay to the Trustee, in lawful money of the
United States of America, an amount equal to the required payment. In the
event of such a failure, this guarantee is a primary and original obligation of
the Guarantor and is an absolute, unconditional, continuing and irrevocable
guarantee of payment and not of collectivity or performance and is in no way
conditioned or contingent upon any attempt to collect from the Board or to
realize upon any of the Trust Estate (as defined in the Indenture). This
guarantee shall remain in full force and effect without respect to future
changes in conditions, including change in law, until the principal of, the
redemption premium (if any) and the interest on the Bonds shall have been paid
in full or shall be deemed to have been paid in full in accordance with the
Indenture. Subject to the provisions of Section 5.2 hereof and unless all of
the Bonds shall have become due at stated maturity or by acceleration or call
for redemption prior to stated maturity, each and every default in payment of
the principal of, the redemption premium (if any) or the interest on any Bond
shall give rise to a separate cause of action hereunder and separate suits may
be brought hereunder as each cause of action arises. The Guarantor hereby
waives (i) notice of the acceptance hereof and of any action taken or omitted
in reliance hereon, (ii) any presentment, demand, notice or protest of any
kind, and (iii) any other act or thing or omission or delay to do any other act
or thing which in any manner or to any extent that the risk of the Guarantor or
which might operate as a discharge of the Guarantor.
Section 2.2. NATURE OF OBLIGATIONS. All obligations of the
Guarantor under Guaranty shall be absolute, unconditional, continuing and
irrevocable and shall be in full force and effect until the entire principal
of, redemption premium (if any) and interest on the Bonds shall have been paid
or shall be deemed to have been paid in accordance with the Indenture and,
until such payment, or the occurrence of those upon which payment shall be
deemed to have occurred, shall not be affected, modified, impaired or
discharged upon the happening from time to time of any event, including,
without limitation, any of the following, whether or not with notice to or the
consent of the Guarantor:
(a) the compromise, settlement, release or termination of any
or all of the obligations, covenants or agreements of the Board under
or contemplated by the Indenture;
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(b) the failure to give notice to the Guarantor of the
occurrence of an event of default under the terms and provisions of
this Guaranty or the Indenture, except as may be otherwise
specifically provided in this Guaranty;
(c) the assigning or mortgaging or the purported assigning or
mortgaging of all or any part of the interest of the Board in the
Project;
(d) the waiver of the payment, performance or observance by
the Board of any of its obligations, covenants or agreements contained
in or contemplated by the Indenture;
(e) the extension of the time for payment of any principal of
or redemption premium (if any) or interest on any Bond or any part
thereof owing or payable on such Bond or of the time for performance
of any other obligation, covenant or agreement under, arising out of
or contemplated by the Indenture or the further extension or the
renewal thereof;
(f) the modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth in or
contemplated by the Indenture;
(g) the taking or the omission of any of the actions referred
to in or contemplated by the Indenture;
(h) any failure, omission, delay or lack on the part of the
Trustee to enforce, assert or exercise any right, power or remedy
conferred on the Trustee by this Guaranty or by the Indenture, or any
other act or acts on the part of the Board, the Trustee or any of the
holders at any time or from time to time of the Bonds and any interest
coupons appertaining thereto;
(i) the voluntary or involuntary liquidation, dissolution,
sale or other disposition of all or substantially all of the assets,
marshalling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment, or other
similar proceedings affecting the Guarantor or the Board or any of the
assets of either of them, or any allegation or contest of the validity
of this Guaranty in any proceeding;
(j) to the extent permitted by law, any event or action that
would in the absence of this clause, result in the release or
discharge of the Guarantor by the operation of law from the
performance or observance of any obligation, covenant or agreement
contained in this Guaranty;
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(k) any right of set-off, counterclaim, reduction, or
diminution which the Guarantor might have against the Board or the
Trustee;
(l) the failure of the Guarantor fully to perform any of its
obligations set forth in Guaranty; or
(m) any other circumstances, occurrence or condition, whether
similar or dissimilar to any of the foregoing, that might be raised in
avoidance of, or in defense against an action to enforce, the
obligations of the Guarantor under this Guaranty.
Provided, however, that neither the Guarantor nor the Company
shall be deemed by the provisions of this Section to have waived any right to
proceed independently only against the Board and/or the Trustee, as a result of
any breach of contract, covenant, obligation or warranty made herein or in any
other agreement relating to the Project.
ARTICLE III.
SPECIAL COVENANTS
Section 3.1. MAINTENANCE OF CORPORATE EXISTENCE. The
Guarantor agrees to maintain and preserve its corporate existence and
organization, and it will not dissolve without first discharging its
obligations under this Guaranty, except as permitted under Section 3.2 hereof.
Section 3.2. MERGER, CONSOLIDATION OR SALE OF ASSETS. The
Guarantor agrees that so long as any Bonds remain outstanding it will not merge
or consolidate with any other corporation and will not transfer or convey all
of its property, assets, licenses or any substantial portion thereof, provided
that the Guarantor may consolidate with or merge into another domestic
corporation (i.e., a corporation incorporated and existing under the laws of
one of the states of the United States of America or the District of Columbia)
or permit one or more other domestic corporations to consolidate with or merge
into it, or transfer all or substantially all of its assets to another domestic
corporation, but only on the condition that (i) the assignee corporation or the
corporation resulting from or surviving such merger (if other than the
Guarantor) or consolidation or the corporation to which such transfer is made
shall expressly assume in writing and agree to pay and to perform all of the
Guarantor's obligations under this Guaranty, and (ii) in connection with any
such consolidation, merger or transfer there shall be filed with the Trustee, a
letter from the chief financial officer of the Guarantor certifying that
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immediately after the consummation of such consolidation, merger or transfer
the corporation resulting from or surviving such consolidation or merger or the
corporation to which such transfer is made will have an aggregate stockholders'
equity at least equal the aggregate stockholders' equity of the Guarantor
immediately preceding such consolidation, merger or transfer. If the Guarantor
is the surviving corporation in such a merger the express assumption referred
to in (i) above shall not be required but the letter of the chief financial
officer of the Guarantor shall be filed as indicated in (ii) above.
Section 3.3. FINANCIAL STATEMENTS. The Guarantor agrees to
have an annual audit made by its regular independent certified public
accountant (or firm thereof) and to furnish the Trustee either a copy of such
audit promptly upon its completion or a copy of the Guarantor's annual report
to its stockholders if such annual report shall contain financial statements of
substantially similar detail and similarly prepared and certified. The
Guarantor also agrees to the Trustee a copy of each of the financial statements
and reports which it customarily furnishes to its stockholders at the same as
they are furnished to said stockholders. The Guarantor also agrees to furnish
to any holder of $1,000,000 or more in aggregate principal amount of the Bonds
a copy of its annual audit or its annual report to its shareholders and copies
of its Form 10-K and 10-Q to the Securities and Exchange Commission, upon the
written request of any such bondholder.
ARTICLE IV.
NOTICE AND SERVICE OF PROCESS, PLEADINGS AND OTHER PAPERS
Section 4.1. AGENT FOR SERVICE. The Guarantor designates and
appoints, without power of revocation, (i) any corporate officer of the
Guarantor, (ii) any officer of the Company and (iii) the Secretary of State of
the State of Tennessee, Nashville, Tennessee, as the respective agents of the
Guarantor upon whom may be served all process, pleadings, notices or other
papers which may or must be served upon the Guarantor as a result of any of its
obligations under this Guaranty.
Section 4.2. CONSENT TO JURISDICTION. The Guarantor
further agrees, without power of revocation:
(a) that any civil suit or action brought against it as a
result of any of its obligations under this Guaranty may be commenced
against it in any court of competent jurisdiction, Federal or State,
by service of process upon any of the above designated agents with a
copy thereof forwarded as provided in Section 4.3 hereof;
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(b) that service of process, pleadings, notices and other
papers upon any of said agents, as aforesaid, shall be taken and held
in all courts to be as valid and binding upon the Guarantor as if due
personal service thereof had been made upon it;
(c) that service upon any of said agents may be effected by
delivering copies of said process, pleadings, notices or, other papers
to any of said agents, reciting that a copy of said process,
pleadings, notices or other papers was forwarded to the Guarantor as
provided in Section 4.3 hereof; and
(d) that in any civil suit or action brought (after notice as
provided herein) against it as a result of any of its obligations
under this Guaranty, it will not assert as a defense, counterclaim or
set-off (i) any default by the Board or the Trustee, or (ii) any cause
of action, claim or counterclaim which it may have against the Board
or the Trustee. Failure to assert such matter shall not be deemed to
be a waiver by the Guarantor but the same may be asserted in a
separate action.
Section 4.3. NOTICES. Any process, pleadings, notices or
other papers served upon any of the foregoing agents shall at the same time, be
sent by registered or certified mail to the Guarantor at the address specified
in Section 6.6 hereof, or to such other address as may be furnished by the
Guarantor to the Trustee in writing.
ARTICLE V.
EVENTS OF DEFAULT AND REMEDIES
Section 5.1. EVENTS OF DEFAULT. If any of the following
events occurs and continuing, it is hereby defined and declared to be and
constitute an "event of default":
(a) failure by the Guarantor to make any payment required to
be made under Section 2.1 hereof as and when the same shall become due
and payable;
(b) failure by the Guarantor to observe and perform any
condition or agreement of this Guaranty on its part to be observed or
performed, other than as referred to in subsection (a) of this
Section, for a period of thirty (30) days after specifying such
failure and requesting that it be remedied, given to the Guarantor by
the Board or the Trustee, unless the Trustee shall agree in writing to
an extension of such time prior to its expiration; provided, however,
if the failure stated in the notice cannot be corrected within the
applicable
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period, the Trustee will not unreasonably withhold its consent to an
extension of such time if it is possible to correct such failure and
corrective action is instituted by the Guarantor within the applicable
period and diligently pursued until the default is corrected;
(c) a receiver, liquidator or trustee (or other similar
official) of the Guarantor is appointed by a court order and such
order remains in effect for more than ninety (90) days or the
Guarantor is adjudicated bankrupt or insolvent; or a petition is filed
against the Guarantor under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in
effect, and is not dismissed within ninety (90) days after such
filing;
(d) the Guarantor (i) files a voluntary petition in
bankruptcy or seeks relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, or consents to the filing of any such petition
against it under such law, or (ii) makes an assignment for the benefit
of its creditors, or consents to the appointment of a receiver,
trustee or liquidator (or other similar official), for it or of all or
any part of its property; or
(e) an "event of default" occurs and is continuing under the
Indenture.
Section 5.2. REMEDIES. Whenever any event of default
referred to in Section 5.1 hereof shall have occurred and is continuing, the
Trustee may and, if requested so to do in writing by the holders of twenty-five
percent (25%) in aggregate principal amount of the Bonds then outstanding, and
if furnished indemnification as hereinafter provided, the Trustee shall be
obligated to proceed hereunder, and the Trustee shall have the right to proceed
first and directly against the Guarantor under this Guaranty without proceeding
against or exhausting any other remedies which it may have and without
resorting to any other security held by the Trustee. Before taking any action
hereunder, the Trustee may require that satisfactory indemnity be furnished for
the reimbursement of all expenses to which it may be put and to protect it
against all liability, except liability which is adjudicated to have resulted
from its negligence or willful default, by reason of any action so taken.
The right to enforce this Guaranty is vested exclusively in
the Trustee for the equal and pro rata benefit of all holders at any time the
Bonds and any interest coupon appertaining thereto,
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unless the Trustee refuses or neglects to act within a reasonable time after
being requested in writing so to do by the holders of at least twenty-five
percent (25%) and after being furnished in aggregate principal amount of the
Bonds then outstanding satisfactory indemnity as aforesaid, in which event the
holder of any of the furnished satisfactory indemnity as aforesaid, in which
event the holder of any of the Bonds or any interest coupon appertaining
thereto may thereupon so act in the name and behalf of the Trustee or may so
act in his own name in lieu of action by or in the name and behalf of the
Trustee; provided, however, that no such holder shall be entitled to take any
action to enforce this Guaranty if and to the extent that the taking of such
action would under applicable law result in a surrender, impairment, waiver or
loss of the rights under this Guaranty of any other holders of any of the Bonds
or any interest coupon appertaining thereto. Except to the extent allowed
above, no holder of any of the Bonds or any interest coupon appertaining
thereto shall have the right to enforce this Guaranty, and then only for the
equal and pro rata benefit of the holders of all the Bonds and the interest
coupons (if any) appertaining thereto.
Section 5.3. NO REMEDY EXCLUSIVE. No remedy herein conferred
upon or reserved to the Trustee is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Guaranty or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any default, omission or
failure of performance hereunder shall impair any such right or power or shall
be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order
to entitle the Trustee to exercise any remedy reserved to it in this Guaranty,
it shall not be necessary to physically produce the Bonds in any proceedings
instituted by the Trustee or to give any notice, other than such notice as may
be herein expressly required. Nothing herein contained shall be deemed to
preclude any action or proceeding taken by any holder of any Bonds or any
interest coupons appertaining thereto against the Guarantor in the event of
non-payment of the principal of, the redemption premium (if any) or the
interest on the Bonds of such holder, but any judgment or recovery so had by
any holder of any Bonds shall be deemed to thereby reduce the amount of any
recovery hereunder to which the Trustee may be entitled, and such holder shall
thereupon, to the extent of such recovery, be excluded from participating in
any amount so recovered by the Trustee.
Section 5.4. ATTORNEYS' FEES AND EXPENSES. The Guarantor
agrees to pay all costs, reasonable expenses and fees, including all reasonable
attorneys' fees, which may be incurred by the Trustee in enforcing or
attempting to enforce this Guaranty
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following any event of default hereunder whether the same shall be enforced by
suit or otherwise.
Section 5.5. GUARANTY FOR BENEFIT OF TRUSTEE AND BONDHOLDERS.
This Guaranty is entered into by the Guarantor for the benefit of the Trustee
and the holders of the Bonds and any interest coupons appertaining thereto and
any successor trustee or co-trustee and their respective successors and assigns
under the Indenture, all of whom shall be entitled to enforce performance and
observance of this Guaranty (subject to the provisions of Section 5.2 hereof)
and of the guarantees and other provisions herein contained to the same extent
as if they were parties signatory hereto.
Section 5.6. REMEDIES CUMULATIVE. The terms of this Guaranty
may be enforced as to any one or more breaches, either separately or
cumulatively.
ARTICLE VI.
WAIVERS, AMENDMENTS AND MISCELLANEOUS
Section 6.1. WAIVERS, AMENDMENTS AND MODIFICATIONS. If
any provision contained in this Guaranty should be breached by the Guarantor
and thereafter waived by the Trustee, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. No waiver, amendment, release or modification of this Guaranty
shall be established by conduct, custom or course of dealing, but solely by an
instrument in writing duly executed by the Trustee. The Trustee shall not
consent to any amendment or modification of this Guaranty or waive any of the
provisions hereof, unless such amendment, modification or waiver is, in the
opinion of the Trustee or Independent Counsel (as defined in the Indenture), a
mere technical or formal amendment, modification or waiver, or not material to
this Guaranty, without publication of notice and the written approval or
consent of the holders of (i) not less than a majority in aggregate principal
amount of the Bonds at the time outstanding given as herein provided with
respect to an amendment, modification or waiver of any of the provisions
Article III hereof, or (ii) all of the Bonds at the time outstanding given as
herein provided with respect to any other amendment, modification or waiver
hereof. If at any time the Guarantor shall request the consent of the Trustee
to any such proposed amendment or modification of this Guaranty or the waiver
of any of the provisions hereof, the Trustee shall, upon being satisfactorily
indemnified with respect to expenses, cause notice of such proposed amendment,
modification or waiver to be published in a newspaper or financial journal of
general circulation among dealers in municipal securities in the City of
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<PAGE> 36
New York, New York, and mailed, first class mail, postage prepaid, to all
registered owners of outstanding Bonds. Such notice shall briefly set forth
the nature of such proposed amendment, modification or waiver and shall state
that copies of the instrument embodying the same are on file at the principal
office of the Trustee for inspection by all holders of the Bonds. If all of
the Bonds are registered as to principal or both principal and interest, a copy
of any proposed amendment, modification or waiver of this Guaranty shall be
mailed, first class mail, postage prepaid, to all such registered owners and
published notice of such amendment, modification or waiver need not be given.
If, within sixty (60) days or such longer period as shall be prescribed by the
Trustee following the publication or mailing of such notice, the holders of no
less than the requisite percentage of outstanding Bonds as required in thus
Section 6.1 shall have consented to or approved the execution of such
amendment, modification or waiver of this Guaranty as herein provided no holder
of any Bond or any interest Coupon appertaining thereto shall have any right to
object to any of the terms and provisions contained therein, or the operation
thereof, or in any manner to question the propriety of the execution thereof,
or to enjoin or restrain the Trustee or the Guarantor from executing the same
or from taking any action pursuant to the provisions thereof.
Section 6.2. EFFECTIVE DATE. The obligations of the
Guarantor hereunder shall arise absolutely and unconditionally when any Bonds
shall have been initially issued, sold and delivered by the Board as
contemplated in the Indenture.
Section 6.3. GOVERNING LAW. This Guaranty and the rights and
obligations of the parties hereto (including third-party beneficiaries) shall
be governed, construed and interpreted according to the laws of the State of
Tennessee.
Section 6.4. ENTIRE AGREEMENT; COUNTERPARTS. This Guaranty
constitutes the entire agreement, and supersedes all prior agreements, both
written and oral, between the parties with respect to the subject matter hereof
and may be executed simultaneously counterparts, each of which shall be deemed
an original, but all of which shall constitute one and the same instrument.
Section 6.5. SEVERABILITY. If any provision of this Guaranty
shall be held or deemed to be or shall, in fact, be invalid, inoperative or
unenforceable as applied in any case in any jurisdiction or jurisdictions or in
all jurisdictions, or in all cases conflicts With any other provision or
provisions hereof or any constitution or statute or rule of public policy, or
for any other reason, such circumstances shall not have the effect of rendering
the provision in question invalid, inoperative or unenforceable in case or
circumstance, or of rendering any other
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<PAGE> 37
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to any extent whatever.
Section 6.6. NOTICES. Any notice or notices which may be or
are required to the Guarantor respecting any matter pertaining to this Guaranty
shall be give to have been sufficiently given if in writing and forwarded in a
sealed envelope by United States registered or certified mail, postage prepaid,
and if given to the Guarantor, addressed to the Guarantor at P.O. Box 1113,
Minneapolis, Minnesota 55440, Attention: General Counsel or if given to the
Trustee, addressed to the Trustee at P.O. Box 40, Columbus Georgia 31902,
Attention: Corporate Trust Department. Either party may, by notice given
hereunder. Either party may, by notice given hereunder, designate any further
or different address to which subsequent notices shall be sent.
Section 6.6. HEADINGS. The headings of the several Articles
and Sections of this Guaranty are for convenience only and shall not be
construed to affect the meaning or construction of any of the provisions
hereof.
Section 6.7. SUCCESSORS. This Guaranty shall be binding upon
the undersigned Guarantor and its successors and assigns and shall inure to the
benefit of, and shall be enforceable by, the Trustee and its successors and
assigns and the holders of the Bonds and any interest coupons appertaining
thereto until payment in full of the Bonds as provided in Section 801 of the
Indenture.
IN WITNESS WHEREOF, the Guarantor, pursuant to proper
resolution duly passed, has caused this Guaranty to be executed in its name and
behalf and its corporate seal to be affixed hereto and attested by its duly
authorized officers as of the date first above written.
GENERAL MILLS, INC.
(CORPORATE SEAL)
By:_____________________________________
Attest: Vice President & Treasurer
___________________________________________
Secretary
(Acceptance by the Trustee follows on page 10.)
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<PAGE> 38
Accepted this ___ day of
October, 1979, by FIRST NATIONAL BANK OF COLUMBUS, Columbus, Georgia, as
Trustee
By:_________________________________________________________________
Senior Vice President & Trust Officer
(CORPORATE SEAL)
Attest:
____________________________________________________________
Vice President & Trust Officer
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<PAGE> 39
SPECIMEN
CPG PRODUCTS CORP.
PROMISSORY NOTE
$4,200,000 October 1, 1979
FOR VALUE RECEIVED, CPG Products Corp. (the "Company"), a
Delaware corporation, hereby promises to pay to the order of The Industrial
Development Board of the County of Knox (the "Board"), the principal sum of
$4,200,000 on or prior to October 1, 2009, together with interest on the unpaid
portion of such principal amount at the rate of 6.5% per annum, payable
semiannually on or prior to each April 1 and October 1 until this Promissory
Note shall have been fully paid or provision for the payment thereof shall have
been made in accordance with the Indenture.
Payments of both principal and interest have been irrevocably
assigned and pledged to The First National Bank of Columbus, Columbus, Georgia,
as Trustee (the "Trustee"), acting pursuant to a Trust Indenture, dated as of
October 1, 1979 (the "Indenture"), between the Board and the Trustee, and such
payments will be made directly to the Trustee for the account of the Board
pursuant to such assignment. Such assignment is made as security for the
payment of $4,200,000 in aggregate principal amount of The Industrial
Development Board of the County of Knox Industrial Development Revenue Bonds
(General Mills, Inc. Project), Series 1979 (the "Bonds"), issued pursuant to
the Indenture. All of the terms, conditions and provisions of the Indenture
are, by this reference thereto, incorporated herein as a part of this
Promissory Note.
Payments hereon are to be made in lawful money of the United
States of America (except as otherwise permitted below) at the principal office
of the Trustee in Columbus, Georgia. Payments shall be made on or before April
1, 1980, and on or before each April 1 and October 1 thereafter until the
principal of, redemption premium (if any) and interest on the Bonds shall have
been fully paid or provision for the payment thereof shall have been made in
accordance with the Indenture, as follows: (i) if such date is April 1, a sum
equal to the amount payable on such date as interest on the Bonds and (ii) if
such date is October 1, a sum equal to the amount payable on such date as
principal of and interest on the Bonds, as provided in the Indenture. In any
event, each payment
<PAGE> 40
shall be sufficient to pay the total amount of interest or principal and
interest payable on the Bonds on such semiannual interest payment date. If at
any semiannual interest payment date the balance in the Bond Fund described in
the Indenture is insufficient to make the required payments of principal,
redemption premium (if any) and interest on the Bonds on such date, the Company
shall forthwith pay any such deficiency.
This Promissory Note is issued in satisfaction of the
Company's payment obligation contained in Section 4.2 of a Financing Agreement,
dated as of October 1, 1979, between the Board and the Company (the
"Agreement") and is entitled to the benefits and subject to the conditions
thereof. This Promissory Note is subject to prepayment as specified in the
Agreement, and all of the terms, conditions and provisions of the Agreement
are, by this reference thereto, incorporated herein as a part of this
Promissory Note.
Anything herein to the contrary notwithstanding, any amount at
any time held by the Trustee in the Bond Fund referred to in the Indenture
shall be credited against the next succeeding payment hereunder and shall
reduce the payment to be made by the Company to the extent such amount is in
excess of the amount required for payment of bonds theretofore matured or
called for redemption and past due interest in all cases where such Bonds or
coupons, if any, have not been presented for payment; and further, if the
amount held by the Trustee in the Bond Fund should be sufficient to pay at the
times the principal of, redemption premium (if any) and interest on the Bonds
then remaining unpaid, the Company shall not be obligated to make any further
payments hereunder.
The obligations of the Company to make the payments required
to be made hereunder shall be absolute and unconditional and shall not be
subject to diminution by set-off, counterclaim, abatement or otherwise. Until
such time as the principal of and interest on the Bonds shall have been fully
paid or provision for the payment thereof shall have been made as provided in
the Indenture, the Company (i) will not suspend or discontinue any payments
required to be made hereunder except to the extent the same have been prepaid
and (ii) except as provided in Sections 7.1, 7.2 and 7.3 of the Agreement, will
not terminate its obligations hereunder for any cause, including, without
limiting the generality of the foregoing, any acts or circumstances that may
constitute failure of consideration, sale, loss, destruction or condemnation of
or damage to the Project, any change in the tax or other laws of the United
States of America or of the State of Tennessee or any political subdivision of
either, or any failure of the Board to perform and observe any agreement,
whether express or implied, or
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<PAGE> 41
any duty, liability or obligation arising out of or in connection with the
Agreement.
In case of an Event of Default, as defined in the Agreement,
the principal of and interest on this Promissory Note may be declared
immediately due and payable as provided in the Agreement.
IN WITNESS WHEREOF, the Company has caused this Promissory
Note to be executed in its corporate name by its Vice President and attested by
its Secretary and its corporate seal to be hereunto affixed, all as of the date
first above written.
CPG PRODUCTS CORP.
(SEAL)
By: /s/E.P. Preiss
---------------------------------
Attest: Vice President
/s/ B. L. Rosenberg
- ---------------------------------
Assistant Secretary
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<PAGE> 42
TRUST INDENTURE
THIS TRUST INDENTURE (the "Indenture"), dated as of the 1st
day of October, 1979, by and between THE INDUSTRIAL DEVELOPMENT BOARD OF THE
COUNTY OF KNOX, a public nonprofit corporation and a public instrumentality of
the County of Knox, Tennessee (the "Board"), and THE FIRST NATIONAL BANK OF
COLUMBUS, a national banking association duly organized and existing under and
by virtue of the laws of the United States of America, having power and
authority to accept and execute trusts, and having its principal office in
Columbus, Georgia, as Trustee (the "Trustee"),
WITNESSETH:
WHEREAS, the Board was organized pursuant to the provisions of
Chapter 28 of Title 6 of the Tennessee Code Annotated, as supplemented and
amended (hereinafter sometimes referred to as the "Act"), for the purpose of
promoting industry, trade and commerce in the State of Tennessee by inducing
manufacturing and industrial enterprises to locate in said State and further
the use of its agricultural products and natural resources; and
WHEREAS, the Board, by due corporate action, has authorized
and agreed to assist in financing the acquisition, construction and
installation of an industrial project consisting of land, buildings, machinery,
equipment and related property (more fully defined hereinafter as the
"Project") to be located in the County of Knox, Tennessee, pursuant to plans
and specifications therefor which are hereinafter more fully referred to; and
WHEREAS, after careful study and investigation of the nature
of the proposed Project, the Board has determined that, in assisting with the
financing of the acquisition, construction and installation of the Project, it
will be acting in furtherance of the public purposes intended to be served by
the Act; and
WHEREAS, the Board has been advised by the Company that the
amount necessary to finance the cost of the acquisition, construction and
installation of the Project, including expenses incidental thereto, is
$4,200,000 and, by proper corporate action, the Board has authorized the
issuance and sale of $4,200,000 in aggregate principal amount of its Industrial
Development Revenue Bonds (General Mills, Inc. Project), Series 1979 (the
"Bonds"), the proceeds of which will be used to finance the cost of the
acquisition, construction and installation of the Project; and
<PAGE> 43
WHEREAS, the Board has entered into a Financing Agreement,
dated as of October 1, 1979 (the "Agreement"), with the Company under the terms
of which the Board has agreed to finance the cost of the Project through the
issuance of the Bonds and, in consideration thereof, the Company has agreed to
deliver to the Board its Promissory Note, dated October 1, 1979 (the "Note"),
providing for payments sufficient to pay the principal of, redemption premium
(if any) and interest on the Bonds as the same become due and payable; and
WHEREAS, the payments to be received by the Board under the
provisions of the Note must be assigned and pledged to, the Trustee together
with the Agreement and as security for the payment of the principal of,
redemption premium (if any) and interest on the Bonds; and
WHEREAS, all things necessary to make the Bonds, when
authenticated by the Trustee and issued as in this Indenture provided, the
valid, binding and legal obligations of the Board according to the import
thereof, and to constitute this Indenture as a valid assignment and pledge of
the payments herein pledged to the payment of the principal of, redemption
premium (if any) and interest on all Bonds issued hereunder and a valid
assignment and pledge of the rights of the Board under the Agreement and the
Note herein assigned and pledged, have been done and performed, and the
creation, execution and delivery of this Indenture, and the execution, issuance
and delivery of the Bonds, subject to the terms hereof, have been duly
authorized;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS
INDENTURE WITNESSETH:
That the Board, in consideration of the premises and the
mutual covenants hereinafter contained and of the acceptance by the Trustee of
the trusts hereby created, and for other good and valuable considerations the
receipt of which is hereby acknowledged, in order to secure the payment of the
principal of, redemption premium (if any) and interest on the Bonds according
to their tenor and effect and to insure the performance and observance by the
Board of all the covenants expressed or implied herein and in the Bonds, has
given, granted, pledged and assigned and does by these presents give, grant,
pledge and assign to the Trustee, and to its successors in the trusts hereby
created, and to them and their assigns forever:
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<PAGE> 44
I.
A security interest in all rights, title and interest of the
Board in the Agreement (except for the indemnification rights provided in
Section 5.2 thereof).
II.
A security interest in all rights, title and interest of the
Board in the Note, including, without limitation, all payments pursuant to the
Note.
III.
Any and all other property of every name and nature from time
to time hereafter by delivery or by writing of any kind, given, granted,
pledged and assigned as and for additional security hereunder, by the Board or
by anyone in its behalf or with its written consent, to the Trustee, which is
hereby authorized to receive any and all such property at any and all times and
to hold and apply the same subject to the terms hereof.
TO HAVE AND TO HOLD all the same with all privileges and
appurtenances hereby given, granted, pledged and assigned or agreed or intended
so to be, to the Trustee and its successors in said trust and to them and their
assigns forever;
IN TRUST, NEVERTHELESS, upon the terms and trusts herein set
forth, for and proportionate benefit, security and protection of all holders or
owners of the Bonds issued and secured hereunder and the interest coupons (if
any) appertaining thereto without preference, priority or distinction as to
lien or otherwise of any of the Bonds or coupons (if any) appertaining thereto
over any of the others;
PROVIDED, HOWEVER, that if the Board, its successors or
assigns, shall well and truly pay, or cause to be paid, the principal of all of
the Bonds and the interest due or to become due thereon together with any
redemption premium required by redemption of any of the Bonds prior to
maturity, at the times and in the manner mentioned in the Bonds and the
interest coupons (if any) appertaining thereto, according to the true intent
and meaning thereof, or shall provide as permitted hereby, for the payment
thereof by depositing with the Trustee, in the form of cash funds or securities
in which such funds are invested, the entire amount due or to become due
thereon, and shall pay or cause to be paid to the Trustee all sums of money due
or to become due to it in accordance with the terms and provisions hereof, then
upon such
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<PAGE> 45
final payments, this Indenture and the rights hereby granted shall cease,
determine and be void, otherwise this Indenture shall be and remain in full
force and effect.
THIS INDENTURE FURTHER WITNESSETH and it is expressly declared
that all Bonds issued and secured hereunder are to be issued, authenticated and
delivered and all property hereby given, granted, pledged or assigned is to be
dealt with and disposed of under, upon and subject to the terms of this
Indenture, and the Board hereby agrees and covenants with the Trustee and with
the respective holders or owners, from time to time, of the Bonds and the
interest coupons (if any) appertaining thereto, as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 101. DEFINITIONS. The terms defined in this Article
I shall, for all purposes of this Indenture and all indentures supplemental
hereto which may be entered into in accordance with the provisions hereof, have
the meanings herein specified, except as otherwise expressly provided or unless
the context otherwise requires:
"ACT" shall mean Chapter 28 of Title 6 of the Tennessee Code
Annotated, as supplemented and amended.
"AGREEMENT" shall mean the Financing Agreement, of even date
herewith, between the Board and the Company, including any supplements or
amendments thereto.
"AUTHORIZED BOARD REPRESENTATIVE" shall mean the person or
persons at the time designated to act on behalf of the Board by written
certificate furnished to the Company and the Trustee containing the specimen
signature of each such person and signed by the Chairman or Vice Chairman of
the Board.
"AUTHORIZED COMPANY REPRESENTATIVE" shall mean the person or
persons of the Company at the time designated to act on behalf of the Company
by written certificate furnished to the Board and the Trustee containing the
specimen signature of each such officer and signed on behalf of the Company by
its President or a Vice President or the Secretary or Assistant Secretary of
the Company.
"BOARD" shall mean The Industrial Development Board of the
County of Knox, a public nonprofit corporation and a public instrumentality of
the County, organized and existing under and pursuant to the Act, and its
successors and assigns.
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<PAGE> 46
"BOND" or "BONDS" shall mean any or all of the $4,200,000 in
aggregate principal amount of Industrial Development Revenue Bonds (General
Mills, Inc. Project), Series 1979, issued by the Board hereunder.
"BOND FUND" shall mean the Industrial Bond Fund created by Section 601 hereof.
The term "BONDHOLDER" or "HOLDER OF THE BONDS" shall mean the
bearer of any coupon Bond not registered as to principal or registered to
bearer and the registered owner of any coupon Bond registered as to principal
only (except to bearer) or registered as to both principal and interest or any
fully registered Bond.
"CODE" shall mean the Internal Revenue Code of 1954, as
amended.
"COMPANY" shall mean CPG Products Corp., a Delaware
corporation, its successors and assigns, and any surviving, resulting or
transferee corporation as permitted under Section 5.3 of the Agreement.
"COUNSEL" shall mean an attorney duly admitted to practice law
before the highest court of any state in the United States of America or the
District of Columbia or a firm of such attorneys.
The term "COUPON" shall mean any of the coupons issued
hereunder evidencing installments of interest on a coupon Bond.
"COUNTY" shall mean the County of Knox, Tennessee, a political
subdivision of the State of Tennessee.
"EVENT OF DEFAULT" shall mean any of the events described in
Section 901 hereof, subject to the terms of Section 910 hereof.
"EXTRAORDINARY SERVICES" and "EXTRAORDINARY EXPENSES" shall
mean all services rendered and all reasonable expenses (including Counsel fees)
incurred by the Trustee under this Indenture other than Ordinary Services and
Ordinary Expenses.
"FINANCING STATEMENT" shall mean the financing statement
(including continuation statements) filed for record to perfect the security
interest.
"GOVERNMENT OBLIGATIONS" shall mean (a) direct obligations of
the United States of America for the payment of which the full faith and credit
of the United States of America is pledged, or (b) obligations issued by any
agency controlled or supervised by and acting as an instrumentality of the
United States
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<PAGE> 47
of America, the payment of the principal of and interest on which is fully and
unconditionally guaranteed as a full faith and credit obligation of the United
States of America (including any securities described in (a) or (b) issued or
held in book-entry form on the books of the Department of Treasury of the
United States of America).
"GUARANTOR" shall mean General Mills, Inc., a Delaware
corporation and wholly-owning parent corporation of the Company, and its
successors and assigns.
"GUARANTY AGREEMENT" shall mean the Guaranty Agreement between
the Guarantor and the Trustee, dated as of even date herewith.
"INDENTURE" shall mean this Trust Indenture and any indentures
supplemental hereto.
"NOTE" shall mean the Promissory Note, a form of which is
attached as Exhibit "A" to the Agreement, executed and delivered by the Company
to the Board pursuant to Section 4.2 of the Agreement.
"ORDINARY SERVICES" and "ORDINARY EXPENSES" shall mean those
services normally rendered and those reasonable expenses (including Counsel
fees) normally incurred by a trustee under instruments similar to this
Indenture.
The terms "OUTSTANDING" or "BONDS OUTSTANDING" shall mean all
Bonds which have been authenticated and delivered by the Trustee under this
Indenture, except:
(a) Bonds cancelled because of payment at, or purchase or
redemption prior to, maturity;
(b) Bonds for the payment or redemption of which cash funds
or securities shall have been theretofore deposited with the Trustee
(whether upon or prior to the maturity or redemption date of any such
Bonds); provided that if such redemption shall have been given or
arrangements satisfactory to the Trustee shall have been made
therefor, or waiver of such notice satisfactory in form to the Trustee
shall have been filed with the Trustee; and
(c) Bonds in lieu of which others have been authenticated
under Section 204 hereof.
The term "PAYMENT IN FULL OF THE BONDS" shall specifically
encompass the situations described in Sections 801 and 802 hereof.
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<PAGE> 48
The term "PERSON" shall mean natural persons, firms,
associations, corporations and public bodies.
Terms which refer generally to the payment of or the
obligation to pay "principal of and interest on the Bonds", shall also include
the payment of or the obligation to pay any applicable redemption premium on
any Bonds which are called for redemption prior to maturity. In this
connection, the terms "principal of and interest on the Bonds" shall be read to
include after the word "and" and before the word "interest" the words
"redemption premium (if any) and."
"PRINCIPAL OFFICE OF THE TRUSTEE" shall mean the principal
office of the Trustee located in Columbus, Georgia.
"PROJECT" shall mean the Project as defined in the Agreement,
as it may at any time exist.
"PROJECT FUND" shall mean the Industrial Project Fund created
by Section 501 hereof.
"SECURITY INTEREST" shall refer to the security interest
created herein and shall have the meaning set forth in the Uniform Commercial
Code of Tennessee, as now or hereafter amended.
"TRUST ESTATE" shall mean the property described in
paragraphs I, II and III of granting clauses of this Indenture.
"TRUSTEE" shall mean The First National Bank of Columbus,
Columbus, Georgia, national banking association, and any successor trustee
hereunder.
Section 102. USE OF PHRASES. "Herein," "hereby,"
"hereunder," "hereof," "hereinbefore," "hereinafter" and other equivalent words
refer to this Indenture and not solely to the particular portion thereof in
which any such word is used. The definitions set forth in Section 101 hereof
include both singular and plural. Whenever used herein, any pronoun shall be
deemed to include both singular and plural and to cover all genders. Any
percentage of Bonds, specified herein for any purpose, is to be figured on the
unpaid principal amount thereof then outstanding.
ARTICLE II
THE BONDS
Section 201. AUTHORIZED AMOUNT OF BONDS. No Bonds may be
issued under the provisions of this Indenture except in accordance with this
Article. The total principal amount of Bonds
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<PAGE> 49
that may be issued hereunder is hereby expressly limited to $4,200,000, subject
to the provisions of Section 206 hereof.
Section 202. ISSUANCE OF BONDS. The Bonds (i) shall be
designated "The Industrial Development Board of the County of Knox Industrial
Development Revenue Bonds (General Mills, Inc. Project), Series 1979," (ii)
shall be dated October 1, 1979 (except for fully registered Bonds issued on or
after April 1, 1980), (iii) shall bear interest from date at the rate of 6.5%
per annum, first interest payable on April 1, 1980, and payable semiannually
thereafter on April 1 and October 1 of each year until maturity and (iv) shall
mature on October 1, 2009.
The Bonds are subject to the sinking fund provisions of
Section 305 hereof.
Coupon Bonds shall be issued in the denomination of $5,000
each and shall be registrable as to principal only or as to both principal and
interest. Fully registered Bonds shall be issued in the denomination of $5,000
or any multiple thereof. Common Bonds shall be numbered consecutively from 1
upwards and fully registered Bonds shall be numbered consecutively from R-1
upwards in order of issuance according to the records of the Trustee.
Fully registered Bonds issued on or subsequent to April 1,
1980 shall be dated as of the date six (6) months preceding the interest
payment date next following the date of authentication and delivery thereof by
the Trustee, unless such date of authentication and delivery shall be an
interest payment date, in which case they shall be dated as of such date of
authentication and delivery; provided, however, that if, as shown by the
records of the Trustee, interest on any Bonds surrendered for transfer or
exchange shall be in default, the fully registered Bond issued in exchange for
Bonds surrendered for transfer or exchange shall be dated as of the date to
which interest has been paid in full on the Bond so surrendered. Coupon Bonds
and fully registered Bonds shall bear interest from their date.
Except as hereinafter set forth, the principal of the Bonds
and the interest on any coupon Bonds shall be payable to bearer upon
presentation and surrender of such interest coupons as they respectively become
due at the principal office of the Trustee. The interest on fully registered
Bonds, except as hereinafter set forth (except payment of such interest which
shall be made only upon surrender of such Bonds) by check or draft drawn upon
the Trustee and mailed to the respective red owners of such Bonds at their
addresses as they appear on the bond registration be kept by the Trustee. All
such payments shall be made in lawful money of the United States of America.
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<PAGE> 50
Section 203. EXECUTION OF BONDS. The Bonds shall be executed
on behalf of the Board by the facsimile signature of the Chairman of its Board
of Directors and attested by the manual signature of its Secretary, and shall
have impressed or printed thereon the corporate seal of the Board. The coupons
attached to the coupon Bonds shall be executed by the facsimile signature of
said Chairman, and such facsimiles shall have the same force and effect as if
said Chairman and Secretary had manually signed each of the coupons. In case
any officer of the Board whose signature or a facsimile of whose signature
shall appear on any Bonds or any coupons appertaining thereto shall cease to be
such officer before the delivery of such Bonds, such signature or such
facsimile shall nevertheless be valid and sufficient for all purposes the same
as if such officer has remained in office until such delivery.
Section 204. AUTHENTICATION OF BONDS. Only such Bonds as
shall have endorsed thereon a certificate of authentication substantially in
the form hereinafter set forth duly executed by the Trustee shall be entitled
to any right or benefit under this indenture. No Bond and no coupon
appertaining to any Bond shall be valid or obligatory for any purpose unless
and until such certificate of authentication shall have been duly executed by
the Trustee and such executed certificate of the Trustee upon any such Bond
shall be conclusive evidence that such Bond has been authenticated and
delivered under this Indenture. Said certificate of authentication on any Bond
shall be deemed to have been executed by the Trustee if signed by an authorized
officer of the Trustee, but it shall not be necessary that the same officer
sign the certificate of authentication on all of the Bonds issued hereunder.
Before authenticating or delivering any Bonds, the Trustee shall detach and
cancel all matured coupons, if any, attached thereto, and such cancelled
coupons shall be destroyed by the Trustee.
Section 205. FORM OF BONDS. The coupon Bonds, the coupons to
be attached thereto, the fully registered Bond in the form in which it is to be
initially delivered and the various certificates to be endorsed thereon shall
be in substantially the form hereinafter set forth, with such insertions,
omissions and other variations as may be necessary to conform to the provisions
hereof:
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<PAGE> 51
(FORM OF COUPON BOND)
UNITED STATES OF AMERICA
STATE OF TENNESSEE
THE INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF KNOX
INDUSTRIAL DEVELOPMENT REVENUE BOND
(GENERAL MILLS, INC. PROJECT), SERIES 1979
No. $5,000
FOR VALUE RECEIVED, The Industrial Development Board of the
County of Knox (the "Board"), a public nonprofit corporation and public
instrumentality of the County of Knox, Tennessee, organized and existing under
and pursuant to the laws of the State of Tennessee, hereby promises to pay to
bearer, or if this bond be registered as herein provided then to the registered
owner hereof, solely from the special fund hereinafter described and from no
other source, on the 1st day of October, 2009, the principal sum of
FIVE THOUSAND DOLLARS
and to pay solely from said special fund, interest thereon from the date hereof
at the rate of 6.5% per annum, payable semiannually on April 1 and October 1 in
each year until payment of the principal amount hereof, upon presentation and
surrender of the annexed interest coupons as they severally become due, or, if
this bond be registered as to interest, to the registered owner hereof. Both
the principal hereof and the interest hereon are payable in lawful money of the
United States of America at the principal office in Columbus, Georgia, of The
First National Bank of Columbus, as Trustee (the "Trustee") under the
hereinafter mentioned Trust Indenture, or if a successor Trustee is hereafter
appointed, then at the principal office of such successor.
This bond is one of a duly authorized series in the aggregate
principal amount of $4,200,000 (the "bonds"), of like tenor except as to
numbers and redemption provisions, issued under and secured by a Trust
Indenture, dated as of October 1, 1979 (the 'Indenture"), by and between the
Board and the Trustee, and a resolution of the Board adopted on ___________,
1979, for the purpose of financing the cost of the acquisition of certain land
located in the County of Knox, Tennessee, and the construction and installation
thereon of certain buildings, machinery, equipment and related property (the
"Project").
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<PAGE> 52
This bond is issued and the Indenture was authorized, executed
and delivered by the Board under and pursuant to the Constitution and laws of
the State of Tennessee, including particularly the aforesaid resolution of the
Board. Prior to the issuance hereof, the Board entered into a Financing
Agreement, dated as of October 1, 1979 (the "Agreement"), with CPG Products
Corp., a Delaware corporation qualified to do business in the State of
Tennessee (the "Company"), and the Company executed and delivered to the Board
a Promissory Note, dated October 1, 1979 (the "Note"), pursuant to the terms of
which the Company must pay to the Board such amounts as will be fully
sufficient to pay the principal of and the redemption premium (if any) and the
interest on the bonds as the same become due.
The Company is a wholly-owned subsidiary of General Mills,
Inc., a Delaware corporation (the "Guarantor"), and the Guarantor has entered
into a Guaranty Agreement, dated as of October 1, 1979 (the "Guaranty"), with
the Trustee, under the terms of which the Guarantor has unconditionally
guaranteed the payment of the principal of, redemption premium (if any) and
interest on the bonds.
This bond and the redemption premium (if any) and the interest
hereon are limited obligations of the Board and are payable solely out of the
payments to be received by the Board pursuant to the Agreement and the Note and
out of any payments received by the Trustee pursuant to the Guaranty. THIS
BOND AND THE REDEMPTION PREMIUM (IF ANY) AND THE INTEREST HEREON SHALL NEVER
CONSTITUTE AN INDEBTEDNESS OF THE BOARD OR OF THE COUNTY OF KNOX OR OF THE
STATE OF TENNESSEE WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR
STATUTORY LIMITATION, AND SHALL NOT CONSTITUTE NOR GIVE RISE TO A PECUNIARY
LIABILITY OF THE BOARD, OF THE COUNTY OF KNOX OR OF THE STATE OF TENNESSEE OR A
CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF SAID COUNTY OR STATE.
The Board is obligated to pay the bonds and the interest thereon only from "The
Industrial Development Board of the County of Knox Industrial Bond Fund-General
Mills, Inc. Project-Series 1979" created in the Indenture. No holder of this
bond shall ever have the right to compel any exercise of the taxing power of
the State of Tennessee or any political subdivision thereof, including the
Board, to pay this bond, the redemption premium (if any) and the interest
hereon or other costs incident thereto, nor to enforce payment thereof against
any property of said State or any political subdivision thereof. No recourse
shall be had under or upon any obligation, covenant, or agreement contained in
the Indenture, or in this bond or any coupon appertaining hereto, or under any
judgment obtained against the Board or by the enforcement of any assessment or
by any legal or equitable proceeding by virtue of any constitution or statute
or otherwise or under any circumstances, under or independent of the Indenture,
against any incorporator,
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<PAGE> 53
member, director or officer, as such, past, present or future, of the Board,
either directly or through the Board or otherwise, for the payment for or to
the Board or any receiver thereof, or for or to the holder of the bond or any
coupon appertaining hereto, of any sum that may be due and unpaid by the Board
upon this bond or any coupon appertaining hereto. Any and all personal
liability of every nature, whether at common law or in equity, or by statute or
by constitution or otherwise, of any such incorporator, member, director or
officer, as such, to respond by reason of any act or omission on his part or
otherwise for the payment for or to the Board or any receiver thereof, or for
or to the holder of this bond or any coupon appertaining hereto, of any sum
that may remain due and unpaid upon this bond or any coupon appertaining
hereto, is hereby expressly waived and released by the holder hereof as a
condition of and consideration for the issuance of this bond and the coupons
appertaining hereto by the Board.
Reference to the Indenture is hereby made for a description of
the aforesaid Bond Fund which is charged with, and pledged to, the payment of
the principal of and the redemption premium (if any) and the interest on the
bonds, the nature and extent of the security, a statement of the rights, duties
and obligations of the Board, the Company and the Trustee, the rights of the
holders of the bonds, and the terms, and conditions under which the Agreement,
the Note and the Indenture may be modified by vote of the holders of two-thirds
(2/3) of the principal amount of the bonds at any time outstanding, to all of
the provisions of which the holder hereof, by the acceptance of this bond,
assents.
This Bond may be registered as to the payment of principal
only and also as to both principal and interest on the books of the Trustee, as
Bond Registrar, in accordance with the provisions endorsed on the reverse side
hereof, and in such event the principal or the principal and interest, as the
case may be, shall be payable only at the principal office of the Trustee, as
Bond Registrar.
The bonds are issuable as coupon bonds, registrable as to
principal only and also as to both principal and interest, in the denomination
of $5,000 each, and as fully registered bonds in the denomination of $5,000 or
any multiple thereof. Coupon bonds, upon surrender thereof at the principal
office of the Trustee with all unmatured coupons attached, may, at the option
of the holder thereof, be exchanged for an equal aggregate principal amount of
fully registered bonds of any authorized denomination or denominations, in the
manner, subject to the conditions and upon the payment of the charges provided
in the Indenture. In like manner, subject to such conditions and upon the
payment of such charges, fully registered bonds, upon the surrender thereof at
the principal office of the Trustee with a written instrument of
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<PAGE> 54
transfer satisfactory to the Trustee duly executed by the registered owner or
his duly authorized attorney, may, at the option of the registered owner
thereof, be exchanged for an equal aggregate principal amount of coupon bonds
with appropriate coupons attached, or for an equal aggregate principal amount
of fully registered bonds of any authorized denomination or denominations.
This bond is issued with the intent that the laws of the State
of Tennessee shall govern its construction.
The bonds may not be called for redemption prior to October 1,
1989, except (a) upon exercise by the Company of its option to prepay the Note
in whole in the event of (i) condemnation, damage or destruction of all or
substantially all of the Project to the extent provided in Section 7.1 of the
Agreement, (ii) the Agreement or the Note becoming unenforceable because of
constitutional change or judicial, legislative or administrative action, (iii)
unreasonable burdens or excessive liabilities are imposed on the Company with
respect to the operation of the Project, or (iv) a change in economic
availability of raw materials, energy sources, operating supplies or facilities
necessary for the operation of the Project or such technological or other
changes which in the judgment of the Company render the operation of the
Project uneconomical, or (b) upon the obligation of the Company to prepay the
Note under the circumstances set forth in Sections 5.9 and 7.3 of the
Agreement. If called for redemption as provided in (a) of the foregoing, the
bonds may be redeemed in whole at any time at a redemption price equal to the
principal amount of each bond to be redeemed plus accrued interest thereon to
the date of redemption. If called for redemption as provided in (b) of the
foregoing, the bonds must be redeemed in whole within the time provided in
Section 5.9 of the Agreement following the Determination of Taxability (as
defined in Section 5.9 of the Agreement) at the foregoing redemption price,
plus an additional amount equal to the interest paid (or accrued) on the bonds,
with respect to each holder of a bond redeemed, during the period beginning on
the date of the Event of Taxability (as defined in Section 5.9 of the
Agreement) and ending on and including the date of redemption. If the
outstanding bonds are called for redemption as provided in (b) of the
foregoing, the Trustee, pursuant to Section 306 of the Indenture, will hold and
disburse for the benefit of the Last Holder (as defined in Section 306 of the
Indenture) of each bond outstanding at the time of the Event of Taxability
which has matured or has been redeemed, transferred or will mature or will be
redeemed, transferred or sold prior to the time of such redemption, an amount
equal to the interest paid (or accrued) on such bond during the period
beginning on the date of the Event of Taxability and ending upon and including
the earlier of the date of the maturity, redemption, transfer or sale of such
bond.
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<PAGE> 55
The bonds, if not redeemed before October 1, 1989 in
connection with the options referred to in Section 7.1 of the Agreement or by
mandatory redemption pursuant to the obligation referred to in Sections 5.9 and
7.3 of the Agreement, are also subject to redemption by the Board prior to
maturity on any interest payment date on or after October 1, 1989, in whole or
in part (less than all of the bonds to be selected by the Trustee in the manner
provided in the Indenture), at the redemption prices (expressed as Percentages
of the principal amount) set forth in the table below plus accrued interest
thereon to the date of redemption:
Dates of Redemption Redemption Prices
October 1, 1989 through September 30, 1990 103%
October 1, 1990 through September 30, 1991 102.70
October 1, 1991 through September 30, 1992 102.40
October 1, 1992 through September 30, 1993 102.10
October 1, 1993 through September 30, 1994 101.80
October 1, 1994 through September 30, 1995 101.50
October 1, 1995 through September 30, 1996 101.20
October 1, 1996 through September 30, 1997 100.90
October 1, 1997 through September 30, 1998 100.60
October 1, 1998 through September 30, 1999 100.30
October 1, 1999 and thereafter 100
In addition, the bonds are subject to mandatory sinking fund
redemption prior to maturity, in accordance with Section 305 of the Indenture,
in part, at 100% of the principal amount thereof, plus accrued interest to the
redemption date in the following principal amounts and on the dates set forth
below (the October 1, 2009 amount to be paid rather than redeemed):
October 1 of the Year Principal Amount
- --------------------- ----------------
2005 $840,000
2006 840,000
2007 840,000
2008 840,000
2009 840,000
When any coupon bonds (not registered as to principal
otherwise than to bearer) are called for redemption as aforesaid, notice
thereof identifying the coupon bonds to be redeemed shall be given by
publication at least once in a newspaper or financial journal of general
circulation among dealers in municipal securities in the City of New York, New
York, which notice shall be published not less than thirty (30) days nor more
than sixty (60) days prior to the redemption date, and in the case of the
-14-
<PAGE> 56
redemption of coupon bonds at the time registered as to principal (except
bearer), in addition there shall be sent a copy of such redemption notice by
first class mail at least thirty (30) days but no more than sixty (60) days
prior to the redemption date to the registered owner of each coupon bond to be
redeemed at the address shown on the registration books; provided, however, if
notice of redemption shall have been published as required, failure to give
such notice by mailing, or any defect therein, shall not affect the validity of
any proceeding for the redemption of coupon bonds. If all of the coupon bonds
to be redeemed are at that time registered as to principal (except to bearer),
notice by first class mail to the owner or owners thereof not less than thirty
(30) days nor more than sixty (60) days prior to the redemption date shall be
sufficient and published notice of the call for redemption need not be given.
All coupon bonds called for redemption shall cease to bear interest on the
specified redemption date provided sufficient moneys for their redemption share
on deposit at the designated place of payment at that time, and such bonds
shall no longer be secured by the lien of the Indenture and shall not be deemed
to be outstanding under the provisions of the Indenture or have any other
rights thereunder except the right to receive payment. All unmatured coupons
appertaining thereto shall become void. If, because of the temporary or
permanent suspension of the publication or general circulation of any newspaper
or financial journal or for any other reason, it is impossible or impractical
to publish such redemption notice as aforesaid, then such publication in lieu
thereof as shall be made with the approval of the Trustee shall constitute a
sufficient publication of notice.
The holder of this bond shall have no right to enforce the
provisions of the Indenture or to institute action to enforce the covenants
therein, or to take any action with respect to any Event of Default under the
Indenture, or to institute, appear in or defend any suit or other proceedings
with respect thereto, except as provided in the Indenture. In certain events,
on the conditions, in the manner and with the effect set forth in the
Indenture, the principal of all the bonds issued under the Indenture and then
outstanding may become or may be declared due and payable before the stated
maturity thereof, together with the interest accrued thereon. Modifications or
alterations of the Indenture, or of any supplements thereto, may be made only
to the extent and in the circumstances permitted by the Indenture.
It is hereby certified and recited that all acts, conditions
and things required by the Constitution and laws of the State of Tennessee to
happen, exist and be performed precedent to and in the issuance of this bond,
the execution of the Indenture and the adoption of the aforesaid resolution by
the Board, have happened, exist and have been performed.
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<PAGE> 57
This bond shall not be entitled to any benefit under the
Indenture nor shall it become valid or obligatory for any purpose until it
shall have been authenticated by execution by the Trustee of the certificate
hereon endorsed.
IN WITNESS WHEREOF, The Industrial Development Board of the
County of Knox has caused this bond to be executed in its name by the facsimile
signature of its Chairman and its corporate seal to be impressed hereon and
attested by the manual signature of its Secretary, and has caused the interest
coupons hereto attached to be executed by the facsimile signature of its
Chairman all as of the 1st day of October, 1979.
THE INDUSTRIAL DEVELOPMENT
BOARD OF THE COUNTY OF KNOX
By: (Form)
-----------------------------
Chairman
(SEAL)
Attest:
(Form)
- ---------------------------
Secretary
-16-
<PAGE> 58
(FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
This bond is one of the bonds described in the above-mentioned
Trust Indenture.
THE FIRST NATIONAL BANK OF
COLUMBUS, as Trustee
By: (Form)
-----------------------------
Authorized Officer
-17-
<PAGE> 59
(FORM OF COUPON)
No. $______________
On the 1st day of _______________, 199_, unless the
hereinafter mentioned bond have been duly called for previous redemption and
payment of the redemption price made or provided for, The Industrial
Development Board of the County of Knox, promises pay to bearer at the
principal office of The First National Bank of Columbus, Columbus, Georgia, as
Trustee, or at the principal office of any successor Trustee, the amount shown
hereon in lawful money of the United States of America, solely from the special
fund referred to in and for the interest thereon due on its Industrial
Development Revenue Bond (General Mills, Inc. Project), Series 1979, dated
October 1, 1979, and numbered _______________ .
(Facsimile)
------------------------------
Chairman
The Industrial Development Board of the County of Knox
* * * * *
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<PAGE> 60
(PROVISION FOR REGISTRATION)
This bond may be registered in the name of the holder on books
kept by the Trustee, as Bond Registrar, as to principal only, such registration
being noted hereon by the Bond Registrar in the registration blank below, after
which no transfer shall be valid unless made on said books at the request of
the registered owner or attorney duly authorized and similarly noted in the
registration blank below, but this bond may be discharged from registration by
being so transferred to bearer, after which it shall be transferable by
delivery, but it may be again registered as before. The registration of this
bond as to principal shall not restrain the negotiability of the coupons by
delivery merely, but the coupons may be surrendered and the interest made
payable only to the registered owner of this bond, in which event the Bond
Registrar shall note in the registration blank below that this bond is
registered as to interest as well as to principal. At the request of the
registered owner, this bond when converted into a bond registered as to both
principal and interest may be reconverted into a coupon bond and such coupon
bond ma%, again be converted into a bond registered as to both principal and
interest as hereinabove provided. Upon reconversion of this bond, when
registered as to principal and interest, into a coupon bond, coupons
representing the interest to accrue hereon to date of maturity shall be
reattached hereto by the Bond Registrar who shall note in the registration
blank below whether the bond is registered as to principal only or payable to
bearer.
<TABLE>
<CAPTION>
DATE OF IN WHOSE NAME BOND
REGISTRATION REGISTERED REGISTRAR
<S> <C>
: :
: :
: :
: :
</TABLE>
(END OF COUPON BOND FORM)
-19-
<PAGE> 61
(FORM OF FULLY REGISTERED BOND)
UNITED STATES OF AMERICA
STATE OF TENNESSEE
THE INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF KNOX
INDUSTRIAL DEVELOPMENT REVENUE BOND
(GENERAL MILLS, INC. PROJECT), SERIES 1979
No. R-_________ $_____________
FOR VALUE RECEIVED, The Industrial Development Board of the
County of Knox (the "Board"), a public nonprofit corporation and a public
instrumentality of the County of Knox, Tennessee, organized and existing under
and pursuant to the laws of the State of Tennessee, hereby promises to pay to
________________________, or registered assigns, solely from the special fund
hereinafter described and from no other source, on the 1st day of October,
2009, the principal sum of
____________________ DOLLARS
and to pay solely from said special fund, interest thereon from the date hereof
at the rate of 6.5%@ per annum, payable semiannually on April 1 and October 1
in each year until payment of the principal amount hereof. The principal of
this bond is payable in lawful money of the United States of America at the
principal office in Columbus, Georgia, of The First National Bank of Columbus,
as Trustee (the "Trustee") under the hereinafter mentioned Trust Indenture, or
if a successor Trustee is hereafter appointed, then at the principal office of
such successor. The interest on this bond (except for final payment of such
interest which shall be made only upon surrender of this bond) is payable by
check or draft drawn upon the Trustee and mailed to the registered owner at his
address as it appears on the bond registration books to be kept by the Trustee.
This bond is one of a duly authorized series in the aggregate
principal amount of $4,200,000 (the "bonds") of like tenor, except as to
numbers and redemption provisions, issued under and secured by a Trust
Indenture, dated as of October 1, 1979 (the "Indenture"), by and between the
Board and The First National Bank of Columbus, and a resolution of the Board
adopted on __________, 1979, for the purpose of financing the cost of the
acquisition of certain land located in the County of Knox, Tennessee, and the
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<PAGE> 62
construction and installation thereon of certain buildings, machinery,
equipment and related property (the "Project").
This bond is issued and the Indenture was authorized, executed
and delivered by the Board under and pursuant to the Constitution and laws of
the State of Tennessee, including particularly the aforesaid resolution of the
Board. Prior to the issuance hereof, the Board entered into a Financing
Agreement, dated as of October 1, 1979 (the "Agreement"), with CPG Products
Corp., a Delaware corporation qualified to do business in the State of
Tennessee (the "Company"), and the Company executed and delivered to a
Promissory Note, dated October 1, 1979 (the "Note"), pursuant to the terms of
which the Company must pay to the Board such amounts as will be fully
sufficient to pay the principal of and the redemption premium (if any) and the
interest on the bonds as the same become due.
The Company is a wholly-owned subsidiary of General Mills,
Inc., a Delaware corporation (the "Guarantor"), and the Guarantor has entered
into a Guaranty Agreement, dated as of October 1, 1979 (the "Guaranty"), with
the Trustee, under the terms of which the Guarantor has unconditionally
guaranteed the payment of the principal of, redemption premium (if any) and
interest on the bonds.
This bond and the redemption premium (if any) and the interest
hereon are limited obligations of the Board and are payable solely out of the
payments to be received by the Board pursuant to the Agreement and the Note and
out of any payments received by the Trustee pursuant to the Guaranty. THIS
BOND AND THE REDEMPTION PREMIUM (IF ANY) AND THE INTEREST HEREON SHALL NEVER
CONSTITUTE ANY OF KNOX OR OF THE STATE OF INDEBTEDNESS OF THE BOARD OR OF THE
COUNTY OF TENNESSEE WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR
STATUTORY LIMITATION, AND SHALL NOT CONSTITUTE NOR GIVE RISE TO A PECUNIARY
LIABILITY OF THE BOARD OR OF THE COUNTY OF KNOX OR OF THE STATE OF TENNESSEE OR
A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF SAID COUNTY OR STATE.
The Board is obligated to pay the bonds and the interest thereon only from the
"Industrial Development Board of the County of Knox Industrial Bond Fund -
General Mills, Inc. Project - Series 1979" created in the Indenture. No holder
of this bond shall ever have the right to compel any exercise of the taxing
power of the State of Tennessee or any political subdivision thereof, including
the Board, to pay this bond, the redemption premium (if any) and the interest
hereon or other costs incident thereto, nor to enforce payment thereof against
any property of said State or any political subdivision thereof. No recourse
shall be had under or upon any obligation, covenant, or agreement contained in
the Indenture, or in this bond, or under any judgment obtained against the
Board or by the enforcement of any assessment or by any legal or equitable
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<PAGE> 63
proceeding by virtue of any constitution or statute or otherwise or under any
circumstances, under or independent of the Indenture, against any incorporator,
member, director or officer, as such, past, present or future, of the Board,
either directly or through the Board or otherwise, for the payment for or to
the Board or any receiver thereof, or for or to the holder of this bond, of any
sum may be due and unpaid by the Board upon this bond. Any and all personal
liability of every nature, whether as common law or in equity, or by statute or
by constitution or otherwise, of any such incorporator, member, director or
officer, as such, to respond by reason of any act or omission on his part or
otherwise for the payment for or to the Board or any receiver thereof, or for
or to the holder of this bond, of any sum that may remain due and unpaid upon
this bond, is hereby expressly waived and released as a condition of and
consideration for the issuance of this bond by the Board.
Reference to the Indenture is hereby made for a description of
the aforesaid Bond Fund which is charged with, and pledged to, the payment of
the principal of and the redemption premium (if any) and the interest on the
bonds, the nature and extent of the security, a statement of the rights, duties
and obligations of the Board, the Company and the Trustee, the rights of the
holders of the bonds, and the terms and conditions under which the Agreement,
the Note and the Indenture may be modified by vote of the holders of two-thirds
(2/3) of the principal amount of the bonds at any time outstanding, to all of
the provisions of which the holder hereof, by the acceptance of this bond,
assents.
This bond is transferable by the registered owner hereof in
person or by his attorney duly authorized in writing at the principal office of
the Trustee, but only in the manner, subject to the conditions and upon payment
of the charges provided in the Indenture and upon surrender and cancellation of
this bond. Upon such transfer, a new fully registered bond or fully registered
bonds in the same aggregate principal amount of any authorized denomination or
denominations shall be issued to the transferee or transferees in exchange
therefor, and the Trustee shall verify the endorsements made as described in
the preceding paragraph; no transferee shall be entitled to rely upon such
endorsements as indicating the amount of this bond which has been redeemed,
without the verification of the Trustee required herein.
The bonds are issuable as coupon bonds, registrable as to
principal only and also as to both principal and interest, in the denomination
of $5,000 each, and as fully registered bonds without coupons in the
denomination of $5,000 or any multiple thereof. Coupon bonds, upon surrender
thereof at the principal office of the Trustee with all unmatured coupons
attached, may, at the option of the holder thereof, be exchanged for an equal
aggregate principal
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<PAGE> 64
amount of fully registered bonds of any authorized denomination or
denominations, in the manner, subject to the conditions and upon the payment of
the charges provided in the Indenture. In like manner, subject to such
conditions and upon the payment of such charges, fully registered bonds, upon
the surrender thereof at the principal office of the Trustee with a written
instrument of transfer satisfactory to the Trustee duly executed by the
registered owner or his duly authorized attorney may, at the option of the
registered owner thereof, be exchanged for an equal aggregate principal amount
of coupon bonds with appropriate coupons attached, or for an equal aggregate
principal amount of fully registered bonds of any authorized denomination or
denominations.
This bond is issued with the intent that the laws of the State
of Tennessee shall govern its construction.
The bonds may not be called for redemption prior to October 1,
1989, except (a) upon exercise by the Company of its option to prepay the Note
in whole in the event of (i) condemnation, damage or destruction of all or
substantially all of the Project to the extent provided in Section 7.1 of the
Agreement, (ii) the Agreement or the Note becoming unenforceable because of
constitutional change or judicial, legislative or administrative action, (iii)
unreasonable burdens or excessive liabilities are imposed on the Company with
respect to the operation of the Project, or (iv) a change in the economic
availability of raw materials, energy sources, operating supplies or facilities
necessary for the operation of the Project or such technological or other
changes which in the judgment of the Company render the operation of the
Project uneconomical, or (b) upon the obligation of the Company to prepay the
Note under the circumstances set forth in Sections 5.9 and 7.3 of the
Agreement. If called for redemption pursuant to the foregoing, the bonds may
be redeemed in whole at any time at a redemption price equal to the principal
amount of each bond to be redeemed plus accrued interest thereon to the date of
redemption. If called for redemption as provided in (b) of the foregoing, the
bonds must be redeemed in whole within the time provided in Section 5.9 of the
Agreement following the Determination of Taxability (as defined in Section 5.9
of the Agreement) at the foregoing redemption price, plus an additional amount
equal to the interest paid (or accrued) on the bonds, with respect to each
holder of a bond, during the period beginning on the date of the Event of
Taxability (as defined in Section 5.9 of the Agreement) and ending upon and
including the date of such redemption. If the outstanding bonds are called for
redemption as provided in (b) of the foregoing, the Trustee, pursuant to
Section 306 of the Indenture, will hold and disburse for the benefit of the
Last Holder (as defined in Section 306 of the Indenture) of each bond
outstanding at the time of the Event of Taxability which has been redeemed,
transferred or sold or will mature or will be
-23-
<PAGE> 65
redeemed, matured, transferred or sold prior to the time of such redemption, an
amount equal to the interest paid (or accrued) on such bond during the period
beginning on the date of the Event of Taxability and ending upon and including
the earlier of the date of the maturity, transfer or sale of such bond.
The bonds, if not redeemed before October 1, 1979 in
connection with the options referred to in Section 7.1 of the Agreement or by
mandatory redemption pursuant to the obligation referred to in Sections 5.9 and
7.3 of the Agreement, are subject to redemption by the Board prior to maturity
on any interest payment date on or after October 1, 1989 in whole or in part
(less than all of the bonds to be selected by the Trustee in the manner
provided in the Indenture) at the redemption prices (expressed as percentages
of principal amount) set forth in the table below plus accrued interest thereon
to the date of redemption:
Dates of Redemption Redemption Prices
------------------- -----------------
October 1, 1989 through September 30, 1990 103%
October 1, 1990 through September 30, 1991 102.70
October 1, 1991 through September 30, 1992 102.40
October 1, 1992 through September 30, 1993 102.10
October 1, 1993 through September 30, 1994 101.80
October 1, 1994 through September 30, 1995 101.50
October 1, 1995 through September 30, 1996 101.20
October 1, 1996 through September 30, 1997 100.90
October 1, 1997 through September 30, 1998 100.60
October 1, 1998 through September 30, 1999 100.30
October 1, 1999 and thereafter 100
In addition, the bonds are subject to mandatory sinking fund
redemption prior to maturity, in accordance with Section 305 of the Indenture,
in part, at 100% of the principal amount thereof, plus accrued interest to the
redemption date, in the following principal amounts and on the dates set forth
below (the October 1, 2009 amount to be paid rather than redeemed):
October 1 of the Year Principal Amount
--------------------- ----------------
2005 $840,000
2006 840,000
2007 840,000
2008 840,000
2009 840,000
Written notice of the redemption in whole or in part of this
bond shall be given by first class mail, postage prepaid, mailed not less than
thirty (30) days nor more than sixty (60) days
-24-
<PAGE> 66
prior to the redemption date to the registered owner hereof at the last address
shown on the registration books kept by the Trustee; provided, however, if
notice of redemption is required to be published pursuant to Section 304 of the
Indenture and such published notice covers the redemption, in whole or in part,
of this bond, and is published in accordance with such requirements, neither
failure to give notice by mail, nor any defect in any notice so mailed shall
affect the validity of the proceedings for redemption as it affects this bond.
Upon deposit with the Trustee of the moneys required to effect
any redemption, the bonds or portion thereof thus called and provided for shall
not bear interest after the redemption date and shall not be considered to be
outstanding or to have any other rights under the Indenture other than the
right to receive payment.
If less than the entire principal amount of this bond is to be
redeemed upon the surrender hereof, (a) appropriate endorsements shall be made
hereon by the Trustee to reflect such partial redemption, or (b) there shall be
issued to the registered owner, without charge therefor, for the unredeemed
balance hereof, at the option of the registered owner either coupon bonds or
registered bonds without coupons in any of the authorized denominations as more
fully set out in the Indenture.
The holder of this bond shall have no right to enforce the
provisions of the Indenture or to institute action to enforce the covenants
therein, or to take any action with respect to any Event of Default under the
Indenture, or to institute, appear in or defend any suit or other proceedings
with respect thereto, except as provided in the Indenture. In certain events,
on the conditions, in the manner and with the effect set forth in the
Indenture, the principal of all the bonds issued under the Indenture and then
outstanding may become or may be declared due and payable before the stated
maturity thereof, together with the interest accrued thereon. Modifications or
alterations of the Indenture, or of any supplements thereto, may be made only
to the extent and in the circumstances permitted by the Indenture.
It is hereby certified and recited that all acts, conditions
and things required by the Constitution and laws of the State of Tennessee to
happen, exist and be performed precedent to and in the issuance of this bond,
the execution of the Indenture and the adoption of the aforesaid resolution by
the Board have happened, exist and have been performed.
This bond shall not be entitled to any benefit under the
Indenture nor shall it become valid or obligatory for any purpose until it
shall have been authenticated by execution by the Trustee of the certificate
hereon endorsed.
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<PAGE> 67
IN WITNESS WHEREOF, The Industrial Development Board of the
County of Knox has caused this bond to be executed in its name by the facsimile
signature of its Chairman and its corporate seal to be impressed hereon and
attested by the manual signature of its Secretary, all as of the 1st day of
October, 1979.
THE INDUSTRIAL DEVELOPMENT
BOARD OF THE COUNTY OF KNOX
By: (Form)
-------------------------------
Chairman
(SEAL)
Attest:
(Form)
- ----------------------------------
Secretary
-26-
<PAGE> 68
(FORM OF ASSIGNMENT)
FOR VALUE RECEIVED
_______________________, the undersigned, hereby sells,
assigns and transfers unto ______________________________.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________________
_____________________________________________
__________________________________________________________________
__________________________________________________________________
the within bond of
THE INDUSTRIAL BOARD OF
THE COUNTY OF KNOX
and does hereby irrevocably constitute and appoint ______________ Attorney to
transfer the said bond on the books of the within named Board, with full power
of substitution in the premises.
_____________________________
Dated:
In the presence of:
______________________________
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<PAGE> 69
(FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
This bond is one of the bonds described in the above-mentioned
Trust Indenture.
THE FIRST NATIONAL BANK OF
COLUMBUS, as Trustee
By: (Form)
-----------------------------------
Authorized Officer
(FORM OF SCHEDULE OF PAYMENTS ON ACCOUNT OF PRINCIPAL)
Partial redemptions of the principal of this Bond have been
made as follows:
<TABLE>
<CAPTION>
DATE AMOUNT BALANCE OF AUTHORIZED
REDEEMED PRINCIPAL AMOUNT SIGNATURE
UNPAID
<S> <C> <C>
: : :
: : :
: : :
: : :
: : :
</TABLE>
(END OF FORM OF FULLY REGISTERED BOND)
-28-
<PAGE> 70
Section 206. MUTILATED, LOST, STOLEN OR DESTROYED BONDS OR
COUPONS. If any Bond is mutilated, lost, stolen or destroyed, the Board may
execute, and the Trustee shall thereupon authenticate and deliver, a new Bond
of like tenor in lieu of and in substitution for the Bond mutilated, lost,
stolen or destroyed, and any such new coupon Bond shall have attached thereto
coupons corresponding in all respects to those (if any) on the coupon and
mutilated, lost, stolen or destroyed; provided that, in the case of any
mutilated and, such mutilated Bond together with all coupons (if any) attached
thereto shall first be surrendered to the Board and the Trustee, and in the
case of any lost, stolen or destroyed Bond, there shall be first furnished to
the Board, the Company and the Trustee evidence satisfactory to each of them of
the ownership of such Bond and of such loss, or destruction, together with
indemnity satisfactory to each of them. In the event any coupon is mutilated,
lost, stolen or destroyed, the Board may issue a duplicate coupon the same
terms and conditions as those provided in the preceding sentence hereof
respecting the replacement of mutilated, lost, stolen or destroyed Bonds. If
any such Bond or coupon shall have matured, instead of issuing a new Bond or
coupon the Trustee may pay the same. The Board and the Trustee may charge the
holder or owner of such Bond or coupon with their reasonable fees and expenses
in this connection.
Section 207. REGISTRATION OF BONDS; PERSONS TREATED AS
OWNERS. Title to any coupon Bond (unless such Bond is registered in the manner
hereinafter provided) and to any interest coupon shall pass by delivery in the
same manner as a negotiable instrument payable to bearer. The Board shall
cause books for the registration and for the transfer of the Bonds as provided
in this Indenture to be kept by the Trustee which is hereby constituted and
appointed the Bond Registrar of the Board. At the option of the bearer, any
coupon Bond may be registered as to principal only or as to both principal and
interest on such books upon presentation thereof to the Trustee which shall
make notation of such registration thereon. Any coupon Bond registered as to
principal alone or as to both principal and interest may thereafter be
transferred only upon an assignment duly executed by the registered owner or
his attorney in such form as shall be satisfactory to the Trustee, such
transfer to be made on such books and endorsed on such Bond by the Trustee.
Such transfer may be to bearer and thereby transferability by delivery shall be
restored, subject, however, to successive registrations and transfers as
before. The principal of any Bond registered as to principal alone, unless
registered to bearer, shall be payable only to or upon the order of the
registered owner or his legal representative, but the coupons appertaining to
any coupon Bond registered as to principal alone shall remain payable to bearer
notwithstanding such registration.
-29-
<PAGE> 71
The principal of and interest on any Bond registered as to
both principal and interest, unless registered to bearer, shall be payable only
to or upon the order of the registered owner or his legal representative. Upon
surrender for transfer of any fully registered Bond at the principal office of
the Trustee, the Board shall execute and the Trustee shall authenticate and
deliver in the name of the transferee or transferees a new fully registered
Bond or fully registered Bonds in the same aggregate principal amount and of
any authorized denomination or denominations.
Fully registered Bonds may be exchanged at the principal
office of the Trustee for an equal aggregate principal amount of coupon Bonds
(or for an equal aggregate principal amount of fully registered Bonds of any
authorized denomination of denominations), and coupon Bonds may be exchanged at
the principal office of the Trustee for an equal aggregate principal amount of
fully registered Bonds of any authorized denomination or denominations. All
coupon Bonds surrendered for exchange and delivered in exchange shall have
attached thereto all unmatured coupons appertaining thereto (together with any
matured coupons in default appertaining thereto). The Board shall execute and
the Trustee shall authenticate and deliver coupon Bonds which the bondholder
making the exchange is entitled to receive, bearing numbers nor,
contemporaneously then Outstanding. The execution by the Board of any fully
registered Bond of any authorized denomination shall constitute full and due
authorization of the issuance of such Bond, and the Trustee shall thereby be
authorized to authenticate and deliver such fully registered Bond. The Trustee
shall not be required to transfer or exchange any fully registered Bond or any
coupon Bond registered as to principal alone or as to both principal and
interest during the period of fifteen (15) days next preceding any interest
payment date of such Bond nor to transfer or exchange any Bond after the
publication of notice calling such Bond for redemption has been made, nor
during the period of fifteen (15) days next preceding publication of a notice
of redemption of any Bonds.
As to any Bond registered as to principal alone or as to both
principal and interest or as to any fully registered Bond, the person in whose
name the same shall be registered shall be deemed and regarded as the absolute
owner thereof for all purposes, and payment of or on account of the principal
of any such coupon Bond registered as to principal alone or as to both
principal and interest or payment of either principal or interest on any fully
registered Bond shall be made only to or upon the order of the registered owner
thereof or his legal representative, but such registration may be changed as
hereinabove provided. All such payments shall be valid and effectual to
satisfy and discharge the liability upon such Bond to the extent of the sum or
sums so paid. The Board and the Trustee may deem and treat the bearer of any
-30-
<PAGE> 72
coupon Bond which shall not at the time be registered as to principal (except
to bearer), and the bearer of any coupon appertaining to any Bond, whether such
Bond be registered as to principal or not, as the absolute owner of such Bond
or coupon, as the case may be, whether such Bond or coupon shall be overdue or
not, for the purpose of receiving payment thereof and for all other purposes
whatsoever, and neither the Board nor the Trustee shall be affected by any
notice to the contrary.
The Board may charge the actual cost of printing such Bond, if
any, for each new Bond issued upon any exchange or transfer. In each case the
Trustee shall require the payment by the bondholder requesting exchange or
transfer of any tax or other governmental charge required to be paid with
respect to such exchange or transfer.
Section 208. CANCELLATION. All Bonds and coupons which have
been surrendered for the purpose of payment (including Bonds which have been
redeemed and unmatured coupons appertaining thereto) shall be cancelled and
cremated or otherwise destroyed by the Trustee and shall not be reissued and a
certificate of cremation or destruction evidencing such cremation or
destruction shall be furnished by the Trustee to the Board and the Company.
Section 209. UNPAID COUPONS. All unpaid coupons which
appertain to coupon Bonds called for redemption and which have become payable
on or prior to the redemption date shall continue to be payable to the bearers
severally and respectively upon the presentation and surrender of such coupons.
Section 210. DELIVERY OF BONDS. Upon the execution and
delivery of this Indenture, the Board shall execute the Bonds and deliver them
to the Trustee, and the Trustee shall authenticate the Bonds and deliver them
to the initial purchasers thereof as shall be directed by the Board as
hereinafter in this Section 210 provided.
Prior to the delivery by the Trustee of any of the Bonds,
there shall be filed with the Trustee:
(a) A copy, duly certified by the Secretary of the Board of
Directors of the Board, of the resolution adopted by the Board
authorizing the issuance of the Bonds, the execution and delivery of
this Indenture and the Agreement and the acceptance of the Note;
(b) An executed counterpart of this Indenture, the Agreement
and the original executed Note;
(c) An executed counterpart of the Guaranty Agreement;
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(d) A copy of the Financing Statement filed or forwarded for
filing to perfect the security interest created herein;
(e) An unqualified approving opinion of a firm of nationally
recognized bond attorneys satisfactory to the Trustee with respect to
the Bonds; and
(f) A request and authorization to the Trustee on behalf of
the Board and signed by its Chairman and Secretary of its Board of
Directors to authenticate and deliver the Bonds to the purchasers
therein identified upon payment to the Trustee a specified sum plus
accrued interest to the date of such delivery, and directing the
Trustee to deposit the proceeds derived from the sale of the Bonds in
accordance with the provisions of Section 502 hereof.
ARTICLE III
REDEMPTION OF BONDS BEFORE MATURITY
Section 301. EXTRAORDINARY REDEMPTION OF BONDS. The Bonds
may not be called for redemption prior to October 1, 1989, except in the event
(a) of exercise by the Company of its option to prepay the Note in whole as
provided in Section 7.1 of the Agreement or (b) the Company is required to
prepay the Note in whole as provided in Sections 5.9 and 7.3 of the Agreement.
If called for redemption pursuant to (a) of the foregoing, the Bonds may be
redeemed in whole at any time at a redemption price equal to the principal
amount of each Bond to be redeemed plus accrued interests to the date of
redemption. If called for redemption as provided in (b) of the foregoing, the
Bonds must be redeemed in whole within the time provided in Section 5.9 of the
Agreement following the Determination of Taxability (as defined in Section 5.9
of the Agreement) at the foregoing redemption price, plus an additional amount
equal to the interest paid (or accrued) on the Bonds, with respect to each
holder of a Bond, during the period beginning on the date of the Event of
Taxability (as defined in Section 5.9 of the Agreement) and ending upon and
including the date of such redemption. If the outstanding Bonds are called for
redemption as provided in (b) of the foregoing, the Trustee, pursuant to
Section 306 hereof, will hold and disburse for the benefit of the Last Holder
(as defined in Section 306 hereof) of each Bond outstanding at the time of the
Event of Taxability which has matured or has been redeemed, transferred or sold
or will mature or will be redeemed, transferred or sold prior to the time of
such redemption, an amount equal to the interest paid (or accrued) on such Bond
during the period beginning on the date of the Event of Taxability and ending
upon and including the earlier of the date of the maturity, redemption,
transfer or sale of such Bond.
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Section 302. OPTIONAL REDEMPTION OF BONDS. The Bonds, if not
redeemed before October 1, 1989, in connection with the exercise of the option
referred to in Section 7.1 of the Agreement or by mandatory redemption pursuant
to the obligation referred to in Sections 5.9 and 7.3 of the Agreement, are
subject to redemption by the Board prior to maturity on any interest payment
date on or after October 1, 1989, in whole or in part (less than all of the
Bonds to be selected by the Trustee as provided in Section 303 hereof), at the
redemption prices (expressed as percentages of principal amount) set forth in
the table below plus accrued interest thereon to the date of redemption:
Dates of Redemption Redemption Prices
------------------- -----------------
October 1, 1989 through September 30, 1990 103%
October 1, 1990 through September 30, 1991 102.70
October 1, 1991 through September 30, 1992 102.40
October 1, 1992 through September 30, 1993 102.10
October 1, 1993 through September 30, 1994 101.80
October 1, 1994 through September 30, 1995 101.50
October 1, 1995 through September 30, 1996 101.20
October 1, 1996 through September 30, 1997 100.90
October 1, 1997 through September 30, 1998 100.60
October 1, 1998 through September 30, 1999 100.30
October 1, 1999 and thereafter 100
In addition, the Bonds are subject to mandatory sinking fund
redemption prior to maturity on the dates and in the amounts provided in
Section 305 hereof.
Section 303. PRO RATA REDEMPTION. With respect to any
partial redemption of Bonds, the particular Bonds to be redeemed shall be
selected by the Trustee in the following manner:
(a) If none of such Bonds at the time outstanding are
registered Bonds without coupons, the particular Bonds to be redeemed
shall be determined by lot or otherwise in such manner as the Trustee
in its discretion shall determine to be fair.
(b) If any of such Bonds at the time outstanding are
registered Bonds without coupons, the Trustee,
(1) shall first prorate the principal amount of the
Bonds to be redeemed between (x) registered Bonds without
coupons, and (y) coupon Bonds (whether or not registered), in
proportion to the respective principal amounts thereof at the
time outstanding;
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(2) shall then determine by lot or otherwise in such
manner as the Trustee in its discretion shall determine to be
fair the Particular coupon Bonds (whether or not registered),
which are to be redeemed and such Bonds shall be of the
aggregate principal amount prorated to such Bonds pursuant to
clause (y) of (b)(1) above;
(3) shall then prorate the aggregate principal
amount of registered Bonds without coupons to be redeemed as
determined pursuant to clause (x) of (b)(1) above, among all
owners (for this purpose all registered Bonds without coupons
registered in the name of the same owner shall be aggregated
and treated as a single Bond held by such owner) of such
registered Bonds without coupons, in proportion to the
principal amount of such Bonds registered in the name of each
such owner, according to such method as the Trustee shall deem
proper in its discretion, and shall then designate the
particular registered Bonds without coupons, or portions
thereof to be redeemed;
provided, however, that in any such pro rating the Trustee shall,
according to such method as it shall deem proper in its discretion,
make such adjustments by increasing or decreasing by not more than
$5,000 the amount which would be allocable on the basis of exact
proportion to coupon Bonds (whether or not registered) or to
registered Bonds without coupons, or to any one or more owners of
registered Bonds without coupons, as may be necessary to the end that
the principal amount so pro rated shall be in each instance an
integral multiple of $5,000. On each subsequent partial redemption of
Bonds, the Trustee shall make such adjustments, to the extent
practicable, as will equalize on a cumulative basis, the prorations as
between coupon Bonds (whether or not registered) and registered Bonds
without coupons, and among owners of registered Bonds without coupons.
Section 304. NOTICE OF REDEMPTION OF BONDS. If all of the
Bonds to be redeemed (in whole or in part) are registered Bonds without coupons
or coupon Bonds registered as to principal (other than to bearer), notice of
the redemption shall be given by first class mail, postage prepaid, mailed not
less than thirty (30) nor more than sixty (60) days prior to the redemption
date to each registered owner of the Bonds or portions thereof to be redeemed
at the last address shown on the registration books kept by the Trustee. In
all other cases notice of the call for redemption identifying the Bonds, or
portions thereof, to be redeemed shall be given by publication at least once in
a newspaper or financial journal of general circulation among dealers in
municipal securities in the City of New York, New York, which notice shall be
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published not less than thirty (30) nor more than sixty (60) days prior to the
redemption date. If notice by publication shall be required, notice shall also
be mailed as aforesaid to the registered owner of each Bond to be redeemed in
whole or in part, but if notice is published as aforesaid, neither failure to
give notice by mail nor defect in any notice so mailed shall affect the
validity of the proceeding for redemption.
At least one (1) business day prior to the redemption date,
sufficient moneys shall be deposited in the Bond Fund to pay the principal
amount of the Bonds called for redemption and accrued interest thereon to the
redemption date and the redemption premium, if any. Bonds or portions thereof
thus called and provided for as hereinabove specified shall not bear interest
after the redemption date and shall not be considered to be outstanding or to
have any other rights under the Indenture other than the right to receive
payment.
If, because of the temporary or permanent suspension of the
publication or general circulation of any newspaper or financial journal or for
any other reason, it is impossible or impractical to publish such notice of
call for redemption in the manner hereinabove provided, then such publication
in lieu thereof as shall be made with the approval of the Trustee shall
constitute a sufficient publication of notice.
In the case of any partial redemption of registered Bonds
without coupons pursuant to Section 303 hereof, upon notice of intention to
effect any such partial redemption, the owner of any registered Bond without
coupons subject to such a partial redemption shall forthwith surrender each
Bond to the Trustee (1) for payment of the redemption price (including the
redemption premium (if any) and interest to the date fixed for redemption) of
the portion thereof called for redemption, and (2) (i) for appropriate
endorsement thereon to reflect such redemption, or (ii) in exchange for the
unredeemed balance, at the option of the registered owner, for either coupon
Bonds or registered coupons in any authorized denominations in the aggregate
principal amount of the unredeemed balance of the principal amount of such
registered Bond without coupons. A new Bond or Bonds representing the
unredeemed balance of the principal of such registered Bond without coupons
shall be issued to the registered owner thereof without charge therefor.
Section 305. SINKING FUND. As and for the retirement of
Bonds, the payments required to be made by the Company on the Note on or prior
to October 1, 2005 and on or prior to each October 1 thereafter to and
including October 1, 2009 (each such day is hereinafter referred to as a
"sinking fund payment date"), shall include sufficient moneys to redeem (after
credit as provided
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below) the following principal amounts of Bonds (the October 1, 2009 amount to
be paid rather than redeemed):
October 1 of the Year Principal Amount
--------------------- ----------------
2005 $840,000
2006 840,000
2007 840,000
2008 840,000
2009 840,000
At its option, to be exercised (but only with the written
consent of the Company) on or before the forty-fifth day next preceding any
such sinking fund payment date, the Board may (a) deliver to the Trustee for
cancellation Bonds in any aggregate principal amount desired with all unmatured
coupons (if any) attached, or (b) receive a credit in respect of its sinking
fund redemption obligation for any Bonds which prior to its said date have been
redeemed (otherwise than through the operation of the sinking fund) to and
cancelled by the Trustee and not theretofore applied as a credit against any
sinking fund redemption obligation. Each Bond so delivered or previously
redeemed shall be credited by the Trustee at 100% of the principal amount
thereof on the obligation of the Board on such sinking fund redemption date,
and any excess shall be credited on future until sinking fund obligations in
chronological order and the principal amount of such Bonds to be redeemed by
operation of the sinking fund shall be accordingly reduced.
The Board will on or before the forty-fifth day next preceding
each sinking fund redemption date furnish the Trustee and the Company with its
certificate indicating whether or not and to what extent the provisions of (a)
and/or (b) of the preceding paragraph are to be availed with respect to such
sinking fund payment and confirm that moneys equal to the balance of such
sinking fund payment will be paid on or before the next succeeding sinking fund
payment date.
The Trustee shall redeem in the manner provided in Section
304, such an aggregate principal amount of the Bonds at 100% of the principal
amount thereof plus accrued interest to the redemption date as will exhaust as
nearly as practicable such cash sinking fund payment. Such redemption shall be
by lot in such manner as may be designated by the Trustee.
Section 306. ADDITIONAL PAYMENTS UPON DETERMINATION OF
TAXABILITY. If the outstanding Bonds are called for redemption pursuant to
Section 301 of this Indenture as a result of the Company being required to
prepay the Note under the circumstances set forth in Sections 5.9 and 7.3 of
the Agreement, the Trustee
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will hold, administer and disburse that part of the purchase price received by
the Trustee from the Company relating to Bonds which were outstanding at the
time of the Event of Taxability (as defined in Section 5.9 of the Agreement)
but which matured or were redeemed, transferred or sold or will mature or will
be redeemed, transferred or sold prior to the redemption date, for the benefit
of the Last Holders (as hereinafter defined) of such Bonds. The Trustee shall
pay to the Last Holder of each such Bond an amount equal to the interest paid
(or accrued) on the Bonds during the period beginning on the date of the Event
of Taxability (as defined in Section 5.9 of the Agreement) and ending on the
earlier the date of the maturity, redemption, transfer or sale of such Bonds.
A "Last Holder" of a particular Bond is the person who was the registered owner
of such Bond on the date maturity or the date of the redemption, transfer or
sale thereof, as evidenced by the registration books kept by the Trustee, as
Bond Registrar, or if such Bond was not so registered on the date of maturity
or the date of the redemption, transfer or sale thereof, the Person (if any)
whose name and address shall appear on the list provided for by Section 404 of
this Indenture as the last known holder of such Bond on the date of maturity or
the date of the redemption, transfer or sale thereof. If the Last Holder of
any such Bond cannot be ascertained by the Trustee in the manner aforesaid,
then the aggregate amount of money held for the benefit of such Last Holder
shall belong to and be repaid to the Company by the Trustee as an overpayment
of the prepayment price of the Note.
ARTICLE IV
GENERAL COVENANTS
Section 401. PAYMENT OF PRINCIPAL AND INTEREST; LIMITED
OBLIGATION. The Board covenants that it will promptly pay the principal
(whether at the stated maturity of or by mandatory redemption as provided
herein) of and interest on the Bonds at the place, on the dates and in the
manner provided herein and in the Bonds and in the coupons (if, any) as
pertaining thereto according to the true intent and meaning thereof. The Bonds
are limited obligations of the Board payable solely out of the payments to be
received by the Board pursuant to the Agreement and the Note, which payments
are hereby specifically assigned and pledged to the payment thereof in the
manner and to the extent herein specified, and nothing in the Bonds or coupons
or in this Indenture should be considered to be an assignment or pledge of any
other funds or assets of the Board other than the Trust Estate. Neither the
State of Tennessee nor any political subdivision thereof, nor the Board, shall
be obligated to pay the Bonds or the interest thereon or other costs incident
thereto except from the payments pledged therefor, and the Bonds and the
redemption premium (if any) and the
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interest thereon shall never constitute an indebtedness of the Board or of the
County or of the State of Tennessee within the meaning of any State
constitutional provision or statutory limitation and shall not constitute nor
give rise to a pecuniary liability of the Board or of the County or of said
State or a charge against the general credit or taxing powers of the County or
said State. The principal of and interest on the Bonds are payable solely from
the Bond Fund.
Section 402. PERFORMANCE OF COVENANTS; BOARD. The Board
covenants that it will faithfully perform at all times any and all covenants,
agreements, undertakings, stipulations and provisions contained in this
Indenture, in any and every Bond, and in all proceedings of the Board
pertaining thereto. The Board covenants that it is duly authorized under the
Constitution and laws of the State of Tennessee to issue the Bonds, to execute,
deliver and perform this Indenture and to assign and pledge and to grant the
security interest herein created in the Trust Estate in the manner and to the
extent herein set forth; that all action on its part for the issuance of the
Bonds and the execution and delivery of this Indenture has been duly and
effectively taken.
Section 403. RECORDATION OF FINANCING STATEMENT; PRIORITY OF
PLEDGE AND SECURITY INTEREST. The Board covenants that it will cause the
Financing Statement to be recorded and filed in such manner and at such places
as may be required by law in order to perfect the security interest created
herein in the Trust Estate.
The pledge herein made of the payments to be received under
the Note and the security interest created herein with respect thereto
constitute a first and prior pledge thereof and a perfected security interest
therein and shall not be impaired by the Board or the Trustee. Said payments
shall not otherwise be pledged, and, except as provided herein, no persons
shall have any rights with respect thereto.
Section 404. LIST OF BONDHOLDERS. To the extent that such
information be known to the Trustee under the terms of this Section 404, it
will keep on file at its principal office a list of names and addresses of the
last known holders of all Bonds which are payable to bearer and believed to be
held by each of such last known holders. Any bondholder may request that his
name and address be placed on said list by filing a request with the Trustee,
which request shall include a statement of the principal written amount of
Bonds held by such holder and the numbers of such Bonds. The Trustee shall be
under no responsibility with regard to the accuracy of said list. At
reasonable times and under reasonable regulations established by the Trustee,
said list may be inspected and copied by the Company or by holders (or a
designated
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representative thereof) of twenty-five percent (25%) or more in principal
amount of the Bonds, such ownership and the authority of any such designated
representative to be evidenced to the satisfaction of the Trustee.
Section 405. RIGHTS UNDER AGREEMENT AND NOTE. The Agreement
and Note set forth the obligations of the Board and the Company, including a
provision that subsequent to the initial issuance of the Bonds and prior to
Payment in Full of the Bonds, neither the Agreement nor the Note may be
effectively amended, changed, modified, altered or terminated without the
written consent of the Trustee, and reference is hereby made to the Agreement
and the Note for detailed statements of the obligations of the Board and the
Company thereunder. The Board agrees that the Trustee in its own name or in
the name of the Board may enforce all rights of the Board and all obligations
of the Company provided for in the Agreement (except certain indemnification
rights provided in Section 5.2 thereof) and the Note for and on behalf of the
bondholders, whether or not the Board is in default hereunder.
Section 406. BOARD'S FLECTION TO ISSUE BONDS PURSUANT TO
SECTION 103(B)(6)(D) OF THE CODE. Prior to the issuance and delivery of the
Bonds, the Board will have made all necessary filings to effect an election
with respect to the Bonds under Section 103(b)(6)(D) of the Code.
ARTICLE V
CUSTODY AND APPLICATION OF PROCEEDS OF BONDS
Section 501. CREATION OF THE PROJECT FUND. There is hereby
created by the Board and ordered established with the Trustee a trust fund to
be designated "The Industrial Development Board of the County of Knox
Industrial Development Project Fund General Mills, Inc. Project Series 1979."
Section 502. DISPOSITION OF BOND PROCEEDS. Upon the issuance
and delivery Bonds, the proceeds of the sale of such Bonds shall be deposited
as follows: (a) an amount equal to the accrued interest on the Bonds shall be
deposited in the Bond Fund and (b) the balance of said proceeds shall be
deposited in the Project Fund.
Section 503. DISBURSEMENTS FROM PROJECT FUND. Moneys in the
Project Fund shall be disbursed in accordance with the provisions of the
Agreement. The Board agrees to take promptly all necessary and appropriate
action in approving and ordering all such disbursements. The Trustee is hereby
authorized and directed to issue its checks for each disbursement from the
Project Fund
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requested in accordance with the provisions of the Agreement, and the Trustee
shall be relieved of all liability with respect to making disbursements from
the Project Fund in accordance with the provisions of the Agreement.
The Trustee shall maintain adequate records pertaining to the
Project Fund and all disbursements therefrom, and after a certificate of
payment of all costs of the Project has been filed as provided in Section 504
hereof, the Trustee shall file an accounting thereof with the Board and with
the Company.
Section 504. PAYMENT OF COSTS. The payment of all costs and
expenses permitted to be paid from the Project Fund in connection with the
acquisition, construction and installation of the Project and the issuance of
the Bonds shall be evidenced by the filing with the Trustee of the certificate
of completion required by the provisions of the Agreement. As soon as
practicable, any moneys remaining in the Project Fund shall, in accordance with
the provisions of Section 3.3(e) of the Agreement, be paid by the Trustee into
the Bond Fund with written advice to the Board and the Company of such action
unless the Company shall have directed the Trustee to purchase Bonds for the
purpose of cancellation in accordance with the provisions of the Agreement.
ARTICLE VI
REVENUES AND FUNDS
Section 601. CREATION OF THE BOND FUND. There is hereby
created by the Board and ordered established with the Trustee a trust fund to
be designated "The Industrial Development Board of the County of Knox
Industrial Bond Fund - General Mills, Inc. Project - Series 1979" which shall
be used to pay the principal of and interest on the Bonds.
Section 602. PAYMENTS INTO THE BOND FUND. There shall be
paid into the Bond Fund all accrued interest received upon the sale of the
Bonds. In addition, there shall be paid into the Bond Fund, as and when
received, (a) any moneys required to be paid therein from the Project Fund as
provided in the Agreement, (b) all payments made under the Note and (c) all
other moneys received by the Trustee under and pursuant to any of the
provisions of the Agreement or the Note when accompanied by the directions that
such moneys are to be paid into the Bond Fund. The Board covenants that so
long as any of the Bonds are outstanding it will pay, or cause to be paid, into
the Bond Fund sufficient moneys from the payments to be received pursuant to
the Note to pay promptly the principal of and interest on the Bonds as the same
become due and payable, and to this end, the Board covenants and agrees that if
there
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occurs an Event of Default under the Agreement or the Note, the Board will
fully cooperate with the Trustee and with the bondholders to the end of fully
protecting the rights and security of the bondholders.
Section 603. USE OF MONEYS IN THE BOND FUND. Except as
provided in Section 608 hereof, moneys in the Bond Fund shall be used solely
for the payment of the principal of and interest on the Bonds, whether at
stated maturity, at the date fixed in Section 305 hereof for mandatory sinking
fund redemption prior to stated maturity, or upon maturity by declaration. At
the direction of the Company, any moneys in the Bond Fund may be used to redeem
or purchase a portion of the Bonds so long as the Company is in default with
respect to any payments due under the Note and to the extent that such moneys
are in excess of the amount required for the payment of Bonds theretofore
matured or called for redemption and the payment of interest then due in all
cases where Bonds or coupons have not been presented for payment.
Section 604. CUSTODY OF THE BOND FUND. The Bond Fund shall
be held by the Trustee as a trust fund for the benefit of the bondholders. The
Board hereby authorizes and directs the Trustee to withdraw, from time to time,
sufficient moneys from the Bond Fund to pay the principal of and interest on
the Bonds as the same become due and payable, which authorization and direction
the Trustee hereby accepts.
Section 605. NON-PRESENTMENT OF BONDS OR COUPONS. If any
Bond shall not be presented for payment when the principal thereof becomes due,
either at stated maturity, at the date fixed for redemption prior to stated
maturity, or upon maturity by declaration or if any coupon shall not be
presented for payment at the due date thereof provided moneys sufficient to pay
such Bond or coupon shall have been made available to the Trustee for the
benefit of the holder thereof, all liability of the Board to the holder hereof
for the payment of such Bond or coupon, as the case may be, shall forthwith
cease, determine and be completely discharged, and thereupon it shall be the
duty of the Trustee to hold such moneys, without liability for interest
thereon, for the benefit of the holder of such Bond, or the holder of such
coupon, as the case may be, who shall thereafter be restricted exclusively to
such moneys, for any claim of whatever nature or his part under this Indenture
or on, or with respect to, such Bond or coupon, subject to and requirements
imposed by law as may be applicable to such Bond or coupon.
Section 606. TRUSTEE'S AND PAYING AGENTS' FEES, CHARGES AND
EXPENSES. Pursuant to the terms of the Agreement, the Company has agreed to
pay directly to the Trustee until Payment in Full of
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the Bonds shall have been made: (i) an amount equal to the annual fee of the
Trustee for the Ordinary Services of the Trustee rendered and its Ordinary
Expenses incurred under this Indenture, (ii) the reasonable fees and charges of
the Trustee and any paying agents for acting as paying agents, and the
reasonable fees of Trustee's Counsel, as and when the same become due, and
(iii) the reasonable fees and charges of the Trustee for Extraordinary Services
rendered by it and Extraordinary, Expenses incurred by it under this Indenture,
as and when the same become due. It is further understood and agreed that the
initial or acceptance fees of the Trustee will be paid to the Trustee from the
Project Fund as and when the same shall become due. The Company may contest in
good faith the necessity for any such Extraordinary Services and Extraordinary
Expenses and the reasonableness of any of the fees or charges referred to
herein.
Section 607. MONEYS TO BE HELD IN TRUST. All moneys paid
over to the Trustee for the account of the Bond Fund or the Project Fund under
any provision of this Indenture shall be held in trust by the Trustee, and
except for moneys held by the Trustee for the redemption of Bonds, notice of
the redemption of which has been duly given, shall, while held by the Trustee,
constitute part of the Trust Estate.
Section 608. REPAYMENT TO THE COMPANY FROM THE BOND FUND.
Any moneys remaining in the Bond Fund after Payment in Full of the Bonds and
payment of the fees.
ARTICLE VIII
DISCHARGE OF LIEN
Section 801. DISCHARGE OF LIEN AND SECURITY INTEREST. Upon
Payment in full of the Bonds, these presents and the Trust Estate and the
security interest therein shall cease, determine and be void, and thereupon the
Trustee shall cancel and deliver the Note to the Company, execute and deliver
to the Board such instruments in writing as shall be required to cancel and
discharge this Indenture and the security interest and assign and deliver to
the Board so much of the Trust Estate as may be in its possession or subject to
its control, except funds in the Project Fund or the Bond Fund required to be
paid to the Company pursuant to Section 8.5 of the Agreement, cash or
securities deposited with the Trustee pursuant to Section 802 hereof and cash
held by the Trustee for the payment of the principal of and interest on the
Bonds which have become due but have not yet been presented for payment.
If the Board shall pay or cause to be paid (i) the principal
of and interest on all of the Bonds at the times and in
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the manner stipulated therein and herein and (ii) all Trustee's and paying
agents' fees and expenses due or to become due in connection with the payment
of such Bonds, or all provision for the payment of such Bonds shall have been
made as provided in Section 802 hereof, then these presents and the Trust
Estate and the security interest therein shall be considered to have been
discharged and such Bonds shall cease to be entitled to the lien of this
Indenture.
Section 802. PROVISION FOR PAYMENT OF BONDS. All of the
Bonds shall be deemed to have been paid and shall cease to be deemed
outstanding and entitled to the lien of this Indenture if (a) in case any of
such Bonds are to be redeemed on any date prior to their maturity, the Board
shall have given to the Trustee in form satisfactory to the Trustee irrevocable
instructions to redeem such Bonds on such date and either evidence satisfactory
to the Trustee that all redemption notices required by the Indenture have been
given or irrevocable power authorizing the Trustee to give such redemption
notices, (b) there shall have been irrevocably deposited with the Trustee
either moneys in an amount which shall be sufficient, or Government
Obligations, the principal of and interest on which when due will provide
moneys in an amount which, together with the moneys, if any, deposited with or
held by the Trustee at the same time and available for such purpose pursuant to
this Indenture, shall be sufficient to pay the principal of and interest due
and to become due on such Bonds on or prior to the redemption date or maturity
date thereof, as the case may be, and (c) there shall have been paid to the
Trustee all Trustee's and paying agents, fees and expenses due or to become due
in connection with the payment or redemption of any such Bonds.
Section 803. NOTATION UPON PAYMENT OF BONDS. Upon the
payment of any Bond, appropriate notation of such payment shall be made by the
Trustee on the reverse side of the Note.
ARTICLE IX
DEFAULT PROVISIONS AND REMEDIES
OF TRUSTEE AND BONDHOLDERS
Section 901. DEFAULTS; EVENTS OF DEFAULT. If any of the
following events occurs, subject to the terms of Section 911 hereof, it is
hereby defined as and declared to be and to constitute an Event of Default:
(a) default in the due and punctual payment of any interest
on any Bond;
(b) default in the due and punctual payment of the principal
of or redemption premium (if any) on any Bond,
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whether at the maturity date or redemption date prior to maturity
(including mandatory sinking fund redemption pursuant to Section 305
hereof) or upon maturity thereof by declaration;
(c) default in the performance or observance of any other of
the covenants, agreements or conditions on the part of the Board in
this Indenture or in the Bonds contained;
(d) the occurrence of an "Event of Default" under the
Agreement or the Note; or
(e) the occurrence of an "Event of Default" under the
Guaranty Agreement.
Section 902. ACCELERATION. Upon the occurrence of an Event
of Default, the Trustee may, and upon the request of the holders of not less
than twenty-five percent (25%) in principal amount of the Bonds shall, by
notice in writing delivered to the Issuer, declare the principal of all Bonds
and the interest accrued thereon to the date of such declaration to be
immediately due and payable, and the same shall thereupon become and be
immediately due and payable. Upon any such declaration hereunder, the Board
and the Trustee shall immediately declare all payments on the Note to be
immediately due and payable.
Section 903. OTHER REMEDIES. Upon the occurrence of an Event
of Default, the Trustee shall have the power to proceed with any right or
remedy granted by the Constitution and laws of the State of Tennessee, as it
may deem best, including any suit, action or special proceeding in equity or at
law for the specific performance of any covenant or agreement contained herein
or for the enforcement of any proper legal or equitable remedy as the Trustee
shall deem most effectual to protect the rights aforesaid, insofar as such may
be authorized by law. The rights herein specified are to be cumulative to all
other available rights, remedies or powers and shall not exclude any such
rights, remedies or powers. Without intending to limit the foregoing rights,
remedies and powers by virtue of such specification, the Trustee is authorized
to exercise any and all rights available from time to time under the Uniform
Commercial Code of Tennessee, including the right to further assign the Board's
right, title and interest in the Agreement to a third party.
Section 904. RIGHTS OF BONDHOLDERS. Upon the occurrence of
an Event of Default and if requested so to do by the holders of twenty-five
percent (25%) in principal amount of Bonds 'and indemnified as provided in
Section 1001(1) hereof, the Trustee shall be obliged to exercise such one or
more of the rights and remedies conferred by this Article as the Trustee, being
advised by
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Counsel, shall deem most expedient in the interests of the bondholders.
No right or remedy by the terms hereof conferred upon or
reserved to the to the Trustee (or to the bondholders) is intended to be
exclusive of any other right or remedy, but each and every such right and
remedy shall be cumulative and shall be in addition to right or remedy given to
the Trustee or to the bondholders or now or hereafter existing at law, in
equity or by statute.
No delay or omission to exercise any right or remedy accruing
upon any Event Default shall impair any such right or remedy or shall be
construed to be a waiver of y such Event of Default or acquiescence therein;
and every such right and remedy may exercised from time to time and as often as
may be deemed expedient.
No waiver of any Event of Default hereunder, whether by the
Trustee or by the bondholders, shall extend to or shall affect any subsequent
Event of Default or shall impair any rights or remedies consequent thereon.
Section 905. RIGHT OF BONDHOLDERS TO DIRECT PROCEEDINGS.
Anything in this Indenture to the contrary notwithstanding, the holders of a
majority in principal amount of Bonds shall have the right, at any time, by an
instrument or instruments in writing executed and delivered to the Trustee, to
direct the method and place of conducting all proceedings to be taken in
connection with the enforcement of the terms and conditions of this Indenture;
provided, that such direction shall not be otherwise than in accordance with
the provisions of law and of this Indenture.
Section 906. APPLICATION OF MONEYS. All moneys received by
the Trustee pursuant to any right given or action taken under the provisions of
this Article shall, after payment of the costs and expenses of the proceedings
resulting in the collection of such moneys, the expenses, liabilities and
advances incurred or made by the Trustee in connection with such proceedings
and the outstanding fees and expenses of the Trustee incurred under this
Indenture, be deposited in the Bond Fund and all moneys in the Bond Fund shall
be applied as follows:
(a) Unless the principal of all the Bonds shall have become
or shall have been declared due and payable, all such moneys shall be
applied:
First - to the payment to the persons entitled
thereto of all installments of interest then due on the Bonds
(other than installments of interest on Bonds with respect to
the payment of which moneys and/or Government
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Obligations are held pursuant to the provisions of this
Indenture), in the order of the maturity of the installments of
such interest and, if the amount available shall not be
sufficient to pay in full any particular installment, then to
the payment ratably, according to the amounts due on such
installment, to the persons entitled thereto, without any
discrimination or preference; and
Second - To the payment to the persons entitled
thereto of the unpaid principal of any of the Bonds which
shall have become due (other than Bonds called for redemption
for the payment of which moneys and/or Government Obligations
are held pursuant to the provisions of this Indenture), in the
order of their due dates, with interest on such Bonds from the
respective dates upon which they become due and, if the amount
available shall not be sufficient to pay in full the Bonds due
on any particular date, together with such interest, then to
the payment ratably, according to the amount of principal due
on such date, to the persons entitled thereto without any
discrimination or preference.
(b) If the principal of all the Bonds shall have become due
or shall have been declared due and payable, all such moneys shall be
applied to the payment of the principal and interest then due and
unpaid upon the Bonds (other than principal and interest on Bonds with
respect to which moneys and/or Government Obligations are held
pursuant to the provisions of the Indenture), without preference or
priority of principal over interest or of interest over principal or
of any installment of interest over any other installment of interest,
or of any Bond over any other Bond, ratably, according to the amounts
due respectively for principal and interest, to the persons entitled
thereto without any discrimination or preference.
(c) If the principal of all the Bonds shall have been
declared due and payable, and if such declaration shall thereafter
have been rescinded and annulled under the provisions of this Article,
then, subject to the provisions of paragraph (b) of this Section, in
the event that the principal of all the Bonds shall later become due
or be declared due and payable, the moneys shall be applied in
accordance with the provisions of paragraph (a) of this Section.
Whenever moneys are to be applied pursuant to the provisions
of this Section, such moneys shall be applied at such times, and from time to
time, as the Trustee shall determine,
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having due regard to the amount of such moneys available for application and
the likelihood of additional moneys becoming available for such application in
the future. Whenever the Trustee shall apply such funds, it shall fix the date
(which shall be an interest payment date unless it shall deem another date more
suitable) upon which such application is to be made and upon the date interest
on the amounts of principal to be paid on such dates shall cease to accrue.
The Trustee shall give such notice as it may deem appropriate of the deposit
with it of any such moneys and of the fixing of any such date, and shall not be
required to make payment to the holder of any unpaid coupon or any Bond until
such coupon or such Bond and all unmatured coupons, if any, appertaining to
such Bond shall be presented to the Trustee for appropriate endorsement or for
cancellation if fully paid.
Whenever all Bonds and the interest thereon have been paid
under the provisions of this Section 906 and all expenses and charges of the
Trustee have been paid, any balance remaining in the Bond Fund shall be paid to
the Company as provided in Section 608 hereof.
Section 907. RIGHTS AND REMEDIES VESTED IN TRUSTEE. All
rights and remedies (including the right to file proof of claims) under this
Indenture or under any of the Bonds or coupons may be enforced by the Trustee
without the possession of any of the Bonds or coupons or the production thereof
in any trial or other proceedings relating thereto, and any such suit or
proceeding instituted by the Trustee shall be brought in its name as Trustee
without the necessity of joining as plaintiffs or defendants any holders of the
Bonds or coupons, and any recovery of judgment shall be for the equal benefit
of the holders of the Bonds and coupons.
Section 908. RIGHTS AND REMEDIES OF BONDHOLDERS. No holder
of any Bond or coupon shall have any right to institute any suit, action or
proceeding in equity or at law for the enforcement of this Indenture, for the
execution of any trust hereof or to enforce any other right or remedy
hereunder, unless a default has occurred of which the Trustee has been notified
as provided in subsection (h) of Section 1001 hereof, or of which by said
subsection it is deemed to have notice nor unless also such default shall have
become an Event of Default and the holders of twenty-five percent (25%) in
principal amount of Bonds shall have made written request to the Trustee and
shall have offered reasonable opportunity either to proceed to exercise the
powers hereinbefore granted or to institute such action, suit or proceeding in
its, his or their own name or names. Such notification, request and offer of
indemnity are hereby declared in every case at the option of the Trustee to be
conditions precedent to the execution of the powers and trusts in this
Indenture, and to any action or cause of action for the enforcement of this
indenture or for any other right or
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remedy hereunder, it being understood and intended that no one or more holders
of the Bonds or coupons shall have any right in any manner whatsoever to
affect, disturb or prejudice the lien of this Indenture by its, his or their
action or to enforce any right or remedy hereunder except in the manner herein
provided, and that all proceedings at law or in equity shall be instituted, had
and maintained in the manner herein provided and for the equal benefit of the
holders of all Bonds. Nothing in this Indenture contained shall, however,
affect or impair the right of any bondholder to enforce the payment of the
principal of and interest on any Bond at and after the maturity thereof, or the
obligation of the Board to pay the principal of and interest on each of the
Bonds issued hereunder to the respective holders thereof at the time, place,
from the source and in the manner expressed in the Bonds and the coupons.
Section 909. TERMINATION OF PROCEEDINGS. In case the Trustee
shall have proceeded to enforce any right or remedy under this Indenture and
such proceedings shall have been discontinued or abandoned for any reason, or
shall have been determined adversely then and in every such case the Board and
the Trustee shall be restored to their adverse former positions and rights
hereunder with respect to the Trust Estate, and all rights, remedies and powers
of the Trustee shall continue as if no such proceedings had been taken.
Section 910. WAIVERS OF EVENTS OF DEFAULT. The Trustee may
in its discretion waive any Event of Default and its consequences and rescind
any declaration of maturity of principal, and shall do so upon the written
request of the holders of (1) a majority in principal amount of all Bonds in
respect of which a default in the payment of low principal and/or interest
exists, or (2) a majority in principal amount of all Bonds in the case of any
other default; provided, however, that there shall not be waived any Event of
Default pertaining to the payment of the principal of any Bond at its maturity
date or redemption date prior to maturity (including any mandatory sinking fund
payment date), or any Event of Default pertaining to the payment when due of
the interest on any such Bonds, unless prior to such waiver or rescission, all
arrears of interest on such Bonds, with interest (to the extent permitted by
law) at the rate borne by such Bonds on overdue installments of interest, and
all arrears of payments of principal on such Bonds (due otherwise than by
declaration) with interest at the rate borne by such Bonds, and all expenses of
the Trustee in connection with such Event of Default, shall have been paid or
provided for, and in case of any such waiver or rescission, or in case any
proceeding taken by the Trustee on account of any such Event of Default shall
have been discontinued or abandoned or determined adversely, then and in every
such case the Board, Trustee and the bondholders shall be restored to their
former
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positions and rights hereunder respectively, but no such waiver or rescission
shall extend to any subsequent or other Event of Default, or impair any right
consequent thereon.
Section 911. NOTICE OF DEFAULTS; OPPORTUNITY OF THE BOARD AND
COMPANY TO CURE DEFAULTS. No default specified in Section 901 (c) shall
constitute an Event of Default hereunder with notice of such default by
registered or certified mail shall be given by the Trustee to the Board and the
Company, and the Board shall have had thirty (30) days after receipt of such
notice to correct said default or cause said default to be corrected, and shall
not have corrected said default or caused said default to be corrected within
the applicable period; provided, further, that if a default specified in said
Section 901(c) be such that it can be corrected but not within the period
specified herein, it shall not constitute the basis of an Event of Default
hereunder (i) if corrective action capable of ending such default is instituted
by the Board within the allocable period and diligently pursued until the
default is corrected, and (ii) if the Board shall within the applicable period
furnish to the Trustee a certificate executed as provided in Section 1001(f)
certifying that said default is such that it can be corrected but not within
the applicable period and that corrective action capable of remedying such
default has been instituted and is being diligently pursued and will be
diligently pursued until one default is corrected. The Board shall notify the
Trustee by certificate executed as above when such default has been corrected.
The Trustee shall be entitled to rely upon any such certificate given pursuant
to this Section.
With regard to any default concerning which notice is given to
the Company or the Board under the provisions of this Section, the Board hereby
grants to the Company full authority to perform any obligation the performance
of which by the Board is alleged in said notice to be in default, such
performance by the Company to be in the name and stead of the Board with full
power to do any and all things and acts to the same extent that the Board could
do and perform any such things and acts and with power of substitution.
SECTION 1001 1001(a), 1001(b) ARE ILLEGIBLE.
(c) Except as is specifically provided in Section 1407 hereof
with respect to the filing of continuation statements, the Trustee
shall not be responsible for any recital herein, or in the Bonds
(except in respect to the authentication certificate of the Trustee
endorsed on the Bonds), or for the validity of the execution by the
Board of this Indenture or of any supplements hereto or instruments of
further assurance, or for the sufficiency of the security for the
Bonds; and the Trustee shall not be bound to ascertain or inquire as
to the
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performance or observance of any covenants, agreements or conditions
on the part of the Board under the Agreement on the part of the
Company under the Agreement or the Note except as hereinafter set
forth; but the Trustee may require from the Board or the Company full
information and advice as to the performance of the covenants,
agreements and conditions aforesaid. The Trustee shall not be
responsible or liable for any loss suffered in connection with any
investment of funds made by it in accordance with Article VII hereof.
(d) The Trustee may become the owner of any Bonds and coupons
appertaining thereto with the same rights which it would have it if
were not Trustee.
(e) The Trustee shall be protected in acting upon any notice,
request, consent, certificate, order, affidavit, letter, telegram or
other paper or document believed to be genuine and correct and to have
been signed or sent by the proper person or persons. Any action taken
by the Trustee, pursuant to this Indenture upon the request, authority
or consent of any person who at the time of making such request or
giving such authority or consent is the owner of any Bond, shall be
conclusive and binding upon all future owners of the same Bond and
upon Bonds issued in exchange therefor or in place thereof.
(f) As to the existence or non-existence of any fact or as to
the sufficiency or validity of any instrument, paper or proceeding,
the Trustee shall be entitled to rely upon a certificate signed on
behalf of the Board by the Chairman or Vice Chairman of its Board of
Directors and attested by its Secretary or Assistant Secretary as
sufficient evidence of the facts therein contained and prior to the
occurrence of a default of which the Trustee has been notified as
provided in subsection (h) of this Section, or of which by said
subsection it is deemed to have notice, shall also be at liberty to
accept a similar certificate to the effect that any particular
dealing, transaction or action is necessary or expedient, but may at
its discretion secure such further evidence deemed necessary or
advisable, but shall in no case be bound to secure the same. The
Trustee may accept a certificate of the Secretary or Assistant
Secretary under its seal to the effect that a resolution in the form
therein set forth has been adopted by the Board as conclusive evidence
that such resolution has been duly adopted and is in full force and
effect.
(g) The right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty, and the
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Trustee shall not be answerable for other than its negligence or
willful default.
(h) The Trustee shall not be required to take notice or be
deemed to have notice of any default hereunder or under the Agreement
or the Note except failure by the Company to make the payments
required to be paid under the Note and failure by the Board to cause
to be made any of the payments to the Trustee required to be made by
Article VI hereof unless the Trustee shall be specifically notified in
writing of such default by the Board or by the holders of at least
twenty-five percent (25%) in principal amount of the Bonds. All
notices or other instruments required by this Indenture to be
delivered to the Trustee must, in order to be effective, be delivered
at the Principal Office of the Trustee, and in the absence of such
notice so delivered the Trustee may conclusively assume there is no
default except as aforesaid.
(i) At reasonable times the Trustee, and its duly authorized
agents, attorneys, experts, engineers, accountants and representatives
who are acceptable to the Company shall have the right to inspect all
books, papers and recorded, of the Board and the Company pertaining to
the Bonds, and to take such memoranda from and in regard thereto as
may be desired, subject to such confidentiality requirements as the
Board or the Company may impose.
(j) The Trustee shall not be required to give any bond or
surety in respect of the execution of the said trusts and powers or
otherwise in respect of the premises.
(k) Notwithstanding anything elsewhere in this Indenture
contained, the Trustee shall have the right, but shall not be
required, to demand, in respect of the authentication of any Bonds,
the withdrawal of any cash or any action whatsoever within the purview
of this Indenture, any showings, certificates, opinions, appraisals or
other information, or corporate action or evidence thereof, in
addition to that by the terms hereof required as a condition of such
action by the Trustee, deemed desirable for the purpose of
establishing the right of the Board to the authentication any Bonds,
the withdrawal of any cash or the taking of any other action by the
Trustee.
(l) Before taking any remedial action hereunder, the Trustee
may require that a satisfactory indemnity bond be furnished for the
reimbursement of all expenses to which it may be put plus
Extraordinary Services of the Trustee and to protect it against all
liability, except liability which is
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adjudicated to have resulted from the negligence or willful default of
the Trustee by reason of any action so taken.
(m) All moneys received by the Trustee or any paying agent
for the Bonds shall, until used or applied or invested as herein
provided, be held in trust for the purposes of which they were
received but need not be segregated from other funds except to the
extent required herein or by law.
Section 1002. FEES, CHARGES AND EXPENSES OF TRUSTEE. The
Trustee shall be entitled to payment and/or reimbursement for reasonable fees
for its Ordinary Services rendered hereunder and all advances, Counsel fees and
other Ordinary Expenses reasonably made or incurred by the Trustee in
connection with such Ordinary Services and, if the Trustee performs
Extraordinary Services, it shall be entitled to reasonable extra compensation
therefor, and to reimbursement for reasonable Extraordinary Expenses in
connection therewith; provided, that if such Extraordinary Services or
Extraordinary Expenses are occasioned by its negligence or willful default, it
shall not be entitled to compensation or reimbursement therefor. The Trustee
shall be entitled to payment and reimbursement for the reasonable fees and
charges of the Trustee as paying agent for the Bonds and coupons as hereinabove
provided. Upon the occurrence of an Event of Default, but only upon such
occurrence, the Trustee shall have a first lien on the Trust Estate with right
of payment prior to payment of the principal of and interest on any Bond for
the foregoing advances, fees, costs and expenses incurred.
Section 1003. NOTICE TO BONDHOLDERS IF EVENT OF DEFAULT
OCCURS. Upon the occurrence of an Event of Default, the Trustee shall within
thirty (30) days give written notice thereof by first class mail to the last
known holders of all Bonds then outstanding as shown by the list of bondholders
required to be maintained by the terms of Section 404 hereof and to the
registered owners of the Bonds, and, as to an Event of Default described in
Section 901(c) hereof, to the Board.
Section 1004. INTERVENTION BY TRUSTEE. The Board is a party
which, in the opinion of the Trustee and its Counsel, has a substantial bearing
on the interest of the bondholders, the Trustee may intervene on behalf of the
bondholders if so requested in writing by the holders of at least twenty-five
percent (25%) in principal amount of the Bonds. The rights and obligations of
the Trustee under this Section are subject to the approval of a court of
competent jurisdiction.
Section 1005. SUCCESSOR TRUSTEE. Any corporation or
association into which the Trustee may be converted or merged, or with which it
may be consolidated, or to which it may sell or
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transfer its trust business and assets as a whole or substantially as a whole,
or any corporation or association resulting from any such conversion, merger,
sale or transfer to which it is a party ipso facto, shall be and become
successor Trustee hereunder and be vested with all of the title to the Trust
Estate and all the trusts, powers, discretions, immunities, privileges and all
other matters as was its predecessor, without the execution or filing of any
instrument or any further act, deed or conveyance on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
Section 1006. RESIGNATION BY THE TRUSTEE. The Trustee and
any Successor Trustee may at any time resign from the trusts hereby created by
giving thirty (30) days written notice to the Board, the Company and the
Guarantor and by first class mail to each registered owner of Bonds and to each
holder of Bonds as shown by the list of bondholders required to be maintained
by Section 404 hereof, and such resignation shall take effect at the end of
such thirty (30) day period, or upon the earlier appointment of a successor
Trustee by the bondholders or by the Board. Such notice to the Board may be
served personally or sent by registered or certified mail.
Section 1007. REMOVAL OF THE TRUSTEE. The Trustee may be
removed at any time by an instrument or concurrent instruments in writing
delivered to the Trustee, the Board, the Company and the Guarantor and signed
by the holders of a majority in principal amount of the Bonds.
Section 1008. APPOINTMENT OF SUCCESSOR TRUSTEE BY THE
BONDHOLDERS; TEMPORARY TRUSTEE. If the Trustee hereunder shall resign, be
removed, be dissolved, be in course of dissolution or liquidation, or shall
otherwise become incapable of acting hereunder or in case it shall be taken
under the control of any public officer, officers or a receiver appointed by a
court, a successor may be appointed by the holders of a majority in principal
amount of the Bonds, by an instrument or concurrent instruments in writing
signed by such holders, or by their attorneys in all duly authorized; provided,
nevertheless, that in case of such vacancy, the Board by an instrument signed
by the Chairman or Vice Chairman of its Board of Directors and attested by its
Secretary under seal, may appoint a temporary Trustee to fill such vacancy
until a successor Trustee shall be appointed by the bondholders in the manner
above provided; and any such temporary Trustee shall immediately and without
further act be superseded by the Trustee so appointed by such bondholders.
Every such Trustee appointed pursuant to the provisions of this Section shau be
a trust company or bank (having trust powers) in good standing, within or
outside the State of Tennessee, having an unimpaired capital surplus of not
less than $25,000,000, if there be such an
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institution willing, qualified and able to accept the trust upon reasonable or
customary terms.
Section 1009. CONCERNING ANY SUCCESSOR TRUSTEE. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver,
to its predecessor and also to the Board, the Company and the Guarantor an
instrument in writing accepting such appointment hereunder, and thereupon such
successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, trusts, duties and
obligations of its predecessor; but such predecessor shall, nevertheless, on
the written request of the Board, or of its successor, execute and deliver an
instrument transferring to such successor Trustee all the estates, properties,
rights, powers and trusts such predecessor hereunder; and every predecessor
Trustee shall deliver all securities and moneys held by it as Trustee hereunder
to its successor. Should any instrument in writing from the Board be required
by any successor Trustee in order to vest more fully and certainly in such
successor the estates, properties, rights, powers and trusts hereby tested or
intended to be vested in the predecessor and all such instruments in writing
shall, on request, be executed, acknowledged and delivered by the Board.
Section 1010. RIGHT OF TRUSTEE TO PAY TAXES AND OTHER
CHARGES. If any tax, assessment or governmental or other charge upon any part
of the Trust Estate is not paid as required herein, the Trustee may pay such
tax, assessment or charge, without prejudice, however, to any rights of the
Trustee or the bondholders hereunder arising in consequence of such failure;
and any amount at any time so paid under this Section, with interest thereon
from the date of payment at the rate of eight percent (8%) per annum, shall
become so much additional indebtedness secured by this Indenture, and the same
shall be given a preference in payment over the principal of and interest on
the Bonds and shall be paid out of the revenues and receipts from the Trust
Estate, if not otherwise caused to be paid; but the Trustee shall not be under
obligation to make any such payment unless it shall have been requested to do
so by the holders of at least twenty-five percent (25%) in principal amount of
the Bonds and shall have been provided with sufficient moneys for the purpose
of making such payment.
Section 1011. TRUSTEE PROTECTED IN RELYING UPON RESOLUTIONS,
ETC. The resolutions, opinions, certificates and other instruments provided
for in this Indenture may be accepted by the Trustee as conclusive evidence of
the facts and conclusions stated therein and shall be full warrant, protection
and authority to the Trustee for the withdrawal of moneys hereunder.
Section 1012. SUCCESSOR TRUSTEE AS CUSTODIAN OF FUNDS, PAYING
AGENT AND BOND REGISTRAR. In the event of a change in the
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office of Trustee the predecessor Trustee which has resigned or has been
removed shall cease to be the holder of the Bond Fund and of the Project Fund,
paying agent for the principal of and interest on the Bonds and Bond Registrar,
and the successor Trustee shall become such holder, paying agent and Bond
Registrar.
Section 1013. TRUST ESTATE MAY BE VESTED IN CO-TRUSTEE. It
is the purpose hereof that there shall be no violation of any law of any
jurisdiction (including particularly the laws of the State of Tennessee)
denying or restricting the right of banking corporations or associations to
transact business as trustee in such jurisdiction. It is recognized that in
the case of litigation hereunder, and in particular the case of the enforcement
of this Indenture upon the occurrence of an Event of Default, it may be
necessary that the Trustee appoint an additional individual or institution as a
separate Trustee or Co-Trustee. The following provisions of this Section are
adapted to these ends.
Upon the incapacity or lack of authority of the Trustee, by
reason of any present or future law of any jurisdiction. to exercise any of the
rights, powers and trusts herein granted to the Trustee or to hold title to the
Trust Estate or to take any other action which may be necessary or desirable in
connection therewith, each and every remedy, power, right, claim, demand, cause
of action, immunity, estate, title, interest and lien expressed or intended
hereby to be exercised by or vested in or conveyed to the Trustee with respect
thereto shall be exercisable and vest in such separate Trustee or Trustee but
only to the extent necessary to enable the separate Trustee or Co-Trustee to
exercise such rights, powers and trusts, and every agreement and obligation
necessary to exercise thereof by such separate Trustee or Co-Trustee shall run
to and be enforceable by either of them.
Should any deed, conveyance or instrument in writing from the
Board be required by the separate Trustee or Co-Trustee so appointed by the
Trustee in order to vest more fully and certainly in and confirm to him or it
such properties, rights, powers, trusts, duties and obligations, any and all
such deeds, conveyances and instruments, shall, on request, be executed,
acknowledged and delivered by the Issuer. In case any separate Co-Trustee, or
a successor to either, shall die, become incapable of acting, Trustee on or be
removed, all the estates, properties, rights, powers, trusts, duties and
obligations of such separate Trustee or Co-Trustee, so far as permitted by law,
shall vest in and be exercised by the Trustee until the appointment of a new
Trustee or successor to such separate Trustee or Co-Trustee.
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ARTICLE XI
MEETINGS OF BONDHOLDERS
Section 1101. PURPOSES FOR WHICH BONDHOLDERS' MEETINGS MAY BE
CALLED. A meeting of bondholders may be called at any time and from time to
time for any of the following purposes:
(a) to give any notice to the Board, the Company, the
Guarantor or the Trustee, or to give any directions to the Trustee, or
to consent to the waiving of any default or Event of Default hereunder
and its consequences, or to take any other action authorized to be
taken by bondholders pursuant to Section 908;
(b) to remove the Trustee pursuant to Section 1007, and to
appoint a successor Trustee pursuant to Section 1008;
(c) to consent to the execution of a supplemental indenture
pursuant to Section 1202, or to consent to the execution of an
amendment, change or modification of the Agreement pursuant to Section
1302; or
(d) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Bonds under any other provision hereof or under applicable law.
Section 1102. PLACE OF MEETINGS OF BONDHOLDERS. Meetings of
bondholders may be held at such place or places as the Trustee or, in case of
its failure to act, the bondholders calling the meeting shall from time to time
determine.
Section 1103. CALL AND NOTICE OF BONDHOLDERS' MEETINGS. (a)
The Trustee may at any time call a meeting of bondholders to be held at such
time and at such place as the Trustee shall determine. Notice of every meeting
of bondholders, 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
published at least three (3) times in a newspaper or financial journal of
general circulation among dealers in municipal securities in the City of New
York, New York, the first publication to be not less than twenty (20) nor more
than one hundred eighty (180) days prior to the date fixed for such meeting.
If all of the outstanding Bonds are at that time registered as to principal
(except to bearer) or as to both principal and interest, notice by first class
mail to such bondholders shall be sufficient, and published notice need not be
given.
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At the time of the first publication of such notice, the
Trustee shall also mail, stage prepaid, a copy of such notice to the registered
owner of each Bond registered as principal or as to principal and interest, at
the address shown on the registration books. Any failure of the Trustee to
mail such notice, or any defect therein shall not, however, in any way impair
or affect the validity of any such meeting.
(b) In case at any time the holders of at least ten percent
(10%) in aggregate principal amount of the Bonds outstanding shall
have requested the Trustee to call a meeting of the bondholders by
written request setting forth in reasonable detail the action proposed
to be taken at the meeting, and the Trustee shall not have made the
first giving of the notice of such meeting within twenty (20) days
after receipt of such request, then such bondholders may determine the
time and place for such meeting and may call such meeting to take any
action authorized in Section 1101 by giving notice thereof as provided
n subsection (a) of this Section.
Section 1104. PERSONS ENTITLED TO VOTE AT BONDHOLDERS'
MEETINGS. To be entitled to vote at any meeting of bondholders, a person shall
be the holder of one or more of the Bonds outstanding, or a person appointed by
an instrument in writing as proxy for a bondholder by such bondholder. The
other persons who shall be entitled to be present or to speak at any meeting
are their Counsel and any representatives of the Trustee and its Counsel, any
representatives of the Company and its Counsel, any representatives of the
Guarantor and its Counsel and any representatives of the Board and its Counsel.
Section 1105. DETERMINATION OF VOTING RIGHTS; CONDUCT AND
ADJOURNMENT OF MEETINGS. (a) Notwithstanding any other provisions hereof, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of bondholders in regard to proof of the holding of Bonds 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 Bonds shall be
proved in the manner specified in Section 1401, and the appointment of any
proxy shall be proved in the manner specified in Section 1401 or by having the
signature of the person executing the proxy witnessed or guaranteed by any
bank, banker or trust company authorized by Section 1401 to certify to the
holding of Bonds. Such regulations may provide that written instruments
appointing proxies, regular on their face, may be presumed valid and genuine
without the proof specified in Section 1401 or other proof.
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(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 Board or by bondholders as provided in subsection (b) of Section 1103, in
which case the Board or the bondholders calling the meeting, as the case may
be, shall in like manner appoint a temporary chairman. A permanent chairman
and a permanent secretary of the meeting shall be elected by vote of the
holders of a majority of the Bonds represented at the meeting and entitled to
vote.
(c) At any meeting each bondholder or proxy shall be entitled
to one vote for each $5,000 principal amount of Bonds outstanding held or
represented by such bondholder; provided, however, that no vote shall be cast
or counted at any meeting in respect of any Bond challenged as not outstanding
and ruled by the chairman of the be not outstanding. The chairman of the
meeting shall have no right to vote, except as a bondholder or proxy.
(d) At any meeting of bondholders, the presence of persons
holding or representing Bonds in an aggregate principal amount sufficient under
the appropriate provision hereof to take action upon the business for the
transaction of which such meeting was called shall constitute a quorum. Any
meeting of bondholders called pursuant to Section 1103 may be adjourned from
time to time by vote of the holders (or for the holders) of a majority of the
Bonds represented at the meeting and entitled , whether or not a quorum shall
be present; and the meeting may be held as so adjourned without further notice.
Section 1106. COUNTING VOTES AND RECORDING ACTION OF
MEETINGS. The vote upon any resolution submitted to any meeting of bondholders
shall be by written ballots on which shall be subscribed the signatures of the
bondholders or of their representatives by proxy and the number or numbers of
the Bonds outstanding 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 triplicate, of the
proceedings of each meeting of bondholders 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 published or mailed
as provided in Section 1103. 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 Board, another to the Company and another to the
Trustee to be preserved by the Trustee,
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which copy shall have attached thereto the ballots voted at the meeting. Any
record so signed and verified shall be conclusive evidence of the matters
therein stated.
Section 1107. REVOCATION BY BONDHOLDERS. At any time prior
to (but not after) the evidencing, to the Trustee, in the manner provided in
Section 1106, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Bonds specified herein in connection with
such action, any holder of a Bond the number of which is included in the Bonds
the holders of which have consented to such action may, by filing writ-ten
notice with the Trustee at its principal office and upon proof of holding as
provided in Section 1401, revoke such consent so far as concerns such Bond.
Except as aforesaid, any such consent given by the holder of any Bond shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Bond and of any Bond issued in exchange therefor or in lieu thereof,
irrespective of whether or not any notation in regard thereto is made upon such
Bond. Any action taken by the holders of the percentage in aggregate principal
amount of the Bonds specified herein in connection with such action shall be
conclusively binding upon the Board, the Company, the Trustee and the holders
of all the Bonds.
ARTICLE XII
SUPPLEMENTAL INDENTURES
Section 1201. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT
OF BONDHOLDERS. The Board and the Trustee may without the consent of, or
notice to, any of bondholders, enter into an indenture or indentures
supplemental to this Indenture as shall not be inconsistent with the terms and
provisions hereof for any one or more of the following purposes:
(a) to cure any ambiguity or formal defect or omission in
this Indenture;
(b) to grant to or confer upon the Trustee for the benefit of
the bondholders any additional rights, remedies, powers or authorities
that may lawfully be granted to or conferred upon the bondholders or
the Trustee or either of them;
(c) to subject to the pledge of this Indenture additional
revenues, properties or collateral;
(d) to modify, amend or supplement this Indenture or any
indenture supplemental hereto in such manner as to permit the
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<PAGE> 101
qualification hereof and thereof under the Trust Indenture Act of
1939, as amended, or any similar Federal statute hereafter in effect
or to permit the qualification of the Bonds for sale under the
securities laws of any of the states of the United States of America,
and, if they so determine, to add to this Indenture or any indenture
supplemental hereto such other terms, conditions and provisions as may
be permitted by said Trust Indenture Act of 1939 or similar Federal
statute;
(e) to evidence the appointment of a separate or Co-Trustee
or the succession of a new Trustee or paying agent hereunder; and
(f) in connection with any other change therein which, in the
judgment of the Trustee, is not to the prejudice of the Trustee or the
bondholders.
Section 1202. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF
BONDHOLDERS. Exclusive of supplemental indentures covered by Section 1201
hereof and subject to the terms and provisions contained in this Section, and
not otherwise, the holders of not less than two-thirds (2/3) in principal
amount of the Bonds shall have the right, from time to time, anything contained
in this Indenture to the contrary notwithstanding, to consent to and approve of
the execution by the Board and the Trustee of such other indenture or
indentures supplemental hereto as shall be deemed necessary and desirable by
the Board for the purpose of modifying, altering, amending, adding to or
rescinding, in any particular, any of the terms or provisions contained in this
Indenture or in any supplemental indenture; provided, however, that nothing in
this Section contained shall permit, or be construed as permitting (a) an
extension of the maturity date on which the principal of or the interest on any
Bond is, or is to become, due and payable, (b) a reduction in the principal
amount of any Bond, the rate of interest thereon or any redemption premium, (c)
a preference or priority of any Bond or Bonds over any other Bond or Bonds, or
(d) a reduction in the principal amount of the Bonds required for consent to
such supplemental indenture.
If the Board shall request the Trustee to enter into any such
supplemental indenture for any of the purposes of this Section, the Trustee
shall, upon being fully satisfactorily indemnified with respect to expenses,
cause notice of the proposed execution of such supplemental indenture to be
published as shall be requested by the Board and in any event one (1) time in a
newspaper or financial journal of general circulation in the City of New York,
New York. Such notice shall briefly set forth the nature of the proposed
supplemental indenture and shall state that copies thereof are on file at the
Principal Office of the Trustee for inspection by all bondholders. If, within
sixty (60) days or
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such longer period as shall be Prescribed by the Trustee following the final
publication of such notice, the holders of not less than two-thirds (2/3) in
principal amount of the Bonds shall have consented to and approved the
execution of such supplemental indenture as herein provided, no holder of any
Bond shall have any right to any of the terms and provisions contained therein,
or the operation thereof, or in manner to question the propriety of the
execution thereof, or to enjoin or restrain the Trustee or the Board from
executing the same or from taking any action pursuant to the provisions
thereof. Upon the execution of any such supplemental indenture as in this
t:Section permitted and provided, this Indenture shall be modified and amended
in accordance therewith.
Anything herein to the contrary notwithstanding, a supplemental
indenture under this Article XII which affects any right of the Company under
the Agreement shall not become effective unless and until the Company shall
have consented to the execution and delivery of such supplemental indenture.
In this regard, the Trustee shall cause notice of the proposed execution and
delivery of any such supplemental indenture together with a copy of the
proposed supplemental indenture to be mailed by certified or registered mail to
the Company at least fifteen (15) days prior to the proposed date of execution
and delivery of any such supplemental indenture. The Company shall be deemed
to have consented to the execution and delivery of any such supplemental
indenture if the Trustee does not receive a letter of protest or objection
thereto signed by or on behalf of the Company on or before 4:30 o'clock P.M.,
E.S.T., on the 15th day after the mailing of said notice and a copy of the
proposed supplemental indenture.
ARTICLE XIII
AMENDMENT OF AGREEMENT AND NOTE
Section 1301. AMENDMENTS, ETC., TO AGREEMENT AND NOTE NOT
REQUIRING CONSENT OF BONDHOLDERS. The Trustee shall without the consent of, or
notice to, the bondholders consent to any amendment, change or modification of
the Agreement or the Note as may be required (i) by the provisions of the
Agreement or the Note or this Indenture, (ii) for the purpose of curing any
ambiguity or formal defect or omission in the Agreement or the Note, or (iii)
in connection with any other change therein which, in the judgment of the
Trustee, is not to the prejudice of the Trustee or the bondholders.
Section 1302. AMENDMENTS, ETC., TO AGREEMENT AND NOTE
REQUIRING CONSENT OF BONDHOLDERS. Except for the amendments, changes or
modifications as provided in Section 1301 hereof,
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<PAGE> 103
neither the Board nor the Trustee shall consent to any other amendment, change
or modification of the Agreement or the Note without publication of notice and
the written approval or consent of the holders of not less than two-thirds
(2/3) in principal amount of the Bonds given and procured as in Section 1202
hereof; provided, however, that nothing contained in this Article shall permit,
or be construed as permitting, any amendment, change or modification of the
Company's unconditional obligations to make payments under the Agreement or the
Note or the Company's covenants with respect to the use of the proceeds of the
Bonds. If at any time the Board and the Company shall request the consent of
the Trustee to any such proposed amendment, change or modification of the
Agreement or the Note, the Trustee shall, upon satisfactorily indemnified with
respect to expenses, cause notice to be published in same manner as provided by
Section 1202 hereof with respect to proposed supplemental indentures. Such
notice shall briefly set forth the nature of such proposed supplemental
amendment, change or modification and shall state that copies of the instrument
embodying the same are on file at the Principal Office of the Trustee for
inspection by Bondholders.
ARTICLE XIV
MISCELLANEOUS
Section 1401. CONSENTS ETC., OF BONDHOLDERS. Any consent, request,
direction, approval, objection or other instrument required by this Indenture
to be executed by the bondholders may be in any number of concurrent writings
of similar tenor and may be signed or executed by such bondholders in person or
by agent appointed in writing. Proof of the execution of any such consent,
request, direction, approval, objection or other instrument, of the writing
appointing any such agent and of the ownership of Bonds, if made in the
following manner, shall be sufficient for any of the purposes of this
Indenture, and shall be conclusive in favor of the Trustee with regard to any
action taken under any such instrument, namely:
(f) Any request, demand, authorization, direction, notice,
consent, waiver or any other action provided to be given or taken by
bondholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such bondholders
in person or by agent duly appointed in writings 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 Board and the Company.
Proof of execution of any such instrument or of a writing appointing
any such agent, or of the holding by any
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<PAGE> 104
person of any Bond not registered as to principal, shall be sufficient
for any purpose hereof and conclusive in favor of the Trustee, the
Company and the Board, if made in the manner provided in this Section.
(g) 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 by the certificate of any 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 an officer of a
corporation or a member of a partnership, on behalf of such
corporation or partnership, such certificate or affidavit shall also
constitute sufficient proof of his authority.
(h) The amount of any Bond not registered as to principal
held by any person executing any such instrument or writing as a
bondholder, and the numbers of such unregistered Bonds, and the date
of his holding the same, may be proved by the production of such Bonds
or by a certificate executed, as depositary, by any trust company,
bank or banker (wherever situated), if such certificate is in form
satisfactory to the Trustee, showing that at the date therein
mentioned such person had on deposit with such depositary, or
exhibited to it, the Bond or Bonds therein described; or such facts
may be proved by the certificate or affidavit of the person executing
such instrument or writing as a bondholder, if such certificate or
affidavit is in form satisfactory to the Trustee. The Trustee may
assume that such ownership of any unregistered Bond continues until
(1) another certificate bearing a later date issued in respect of the
same unregistered Bond is produced, or (2) such unregistered Bond is
produced by some other person, or (3) such unregistered Bond is
registered as to principal or as to both principal and interest, or
(4) such unregistered Bond is no longer outstanding hereunder.
(i) The fact and date of execution of any such instrument or
writing and the amount and numbers of unregistered Bonds held by the
person so executing such instrument or writing may also be proved in
any other manner which the Trustee deems sufficient; and the Trustee
may in any instance require further proof with respect to any of the
matters referred to in this Section.
(j) The ownership of Bonds registered as to principal or as
to both principal and interest shall be proved by the registration
books kept by the Trustee as Bond Registrar.
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(k) Any request, demand, authorization, direction, notice,
consent, waiver or other action by any bondholder shall bind every
future holder of the same Bond in respect of anything done or suffered
to be done by the Trustee or the Board in reliance thereon, whether or
not notation of such action is made upon such Bond.
Section 1402. LIMITATION OF RIGHTS. With the exception of
rights herein expressly conferred, nothing expressed or mentioned in or to be
implied from this indenture or the Bonds is intended or shall be construed to
give to any person or company other than the parties hereto, the Company and
the holders of the Bonds and coupons any legal or equitable right, remedy or
claim under or in respect to this Indenture or any covenants, agreements,
conditions and provisions herein contained, this Indenture and all of the
covenants, agreements, conditions and provisions hereof being intended to be
and being for the sole and exclusive benefit of the parties hereto, the Company
and the Bondholders of the Bonds and coupons as herein provided.
Section 1403. SEVERABILITY. If any provision of this
Indenture shall be held or deemed to be or shall, in fact, be inoperative or
unenforceable as applied in any particular case in any jurisdiction or
jurisdictions or in all jurisdictions, or in all cases because it conflicts
with any other provision or provisions hereof or any Constitution or statute or
rule of public policy, or for any other reason, such circumstances shall not
have the effect of rendering the provision in questions inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative or unenforceable
to any extent whatever.
Section 1404. NOTICES. Except as otherwise specifically
provided herein, it shall be sufficient service of any notice, request,
complaint, demand or other paper if the same shall be duly mailed by registered
or certified mail, return receipt' requested, postage prepaid, addressed as
follows:
(a) If to the Board The Industrial Development Board
of the County of Knox
301 Church Street
Knoxville, Tennessee 37901
Attention: Secretary
(b) If to the Company CPG Products Corp.
c/o General Mills, Inc.
P.O. Box 1113
Minneapolis, MN 55440
Attention: General Counsel
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<PAGE> 106
(c) If to the Guarantor General Mills, Inc.
P.O. Box 1113
Minneapolis, MN 55440
Attention: General Counsel
(d) If to the Trustee The First National Bank of
Columbus
P.O. Box 40
Columbus, Georgia 31902
Attention: Corporate Trust
Officer
A copy of each notice, certificate or other communication given hereunder by
either the Board, the Company, the Guarantor or the Trustee to any one of the
others shall also be given to all of the others. The Board, the Company, the
Guarantor and the Trustee may, by notice given hereunder, designate any further
or different addresses to which subsequent notices, certificates or other
communications shall be sent.
Section 1405. TRUSTEE AS PAYING AGENT AND BOND REGISTRAR.
The Trustee is hereby designated and agrees to act as paying agent and Bond
Registrar for and in respect to the Bonds.
Section 1406. PAYMENTS DUE ON SATURDAYS, SUNDAYS AND
HOLIDAYS. In any case where the date of maturity of principal of or interest
on the Bonds or the date fixed for redemption of any Bonds shall be, in the
city of payment, a Saturday, Sunday or a legal holiday or a day on which
banking institutions are authorized by law to close, then payment of principal
or interest need not be made on such date in such city but may be made on the
next succeeding business day not a Saturday, Sunday, legal holiday or day upon
which banking institutions are authorized by law to close with the same force
and effect as if made on the date of maturity or the date fixed for redemption,
and no interest shall accrue for the period after such date.
Section 1407. FILING OF CONTINUATION STATEMENTS. The Trustee
shall file any continuation statements required to be filed pursuant to the
Uniform Commercial Code of the State of Tennessee in order to maintain the lien
of and security interest in the Trust Estate. Such continuation statements
shall be filed from time to time as in the opinion Trustee's counsel are
necessary in order to preserve the lien of this Indenture.
Section 1408. COUNTERPARTS. This Indenture may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
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<PAGE> 107
Section 1409. LAWS GOVERNING INDENTURE. The effect and
meaning of this Indenture and the rights of all parties hereunder shall be
governed by, and construed according to, the laws of the State of Tennessee.
Section 1410. NO RECOURSE AGAINST BOARD. Anything herein to
the contrary notwithstanding, no recourse shall be had under or upon any
obligation, covenant or agreement contained in this Indenture against any
incorporator, member, director or officer, as such, past, present or future, of
the Board, either directly or through the Board. Any and all personal
liability of every nature, whether at common law or in equity, or by statute or
by constitution or otherwise, of any such incorporator, member, director or
officer is hereby expressly waived and released as a condition of and
consideration for the execution of this Indenture.
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<PAGE> 108
IN WITNESS WHEREOF, the Board has caused these presents to be
signed in its name and behalf by its Chairman and its corporate seal to be
hereunto affixed and attested by its Secretary, and to evidence its acceptance
of the trusts hereby created the Trustee has caused these presents to be signed
in its name and behalf and its official seal to be hereunto affixed and
attested by its duly authorized officers, all as of the date first above
written.
THE INDUSTRIAL DEVELOPMENT
BOARD OF THE COUNTY OF KNOX
By:_____________________________
Chairman
(CORPORATE SEAL)
Attest:
__________________________________
Secretary
THE FIRST NATIONAL BANK OF
COLUMBUS, as Trustee
By:_____________________________
Senior Vice President & Trust
Officer
(CORPORATE SEAL)
Attest:
__________________________________
Vice President & Trust Officer:
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<PAGE> 109
ACKNOWLEDGMENT OF BOARD
STATE OF TENNESSEE
COUNTY OF KNOX
Before me, the undersigned authority, a Notary Public in and
for the State and County aforesaid, personally appeared Clinton Campbell and
John Holifield with whom I am personally acquainted, and who upon oath
acknowledged themselves to be the Chairman and Secretary, respectively, of THE
INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF KNOX, TENNESSEE, the within named
bargainer, a corporation, and that they as such officers, being authorized so
to do, executed the foregoing instrument for the purposes therein contained.
Witness my hand and official seal at office in Knox County,
Tennessee, this ___ day of October, 1979.
____________________________________
Notary Public
(SEAL)
My commission expires: ____________
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<PAGE> 110
ACKNOWLEDGMENT OF TRUSTEE
STATE OF GEORGIA
COUNTY OF MUSCOGEE
Before me, the undersigned authority, a Notary Public in and
for the State and County aforesaid, personally appeared John H. Holder and
Charles H. Kent, with both of whom I am personally acquainted, and who, upon
their oaths, acknowledged themselves to be Senior Vice President & Trust
Officer and Vice President & Trust officer, respectively, to THE FIRST NATIONAL
BANK OF COLUMBUS, Columbus, Georgia, a national banking association and one of
the within-named bargainers, and that they, as such officers, and being
authorized so to do, executed the foregoing instrument for the purposes
contained therein, by subscribing thereto the name of said association and by
affixing thereto the name of said association and by affixing thereto and
attesting the official seal of said association by themselves as such officers.
WITNESS my hand and notarial seal of office at Columbus,
Georgia, this 18th day of October, 1979.
____________________________________
Notary Public
(SEAL)
My commission expires:______________
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<PAGE> 111
FINANCING AGREEMENT
between
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE COUNTY OF KNOX
and
CPG PRODUCTS CORP.
Relating to the issuance of $4,200,000 The Industrial Development Board of the
County of Knox Industrial Development Revenue Bonds (General Mills, Inc.
Project), Series 1979.
Dated as of October 1, 1979
This instruments was prepared by:
King & Spalding
2500 Trust Company Tower
Atlanta, Georgia 30303
<PAGE> 112
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I.
DEFINITIONS AND RULES OF CONSTRUCTION
<S> <C> <C>
Section 1.1. Definitions ............................................. 2
Section 1.2. Rules of Construction ................................... 4
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties by the Board ............. 5
Section 2.2. Representations and Warranties by the Company ........... 6
ARTICLE III.
ISSUANCE OF THE BONDS;
ACQUISITION, CONSTRUCTION AND INSTALLATION OF THE PROJECT
Section 3.1. Agreement to Issue Bonds; Application of Proceeds ....... 8
Section 3.2. Acquisition, Construction and Installation of
the Project ............................................. 8
Section 3.3. Disbursements from the Project Fund ..................... 9
Section 3.4. Obligation of the Parties to Cooperate in Furnishing
Documents to Trustee .................................... 11
Section 3.5. Establishment of Completion Date ........................ 11
Section 3.6. Company Required to Pay Project Costs in Event
Project Fund Insufficient ............................... 12
Section 3.7. Remedies Against Contractors and Subcontractors and Their
Sureties ................................................ 12
Section 3.8. Investment of Project Fund and Bond Fund
Moneys Permitted ........................................ 12
ARTICLE IV.
TITLE TO PROJECT; PROVISIONS FOR PAYMENT
Section 4.1. Title to the Project .................................... 13
Section 4.2. Payment Obligations of the Company ...................... 13
</TABLE>
i
<PAGE> 113
<TABLE>
<S> <C> <C>
Section 4.3. Payments Assigned and Pledged ........................... 13
Section 4.4. Unconditional Obligation of Company ..................... 13
Section 4.5. Company's Performance Under Indenture ................... 14
ARTICLE V.
PARTICULAR COVENANTS
Section 5.1. Maintenance, Operation and Insurance of Project; Taxes;
No Operation of Project by Board ........................ 14
Section 5.3. Maintenance of Corporate Existence ...................... 15
Section 5.4. Qualification in Tennessee .............................. 16
Section 5.5. Agreement of Board Not to Assign ........................ 16
Section 5.6. Redemption of Bonds ..................................... 16
Section 5.7. Reference to Bonds Ineffective After Bonds Paid ......... 16
Section 5.8. Covenants of Company and Board With Respect to Capital
Expenditures ............................................ 17
Section 5.9. Determination and Event of Taxability ................... 18
Section 5.10. Covenant of Company with Respect to Use of Bond Proceeds. 21
ARTICLE VI.
DEFAULTS AND REMEDIES
Section 6.1. Events of Default ....................................... 21
Section 6.2. Remedies on Default ..................................... 23
Section 6.3. No Remedy Exclusive ..................................... 23
Section 6.4. Attorneys' Fees and Expenses ............................ 24
Section 6.5. Waiver of Events of Default ............................. 24
SIGNATURES AND SEALS
EXHIBIT "A" - PROMISSORY NOTE A-1
EXHIBIT "B" - DESCRIPTION OF PROJECT LAND B-1
EXHIBIT "C" - PROJECT EQUIPMENT LIST C-1
</TABLE>
ii
<PAGE> 114
FINANCING AGREEMENT
THIS FINANCING AGREEMENT, dated as of October 1, 1979, between THE
INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF KNOX (hereinafter called the
"Board"), a public nonprofit corporation and a oublic instrumentality of the
County of Knox, Tennessee (the "Board"), and CPG PRODUCTS CORP. (the
"Company"), a Delaware corporation qualified to do business in the State of
Tennessee;
W I T N E S S E T H:
--------------------
WHEREAS, the Board is a public nonprofit corporation and a public
instrumentality of the County of Knox, Tennessee, and is authorized under
Sections 6-2801 to 6-2821, inclusive, Tennessee Code Annotated, as amended
(hereinafter called the "Act"), to enter into loan agreements with
manufacturing, industrial, financiai and commercial enterprises with respect to
one or more projects for such pavments and upon such terms and conditions as
the board of directors of the Board may deem advisable in accordance with the
provisions of the Act in order to maintain and increase employment
WHEREAS, pursuant to and in accordance with the Act and in furtherance of
the public purposes for which it was created, the Board has agreed to finance a
portion of the costs of the acquisition, construction and installation of a
certain "Project" located in the County of Knox, Tennessee, for the Company;
and
WHEREAS, the Board has been advised by the Company that the amount
necessary to finance the acquisition, construction and installation of the
Project, including expenses incidental thereto, is at least $4,200,000; and
WHEREAS, after careful consideration, the Board has determined that the
most feasible method of financing the cost of the Project is by the issuance of
$4,200,000 The Industrial Development Board of the County of Knox Industrial
Development Revenue Bonds (General Mills, Inc. Project), Series 1979 (the
"Bonds"); and
WHEREAS, the Bonds are to be issued under and secured by a Trust
Indenture, dated as of October 1, 1979 (the "Indenture"), between the Board and
The First National Bank of Columbus, Columbus, Georgia, as Trustee (the
"Trustee"); and
WHEREAS, General Mill, Inc. (the "Guarantor"), a Delaware corporation and
owner of 100% of the stock of the Company, in order to induce the Board to
issue the Bonds and in order to induce the future purchasers and holders of the
bonds to buy the same, entered into a Guaranty
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Agreement, dated as of October 1, 1979 (the "Guaranty"), with the Trustee, the
terms of which require the Guarantor to guarantee absolutely and
unconditionally the payment of the principal of, the redemption premium (if
any) and the interest on the Bonds, as the same become due and payable;
NOW, THEREFORE, THIS FINANCING AGREEMENT WITNESSETH:
That the parties hereto, intending to be legally bound hereby and f or and
in consideration of the mutual covenants herein contained, DO HEREBY AGREE as
follows:
ARTICLE I.
DEFINITIONS AND RULES OF CONSTRUCTION
-------------------------------------
Section 1.1. DEFINITIONS. The terms defined in this Article I shall, for
all purposes of this Financing Agreement and all agreements supplemental hereto
which may be entered into in accordance with the provisions hereof, have the
meanings herein specified, unless the context otherwise requires:
"ACT" shall mean Sections 6-2801 to 6-2821, inclusive, of the Tennessee
Code Annotated, as supplemented and amended.
"AGREEMENT" shall mean this Financing Agreement and shall include any and
all modifications, alterations, supplements or amendments hereto.
"AUTHORIZED BOARD REPRESENTATIVE" shall mean the person or persons at the
time designated to act on behalf of the Board by written certificate filed with
the Company and the Trustee containing the specimen signature of each such
person and signed by the Chairman or Vice Chairman of the Board of Directors of
the Board.
"AUTHORIZED COMPANY REPRESENTATIVE" shall mean the person or persons of
the Company aL the time designated to act on behalf of the Company by written
certificate furnished to the Board and the Trustee containing the specimen
signature of each such person and signed on behalf of the Comoany by its
President or a Vice President and an Assistant Secretary or the Treasurer of
t@e Company.
"BOARD" shall mean The Industrial Development Board of the County of Knox,
a public nonprofit corporation and a public instrumentality of the County of
Knox, organized and existing under and by virtue of the Act, and its successors
and assigns.
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"BOND" or "BONDS" shall mean any or all of the $4,200,000 in aggregate
principal amount of Industrial Development Revenue Bonds (General Mills, Inc.
Project), Series 1979, issued by the Board pursuant to the Indenture.
"BOND FUND" shall meant the Industrial Bond Fund created by Section 601 of
the Indenture.
The term "BONDHOLDER" or "HOLDER OF THE BONDS" shall mean the bearer of
any Bond not registered as to principal and the registered owner of anv Bond
registered as to principal.
"BUILDING" shall mean those buildings and all other facilities and
improvements forming a part of the Project and not constituting part of the
Project Fcuipment which are required by Section 3.2 hereof to be constructed on
the Project Land, as they may at any time exist.
"CODE" shall mean the Internal Revenue Code of 1954, as amended.
"COMPANY" shall mean CPG Products Corp., a Delaware corporation, its
successors and assigns, and any surviving, resulting or transf eree corporation
as permitted under Section 5.3 hereof.
"COMPLETION DATE" shall mean the date of completion of the acquisition,
construction and installation of the Project as that d ate shall be certified
as provided in Section 3.5 hereof.
"COUNSEL" shall mean an attorney duly admitted to practice law before the
highest court of any state of the United States of America or the District of
Columbia or a firm of such attorneys.
"COUNTY" shall mean the County of Knox, Tennessee, a political subdivision
of the State of Tennessee.
"EVENT OF DEFAULT" shall mean any of the events described in Section 6.1
hereof.
"GOVERNMENT OBLIGATIONS" shall mean (a) direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged or (b) obligations issued by any agency
controlled or supervised by and acting as an instrumentality of the United
States of America, the payment of the principal of and interest on which is
fully and unconditionally guaranteed as a full faith and credit obligation of
the United States of America (including any securities described in (a) or (b)
issued or held in book-entry form on the books of the Department of Treasury of
the United States of America).
"GUARANTOR" means General Mills, Inc., a Delaware corporation and
wholly-owned
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parent corporation of the Company, and its sucessors and assigns
and any surviving, resulting or transferee corporation as permitted under
Section 3.2 of the Guaranty Agreement.
"GUARANTY AGREEMENT" means the Guaranty Agreement between the Guarantor
and the Trustee, dated as of even date herewith.
"INDENTURE" shall mean the Trust Indenture, of even date herewith, between
the Board and the Trustee, pursuant to which the Bonds are to be issued and
secured, including any indentures supplemental thereto.
"NOTE" shall mean the Promissory Note of the Company, a form of which is
attached hereto as Exhibit "A", issued by the Company to the Board pursuant to
Section 4.2 hereof.
The term "PAYMENT IN FULL OF THE BONDS" shall specifically encompass the
situations described in subsections (a) and (b) of Section 5.7 hereof.
Terms which refer generaliy to the payment or the obligation to pay
"PRINCIPAL OF AND INTEREST ON THE BONDS" shall also include the payment or the
obligation to pay any applicable redemption premium on any Bonds which are
called for redemption prior to maturity. In this connection, the terms
"principal of and interest on the Bonds" shall be read to include the word
"and" and before the word "interest" the words "redemption premium (if any)
and".
"PROJECT" shall mean the Project Land, the Building and the Project
Equipment, as they may at any time exist.
"PROJECT EQUIPMENT" shall mean those items of machinery, equipment and
related property required by Section 3.2 hereof to be accuired and installed in
the Building and on the Project Land with proceeds from the sale of the Bonds
or the proceeds of any payment by the Company pursuant to Section 3.6 hereof,
which Project Equipment is more fully described in Exhibit "C" attached hereto
and by this reference made a part hereof.
"PROJECT FUND" shall mean the Project Fund created by Section 501 of the
Indenture.
"PROJECT LAND" shall mean the real property described in Exhibit "B"
attached hereto and by this reference made a part of this Agreement.
"TRUSTEE" shall mean The First National Bank of Columbus, Columbus,
Georgia, a national banking association, and any successor trustee under the
Indenture.
Section 1.2. RULES OF CONSTRUCTION. Unless the context clearly indicates
to the
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contrary:
(a) "Herein", "hereby", "hereunder", "hereof", "hereinbefore",
and other equivalent words refer to this Agreement and not solely
to the particular portion thereof in which any such word is used.
(b) Words importing the singular number shall include the plural
number and vice versa, and any pronoun used herein shall be deemed to
cover all genders.
(c) All references herein to particular Articles or Sections are
references to Articles or Sections of this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
Section 2.1. REPRESENTATIONS AND WARRANTIES BY THE BOARD. The Board
makes the following representations as the basis for the undertakings on its
part herein contained:
(a) The Board is a public nonprofit corporation and a public
instrumentality of the County, duly incorporated and existing pursuant to
the Act.
(b) The Board has the power to enter into the transactions
contemplated by this Agreement and to carry out its obligations
hereunder.
(c) The Board is not in default under any of the provisions
contained in the laws of the State of Tennessee.
(d) The execution and deliverv of this Agreement by the Board has
been duly authorized by all necessary corporat@ action on the part of the
Board, and neither such execution and delivery nor performance by the
Board of its obligations under this Agreement will not violate any
provision of the Act or of any other law or administrative regulation or
of any judicial or administrative order, award, judgment or decree
applicable to the Board or of the certificate of incorporation or bylaws
of the Board.
(e) As required by the Act, the certificate of incorporation of the
Board has been duly filed for record in the Office of the Secretary of
State of the State of Tennessee.
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(f) The Board has determined that in assisting with the financing of
the acquisition, construction and installation of the Project, it will be
acting in furtherance of the public purposes intended to be served by the
Act.
(g) The Board proposes to provide funds for the acquisition,
construction and nstallation of the Project, as may be necessary, all as
hereinafter provided.
(h) The Board by a resolution adopted on April 9, 1979, took
affirmative official action towards the issuance of the bonds.
(i) The Board proposes to issue $4,200,000 in aggregate principa
amount of Bonds following the execution and delivery of this Agreement.
The date, denomination, interest rate, maturity schedule, redemption
provisions and other pertinent provisions with respect to the Bonds are
fully set forth in the Indenture and by this reference made a part of
this Agreement.
(j) The Bonds are to be issued under and secured by the Indenture
pursuant to the terms of which the Board will assign to the Trustee as
security for the payment of the principal of and interest on the Bonds
all of its right, title and interest in the Agreement (except the
indemnification rights contained in Section 5.2 hereof) and the Note and
ail payments to be received by the Board under the Note.
(k) Notwithstanding anything herein to the contrary, any obligation
the Board may hereby incur for the payment of money shall not constitute
a general debt on its part but shall be payable solely from the payments
to be received by the Board under the Note and the proceeds derived bv
the Board from the sale of the Bonds.
(l) Notwithstanding anything herein to the contrary, any obligation
the Board may hereby incur for the pavment of money shall not constitute
an indebtedness or a general obligation of the Board, the County or the
State of Tennessee within the meaning of any state constitutional or
statutory limitation, or a pledge of the faith and credit of the County
or said State and does not directly, indirectly or contingently obligate
the County or said State to levy or to pledge any form of taxation
whatever for the payment of such principal and interest on the Bonds.
Section 2.2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
makes the following representations as of the basis for the undertakings on its
part therein contained:
(a) The Company is a corporation duly incorporated and in good
standing under the laws of the State of Delaware and is duly qualified
and authorized to engage in business in the State of Tennessee, has the
power to enter into and perform and observe
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the agreements and covenants on its part contained in this Agreement
and to issue the Note and by proper corporate action has duly authorized
the execution and delivery of this Acreement and the Note.
(b) The Project will be an authorized "project" as defined in the
Act, as heretofore amended and supplemented.
(c) The Project constitutes land or property of a character subject
to the allowance for depreciation under Section 167 of the @ode and
substantially all of the net proceeds received from the sale of the Bonds
(net proceeds being those proceeds remaining after depositing the accrued
interest received from said sale in the Bond Fund and after paying all
expenses incurred in connection with the issuance of the Bonds) will be
used to finance the cost of the acquisition, construction and
installation of the Project and are properly capitalizable for Federal
income tax purposes. No part of said proceeds is to be used by the
Company, directly or indirectly, as working capital or to finance
inventory.
(d) Prior to April 9, 1979, the date of official action by the Board
towards the issuance of the Bonds, no expenses related to the Pro)ect
were paid or incurred by the Company or any "related person" to the
Company as that term is defined in Section 103(c)(6)(D) of the Code.
(e) No state, territory or possession of the United States of
America, nor any political subdivision of any such state, territory or
possession, nor the District of Columbia, nor any entity acting on behalf
of any of the foregoing, has, since April 30, 1968, issued any
obligations the proceeds of which are to be or have been used primarily
with respect to any facilities (i) that are located within the corporate
limits of the County, and (ii) a "principal user" of which facilities
was, is or will be the Company or any "related person" (as the terms
principal used and "related person" are defined and used in Section
103(b)(6) of the Code). For purposes of this subparagraph (e), a
contiguous or integrated facility located on both sides of the border
between any two or more political jurisdictions shall be considered as
being located wholly within each such political jurisdiction.
(f) Based on current facts, estimates and circumstances, it is
expected that:
(1) the acquisition, construction and installation of the
Project and the expenditure of all Bond proceeds will be completed
by November 1, 1980,
(2) work on the Project (which has commenced) will proceed with
due
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diligence to completion,
(3) the net proceeds from the sale of the Bonds are needed for
the purpose of paying all or a part of the cost of the acquisition,
construction and installation oi the Project, and
(4) the Project will not be sold or disposed of, in whole or
in part, prior to the payment in full of the bonds.
(g) Various contracts providing for the acquisition, construction
and installation of the Project have been entered into, and the amounts
required to be paid under said contracts exceed $100,000.
(h) The Company is not subject to any charter, by-law or contractual
limitation or provision of any nature whatsoever which in any way limits,
restricts or prevents the Company from entering into this Agreement,
issuing the Note or performing any of its obligations hereunder or
thereunder; and the execution and delivery of this Agreement and the
Note, the consummation of the transactions contemplated hereby and
thereby, and the fulfillment of or compliance with the terms and
conditions of this Agreement and the Note will not conflict with or
result in a breach of the terms, conditions or provisions of any
corporate restriction or any agreement or instrument to which the Comany
is a party or by which it is bound, or constitute a default under any of
the foregoing.
ARTICLE III.
ISSUANCE OF THE BONDS;
ACQUISITION, CONSTRUCTION AND INSTALLATION OF THE PROJECT
Section 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF PROCEEDS. In
order to provide funds for the payment of the cost of the acquisition,
construction and installation of the Project, the Board agrees that as soon as
possible it will authorize, sell and cause to be delivered to the initial
purchasers thereof. the Bonds. Upon receipt of the proceeds from the sale of
the Bonds, the Board will deposiT, all accrued interest from said sale in the
Bond Fund and will deposit the balance of the proceeds received from said sale
in the Project Fund.
Section 3.2. ACQUISITION, CONSTRUCTION AND INSTALLATION OF THE PROJECT.
The Company agrees that the acquisition, construction and installation of the
Project will be completed as promptly as practicable after receipt of the
proceeds from the sale of the Bonds, delays incident to strikes, riots, acts of
God or the public enemy beyond the reasonable control of the Company
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only excepted, but if such acquisition, construction and installation is not
completed, there shall be no resulting liability on the part of the Board and
no diminution in or postponement of the payments required to be paid by the
Company hereunder or under the Note.
Section 3.3. DISBURSEMENTS FROM THE PROJECT FUND. The Board will in the
Indenture authorize and direct the Trustee to use the moneys in the Project
Fund for the following purposes but, subject to the provisions of Section 3.8
hereof, for no other purpose:
(a) payment to the Company of such amounts, if any, as shall be
necessary to reimburse the Companv in full for all advances and payments
made by the Company prior to or after the delivery of the Bonds for
expenditures in connection with acquisition by the Company of appropriate
title in and to the Project Land (including the cost of such acquisition
and of any rights-of-way for the purpose of providing access to and from
the Project Land), clearing the Project Land, site improvement, the
preparation of Plans and specifications for the Project (including any
preliminary study or planning of the Project or any aspect thereof), the
construction of the Building, the acquisition and installation of the
Project Equipment and the acquisition, construction and installation
necessary to provide utility services or other facilities including
trackage to connect the Project with public transportation facilities,
and all real or personal properties deemed necessary in connection with
the Project, or any one or more of said expenditures (including
architectural, engineering and supervisory services) with respect to any
of the foregoing;
(b) payment of, or reimbursement of the Board or the Companv for the
reasonable legal and accounting fees and exoenses, financial consultants
fees, underwriting costs and rinting and engraving costs incurred in
connection with the authorization, sale and issuance of the Bonds, the
Preparation of this Agreement, the Note, the Indenture and all other
documents in connection therewith.
(c) payment to the Board of the sum of $100.00;
(d) payment of the initial or acceptance fee of the Trustee and the
reasonable fees and expenses of its counsel;
(e) payment of any other valid costs and expenses relating to the
Project which are permissible under the laws of the State of Tennessee;
provided, however, that none of the moneys in the Project Fund shall be
used to pay interest on the Bonds;
(f) all moneys remaining in the Project Fund (including moneys
earned on investments made pursuant to the provisions of Section 3.8
hereof) after the Completion Date and payment in full of the cost of the
acquisition, construction and installation of the Project and after
payment of all other items provided for in the preceding subsections of
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this Section then due and payable, shall at the direction of the Company
be (i) used by the Trustee for the purchase of Bonds for the purpose of
cancellation, (ii) paid into the Bond Fund, or (iii) a combination of (i)
and (ii) as is provided in such direction, provided that amounts approved
by the Authorized Company Representative and the Authorized Board
Representative shall be retained by the Trustee in the Project Fund for
payment of costs of the Project not then due and payable. Any balance
remaining of such retained funds after full payment of all such costs of
the Project shall be used by the Trustee as directed by the Company in
the manner specified in clauses (i), (ii) or (iii) of this subsection.
Should moneys remain in the Project Fund after the Completion Date in an
amount in excess of $400,000, no such excess shall be transferred to the
Bond Fund unless an opinion of a firm of nationally recognized bond
attorneys satisfactory to the Trustee is obtained stating that such
transfer will not impair the exemption ol interest on the Bonds from
Federal income taxation pursuant to Section 10@(b) of the Code.
The payments specified in subsections (a) through (d) of this Section
shall be made by the Trustee only upon receipt of the following:
(1) a written requisition for such payment signed by the Authorized
Company Representative; provided, that the occurrence of an event of Default
and as long as such Event of Default continues, each such requisition shall
also be signed by the Authorized Board Representative;
(2) a certificate by the person or persons signing such requisition
certifying:
(i) that an obligation in the stated amount has been incurred in
connection with the issuance of the Bonds or the acquisition,
construction and installation of the Project;
(ii) that such obligation is a proper charge against the Project
Fund and has not been paid and has not been the basis of any previous
withdrawal from the Project Fund; and specifying the purpose and
circumstances of such obligation in reasonable detail and the name and
address of the person, firm or corporation to whom such obligation is
owed, accompanied by a bill or statement of account for such obligation;
(iii) that they have no notice of any vendors, mechanic's, or other
liens or right to liens, chattel mortgages or conditional sales
contracts, or other contracts or obligations which should be satisfied or
discharged before payment of such obligation is made;
(iv) that such requisition contains no recuest for payment of any
portion of such obligation which the Company is, as of the date of such
requisition, entitled to retain under any retained percentage agreements;
and
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(v) that such requisition contains no request for payment of any
portion of such obligation which the company is, as of the date of such
requisition, entitled to retain under any retained percentage agreements;
and
(3) with respect to any such requisition for payment of labor, services,
material, supplies or equipment, a certificate, signed by the Authorized
Company Representative, certifying that insofar as such obligation was incurred
for labor, services, material, supplies or equipment in connection with the
acquisition, construction and installation of the Project, (i) such labor and
services were actually performed in a satisfactory manner, (ii) such materials,
supplies and equipment were actually used in connection with the acquisition,
construction and installation of the Project, and (iii) such labor and services
were performed and such materials, supplies and equipment were actually used
solely in connection with the acquisition, construction and installation of the
Project.
The Company shall furnish the Board with a copy of each requisition
submitted to the Trustee under this Section. The Board may rely as to the
completeness and accuracy of all statements in such requisition upon the
approval of such requisition by an Authorized Company Representative, and the
Comoany hereby covenants and agrees to indemnify and save harmless the
Board, its officers, directors, agents and employees from any liability
incurred in connection with any requisition so approved.
In making any such payment from the Project Fund, the Trustee may rely on
any such requisitions and certificates delivered to it pursuant to this Section
and the Trustee shall be relieved of all liability with respect to making such
payments in accordance with any such requisitions and certificates without
inspection of the Project or any other investigation.
Section 3.4. OBLIGATION OF THE PARTIES TO COOPERATE IN FURNISHING
DOCUMENTS TO TRUSTEE. The Board and the Company agree to cooperate with each
other in furnishing to the Trustee the documents referred to in Section 3.3
hereof that are required to effect payments out of the Project Fund and to
cause such requisitions to be directed by the Authorized Company Representative
or by the Authorized Companv Representative and the Authorized Board
Representative, as the case may be, to the Trustee as may be necessary to
effect payments out of the Project Fund in accordance with Section 3.3 hereof.
Such obligation of the Board and the Company is subject to any provisions of
this Agreement or the Indenture requiring additional documentation with respect
to payments and shall not extend beyond the moneys in the Project Fund
available for payment under the terms of the Indenture.
Section 3.5. ESTABLISHMENT OF COMPLETION DATE. The Completion Date
shall be evidenced to the Trustee by a certificate signed by the Authorized
Company Representative stating that, except for amounts retained by the Trustee
for costs of the Project not then due and payable as provided in Section 3.3(e)
hereof, (i) the acquisition, construction and installation of
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the project has been completed and all labor, services, materials, supplies and
equipment used in such acquisition, construction and installation have been
paid for, (ii) all other facilities necessary in connection with the Project
have been acquired, constructed and installed and all costs and expenses
incurred in connection therewith have been paid, (iii) the Project and all
other facilities in connection therewith have been acquired, constructed and
installed to his satisfaction and are suitable and sufficient for the efficient
operation of the Project for its intended purposes. Notwithstanding the
foregoing, such certificate by the Authorized Company Representative shall
state that it is given without prejudice to any rights against third parties
which exist on the date of such certificate or which may subsequently come into
being. The Board and the Company agree to cooperate one with the other in
causing such certificate to be furnished to the Trustee.
Section 3.6. COMPANY REQUIRED TO PAY PROJECT COSTS IN EVENT PROJECT FUND
INSUFFICIENT. If the moneys in the Project Fund available for payment of the
Cost of the Project should not be sufficient to pay the cost thereof in full,
the Company agrees to complete the Project and to pay all ihat portion of the
cost of the Project as mav be in excess of the moneys available therefor in the
Project Fund. The Board does not make any warranty, either express or implied,
that the moneys which will be paid into the Project Fund and which, under the
provisions of this Agreement, will be available for payment of the cost of the
Project will be sufficient to pay all costs which will be incurred in that
connection. The Company agrees that if after exhaustion of the moneys in the
Project Fund the Company should pay any portion of the cost of the Project
pursuant to the provisions of this Section, it shall not be entitled to any
reimbursement theref or from the Board or from the Trustee or from the holders
or owners of any of the Bonds, nor shall it be entitled to any diminution in or
postponement of the payments required to be made hereunder or under the Note.
Section 3.7. REMEDIES AGAINST CONTRACTORS AND SUBCONTRACTORS AND THEIR
SURETIES. The Company may prosecute or defend anv action or proceeding or take
any other action involving any defaulting contractor, subcontractor or surety
therefor which the Company deems reasonably necessary, and the Board agrees to
cooperate fully with the Company, to the extent it might lawfully do so, in any
such action or proceeding. Any amounts recovered by way of damages, refunds,
adjustments or otherwise in connection with the foregoing shall belong to the
Company.
Section 3.8. INVESTMENT OF PROJECT FUND AND BOND FUND MONEYS PERMITTED.
Any moneys held in the Project Fund and the Bond Fund shall be invested or
reinvested by the Trustee as provided in Article VII of the Indenture.
ARTICLE IV.
TITLE TO PROJECT; PROVISIONS FOR PAYMENT
----------------------------------------
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Section 4.1. TITLE TO THE PROJECT. The Board agrees that it shall not be
vested with any interest in the Project as a result of issuing the Bonds to
finance the cost thereof and that title to the Project shall be and remain in
the Company throughout the term of this Agreement.
Section 4.2. PAYMENT OBLIGATIONS OF THE COMPANY. As consideration for
the issuance of the Bonds bv the Board, the Company will execute and deliver
the Note to the Trustee, as the assignee and pledgee of the Board under the
Indenture, contemporaneously with the delivery of this Agreement. The Company
agrees to make prompt payment of all amounts payable on the Note when due.
The Company agrees to pay to the Trustee until Payment in Full of the
Bonds shall have been made, (i) an amount equal to the fees of the Trustee for
the Ordinary Services (as defined in the Indenture) of the Trustee rendered and
its Ordinary Fxoenses (as defined in the Indenture) incurred under the
Indenture, (ii) the reasonable fees and charges of the Trustee and any paying
agents for acting as paving agent as provided in the Indenture, as and when the
same become due, including the reasonable fees of its counsel, and (iii) the
reasonable fees and charges of the Trustee for Extraordinary Services (as
defined in the Indenture) rendered by it and Extraordinary Expenses (as defined
in the Indenture) incurred by it under the Indenture, as and when the same
become due; provided, that the Company may, without creating a default
hereunder, withhold such payment to contest in good faith the nencesity for any
such Extraordinary Services and Extraordinary Expenses and the reasonableness
of any such fees, charges or expenses.
Section 4.3. PAYMENTS ASSIGNED AND PLEDGED. It is understood and agreed
by the Board that payments required to be made by the Board under the Note are
assigned and pledged to the Trustee under the Indenture. The Company hereby
assents to such assignment and pledge. The Company further agrees that (i) all
payments under the hall be paid directly to the Trustee for the account of the
Board and shall be used in the Bond Fund, and (ii) all payments required to be
made as provided in the paragraph of Section 4.2 hereof shall be palid directly
to the Trustee for its own use or for payment to any paying agents.
Section 4.4. UNCONDITIONAL OBLIGATION OF COMPANY. The obligations of the
Company to make the payments required to be made under the Note and to perform
and observe the other agreements on its part contained herein and in the Note
shall be absolute and unconditional and shall not be subject to diminution by
set-off, counterclaim, abatement or otherwise. Until such time as Payment in
Full of the Bonds shall have been made, the Company (i) will not suspend or
discontinue any payments required to be made under the Note except to the
extent the same have been prepaid, (ii) will perform and observe all it other
agreements contained in this Agreement and in the Note and (iii) except as
provided in Sections 7.1, 7.2 and 7.3 hereof, will not terminate this Agreement
or its obligations under the Note for any cause including, without limiting the
generality of the foregoing, any acts or circumstances that may constitute
failure of
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consideration, sale, loss, destruction or condemnation of or damage to the
Project, any change in the tax or other laws of the United States of America or
of the State of Tennessee or any political subdivision of either, or any
failure of the Board to perform and observe any agreement, whether express or
implied. or any duty, liability or obligation arising out of or in connection
with this Agreement. Nothing contained in this Section shall be construed to
release the Board from the performance of any of the agreements on its part
contained herein; and in the event the Board should fail to perform any such
agreement on its part, the Company may institute such action against the Board
as the Company may deem necessary to compel such performance so long as such
action shall not do violence to the agreement on the part of the Company
contained in the preceding sentence.
Nothing contained herein shall be construed as a waiver of any rights
which the Company may have against the Board under this Agreement, or against
other persons under the Agreement, the Indenture or otherwise or under any
provision of law.
Section 4.5. COMPANY'S PERFORMANCE UNDER INDENTURE. The Company agrees,
for the benefit of the holder; from time to time of the Bonds to do and perform
all acts and things contemplated in the Indenture to be done or performed by
it.
ARTICLE V.
PARTICULAR COVENANTS
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Section 5.1. MAINTENANCE, OPERATION AND INSURANCE OF PROJECT; TAXES; NO
OPERATION OF PROJECT BY BOARD. The Company hereby covenants that it will at
its own expense maintain and operate all portions of the Project during their
useful lives or until they are replaced with facilities necessary in their
operation, but this covenant does not require the Company to operate any
portion of the Project after such portion is no longer useful in the business
of the Company and does not prevent the Company from merging or consolidating
with another corporation as permitted by Section 5.3 hereof. The Company
further covenants that it will pay all taxes levied with respect to the Project
and the income therefrom and that it will at its own expense keep the Project
properly insured, but it shall be thesole judge of the type and adequacy of
such insurance. Nothing contained in this Agreement shall be deemed to
authorize or require the Board to operate the Project or to conduct any
business enterprise therewith.
Section 5.2. BOARD'S EXPENSES; RELEASE AND INDEMNIFICATION PROVISIONS.
The Company agrees, whether or not the transactions contemplated by this
Agreement, the Note and the Indenture shall be consummated;
(a) to pay, and save the Board and the Trustee harmless against
liability for
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the payment of, all reasonable out-of-pocket expenses arising in
connection with said contemplated transactions, including the
reasonable fees and expenses of the Board's counsel; and
(b) to protect, indemnify and save the Board and its officers
harmless from and against all liability, losses, damages, costs, exoenses
(including reasonable attorneys' fees), taxes, causes of action, suits,
claims, demands and judgments of any nature or from, by or on behalf of
any person, firm, corporation or other legal entity arising in any manner
from the transaction of which this Agreement is a part or arising in any
manner in connection with the Project, including, without limiting the
generality of the foregoing, arising from (i) the work done on the
Project or the operation of the Project during the term of this
Agreement, or (ii) any breach or default on the part of the Company in
the performance of any of its obligations under this Agreement, or (iii)
the Project or any part, thereof, or give any violation of contract,
agreement or restriction by the Company relating to the Project or (v)
any violation of law, ordinance or regulation affecting the Project or
any part thereof or the ownership or occupancy or use thereof. Upon
notice from the Board, the Company shall defend the Board in any action
or proceeding brought in connection with any of the above; and
(c) it is the intention of the parties that the Board and its
officers shall not incur pecuniary liability by reason of the terms of
this Agreement or by reason of the undertakings required of the Board or
its officers hereunder in connection with the issuance of the Bonds, the
execution of the Indenture, the performance of any act required of the
Board or its officers by this Agreement, or the performance of any act
requested by the Board or its officers by the Company or arising in any
manner in Connection with the Project or the financing of, the Project;
nevertheless, if the Board or its officers should incur any such
pecuniary liability, then in such event the Company shall indemnify and
hold the Board and its officers harmless against all claims by or on
behalf of any person, firm or corporation or other lecal entity, arising
out of the same, and all reasonable costs and expenses incurred in
connection with any such claim or in connection with any action or
proceeding brought thereon, and upon notice from the Board, the Company
shah defend the Board and its officers in any such action or proceeding;
and
(d) the provisions of this Section shall not apply to any claim or
liability resulting from the Board's acts of negligence, bad faith, fraud
or deceit or for any claim or liability which the Company was not given
the opportunity to contest, due to the negligence of the Board.
Section 5.3. MAINTENANCE OF CORPORATE EXISTENCE. The Company agrees that
so long as any Bonds remain outstanding it will maintain its corporate
existence and will not merge into or consolidate with any other corporation and
will not transfer all or substantially all of its
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property, assets and licenses; provided, however, the Company may, without
violating any provision of this Agreement, consolidate with or merge into
another domestic corporation (i.e., a corporation incorporated and existing
under the laws of one of the states of the United States) or permit one or
more other domestic corporations to consolidate with or merge into it, or
transfer all or substantially all of its assets to another domestic
corporation, but only on the condition that the corporation to which such
transfer of assets is made or the corporation resulting from or surviving such
merger or consolidation shall expressly assume and agree in writing to perform
all of the Company's obligations under this Agreement and the Note.
Section 5.4. QUALIFICATION IN TENNESSEE. The Company warrants (i) that it
is and through the term hereof it will continue to be duly qualified to do
business in the State of Tennessee, and (ii) that if it elects to consolidate
with, merge into or transfer its assets to another corporation in accordance
with Section 5.3, and such other corporation is not organized under the laws of
the State of Tennessee, the Company, as a condition of such consolidation,
merger or transfer of assets, shall cause such other corporation to qualify to
do business as a foreign corporation in said State and to remain so qualified
continuously during the term hereof.
Section 5.5. AGREEMENT OF BOARD NOT TO ASSIGN. Except for the assignment
of this Agreement and the Note to the Trustee pursuant to the Indenture, the
Board agrees that it will not attempt to further assign, transfer or convey
its interest in this Agreement or the Note or create any pledge or lien of any
form or nature with respect to the payments under the Note.
Section 5.6. REDEMPTION OF BONDS. The Board or the Trustee, at the time
of the Company and if the same are then redeemable, shall forthwith that may be
necessary under the applicable redemption provisions of the fect redemption of
ali or any portion of the Bonds, as may be specified by the Company, on the
earliest redemption cate on which such redemption may be made under such
applicable provisions or upon the date set for such redemption by the Company
pursuant to Section 7.1 hereof. So long as the Company is not in default
hereunder neither the Board nor the Trustee shall redeem Bonds prior to their
respective maturities unless requested in writing by the Company.
Section 5.7. REFERENCE TO BONDS INEFFECTIVE AFTER BONDS PAID. Upon
Payment in Full of the Bonds, all references in this Agreement and the Note to
the Bonds and the Trustee shall be ineffective and neither the Board, the
Trustee nor the holders or owners of any of the Bonds shall thereafter have any
rights hereunder or under the Note and the Company shall have no further
obligation hereunder or under the Note, saving and excepting those that shall
have heretofore vested. For purposes of this Agreement and the Note, Payment
in Full of the Bonds shall be deemed to have occurred:
(a) If there are in the Bond Fund moneys sufficient to pay the
principal of all outstanding Bonds plus the interest due thereon until
and at their maturitv and provision
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for payment of all Trustee's and paying agents' reasonable fees and
expenses, accrued and to accrue, has been made in a manner satisfactory
to the Trustee and such paying agents, or
(b) If there have beeh irrevocably deposited with the Trustee (i)
either moneys in an amount which shall be sufficient, or Government
Obligations the principal of and interest on which when due will provide
moneys which, together with moneys, if any, deposited with or held by the
Trustee at the same time and available for such purpose pursuant to the
Indenture, shall be sufficient to pay the principal of and interest due
or to become due on all oustanding Bonds on or prior to the redemption
date or maturity thereof, (ii) all Trustee's and paying agents'
reasonable fees and expenses due or to become due in connection with the
payment or redemption of the Bonds, and (iii) if any Bonds are to be
redeemed on any date prior to their maturity, irrevocable instructions to
redeem such Bonds on such date and either evidence satisfactory to the
Trustee that all reemption notices required by the Indenture have been
given or irrevocable power authorizing the Trustee to give such
redemption notices.
Section 5.8. COVENANTS OF COMPANY AND BOARD WITH RESPECT TO CAPITAL
EXPENDITURES. The Board is issuing the Bonds pursuant to an election made by
it under Section 103(b)(6)(D) of the Code. It is the intention of the parties
hereto that the interest on the Bonds be and remain free from Federal income
taxation, and to that end, the Board and the Company do hereby covenant with
each other with the Trustee and with each of the future holders of any Bonds or
interest coupons appertaining thereto, as follows:
(a) The Company and the Board covenant and represent that there have
never been issued any bonds with respect to "facilities" described in
Section 103(c)(6) of the Code which are located in the County, which
bonds would be taken into account in determining the aggregate face
amount of the Bonds as provided in Section 103(b)(6)(D)(ii) of the Code.
(b) The Company further covenants and represents that the aggregate
principal amount of bonds being issued and capital expenditures
heretofore made (other than those mentioned in Section 103(b)(6)(F) of
the Code) with respect to "facilities" described in Section 103(c)(6)(F)
of the Code which are located in the County have not exceeded and will
not exceed $10,000,000 (or any such larger amount as may be hereafter
permitted by law) during the six-year period beginning three years before
the date of issuance and delivery of the Bonds.
(c) The Board and the Company further covenant and agree that
during, the three-year period following the date of the issuance and
delivery of the Bonds, neither of them shall make or cause or permit to
be made any capital expenditures (other than those
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mentioned in Section 103(b)(6)(F) of the Code) with respect to
"facilities" described in said Section 103(b)(6)(F) of the Code which are
located in the County, which would cause the interest on the Bonds to be
subject to Federal income taxation.
(d) The Company further covenants and agrees that should the
circumstances set forth in said Section 103(b)(6)(D) and (E) occur
(during the six-year period referred to therein), either through the
fault of the Company or through circumstances beyond the Company's
control, and there shall occur a Determination of Taxability as defined
in Section 5.9 hereof, the Company shall promptly prepay the Note as
provided for in Section 7.3 hereof, and the Company and the Board hereby
agree that the Board will use all payments thus accelerated for the
immediate redemption of all outstanding Bonds and otherwise as provided
in Section 5.9 hereof.
(e) The Company further covenants and agrees that as of October 1,
1980, and as of the first day of each October thereafter to and including
October 1, 1983, it will furnish to the trustee a certificate of the
chief financial officer of the Company within ninety (90) days of said
date stating that during the period beginning three (3) years prior to
the date of the issuance and delivery of the Bonds and extending
through the applicable date such certificate is to cover (or as to the
certificate due October 1, 1983, extending through the day which is the
third anniversary of the date of issuance and delivery of the Bonds,
capital expenditures (including as capital expenditures for this purpose
the principal amount of the Bonds) in excess of $10,000,000 (or any such
larger amount as may be hereafter permitted by law) have not been paid or
incurred with respect to "facilities" described in said Section
103(b)(6)(E) of the Code which are located in the County.
(f) The Board and the Company further covenant and agree to comply
fully, during the term of this Agreement, with all effective rules,
rulings or regulations promulgated by the Department of Treasury or the
Internal Revenue Service, with respect to bonds issued under said Section
103(b)(6)(D) of the Code so as to maintain the tax-exempt status of the
interest on the Bonds.
Section 5.9. DETERMINATION AND EVENT OF TAXABILITY. Should there occur a
"Determination of Taxability" (the "Determination") as hereinafter defined, not
later than forty-five(45) days from the date of the Determination the Company
shall accelerate payment of the Note payments due under Section 4.2 of this
Agreement and shall pay to the Trustee for deposit in the Bond Fund, the
following:
(a) For application by the Trustee to the redemption of Bonds
outstanding on the date of the Determination and which will not mature or
otherwise be redeemed, transferred or sold prior to the redemption date
provided for in this Section 5.9:
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(1) the principal amount of such Bonds plus accrued interest
to such redemption date; plus
(2) an additional amount equal to the interest paid (or
accrued) on such Bonds during the period beginning on the date of
the "Event of Taxability" (the "Event") as hereinafter defined and
ending on the date of such redemption.
(b) To be paid by the Trustee to the holders of Bonds outstanding on
the date of the Event which have matured or have been redeemed,
transferred or sold or which will mature or will be redeemed, transferred
or sold prior to the redemption date provided for in this Section 5.9, an
additional amount equal to the interest paid (or accrued) on such Bonds
during the period beginning on the date of the Event and ending on the
earlier of the date of the maturity, redemption, transfer or sale of such
Bonds.
Said purchase price shall also include exoenses of redemption and the
reasonable fees and expenses of the Trustee and the paying agent(s).
An "Event of Taxability" shall mean:
(a) the paying or incurring of capital expenditures in an amount in
excess of the amount permitted in Section 103(b)(6)(D) of the Code which
has the effect of causing the interest payable on the Bonds to become
includable in the gross income, for Federal income tax purposes, of any
taxpaying bondholder;
(b) the taking of any action by the Company or the failure of the
Company to take any action, or any misrepresentation of the Company,
contained in the Agreement or in any certzicate of the Company required
to be delivered under the Agreement or in connection with the issuance,
sale or delivery of the Bonds which such act or omission or
misrepresentation has the effect under the code and applicable
regulations thereunder as of the date of such act failure or
misrepresentation, of causing the interest payable on the Bonds to become
includable in the gross income, for Federal income tax Durposes, of any
taxpaying bondholder; provided, however, that if the Determination is
based upon that conclusion that, with respect to any particular holder,
such holder is a "substantial user" of the Project as provided in Section
103(b)(7) of the Code or a "related person" as referred to in Section
103(b)(6)(C) of the Code, no Determination shall be deemed to have
occurred or
(c) on that date when the Company is advised in writing by the
Commissioner or any District Director of Internal Revenue that there has
been issued a public or private ruling of the Internal Revenue Service or
a technical advice memorandum issued by the
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national office of the Internal Revenue Service in which the Company
has participated or has been given the opportunity to participate, that
the interest on the Bonds is includable in the gross income of any
taxpaying bondholder due to the occurrence of an Event.
A "Determination of Taxability" shall be deemed to have occurred on the
first to occur of the following:
(a) on that date when the Company files (in compliance with its
obligations under this Agreement) any statement, supplemental statement
or other tax schedule, return or document (whether pursuant to Treasury
Regulations Section 1.103-10(b)(2)(vi), as the same may be amended or
supplemented or otherwise) which discloses that an Event shall have in
fact occurred, or will occur sixty (60) days after any such filing by the
Company (a "Supplemental Statement");
(b) on that date when the Company shall be advised in writing by the
Commission or any District Director of Internal Revenue that, based upon
the filings of the Company under this Agreement, or upon any review or
audit of the Company, or upon any other ground whatsoever, an Event shail
have occurred; or
(c) on that date when the Company shall receive notice from the
Trustee in writing that the Trustee has been advises by (1) any
bondholder that the Internal Revenue Service has assessed as includable
in the gross income of such bondholder the interest on his Bonds due to
the occurrence of an Event, or (ii) the Commissione or any District
Director of Internal Revenue that the interest on the Bonds is includable
in the gross income of any taxpaying bondholder due to the occurrence of
an Event;
provided, however, no Determination shall occur under subparagraph (b) or (c)
hereof unless the Company has been afforded the opportunity, at its expense, to
contest any such assessment, and further, no Determination shall occur until
such contest, if made, has been finally determined, but any such contest shall
be made and finally determined within forty-eight (48) months of the Event or
the Company shall no longer have any right to contest any such assessment.
The Company shall give prompt written notice to the Board and the Trustee
of (a) the filing by the Company of any Supplemental Statement and (b) its
receipt of any oral or written advice from the Internal Revenue Service that an
Event shall have occurred.
The Trustee shall, promptly upon learning of the occurrence of an event
described in (a), (b) or (c) above, cause notice thereof to be given to the
bondholders in the same manner as is provided in the Indenture for notices of
redemption. The Trustee may, in such notice to bondholders, make provisions
for obtaining advice from bondholders, in such form as shall be deemed
appropriate, respecting relevant assessments made on such bondholders by the
Internal
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Revenue Service, so as to be able, if approprite, to verify the existence,
present or future, of a Determination.
Not later than forty-five (45) days after the dalte of a Determination,
the Company shall instruct the Trustee to apply the accelerated payments made
by the Company as a result of such Determination, on the earliest possible date
after the giving of the required notice of redemption under the Indenture, to
the redemption of Bonds or to the payment to the holders of Bonds which have
myatured or have been redeemed, transferred or sold or which will mature or
will be redeemed, transferred or sold prior to the redemption date provided for
in this Section 5.9, all in accordance with the requirements in this Section
5.9. A copy of such instructions shall be forwarded by the Company to the
Board.
Upon the redemption date provided for in this Section 5.9, and providing
there has been deposited with the Trustee the total amount as required, such
amount shall constitute the total compensation due the Board and the holders of
the Bonds as a result of an occurrence of a Determination and the Company shall
not be deemed to be in default under this Agreement by reason of the occurrence
of such Determination and Event.
Section 5.10. COVENANT OF COMPANY WITH RESPECT TO USE OF BOND PROCEEDS.
The Company covenants with the Board and with the Trustee for the benefit of
the holders of the Bonds that it will not permit any of the proceeds of the
Bonds to be invested in such a manner which would cause the Bonds to be
"arbitrage bonds" within the meaning of Section 103(c) of the Code and
applicable regulations proposed or promulgated thereunder as of the date of
such investment.
ARTICLE VI.
DEFAULTS AND REMEDIES
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Section 6.1. EVENTS OF DEFAULT. Each of the following events is hereby
declared an Event of Default:
(a) the Company's failure to make any payment required to be made
under the Note when he same becomes due and payable;
(b) the Company's failure to comply with the provisions of Sections
5.9 and 7.3;
(c) the Company's failure to observe and perform any of its other
covenants
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conditions or agreements contained herein or in the Note for a period of
thirty (30) days after written notice (unless the Company and the Trustee
shall agree in writing to an extension of such time prior to its
eXDiration) specifying such failure and requesting that it be remedied,
given by the Board or the Trustee to the Company, or in the case of any
such default which can be cured with due diligence but no, within such
thirty-day period, the Company's failure to proceed promptly to cure such
default and thereafter prosecute the curing of such default with due
diligence;
(d) if any representation or warranty by the Company contained in
this Agreement is false or misleading in any material respect;
(e) the dissolution or liquidation of the Company or the filing by
the Company of a voluntary petition in bankruptcy, or failure by the
Company within ninety (90) days to lift or bond (if legally permissible)
any execution, garnishment or attachment of such consequence as will
impair its ability to carry on its operations at the Project, or the
commission by the Comoany of any act of bankruptcy, or adjudication of
the Company as a bankrupt, or assignment by the Company for the benefit
of its creditors, or the entry by the Company into an agreement of
composition with its creditors, or the approval by a court of competent
jurisdiction of a petition applicable to the Company in any proceeding
for its reorganization instituted under the provisions of the Federal
bankruptcy statutes, as amended, or under any similar act which may
hereafter be enacted. The term "dissolution or liquidation of the
Company", as used in this subsection, shall not be construed to include
the cessation of the corporate existence of the Company resulting from a
merger or consolidation of the Company into or with another corporation
or a dissolution or liquidation of the Company following a transfer of
all or substantially all of its assets as an entiretv, under the
conditions permitting such actions contained in Section 5.3 hereof; and
(f) a default under the Guaranty Agreement.
The foregoing provisions of this Section are sub ect to the following
limitations: If by reason of force majeure the Companv is unable in whole or in
part to carry out the agreements on its part herein contained, other than the
obligations on the part of the Company contained in Article IV and Sections
5.3, 5.4, 5.9, 7.1 and 7.3 hereof, the Company shall not be deemed in default
during the continuance of such inability. The term "force majeure" as used
herein shall mean, without limitation, the following: acts of God; strikes,
lockouts or other industrial disturbances; acts of public enemies; orders of
any kind of the government of the United States of America or of the State of
Tennessee or any of their departments, agencies, political subdivisions or
officials, or anv civil or military authority; insurrections; riots; epidemics;
landslides; lightning; earthquakes; icebergs; boll weevils; fires; hurricanes;
storms; floods; washouts; droughts; arrests; restraint of government and
people; civil disturbances; explosions;
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breakage or accident to machinery, transmission pipes or canals: partial
or entire failure of utilities; or any other cause or event not reasonably
within the control ol the Companv. The Company agrees, however, to remedy with
all reasonable dispatch the cause or causes preventing the Company from
carrying out its agreements; provided, that the settlement of strikes, lockouts
and other industrial disturbances shall be within the sole discretion of the
Company, and the Company shall not be required to make settlement of strikes,
lockouts and other industrial disturbances by acceding to the demands of "he
opposing party or parties when such course is, in the judgment of the Company,
unacceptable to the Company.
Section 6.2. REMEDIES ON DEFAULT. Whenever an Event of Default shall
have happened and be continuing, the Trustee, as the assignee and pledgee of
the Board under the Indenture, shall have the following rights and remedies:
(a) The Trustee may declare all payments on the Note to be
immediately due and payable, whereupon the same shall become immediately
due and payable. If the Trustee elects to exercise the remedy afforded
in this Section 6.2(a) and, accelerates all payments on the Note, the
amount then due and payable by the Company as accelerated payments shall
be the sum of (1) the aggregate principal amount of the outstanding
Bonds, and (2) all interest on the Bonds then due and accrued on the date
of such acceleration.
(b) The Trustee may take whatever action at law or in equity may
appear necessary or desirable to collect any sums then due and thereafter
to become duehereunder or under the Note or to enforce the observance or
performance of any covenant, condition or agreement of the Company
hereunder or under the Note.
Any amounts collected pursuant to action taken under this Section shall be
paid into the Bond Fund and applied in accordance with the provisions of the
Indenture, or Payment in Full of the Bonds and the payment of any costs
occasioned by an of Default hereunder, any excess moneys in the Bond Fund shall
be returned to the Company as an overpayment of the Note.
Section 6.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Trustee is intended to be exclusive o' any other remedy, and
every remedy shall be cumulative and in addition to every other remedy herein
or now or hereafter existing at law, in equity or by statute. No delay or
omission to exercise any right or power accruing upon an Event of Default shall
impair any such right or power or shall be construed to be a waiver thereof
(unless expressly waived by the Trustee), but any such right or power may be
exercised from time to time and as often as may be deemed expedient. The
Trustee and the holders or owners of the Bonds. subject to the provisions of
the Indenture, shall be entitled to the benefit of all covenants and agreements
herein contained.
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Section 6.4. ATTORNEYS' FEES AND EXPENSES. Should an Event of Default
occur and the Trustee employ attorneys or incur other expenses for the
collection of sums due hereunder or under the Note or the enforcement of
performance of any other obligation of the Company hereunder or under the Note,
the Company shall on demand pay to the Trustee the reasonable fees of such
attorneys and such other reasonable expenses so incurred.
Section 6.5. WAIVER OF EVENTS OF DEFAULT. If, in compliance with the
requirements of Section 910 of the Indenture, the Trustee shall waive any Event
of Def ault as therein defined and its consequences or rescind any declaration
of acceleration of payments of the principal of and interest on the Bonds, such
waiver shall also waive any Event of Default hereunder and its consequences and
such rescission of a declaration of acceleration of the principal of and
interest on the Bonds shall also rescind any declaration of any acceleration of
aU payments on the Note. In case of any such waiver or rescission, or in case
any proceeding taken by the Trustee on account of any such Event of Default
shall have been discontinued or abandoned or determined adversely, then and in
every such case the Board, the Company, the Trustee and the holders or owners
of the Bonds shall be restored to their former positions and rights hereunder
and under the Note respectively, but no such waiver or rescission shall extend
to any subsequent or other Event of Default or impair any right consequent
thereon.
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MORTGAGE AND INDENTURE OF TRUST
THIS MORTGAGE AND INDENTURE OF TRUST, made and entered into as of
September 1, 1979, by and between TAYLOR COUNTY, FLORIDA (the "County"), a
political subdivision of the State of Florida, and THE FIRST NATIONAL BANK OF
COLUMBUS, a banking association duly organized and existing under and by virtue
of the laws of the United States of America, having power and authority to
accept and execute trusts, and having its principal office in Columbus,
Georgia, as Trustee (the "trustee"),
WITNESSETH:
WHEREAS, Section 10(c) of Article VII of the Constitution of the State
of Florida authorizes the issuance of revenue bonds by counties of the State of
Florida to finance the cost of capital projects for industrial or manufacturing
plants to the extent the interest on such revenue bonds is exempt from taxation
under the then existing laws of the United States of America and such revenue
bonds are payable solely from the revenues derived from the sale, operation or
leasing of said projects: and
WHEREAS, the Florida Industrial Development Financing Act (Sections
159.25 - 159.43, Florida Statutes Annotated, as supplemented and amended - the
"Act"), in order to effectuate the purposes of Section 10(c) of Article VII of
the Constitution of the State of Florida, authorizes counties of the State of
Florida to finance, acquire, construct, own and sell industrial plants in order
to promote the industrial economy of said State, increase opportunities for
gainful employment and purchasing power, improve living conditions and
otherwise contribute to the prosperity and welfare of said State and its
inhabitants: and
WHEREAS, the Act further authorizes counties of the State of Florida
to issue their revenue bonds for the purpose of carrying out any of their
powers and, as security for the payment of the principal of and interest on any
such bonds so issued, to pledge the revenues and receipts from any projects
financed thereby to the payment of such Bonds. and
WHEREAS, after careful study and investigation, the County, in
furtherance of the purposes of the Act and pursuant to a resolution duly
adopted, has entered into an Agreement of Sale (the "Agreement"), dated as of
even date therewith, with CPG Products Corp. (the "Company"), a corporation
organized and existing under the laws of the State of Delaware and duly
qualified to do business in the State of Florida, pursuant to which the County
has agreed to locate a new industrial facility in Taylor County, Florida,
consisting of certain land and a building to be constructed thereon and
machinery and equipment to be installed therein (the "Project") for sale to the
Company under the Agreement and the Company has agreed to pay the County
specified purchase price payments and other payments; and
<PAGE> 2
WHEREAS, after careful investigation, the County has found and does
hereby declare that it is in the best interest of the citizens of the County
that the Project be acquired, constructed, installed and sold to the Company
for the purposes stated in the Agreement, all in keeping with the lawful public
purposes of the Act; and
WHEREAS, it is estimated that the cost of the Project will be at least
$5,800,000 and the County has determined that the most feasible method of
financing the cost of the Project is through the issuance hereunder of Taylor
County, Florida Industrial Development Revenue Bonds (CPC, Products Corp.
Project), Series 19701, in the aggregate principal amount of $5,800,000 (the
"Bonds"); and
WHEREAS, the execution and delivery of this Mortgage and Indenture of
Trust and the sale, issuance and delivery of the Bonds have been in all
respects duly and validly authorized by resolution duly adopted by the Board of
County Commissioners of the County (the "Board"); and
WHEREAS, the County will receive purchase price payments and other
payments from the Company pursuant to the Agreement, which payments together
with the Agreement itself and all other revenues arising out of or in
connection with its ownership of the Project shall be pledged as security for
the payment of the principal of, redemption premium (if any) and interest on
the Bonds; and
WHEREAS, General Mills, Inc., a Delaware corporation and owner of 100%
of the stock of the Company (the "Guarantor"), in order to induce the County to
issue the Bonds and in order to induce the future purchasers and holders of the
Bonds to buy the same, entered into a Guaranty Agreement (the "Guaranty"),
dated as of even date herewith, with the Trustee, the terms of which required
the Guarantor to guarantee absolutely and unconditionally the payment of the
principal of, the redemption premium (if any) and the interest on the Bonds, as
the same become due; and
WHEREAS, the County has found and does hereby declare that the Project
will directly result in an increase in employment opportunities in the County
of approximately 100-150 jobs; and
WHEREAS, the County has been induced to finance, acquire, construct
and install the Project and to sell the Project to the Company by the promise
of the Company to locate a new industrial facility in the County; and
WHEREAS, all things necessary to make the Bonds. when authenticated by
the Trustee and issued as in this Mortgage and Indenture of Trust provided, the
valid, binding and legal obligations of the County according to the import
thereof, and to constitute this Mortgage and
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Indenture of Trust a valid and fist lien on and security interest in the
properties mortgaged hereby, a valid pledge of the payments herein pledged to
the payment of the principal of, redemption premium (if any) and interest on
the Bonds and a valid assignment of the rights of the County under the
Agreement (including the security interest created therein) have been done and
performed, and the execution and delivery of this Mortgage and Indenture of
Trust and the execution and delivery of the Bonds, subject to the terms hereof,
have in all respects been duly authorized;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS INDENTURE
WITNESSETH;
That the County, in consideration of the premises and of the
acceptance by the Trustee of the trusts hereby created, and of the purchase and
acceptance of the Bona's by the holders and owners thereof, and of the sum of
One Dollar ($1.00), lawful money of the United States of America, to it duly
paid by the Trustee, at or before the execution and delivery of these presents,
and for other good and valuable consideration the receipt of which is hereby
acknowledged, in order to secure the payment of the principal redemption
premium (if any) and interest on the Bonds according to their tenor and effect
and to insure the performance and observance by the County of all the covenants
expressed or implied herein and in the Bonds, has given, granted, pledged,
assigned, conveyed, mortgaged and sold and transferred and does by these
presents gives grant, pledge, assign, convey, mortgage and sell and transfer to
the Trustee, and to its successors in the trusts hereby created, and to them
and their assigns forever:
I.
The real estate and premises described in Exhibit "A" attached hereto,
with all additions, improvements and fixtures now or hereafter located thereon
or therein and with the easements, hereditaments, servitudes, appurtenances,
rights, privileges and immunities thereunto belonging or appertaining, subject
to Permitted Encumbrances as hereinafter defined.
II.
A security interest in all right, title and interest of the County in
the Agreement, dated as of even date herewith, between the County and the
Company (including, without limitation, the security interest in the Project
Equipment specifically granted therein to the County), and all amendments,
modifications and renewals thereof.
III.
A security interest in all purchase price payments and other payments
to be received by the County pursuant to the Agreement and all amendments,
modifications and renewals thereof,
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<PAGE> 4
and a security interest in all other revenues arising out of or in connection
with the County's ownership of the Project.
IV.
A security interest in any and all other property of every name and
nature from time to time hereafter by delivery or by writing of any kind, given
granted, pledged, assigned, conveyed, mortgaged, sold or transferred, as and
for additional security hereunder, by the County or by anyone in its behalf or
with its written consent, to the Trustee, which is hereby authorized to receive
any and all such property at any and all times and to hold and apply the same
subject to the terms hereof.
TO HAVE AND TO HOLD all and singular the same with all privileges and
appurtenances hereby conveyed and assigned, or agreed or intended so to be, 'to
the Trustee and its successors in said trust and to them and their assigns
forever;
IN TRUST, NEVERTHELESS, upon the terms and trusts herein set forth,
for the equal and proportionate benefit, security and protection of all holders
of the Bonds and interest coupons (if any) issued or to be issued under and
secured by this Indenture, without preference, priority or distinction as to
lien or otherwise of any of the Bonds or coupons over any of the others except
as herein expressly provided;
PROVIDED, HOWEVER, that if the County, its successors or assigns,
shall well and truly pay, or cause to be paid, the principal of the Bonds and
the interest due or to become due thereon together with any redemption premium
required by redemption of any of the Bonds prior to maturity, at the times and
in the manner mentioned in the Bonds and the interest coupons appertaining to
the Bonds, respectively, according to the true intent and meaning thereof, or
shall provide for the payment thereof as permitted hereby, and shall well and
truly keep, perform and observe ail the covenants and conditions pursuant to
the terms of this Indenture to be kept, performed and observed by it, and shall
pay or cause to be paid to the Trustee all sums of money due or to become due
to it in accordance with the terms and provisions hereof, then upon such final
payments this Indenture and the rights hereby granted shall cease. determine
and be void; otherwise, this Indenture shall be and remain in full force and
effect.
THIS INDENTURE FURTHER WITNESSETH and it is expressly declared, that
all Bonds issued and secured hereunder are to be issued, authenticated and
delivered and all property, rights and interests hereby given, granted,
pledged, assigned, conveyed, mortgaged, sold or transferred are to be dealt
with and disposed of under, upon and subject to the terms, conditions,
stipulations, covenants, agreements, trusts, uses and purposes as hereinafter
expressed, and the County has agreed and covenanted and does hereby agree and
covenant with
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<PAGE> 5
the Trustee and with the respective holders and owners, from time to time, of
the Bonds or coupons (if any) or any part thereof, as follows, that is to say:
ARTICLE I.
DEFINITIONS AND CERTAIN RULES OF INTERPRETATION
Section 101. DEFINITIONS. In addition to the words and terms
elsewhere defined herein, the following words and terms as used herein shall
have the following meanings unless the context or use clearly indicates another
or different meaning or intent, and any other words and terms defined in the
Agreement shall have the same meanings when used herein as assigned them in the
Agreement unless the context or use clearly indicates another or different
meaning or intent:
"ACT" means the Florida Industrial Development Financing Act. being
Chapter 159, Part II, Florida Statutes (Sections 15111.25 - 159.43. inclusive,
Florida Statutes Annotated, as supplemented and amended);
"AGREEMENT" means the hereinbefore mentioned Agreement of Sale between
the County and the Company, dated as of even date herewith:
"BOARD" means the Board of County Commissioners of Taylor County,
Florida:
"BOND FUND" means the Bond principal and interest payment fund created
by Section 502 in which there shall be established a general account and a
special account. Any reference herein to the words "Bond Fund" without further
qualification shall constitute a reference to said general account:
"BONDHOLDER" or "HOLDER OF THE BONDS" means the bearer of any Bond not
registered as to principal and the registered owner of any Bond registered as
to principal;
"BONDS" means the Industrial Development Revenue Bonds of the County
issued hereunder. Any percentage of Bonds, specified herein for any purpose,
is to be figured on the aggregate principal amount of Bonds then outstanding;
"CODE" means the Internal Revenue Code of 1954, as amended, and the
applicable regulations thereunder;
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<PAGE> 6
"COMPANY" means CPG Products Corp., a Delaware corporation, and its
successors and assigns, including any surviving, resulting or transferee
corporation as provided in Section 8.3 of the Agreement;
"CONSTRUCTION FUND" means the construction fund created by Section
602;
"COUNSEL" means an attorney, or firm thereof, admitted to practice law
before the highest court of any state in the United States of America or the
District of Columbia,
"COUNTY" means Taylor County, a political subdivision of the State;
"COUPON" means any of the coupons issued hereunder evidencing
installments of interest on a Bond;
"DEFAULT" means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an event of
default;
"EVENT OF DEFAULT" means the events specified in Section 1001, subject
to the terms of Section 1013;
"EXTRAORDINARY SERVICES" and "EXTRAORDINARY EXPENSES' means all
services rendered and all expenses incurred by the Trustee under this Indenture
other than Ordinary Services and Ordinary Expenses;
"FINANCING STATEMENTS" means any and all financing statements
(including continuation statements) filed for record from time to time to
perfect the security interests created or assigned;
"GOVERNMENT OBLIGATIONS" means (a) general and direct obligations of the
United States of America for the payment of which the full faith and credit of
the United States of America is pledged, or (b) obligations issued by a Person
controlled or supervised by and acting as an instrumentality of the United
States of America, he payment of the principal of, premium, if any, and the
interest on which is fully guaranteed as a full faith and credit obligation by
the United States of America:
"GUARANTOR" means General Mills. Inc., a Delaware corporation, its
successors and assigns, including any surviving, resulting or transferee
corporation as provided in Section 3.2 of the Guaranty;
"GUARANTY" means the hereinbefore mentioned Guaranty Agreement from
the Guarantor to the Trustee, dated as of even date herewith;
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<PAGE> 7
"INDENTURE" means this Mortgage and Indenture of Trust and other
supplemental agreements with the Trustee in pursuance hereof;
"INDEPENDENT AUDITOR" means a certified public accountant, or firm
thereof, who or which is "independent" as that term is defined in Rule 101 and
related interpretations of the Code of Professional Ethics of the American
Institute of Certified Public Accountants, of recognized standing, who or which
does not devote his or its full time to the County, the Company or the
Guarantor (but who or which may be regularly retained by any of them);
"INDEPENDENT COUNSEL" means an attorney, or firm thereof, admitted to
practice law before the highest court of any state in the United States of
America or the District of Columbia and not an employee on a full-time basis of
the County, the Guarantor or the Company (but who or which may be regularly
retained by any of them);
"MORTGAGED PROPERTY" means the property, rights, moneys, securities
and other amounts given, granted, pledged, assigned, conveyed, mortgaged, sold
and transferred to the Trustee pursuant to the granting clauses hereof.
"ORDINARY SERVICES" and "ORDINARY EXPENSES" means those services
normally rendered and those expenses normally incurred by a trustee under
instruments similar hereto;
"OUTSTANDING," when used with reference to the Bonds at any date as of
which the amount of outstanding Bonds is to be determined, means all Bonds
which have been authenticated and delivered by the Trustee hereunder, except:
(a) Bonds cancelled at or prior to such date;
(b) Bonds for the payment or redemption of which sufficient
moneys and/or Government Obligations meeting the terms and conditions
specified in Section 902 -shall have been theretofore transferred or
deposited into the special account established in the Bond Fund
(whether upon or prior to the maturity or redemption date of any such
Bonds); provided that if such Bonds are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given or
arrangements satisfactory to the Trustee shall have been made
therefor, or waiver of such notice satisfactory in form to the Trustee
shall have been filed with the Trustee:
(c) Bonds in lieu of which others have been authenticated
under Section 207: and
(d) For the purposes of any consent or other action to be
taken by the holders of a specified percentage of outstanding Bonds
hereunder, all Bonds held by or for the County or the Company;
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<PAGE> 8
"PAYMENT IN FULL OF THE BONDS" specifically encompasses the situations
described in Section 902;
"PERSON" means natural persons, firms, associations, corporations and
public bodies;
"PRINCIPAL," whenever used with reference to the Bonds or any portion
thereof, shall be deemed to include "and the redemption premium, if any";
"PRINCIPAL OFFICE OF THE TRUSTEE" means the principal office of the
Trustee as indicated in the first paragraph hereof;
"PROJECT" means the Project Land, the Building and the Project
Equipment, as they may at any time exist;
"PROJECT EQUIPMENT" means those items of machinery, equipment and
related property required herein to be acquired and installed in the Building
or on the Project Land with proceeds from the sale of the Bonds or the proceeds
of any payment by the Company pursuant to Section 4.6 of the Agreement and any
item of machinery, equipment and related property acquired and installed in the
Building or on the Project Land in substitution therefor and renewals and the
replacements thereof pursuant to the provisions of Section 4.1(b), 6.2(a), 7.1
and 7.2 of the Agreement, less such machinery, equipment and related property
as may be released pursuant to Section 6.2(b) of the Agreement or taken by the
exercise of the power of eminent domain as provided in Section 7.2 of the
Agreement, and is further defined as all property owned by the County and to be
sold to the Company pursuant to this Agreement which is not included in the
definition of Project Land or Building, but not including the Company's own
machinery, equipment and related property installed under the provisions of
Section 6.1(b) of the Agreement. The Project Equipment insofar as it will be
initially installed as a part of the Project is more fully described in Exhibit
"B" attached hereto and by this reference made a part hereof;
"PROJECT LAND" means the real property described in Exhibit "A"
attached hereto and in Exhibit "A" to the Agreement and by this reference made
a part hereof, less such real property as may be released pursuant to Sections
8.6 and 11.3 of the Agreement or taken by the exercise of the power of eminent
domain as provided in Section 7.2 of the Agreement;
"SECURITY INTEREST' or "SECURITY INTERESTS" shall refer to the
security interests created herein and in the Agreement and shall have the
meaning set forth in the U.C.C.;
"STATE" shall mean the State of Florida;
"TRUST ESTATE'' means the property described in paragraphs I, II and
III of the granting clause hereof;
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<PAGE> 9
"TRUSTEE" means the party so named and designated in the first
paragraph hereof and its successors and any corporation resulting from or
surviving any consolidation or merger to which it or its successors may be a
party and any successor at the time serving as successor trustee hereunder; and
"U.C.C." means the Uniform Commercial Code of the State, as now or
hereafter amended.
Section 102. CERTAIN RULES OF INTERPRETATION. The definitions set
forth in Section 101 shall be equally applicable to both the singular and
plural forms of the words and terms therein defined and shall cover all
genders.
"Herein," "hereby, "hereunder," "hereof," "hereinbefore,"
"hereinafter" and other equivalent words refer to this Indenture and not solely
to the particular Article, Section or subdivision thereof in which such word is
used.
Reference herein to an Article number (e.g., Article IV) or a Section
number (e.g., Section 702) shall be construed to be a reference to the
designated Article number or Section number hereof unless the context or use
clearly indicates another or different meaning or intent.
ARTICLE II.
THE BONDS
Section 201. AUTHORIZED AMOUNT OF BONDS. No Bonds may be issued
under the provisions of this Indenture except in accordance with this Article.
The total principal amount of Bonds that may be issued hereunder is expressly
limited to $5,800,000, subject to the provisions of Section 207.
Section 202. ISSUANCE OF BONDS. The Bonds (i) shall be designated
"Taylor County, Florida Industrial Development Revenue Bonds (CPG Products
Corp. Project), Series 1979," (ii) shall be dated September 1, 1979, except
with respect to registered Bonds without coupons as hereinafter provided, (iii)
shall bear interest from date at the rate of 6-3/4% per annum (computed on the
basis of a 360-day year, 30-day month), payable March I and September I of each
year until maturity, commencing March 1, 1980, and (iv) shall mature on
September 1, 2004.
The Bonds are subject to the sinking fund provisions of Section 305.
The Bonds may be issued as coupon Bonds or registered Bonds as is hereinafter
provided.
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<PAGE> 10
Coupon Bonds shall be issuable in the denomination of $5,000 each and
shall be registrable as to principal only, in the manner provided in Section
208 hereof. Registered Bonds without coupons shall be issuable in the
denomination of $5,000 each, or any multiple thereof. Coupon Bonds shall be
numbered consecutively from 1 to 1,160 and registered Bonds without coupons
shall be numbered consecutively from R-1 upwards in order of issuance according
to the records of the Trustee.
Registered Bonds without coupons issued before March 1, 1980, shall be
dated as of September 1, 1979, and registered Bonds without coupons issued on
or subsequent to March 1, 1980, shall be dated as of the interest payment date
next preceding the date of authentication and delivery thereof by the Trustee,
unless such date of authentication and delivery shall be an interest payment
date, in which case they shall be dated as of such date of authentication and
delivery; provided, however, that if, as shown by the records of the Trustee,
interest on any Bonds surrendered for transfer or exchange shall be in default,
the registered Bonds without coupons issued in exchange for Bonds surrendered
for transfer or exchange shall be dated as of the date to which interest has
been paid in full on the Bonds surrendered or if no interest has been paid they
shall be dated September 1, 1979. Coupon Bonds and registered Bonds without
coupons shall bear interest from their date.
The principal of and the interest on the Bonds shall be payable in
lawful money of the United States of America at the principal office of the
Trustee or at the principal office of any successor designated pursuant to the
terms hereof. Payment of interest on coupon Bonds shall be made only upon
presentation and surrender of the coupons representing such interest as the
same respectively become due at the principal office of the Trustee. Payment
of interest on registered Bonds without coupons shall be payable by check or
draft drawn upon the Trustee and mailed to the registered owner at his address
as it appears on the bond registration books kept by the Trustee.
Section 203. EXECUTION; LIMITED OBLIGATION. The Bonds shall be
executed on behalf of the County by the manual or facsimile signature of the
Chairman of the Board, and the County's corporate seal shall be affixed thereto
or printed or otherwise reproduced thereon and attested by the manual or
facsimile signature of the Clerk of the Circuit Court in and for the County.
At least one of the aforesaid two signatures appearing on each Bond shall be a
manual signature. The coupons (if any) attached to the Bonds shall be executed
by the facsimile signatures of said Chairman and Clerk, and such facsimile
signatures shall have the same force and effect as if said Chairman and Clerk
had manually signed each of the coupons. The obligation of the County to pay
the Bonds and the interest thereon shall be a limited obligation which shall be
payable from, and wholly secured by, a pledge of the purchase price payments
and other payments received from the Company under the Agreement together with
all other revenues arising out of or in connection with the County's ownership
of the Project. If any officer of the County who shall have executed any Bond
shall cease to be such officer before the
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<PAGE> 11
Bond so executed (by manual or facsimile signature) shall be authenticated and
delivered by the Trustee, such Bond nevertheless may be authenticated and
delivered as though the Person who executed such Bond had not ceased to be such
officer of the County.
Section 204. AUTHENTICATION. Only such Bonds as shall have endorsed
thereon a certificate of authentication substantially in the form hereinafter
set forth executed by the Trustee shall be entitled to any right or benefit
hereunder. No Bond and no coupon appertaining to any Bond shall be valid or
obligatory for any purpose unless and until such certificate of authentication
shall have been executed by the Trustee, and such executed certificate of the
Trustee upon any such Bond shall be conclusive evidence that such Bond has been
authenticated and delivered hereunder. Said certificate of authentication on
any Bond shall be deemed to have been executed by the Trustee if signed by an
authorized officer of the Trustee, but it shall not be necessary that the same
officer sign the certificate of authentication on all of the Bonds issued
hereunder. Before authenticating or delivering any Bonds, the Trustee shall
detach and cancel all matured coupons, if any, appertaining thereto, and such
cancelled coupons shall be destroyed by the Trustee.
Section 205. FORMS OF BONDS. The Bonds, the coupons (if any) to be
attached thereto, the Trustee's certificate of authentication, the validation
certificates the provision for registration and the form of assignment shall be
in substantially the forms hereinafter set forth with such appropriate
variations, omissions, substitutions and insertions as are permitted or
required hereby and may have such letters, numbers or other marks of
identification and such legends and endorsements placed thereon, as may be
required to comply with any applicable or rules or regulations, or as may
consistently herewith, be determined by the officers executing such Bonds, as
evidenced by their signing of the Bonds:
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<PAGE> 12
(FORM OF COUPON BOND)
UNITED STATES OF AMERICA
STATE OF FLORIDA
TAYLOR COUNTY, FLORIDA
TAYLOR COUNTY, FLORIDA INDUSTRIAL DEVELOPMENT REVENUE BONDS
(CPG PRODUCTS CORP. PROJECT)
SERIES 1979
No. $5,000
FOR VALUE RECEIVED, Taylor County, Florida (the "County"), a political
subdivision of the State of Florida, hereby promises to pay to bearer, or if
this bond be registered as herein provided then to the registered owner hereof,
solely from the special fund hereinafter described and from no other source on
the 1st day September, 2004, the principal sum of
FIVE THOUSAND DOLLARS
and to pay solely from said Special fund, interest thereon from date hereof at
the rate of 6-3/4% per annum (computed on the basis of a 360-day year, 30-day
month), payable semiannually on March 1 and September 1 in each year,
commencing March 1, 1980. until payment of the principal amount hereof, upon
presentation and surrender of the annexed interest coupons as they severally
become due. Both the principal hereof and the interest hereon are payable in
lawful money of the United States of America at the principal office in
Columbus, Georgia, of The First National Bank of Columbus, as Trustee (the
"Trustee") under the hereinafter mentioned Mortgage and Indenture of Trust, or
if a successor Trustee is hereafter appointed, then at the principal office of
such successor.
This bond is one of a series in the aggregate principal amount of
$5,800,000 (the "bonds"), of like tenor except as to numbers and redemption
provisions, issued under and secured by a Mortgage and indenture of Trust,
dated as of September 1, 1979, by and between the County and the Trustee (the
"Indenture"), and a resolution of the Board of County
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Commissioners of the County adopted on July 31, 1979, for the purpose of
financing the cost of acquiring certain land and constructing and installing
thereon certain buildings, machinery, equipment and related property (the
"Project").
This bond and the redemption premium (if any) and the interest hereon
shall not be deemed to constitute a debt, obligation or liability of the County
or of the State of Florida or of any political subdivision thereof or a pledge
of the faith and credit of the County or of the State of Florida or of any such
political subdivision and does not directly, indirectly or contingently
obligate the County or said State to levy or to pledge any form of taxation
whatever for the payment of such principal, redemption premium (if any) and
interest. This bond is payable solely from the purchase price payments and
other payments received under the Agreement (hereinafter described), together
with all other revenues arising out of or in connection with the County's
ownership of the Project, and the County is obligated to pay the principal of,
the redemption premium (if any) and the interest on this bond only from the
Taylor County, Florida Industrial Development Revenue Bond Fund - CPG Products
Corp. Project, Series 1979 (the "Bond Fund"), created in the Indenture. No
recourse shall be had for the payment of the principal of, or the redemption
premium (if any) and the interest on this bond against any officer of the
County or member of the Board of County Commissioners of the County.
This bond is issued and the Indenture was authorized executed and
delivered by the County under and pursuant to the Constitution and laws of the
State of Florida, including particularly the Florida Industrial Development
Financing Act (Sections 159.25 159.43, Florida Statutes Annotated, as
supplemented and amended) and the aforesaid resolution of the Board of County
Commissioners of the County. Prior to the issuance hereof, the County entered
into an Agreement of Sale, dated as of even date with the Indenture (the
"Agreement"), with CPG Products Corp.. a Delaware corporation qualified to do
business in the State of Florida (the "Company"), pursuant to the terms of
which the Company must pay to the County purchase price payments, other
payments and revenues which are committed and will be fully sufficient to pay
the principal of, the redemption premium (if any) and the interest on the bonds
as the same become due. Under the terms of the Agreement, it is the obligation
of the Company to pay the costs of maintaining the Project in good repair, to
keep it property insured and to pay all taxes, levies or other charges assessed
against or with respect to the Project.
As security for the payment of the bonds, the Project has been
mortgaged to the Trustee and the rights of the County under the Agreement have
been assigned (together with the security interest in the Project Equipment, as
defined in the Agreement, created therein) to the Trustee under the Indenture.
As additional security for the payment of the bonds, General Mills,
Inc., a Delaware corporation and the wholly-owning parent corporation of the
Company (the "Guarantor"), has entered into a Guaranty Agreement with the
Trustee, dated as of even date with the Indenture,
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<PAGE> 14
under the terms of which the Guarantor has unconditionally Guaranteed to the
Trustee for the benefit of the bondholders the payment of the principal of, the
redemption premium (if any) and the interest on the bonds, as the same become
due.
Reference to the Indenture is hereby made for a description of the
aforesaid Bond Fund which is charged with, and pledged to, the payment of the
principal of, the redemption premium (if any) and the interest on the bonds,
the nature and extent of the security, the rights, duties and obligations of
the County and the Trustee, the rights of the holders of the bonds, the terms
and conditions under and upon the occurrence of which the Indenture and the
Agreement may be modified and the terms and conditions under and upon the
occurrence of which the lien of the Indenture may be defeased as to this bond
prior to the maturity or redemption date hereof, to all of the provisions of
which the holder hereof, by the acceptance of this bond, assents.
The bond is transferable by delivery except when registered as to
principal otherwise than to bearer. This bond may be registered as to
principal only in the name of the owner on the bond registration books of the
County kept in the principal office of the Trustee, as Bond Registrar, such
registration to be made on such books and endorsed hereon by the Bond
Registrar, and after such registration no transfer hereof shall be valid,
unless made on said books of registration at the written request of the
registered owner or his duly authorized attorney and similarly noted hereon.
This bond may be discharged from registration by like transfer to bearer after
which it shall again become transferable by delivery, and this bond may again
and from time to time be registered or discharged from registration in the same
manner. Registration of this bond shall not affect the negotiability of the
coupons attached hereto which shall continue to be payable to bearer and
transferable by delivery.
The bonds are issuable as coupon bonds, registrable as to principal
only, in the denomination of $5,000 each, and as registered bonds without
coupons in the denomination of $5,000 or any multiple thereof. Coupon bonds,
upon surrender thereof at the principal office of the Trustee with all
unmatured coupons attached, may, at the option of the holder thereof, be
exchanged for an aggregate principal amount of registered bonds without coupons
and of any authorized denomination, in the manner, subject to the conditions
and upon the payment of the charges provided in the Indenture. In like manner,
subject to such conditions and upon the payment of such charges, registered
bonds without coupons, upon the surrender thereof at the principal office of
the Trustee with a written instrument of transfer satisfactory to the Trustee
executed by the registered owner or his duly authorized attorney, may, at the
option of the registered owner thereof, be exchanged for an equal aggregate
principal amount of coupon bonds with appropriate coupons attached or for an
equal aggregate principal amount of registered bonds without coupons of any
other authorized denomination.
This bond is issued with the intent that the laws of the State of
Florida shall govern its construction.
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The bonds may not be called for redemption prior to September 1, 1989,
except in the event (1) of condemnation of the Project or any part thereof as
provided in Section 7.2 of the Agreement, (2) of exercise by the Company of its
option to prepay the purchase price of the Project as provided in Section 11.1
of the Agreement, or (3) the Company is required to accelerate the purchase of
the Project under the circumstances set forth in Sections 8.8 and 12.1 of the
Agreement. If called for redemption prior to maturity as provided in (1) or
(2) of the foregoing, such bonds may be redeemed at any time, in whole or (in
case of redemption pursuant to Section 7.2 of the Agreement) in part at a
redemption price equal to the principal amount of each bond to redeemed plus
accrued interest thereon to the redemption date. If called for redemption as
provided in (3) of the foregoing, the bonds must be redeemed in whole within
the time provided by Section 8.8 of the Agreement following the Determination
of Taxability (as defined in Section 8.8 of the Agreement) at the foregoing
redemption price plus an additional amount equal to the interest payable on
each bond so redeemed for each year, or any part thereof, which elapses from
the occurrence of the "Event of Taxability" (as defined in Section 8.8 of the
Agreement) giving rise to such redemption to and through the date of such
redemption.
If the outstanding bonds are called for redemption as provided in (3)
of the foregoing, the Trustee, pursuant to Section 307 of the Indenture, will
hold and disburse for the benefit of the Last Holder (as defined in Section 307
of the Indenture) of each bond which was outstanding at the time of the Event
of Taxability but which was not outstanding at the time of such redemption, an
amount equal to the interest payable on each such bond for each year, or any
part thereof, which shall have elapsed from the occurrence of the Event of
Taxability to and through the date of maturity of each such bond or through the
date of redemption of each such bond.
The bonds, if not redeemed before September 1, 1989, in connection
with the exercise of the options referred to in Section 7.2 or 11.1 of the
Agreement or by mandatory redemption pursuant to the obligation referred to in
Sections 8.8 and 12.1 of the Agreement, are subject to redemption prior to
maturity by the County on any interest payment date on or after September 1,
1989, in whole or in part, at the redemption prices (expressed as percentages
of principal amount) set forth in the table below plus accrued interest thereon
to the redemption date.
Dates of Redemption Redemption
(inclusive) Prices
--------------------- ---------------
September 1, 1989 103-1/2%
March 1, 1990 through September 1, 1991 103
March 1, 1992 through September 1, 1993 102-1/2
March 1, 1994 through September 1, 1995 102
March 1, 1996 through September 1, 1997 101-1/2
-15-
<PAGE> 16
March 1, 1998 through September 1, 1998 101
March 1, 1999 and thereafter 100
In addition, the bonds are subject to mandatory sinking fund
redemption prior to maturity, in accordance with Section 305 of the Indenture,
in part, at 100% of the principal amount thereof, plus accrued interest to the
redemption date, in the following principal amounts and on the dates set forth
below (the 2004 amount to be paid rather than redeemed):
September 1 of the Year Principal Amount
----------------------- ----------------
2000 $1,000,000
2001 1,000,000
2002 1,000,000
2003 1,000,000
2004 1,800,000
The particular bond of this series, or portion thereof in the case of
certain registered bonds without coupons of a principal amount greater than
$5,000, to be redeemed in the case of a partial redemption under any of the
provisions of the Indenture, shall be selected by the Trustee by prorating the
amount of bonds to be redeemed between common bonds and registered bonds
without coupons and among the holders of the registered bonds without coupons,
and by selecting the coupon bond, registered bond without coupons (or part
thereof) or other detail of redemption by lot or otherwise in such manner as
the Trustee shall determine to be fair.
When any coupon bonds (not registered as to principal or otherwise to
bearer) are called for redemption as aforesaid, notice thereof identifying the
coupon bonds to be redeemed shall be given by publication at least once in a
newspaper or financial journal of general circulation among dealers in
municipal securities in The City of New York, New York, which notice shall be
published not less than thirty (30) days nor more than sixty (60) days prior to
the redemption date, and in the case of the redemption of coupon bond's at the
time registered as to principal (except to bearer), in addition there shall be
sent a copy of such redemption notice by first class mail at least thirty (30)
days but no more than sixty (60) days prior to the redemption date to the
registered owner of each coupon bond to be redeem ed at the address shown on
the registration books; provided, however, if notice of redemption shall have
been published as required, failure to give such notice by mailing, or any
defect therein, shall not affect the validity of any proceeding for the
redemption of coupon bonds. If all of the coupon bonds to be redeemed are at
that time registered as to principal (except to bearer), notice by first class
mail to the owner or owners thereof not less than thirty (30) days nor more
than sixty (60) days prior to the redemption date shall be sufficient and
published notice of the call for redemption need not be given. All coupon
bonds called for redemption shall cease to bear interest on the specified
redemption date provided sufficient moneys for their redemption are on deposit
at the
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<PAGE> 17
designated place of payment at that time, and such bonds shall no longer be
secured by the lien of the Indenture and shall not be deemed to be outstanding
under the provisions of the Indenture or have any other rights thereunder
except the right to receive payment. All unmatured coupons appertaining
thereto shall become void. If, because of the temporary or permanent
suspension of the publication or general circulation of any newspaper or
financial journal or for any other reason, it is impossible or impractical to
publish such redemption notice as aforesaid, then such publication in lieu
thereof as shall be made with the approval of the Trustee shall constitute a
sufficient publication of notice.
It is hereby certified and recited that all acts, conditions and
things required by the Constitution and laws of the State of Florida to happen,
exist and be performed precedent to and in the issuance of this bond, the
execution of the Indenture and the adoption of the aforesaid resolution by the
Board of County Commissioners of the County, have happened, exist and have been
performed.
This bond shall not be entitled to any benefit under the Indenture nor
shall it become valid or obligatory for any purpose until it shall have been
authenticated by execution by the Trustee of the certificate hereon endorsed.
IN WITNESS THEREOF, Taylor County, Florida has caused this bond to be
executed in its name by the manual signature of the Chairman of the Board of
County Commissioners of the County and a facsimile of its corporate seal to be
printed hereon and attested by the facsimile signature of the Clerk of the
Circuit Court in and for the County, and has caused the interest coupons hereto
attached to be executed by the facsimile signatures of its said officials. all
as of September 1, 1979.
TAYLOR COUNTY, FLORIDA
ATTEST: (FORM)
BY: ___________________
Chairman
(FORM)
____________________
Clerk
(SEAL)
* * * * *
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<PAGE> 18
TRUSTEE'S AUTHENTICATION CERTIFICATE
The above bond is one of the bonds described in the within-mentioned Mortgage
and Indenture of Trust.
THE FIRST NATIONAL BANK OF COLUMBUS,
as Trustee
By: (FORM)
_________________________________
Authorized Officer
* * * * *
COUPON
No. $
On the 1st day of _______________, ____, unless the hereinafter
mentioned bond shall have been called for previous redemption and payment of
the redemption price made or provided for, Taylor County, Florida promises to
pay to bearer at the principal office in Columbus, Georgia, of The First
National Bank of Columbus, as Trustee, or at the principal office of any
successor Trustee, the amount shown hereon in lawful money of the United States
of America, solely from the Special fund referred to in and for the semiannual
interest then due on its Taylor County, Florida Industrial Development Revenue
Bonds (CPG Products Corp. Project), Series 1979, dated September 1, 1979, and
numbered __________.
(FACSIMILE) (FACSIMILE)
__________________________________ __________________________________
Clerk Chairman
TAYLOR COUNTY, FLORIDA
-18-
<PAGE> 19
* * * * *
-19-
<PAGE> 20
VALIDATION CERTIFICATE
STATE OF FLORIDA
COUNTY OF TAYLOR
The undersigned Chairman of the Board of County Commissioners of
Taylor County, Florida, HEREBY CERTIFIES that the within bond was validated and
confirmed by judgment OF the Circuit Court in and for Taylor County, Florida,
rendered on the 24th day of August, 1979, that no intervention or objection was
filed thereto and that no appeal has been taken therefrom.
(FORM)
______________________________________
Chairman, Board of County
(SEAL) Commissioners of Taylor County, Florida
* * * * *
(FORM OF CERTIFICATE OF REGISTRATION)
SIGNATURE OF
DATE OF IN WHOSE NAME BOND
REGISTRATION : REGISTERED : REGISTRAR :
- ---------------------------------------------------------------------------
: : :
- ---------------------------------------------------------------------------
: :
- ---------------------------------------------------------------------------
(END OF FORM OF COUPON BOND)
-20-
<PAGE> 21
(FORM OF REGISTERED BOND WITHOUT COUPONS)
UNITED STATES OF AMERICA
STATE OF FLORIDA
TAYLOR COUNTY, FLORIDA
TAYLOR COUNTY, FLORIDA INDUSTRIAL DEVELOPMENT REVENUE BONDS
(CPG PRODUCTS CORP. PROJECT)
SERIES 1979
No. R- $__________
FOR VALUE RECEIVED, Taylor County, Florida (the "County"), a political
subdivision of the State of Florida, hereby promises to pay to __________, or
registered assigns, solely from the special fund hereinafter described and from
no other source, on the 1st day of September, ____, the principal sum of
__________ THOUSAND DOLLARS
and to pay to the registered owner hereof solely from said special fund,
interest thereon from date hereof at the rate of 6-3/4% per annum (computed on
the basis of a 360-day year, 30-day month), payable March 1, 1980, and
semiannually thereafter on March 1 and September 1 in each year, commencing
__________, ____, until payment of the principal amount hereof. The principal
of this bond is payable lawful money of the United States of America at the
principal office in Columbus, Georgia, of The First National Bank of Columbus,
as Trustee (the "Trustee") under the hereinafter mentioned Mortgage and
Indenture of Trust, or if a successor Trustee is hereafter appointed, then at
the principal office of such successor. The interest on this bond (except for
final payment of such interest which shall be made only upon surrender of this
bond) is payable by check or draft drawn upon the Trustee and mailed to the
registered owner at his address as it appears on the bond registration books to
be kept by the Trustee.
This bond is one of a series in the aggregate principal amount of
$5,800,000 (the "bonds"), of like tenor except as to numbers, denominations and
redemption provisions, issued under and secured by a Mortgage and Indenture of
Trust, dated as of September 1, 1979, by and
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<PAGE> 22
between the County and the Trustee (the "Indenture"), and a resolution of the
Board of County Commissioners of the County adopted on July 31, 1979, for the
purpose of financing the cost of acquiring certain land and constructing and
installing thereon certain buildings, machinery, equipment and related property
(the "Project").
This bond and the redemption premium (if any) and the interest hereon
shall, not be deemed to constitute a debt, obligation or liability of the
Company or of the State of Florida or of any political subdivision thereof or a
pledge of the faith and credit of the County or of the State of Florida or any
such political subdivision and does not directly, indirectly or contingently
obligate the County or said State to levy or to pledge any form of taxation
whatever for the payment of such principal, redemption premium any) and
interest. This bond is payable solely from the purchase price payments and
other payments received under the Agreement (hereinafter described) together
with all other revenues arising out of or in connection with the County's
ownership of the Project, and th County is obligated to pay the principal of,
the redemption premium (if any) and the interest on this bond only from the
Taylor County, Florida Industrial Development Revenue Bond Fund -- CPG Products
Corp. Project, Series 1979 (the "Bond Fund"), created in the Indenture. No
recourse shall be had for the payment of the principal of, or the redemption
premium (if any) and the interest on, this bond against any officer of the
County or member of the Board of County Commissioners of the County.
This bond is issued and the Indenture was authorized, executed and
delivered by the County under and pursuant to the Constitution and laws of the
State of Florida, including particularly the Florida Industrial Development
Financing Act (Sections 159.25 - 159.43, Florida Statutes Annotated, as
supplemented and amended) and the aforesaid resolution of the Board of County
Commissioners of the County. Prior to the issuance hereof, the County entered
into an Agreement of Sale, dated as of even date with the Indenture (the
"Agreement"), with CPG Products Corp., a Delaware Corporation Qualified to do
business in the State of Florida (the "Company"), pursuant to the terms of
which the Company must may to the County purchase price payments, other
payments and revenues which are committed and will be fully sufficient to pay
the principal of, the redemption premium (if any) and the interest on the bonds
as the same become due. Under the terms of the Agreement, it is the obligation
of the Company to pay the costs of maintaining the Project in good repair, to
keep it properly insured and to pay all taxes, levies or other charges assessed
against or with respect to the Project.
As security for the payment of the bonds, the Project has been
mortgaged to the Trustee and the rights of the County under the Agreement have
been assigned (together with the security interest in the Project Equipment, as
defined in the Agreement, created therein) to the Trustee under the Indenture.
As additional security for the payment of the bonds, General Mills,
Inc.. a Delaware corporation and the wholly-owning parent corporation of the
Company (the "Guarantor"), has
-22-
<PAGE> 23
entered into a Guaranty Agreement with the Trustee, dated as of even date with
the Indenture, under tie terms of which the Guarantor has unconditionally
guaranteed to the Trustee for the benefit of the bondholders the payment of the
principal of, the redemption premium (if any) and the interest on the bonds, as
the same become due.
Reference to the Indenture is hereby made for a description of the
aforesaid Bond Fund which is charged with, and pledged to, the payment of the
principal of, the redemption premium (if any) and the interest on the bonds,
the nature and extent of the security, the rights, duties and obligations of
the County and the Trustee, the rights of the holders of the bonds, the terms
and conditions under and upon the occurrence of which the Indenture and the
Agreement may be modified and the terms and conditions under and upon the
occurrence of which the lien of the Indenture may be defeased as to this bond
prior to the maturity or redemption date hereof. to all of the provisions of
which the holder hereof, by the acceptance of this bond, assents.
The bond is transferable by the registered holder hereof in person or
by his attorney duly authorized in writing at the Principal office of the
Trustee, all subject to the terms and conditions provided in the Indenture.
The bonds are issuable as coupon bonds, registrable as to principal
only, in the denomination of $5,000 each, and as registered bonds without
coupons in the denomination of 55,000 or any multiple thereof. On or after
March 1, 1980, coupon bonds upon surrender thereof at the principal office of
the Trustee with all unmatured coupons attached, may, at the option of the
holder thereof, be exchanged for an equal aggregate principal amount of
registered bonds without coupons and of any authorized denomination, in the
manner, subject to the conditions and upon the payment of the charges provided
in the Indenture. In like manner, subject to such conditions and upon the
payment of such charges, registered bonds without coupons, upon the surrender
thereof at the principal office of the Trustee with a written instrument of
transfer satisfactory to the Trustee executed by the registered owner or his
duly authorized attorney, may, at the option of the registered owner thereof,
be exchanged for an equal aggregate principal amount of coupon bonds with
appropriate coupons attached, or for an equal aggregate principal amount of
registered bonds without coupons of any other authorized denomination.
This bond is issued with the intent that the laws of the State of
Florida shall govern its construction.
The bonds may not be called for redemption prior to September 1,
11,89, except in the event (1) of condemnation of the Project or any part
thereof as provided in Section 7.2 of the Agreement, (2) of exercise by the
Company of its option to prepay the purchase price of the Project as provided
in Section 11.1 of the Agreement, or (3) the Company is required to accelerate
purchase of the Project under the circumstances set forth in Sections 8.8 and
12.1 of
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<PAGE> 24
the Agreement. If called for redemption prior to maturity as provided in (1)
or (2) of the foregoing, such bonds may be redeemed at any time, in whole or
(in case of redemption pursuant to Section 7.14. of the Agreement) in part, at
a redemption price equal to the principal amount of each bond to be redeemed
plus accrued interest thereon to the redemption date. If called for redemption
as provided in (3) of the foregoing, the bonds must be redeemed in whole within
the time provided by Section 8.8 of the Agreement following the Determination
of Taxability (as defined in Section 8.8 of the Agreement) at the foregoing
redemption price plus an additional amount equal to the interest payable on
each bond so redeemed for each year, or any part thereof, which elapses from
the occurrence of the "Event of Taxability" (as defined in Section 8.8 of the
Agreement) giving rise to such redemption to and through the date of such
redemption.
If the outstanding bonds are called for redemption as provided in (3)
of the foregoing, the Trustee, pursuant to Section 307 of the Indenture, will
hold and disburse 'or the benefit of the Last Holder (as defined in Section 307
of the Indenture) of each bond which was outstanding at the time of the Event
of Taxability but which was not outstanding at the time of such redemption, an
amount equal to the interest payable on each such bond for each year, or any
part thereof, which shall have elapsed from the occurrence of the Event of
Taxability to and through the date of maturity of each such bond or through the
date of redemption of each such bond.
The bonds, if not redeemed before September 1, 1989, in connection
with the exercise of the options referred to in Section 7.2 or 11.1 of the
Agreement or by mandatory redemption pursuant to the obligation referred to in
Sections 8.8 and 12.1 of the Agreement, are subject to redemption prior to
maturity by the County on any interest payment date on or after September 1,
1989, in whole or in part, at the redemption prices (expressed as percentages
of principal amount) set forth in the table below plus accrued interest thereon
to the redemption date.
Dates of Redemption Redemption
(inclusive) Prices
------------------- ----------
September 1, 1989 103-1/2%
March 1, 1990 through September 1, 1991 103
March 1, 1992 through September 1, 1993 102-1/2
March 1, 1994 through September 1, 1995 102
March 1, 1996 through September 1, 1997 101-1/2
March 1, 1998 through September 1, 1998 101
March 1, 1999 and thereafter 100
In addition, the bonds are subject to mandatory sinking fund redemption prior
to maturity, in accordance with Section 305 of the Indenture, in part, at 100%
of the principal amount thereof,
-24-
<PAGE> 25
plus accrued interest to the redemption date, in the following principal
amounts and on the dates set forth below (the 2004 amount to be paid rather
than redeemed):
-25-
<PAGE> 26
September 1 of the Year Principal Amount
----------------------- ----------------
2000 $1,000,000
2001 1,000,000
2002 1,000,000
2003 1,000,000
2004 1,800,000
The particular bond of this series, or portion thereof in the case of
certain registered bonds without coupons of a principal amount greater than
$5,000, to be redeemed in the case of a partial redemption under any of the
provisions of the Indenture, shall be selected by the Trustee by prorating the
amount of bonds to be redeemed between coupon bonds and registered bonds
without coupons and among the holders of the registered bonds without coupons,
and by selecting the coupon bond. registered bond without coupons (or part
thereof) or other detail of redemption by lot or otherwise in such manner as
the Trustee shall determine to be fair.
Written notice of the redemption in whole or in part, of this bond
shall be given by first class mail, postage prepaid, mailed not less than
thirty (30) days nor more than sixty (60) days prior to the redemption date to
the registered owner hereof at the last address shown on the registration books
kept by the Trustee: provided. however, if notice of redemption is required to
be published pursuant to Section 302 of the Indenture and such published notice
covers the redemption, in whole or in part, of this bond, and is published in
accordance with such requirements, neither failure to give notice by mail, nor
any defect in any notice so mailed shall affect the validity of the proceedings
for redemption as it affects this bond.
Upon deposit with the Trustee of the moneys required to effect any
redemption, the bonds or portion thereof thus called and provided for shall not
bear interest after the redemption date and shall not be considered to be
outstanding or to have any other rights under the Indenture other than the
right to receive payment.
If less than the entire principal amount of this bond is to be
redeemed upon the surrender hereof, (a) appropriate endorsement shall be made
hereon by the Trustee to reflect such partial redemption, or (b) there shall be
issued to the registered owner, without charge therefor, for the unredeemed
balance hereof, at the option of the registered owner either coupon bonds or
registered bonds without coupons in any of the authorized denominations as more
fully set out in the Indenture.
It is hereby certified and recited that all acts, conditions and
things required by the Constitution and laws of the State of Florida to happen,
exist and be performed precedent to and in the issuance of this bond, the
execution of the Indenture and the adoption of the aforesaid
-26-
<PAGE> 27
resolution by the Board of County Commissioners of the County, have happened,
exist and have been performed.
This bond shall not be entitled to any benefit under the Indenture nor
shall it become valid or obligatory for any purpose until it shall have been
authenticated by execution by the Trustee of the certificate hereon endorsed.
IN WITNESS WHEREOF, Taylor County, Florida has caused this bond to be
executed in its name by the manual signature of the Chairman of the Board of
County Commissioners of the County and a facsimile of its corporate seal to be
printed hereon and attested by the facsimile signature of the Clerk of the
Circuit Court in and for the County, all as of the _____ day of _____________,
______.
TAYLOR COUNTY, FLORIDA
(FORM)
ATTEST: BY: _________________________
Chairman
(FORM)
_____________________
Clerk
(SEAL)
* * * * *
-27-
<PAGE> 28
TRUSTEE'S AUTHENTICATION CERTIFICATE
The above bond is one of the bonds described in the within-mentioned
Mortgage and Indenture of Trust.
THE FIRST NATIONAL BANK OF COLUMBUS,
as Trustee
(FORM)
BY: _________________________
Authorized Officer
* * * * *
VALIDATION CERTIFICATE
STATE OF FLORIDA
COUNTY OF TAYLOR
The undersigned Chairman of the Board of County Commissioners of
Taylor County, Florida, HEREBY CERTIFIES that the within bond was validated and
confirmed by judgment of The Circuit Court in and for Taylor County, Florida,
rendered on the 24th day of August, 1979. that no intervention or objection was
filed thereto and that no appeal has been taken therefrom.
(FORM)
_________________________________________
Chairman, Board of County
Commissioners of Taylor County, Florida
(SEAL)
* * * * *
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<PAGE> 29
(FORM OF ASSIGNMENT)
FOR VALUE RECEIVED
The undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
____________________________________________________________
____________________________________________________________
____________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
the within bond of TAYLOR COUNTY, FLORIDA and does, hereby constitute and
appoint attorney to transfer the said bond on the books of the within named
County, with full power of substitution in the premises.
Dated:
In the presence of: _____________________ ______________________________
Registered Owner
* * * * *
(END OF FORM OF REGISTERED BOND WITHOUT COUPONS)
-29-
<PAGE> 30
Section 206. DELIVERY OF BONDS. Upon the execution and delivery
hereof, the County, shall execute the Bonds and deliver them to the Trustee,
and the Trustee shall authenticate the Bonds and deliver them to the purchaser
or purchasers as shall be directed by the County as hereinafter in this Section
provided.
Prior to the delivery by the Trustee of any of the Bonds, there shall
be filed with the Trustee:
(a) A copy, certified by the Clerk of the Circuit Court in
and for the County, of the resolution of the Board authorizing the
issuance of the Bonds and the execution, delivery and performance of
this Indenture and the Agreement.
(b) An original executed counterpart of this Indenture, the
Agreement and the Guaranty.
(c) Copies of Financing Statements filed to perfect the
security interests created herein and in the Agreement.
(d) (1) The written opinion of Counsel for the County or
other Counsel satisfactory to the Trustee expressing the opinion that
the Financing Statements referred to in (c) above have been filed in
the proper place or places required to make said security interests
"perfected security" interests within the meaning of the U.C.C., and
that there are no other properly indexed security interests of record
affecting the property as to which said security interests were
created; and (2) the title insurance policy or binder (if it has been
requested by the Company) referred to in Section 3.2 of the Agreement.
(e) A request and authorization to the Trustee on behalf of
the County and signed by the Chairman of the Board and the Clerk of
the Circuit Court in and for the County to authenticate and deliver
the Bonds in such specified denominations and forms as permitted
herein to the purchaser or purchasers therein identified upon payment
to the Trustee, but for the account of the County, of a specified SUM
plus accrued interest (if any) to the date of such delivery. The
proceeds from the sale of the Bonds shall be paid over to the Trustee
and deposited to the credit of the Bond Fund and the Construction Fund
as hereinafter provided in Article VI.
(f) Evidence furnished by the County of its election to have
the provision of Section 103(b)(6)(D) of the Code apply to the
issuance of the Bonds, together with evidence as to the proper filing
of such election with the Internal Revenue Service Center.
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<PAGE> 31
(g) An unqualified approving opinion of Messrs. King &
Spalding, Atlanta, Georgia, Bond Counsel, relating to the Bonds.
Section 207. MUTILATED, LOST, STOLEN OR DESTROYED BONDS OR COUPONS.
If any Bond or coupon is mutilated, lost, stolen or destroyed, the County may
execute and the Trustee (Upon the receipt of a written authorization from the
County) may authenticate and deliver a new Bond or coupon of like maturity and
tenor in lieu of and in substitution for the Bond or coupon mutilated, lost,
stolen or destroyed, and any such new Bond shall have attached thereto coupons
corresponding in all respects to those (if any) on such Bond mutilated, lost,
stolen or destroyed; provided that, in the case of any mutilated, Bond or
coupon, such mutilated Bond or Coupon shall first be surrendered to the County,
and in the case of any lost, stolen or destroyed Bond or coupon, there shall be
first furnished to the County and the Trustee evidence satisfactory to them of
the ownership of such Bond or coupon and of such loss, theft or destruction
together with indemnity, satisfactory to them. If any such Bond shall have
matured or a redemption date pertaining thereto shall have passed or any such
coupon shall have become due, instead of issuing a new Bond or coupon the
County may pay the same. The County and the Trustee may charge the holder of
such Bond or coupon with their reasonable fees and expenses in this connection.
Section 208. REGISTRATION OF BONDS; PERSONS TREATED AS OWNERS. Title
to any coupon Bond (unless such Bond is registered in the manner hereinafter
provided) and to any interest coupon shall pass by delivery in the same manner
as a negotiable instrument payable to bearer, the County shall cause books for
the registration and for the transfer of the Bonds as provided herein to be
kept by the Trustee which is hereby constituted and appointed the Bond
Registrar of the County. At the option of the bearer, any coupon Bond may be
registered as to principal alone on such books upon presentation thereof to the
Trustee which shall make notation of such registration thereon. Any coupon
Bond registered as to principal alone may thereafter be transferred only upon
an assignment executed by the registered owner or his duly authorized attorney
in such form as shall be satisfactory to the Trustee, such registration or
transfer to be made on such books and endorsed on such Bond by the Trustee.
Any coupon Bond registered as to principal alone may be discharged from
registration by being transferred to bearer and thereby transferability by
delivery shall be restored, subject, however, to successive registrations,
transfers and discharges from registration as before. The principal of any
Bond registered as to principal alone, unless registered to bearer, shall be
payable only to or upon the order of the registered owner or his duly
authorized attorney, but the coupons appertaining to any coupon Bond registered
as to principal alone shall remain payable to bearer notwithstanding such
registration. Such registrations. transfers and. discharges from registration
shall be without charge to the holders of the Bonds, but any tax or other
governmental charges required to be paid with respect to the same shall be paid
by the holder of the Bond requesting such registration. transfer or discharge
from registration as a condition precedent to the exercise of such privilege.
-31-
<PAGE> 32
Registered Bonds without coupons may be transferred on the books of
registration kept by the Trustee by the registered owner in person or by his
duly authorized attorney, upon surrender thereof, together with a written
instrument of transfer executed by the registered owner or his duly authorized
attorney, upon surrender for transfer of any registered Bond without coupons at
the principal office of the Trustee, the County shall execute and the Trustee
shall authenticate and deliver in the name of the transferee or transferees a
new registered Bond or Bonds without coupons in the same aggregate principal
amount and of any authorized denomination or denominations.
Registered Bonds without coupons may be exchanged at the principal
office of the Trustee for an equal aggregate principal amount of coupon bonds
(or for an equal aggregate principal amount of registered Bonds without coupons
and of any other authorized denomination or denominations), and coupon Bonds
may be exchanged at the principal office of the Trustee for an equal aggregate
principal amount of registered Bonds without coupons and of any authorized
denomination or denominations. All coupon Bonds surrendered for exchange and
delivered in exchange shall have attached thereto all unmatured coupons
appertaining thereto (together with an) matured coupons in default appertaining
thereto). The County shall execute and the Trustee shall authenticate and
deliver Bonds which the bondholder making the exchange is entitled to receive
(in the case of coupon Bonds with appropriate coupons attached thereto),
bearing numbers not contemporaneously then outstanding, and the County shall
direct the Trustee to present the same to the Chairman of the Board for the
execution by said Chairman of the validation certificate thereon, unless his
signature shall appear by facsimile. The execution by the County of any
registered Bond of any denomination without coupons shall constitute full and
due authorization of such denomination, and the Trustee shall thereby be
authorized to authenticate and deliver such registered Bond without coupons.
Such transfers of registration or exchanges of registered Bonds
without coupons shall be without charge to the holders of such Bonds, but any
axes or other governmental charges required to be paid with respect to the same
shall be paid by the holder of the Bond requesting such transfer or exchange as
a condition precedent to the exercise of such Privilege.
The Trustee shall not be required to transfer or exchange any
registered Bond without coupons or any coupon Bond registered as to principal
alone during the period of fifteen (15) days next preceding any interest
payment date of such Bond nor to transfer or exchange any Bond after the
publication of notice calling such Bond for redemption has been made, nor
during the period of fifteen (15) days next, preceding publication of notice of
redemption of any Bonds nor, unless his signature shall appear by facsimile,
until the Chairman of the Board shall have executed the validation certificate
with respect to any replacement Bond or Bonds.
As to any coupon Bond registered as to principal alone or as to any
registered Bond without coupons, the Person in whose name the same shall be
registered shall be deemed and
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<PAGE> 33
regarded as the absolute owner thereof for all purposes, and payment of or on
account of the principal of any such coupon Bond registered as to principal
alone or payment of either principal or interest on any such registered Bond
without coupons shall be made only to or upon the order of the registered owner
thereof or his duly authorized attorney, but such registration may be changed
as hereinabove provided. All such payments shall be valid and effectual to
satisfy and discharge the liability upon such Bond to the extent of the sum or
sums so paid. The County and the Trustee may deem and treat the bearer of any
coupon Bond which shall not at the time be registered as to principal, and the
bearer of any coupon appertaining to any coupons Bond, whether such Bond be
registered as to principal or not, as the absolute owner of such Bond or
coupon, as the case may be, whether such Bond or coupon shall be overdue or
not, for the purpose of receiving payment thereof and for all other purposes
whatsoever, and neither the County nor the Trustee shall be affected by any
notice to the contrary.
The inclusion of the foregoing provisions shall constitute (i) a
continuing request from the County to the Chairman of the Board To execute the
certificate of validation on any replacement Bonds issued, and (ii) the
appointment of the Trustee as agent for the County to do any and all things
necessary to effect any exchange or transfer.
ARTICLE III.
REDEMPTION OF BONDS BEFORE MATURITY
Section 301. REDEMPTION DATES AND PRICES. The Bonds may not be
called for redemption prior to September 1, 1989, except in the event (1) of
condemnation of the Project or any part thereof as provided in Section 7.2 of
the Agreement, (2) of exercise by the Company of its option to prepay the
purchase price of the Project as provided in Section 11.1 of the Agreement, or
(3) the Company is required to accelerate purchase of the Project as provided
in Sections 8.8 and 12.1 of the Agreement. If called for redemption prior to
maturity as provided in (1) or (2) of the foregoing, the Bonds may be redeemed
at any time, in whole or (in case of redemption pursuant to Section 7.2 of the
Agreement) in part, at a redemption price equal to the principal amount of each
Bond to be redeemed plus accrued interest thereon to the redemption date. If
called for redemption as provided in (3) of the foregoing, the Bonds must be
redeemed in whole within the time provided by Section 8.8 of the Agreement
following the Determination of Taxability (as defined in Section 8.8 of the
Agreement) at the foregoing redemption price plus an Additional amount equal to
the interest payable on each Bond so redeemed for each year, or any part
thereof, which elapses from the occurrence of the "Event of Taxability" (as
defined in Section 8.8 of the Agreement) giving rise to such redemption to and
through the date of such redemption.
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If the outstanding Bonds are called for redemption as provided in (3)
of the foregoing, the Trustee, pursuant to Section 307, will hold and disburse
for the benefit of the Last Holder (as defined in Section 307) of each Bond
which was outstanding at the time of the Event of Taxability but which was not
outstanding at the time of such redemption, an amount equal to the interest
payable on each such Bond for each year or any part thereof, which shall have
elapsed from the occurrence of the Event of Taxability), to and through the
date of maturity of each such Bond or through the date of redemption of each
such Bond.
The Bonds, if not redeemed before September 1, 1989, in connection
with the exercise of the options referred to in Section 7.2 or 11.1 of the
Agreement or by mandatory redemption pursuant to the obligation referred to in
Sections 10.8 and. 12.1 of the Agreement, are subject to redemption prior to
maturity by the County on any interest payment date on or after September 1,
1989, in whole or in part, at the redemption prices (expressed as percentages
of principal amount) set forth in the table below plus accrued interest thereon
to the redemption date.
Dates of Redemption Redemption
(inclusive) Prices
------------------- ----------
September 1, 1989 103-1/2%
March 1, 1990 through September 1, 1991 103
March 1, 1992 through September 1, 1993 102-1/2
March 1, 1994 through September 1, 1995 102
March 1, 1996 through September 1, 1997 101-1/2
March 1, 1998 through September 1, 1998 101
March 1, 1999 and thereafter 100
In addition, the Bonds are subject to mandatory sinking fund redemption
prior to maturity on the dates, in the amounts and at the prices provided in
Section 305.
Section 302. NOTICE OF REDEMPTION. If all of the Bonds to be
redeemed (in whole or in part) are registered Bonds without coupons or coupon
Bonds registered as to principal (other than to bearer), notice of redemption
shall be given by first class mail, postage prepaid, mailed not less than
thirty (30) days nor more than sixty (60) days prior to the redemption date to
each registered owner of the Bonds or portions thereof to be redeemed at the
last address shown on the registration books kept by the Trustee. In all other
cases notice of the call for redemption identifying the Bonds, or portions
thereof, to be redeemed shall be given by publication at least once in a
newspaper or financial journal of general circulation among dealers in
municipal securities in The City of New York, New York, which notice shall be
published not less than thirty (30) nor more than sixty (60) days prior to the
redemption date. If notice by publication shall be required, notice shall also
be mailed as aforesaid to the registered owner of each Bond
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to be redeemed in whole or in part, but if notice is published as aforesaid,
neither failure to give notice by mail nor defect in any notice so mailed shall
affect the validity of the proceeding for redemption.
At least one (1) business day prior to the redemption date, sufficient
moneys shall be deposited in the Bond Fund to pay the principal amount of the
Bonds called for redemption and accrued interest thereon to the redemption date
and the redemption premium, if any. Bonds or portions thereof thus called and
provided for as hereinabove specified shall not bear interest after the
redemption date and shall not be considered to be outstanding or to have any
other rights under the Indenture other than the right to receive payment.
If, because of the temporary or permanent suspension of the
publication or general circulation of any newspaper or financial journal or for
any other reason, it is impossible or impractical to publish such notice of
call for redemption in the manner hereinabove provided, then such publication
in lieu thereof as shall be made with the approval of the Trustee shall
constitute a sufficient publication of notice.
In the case of any partial redemption of registered Bonds without
coupons pursuant to Section 306, upon notice of intention to effect any such
partial redemption, the owner of any registered Bond without coupons subject to
such a partial redemption shall forthwith surrender such Bond to the Trustee
(1) for payment of the redemption price (including the redemption premium (if
any) and interest to the date fixed for redemption) of the portion thereof
called for redemption. and (2) (i) for appropriate endorsement thereon to
reflect such redemption, or (ii) in exchange for the unredeemed balance, at the
option of the registered owner, for either coupon Bonds or registered Bonds
without coupons in any authorized denominations in the aggregate principal
amount of the unredeemed balance of the principal amount of such registered
Bond without coupons. A new Bond or Bonds representing the unredeemed balance
of the principal amount of such registered Bond without coupons shall be issued
to the registered owner thereof without charge therefor.
Section 303. CANCELLATION. All Bonds and coupons which have been
surrendered for the purpose of payment (including Bonds which have been
redeemed prior to maturity and unmatured coupons appertaining thereto) shall be
cancelled and cremated or otherwise destroyed by the Trustee and shall not be
reissued and a certificate of cremation or destruction evidencing such
cremation or destruction shall be furnished by the Trustee to the County and
the Company.
Section 304. UNPAID COUPONS. All unpaid coupons which appertain to
Bonds called for redemption and which have become payable on or prior to the
redemption date shall continue to be savable to the bearers severally and
respectively upon the surrender of such coupons.
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Section 305. SINKING FUND. As and for a sinking fund for the
retirement of the Bonds, the purchase price payments and other payments
specified in Section 5.2 of the Agreement which are to be deposited in the Bond
Fund on the first business day prior to September 1, 2000, and at least one (1)
business day prior to each September 1 thereafter to and including September 1,
2004 (each day is hereinafter referred to as a "sinking fund payment date"),
shall include sufficient moneys to redeem (after credit as provided below) the
following principal amounts of Bonds (the 2004 amount to be paid rather than
redeemed):
September 1 of the Year Principal Amount
----------------------- ----------------
2000 $1,000,000
2001 1,000,000
2002 1,000,000
2003 1,000,000
2004 1,800,000
At its option, to be exercised (but only with the written consent of
the Company) on or before the forty-fifth day next preceding any such sinking
fund payment date, the County may (a) deliver to the Trustee for cancellation
Bonds in any aggregate principal amount desired with all unmatured coupons (if
any) attached or (b) receive a credit in respect of its sinking fund redemption
obligation for any Bonds which prior to said date have been redeemed (otherwise
than through the operation of the sinking fund) and -cancelled by the Trustee
and not theretofore applied as a credit against any sinking fund redemption
obligation. Each Bond so delivered or previously redeemed shall be credited by
the Trustee at 100% of the principal amount thereof on the obligation of the
County on such sinking fund redemption date, and any excess shall be credited
on future sinking fund redemption obligations in chronological order, and the
principal amount of such Bonds to be redeemed by operation of the sinking fund
shall be accordingly reduced.
The County will on or before the forty-fifth day next preceding each
sinking fund redemption date furnish the Trustee and the company with its
certificate indicating whether or not and to what extent the provisions of (a)
and/or (b) of the preceding paragraph are to be availed of with respect to such
sinking fund payment and confirm that moneys equal to the balance of such
sinking fund payment will be paid at least one (1) business day prior to the
next succeeding sinking fund payment date.
The Trustee shall redeem, in the manner provided in Section 302
hereof, such an aggregate principal amount of the Bonds at 100% of the
principal amount thereof plus accrued interest to the redemption date as will
exhaust as nearly as practicable such cash sinking fund payment. Such
redemption shall be pro rata as provided in Section 306.
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Section 306. PRO RATA REDEMPTION. With respect to any partial
redemption of Bonds, the particular Bonds to be redeemed shall be selected by
the Trustee, in the following manner:
(a) If none of such Bonds at the time outstanding are
registered Bonds without coupons, the particular Bonds to be redeemed
shall be determined by lot or otherwise in such manner as the Trustee
in its discretion shall determine to be fair.
(b) If any of such Bonds at the time outstanding are
registered Bonds without coupons, the Trustee,
(1) shall first prorate the principal amount of the
Bonds to be redeemed between (x) registered Bonds without
coupons, and (y) coupon Bonds (whether or not registered), in
proportion to the respective principal amounts thereof at the
time outstanding;
(2) shall then determine by lot or otherwise in such
manner as the Trustee in its discretion shall determine to be
fair the particular coupon Bonds (whether or not registered),
which are to be redeemed and such Bonds shall be of the
aggregate principal amount prorated to such Bonds pursuant to
clause (y) of (b)(1) above:
(3) shall then prorate the aggregate financial
amount of registered Bonds without coupons to be redeemed as
determined pursuant to clause (x) of (b)(l) above, among all
owners (for this purpose all registered Bonds without, coupons
registered in the name of the same owner shall be aggregated
and treated as a single Bond held by such owner) of such
registered Bonds without coupons, in proportion to the
principal amount of such Bonds registered in the name of each
such owner, according to such method as the Trustee shall deem
proper in its discretion, and shall then designate the
particular registered Bonds without coupons, or portions
thereof to be redeemed;
provided, however, that in any such pro rating the Trustee shall,
according to such method as it shall deem proper in its discretion,
make such adjustments by increasing or decreasing by not more than
55,000 the amount which would be allocable on the basis of exact
Proportion to coupon Bonds (whether or not registered) or to
registered Bonds without coupons, or to any one or more owners of
registered Bonds without coupons, as may be necessary to the end that
the principal amount so pro rated shall be in each instance an
integral multiple of $5.000. On each subsequent partial redemption of
Bonds, the Trustee shall make such adjustments, to the extent
practicable, as will equalize on a cumulative basis, the prorations as
between coupon Bonds (whether or not
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registered) and registered Bonds without coupons, and among owners of
registered Bonds without coupons.
Section 307. ADDITIONAL PAYMENTS UPON DETERMINATION OF TAXABILITY.
If the Bonds are called for redemption pursuant to Section 301 as a result of
the Company being required to accelerate the purchase of the Project under the
circumstances set forth in Sections 8.8 and 12.1 of the Agreement, the Trustee
will hold, administer and disburse that part of the purchase price received by
the Trustee from the Company relating to Bonds which were outstanding at the
time of the Event of Taxability (as defined in Section 8.8 of the Agreement)
but which were not outstanding at the redemption date, for the benefit of the
Last Holders (as hereinafter defined) of such Bonds. The Trustee shall pay to
the Last Holder of each such Bond an amount equal to the interest savable on
each such Bond for each year, or any part thereof, which shall have elapsed
from the occurrence of the Event of Taxability to and through the date of
maturity of each such Bond or through the date of redemption of each such Bond.
A "Last Holder" of a particular Bond is the Person who was the registered owner
of such Bond on the date of maturity or the date of redemption thereof as
evidenced by the registration books kept by the Trustee, as Bond Registrar or
if such Bond was not so registered on the date of maturity or the date of
redemption thereof the Person (if any) whose name and address shall appear on
the list provided for by Section 409 as the last known holder of such Bond on
the date of maturity or the date of redemption thereof. If the Last Holder of
any such Bond cannot be ascertained by the Trustee in the manner aforesaid,
then the aggregate amount of money held for the benefit of such Last Holder
shall belong to and be repaid to the Company by the Trustee as an overpayment
of the purchase price for the Project.
Section 308. PAYMENT OF BONDS. Upon any redemption, whether at or
prior to maturity, of all or any portion of any Bond. the holder thereof shall
forthwith surrender such Bond to the Trustee, together with any unmatured
coupons appertaining thereto. Payment of the applicable redemption price shall
be made only upon surrender of such Bond, together with any unmatured coupons
appertaining thereto. If, on the redemption date, sufficient moneys shall have
been deposited with the Trustee to effect, such redemption in accordance with
this Indenture, then all coupons for interest maturing subsequent to the
redemption date with respect to any coupon Bond subject to redemption shall be
void. With respect to any coupon Bond so called for redemption, all interest
installments represented by coupons which shall have matured on or prior to the
redemption date shall continue to be payable to the bearers of such coupons,
and accrued and unpaid interest payable to the registered owner or bearer (as
the case may be) to the date fixed for redemption of any coupon Bond shall not
be deemed to include such interest installments represented by coupons which
shall have matured on or prior to the redemption date.
ARTICLE IV.
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GENERAL AGREEMENTS
Section 401. PAYMENT OF PRINCIPAL AND INTEREST. The County agrees
that it will promptly pay the principal of and the interest on the Bonds at the
place, on the dates and in the manner provided herein and in the Bonds and in
the coupons (if any) appertaining thereto according to the true intent and
meaning hereof and thereof. The principal and interest are payable solely from
purchase price payments and other payments received from the Company under the
Agreement together with all other revenues arising out of or in connection with
the County's ownership of the Project, which purchase price payments, other
payments and revenues are hereby specifically pledged to the payment of the
principal and interest in the manner and to the extent herein specified. Any
proceeds which arise upon the foreclosure of the Indenture or with respect to
any disposition of the County's security interests in the Agreement, the
purchase price payments, other payments and revenues derived therefrom and the
Project Equipment shall, for all purposes of this Indenture and the Bonds, be
deemed to be purchase price payments,other payments and revenues arising out or
in connection with the County's ownership of the Project. The Bonds and the
interest thereon shall not be deemed to constitute a debt or a general
obligation of the State or of the County and the Bonds do not directly,
indirectly or contingently obligate the State or the County to levy or to
pledge any form of taxation whatever for the payment of the principal of or the
interest on the Bonds. The principal of and interest on the Bonds are payable
solely from the Bond Fund and specifically from the special account established
therein pursuant to Section 502.
Section 402. PERFORMANCE OF AGREEMENTS; COUNTY. The County agrees
that it will faithfully perform at all times any and all agreements,
undertakings, stipulations and provisions contained in this Indenture, in any
and every Bond, and in all proceedings of the County pertaining thereto. The
County agrees that it is authorized under the Constitution and laws of the
State to issue the Bonds and to execute, deliver and perform this Indenture, to
mortgage the Project Land and to pledge and to grant the security interest
herein created in the purchase price payments and other payments received from
the Company under the Agreement together with all other revenues arising out of
or in connection with its ownership of the Project in the manner and to the
extent herein set forth; that all action on its part for the issuance of the
Bonds and the execution, delivery and performance of this Indenture has been
effectively taken, and that the Bonds are and will be valid and enforceable
limited obligations of the County according to the import thereof.
Section 403. OWNERSHIP; INSTRUMENTS OF FURTHER ASSURANCE. The County
agrees that it lawfully owns and possesses the Project Land, that it has good
and marketable fee simple title therein and thereto and that it holds and owns
the Project Equipment and that it has or will acquire good and marketable title
thereto (subject, however, to Permitted Encumbrances as defined in the
Agreement) and that it will defend said title therein and thereto and every
part thereof to the Trustee, and its respective successors and assigns, for the
benefit of the
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bondholders against the claims and demands of all Persons whomsoever. The
County agrees that it will do, execute, acknowledge and deliver or cause to be
done, executed, acknowledged and delivered, such indentures supplemental hereto
and such further acts, instruments and transfers as the Trustee may reasonably
require for the better giving, granting, pledging, assigning, conveying,
mortgaging, transferring, assuring and confirming unto the Trustee all and
singular the property herein described and the purchase price payments, other
payments and revenues pledged hereby to the payment of the principal of and the
interest on the Bonds. The County agrees that, except as herein and in the
Agreement provided, it will not sell, convey, mortgage, encumber or otherwise
dispose of any part of the Project.
Section 404. PAYMENT OF TAXES, CHARGES, ETC. Pursuant to the
provisions of Section 6.3 of the Agreement, the Company has agreed pay all
lawful taxes, assessments and charges at any time levied or assessed upon or
against the Project, or any part thereof, which might impair or prejudice the
lien and security interest of this Indenture; provided, however, that nothing
contained in this Section shall require the payment of any such taxes,
assessments or charges if the same are not required to be paid under the
provisions of Section 6.3 of the Agreement.
Section 405. MAINTENANCE AND REPAIR. Pursuant to the provisions of
Section 6.1 of the Agreement, the Company has agreed at its own expense to
cause the Project to be maintained, preserved and kept in good condition,
repair and working order, and that it will, from time to time, cause to be made
all needed repairs so that the Project shall at all times be kept in good and
tenantable condition and repair, and that the Company may, at its own expense,
make, from time to time, additions, modifications and improvements to the
Project under the terms and conditions set forth in Section 6.1 of the
Agreement.
Section 406. RECORDATION OF THE AGREEMENT, INDENTURE AND FINANCING
STATEMENTS. The County agrees that it will cause the Agreement, this Indenture
and all supplements thereto and hereto, as well as all other instruments as may
be required by law from time to time, to be kept recorded and filed in such
manner and in such places as may be required by law in order to protect and
preserve fully the interest of the bondholders in the property conveyed
thereunder and the rights, privileges and options of the Trustee thereunder.
Financing Statements covering the securing interests created with respect to
the Project Equipment, the Agreement and all purchase price payments and other
payments to be received by the County under the Agreement and all other
revenues arising out of or in connection with the County's ownership of the
Project and meeting the requirements of the U.C.C. shall be filed in the manner
and places required by the U.C.C. The Trustee covenants that it will cause all
necessary Financing Statements, amendments thereto, continuation statements and
instruments of a similar character to be recorded and filed in such manner and
in such places as may be required by law in order to preserve and protect fully
the security of the holders and owners of the Bonds and the bearers of the
coupons appertaining thereto and the rights of the Trustee hereunder.
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Section 407. INSPECTION OF PROJECT BOOKS. The County agrees that all
books and documents in its possession relating to the Project and the purchase
price payments, other payments and revenues arising out of or in connection
with the Project shall at all times be open to inspection by such accountants
or other agents as the Trustee may, from time to time, designate.
Section 408. PRIORITY OF PLEDGE AND SECURITY INTEREST. The pledge
herein made of the purchase price payments and other payments received from the
Company under the Agreement together with all other revenues arising out of or
in connection with the County's ownership of the Project and the security
interest created herein with respect thereto is a first and prior pledge
thereof and a security interest therein and shall not be impaired directly or
indirectly by the County or the Trustee, and neither such purchase price
payments, other payments and revenues nor the Project nor the Countries
interest in the Agreement shall otherwise be pledged, and no Persons shall have
any rights with respect thereto except as provided herein and in the Agreement.
Section 409. LIST OF BONDHOLDERS. To the extent that such
information shall be known to the Trustee under the terms of this Section, it
will keep on file at its principal office a list of names and addresses of the
last known holders of all coupon Bonds and all Bonds which are payable to
bearer and believed to be held by each of such last known holders. Any
bondholder may request that his name and address be placed on said list by
filing a written request with the Trustee, which request shall include a
statement of the principal amount of Bonds held by such holder and the numbers
of such Bonds. The Trustee shall be under no responsibility with regard to the
accuracy of said list. At reasonable times and under reasonable regulations
established by the Trustee, said list may be inspected and copied by the
Company or by bondholders (or a designated representative thereof) of
twenty-five per centum (25%) or more in principal amount of the Bonds, such
ownership and the authority of any such designated representative to be
evidenced to the satisfaction of the Trustee.
Section 41 0. RIGHTS UNDER AGREEMENT. The Agreement sets forth the
respective obligations of the County and the Company relating to the sale of
the Project, including a provision that subsequent to the initial issuance of
the Bonds and prior to payment in full thereof, the Agreement may not be
effectively amended, changed, modified, altered or terminated (other than as
provided therein) without the written consent of the Trustee. Reference is
hereby made to the Agreement for a detailed statement of the obligations of the
Company thereunder, and the County agrees that the Trustee in its own name or
in the name of the County may enforce all rights of the County and all
obligations of the Company under and pursuant to the Agreement for and on
behalf of the bondholders, whether or not the County is in default hereunder.
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Section 411. COUNTY'S ELECTION TO ISSUE BONDS PURSUANT TO SECTION
103(b)(6)(D) OF THE CODE. Prior to the issuance and delivery of the Bonds, the
County will have made all necessary filings to effect an election with respect
to the Bonds under Section 103(b)(6)(D) of the Code.
ARTICLE V.
REVENUES AND FUNDS
Section 501. SOURCE OF PAYMENT OF BONDS. The obligation of the
County to pay the principal of and the interest on the Bonds is not a general
obligation of the County but is a limited obligation payable solely from the
purchase price payments and other payments received from the Company under the
Agreement together with all other revenues arising out of or in connection with
the County's ownership of the Project and as authorized and provided herein.
Reference to Section 401 is made as to the characterization of any proceeds
which might arise upon the foreclosure of the Indenture or the disposition of
the security interests in the Agreement, the purchase price payments, other
payments and revenues derived therefrom or the Project Equipment.
The Project is to be sold pursuant to the Agreement and the purchase
price payments and other payments provided for in Section 5.2 of the Agreement
are to be remitted directly to the Trustee for the benefit of the bondholders
and are to be deposited in the Bond Fund. Said purchase price payments and
other payments are sufficient in amount and become due in a timely manner so as
to insure the prompt payment of the principal of and interest on the Bonds.
Section 502. CREATION OF THE BOND FUND. There is hereby created by
the County and ordered established with the Trustee a trust fund to be
designated "Taylor County, Florida Industrial Development Revenue Bond Fund --
CPG Products Corp. Project, Series 1979", which shall be used to pay the
principal of and the interest on the Bonds. There shall be established as
trust accounts within the Bond Fund a general account and a special account.
Any reference in this Indenture to "Bond Fund" without further qualification or
explanation shall constitute a reference to said general account.
Section 503. PAYMENTS INTO THE BOND FUND. There shall be paid into
the Bond Fund all accrued interest (if any) derived from the sale of the Bonds.
In addition, there shall be paid into the Bond Fund, as and when received,
(a) any amount remaining in the Construction Fund to the
extent provided in Section 4.3(k) of the Agreement,
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(b) all purchase price payments and other payment specified
in Section 5.2 of the Agreement,
(c) all moneys required to be so deposited pursuant to
Section 302,
(d) all other moneys received by the Trustee under and
pursuant to any of the provisions of the Agreement or this Indenture
which are required or which are accompanied by directions that such
moneys are to be paid, into the Bond Fund, and
(e) moneys, if any, received pursuant to the Guaranty.
The County agrees that so long as any of the Bonds are outstanding it
will pay, or cause to be paid, into the Bond Fund from the sources of payment
described in Section 501 sufficient moneys to Day promptly the principal of and
the interest on the Bonds as the same become due and payable. If there occurs
an event of default under the Agreement or this Indenture resulting in the
right of possession of the Project being returned to the County, the County
will fully cooperate with the Trustee and with the bondholders to the end of
fully protecting the rights and security of the bondholders. Nothing herein
shall be construed as requiring the County to operate the Project or to use any
funds from any source to pay the principal of and the interest on the Bonds or
to pay the costs of maintaining and insuring the Project other than purchase
price payments, other payments and revenues arising out of or in connection
with its ownership of the Project.
Section 504. USE OF MONEYS IN THE BOND FUND.
(a) Moneys in the Bond Fund shall be used solely for the payment of
the principal of and interest on the Bonds. No part of the purchase price
payments, other payments and revenues under the Agreement required to be paid
into the Bond Fund (excluding prepayments under Section 9.5 of the Agreement
and amounts paid in connection with the sinking fund requirements of Section
305) shall be used to redeem prior to maturity, a portion of the Bonds;
provided, that whenever the moneys held in the Bond Fund (in the general
account and the special account) from any source whatsoever are sufficient to
redeem all of the Bonds and to pay interest to accrue thereon prior to such
redemption, the County agrees to take and cause to be taken the necessary steps
to redeem all of the Bonds on the next succeeding redemption date for which the
required redemption notice can be given, and, provided, further that any moneys
in the Bond Fund other than purchase price payments, other payments and
revenues may be used to redeem a portion of the Bonds so long as the Company
has paid all required purchase price payments, other payments and revenues
under the Agreement.
(b) At the maturity date or redemption date prior to maturity of each
Bond and at the due date of each installment of interest on each Bond, the
Trustee shall transfer from the general
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account in the Bond Fund to the Special account in the Bond Fund sufficient
moneys to pay all principal of and the Interest (if any) then due and payable
with respect to each such Bond. Moneys so transferred into said special
account shall not thereafter be invested in any manner but shall be held by the
Trustee without liability on the part of the Trustee or the County for interest
thereon until actually paid out for the purposes intended.
The County hereby authorizes and directs the Trustee to withdraw, from
time to time, sufficient moneys from the special account in the Bond Fund to
pay the principal of and the interest on the Bonds as the same become due and
payable, which authorization and direction the Trustee hereby accepts.
Section 505. CUSTODY OF THE BOND FUND. The Bond Fund shall be held
by the Trustee as a trust fund for the benefit of the bondholders. The general
account and the special account established in the Bond Fund shall also
constitute trust accounts.
Section 506. NON-PRESENTMENT OF BONDS OR COUPONS. If any Bond shall
not be presented for payment when the principal thereof or any portion of the
principal thereof becomes due either at maturity or at the redemption date, or
if any coupon shall not be presented for payment at the due date thereof,
provided moneys sufficient to pay such Bond or portion thereof or such coupon
shall have been made available to the Trustee and are held in the appropriate
account in the Bond Fund for the benefit of the holder thereof, all liability
of the County to the holder thereof for the payment of such Bond or portion
thereof or such coupon, as the case may be, shall forthwith cease, determine
and be completely discharged, and thereupon it shall be the duty of the Trustee
to hold such moneys in said special account, without liability for interest
thereon, for the benefit of the holder of such Bond. or the holder of such
coupon, as the case may be, who shall thereafter be restricted exclusively to
moneys held in said special account. for any claim of whatever nature on his
part under this Indenture or on, or with respect to, such Bond or portion
thereof or such coupon, subject to any requirements imposed by law as may be
applicable to such Bond or coupon.
Section 507. TRUSTEE'S AND PAYING AGENT'S FEES, CHARGES AND EXPENSES.
Pursuant to the terms of the Agreement, the Company has agreed to pay directly
to the Trustee, commencing with the Completion Date (as defined in the
Agreement) and continuing until the principal of and interest on the Bonds
shall have been paid in full: (i) an amount equal to the annual fee of the
Trustee for its Ordinary Services rendered and its Ordinary Services incurred
hereunder, (ii) the reasonable fees and charges of the for acting as paving
agent and as Bond Registrar, and the reasonable fees of Trustee's Counsel, as
and when the same become due, and (iii) the reasonable fees and charges of the
Trustee for Extraordinary Services rendered by it and Extraordinary Expenses
incurred by it hereunder, as and when the same become due. It is further
understood and agreed that the initial or acceptance fee of the Trustee and the
fees, charges and expenses of the Trustee referred to in the preceding sentence
which become due
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prior to the time the Company becomes obligated to pay the same, will be paid
to the Trustee from the Construction Fund, as and when the same shall become
due. As specified in Section 5.2 of the Agreement, the Company may contest in
good faith the necessity for any such Extraordinary Services and Extraordinary
Expenses and the reasonableness of any of the fees and charges referred to
herein.
Section 508. MONEYS TO BE HELD IN TRUST. All moneys paid over to the
Trustee for the account of the Bond Fund (to be held in the general account or
the special account therein) under any provision hereof shall be held in trust
by the Trustee for the benefit of the holders of the Bonds and coupons (if any)
entitled to be paid therefrom.
Section 509. INSURANCE AND CONDEMNATION PROCEEDS. Reference is
hereby made to the Agreement whereunder it is provided that under certain
circumstances the respective net proceeds of insurance and condemnation awards
are to be paid to the Trustee and deposited in separate trust accounts (but not
in the Bond Fund) and to be disbursed and paid out as therein provided. The
Trustee hereby accepts and agrees to perform the duties and obligations as
therein specified.
Section 510. REPAYMENT TO THE COMPANY FROM THE BOND FUND. (a) Any
moneys remaining in the general account in the Bond Fund after payment in full
of all Bonds and coupons (if any) (taking into account Section 902), the fees,
charges and expenses of the Trustee, the paving agent(s) and the Bond Registrar
which have accrued and which will accrue and all other items required to be
paid hereunder (other than items payable from the special account in the Bond
Fund) shall be paid to the Company upon the expiration or sooner termination of
the term of the Agreement as provided in Article XIII of the Agreement.
(b) Any moneys held by the Trustee in the special account in the Bond
Fund shall be retained by the Trustee for the payment or redemptions of Bonds
and coupons (if any) not yet presented for payment or redemption. If, through
lapse of time or otherwise, the holders of certain Bonds or certain coupons
shall no longer be entitled to enforce payment of such obligations, then. it
shall be the duty of the Trustee forthwith to return to the Company all moneys
held by the Trustee in said special account, subject to any other requirements
of law as may be applicable to such funds.
ARTICLE VI.
CUSTODY AND APPLICATION OF PROCEEDS OF BONDS
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Section 601. DISPOSITION OF ACCRUED INTEREST. Upon the issuance and
delivery of the Bonds, there shall be paid into the Bond Fund all accrued
interest (if any) derived from the sale of the Bonds.
Section 602. CONSTRUCTION FUND, DISBURSEMENTS. There is hereby
created by the County and ordered established with the Trustee a trust fund to
be designated "Taylor County, Florida Construction Fund -- CPG Products Corp.
Project, Series 1979." The balance of the proceeds derived from the sale of
the Bonds remaining after making the deduction provides. for in Section 601
shall be paid into the Construction Fund. Moneys in the Construction Fund
shall be disbursed in accordance with the provisions of the Agreement, and
particularly Section 4.3 thereof.
The County agrees to take promptly all necessary and appropriate
action in approving and ordering all such disbursements. The Trustee is hereby
authorized and directed to issue its checks for each disbursement required by
the aforesaid provisions of the Agreement, and the Trustee shall be relieved of
all liability with respect to making disbursements in accordance with the
provisions of Section 4.3 of the Agreement.
The Trustee shall maintain adequate records pertaining to the
Construction Fund and all disbursements therefrom, and after the Project, has
been completed and a certificate of payment of all costs filed as provided in
Section 603, the Trustee shall file an accounting thereof with the County and
with the Company.
Section 603. COMPLETION OF THE PROJECT. The completion of the
Project and the payment of all costs and expenses incident thereto shall be
evidenced by the filing with the Trustee of (i) the certificate of the Project
Supervisor required by Section 4.5 of the Agreement, and (ii) a certificate
signed by the Authorized County Representative and the Authorized Company
Representative (designated pursuant to the terms of the Agreement), which
certificate shall state that all costs and expenses in connection with the
Project and payable out of the Construction Fund have been paid except for
costs and expenses not then due and payable with respect to which funds are
being retained in the Construction Fund with the approval of the Company and
the County for the payment of the same. As soon as practicable, and in any
event not later than sixty (60) days from the date of the certificate referred
to in subsection (ii) of the preceding sentence, any moneys remaining in the
Construction Fund (other than moneys retained to pay costs and expenses not
then due and payable) shall, without further authorization (but subject to the
fulfillment of the conditions specified in Section 4.3(k) of the Agreement
relating to the transfer of moneys from the Construction Fund to the Bond
Fund), be deposited by the Trustee into the Bond Fund with written advice to
the County and the Company of such action unless the Company shall have
directed the Trustee to purchase Bonds for the purpose of cancellation in
accordance with Section 4.3(k) of the Agreement.
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ARTICLE VII.
INVESTMENTS
Section 701. CONSTRUCTION FUND INVESTMENTS. Moneys held in the
Construction Fund or in any other trust fund or account held by the Trustee
hereunder (except the Bond Fund or an account in the Bond Fund) shall be
invested and reinvested by the Trustee in accordance with the treatment
prescribed for Construction Fund moneys in Section 4.9 of the Agreement. Such
investments shall be held by or under the control of the Trustee and shall be
deemed at all times a part of the Construction Fund or other pertinent trust
fund, and the interest accruing thereon and any profit resulting therefrom
shall be credited to the Construction Fund or other pertinent trust fund, and
any loss resulting therefrom shall be charged to the Construction Fund or other
pertinent trust fund. The Trustee is directed to sell and convert to cash a
sufficient amount of such investments whenever th cash held in the Construction
Fund or other pertinent trust fund is insufficient to pay a requisition when
presented or to otherwise make a timely disbursement required to be made
therefrom.
Section 702. BOND FUND INVESTMENTS. Moneys held in the Bond Fund
(other than moneys held in the special account in the Bond Fund referred to in
Section 5.02) shall be invested and reinvested by the Trustee in accordance
with the treatment prescribed for Construction Fund moneys in Section 4.9 of
the Agreement. Such investments shall be held by or under the control of the
Trustee and shall be deemed at all times a part of the Bond Fund, and the
interest accruing thereon and any profit realized therefrom shall be credited
to the Bond Fund, and any loss resulting therefrom shall be charged to the Bond
Fund. The Trustee is directed to sell and convert to cash a sufficient amount
of such investments in the Bond Fund whenever the cash held in the Bond Fund is
insufficient to provide for the payment of the principal of (whether at the
maturity date or redemption date prior to maturity) and the interest on the
Bonds as the same become due and payable. Any interest or gain received from
such investments shall be credited to and held in the Bond Fund and any loss
from such investments shall be charged against the Bond Fund and paid by the
Company.
ARTICLE VIII.
POSSESSION, USE AND PARTIAL RELEASE
OF PROPERTY FORMING A PART OF THE PROJECT
Section 801. SUBORDINATION TO RIGHTS OF THE COMPANY. So long as
there exists no event of default under the Agreement, this Indenture and the
rights, options and privileges hereunder and thereunder of the Trustee and the
bondholders are specifically made subject and.
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subordinate to the rights, options and privileges of the Company set forth in
the Agreement. So long as not otherwise provided in this Indenture, the
Company shall be suffered and permitted to possess, use and enjoy the Project
and its appurtenances so as to carry out its obligations under the Agreement.
Section 802. RELEASE OF CERTAIN LAND. Reference is made to, the
provisions of the Agreement, including, without limitation, Section 11.3
thereof, wherein the County and the Company have reserved the right to withdraw
certain portions of the Project Land from the Agreement and this Indenture upon
compliance with the terms and conditions of the Agreement. The Trustee shall
release from the Agreement and the lien of this Indenture any such land and
from this Indenture all rights to and liens on the purchase price payments,
other payments and revenues derived from such released land upon compliance
with the provisions of the Agreement. The Trustee is hereby authorized and
directed to execute and record, or cause to be executed and to be properly
recorded. any and all instruments reasonably requested by the Company to
effectuate a release from the Agreement and this Indenture of the Project Land
and to terminate any security interest or other lien with respect thereto.
Section 803. RELEASE OF PROJECT EQUIPMENT. Reference is made to the
provisions of the Agreement, including, without limitation. Section 6.2
thereof, wherein the Company has reserved the right to withdraw certain items
of Project Equipment (as defined in the Agreement) from the Agreement and this
Indenture upon compliance with the terms and conditions of the Agreement. The
Trustee shall at the request of the County or the Company confirm that any such
withdrawn items are no longer subject to the Agreement and this Indenture and
the security interest created with respect thereto and that all rights to and
liens on the purchase price payments, other payments and revenues derived from
such withdrawn items hereunder shall be relinquished upon compliance with the
provisions of the Agreement. The Trustee is hereby authorized and directed to
execute and record or cause to be executed and properly recorded any and all
instruments reasonably requested by the Company to effectuate a release from
the Agreement and this Indenture of the Project Equipment and to terminate any
security interest with respect thereto.
Section 804. GRANTING OF EASEMENTS. Reference is made to the
Provisions of the Agreement, including, without limitation, Section 8.6
thereof, wherein the Company has reserved the right to grant or release
easements and take other action upon compliance with the terms and conditions
of the Agreement. The Trustee shall confirm in writing any action taken by the
Company under said Section 8.6 upon compliance with the provisions of the
Agreement.
ARTICLE IX.
DISCHARGE OF LIEN
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Section 901. DISCHARGE OF LIEN AND SECURITY INTERESTS. If the County
shall pay or cause to be paid the principal of and interest on the Bonds at the
times and in the manner stipulated therein and herein, and if the County shall
keep, perform and observe all and singular the agreements in the Bonds and
herein expressed as to be kept, performed and observed by it or on its part,
then the lien hereof, these presents and the Mortgage Property and the security
interests shall cease, determine and be void, and thereupon the Trustee shall
cancel and discharge this Indenture and the security interests, and execute and
deliver to the County such instruments in writing as shall be required to
cancel and discharge this Indenture, and the security interests, and reconvey
to the County the Mortgaged Property, and assign and deliver to the County so
much of the Mortgaged Property as may be in its possession or subject to its
control, except for moneys and Government Obligations held in the special
account in the Bond Fund for the purpose of paying Bonds and coupons (if any)
which have not yet been presented for payment and moneys and obligations in the
Bond Fund required to be paid to the Company pursuant to Section 510.
Section 902. PROVISION FOR PAYMENT OF BONDS. Bonds and coupons shall
be deemed to have been paid within the meaning of Section 901:
(a) if the Trustee shall hold in the Special account in the
Bond Fund sufficient moneys, or
(b) if the Trustee shall hold in the special account in the
Bond Fund Government Obligations of such maturities and interest
payment dates and bearing such interest as will, without further
investment or reinvestment of either the principal amount thereof or
the interest earnings thereon (said earnings to be held in trust
also), be sufficient together with any moneys referred to in
subsection (a) above,
for the payment at their respective maturities or redemption dates prior to
maturity, of the principal thereof, together with the redemption premium, if
any, and the interest to accrue thereon to such maturity or redemption dates,
as the case may be; provided that if any Bonds referred to in this Section are
to be redeemed prior to the maturity thereof, notice of such redemption shall
have been given or arrangements satisfactory to the Trustee shall have been
made therefor, or waiver of such notice satisfactory in form to the Trustee
shall have been filed with the Trustee.
Limitations elsewhere specified herein regarding the investment of
money's held by the Trustee in the special account in the Bond Fund shall not
be construed to prevent the depositing and holding in said special account of
the obligations described in the preceding paragraph for the purpose of def
easing the lien of this Indenture as to Bonds and Coupons (if any) which have
not yet become due and payable.
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ARTICLE X.
DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE
AND BONDHOLDERS
Section 1001. DEFAULTS; EVENTS OF DEFAULT. If any of the following
events occurs, subject to the terms of Section 1013, it is hereby defined as
and declared to be and to constitute an "event of default" hereunder:
(a) default in the due and punctual payment of any interest
on any Bond; or
(b) default in the due and punctual payment of the principal
of any Bond, whether at the maturity date or redemption date prior to
maturity (including mandatory sinking fund redemption pursuant to
Section 305), or upon maturity thereof by declaration: or
(c) default in the performance or observance of any other of
the agreements or conditions on the part of the County herein or in
the Bonds contained; or
(d) the occurrence of an "event of default" under the
Agreement as provided in Section 10.1 thereof: or
(e) the occurrence of an "event of default" under the
Guaranty as provided in Section 5.1 thereof.
Section 1002. ACCELERATION. Upon the occurrence of an event of
default, the Trustee may, and upon the written request of the holders of not
less than twenty-five per centum (25%) in principal amount of Bonds shall, by
notice in writing delivered to the County, declare the principal of all Bonds
and the interest accrued thereon to the date of such acceleration immediately
due and payable, and the same shall thereupon become and be immediately due and
payable.
Section 1003. FORECLOSURE. Upon the occurrence of an event of
default, it shall be lawful for the Trustee to foreclose the lien on the
Project created and vested in its Indenture by proceeding in equity in
accordance with the laws of the State. The Trustee or the holder or holders of
any of the Bonds then outstanding are authorized to purchase the Project at any
such foreclosure sale.
Section 1004. OTHER REMEDIES. Upon the occurrence of an event of
default, the Trustee shall have the power to proceed with any right or remedy
granted by the Constitution and laws of the State, as it may deem best,
including any suit, action or special proceeding in equity or
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at law for the specific performance of any agreement contained herein or for
the enforcement of any proper legal or equitable remedy as the Trustee shall
deem most effectual to protect the rights aforesaid, insofar as such may be
authorized by law, and the right to the appointment, as a matter of right and
without regard to the sufficiency of the security afforded by the Mortgaged
Property, of a receiver for all or any part of the Mortgaged Property and the
purchase price payments, other payments and revenues thereof; the rights herein
specified are to be cumulative to all other available rights, remedies or
powers and shall not exclude any such rights, remedies or powers. Without
intending to limit the foregoing rights, remedies and powers by virtue of such
specification, the Trustee is authorized to exercise any and all rights
available from time to time under the U.C.C., including the right to assign
further the County's right, title and interest in the Agreement to a third
party.
Section 1005. RIGHTS OF BONDHOLDERS. Upon the occurrence of an event
of default and if requested so to do by the holders of twenty-five per centum
(25%) in principal amount of Bonds and indemnified as provided in Section 1101
hereof, the Trustee shall be obligated to exercise such one or more of the
rights and remedies conferred by this Article as the Trustee. being advised by
Counsel, shall deem most expedient in the interests of the bondholders.
No right or remedy by the terms of this Indenture conferred upon or
reserved to the Trustee (or to the bondholders) is intended to be exclusive of
any other right or remedy, but each and every such right and remedy shall be
cumulative and shall be in addition to any other right or remedy given to the
Trustee or to the bondholders or now or hereafter existing at law, in equity or
by statute.
No delay or omission to exercise any right or remedy accruing upon any
event of default shall impair any such right or remedy or shall be construed to
be a waiver of any such event of default or acquiescence therein; and every
such right and remedy may be exercised from time to time and as often as may be
deemed expedient.
No waiver of any event of default hereunder, whether by the Trustee or
by the bondholders, shall extend to or shall affect any subsequent event of
default or shall impair any rights or remedies consequent thereon.
Section 1006. RIGHT OF BONDHOLDERS TO DIRECT PROCEEDINGS. Anything
herein to the contrary notwithstanding, the holders of a majority in principal
amount of Bonds shall have the right, at any time, by an instrument or
instruments in writing executed and delivered to the Trustee, to direct the
method and place of conducting all proceedings to be taken in connection with
the enforcement of the terms and conditions hereof, or for the appointment of a
receiver or any other proceedings hereunder; provided, that such direction
shall not be otherwise than in accordance with the provisions hereof and of
law.
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Section 1007. APPOINTMENT OF RECEIVERS. Upon the occurrence of an
event of default and upon the filing of a suit or other commencement of
judicial proceedings to enforce the rights and remedies of the Trustee and of
the bondholders hereunder, the Trustee shall be entitled, as a matter of right,
to the appointment of a receiver or receivers of the Project and of the
purchase price payments, other payments and revenues thereof and therefrom,
pending such proceedings, with such powers as the court making such appointment
shall confer.
Section 1008. FORECLOSURE OF INDENTURE. Upon the occurrence of an
event of default, to the extent that such rights may then lawfully be waived,
neither the County, nor anyone claiming through or under it, shall set up,
claim or seek to take advantage of any appraisement, valuation, stay, extension
or redemption laws now or hereafter in force, in order to prevent or hinder the
enforcement of this indenture or the foreclosure of this Indenture, but the
County, for itself and all who may claim through or under it, hereby waives, to
the extent that they lawfully may do so, the benefit of all such laws and all
right of appraisement and redemption to which it may be entitled under the laws
of the State; provided, however, any deficiency remaining subsequent to
foreclosure shall not constitute an obligation of the County but shall be
payable solely from the moneys, revenues and receipts pledged under this
Indenture.
Section 1009. APPLICATION OF MONEYS. All moneys received by the
Trustee pursuant to any right given or action taken under the provisions of
this Article shall, after payment of the costs and expenses of the proceedings
resulting in the collection of such moneys and of the expenses, liabilities and
advances incurred or made by the Trustee, be deposited in the Bond Fund and all
moneys in the Bond Fund shall be applied as follows:
(a) Unless the principal of all the Bonds shall have become
or shall have been declared due and payable, all such moneys shall be
applied:
first - to the payment to the Persons entitled
thereto of all installments of interest then due on the Bonds
(other than installments of interest on Bonds with respect to
the payment of which moneys and/or Government Obligations are
set aside in the special account in the Bond Fund), in the
order of the maturity of the installments of such interest
and, if the amount available shall not be sufficient to pay in
full any particular installment, then to the payment ratably,
according to the amounts due on such installment, to the
Persons entitled thereto, without any discrimination or
privilege; and
second - to the payment to the Persons entitled
thereto of the unpaid principal of any of the Bonds which
shall have become due (other than principal of Bonds with
respect to the payment of which moneys and/or Government
Obligations are set aside in the special account in the Bond
Fund), in the order of their due dates, with interest on such
Bonds from the respective dates upon
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which they become due and, if the amount available shall not
be sufficient to pay in full Bonds due on any particular date,
together with such interest, then to the payment ratably,
according to the amount of principal due on such date, to the
Persons entitled thereto, without any discrimination or
privilege.
(b) If the principal of all the Bonds shall have become due
or shall have been declared due and payable, all such moneys shall be
applied to the payment of the principal and the interest then due and
unpaid upon the Bonds (other than principal of and interest on Bonds
with respect to the payment of which moneys and/or Government
Obligations are set aside in the special account in the Bond Fund),
without preference or priority of principal over interest or of
interest over principal, or of any installment of interest over
principal, or of any installment of interest, or of any Bond over any
other Bond, ratably, according to the amounts due respectively for
principal and interest, to the Persons entitled thereto without any
discrimination or privilege.
(c) If the principal of all the Bonds shall have been
declared due and payable, and if such declaration shall thereafter
have been rescinded and annulled under the provisions of this Article
then, subject to the provisions of paragraph (b) of this Section in
the event that the principal of all the Bonds shall late, become due
or be declared due and payable, the moneys shall be applied in
accordance with the provisions of Paragraph (a) of this Section.
Whenever moneys are to be applied pursuant to the provisions of this
Section, such money shall be applied at such times, and from time to time, as
the Trustee shall determine, having due regard to the amount of such moneys
available for application and the likelihood of additional moneys becoming
available for such application in the future. Whenever the Trustee shall apply
such funds, it shall fix the date (which shall be an interest payment date
unless it, shall deem another date more suitable) upon which such application
is to be made, and upon such date interest on the amounts of principal to be
paid on such dates shall cease to accrue. The Trustee shall give such notice
as it may deem appropriate of the deposit with it of any such moneys and of the
fixing of any such date and shall not be required to make payment to the holder
of any matured coupon or any Bond until such coupon or such Bond and all
unmatured coupons, if any, appertaining to such Bond shall be presented to the
Trustee for appropriate endorsement or for cancellation if paid in full.
Whenever ail Bonds and interest thereon have been paid under the
provisions of this Section and all expenses and charges of the Trustee have
been paid, any balance remaining in the two accounts in the Bond Fund shall be
paid to the Company as provided in Section 510.
Section 1010. RIGHTS AND REMEDIES VESTED IN TRUSTEE. All rights and
remedies of action (including the right to file proof of claims) hereunder or
under any of the Bonds or
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coupons may be enforced by the Trustee without the possession of any of the
Bonds or coupons or the production thereof in any trial or other proceedings
relating thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its name as Trustee without the necessity of joining as
plaintiffs or defendants any holders of the Bonds or coupons, and any recovery
of judgment shall be for the equal benefit of the holders of the Bonds and
coupons (if any).
Section 1011. RIGHTS AND REMEDIES OF BONDHOLDERS. No holder of any
Bond or coupon shall have any right to institute any suit, action or proceeding
in equity of at law for the enforcement hereof, for the execution of any trust
hereof or for the appointment of a receiver or to enforce any other right or
remedy hereunder, unless a default has occurred of which the Trustee has been
notified as provided in subsection (g) of Section 1101, or of which by said
subsection it is deemed to have notice, nor unless also such default shall have
become an event of default and the holders of twenty-five per centum (25%) in
principal amount of Bonds shall have made written request to the Trustee and
shall have offered reasonable opportunity either to proceed to exercise the
powers hereinbefore granted or to institute such action, suit or proceeding in
its own name, nor unless also such bondholders have offered to the Trustee
indemnity as provided in Section 1101, nor unless also the Trustee shall
thereafter fail or refuse to exercise the powers hereinbefore granted, or to
institute such action, suit or proceeding in its own name. Such notification,
request and offer of indemnity are hereby declared in every case at the option
of the Trustee to be conditions precedent to the execution of the powers and
trusts hereof, and to any action or cause of action for the enforcement hereof,
or for the appointment of a receiver or for any other right or remedy
hereunder, it being understood and intended that no one or more holders of the
Bonds or coupons shall have any right in any manner whatsoever to affect,
disturb or prejudice the lien hereof by its action or to enforce any right or
remedy hereunder except in the manner herein provided, and that all proceedings
at law or in ecruitv shall be instituted, had and maintained in the manner
herein provided and for the equal benefit of the holders of all Bonds. Nothing
herein contained shall, however, affect or impair the right of any bondholder
to enforce the payment of the principal of and the interest on any Bond at and
after the maturity thereof, or the obligation of the County to pay the
principal of and the interest on each of the Bonds issued hereunder to the
respective holders thereof at the time, place, from the source and in the
manner expressed in the Bonds.
Section 1012. TERMINATION OF PROCEEDINGS. If the Trustee shall have
proceeded to enforce any right or remedy hereunder by the appointment of a
receiver, by entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely, then and in every such case the County and the Trustee shall be
restored to their former positions and rights hereunder with respect to the
Mortgaged Property and all rights, remedies and powers of the Trustee shall
continue as if no such proceedings had been taken.
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Section 1013. WAIVERS OF EVENTS OF DEFAULT. The Trustee may in its
discretion waive any event of default hereunder and its consequences and
rescind any declaration of maturity of principal and shall do so upon the
written request of the holders of (1) a majority in principal amount of all
Bonds in respect of which a default as to the payment of principal and/or
interest exists, or (2) a majority in principal amount of all Bonds in the case
of any other event of default; provided, however, that there shall not be
waived (a) any event of default pertaining to the payment of the principal of
any Bond at its maturity date or redemption date prior to maturity (including
any mandatory sinking fund redemption date) or (b) any event of default
pertaining to the payment when due of the interest on any Bond, unless prior to
such waiver or rescission, all arrears of principal (due otherwise than by
declaration) and interest. with interest (to the extent permitted by law) at
the rate borne by the Bonds in respect of which such event of default shall
have occurred on overdue installments of interest, and all arrears of payments
of principal when due, as the case may be, and all expenses of the Trustee in
connection with such event of default, shall have been paid or provided for,
and in case of any such waiver or rescission, or in case any proceeding taken
by the Trustee on account of any such event of default shall have been
discontinued or abandoned or determined adversely, then and in every such case
the County, Trustee and the bondholders shall be restored to their former
positions and rights hereunder, respectively, but no such waiver or rescission
shall extend to any subsequent or other event of default, or impair any right
consequent thereon.
Section 1014. NOTICE OF DEFAULTS; OPPORTUNITY OF THE COUNTY AND
COMPANY TO CURE DEFAULTS. No default specified in Section 1001(c) shall
constitute an even, of default hereunder until notice of such default by
registered or certified mail shall be given by the Trustee to the County, the
Company and the Guarantor, and the County shall have had thirty (30) days after
receipt of such notice to correct said default or cause said default to be
corrected and shall not have corrected said default or caused said default to
be corrected within the applicable period; provided, further, that if a default
specified in said Section 1001(c) be such that it can be corrected but not
within the period specified, herein, it shall not constitute the basis of an
event of default hereunder (i) if corrective action capable of remedying such
default is instituted by the County within the applicable period and diligently
pursued until the default is corrected, and (ii) if the County shall within the
applicable period furnish to the Trustee a certificate executed as provided in
Section 1101(e) certifying that said default is such that it can be corrected
but not within the applicable period and that corrective action capable of
remedying such default has been instituted and is being diligently pursued and
will be diligently pursued until the default is corrected. The County shall
notify the Trustee by certificate executed as above when such default has been
corrected. The Trustee shall be entitled to rely upon any such certificate
given pursuant to this Section.
With regard to any default concerning which notice is given to the
Company or the County under the provisions of this Section, the County hereby
grants to the Company full authority to perform any obligation the performance
of which by the County is alleged in said
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notice to be in default, such performance by the Company to be in the name and
stead of the County with full power to do any and all things and acts and with
power of substitution.
ARTICLE XI.
THE TRUSTEE
Section 1101. ACCEPTANCE OF THE TRUSTS. The Trustee hereby accepts
the trusts imposed upon it hereby and agrees to perform said trusts as would an
ordinarily prudent trustee under a corporate mortgage, but only upon and
subject to the following express terms and conditions:
(a) The Trustee may execute any of the trusts or powers
hereof and perform any of its duties by or through attorneys, agents,
receivers or employees but shall be answerable for the conduct of the
same in accordance with the standard specified above, shall be
entitled to advice of Counsel concerning all matters of trusts hereof
and the duties hereunder and may in all cases pay such reasonable
compensation to all such attorneys, agents, receivers and employees as
may reasonably be employed in connection with the trusts hereof. The
Trustee may act upon the opinion or advice of any attorney (who may be
the attorney or attorneys for the County, the Company or the
Guarantor), approved by the Trustee in the exercise of reasonable
care. The Trustee shall not be responsible for any loss or damage
resulting from any action or non-action in good faith in reliance upon
such opinion or advice.
(b) Except as is specifically provided in Section 1114 with
respect to the filing of continuation statements, the Trustee shall
not be responsible for any recital herein, or in the Bonds (except in
respect to the authentication certificate of the Trustee endorsed on
the Bonds), or for the recording or re-recording, filing or refiling
of the Indenture or the Agreement, or for insuring the Mortgaged
Property or any part of the Project or collecting any insurance
moneys, or for the validity of the execution hereof by the County or
of any supplements hereto or instruments of further assurance, or for
the sufficiency of the security for the Bonds, or for the value of or
title in and to the Mortgaged Property or any part of the Project or
otherwise as to the maintenance of the security hereof; except that if
the Trustee enters into possession of a part or all of the Mortgaged
Property pursuant to any provision hereof, it shall use due diligence
in preserving the same, and the Trustee shall not be bound to
ascertain or inquire as to the performance or observance of any
agreements or conditions on the part of the County or on the part of
the Company under the Agreement, except as hereinafter set forth; but
the Trustee may require of the County or the Company full information
and advice as
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to the performance of the agreements and conditions aforesaid and as
to the condition of the Mortgaged Property.
(c) The Trustee shall not be accountable except to the extent
herein specifically provided for the use of the proceeds of any of the
Bonds. The Trustee may become the owner of the Bonds and any coupons
appertaining thereto with the same rights which it would have if it
were not Trustee.
(d) The Trustee shall be protected in acting upon any notice,
request, consent, certificate, order, affidavit, letter, telegram or
other paper or document believed to be genuine and correct and to have
been signed or sent by the proper Person or Persons. Any action taken
by the Trustee, pursuant hereto upon the request, authority or consent
of any Person who at the time of making such request or giving such
authority or consent is the holder of any Bond, shall be conclusive
and binding upon all future holders of the same Bond and upon Bonds
issued in exchange therefor or in place thereof.
(e) As to the existence or non-existence of any fact or as to
the sufficiency or validity of any instrument, paper or proceeding,
the Trustee shall be entitled to rely upon a certificate signed on
behalf of the County by the Chairman of the Board and attested by the
Clerk of the Circuit Court in and for the County as sufficient
evidence of the facts therein contained and prior to the occurrence a
default of which the Trustee has been notified as provided in
subsection (g) of this Section, or of which by said subsection it is
deemed to have notice, shall also be at liberty to accept a similar
certificate to the effect that any particular dealing, transaction or
action is necessary or expedient, but may at its discretion secure
such further evidence deemed necessary or advisable, but shall in no
case be bound to secure the same. The Trustee may accept a
certificate of the Clerk of the Circuit Court in and for the County
under its seal to the effect that a resolution in the form therein set
forth has been adopted by the Board as conclusive evidence that such
resolution has been adopted, and is in full force and effect.
(f) The right of the Trustee to do things enumerated herein
shall not be construed as a duty, and the Trustee shall not be
answerable for other than its negligence or willful default.
(g) The Trustee shall not be required to take notice or be
deemed to have notice of any default hereunder except failure by the
County to cause to be made any of the payments to the Trustee required
to be made by Article V, unless the Trustee shall be specifically
notified in writing of such default by the County or by the holders of
at least twenty-five per centum (25%) in principal amount of the
Bonds. All notices or other instruments required to be delivered to
the Trustee must, in order to be effective, be
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delivered at the principal office of the Trustee, and in the absence
of such notice so delivered the Trustee may conclusively assume there
is no default except as aforesaid.
(h) The Trustee shall not be personally liable for any debts
contracted or for damages to Persons or property, or for salaries or
non-fulfillment of contracts during any period in which it may be in
the possession of or managing the Project as in this Indenture
provided.
(i) At reasonable times the Trustee, and its duly authorized
agents. attorneys, experts, engineers, accountants and representatives
who are acceptable to the Company, shall have the right to inspect the
Project as well as all books, payers and records of the County
pertaining to the Project and the Bonds and to take such memoranda
from and in regard thereto as may be desired.
(j) The Trustee shall not be required to give any bond or
surety in respect of the execution of the said trusts and powers or
otherwise in respect of the premises.
(k) Notwithstanding anything elsewhere herein contained, the
Trustee shall have the right, but shall not be required, to demand, in
respect of the authentication of any Bonds, the withdrawal of any
cash, the release of any property, or any action whatsoever within the
purview hereof, any showings, certificates, opinions, appraisals or
other information, or corporate action or evidence thereof, in
addition to that by the terms hereof required as a condition of such
action by the Trustee deemed desirable for the purpose of establishing
the right of the County to the authentication of any Bonds, the
withdrawal of any cash or the taking of any other action by the
Trustee.
(l) Before taking such action hereunder, the Trustee may
require that a satisfactory indemnity bond be furnished for the
reimbursement of all expenses to which it may be put and to protect it
against all liability, except liability which is adjudicated to have
resulted from the negligence or willful default of the Trustee by
reason of any action so taken.
(m) All moneys received by the Trustee or any paving agent
for the Bonds shall, until used or applied or invested as herein
provided, be held in trust for the purposes for which they were
received but need not be segregated from other funds except to the
extent required herein or by law. Neither the Trustee nor any such
paving agent shall be under any liability for interest on any moneys
received hereunder except such as may be agreed upon.
Section 1102. FEES, CHARGES AND EXPENSES OF TRUSTEE. The Trustee
shall be entitled to payment and/or reimbursement for reasonable fees for its
Ordinary Services rendered
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hereunder and all advances, Counsel fees and other Ordinary Expenses reasonably
and necessarily made or incurred by the Trustee in connection with such
Ordinary Services, and, if it should become necessary that the Trustee perform
Extraordinary Services, it shall be entitled to reasonable extra compensation
therefor and to reimbursement for reasonable and necessary Extraordinary
Expenses in connection therewith; provided, that if such Extraordinary Services
or Extraordinary Expenses are occasioned by its negligence or willful default,
it shall not be entitled to compensation or reimbursement therefor. The
Trustee shall be entitled to payment and reimbursement for the reasonable fees
and charges of the Trustee as paying agent for the Bonds and coupons (if any)
as hereinabove provided. Upon the occurrence of an event of default, but only
upon such occurrence, the Trustee shall have a first lien on the Mortgaged
Property with right of payment prior to payment of the principal of and the
interest on any Bond for the foregoing advances, fees, costs, and expenses
incurred.
Section 1103. NOTICE TO BONDHOLDERS IF DEFAULT OCCURS. If a default
occurs of which the Trustee is by subsection (g) of Section 1101 required to
take notice or if notice of a default be given as in said subsection (g)
provided, then the Trustee shall give written notice thereof by first class
mail to the last known holders of all Bonds then outstanding shown by the list
of bondholders required to be maintained by the terms of Section 409 and to the
registered owners of Bonds, and, as to defaults described in Section 1001(c),
to the County.
Section 1104. INTERVENTION BY TRUSTEE. In any judicial proceeding to
which the County is a party which, in the opinion of the Trustee and its
Counsel, has a substantial bearing on the interest of the bondholders, the
Trustee may intervene on behalf of the bondholders and shall do so if requested
in writing by the holders of at least twenty- five per centum (25%) in
principal amount of the Bonds. The rights and obligations of the Trustee under
this Section are subject to the approval of a court of competent jurisdiction.
Section 1105. SUCCESSOR TRUSTEE. Any corporation or association into
which the Trustee may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its trust business and assets
as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, merger, consolidation, sale or transfer to
which it is a party, ipso facto, shall be and become successor Trustee
hereunder and vested with all of the title to the Mortgaged Property and all
the trusts, powers, discretions, immunities, privileges and all other matters
as was its predecessor, without the execution or filing of any instrument or
any further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 1106. RESIGNATION BY THE TRUSTEE. The Trustee and any
successor Trustee may at any time resign from the trusts hereby created by
giving thirty (30) days' written notice to the County, the Company and the
Guarantor and by first class mail to each registered owner of Bonds and to each
holder of Bonds as shown by the list of bondholders required to be
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maintained by Section 409 hereof, and such resignation shall take effect at the
end of such thirty (30) day period or upon the earlier appointment of a
successor Trustee by the bondholders or by the County. Such notice to the
County, the Company and the Guarantor may be served personally or sent by
registered or certified mail.
Section 1107. REMOVAL OF THE TRUSTEE. The Trustee may be removed at
any time by an instrument or concurrent instruments in writing delivered to the
Trustee and to the County and signed by the holders of a majority in principal
amount of the Bonds.
Section 1108. APPOINTMENT OF SUCCESSOR TRUSTEE BY THE BONDHOLDERS;
TEMPORARY TRUSTEE. If the Trustee shall resign, be removed. be dissolved, be
in course of dissolution or liquidation. or shall otherwise become incapable of
acting hereunder or in case it shall be taker, under the control of any public
officer, officers or a receiver appointed by a court, a successor may be
appointed by the holders of a majority in principal amount of the Bonds, by an
instrument or concurrent instruments in writing signed by such holders, or by
their attorneys-in-fact, duly authorized; provided nevertheless, that in case
of such vacancy the County by an instrument signed by the chairman of the Board
and attested by the Clerk of the Circuit Court in and for the County under its
seal, may appoint a temporary Trustee to fill such vacancy until a successor
Trustee shall be appointed by the bondholders in the manner above provided; and
any such temporary Trustee shall immediately and without further act be
superseded by the Trustee so appointed by such bondholders. Every such Trustee
appointed pursuant to the provisions of this Section shall be a trust company
or bank (having trust powers) in good standing, shall be located within or
outside the State and shall have an unimpaired capital and surplus of not less
than twenty-five million dollars ($25,000,000), if there be such an institution
willing, qualified and able to accept the trusts upon reasonable or customary
items.
Section 1109. CONCERNING ANY SUCCESSOR TRUSTEE. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to its
predecessor and also to the County an instrument in writing accepting such
appointment hereunder, and thereupon such successor, without any further act,
deed or conveyance, shall become fully vested with all the estates, properties,
rights, powers, trusts, duties and obligations of its predecessor; but such
predecessor shall, nevertheless, on the written request of the County, or of
its successor, execute and deliver an instrument transferring to such successor
Trustee all the estates, properties, rights, powers and trusts of such
predecessor hereunder; and every predecessor Trustee shall deliver all
securities and moneys held, by it as Trustee hereunder to its successor.
Should any instrument in writing from the County be required by any successor
Trustee in order to vest more fully and certainly in such successor the
estates, properties, rights, powers and trusts hereby vested or intended to be
vested in the predecessor any and all such instruments in writing shall, on
request, be executed, acknowledged and delivered by the County. The
resignation of any Trustee and the instrument or instruments removing any
Trustee and appointing a successor hereunder, together with all other
instruments provided for in this Article, shall be filed and/or
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recorded by the successor Trustee in each recording office where this Indenture
and the Financing Statements shall have been filed and/or recorded.
Section 1110. RIGHT OF TRUSTEE TO PAY TAXES AND OTHER CHARGES. If
any tax, assessment or governmental or other charge upon any part of the
Mortgaged Property or the Project is not paid as required herein, the Trustee
may pay such tax, assessment or charge, without prejudice, however, to any
rights of the Trustee or the bondholders hereunder arising in consequence of
such failure; and any amount at any time so paid under this Section, with
interest thereon from the date of payment at the rate of eight per centum (8%)
per annum, shall become so much additional indebtedness secured hereby, and the
same shall be given a preference in payment over the principal of and interest
on the Bonds and shall be paid out of the revenues and receipts from the
Mortgaged Property, if not otherwise caused to be paid; but the Trustee shall
not be under obligation to make any such payment unless it shall have been
requested to do so by the holders of at least twenty-five per centum (25%) in
principal amount of the Bonds and shall have been provided with sufficient
moneys for the purpose of making such payment.
Section 1111. TRUSTEE PROTECTED IN RELYING UPON RESOLUTIONS, ETC.
The resolutions, opinions, certificates and other instruments provided for
herein may be accepted by the Trustee as conclusive evidence of the facts and
conclusions stated therein and shall be full warrant, protection and authority
to the Trustee for the release of property and the withdrawal of moneys
hereunder.
Section 1112. SUCCESSOR TRUSTEE AS CUSTODIAN OF FUNDS, PAYING AGENT
AND BOND REGISTRAR. Upon a change in the office of Trustee, the predecessor
Trustee which has resigned or has been removed shall cease to be the holder of
the Bond Fund and of the Construction Fund, paying agent for the principal of
and the interest on the Bonds and Bond Registrar, and the successor Trustee
shall become such holder, paving agent and Bond Registrar.
Section 1113. MORTGAGED PROPERTY MAY BE VESTED IN CO-TRUSTEE. It is
the purpose hereof that there shall be no violation of any law of any
jurisdiction (including particularly the laws of the State) denying or
restricting the right of banking corporations or associations to transact
business as trustee in such jurisdiction. It is recognized that in case of
litigation hereunder or under the Agreement or this Indenture, and in
particular in case of the enforcement of either upon the occurrence of an event
of default, it may be necessary that the Trustee appoint an additional
individual or institution as a separate Trustee or Co-Trustee. The following
provisions of this Section are adapted to these ends.
Upon the incapacity or lack of authority of the Trustee, by reason of
any present or future law of any jurisdiction, to exercise any of the rights,
powers and trusts herein granted to the Trustee or to hold title to the
Mortgaged Property or to take any other action which may be
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necessary or desirable in connection therewith, each and every remedy, power,
right, claim, demand, cause of action, immunity, estate, title, interest and
lien expressed or intended to be exercised by or vested in or conveyed to the
Trustee with respect thereto shall be exercisable by and vest in any such
separate Trustee or Co-Trustee upon the appointment of same by the Trustee but
only to the extent necessary to enable the separate Trustee or Co-Trustee to
exercise such rights, powers and trusts, and every agreement and obligation
necessary to the exercise thereof by such separate Trustee or Co-Trustee shall
run to and be enforceable by either of them.
Should any deed, conveyance or instrument in writing from the County
be required by the separate Trustee or Trustee so appointed by the Trustee in
order to vest more fully and certainly in and confirm to him or it such
properties, rights, powers, trusts, duties and obligations, any and all such
deeds, conveyances and instruments shall on request, be executed. acknowledged
and delivered by the county. In case any separate Trustee or Co-Trustee, or a
successor to either. shall die, become incapable oil acting, resign or be
removed, all the estates, properties, rights, powers, trusts, duties and
obligations of such separate Trustee or Co-Trustee, so far as permitted by law,
shall vest in and be exercised by the Trustee until the appointment by the
Trustee of a new Trustee or successor to such separate Trustee or Co-Trustee.
Section 1114. FILING OF CERTAIN CONTINUATION STATEMENTS. From time
to time, the Trustee shall file or cause to be filed continuation Statements
for the purpose of continuing without lapse the effectiveness of (i) those
Financing Statements which shall have been filed or Prior to the issuance of
the Bonds in connection with the security for the Bonds pursuant to the
authority of the U.C.C., and (ii) any previously filed continuation statements
which shall have been filed as herein required. The County shall sign and
deliver to the Trustee or its designee such continuation statements as may be
requested of it from time to -time by the Trustee. Upon the filing of any such
continuation statement, the Trustee shall immediately notify the County that
the same has been accomplished.
ARTICLE XII.
MEETINGS OF BONDHOLDERS
Section 1201. PURPOSES FOR WHICH BONDHOLDERS' MEETINGS MAY BE
CALLED. A meeting of bondholders may be called at any Time and from time to
time for any of the following purposes:
(a) To give any notice to the County, the Company, the
Guarantor or the Trustee, or to give any directions to the Trustee, or
to consent to the waiving of any
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default or event of default hereunder and its consequences, or to take
any other action authorized to be taken by bondholders pursuant to
Section 1011:
(b) to remove the Trustee Pursuant to Section 1107 and to
appoint a successor trustee pursuant to Section 1108;
(c) to consent to the execution of a supplemental indenture
pursuant to Section 1302, or to consent to the execution of an
amendment, change or modification of the Agreement pursuant to Section
1402; or
(d) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Bonds under any other provision hereof or under applicable law.
Section 1202. PLACE OF MEETINGS OF BONDHOLDERS. Meetings
of bondholders may be held at such Place or places as the Trustee or, in case
of its failure to act, the bondholders calling the meeting shall from time to
time determine.
Section 1203. CALL AND NOTICE OF BONDHOLDERS' MEETINGS. (a)
The Trustee may at any time call a meeting of bondholders to be held at such
time and at such place as Trustee shall determine. Notice of every meeting of
bondholders, 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
published at least three (3) times in a newspaper or financial journal of
general circulation among dealers in municipal securities in The City of New
York, New work, the first publication to be not less than twenty (20) nor more
than one hundred eighty (180) days prior to the date fixed for such meeting.
If all of the outstanding Bonds are at that time registered as to principal
(except to bearer) or as to both principal and interest, notice by first class
mail to such bondholders shall be sufficient and published notice need not be
given.
At the time of the first publication of such notice, the Trustee shall
also mail, postage prepaid, a copy of such notice to the registered owner of
each Bond registered as to principal or as to principal and interest, at the
address shown on the registration books. Any failure of the Trustee to mail
such notice, or any defect therein shall not, however, in any way impair or
affect the validity of any such meeting.
(b) In case at any time the holders of at least ten percent
in aggregate principal amount of the Bonds outstanding shall have requested the
Trustee to call a meeting of the bondholders by written request setting forth
in reasonable detail the action proposed to be taken at the meeting and the
Trustee shall not have made the first giving of the notice of such meeting
within twenty (20) days after receipt of such request, then such bondholders
may determine the
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time and the place for such meeting and may all such meeting to take any action
authorized in Section 1201 by giving notice thereof as provided in subsection
(a) of this Section.
Section 1204. PERSONS ENTITLED TO VOTE AT BONDHOLDERS' MEETINGS. To
be entitled to vote at any meeting, of bondholders, a Person shall be a holder
of one or more Bonds outstanding, or a Person appointed by an instrument in
writing as proxy for a bondholder by such bondholder. The only Persons who
shall be entitled to be present or to speak at any meeting of bondholders shall
be the Persons to vote and such meeting and their Counsel, any representatives
of the Trustee and its Counsel and representatives of the Company, and its
Counsel any representatives of the Guarantor and its Counsel and any
representatives of the County and its Counsel.
Section 1205. DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT
OF MEETINGS. (a) Notwithstanding any other provisions hereof, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
bondholders in regard to proof of the holding of Bonds and of the appointment
of proxies and in regard to the attornment 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 Bonds shall, be proved in the manner specified
in Section 1501 and the appointment of any proxy, shall be proved in the manner
specified in Section 1501 or by having the signature of the person executing
the proxy witnessed or guaranteed by any bank, banker or trust company
authorized by Section 1501 to certify to the holding of Bonds. Such
regulations may provide that written instruments and appointing proxies,
regular on their face, may be presumed valid and genuine without the proof
specified in Section 1501 or other proof.
(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 County or by bondholders as provided in subsection (b) of Section 1203 in
which case the County or the bondholders calling the meeting, as the case may
be, shall in like manner appoint a temporary chairman. A permanent chairman
and a permanent secretary of the meeting shall be elected by vote of the
holders of a majority of the Bonds represented at the meeting and entitled to
vote.
(c) At any meeting each bondholder or proxy shall be entitled
to one vote for each $5,000 principal amount of outstanding Bonds held or
represented by the bondholder; provided, however, that no vote shall be cast or
counted at any meeting in respect of any Bonds 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 bondholder or proxy.
(d) At any meeting of bondholders, the presence of Persons
holding or representing Bonds in an aggregate principal amount sufficient under
the appropriate provision
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hereof to take action upon the business for the transaction of which such
meeting was called shall constitute a quorum. Any meeting of bondholders
called pursuant to Section 1203 may be adjourned from time to time by vote of
the holders (or proxies for the holders) of a majority of the Bonds represented
at the meeting and, entitled to vote, whether or not a quorum shall be present;
and the meeting may be held as so adjourned without further notice.
Section 1206. COUNTING VOTES AND RECORDING ACTION OF MEETINGS. The
vote upon any resolution submitted to any meeting of bondholders shall be by
written ballots on which shall be subscribed the signatures of the bondholders
or of their representatives by proxy and the number or numbers of the
outstanding Bonds 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 triplicate, of the proceedings
of each meeting of bondholders 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 published or mailed as
provided in Section 1203. 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 County, another to the Company and another to
the Trustee to be preserved by the Trustee, which copy shall have attached
thereto the ballots voted at the meeting. Any record so signed and verified
shall be conclusive evidence of the matters therein stated.
Section 1207. REVOCATION BY BONDHOLDERS. At any time prior to (but
not after) the evidencing to the Trustee, in the manner provided in Section
1206, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Bonds specified herein in connection with such action
any holder of a Bond the number of which is included in the Bonds the holders
of which have consented to such action may, by filing written notice with the
Trustee at its principal office and upon or of holding as provided in Section
1501, revoke such consent so far as concerns such Bond. Except as aforesaid
any such consent given by the holder of any Bond shall be conclusive and
binding upon such holder and upon all future holders and owners of such Bond
and of any Bond issued in exchange therefor or in lieu thereof, irrespective of
whether or not any notation in regard thereto is made upon such Bond. Any
action taken by the holders of the percentage in aggregate principal amount of
the Bonds specifically herein in connection with such action shall be
conclusively binding upon the County, the Company, the Trustee and the holders
of all the Bonds.
ARTICLE XIII.
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SUPPLEMENTAL INDENTURES
Section 1301. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF
BONDHOLDERS. The County and the Trustee may without the consent of, or notice
to, any of the bondholders, enter into an indenture or indentures supplemental
hereto as shall not be inconsistent with the terms and provisions hereof for
any one or more of the following purposes:
(a) to cure any ambiguity or formal defect or omission
herein;
(b) to grant to or confer upon the Trustee for the benefit of
the bondholders any additional rights, remedies, powers or authorities
that may lawfully be granted to or conferred upon the bondholders or
the Trustee or either of them;
(c) to subject to the lien and pledge hereof additional
purchase price payments, other payments and revenues, receipts,
properties or collateral;
(d) to modify, amend or supplement this Indenture or any
indenture supplemental hereto in such manner as to permit the
qualification hereof and thereof under the shortage and Indenture of
Trust Act of 1939, as amended, or any similar Federal statute
hereafter in effect or to permit the qualification of the Bonds for
sale under the securities laws of any of the states of the United
States of America, and, if they so determine to add hereto or to any
indenture Supplemental hereto such other terms, conditions and
provisions as may be permitted by said Mortgage and Indenture of Trust
Act of 1931.1 or similar Federal statute,
(e) to evidence the appointment of a separate Trustee or
Co-Trustee or the succession of a new Trustee or paying agent
hereunder: and
(f) in connection with any other changes herein which, in the
judgment of the Trustee, do not prejudice the interests of the Trustee
or the bondholders.
Section 1302. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF
BONDHOLDERS. Exclusive of supplemental indentures covered by Section 1301 and
subject to the terms and provisions contained in this Section, and not
otherwise, the holders of not less than two thirds (2/3) in principal amount of
the Bonds shall have the right, from time to time, anything contained herein to
the contrary notwithstanding, to consent to and approve the execution by the
County and the Trustee of such other indenture or indentures supplemental
hereto as shall be deemed necessary and desirable by the County for the purpose
of modifying, altering, amending, adding to or rescinding, in any particular,
any of the terms or provisions contained herein or in any supplemental
indenture; provided, however, that nothing in this Section contained shall
permit, or be construed as permitting, (a) an extension of the maturity date
(or mandatory
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sinking fund redemption date) on which the principal of or the interest on any
Bond is, or is to become, due and payable, (b) a reduction in the principal
amount of any Bond, the rate of interest thereon or any redemption premium, (c)
a privilege or priority of any Bond or Bonds over any other Bond or Bonds, or
(d) a reduction in the principal amount of the Bonds required for consent to
such supplemental indenture.
If the County shall request the Trustee to enter into any such
Supplemental indenture for any of the purposes of this Section, the Trustee
shall, upon being satisfactorily indemnified with respect to expenses, cause
notice of the proposed execution of such supplemental Indenture to be published
as shall be requested by the County and in any event one (1) time in a
newspaper or financial journal of general circulation among dealers in
municipal securities in The City of New York, New York. Such notice shall
briefly set forth the nature of the proposed supplemental indenture and shall
state that copies thereof are on file at the principal office of the Trustee
for inspection by all bondholders. If within sixty (60) days or such longer
period as shall be prescribed by the County following the final publication of
such notice, the holders of not less than two-thirds (2/3) in principal amount
of the Bonds shall have consented to and approved the execution of such
supplemental indenture as herein provided, no holder of any Bond shall have any
right to object to any of the terms and provisions contained therein, or the
operation thereof, or in any manner to question the propriety of the execution
thereof, or to enjoin or restrain the Trustee or the County from executing the
same or from taking any action pursuant to the provisions thereof. Upon the
execution of any such supplemental indenture as in this Section permitted and
provided, this Indenture shall be modified and amended in accordance therewith.
Anything herein to the contrary notwithstanding, a supplemental
indenture under this Article XIII which affects any right of the Company under
the Agreement shall not become effective unless and until the Company shall
have consented to the execution and delivery of such supplemental indenture.
In this regard, the Trustee shall cause notice of the proposed execution and
delivery of any such supplemental indenture together with a copy of the
proposed supplemental indenture to be mailed by certified or registered mail to
the Company at least fifteen (15) days prior to the proposed date of execution
and delivery of any such supplemental indenture. The Company shall be deemed
to have consented to the execution and delivery of any such supplemental
indenture the Trustee does not receive a letter of protest or objection thereto
signed by or on behalf of the Company on or before 4:30 o'clock P.M., E.S.T. or
E.D.T., as the case may be, of the fifteenth (15th) day after the mailing of
said notice and a copy of the proposed supplemental indenture.
ARTICLE XIV.
AMENDMENT OF AGREEMENT
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Section 1401. AMENDMENTS, ETC., TO AGREEMENT NOT REQUIRING CONSENT OF
BONDHOLDERS. The Trustee shall without the consent of, or notice to, the
bondholders consent to any amendment, change or modification of the Agreement
as may be required
(a) by the provisions of the Agreement or herein,
(b) for the purpose of curing any ambiguity or formal defect
or omission in the Agreement,
(c) in connection with the Project Equipment so as to
identify more precisely the same or substitute additional machinery,
equipment and related personal property acquired with the proceeds of
the Bonds in accordance with the provisions of Sections 4.1(b) and S.2
of the Agreement.
(d) in connection with additional real Property which
pursuant to the Agreement is to become part of the Project Land.
(e) in connection with any other change therein which, in the
judgment of the Trustee, does not prejudice the interests of the
Trustee or the bondholders.
Section 1402. AMENDMENTS, ETC., TO AGREEMENT REQUIRING CONSENT OF
BONDHOLDERS. Except for the amendments, changes or modifications as provided
in Section 1401, neither the County nor the Trustee shall consent to any other
amendment, change or modification of the Agreement without publication of
notice and the written approval or consent of the holders of not less than
two-thirds (2/3) in principal amount of the Bonds given and Procured as in
Section 1302 provided. If at any time the County and the Company shall request
the consent of the Trustee to any such proposed amendment, change or
modification of the Agreement, the Trustee shall, upon being satisfactorily
indemnified with respect to expenses cause notice of such proposed amendment,
change or modification to be published, in the same manner as provided by
Section 1302 with respect to proposed supplemental indentures. Such notice
shall briefly set forth the nature of such proposed amendment change or
modification and shall state that copies of the instrument embodying the same
are on file at the principal office of the Trustee or bondholders.
ARTICLE XV.
MISCELLANEOUS
Section 1501. CONSENTS, ETC. OF BONDHOLDERS.
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<PAGE> 69
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided to be given or taken by bondholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed, by such bondholders 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 County and the
Company. Proof of execution of any such instrument or of a writing appointing
any such agent, or of the holding by any Person of any Bond not registered as
to principal, shall be sufficient or any purpose hereof and conclusive in favor
of the Trustee, the Company and the County, 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 witness of such
execution by the certificate of any 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 an officer of a corporation or a member of a Partnership,
on behalf of such corporation or partnership, such certificate or affidavit
shall also constitute sufficient proof of his authority.
(c) The amount of any Bond not registered as to principal
held by any Person executing any such instrument or writing as a bondholder,
and the numbers of such unregistered Bonds and the date of his holding the same
may be proved by the production of such Bonds or by a certificate executed, as
depositary, by any trust company, bank or banker (wherever situated), if such
certificate is in form satisfactory to the Trustee showing that at the date
therein mentioned such Person had on deposit with such depositary, or exhibited
to it, the Bond or Bonds therein described: or such facts may be proved by the
certificate or affidavit of the Person executing such instrument or writing as
a bondholder, if such certificate or affidavit is in form satisfactory to the
Trustee.
The Trustee may assume that such ownership of and,
unregistered Bond continues until (1) another certificate bearing a later date
issued in respect of the same unregistered Bond is produced, or (2) such
unregistered Bond is produced by some other Person, or (3) such unregistered
Bond is registered as to principal or as to both principal and interest, or (4)
such unregistered Bond is no longer outstanding hereunder.
(d) The fact and date of execution of any such instrument or
writing and the amount and numbers of unregistered Bonds held by the Person so
executing such instrument or writing may also be proved in any other manner
which the Trustee deems sufficient; and the Trustee may in any instance require
further proof with respect to any of the matters referred to in this Section.
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<PAGE> 70
(e) The ownership of Bonds registered as to principal or as
to both principal and interest shall be proved by the registration books kept
by the Trustee as Bond Registrar.
(f) Any request, demand, authorization, direction, notice,
consent, waiver or other action by any Bondholder shall bind every future
holder of the same Bond, in respect of anything done or suffered to be done by
the Trustee or the County in reliance thereon, whether or not notation of such
action is made upon such Bond.
Section 1502. LIMITATION OF RIGHTS. With the exception of rights
herein expressly conferred, nothing expressed or mentioned in or to be implied
herefrom or from the Bonds is intended or shall be construed to give to any
Person other than the parties hereto, the Company and the holders of the Bonds
and coupons (if any), any legal or equitable right, remedy or claim under or in
respect hereto or any agreements, conditions and provisions herein contained,
this Indenture and all of the agreements, conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of the
parties hereto, the Company and the holders of the Bonds and coupons (if, any)
as herein provided.
Section 1503. SEVERABILITY. If any provision hereof shall be held or
deemed to be or shall, in fact, be inoperative or unenforceable as applied in
any particular case in any jurisdiction or jurisdictions or in all
jurisdictions, or in all cases because it conflicts with any other provision or
provisions hereof or any Constitution or statute or rule of public policy, or
for any other reason, such circumstances shall not have the effect of rendering
the provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatever.
Section 1504. NOTICES. It shall be sufficient service of any
notice, request, complaint, demand or other paper if the same shall be mailed
by or certified registered mail, return receipt requested, postage prepaid,
addressed as follows:
(g) If to the County Board of County
Commissioners of Taylor
County, Florida
Taylor Courthouse
Perry, Florida 32347
Attention: Chairman
(h) If to the Company CPG Products Corp.
c/o General Mills, Inc.
P. O. Box 1113
Minneapolis, Minnesota 55440
Attention: General Counsel
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(i) If to the Trustee The First National
Bank of Columbus
P. O. Box 40
Columbus, Georgia 31902
Attention: Corporate Trust
Department
(j) If to the Guarantor General Mills, Inc.
P.O. Box 1113
Minneapolis, Minnesota 55440
Attention: General Counsel
A duplicate copy of each notice, certificate or other communication given
hereunder by either the County, the Company, the Trustee or the Guarantor to
any one of the others shall also be given to all of the others. The County,
the Company, the Trustee and the Guarantor may, by notice given hereunder,
designate any further or different addresses to which subsequent notices,
certificates or other communications shall be sent
Section 1505. TRUSTEE AS PAYING AGENT AND BOND REGISTRAR. The
Trustee is hereby designated and agrees to act as paving agent and Bond
Registrar for and in respect to the Bonds.
Section 1506. PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS. In
any case where the date of maturity of principal of and/or interest on the
Bonds or the date fixed for redemption of any Bonds shall be, in the city of
payment, a Saturday, a Sunday, a legal holiday or a day on which banking
institutions are authorized by law to close, then payment of principal and/or
interest need not be made on such date in such city but may be made on the next
succeeding business day not a Saturday, a Sunday, a legal holiday or a day on
which banking, institutions are authorized by law to close with the same force
and effect as if made on the date of maturity or the date fixed for redemption,
and no interest shall accrue for the period after such date.
Section 1507. COUNTERPARTS. This Indenture may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section 1508. LAWS GOVERNING INDENTURE. The effect and meaning
hereof and the rights of all parties hereunder shall be governed by, and
construed according to the laws of the State.
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<PAGE> 72
IN WITNESS WHEREOF, the County has caused this Indenture to be
executed in its name and its corporate seal to be hereunto affixed and attested
by its duly authorized officers, and to evidence its acceptance of the trusts
hereby created the Trustee has caused these presents to be executed in its
corporate name and behalf and its corporate seal to be hereunto affixed and
attested by its duly authorized officers, all as of the date first above
written.
TAYLOR COUNTY, FLORIDA
Attest:
By:_____________________________________
Chairman, Board of County
__________________________________ Commissioners of Taylor
Clerk, Circuit Court in and County, Florida
for Taylor County, Florida
(CORPORATE SEAL)
As to the County, signed and
sealed in the presence of:
___________________________________________
Witness
___________________________________________
Notary Public
My commission expires:
(NOTARIAL SEAL)
(Execution by the Trustee follows on page 59.)
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<PAGE> 73
FIRST NATIONAL BANK
OF COLUMBUS, as Trustee
Attest:
By:_____________________________________
Title
__________________________________
Title:
(CORPORATE SEAL)
As to the County, signed and
sealed in the presence of:
___________________________________________
Witness
___________________________________________
Notary Public
My commission expires:
(NOTARIAL SEAL)
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<PAGE> 74
EXHIBIT "A"
to
Mortgage and Indenture of Trust
between
Taylor County, Florida and
The First National Bank of Columbus
dated as of September 1, 1979
PROJECT LAND
Parcel 1:
A tract of land on the north side of Dreamland Subdivision and south of a
Southern Railroad sdur track described as follows: Begin at the southwest
corner of the southwest one quarter of the southwest one quarter of Section 25,
Township 4 South, Range 7 East, Perry, Taylor County, Florida, and run North 01
degrees 03 minutes West 503.70 feet to The south side of Southern Railroad, 50
feet from the center line thereof; thence along said south right-of-way line
North 67 degrees 59 minutes East 159.80 feet to the P.C. of a curve to the
right having a radius of 663.14 feet, arc distance 115.33 feet, chord bearing
South 60 degrees 22 minutes 40 seconds East, chord distance 1039.96 feet to the
north side of Lot 1, Block H, Dreamland Subdivision as recorded in Plat Book 1,
page 51 of the Public records of Taylor County, Florida, thence along north
line of Dreamland Subdivision South 87 degrees 17 minutes West 1044.13 feet to
the point of beginning and being part of the southwest one quarter of the
southwest one quarter of Section 25, Township 4 South, Range 7 East.
Containing 11.72 acres.
Parcel 2:
A survey of that part of the southwest one quarter of the northwest one quarter
of Section 25, Township 4 South, Range 7 Fast, being described as follows:
Commence at the southwest corner of the southwest one quarter of the northwest
one quarter of Section 25, Township 4 South, Range 7 Fast, Perry, Taylor
County, Florida and run North 01 degrees 03 minutes West 503.70 feet to the
south side of Southern Railroad 50 feet from the center line thereof; thence
along said south right-of-way line North 67 degrees 59 minutes East, 159.80
feet to the P.C. of a curve and the point of beginning; thence from said P.C.
of a curve to the right having a radius of 663.14 feet, arc distance 1,195.33
feet, chord bearing 60 degrees 22 minutes 40 seconds East chord distance
1,039.96 feet to the north side of Lot 1, Block H, Dreamland Subdivision as
recorded in Plat Book 1, Page 51 of the public records of Taylor County,
Florida. Thence North 87 degrees 17 minutes East along the north line of said
subdivision 99.60 feet; thence North 0 degrees 07 minutes 56 seconds West
895.60 feet to the South right-of-way line of Duval Street; thence South 87
degrees 03 minutes 30 seconds West along said right-of-way 103.03 feet to the
P.C. of a curve to the left having a radius of 1,402.40 feet, arc distance
166.40, chord
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bearing South 83 degrees 40 minutes West, chord distance 166.40 feet to the
intersection of a curve to the right on the southerly right-of-way line of
Southern Railroad having a radius of 1,137.99 feet, arc distance 373.25 feet,
chord bearing South 58 degrees 23 minutes 30 seconds West, chord distance
371.58 feet to the P.C. of said curve; thence run South 68 degrees 03 minutes
22 seconds West along said southerly right-of-way of railroad 449.27 feet to
the point of beginning. Containing 7.27 acres.
(Subject to Permitted Encumbrances.)
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EXHIBIT "B"
to
Mortgage and Indenture of Trust
between
Taylor County, Florida
and
The First National Bank of Columbus
dated as of September 1, 1979.
PROJECT EQUIPMENT
1 3200 lb./hour continuous potato chip operation including subordinate
equipment.
1 2000 lb./hour corn chip/tortilla chip operation including subordinate
equipment.
I "Bugel" cooker and operating equipment.
I pork rind operation.
2 continuous popcorn cookers with packaging machines and subordinate
equipment.
3 extruders.
1 continuous roasting oven for collette products.
1 bulk handling system.
1 potato unloader.
flow racks.
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<PAGE> 77
ACKNOWLEDGEMENT OF COUNTY
STATE OF FLORIDA
COUNTY OF TAYLOR
I, the undersigned, a Notary Public in and for said State and
County, Do HEREBY CERTIFY that ___________ ______________________ and
___________________________________ whose names as Chairman of the Board of
County Commissioners of Taylor County, Florida, and Clerk of the Circuit Court
in and for Taylor County, Florida, are signed to the foregoing Indenture, and
who are known to me and known to be such officers, acknowledged before me under
oath, that, being informed of the contents of said Indenture, they, in their
capacities as such officers and with full authority, executed the same
voluntarily for and as the act of said County.
Given under my hand and seal of office.
________________________________________
Notary Public
(SEAL)
My commission expires:
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ACKNOWLEDGMENT OF TRUSTEE
STATE OF GEORGIA
COUNTY OF MUSKOGEE
I, the undersigned and for said State and County DO HEREBY CERTIFY
that _________________________________ , whose name as
____________________________ of THE FIRST NATIONAL BANK OF COLUMBUS, is signed
to the foregoing Indenture, and who is known to me and known to be such
officer, acknowledge before me under oath, that, being informed of the contents
of said Indenture, he, as such officer and with full authority, executed the
same voluntarily for and as the act of THE FIRST NATIONAL BANK OF COLUMBUS,
acting in its capacity as Trustee.
Given under my hand and seal of office.
________________________________________
Notary Public
(SEAL)
My commission expires:
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<PAGE> 79
Insofar as the foregoing obligation was incurred for work, material, supplies
or equipment in connection with the construction of the Project, the
undersigned Project Supervisor does hereby certify that such work was actually
performed in a satisfactory manner and that such materials, supplies or
equipment were actually used in or about the construction or delivered at the
site of the Project for that purpose.
Dated:_____________________________ ____________________________________
Project Supervisor
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<PAGE> 80
AGREEMENT OF SALE
between
TAYLOR COUNTY, FLORIDA
and
CPG PRODUCTS CORP.
Dated as of September 1, 1979
This Agreement of Sale and all right, title and interest of Taylor County,
Florida in any purchase price payments, other payments and revenues derived
under this Agreement of Sale have been assigned to The First National Bank of
Columbus, Columbus, Georgia, as Trustee under the Trust Indenture, dated as of
even date herewith, from Taylor County, Florida which secures $5,800,000 in
principal amount of Taylor County, Florida Industrial Development Revenue Bonds
(CPG Products Corp. Project), Series 1979.
This instrument was prepared by:
King & Spalding
2500 Trust Company Tower
Atlanta, Georgia 30303
<PAGE> 81
AGREEMENT OF SALE
TABLE OF CONTENTS
(The Table of Contents for this Agreement of Sale is for convenience of
reference only and is not intended to define, limit or describe the scope or
intent of any provisions of this Agreement of Sale.)
Page
----
PARTIES 1
ARTICLE I. DEFINITIONS AND CERTAIN RULES OF
INTERPRETATION
Section 1.1. Definitions. 1
Section 1.2. Certain Rules of Interpretation. 6
ARTICLE II. REPRESENTATIONS
Section 2.1. Representations by the County. 7
Section 2.2. Representations by the Company. 8
ARTICLE III. SALE OF THE PROJECT
Section 3.1. Sale of the Project. 10
Section 3.2. Warranty of Title. 10
ARTICLE IV. COMMENCEMENT AND COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS
Section 4.1. Agreement to Acquire and Construct the
Project. 11
Section 4.2. Agreement to Issue Bonds; Application of
Bond Proceeds. 12
Section 4.3. Disbursements from the Construction
Fund. 12
Section 4.4. Obligation of the Parties to Cooperate
in Furnishing Documents to Trustee. 17
Section 4.5. Establishment of Completion Date. 17
Section 4.6. Company Required to Pay Project Costs if
Construction Fund Insufficient. 18
Section 4.7. Project Supervisor. 18
Section 4.8. County to Pursue Remedies Against
Suppliers, Contractors and
Subcontractors and Their Sureties. 18
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<PAGE> 82
Page
----
Section 4.9. Investment of Construction Fund Moneys
Permitted. 19
ARTICLE V. TERM OF THIS AGREEMENT; USE OF THE PROJECT;
PROVISIONS FOR PAYMENT
Section 5.1. Term of This Agreement; Use of the Project.
Section 5.2. Basic Payments Required of Company. 20
Section 5.3. Place of Payments. 21
Section 5.4. Obligations of Company Hereunder
Absolute and Unconditional. 21
Section 5.5. Company's Performance Under Indenture. 22
ARTICLE VI. MAINTENANCE, MODIFICATIONS, TAXES AND INSURANCE
Section 6.1. Maintenance and Modification of
Project by Company. 22
Section 6.2. Removal of Project Equipment. 23
Section 6.3. Taxes, Other Governmental Charges and
Utility Charges. 25
Section 6.4. Insurance Required. 26
Section 6.5. Application of Net Proceeds of
Insurance. 27
Section 6.6. Additional Provisions Respecting
Insurance. 27
Section 6.7. Other County Expenses. 28
Section 6.8. Advances by County or Trustee. 28
Section 6.9. Indemnification of County and Trustee. 28
Section 6.10. Investment Credit. 29
ARTICLE VII. DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1. Damage and Destruction. 29
Section 7.2. Condemnation. 31
Section 7.3. Condemnation of Company-Owned Property. 33
ARTICLE VIII. SPECIAL AGREEMENTS
Section 8.1. No Warranty of Condition or Suitability
by the County. 33
Section 8.2. Inspection of the Project. 33
Section 8.3. Company to Maintain Its Corporate
Existence; Exceptions Permitted. 33
Section 8.4. Qualification in the State. 34
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<PAGE> 83
Page
----
Section 8.5. Annual Audit. 34
Section 8.6. Granting of 34
Section 8.7. Representations and Agreements
of Company and County with
to Capital 35
Section 8.8. Determination and Event of Taxability. 36
Section 8.9. Grant of Security Interest in Project
Equipment. 39
ARTICLE IX. ASSIGNMENT, MORTGAGING AND SELLING; REDEMPTION
Section 9.1. Assignment. 39
Section 9.2. Mortgaging of Project by County to the
Trustee. 40
Section 9.3. Restrictions on Sale of Project by
County. 40
Section 9.4. Redemption of Bonds. 40
Section 9.5. Prepayment of Purchase Price. 41
Section 9.6. Reference to Bonds Ineffective After
Bonds Paid. 41
Section 9.7. County's Election to Issue Bonds
Pursuant to Section 103(b)(6)(D) of the
Code. 41
ARTICLE X. EVENTS OF DEFAULT AND REMEDIES
Section 10.1. Events of Default Defined. 41
Section 10.2. Remedies. 43
Section 10.3. No Remedy Exclusive. 45
Section 10.4. Agreement to Pay Attorneys' Fees and
Expenses. 45
Section 10.5. No Additional Waiver Implied by One
Waiver. 45
Section 10.6. Waiver of Appraisement, Valuation, etc. 45
ARTICLE XI. OPTIONS TO PREPAY THE PURCHASE PRICE
Section 11.1. Option to Prepay Under Certain
Conditions. 45
Section 11.2. Additional Option to Prepay. 47
Section 11.3. Option to Accelerate Purchase of
Unimproved Land. 48
Section 11.4. Relative Position of Options and
Indenture. 49
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<PAGE> 84
Page
----
ARTICLE XII. OBLIGATION OF COMPANY
Section 12.1. Obligation of Company to Prepay the
Purchase Price Under Certain
Circumstances. 49
ARTICLE XIII. MISCELLANEOUS
Section 13.1. Notices. 50
Section 13.2. Binding Effect. 51
Section 13.3. Severability. 51
Section 13.4. Amounts Remaining in Bond Fund. 51
Section 13.5. Amendments, Changes and Modifications. 51
Section 13.6. Execution Counterparts. 51
Section 13.7. Captions. 51
Section 13.8 Recording of Agreement
Section 13.9. Law Governing Construction of
Agreement. 51
Section 13.10. Net Obligation. 51
SIGNATURES AND SEALS 52
ACKNOWLEDGMENTS 54
EXHIBIT "A" DESCRIPTION OF PROJECT LAND A-1
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<PAGE> 85
AGREEMENT OF SALE
THIS AGREEMENT OF SALE is entered into as of September 1, 1979 by and
between TAYLOR COUNTY, FLORIDA (the "County"), a political subdivision of the
State of Florida, as Seller, and CPG PRODUCTS CORP. (the "Company"), a Delaware
corporation qualified to do business in the State of Florida, as Purchaser.
WITNESSETH:
----------
In consideration of the respective representations and agreements
hereinafter contained, the County and the Company agree as follows (provided,
that in the performance of the agreements of the County herein contained, any
obligation it may thereby incur for the payment of money shall not be a general
debt on its part but shall be payable solely out of the purchase price
payments, other payments and revenues derived from this Agreement, the sale of
the "Bonds" referred to in Section 2.1 hereof, certain insurance and
condemnation awards as herein described and any other revenues arising out of
or in connection with its ownership of the "Project" as hereinafter defined):
ARTICLE I.
DEFINITIONS AND CERTAIN RULES OF INTERPRETATION
-----------------------------------------------
Section 1.1. DEFINITIONS. In addition to the words and terms elsewhere
defined herein, the following words and terms as used herein shall have the
following meanings unless the context or use clearly indicates another or
different meaning or intent, and any other words and terms defined in the
Indenture shall have the same meanings when used herein as assigned them in the
Indenture unless the context or use clearly indicates another or different
meaning or intent:
"ACT" means the Florida Industrial Development Financing Act, being
Chapter 159, Part II, Florida Statutes (Sections 159.25 - 159.43, inclusive,
Florida Statutes Annotated, as supplemented and as amended);
"AGREEMENT" means this Agreement of Sale as it now exists and as it may
hereafter be amended pursuant to Article XIV of the Indenture;
"AUTHORIZED COMPANY REPRESENTATIVE" means the Person at the time
designated to act on behalf of the Company by written
<PAGE> 86
certificate furnished to the County and the Trustee containing the specimen
signature of such Person and signed on behalf of the Company by the chairman of
the board, president or any vice president of the Company. Such certificate
may designate an alternate or alternates;
"AUTHORIZED COUNTY REPRESENTATIVE" means the Person at the time designated
to act on behalf of the County by written certificate furnished to the Company
and the Trustee containing the specimen signature of such Person and signed on
behalf of the Board by its Chairman. Such certificate may designate an
alternate or alternates. Such Person must be satisfactory to the Company and
shall be replaced by the County upon the written request of the Company;
"BOARD" means the Board of County Commissioners of Taylor County, Florida;
"'BOND FUND" means the Bond principal and interest payment fund created
pursuant to Section 502 of the Indenture and within which have been established
a general account and a special account. Any reference herein to the "Bond
Fund" without further limitation or explanation shall be deemed to be a
reference to the general account in the Bond Fund;
"BONDHOLDER" or "HOLDER OF THE BONDS" means the bearer of any Bond not
registered as to principal and the registered owner of any Bond registered as
to principal;
"BONDS" means the Industrial Development Revenue Bonds of the County
referred to in Section 2.1 and to be issued pursuant to the Indenture;
"BUILDING" means those certain buildings and all other facilities and
improvements forming a part of the Project and not constituting part of the
Project Equipment which are required by Section 4.1(a) to be constructed on the
Project Land, as they may at any time exist;
"CODE" means the Internal Revenue Code of 1954, as amended, and the
applicable regulations thereunder;
"COMPANY" means the corporation designated as such in the first paragraph
hereof and its successors and assigns including any surviving, resulting or
transferee corporation as provided in Section 8.3;
"COMPLETION DATE" means the date of completion of the construction of the
Building and the installation of the Project
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<PAGE> 87
Equipment as that date shall be certified as provided in Section 4.5;
"CONSTRUCTION FUND" means the construction fund created pursuant to
Section 602 of the Indenture and referred to in Article IV;
"CONSTRUCTION PERIOD" means the period between the beginning of
construction of the Project or the date of issuance and delivery of the Bonds
(whichever is earlier) and the Completion Date;
"COUNTY" means Taylor County, Florida, a political subdivision of the
State;
"DEFAULT" means an event or condition the occurrence of which would, with
the lapse of time or the giving of notice or both, become an event of default;
"EVENT OF DEFAULT" means one of the events so denominated and described in
Section 10.1;
"EXTRAORDINARY SERVICES" and "EXTRAORDINARY EXPENSES" means all services
rendered and all expenses incurred by the Trustee under the Indenture other
than Ordinary Services and Ordinary Expenses;
"FINANCING STATEMENTS" means any and all financing statements (including
continuation statements) filed for record from time to time to perfect the
security interests created or assigned;
"GUARANTOR" means General Mills, Inc., a Delaware corporation;
"GUARANTY" means the Guaranty Agreement, of even date herewith, from the
Guarantor to the Trustee;
"INDENTURE" means the Mortgage and Indenture of Trust between the County
and the Trustee, of even date herewith, pursuant to which the Bonds are
authorized to be issued, the Project is mortgaged to the Trustee and the
County's right, title and interest herein and the purchase price payments,
other payments and revenues arising out of or in connection with the County's
ownership of the Project are pledged and assigned, along with the security
interest created herein in the Project Equipment, as security for the payment
of the principal of and the interest on the Bonds, including any indenture
supplemental thereto;
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<PAGE> 88
"INDEPENDENT AUDITOR" means a certified public accountant, or firm
thereof, who or which is "independent" as that term is defined in Rule 101 and
related interpretations of the Code of Professional Ethics of the America
Institute of Certified Public Accountants, of recognized standing, who or which
does not devote his or its full time to the County, the Company or the
Guarantor (but who or which may be regularly retained by any of them);
"INDEPENDENT COUNSEL" means an attorney, or firm thereof, duly admitted to
practice law before the highest court of the State and not an employee on a
full-time basis of the County, the Company or the Guarantor (but who or which
may be regularly retained by any of them);
"INDEPENDENT ENGINEER" means an engineer or engineering firm registered
and qualified to practice the profession of engineering under the laws of the
State, or any other state with similar requirements and may include employees
of the County, the Company or the Guarantor provided that they are registered
and qualified as above provided;
"NET PROCEEDS," when used with respect to any insurance or condemnation
award, means the gross proceeds from the insurance or condemnation award with
respect to which that term is used remaining after payment of all expenses
(including reasonable attorneys' fees and any Extraordinary Expenses of the
Trustee as defined in the Indenture) incurred in the collection of such gross
proceeds;
"ORDINARY SERVICES" and "ORDINARY EXPENSES" means those services normally
rendered and those expenses normally incurred by a trustee under instruments
similar to the Indenture;
"PAYMENT IN FULL OF THE BONDS" specifically encompasses the situations
referred to in Section 9.6;
"PERMITTED ENCUMBRANCES" means, as of any particular time,
(a) liens for ad valorem taxes and special assessments not then
delinquent or permitted to exist as provided in Section 6.3;
(b) this Agreement, the Indenture and the security interests
created herein and in the Indenture;
(c) such utility, access or other easements and
rights-of-way, restrictions, reservations, reversions and exceptions as
do not, in the opinion of an Independent Engineer and the Company,
materially interfere with or impair the operations
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being conducted in the Building (or, if no operations are being
conducted therein, the operations for which the Building was designed or
last modified) or elsewhere on the Project Land;
(d) unfiled and inchoate mechanics' and materialmen's liens for
construction work in progress;
(e) architects', contractors', subcontractors', mechanics',
materialmen's, suppliers', laborers', vendors', workmen's, repairmen's,
carriers', land surveyors' and engineers' liens or other similar liens
not then payable, and those permitted to exist as provided in Section
6.1; and
(f) such minor defects, irregularities, encumbrances, easements,
rights-of-way and clouds on title as normally exist with respect to
properties similar in character to the Project and as do not, in the
opinion of Bond Counsel, Independent Counsel or counsel rendering the
title opinion, materially interfere with or impair the operations being
conducted in the Building (or, if no operations are being conducted
therein, the operations for which the Building was designed or last
modified) or elsewhere on the Project Land;
"PERSON" means natural persons, firms, associations, corporations and
public bodies;
"PRINCIPAL," whenever used with reference to the Bonds or any portion
thereof, shall be deemed to include "and the redemption premium, if any";
"PROJECT" means the Project Land, the Building and the Project
Equipment, as they may at any time exist;
"PROJECT EQUIPMENT" means those items of machinery, equipment and
related property required herein to be acquired and installed in the Building
or on the Project land with proceeds from the sale of the Bonds or the proceeds
of any payment by the Company pursuant to Section 4.6 and any item of machinery,
equipment and related property acquired and installed in the Building or on the
Project Land in substitution therefor and renewals and replacements thereof
pursuant to the provisions of Sections 4.1(b), 6.2(a), 7.1 and 7.2, less such
machinery, equipment and related property as may be released pursuant to Section
6.2(b) or taken by the exercise of the power of eminent domain as provided in
Section 7.2, and is further defined as all property owned by the County and to
be sold to the Company pursuant to this Agreement which is not included in the
definition of Project Land or Building, but not including the Company's own
machinery, equipment and related property installed under the provisions of
Section 6.1(b). The Project Equipment
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insofar as it will be initially installed as a part of the Project is
more fully described in Exhibit "B" to the Indenture;
"PROJECT LAND" means the real property described in Exhibit "A" attached
hereto and in Exhibit "A" to the Indenture and by this reference made a part
hereof, less such real property as may be released pursuant to Sections 8.6 and
11.3 or taken by the exercise of the power of eminent domain as provided in
Section 7.2;
"PROJECT SUPERVISOR" means the project supervisor or alternate supervisor
who at the time shall have been designated as such in or pursuant to the
provisions of Section 4.7;
"SECURITY INTEREST" or "SECURITY INTERESTS" shall refer to the security
interest created herein and in the Indenture and shall have the meaning set
forth in the U.C.C.;
"STATE" shall mean the State of Florida;
"TRUSTEE" means The First National Bank of Columbus, Columbus, Georgia, or
any co-trustee or any successor trustee appointed, qualified and then acting
under the provisions of the Indenture;
"U.C.C." means the Uniform Commercial Code of the State, as now or
hereafter amended.
Section 1.2. CERTAIN RULES OF INTERPRETATION. The definitions set forth
in Section 1.1 shall be equally applicable to both the singular and the plural
forms of the terms therein defined and shall cover all genders.
"Herein," "hereby," "hereunder," "hereof," "hereinbefore," "hereinafter"
and other equivalent words refer to this Agreement and not solely to the
particular Article, Section or subdivision hereof in which such word is used.
Reference herein to an Article number (e.g., Article IV) or a Section
number (e.g., Section 6.8) shall be construed to be a reference to the
designated Article number or Section number hereof unless the context or use
clearly indicates another or different
meaning or intent.
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ARTICLE II.
REPRESENTATIONS
---------------
Section 2.1. REPRESENTATIONS BY THE COUNTY. The County makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The County is a political subdivision of the State duly created
and existing under the Constitution and laws of the State. Under the
provisions of the Act, the County has the power to enter into the
transactions contemplated by this Agreement and to carry out its
obligations hereunder. The Project constitutes and will constitute a
"project" within the meaning of the Act. Neither the execution and
delivery of this Agreement, the consummation of the transactions
contemplated hereby, nor the fulfillment of a compliance with the terms
and conditions hereof, conflicts with, or results in a breach of, any of
the terms, conditions or provisions of any applicable statute, rule or
regulation, restriction or limitation or any agreement, instrument or
court or other Governmental order to which the County is now a party or
by which it is bound, or constitutes a default under any of the
foregoing. By proper corporate action, the County has been duly
authorized to execute and delivery this Agreement.
(b) The County has determined that the issuance of the Bonds, the
acquisition, construction and installation of the Project and the sale of
the Project to the Company is a lawful and valid public purpose in that
it will promote the industrial economy of the State, increase
opportunities for gainful employment and purchasing power, improve living
conditions, and otherwise contribute to the prosperity and welfare of the
State and its inhabitants.
(c) Notwithstanding anything herein contained to the contrary, any
obligation the County may hereby incur for the payment of money shall not
be a general debt on its part but shall be payable solely from proceeds
derived from this Agreement, the sale of the Bonds, the condemnation
awards as herein described and any other revenues derived from its
ownership of the Project.
(d) The County has been induced to enter into this undertaking by
the promise of the Company to locate a new industrial facility in the
County, which will increase employment opportunities in the County by
approximately 100 - 150 jobs.
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(e) To accomplish the foregoing, the County proposes to issue
$5,800,000 in aggregate principal amount of its Bonds simultaneously with
the execution and delivery hereof. The date, denomination, interest
rate, maturity schedule, redemption provisions and other pertinent
provisions with respect to the Bonds are set forth in the Indenture
(particularly Articles II and III thereof) and by this reference thereto
they are incorporated herein.
(f) By resolution duly adopted July 17, 1979, the Board took
official action providing for the acquisition, construction, installation
and selling of the Project and the financing of the Project through the
issuance of the Bonds.
(g) The Bonds are being issued under and secured by the Indenture,
pursuant to which the County's right, title and interest herein
(including, without limitation, the security interest in the Project
Equipment specifically granted to the County herein) and the purchase
price payments, other payments and revenues arising out of or in
connection with the County's ownership of the Project will be pledged,
the Project will be mortgaged to the Trustee and a security interest in
the aforesaid will be created as security for the payment of the
principal of and the interest on the Bonds.
Section 2.2. REPRESENTATIONS BY THE COMPANY. The Company makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Company is a corporation duly incorporated under the laws
of the State of Delaware, is qualified to do business in the State, is in
good standing under the laws of Delaware and the State, has the power to
enter into this Agreement and perform all obligations contained herein,
and has, by proper corporate action, been duly authorized to execute,
deliver and perform this Agreement.
(b) The issuance of the Bonds and the acquisition, construction and
installation of the Project and the sale of the Project by the County to
the Company has induced the Company to locate a new industrial facility
in the County, which will directly result in an increase in employment
opportunities in the County by approximately 100-150 jobs.
(c) The Company intends to operate the Project from the Completion
Date to the expiration or sooner termination of this Agreement for an
activity authorized by the Act.
(d) The Company is not subject to any charter, by-law or
contractual limitation or provision of any nature whatsoever
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which in any way limits, restricts or prevents the Company from
entering into this Agreement or from performing any of its obligations
hereunder, except to the extent that such performance may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors'
rights generally, and agrees that, anything herein to the contrary
notwithstanding, so long as any of the Bonds are outstanding there shall
be no abatement of the amounts payable by the Company as provided in
Section 5.2.
(e) The Company represents and covenants that substantially all of
the proceeds of the sale of the Bonds will be used to finance the
acquisition, construction and installation of the Project. No part of
said proceeds is to be used by the Company, directly or indirectly, as
working capital or to finance inventory. The construction of the Project
was not commenced prior to the adoption by the Board of the resolution
referred to in Section 2.1.
(f) Based on current facts, estimates and circumstances, it is
expected that:
(1) the acquisition, construction and installation of the
Project and the expenditure of all Bond proceeds will be completed
by January 1, 1981;
(2) work on the Project (which has commenced) will proceed
with due diligence to completion;
(3) the net proceeds from the sale of the Bonds are needed
for the purpose of paying all or a part of the cost of the
acquisition, construction and installation of the Project; and
(4) its interest in the Project will not be sold or disposed
of, in whole or in part, prior to payment in full of the Bonds.
(g) The information furnished by the Company and used by the County
in preparing the election which it will file with the Internal Revenue
Service pursuant to Section 103(b)(6)(D) of the Code will be true and
complete as of the date of filing of said election.
(h) Various contracts providing for the acquisition,
construction and installation of the Project have been entered into, and
the amounts required to be paid under said contracts exceed 2 1/2% of the
estimated total cost of the Project.
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ARTICLE III.
SALE OF THE PROJECT
-------------------
Section 3.1. SALE OF THE PROJECT. In consideration hereof, the County
hereby agrees to bargain, grant, sell, convey and deliver to the Company, and
the Company hereby agrees to purchase from the County, all of the right, title
and interest of the County in the Project, subject to Permitted Encumbrances to
which the Company has consented, in accordance with the provisions hereof.
The County agrees to execute a limited warranty deed to the Company and to
deliver the same to the Trustee to be held in escrow for delivery to the
Company upon payment in full of the Bonds. Said limited warranty deed shall
convey to the Company fee simple title to the Project Land free and clear from
all encumbrances except Permitted Encumbrances to which the Company has
consented. Said limited warranty deed shall warrant title to said property
against all Persons claiming by, through or under the County.
From the date hereof and throughout the term hereof, the parties hereto
agree that, so long as the Company is not in default hereunder, it shall
possess, occupy, use, enjoy and operate the Project for an activity authorized
by the Act. Such possession, occupation, use, enjoyment and operation of the
Project by the Company shall be exclusive, and the County agrees that it will
permit no other use of the Project by anyone other than the Company during the
term hereof without the written consent of the Company. The County reserves
only the right to make such use of the Project Land as is necessary to acquire,
construct and install the Project as provided in Article IV.
Upon payment in full of the Bonds, the Trustee shall deliver to the
Company the above referred to limited warranty deed executed in the proper
manner so as to permit the same to be recorded, and the County shall execute
such other instruments and documents as the Company may reasonably request to
perfect the transfer of title to the Project to the Company.
Section 3.2. WARRANTY OF TITLE. The County for itself, its successors
and its assigns, warrants to the Company, its successors and its assigns, that
it has good and marketable fee simple title in and to the Project Land described
in Exhibit "A" to the Indenture free from all encumbrances except Permitted
Encumbrances. Upon the execution and delivery hereof, the County agrees that it
will furnish to the Company an owner/mortgagee title insurance policy or binder
issued by a title insurance company nominated by the Company insuring such title
in the face amount of
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$3,000,000. Likewise, upon delivery of the Bonds, the County agrees that it
furnish to the Trustee an opinion of the County's Counsel or other Counsel
satisfactory to the Trustee stating that the Indenture has been duly filed in
the public records of the County and constitutes a first mortgage on the Project
Land subject only to this Agreement and the other Permitted Encumbrances as
defined herein.
ARTICLE IV.
COMMENCEMENT AND COMPLETION OF THE PROJECT;
-------------------------------------------
ISSUANCE OF THE BONDS
---------------------
Section 4.1. AGREEMENT TO ACQUIRE AND CONSTRUCT THE PROJECT. Not
later than the delivery hereof, the County will have acquired the title in and
to the Project Land which it warrants in Section 3.2 hereof and, subject to the
provisions of Section 4.6, the County agrees that:
(a) It will cause the Building to be constructed on the Project
Land, wholly within the boundary lines thereof. It will acquire,
construct and install other facilities necessary for the completion and
commencement of operation of the Project. The aforesaid acquisition,
construction and installation shall be substantially in accordance with
plans and specifications prepared by the General Mills Facilities
Engineering Department, dated July, 1979, a copy of which is on file with
the Clerk of the Circuit Court in and for the County. Any additions,
modifications, revisions or changes to said plans and specifications
shall also be filed with said Clerk and the Authorized Company
Representative. The Building shall be the property of the County and
subject to the terms hereof.
(b) It will cause the Project Equipment to be acquired and
installed in the Building or on the Project Land, and the Project
Equipment will consist of machinery, equipment and other related property
described in the list attached as Exhibit "B" to the Indenture and such
other items of machinery, equipment and related property as in the
Company's judgment may be necessary for the operation of the Project
and as shall from time to time prior to the Completion Date be specified
in written orders from the Company to the County, all of which
acquisitions and installations shall be made substantially in accordance
with directions given by the Company. The Project Equipment shall be the
property of the County and subject to the terms hereof.
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<PAGE> 96
The County agrees that only such changes (other than those requested by
the Company, which shall be made as requested) will be made in said plans and
specifications as may be specified by the Project Supervisor. The County
agrees that it will enter into, or accept the assignment of, such contracts as
the Company may request in order to effectuate the purposes of this Section,
but that it will not execute any other contract or give any order for the
construction of the Building or for the acquisition and installation of the
Project Equipment unless and until the Project Supervisor shall have approved
the same in writing.
The County agrees to complete construction of the Building as promptly as
practicable after receipt of the proceeds from the sale of the Bonds, to
continue said construction with all reasonable dispatch and to use its best
efforts to cause said construction to be completed as soon as practicable,
delays incident to strikes, riots, lockouts or other industrial disturbances,
orders of the United States government or the State or any agency thereof,
fires or explosions, acts of God or the public enemy beyond the reasonable
control of the County only excepted, but if said construction is not completed
within the time herein contemplated, there shall be no resulting liability on
the part of the County and no diminution in or postponement or abatement of the
purchase price payments and other payments required in Section 5.2 hereof to be
made by the Company. The County agrees to effect the acquisition and
installation of the Project Equipment as promptly as practicable after
specification by the Company of the items to be installed and receipt of the
installation schedule desired by the Company.
Section 4.2. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS.
In order to provide funds for the payment of the cost of the acquisition,
construction and installation called for in Section 4.1 (including capitalized
interest), the County agrees that as soon as possible it will authorize,
validate, sell and cause to be delivered to the purchaser or purchasers thereof,
the Bonds, bearing interest and maturing as set forth in Article II of the
Indenture, at a price to be approved by the Company plus accrued interest (if
any) to the date of delivery of the Bonds, and it will thereupon immediately
deposit all accrued interest (if any) received upon the sale of the Bonds in the
Bond Fund and will immediately deposit the balance of the proceeds from said
sale in the Construction Fund.
Section 4.3. DISBURSEMENTS FROM THE CONSTRUCTION FUND. The County will
in the Indenture authorize and direct the Trustee to use the moneys in the
Construction Fund for the following purposes but, subject to the provisions of
Section 4.9, for no other purposes:
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(a) payment of the initial or acceptance fee of the Trustee and
reasonable fees and expenses of its Counsel, the fees for recording the
deeds whereby the appropriate title in and to the Project Land has been
conveyed and assigned to the County, payments for title examination and
insurance, and any title curative documents that either the Company or
the County's Counsel may deem desirable to file for record in order to
perfect or protect the title of the County in and to the Project Land and
the fees and expenses in connection with any actions or proceedings that
either the Company or the County's Counsel may deem desirable to bring in
order to perfect or protect the title of the County in and to the Project
Land;
(b) payment to the Company and the County, as the case may be, of
such amounts, if any, as shall be necessary to reimburse the Company and
the County in full for all advances and payments made by them or either
of them prior to or after the date of issuance and delivery of the Bonds
for expenditures in connection with acquisition by the County of
appropriate title in and to the Project Land (including the cost of such
acquisition and of any rights-of-way for the purpose of providing access
to and from the Project Land), clearing the Project Land, site
improvement, the preparation of plans and specifications for the Project
(including any preliminary study or planning of the Project or any aspect
thereof), the construction of the Building, the acquisition and
installation of the Project Equipment and the acquisition, construction
and installation necessary to provide utility services or other
facilities including trackage to connect the Project with public
transportation facilities, and all real or personal properties deemed
necessary in connection with the Project, or any one or more of said
expenditures (including architectural, engineering and supervisory
services) with respect to any of the foregoing;
(c) payment of, or reimbursement of the Company and the County for,
the reasonable legal and accounting fees and expenses, financial
consultants' fees, financing charges (including underwriting or placement
fees) and printing and engraving costs incurred in connection with the
authorization, sale and issuance of the Bonds, the preparation of this
Agreement, the Guaranty, the Indenture, the Financing Statements and all
other documents in connection therewith (including computer charges) and
in connection with the acquisition of appropriate title in and to the
Project Land, including fees for recording this Agreement, the Indenture
and the Financing Statements and payment of the premium for any title
insurance which may be obtained with respect to title in and to the
Project Land;
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(d) payment of, or reimbursement of the Company and the County
for, labor, services, materials, supplies and/or equipment used or
furnished in site improvement and in the construction of the
Building, all as provided in the plans and specifications therefor,
payment for the cost of the acquisition and installation of the Project
Equipment, payment for the cost of acquisition, construction and
installation of utility services or other facilities including trackage
to connect the Project with public transportation facilities, and all
real and personal properties deemed necessary in connection with the
Project and payment for the miscellaneous expenses incidental to any of
the foregoing;
(e) payment of, or reimbursement of the Company and the County for,
the fees, if any, for architectural, engineering and supervisory services
with respect to the Project;
(f) payment of, or reimbursement of the Company and the County for,
as such payments become due, the reasonable fees and expenses of the
Trustee, the Bond Registrar, the paying agent(s) and the reasonable fees
and expenses of their Counsel properly incurred under the Indenture that
may become due during the Construction Period and payment into the Bond
Fund of sufficient moneys to pay interest on the Bonds accruing during
the Construction Period;
(g) to such extent as they shall not be paid by a supplier or
contractor for construction or installation with respect to any part of
the Project, payment of the premiums on all insurance required to be
taken out and maintained hereunder during the Construction Period, or
reimbursement thereof if paid by the Company under Section 6.4;
(h) payment of the taxes, assessments and other charges, if any,
referred to in Section 6.3 hereof that may become payable with respect to
the Project during the Construction Period;
(i) payment of expenses incurred with approval of the Company in
seeking to enforce any remedy against any supplier, contractor or
subcontractor in respect of any alleged default under a contract relating
to the Project;
(j) payment of, or reimbursement of the Company and the County for
any other legal and valid costs and expenses relating to the Project; and
(k) all moneys remaining in the Construction Fund (including moneys
earned on investments made pursuant to the provisions of Section 4.9)
after the Completion Date and
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payment in full of the costs of the construction of the Building and
the acquisition and installation of the Project Equipment, and after
payment of all other items provided for in the preceding subsections
of this Section then due and payable, shall at the direction of the
Company be (i) used by the Trustee for the immediate redemption of Bonds
or the purchase of Bonds for the purpose of cancellation, or (ii) paid
into the Bond Fund, or (iii) a combination of (i) and (ii) as is provided
in such direction, provided that amounts approved by the Authorized
Company Representative and Authorized County Representative shall be
retained by the Trustee in the Construction Fund for payment of costs not
then due and payable. Any balance remaining of such retained moneys after
full payment of all such Project Costs shall be used by the Trustee as
directed by the Company in the manner specified in clauses (i), (ii) or
(iii) of this subsection. The County and the Company agree with the
holders of the Bonds and the interest coupons (if any) appertaining
thereto that substantially all of the Bond proceeds will be used for the
purposes set out in Section 103(b)(6) of the Code to the end that the
interest on the Bonds shall be and remain exempt from Federal income
taxation. Should Bond proceeds remain in the Construction Fund after the
Completion Date in an amount in excess of $494,000, no such excess shall
be transferred to the Bond Fund unless an opinion of a firm of nationally
recognized bond attorneys satisfactory to the Trustee is obtained stating
that such transfer will not jeopardize the tax-exempt status of interest
payable on the Bonds.
The payments specified in subsections (a) through (j) of this
Section (other than the payment of interest on the Bonds accruing prior
to the Completion Date) shall be made by the Trustee only upon receipt of
the following:
(1) a written requisition for such payment signed by
(i) the Authorized County Representative, and (ii) the Authorized Company
Representative or (in lieu of the Authorized Company Representative) the
Project Supervisor;
(2) a certificate by the Persons signing such requisition
certifying:
(i) that an obligation in the stated amount has been incurred
by or on behalf of the County;
(ii) that such obligation is a proper charge against the
Construction Fund and has not been paid, and specifying the purpose
and circumstances of such obligation in reasonable detail and to
whom such
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obligation is owed, accompanied by a bill or statement of
account for such obligation;
(iii) that they have no notice of any vendors',
materialmen's, mechanics', suppliers' or other similar liens or
right to liens, chattel mortgages or conditional sales contracts,
or other contracts or obligations (other than those being contested
in good faith as permitted in Section 6.1(c)) which should be
satisfied or discharged before payment of such obligation is made;
and
(iv) that such requisition contains no request for payment on
account of any portion of such obligation which the County is, as
of the date of such requisition, entitled to retain under retained
percentage agreements; and
(3) with respect to any such requisition for payment for labor,
services, material, supplies and/or equipment, an additional certificate,
signed by the Project Supervisor, certifying that insofar as such
obligation was incurred for work, material, supplies or equipment in
connection with the acquisition, construction and installation of the
Project, such labor was actually performed in a satisfactory manner and
such material, supplies and/or equipment were actually used in or about
the construction or delivered at the site of the Project for that
purpose. If any such requisition for material, supplies or equipment
requires reimbursement for such item to the Company, such requisition
shall include any bill of sale necessary to convey title in and to such
item to the County.
In approving or certifying any requisition under this Section, the
County may rely as to the completeness and accuracy of all statements in such
requisition upon the approval of or certification to such requisition by the
Authorized Company Representative and/or the Project Supervisor, as the case may
be, and the Company hereby agrees to indemnify and save harmless the County, its
officers, agents and employees and members of the Board from any liability
incurred in connection with any requisition so approved or certified.
In making any such payment from the Construction Fund, the Trustee
may rely on any such requisition and any such certificates delivered to it
pursuant to this Section, and the Trustee shall be relieved of all liability
with respect to making such payments in accordance with such requisitions and
such supporting certificate or certificates without inspection of the Project or
any other investigation.
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The County and the Company agree for the benefit of each other and for the
benefit of the holders of the Bonds that the proceeds of the Bonds will not be
used in any manner which would result in the loss of the exemption from Federal
income taxation of the interest on the Bonds claimed under Section 103(b)(6) of
the Code.
Section 4.4. OBLIGATION OF THE PARTIES TO COOPERATE IN FURNISHING
DOCUMENTS TO TRUSTEE. The County and the Company agree to cooperate with each
other in furnishing to the Trustee the documents referred to in Section 4.3
that are required to effect payments out of the Construction Fund and to cause
such requisitions and certificates to be directed by the Authorized County
Representative, the Authorized Company Representative and the Project
Supervisor to the Trustee as may be necessary to effect such payments. Such
obligation of the County and the Company is subject to any provisions hereof or
of the Indenture requiring additional documentation with respect to payments
and shall not extend beyond the moneys in the Construction Fund available for
payment under the terms of the Indenture.
Section 4.5. ESTABLISHMENT OF COMPLETION DATE. The Completion Date
shall be evidenced to the Trustee by a certificate signed by the Project
Supervisor stating that, except for amounts retained by the Trustee for Project
costs not then due and payable as provided in Section 4.3(k),
(a) construction of the Building has been completed substantially
in accordance with the plans and specifications therefor and all labor,
services, materials, supplies and/or equipment used in such construction
have been paid for,
(b) all other facilities necessary in connection with
the Project have been acquired, constructed and installed substantially
in accordance with the plans and specifications therefor and all costs
and expenses incurred in connection therewith have been paid,
(c) the Project Equipment has been acquired and installed to his
satisfaction, the Project Equipment so acquired and installed together
with any other machinery, equipment and related property provided and
installed in the Building or on the Project Land by the Company is
suitable and sufficient for the efficient operation of the Project and
all costs and expenses incurred in the acquisition and installation of
the Project Equipment and other machinery, equipment and related property
have been paid, and
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(d) a certificate of occupancy, if required, and any other
permissions required of governmental authorities for the occupancy of the
Project have been obtained.
Notwithstanding the foregoing, such certificate by the Project Supervisor shall
state that it is given without prejudice to any rights against third parties
which exist on the date of such certificate or which may subsequently come into
being. The County and the Company agree to cooperate one with the other in
causing such certificate to be furnished to the Trustee.
Section 4.6. COMPANY REQUIRED TO PAY PROJECT COSTS IF
CONSTRUCTION FUND INSUFFICIENT. If the moneys in the Construction Fund
available for payment of the costs of the Project should not be sufficient to
pay the costs thereof in full, the Company agrees to complete the Project and to
pay all that portion of the costs of the Project as may be in excess of the
moneys available therefor in the Construction Fund. The County does not make
any warranty, either express or implied, that the moneys which will be paid into
the Construction Fund and which, under the provisions hereof, will be available
for payment of the costs of the Project, will be sufficient to pay all the costs
which will be incurred in that connection. The Company agrees that if after
exhaustion of the moneys in the Construction Fund the Company should pay any
portion of the costs of the Project pursuant to the provisions of this Section,
it shall not be entitled to any reimbursement therefor from the County or from
the Trustee or from the holders of any of the Bonds, nor shall it be entitled to
any diminution in or postponement or abatement of the purchase price payments
and other payments required to be made pursuant to Section 5.2 hereof.
Section 4.7. PROJECT SUPERVISOR. Lee L. Gross is hereby
designated as the Project Supervisor for the purpose of taking all actions and
making all certificates required to be taken and made by the Project Supervisor
under the provisions hereof. If the Project Supervisor should become
unavailable or unable to take any action or make any certificate provided for
herein, another Project Supervisor and/or an Alternate Project Supervisor shall
thereupon be appointed by the County pursuant to designation for that purpose
made by the Company.
Section 4.8. COUNTY TO PURSUE REMEDIES AGAINST SUPPLIERS,
CONTRACTORS AND SUBCONTRACTORS AND THEIR SURETIES. At the direction and
sole cost of the Company (to the extent that such cost is not payable and
actually paid from the Construction Fund), the County will promptly proceed,
either separately or in conjunction with others, to exhaust the remedies of the
County against any defaulting supplier, contractor or subcontractor and against
any surety therefor, for the performance of any contract made in connection
with the Project. If the Company shall so
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notify the County, the Company may, in its own name or in the name of
the County, prosecute or defend any action or proceeding or take any other
action involving any such supplier, contractor, subcontractor or surety which
the Company deems reasonably necessary, and in such event the County agrees to
cooperate fully with the Company and to take all action necessary, to the extent
it might lawfully do so, to effect the substitution of the Company for the
County in any such action or proceeding. In addition, the County recognizes that
it may be entitled to a refund of certain sales, use or other taxes levied and
paid on goods and merchandise which are used in the construction of the Project
and which become an integral part thereof. The County agrees that it will, at
the request and expense of the Company, take all necessary action to obtain any
such refund to which, in the opinion of Independent Counsel, it is entitled.
Any moneys recovered by way of damages, refunds, adjustments or otherwise in
connection with the foregoing prior to the Completion Date shall be paid into
the Construction Fund and after the Completion Date shall be paid into the Bond
Fund.
Section 4.9. INVESTMENT OF CONSTRUCTION FUND MONEYS PERMITTED. Any
moneys held in the Construction Fund shall be invested or reinvested by the
Trustee upon the written request and direction of the Company in such
investments as are now or may hereafter be permitted for investment of bond
proceeds by the laws of the State. Such investments shall be made upon written
direction of the Authorized Company Representative and shall mature in such
amounts and at such times as may be necessary to provide funds when needed to
make payments from the Construction Fund. The Trustee may make any and all
such investments through its own bond department. Any interest or gain
received from such investments shall be credited to and held in the
Construction Fund, and any loss from such investments shall be charged against
the Construction Fund and paid by the Company.
ARTICLE V.
TERM OF THIS AGREEMENT; USE OF
------------------------------
THE PROJECT; PROVISIONS FOR PAYMENT
-----------------------------------
Section 5.1. TERM OF THIS AGREEMENT; USE OF THE PROJECT. This
Agreement shall become effective upon its execution and delivery and
shall remain in full force and effect, subject to the other provisions hereof
(including particularly Articles X, XI and XII), up to and including midnight,
September 1, 2004, or if at said time and on said date all of the Bonds have
not been paid in full, then on such date as such payment shall have been made.
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The County does hereby agree that it will not take any action, other than
pursuant to Article X hereof, to prevent the Company from having exclusive
possession, use and enjoyment of the Project during the term of this Agreement
and will, at the request of the Company, and at the Company's expense,
cooperate with the Company in order that the Company may have exclusive
possession, use and enjoyment of the Project, subject to the right of the
County to make such use of the Project Land as is necessary to acquire,
construct and install the Project in the manner more fully set forth in Article
IV hereof.
Section V.2. BASIC PAYMENTS REQUIRED OF COMPANY. The Company hereby
agrees to make the payments required hereunder directly to the Trustee for the
account of the County in the following manner: At least one (1) business day
before March 1, 1980 and at least one (1) business day before each March 1 and
September 1 in each year thereafter until the principal of and the interest on
the Bonds shall have been paid in full, the Company shall pay to the Trustee as
the purchase price for the Project (i) if such date is September 1, a sum of
money equal to the amount payable on such date as principal of (whether at
stated maturity or by mandatory sinking fund redemption as provided in Section
305 of the Indenture) and interest on the Bonds, as provided in the Indenture,
and (ii) if such date is March 1, a sum of money equal to the amount payable on
such date as interest on the Bonds, as provided in the Indenture. In any event
each payment under this Section shall be sufficient to pay the total amount of
principal (whether at stated maturity or by mandatory sinking fund redemption
as provided in Section 305 of the Indenture) and interest payable on such
semiannual interest payment date, and if at any semiannual interest payment
date the amount of money available in the Bond Fund is insufficient to make
required payments of principal (whether at stated maturity or by mandatory
sinking fund redemption as provided in Section 305 of the Indenture) and
interest on such date, the Company shall forthwith pay to the Trustee the
amount of any such deficiency.
Anything herein to the contrary notwithstanding, any amount of money at
any time held by the Trustee in the Bond Fund shall be credited against the
next succeeding payment, and such credit shall reduce the payment to be made by
the Company; and, further, if the amount held by the Trustee in the Bond Fund
should be sufficient to pay at the times required the principal of and the
interest on the Bonds then remaining unpaid, the Company shall not be obligated
to make any further payments under the provisions of this Section.
The Company agrees to pay to the Trustee until the principal of and the
interest on the Bonds shall have been paid in full (i) an amount equal to the
annual fee of the Trustee for the
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Ordinary Services of the Trustee rendered and its Ordinary Expenses incurred
under the Indenture, (ii) the reasonable fees and charges of the Trustee and any
other paying agent for acting as paying agent as provided in the Indenture, as
and when the same become due, and (iii) the reasonable fees and charges of the
Trustee for Extraordinary Services rendered by it and Extraordinary Expenses
incurred by it, as and when the same become due; provided, that the Company may,
without precipitating an event of default hereunder, withhold such payment to
contest in good faith the necessity for any such Extraordinary Services and
Extraordinary Expenses and the reasonableness of any such fees, charges or
expenses.
If the Company should fail to make any of the payments required in this
Section, the item or installment which the Company has failed to make shall
continue as an obligation of the Company until the same shall have been fully
paid, and the Company agrees to pay the same with interest thereon at the rate
of eight per centum (8%) per annum until paid.
Section 5.3. PLACE OF PAYMENTS. The purchase price payments provided for
in Section 5.2 and the interest on delinquent payments shall be paid directly
to the Trustee for the account of the County and will be deposited in the Bond
Fund. The other payments provided for in Section 5.2 shall be paid directly to
the Trustee for its own use or for disbursement to any other paying agent, as
the case may be.
Section 5.4. OBLIGATIONS OF COMPANY HEREUNDER ABSOLUTE AND UNCONDITIONAL.
The obligations of the Company to make the purchase price payments and other
payments required in Section 5.2 and to perform and observe the other
agreements on its part contained herein shall be absolute and unconditional.
Until such time as the principal of and the interest on the Bonds shall have
been paid in full, the Company (i) will not suspend or discontinue any payments
provided for in Section 5.2 except to the extent the same have been prepaid,
(ii) will perform and observe all of its other agreements contained herein, and
(iii) except as provided in Sections 11.1, 11.2 and 12.1, will not terminate
this Agreement for any cause, including, without limiting the generality of the
foregoing, failure of the County to complete the Project, failure of the
County's title in and to the Project or any part thereof, any acts and
circumstances that may constitute failure of consideration, eviction or
constructive eviction, destruction of or damage to the Project, commercial
frustration of purpose, any change in the tax or other laws of the United States
of America or of the State or any political subdivision of either or any failure
of the County to perform and observe any agreement, whether express or implied,
or any duty, liability or obligation arising out of or connected herewith or
with the Indenture. Nothing contained in this Section shall be construed to
release the County from the
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performance of any of the agreements on its part herein contained; and if
the County should fail to perform any such agreement, the Company may institute
such action against the County as the Company may deem necessary to compel
performance or recover its damages for nonperformance so long as such action
shall not do violence to the agreements on the part of the Company contained in
the preceding sentence. The Company may, however, at its own cost and expense
and in its own name or in the name of the County, prosecute or defend any action
or proceeding or take any other action involving third Persons which the Company
deems reasonably necessary in order to insure the acquisition, construction and
completion of the Project or to secure or protect its right of possession,
occupancy and use hereunder, and in such event the County hereby agrees to
cooperate fully with the Company and to take all lawful action which is required
to effect the substitution of the Company for the County in any such action or
proceeding if the Company shall so request.
Nothing contained herein shall be construed to be a waiver of any rights
which the Company may have against the County under this Agreement, or against
other Persons under this Agreement, the Indenture, or otherwise, or under any
provision of law.
Section 5.5. COMPANY'S PERFORMANCE UNDER INDENTURE. The Company agrees,
for the benefit of the holders from time to time of the Bonds, to do and
perform all acts and things contemplated in the Indenture to be done or
performed by it.
ARTICLE VI.
MAINTENANCE, MODIFICATIONS, TAXES AND INSURANCE
Section 6.1. MAINTENANCE AND MODIFICATION OF PROJECT BY COMPANY. (a)
Throughout the term of this Agreement the Company shall at its own expense (i)
keep the Project in as safe condition as the operation thereof will reasonably
permit, and (ii) keep the Building and the Project Equipment and all other
improvements forming a part of the Project in good repair and in good operating
condition, making from time to time all reasonably necessary repairs thereto
and renewals and replacements thereof.
(b) The Company may from time to time, in its sole discretion and at its
own expense, make any additions, modifications or improvements to the Project,
including installation of additional machinery, equipment and related property
in the Building or on the Project Land, which it may deem desirable for its
business purposes; provided that all such additions, modifications and
improvements do not adversely affect
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the structural integrity of the Building and are located wholly within
the boundary lines of the Project Land. All machinery, equipment and related
property so installed by the Company shall remain the sole property of the
Company in which neither the County nor the Trustee shall have any interest and
may be modified or removed at any time while there exists no event of default
hereunder; provided, that any damage to the Project occasioned by such
modification or removal shall be repaired by the Company at its own expense.
(c) The Company shall not permit any mechanics', materialmen's,
suppliers', vendors' or other similar lien to be established or remain against
the Project for labor or materials furnished or services rendered in connection
with any additions, modifications, improvements, repairs, renewals or
replacements so made by it; provided, that if the Company shall first notify
the Trustee of its intention so to do, the Company may in good faith contest
any mechanics', materialmen's, suppliers', vendors' or other similar lien filed
or established against the Project and, in such event, may permit the items so
contested to remain undischarged and unsatisfied during the period of such
contest and any appeal therefrom unless the County or the Trustee shall notify
the Company that, in the opinion of Independent Counsel, by nonpayment of any
such items the lien or security interests afforded by this Agreement or the
Indenture as to any part of the Project or the purchase price payments, other
payments and revenues from the Project will be materially endangered or the
Project or any part thereof or the purchase price payments, other payments and
revenues from the Project will be subject to loss or forfeiture, in which
event the Company shall promptly pay or bond (if legally permissible) and cause
to be satisfied and discharged all such unpaid items. The County will cooperate
fully with the Company in any such contest.
Section 6.2. REMOVAL OF PROJECT EQUIPMENT. The County shall not be
under any obligation to renew, repair or replace any inadequate, obsolete, worn
out, unsuitable, undesirable, inappropriate or unnecessary Project Equipment.
If the Company in its sole discretion determines that any such items of Project
Equipment have become inadequate, obsolete, worn out, unsuitable, undesirable,
inappropriate or unnecessary for its purposes at such time, the Company may
remove such items from the Building and the Project Land and (on behalf of the
County) sell, trade in or otherwise dispose of them (as a whole or in part)
without any responsibility or accountability to the County or the Trustee
therefor, provided that the Company shall either:
(a) substitute (either by direct payment of the costs thereof or by
advancing to the County the moneys necessary therefor) and install
anywhere in the Building or on the
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Project Land other machinery, equipment or related property having
equal or greater utility (but not necessarily having the same function or
value) in the operation of the Building as a modern industrial facility
(provided such removal and substitution shall not impair operating unity),
all of which substituted machinery, equipment or related property shall be
free of all liens and encumbrances (other than Permitted Encumbrances) but
shall become a part of the Project Equipment; or
(b) not make any such substitution and installation, provided (i)
that in the case of the sale of any such machinery, equipment or related
property to anyone other than itself or in the case of the scrapping
thereof, the Company shall pay into the Bond Fund the proceeds from such
sale or the scrap value thereof, as the case may be, (ii) that in the
case of the trade-in of such machinery, equipment or related property for
other machinery, equipment or related property not to be installed in the
Building or on the Project Land, the Company shall pay into the Bond Fund
the amount of the credit received by it in such trade-in, and (iii) that
in the case of the sale of any such machinery, equipment or related
property to the Company or in the case of any other disposition thereof,
the Company shall pay into the Bond Fund an amount equal to the original
cost thereof less depreciation using methods and rates calculated in
accordance with generally accepted accounting principles.
The removal from the Project of any portion of the Project Equipment pursuant
to the provisions of this Section shall not entitle the Company to any
diminution in or postponement or abatement of the purchase price payments and
other payments required to be made pursuant to Section 5.2.
The Company shall promptly report to the Trustee each such removal,
substitution, sale, trade-in or other disposition and shall pay to the Trustee
such amounts as are required by the provisions of the preceding subsection (b)
of this Section to be paid into the Bond Fund promptly after the sale, trade-in
or other disposition requiring such payment; provided, however, that no such
report and payment need be made until the amount to be paid into the Bond Fund
on account of all such sales, trade-ins or other dispositions not previously
reported aggregates at least $50.000. The Company shall not remove or permit
the removal of any item of Project Equipment except in accordance with the
provisions of this Section.
The Company shall deliver to the County appropriate documents conveying to
the County title to any machinery, equipment or related property installed or
placed in the Building or upon the
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Project Land pursuant to this Section, and upon the request of the Company,
the County shall deliver or cause or direct the Trustee to deliver to
the Company appropriate documents conveying to the Company title to any property
removed from the Project pursuant to this Section and releasing the same from
the lien of the Indenture and cancelling any security interest with respect
thereto. The Trustee shall take or cause to be taken such action, if any, as
may be necessary to perfect a security interest with respect to any property
placed in the Building or upon the Project Land and pursuant to this Section.
Section 6.3. TAXES, OTHER GOVERNMENTAL CHARGES AND UTILITY CHARGES.
The County and the Company acknowledge that under present law no part of
the fee simple title in and to the Project owned by the County is subject to ad
valorem taxation by the State or by any political or taxing subdivision thereof,
and that under present law the income and profits (if any) of the County from
the Project are not subject to either Federal or State taxation. The Company
shall pay, as the same become lawfully due and payable, (i) all taxes and
governmental charges of any kind whatsoever upon or with respect to the interest
held by the Company hereunder, (ii) all taxes and governmental charges of any
kind whatsoever upon or with respect to the Project or any machinery, equipment
or related property installed or brought by the Company therein or thereon
(including, without limiting the generality of the foregoing, any taxes levied
upon or with respect to the income or profits of the County from the Project
which, if not paid, will become a lien on the Project prior to or on a parity
with the security interest created hereunder or the lien created by the
Indenture or a charge on the purchase price payments, other payments and
revenues from the Project prior to or on a parity with the security interest
therein and the pledge or assignment thereof created and made in the Indenture),
(iii) all utility and other charges incurred in the operation, maintenance, use,
occupancy and upkeep of the Project, and (iv) all assessments and charges
lawfully made by any governmental body for public improvements that may be
secured by a lien on the Project; provided, that with respect to special
assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Company shall be obligated to pay only
such installments as are required to be paid during the term of this Agreement.
The Company may, at its own expense and in its own name and behalf or in
the name and behalf of the County, in good faith contest any such taxes,
assessments and other charges and, in the event of any such contest, may permit
the taxes, assessments and other charges so contested to remain unpaid during
the period of such contest and any appeal therefrom unless the County or the
Trustee shall notify the Company that, in the opinion of Independent Counsel,
by nonpayment of any such items the lien or
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security interests afforded by this Agreement and/or the Indenture as to any
part of the Project or the purchase price payments, other payments and revenues
derived from the Project will be materially endangered or the Project or any
part thereof will be subject to loss or forfeiture, in which event such taxes,
assessments or charges shall be paid promptly. The County shall cooperate fully
with the Company in any such contest. If the Company shall fail to pay any of
the foregoing items required by this Section to be paid by the Company, the
County or the Trustee may (but shall be under no obligation to) pay the same and
any amounts so advanced therefor by the County or the Trustee shall become an
additional obligation of the Company to the one making the advancement, which
amounts, together with interest thereon at the rate of eight per centum (8%) per
annum from the date thereof, the Company agrees to pay.
Section 6.4. INSURANCE REQUIRED. Throughout the term of this
Agreement the Company shall keep the Project continuously insured against
such risks as are customarily insured against by businesses of like size and
type (other than business interruption insurance), paying (except as provided in
Section 4.3(g)) as the same become due all premiums in respect thereto,
including but not necessarily limited to:
(a) insurance to the full insurable actual cash value
of the Project as determined by the Company against (i) loss from damage
by fire and lightning, with uniform standard extended coverage
endorsement limited only as may be provided in the standard form of
extended coverage endorsement at the time in use in the State (provided
that such insurance may provide for a deductible provision of not in
excess of $100,000 with respect to direct damage applicable to each
separate instance of loss insured against), and (ii) in time of war in
which the United States of America is a belligerent, against loss from
the risks and hazards of war, if such insurance is then reasonably
obtainable and generally carried by owners of facilities of like nature
in the State; and
(b) if the Project is comprised in part of a boiler (or boilers)
and/or a pressure vessel (or pressure vessels), boiler and pressure
vessel (including pressure pipes) explosion insurance in an amount at
least equal to $5,000,000 (with deductible provisions not to exceed
$1,000) against loss from damage with respect to all boilers and pressure
vessels and pressure pipes which may be installed in the Project; and
(c) general public liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Project
and the adjoining streets, sidewalks and passageways, such insurance to
afford protection of not less than $1,000,000 aggregate per occurrence
for personal injury,
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bodily injury and death, and not less than $50,000 with respect to
property damage resulting from any one occurrence and the policies
evidencing such insurance may provide that the Company shall be
self-insured as it deems prudent in connection with each separate claim
insured against. Such self-insurance may, at the Company's option, be
taken directly as a deductible or indirectly under any type of
retrospective rating arrangement between the Company and such insurer as
it may select; and
(d) during the Construction Period and throughout the term of this
Agreement, the Company shall maintain, or cause to be maintained, in
connection with the Project, Worker's Compensation Coverage required by
then applicable law.
Section 6.5. APPLICATION OF NET PROCEEDS OF INSURANCE. The Net
Proceeds of the insurance carried pursuant to the provisions of Section
6.4 shall be applied as follows: (1) the Net Proceeds of the insurance required
in Sections 6.4(a) and (b) shall be applied as provided in Section 7.1, and (ii)
the Net Proceeds of the insurance required in Sections 6.4(c) and (d)
shall be applied toward extinguishment or satisfaction of the liability with
respect to which such insurance proceeds may be paid.
Section 6.6. ADDITIONAL PROVISIONS RESPECTING INSURANCE. All
insurance required in Section 6.4 shall be taken out and maintained in
generally recognized responsible insurance companies selected by the Company
(including any insurance company owned or controlled by the Guarantor). All
policies evidencing such insurance shall provide for payment of the losses for
coverage required by Sections 6.4(a) and (b) to the County, the Company and the
Trustee as their respective interests may appear, and the policies required by
Section 6.4(a) and (b) shall contain standard mortgage clauses requiring that so
long as any of the Bonds are outstanding all Net Proceeds of insurance resulting
from any claim for loss or damage covered thereby be paid to the Trustee if the
amount of Net Proceeds when added to any applicable deductible amount relating
to said claim exceeds $100,000; provided, however, that all claims regardless of
amount may be adjusted by the Company with the insurers, subject to approval of
the Trustee, which approval shall not be unreasonably withheld, as to settlement
of any claim which is in an amount which would require payment to the Trustee as
aforesaid. The insurance hereby required may be contained in blanket policies
now or hereafter maintained by the Company.
All such policies, or a certificate or certificates of the insurers that
such insurance is in force and effect, shall be deposited with the Trustee and
shall contain a provision that such policy may not be cancelled unless the
Trustee is notified at least
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ten (10) days prior to cancellation; and at least ten (10) days prior to
expiration of any such policy, the Company shall furnish the Trustee with
evidence satisfactory to the latter that the policy has been renewed or replaced
or is no longer required hereby.
Section 6.7. OTHER COUNTY EXPENSES. Anything to the contrary herein
notwithstanding, the Company shall pay any reasonable and necessary expenses
not specifically mentioned herein which are incurred by the County in
connection with the Project, this Agreement, the Indenture, the Financing
Statements or the Bonds, and which are not payable from the Construction Fund
pursuant to Section 4.3.
Section 6.8. ADVANCES BY COUNTY OR TRUSTEE. If the Company fails to
maintain the full insurance coverage required hereby or fails to keep the
Project in as safe condition as its operating conditions will reasonably permit,
or fails to keep the Building and the Project Equipment in good repair and good
operating condition, the County or the Trustee may (but unless satisfactorily
indemnified shall be under no obligation to) take out the required policies of
insurance and pay the premiums on the same or make the required repairs,
renewals and replacements; and all amounts so advanced therefor by the County or
the Trustee will become an additional obligation of the Company to the one
making the advancement, which amounts, together with interest thereon at the
rate of eight per centum (8%) per annum from the date thereof, the Company
agrees to pay.
Section 6.9. INDEMNIFICATION OF COUNTY AND TRUSTEE. The Company shall
indemnify and save the County and the Trustee harmless against and from all
claims by or on behalf of any Person arising from the conduct or management of,
or from any work or thing done on, the Project during the term of this
Agreement, and against and from all claims arising during the term of this
Agreement from (a) any condition of the Project caused by the Company, (b) any
failure on the part of the Company in the performance of any of its obligations
hereunder, (c) any contract entered into in connection with the acquisition,
construction and installation of the Project, (d) any act of negligence of the
Company, or of any of its agents, contractors, servants, employees or
licensees, and (e) any act of negligence of any assignee of the Company, or of
any agent, contractor, servant, employee or licensee of any assignee of the
Company. The Company shall indemnify and save the County and the Trustee
harmless from and against all costs and expenses incurred in or in connection
with any action or proceeding brought thereon, and upon notice from the County
or the Trustee, the Company shall defend them or either of them in any such
action or proceeding.
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Section 6.10. INVESTMENT CREDIT. The County agrees that any investment
tax credit with respect to the Project or any part thereof shall be made
available to the Company, and the County will fully cooperate with the Company
in any effort by the Company to avail itself of any such investment tax credit,
but, neither the County nor the Trustee shall have any responsibility or
liability for the Company's failure to receive any such investment tax credit.
The County agrees to cause the Trustee to cooperate in making any investment
tax credit available to the Company.
ARTICLE VII.
DAMAGE, DESTRUCTION AND CONDEMNATION
------------------------------------
Section 7.1. DAMAGE AND DESTRUCTION. Unless the Company shall have
elected to exercise its option to prepay the payments required hereunder
pursuant to the provisions of Section 11.1(a), if prior to payment in full
of the Bonds the Project is damaged by fire or other casualty to such extent
that the claim for loss (including any deductible amount pertaining thereto)
resulting from such damage is greater than $100,000, the Company shall promptly
give written notice thereof to the Trustee. All Net Proceeds of insurance
resulting from claims for such losses shall be paid to and held by the Trustee
in a trust account and invested in accordance with Section 702 of the Indenture,
whereupon (i) the Company, or the County at the Company's direction, shall
proceed promptly to replace, repair, rebuild or restore the property damaged or
destroyed to substantially the same condition as existed prior to the event
causing such damage or destruction, with such changes, alterations and
modifications (including the substitution and addition of other property) as may
be desired by the Company and as will not impair operating unity of the Project
or change its character to such an extent that its ownership by the County would
not be permitted under the Act and (ii) the Trustee shall apply so much as may
be necessary of the Net Proceeds of such insurance to the payment of the costs
of such replacement, repair, rebuilding or restoration, either on completion
thereof or as the work progresses, as directed by the Company. Each such
direction of the Company shall be accompanied by a certificate of an architect
or engineer (who shall be selected by the Company and satisfactory to the
Trustee) in charge of the replacement, repair, rebuilding or restoration, dated
not more than thirty (30) days prior to such direction, setting forth in
substance that (a) the sum then directed to be applied either has been paid by
the Company, or is justly due, to contractors, subcontractors, materialmen,
engineers, architects or other Persons who shall have rendered services or
furnished materials or improvements for the replacement, repair, rebuilding or
restoration therein specified; the names of such Persons; a brief description of
such services or materials or
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improvements and the several amounts so paid or due to each of such Persons;
and, a statement that none of the costs of the services or materials or
improvements described in such certificate has been or is being made the basis,
in any previous or then pending direction, for payment under this Section and
that the sum then directed to be applied does not exceed the value of the
services or materials or improvements described in the certificate, and (b)
except for the amount, if any, stated (pursuant to (a) preceding) in such
certificate to be due for services or materials or improvements, there is not
outstanding any indebtedness known to the Persons signing such certificate which
is then due for labor, services, wages, material, supplies and/or equipment in
connection with the replacement, repair, rebuilding or restoration which, if
unpaid, might become the basis of mechanics', materialmen's, suppliers',
vendors' or other similar liens (other than those being contested
in good faith as permitted in Section 6.1(c)) upon the Project or any part
thereof. The Trustee may conclusively rely upon such direction and shall have
no liability or responsibility for payments made pursuant to this Section in
reliance thereon. If said Net Proceeds are not sufficient to pay in full the
costs of such replacement, repair, rebuilding or restoration, the Company shall
nonetheless complete the same and shall pay that portion of the costs thereof
in excess of the amount of said Net Proceeds or shall advance to the County and
the Trustee the moneys necessary to complete said work, in which case the
County shall proceed so to complete the work. The Company shall not, by reason
of the payment of such excess costs (whether by direct payment thereof or
advances to the County or the Trustee), be entitled to any reimbursement from
the County or any diminution in or postponement or abatement of the purchase
price payments and other payments required to be made pursuant to Section 5.2
hereof.
Any balance of said Net Proceeds remaining after payment of all the costs
of such replacement, repair, rebuilding or restoration shall be paid into the
Bond Fund. If payment in full of the Bonds has been made, all Net Proceeds
shall be paid to the Company.
If prior to payment in full of the Bonds the Project is damaged by fire or
other casualty to such an extent that the claim for loss (including any
deductible amount pertaining thereto) resulting from such damage is not greater
than $100,000, and such damage has not impaired operating units of the Project,
the Company shall not be obligated to replace, repair, rebuild or restore the
property damaged and may retain all Net Proceeds of insurance; provided, that
if such damage impairs the operating unity of the Project, the Company, or the
County at the Company's request, shall promptly replace, repair, rebuild or
restore the property damaged and shall apply for such purpose so much as may be
necessary of said Net Proceeds, notwithstanding that the claim for loss
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(including any deductible amount pertaining thereto) resulting from such damage
is not greater than $100,000, unless the Company shall have elected to exercise
its option under Section 11.1(a).
Section 7.2. CONDEMNATION. Unless the Company shall exercise its
option to prepay the payments required hereunder pursuant to the provisions of
Section 11.1(b), if the title in and to, or the temporary use of, the
Project or any part thereof shall be taken under the exercise of the power of
eminent domain by any governmental body or by any other Person acting under
governmental authority and the Net Proceeds of the condemnation award made in
such eminent domain proceeding is greater than $100,000, the Company shall be
obligated to continue to make the purchase price payments and other payments
specified in Section 5.2 and the County shall cause the Net Proceeds received by
it and the Trustee, from any such award, to be applied in one or more of the
following ways as shall be directed in writing by the Company:
(a) the restoration of the improvements of the Project to
substantially the same condition as existed prior to the exercise of such
power of eminent domain;
(b) the acquisition, by construction or otherwise, by the County of
other improvements suitable for the Company's operations at the Project
(which improvements will be deemed a part of the Project, and available
for use and occupancy by the Company without the making of any payments
other than herein provided to the same extent as if such other
improvements were specifically described herein and demised hereby);
provided, that such improvements will be acquired by the County subject
to no liens, security interests or encumbrances prior to the lien or
security interests afforded by this Agreement and/or the Indenture, other
than Permitted Encumbrances;
(c) redemption of the Bonds at par together with accrued interest
thereon to the date of redemption; provided, that no part of any such
condemnation award may be applied for such redemption unless (1) all of
the Bonds are to be redeemed in accordance with the Indenture upon the
exercise of the option to purchase provided by Section 11.1(b), or (2) if
less than all of the Bonds are to be redeemed, the Company shall furnish
to the County and the Trustee a certificate of an Independent Engineer
acceptable to the County and the Trustee stating (i) that the property
forming a part of the Project that was taken in such eminent domain
proceeding is not essential to the Company's use or occupancy of the
Project, (ii) that the Project has been restored to a condition
substantially equivalent to its condition prior to the taking in such
eminent domain proceeding, or (iii) that improvements have
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been acquired which are suitable for the Company's operations at the
Project as contemplated by the foregoing subsection (b) of this
Section;
(d) payment into the Bond Fund or, if payment in full of the Bonds
has been made, to the Company.
Unless the Company shall have elected to exercise its option
provided by Section 11.1(b), within ninety (90) days from the date of entry
of a final order in any eminent domain proceeding granting condemnation, the
Company shall direct the County and the Trustee in writing as to which way or
ways specified in this Section the Company elects to have the condemnation award
applied. The direction of the Company shall, in the case of a restoration
under Section 7.2(a) or the acquisition or construction of improvements under
Section 7.2(b), be accompanied by a certificate similar to that required in the
second paragraph of Section 7.1. The Trustee may conclusively rely upon such
direction and shall have no liability for payments made pursuant to this
Section in reliance thereon.
If the title to, or the temporary use of, the Project or any part thereof
shall be taken under the power of eminent domain by any governmental body or by
any other Person acting under governmental power and the Net Proceeds of the
condemnation award made in such eminent domain proceeding is not greater than
$100,000 and such taking does not impair the operating unity of the Project,
the Company shall be obligated to continue to make the purchase price payments
and other payments specified in Section 5.2 but the Net Proceeds of the
condemnation award need not be applied in one or more of the ways specified in
the first paragraph of this Section 7.2 and said Net Proceeds shall be paid to
the Company; provided, that if such taking impairs the operating unity of the
Project, the Company shall be obligated to direct the County and the Trustee as
to the way or ways specified in the first paragraph of this Section to have the
Net Proceeds of the condemnation award applied, notwithstanding that such award
is not greater than $100,000, unless the Company elects to exercise its option
under Section 11.1(b).
The County shall cooperate fully with the Company in the handling and
conduct of any prospective or pending eminent domain proceeding with respect to
the Project or any part thereof and shall, to the extent it may lawfully do so,
permit the Company to litigate in any such proceeding in the name and on behalf
of the County. In no event will the County voluntarily settle, or consent to
the settlement of, any prospective or pending eminent domain proceeding with
respect to the Project or any part thereof without the written consent of the
Company.
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Section 7.3. CONDEMNATION OF COMPANY-OWNED PROPERTY. The Company shall
be entitled to the proceeds of any condemnation award or portion thereof made
for damages to or takings of its own property or for damages on account of the
taking of or interference with the Company's rights to possession, use or
occupancy of the Project.
ARTICLE VIII.
SPECIAL AGREEMENTS
------------------
Section 8.1. NO WARRANTY OF CONDITION OR SUITABILITY BY THE COUNTY.
The County makes no warranty, either express or implied, as to the condition of
the Project or that it will be suitable for the Company's purposes or needs.
The Company releases the County from, agrees that the County shall not be
liable for and agrees to hold the County harmless against, any loss or damage
to property or any injury to or death of any Person that may be occasioned by
any cause whatsoever pertaining to the Project or the use thereof.
Section 8.2. INSPECTION OF THE PROJECT. The Company agrees that the
County and the Trustee and their duly authorized agents who are acceptable to
the Company shall have the right at reasonable times during business hours.
subject to the Company's usual safety, health, sanitary and security
requirements for Persons on the Project Land, to enter upon the Project Land
and to examine and inspect the Project without interference or prejudice to the
Company's operations. The Company further agrees that the County and its duly
authorized agents who are acceptable to the Company shall have such rights of
access to the Project as may be reasonably necessary to cause to be completed
the acquisition, construction and installation of the Project.
Section 8.3. COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; EXCEPTIONS
PERMITTED. The Company agrees that so long as any Bonds remain outstanding it
shall maintain its corporate existence and shall not merge or consolidate with
any other corporation and shall not transfer or convey all of its property,
assets and licenses, or any substantial portion thereof; provided, however, the
Company may, without violating any provision hereof, consolidate with or merge
into another domestic corporation (i.e., a corporation incorporated and
existing under the laws of one of the states of the United States of America or
the District of Columbia) or permit one or more other domestic corporations to
consolidate with or merge into it, or transfer all or substantially all of its
assets to another domestic corporation, but only on condition that (i) the
assignee corporation or the corporation resulting from or surviving such merger
(if other than the Company)
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or consolidation or the corporation to which such transfer is made is in
compliance with the terms of Section 8.4 and shall expressly assume in
writing and agree to perform all of the Company's obligations hereunder, and
(ii) in connection with any such consolidation, merger or transfer there shall
be filed with the County and the Trustee, a letter from the chief financial
officer of the Company certifying that immediately after the consummation of
such consolidation, merge or transfer the corporation resulting from or
surviving such consolidation or merger or the corporation to which such transfer
is made will have an aggregate stockholders' equity at least equal to 85% of
the aggregate stockholders' equity of the Company on the date of such
consolidation, merger or transfer. If the Company is the surviving corporation
in such a merger, the express assumption referred to in (i) above shall not be
required, but the letter of the chief financial officer of the Company shall be
filed as indicated in (ii) above.
The Company shall preserve and keep in full force and effect all licenses
and permits necessary to the proper conduct of its business.
Section 8.4. QUALIFICATION IN THE STATE. The Company warrants (except
as may be otherwise permitted pursuant to the provisions of Section 8.3) that
it is and throughout the term hereof it will continue to be a corporation
either organized under the laws of the State or duly qualified to do business
in the State as a foreign corporation.
Section 8.5. ANNUAL AUDIT. An annual audit of the Guarantor and its
consolidated subsidiaries made by an independent certified public accountant
(or firm thereof) shall be furnished to the Trustee promptly upon its
completion or a copy of the Guarantor's annual report to its stockholders shall
be furnished to the Trustee if such annual report shall contain financial
statements of substantially similar detail and similarly prepared and
certified. The Company also agrees to furnish the Trustee a copy of each of
the financial statements and reports which the Guarantor customarily furnishes
to its stockholders at the same time as they are furnished to said
stockholders.
Section 8.6. GRANTING OF EASEMENTS. If no event of default shall have
happened and be continuing, the Company may at any time or times cause to be
granted easements, licenses, rights-of-way (temporary or perpetual and
including the dedication of public highways) and other rights or privileges in
the nature of easements with respect to any property included in the Project,
and such grant will be free from any lien or security interest created by this
Agreement and the Indenture, or the Company may cause to be released existing
easements, licenses, rights-of-way and other rights or privileges in the nature
of easements, held with respect
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to any property included in the Project with or without consideration, and the
County agrees that it shall execute and deliver and will cause and direct the
Trustee to execute and deliver any instrument necessary or appropriate to
confirm and grant or release any such easement, license, right-of-way or other
right or privilege upon receipt of: (i) a copy of the instrument of grant or
release and (ii) a written application signed by the president or any vice
president of the Company requesting the and delivery of such instrument and
stating (1) that such grant or release is not detrimental to the proper conduct
of the business of the Company and (2) that such grant or release will not
impair the effective use or interfere with the operation of the Project and will
not materially weaken, diminish or impair the security intended to be given by
or under this Agreement and the Indenture.
Section 8.7. REPRESENTATIONS AND AGREEMENTS OF COMPANY AND COUNTY
WITH RESPECT TO CAPITAL EXPENDITURES. The County is issuing the Bonds
pursuant to an election made by it under Section 103(b)(6)(D) of the Code. It
is the intention of the parties hereto that the interest on the Bonds be and
remain free from Federal income taxation, and to that end the County and the
Company do hereby represent and agree with each other, the Trustee and each of
the future holders of any Bonds or interest coupons appertaining thereto, as
follows:
(a) The Company and the County represent that there have never been
issued any bonds with respect to "facilities" described in Section
103(c)(6)(E) of the Code which are located in the County, which bonds
would be taken into account in determining the aggregate face amount of
the Bonds as provided in Section 103(b)(6)(D)(ii) of the Code.
(b) The Company further represents that the aggregate principal
amount of Bonds being issued and capital expenditures heretofore made
during the three-year period immediately preceding the issuance and
delivery of the Bonds (other than those mentioned in Section 103(b)(6)(F)
of the Code) with respect to "facilities" described in Section
103(c)(6)(E) of the Code which are located in the County, do not exceed
$10,000,000.
(c) The County and the Company agree that during the three-year
period immediately following the date of the issuance and delivery of the
Bonds, neither of them shall make or cause or permit to be made any
capital expenditures (other than those mentioned in Section 103(b)(6)(F)
of the Code) with respect to "facilities" described in Section
103(b)(6)(E) of the Code which are located in the County, which would
cause
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the interest payable on the Bonds to be or become subject to
Federal income taxation.
(d) The Company further agrees that should the circumstances set
forth in Sections 103(b)(6)(D) and (E) of the Code occur (during the
six-year period referred to therein), either through the fault of the
Company or though circumstances beyond the Company's control, and there
shall occur a Determination of Taxability as defined in Section 8.8, the
Company shall promptly prepay the purchase price of the Project as
provided for in Section 12.1 and the Company and the County hereby agree
that the County will use moneys received from such prepayment for the
immediate redemption of all outstanding Bonds and otherwise as provided
in Section 8.8.
(e) The Company further agrees that on or before September 1, 1980,
and on or before the first day of each September thereafter to and
including September 1, 1983, it will furnish to the Trustee a certificate
of the chief financial officer of the Company stating that during the
period beginning three (3) years prior to the date of issuance and
delivery of the Bonds and extending through the last day of the Company's
most recently completed fiscal year prior to any such September 1 (or as
to the certificate due September 1, 1983, extending through the day which
is the third anniversary of the date of issuance and delivery of the
Bonds), capital expenditures (including as capital expenditures for this
purpose the principal amount of the Bonds) in excess of $10,000,000 (or
any such larger amount as may at the time be permitted by law) have not
been paid or incurred with respect to "facilities" described in said
Section 103(b)(6)(E) of the Code which are located in the County.
(f) The County and the Company further agree to comply fully,
during the term hereof, with all effective rules, rulings and regulations
promulgated by the Department of Treasury or the Internal Revenue
Service, with respect to bonds issued under said Section 103(b)(6)(D) of
the Code so as to maintain the tax-exempt status of the interest payable
on the Bonds.
Section 8.8. DETERMINATION AND EVENT OF TAXABILITY. If there
occurs a "Determination of Taxability" ("Determination") as hereinafter
defined, not later than six (6) months following the date of such Determination
the Company shall accelerate payment of the purchase price payments and other
payments due under Section 5.2 of this Agreement and shall pay to the Trustee as
the
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accelerated purchase price of the Project for deposit in the Bond Fund, the
following:
(a) For application by the Trustee to the redemption of Bonds
outstanding on the date of such Determination and which will not mature
or otherwise be redeemed prior to the redemption date provided for in
this Section:
(i) the principal amount of each such Bond plus accrued
interest to such redemption date; plus
(ii) an additional amount equal to the interest payable on
each such Bond for each year, or any part thereof, which elapses
from the occurrence of the related "Event of Taxability" ("Event")
as hereinafter defined to and through such redemption date.
(b) To be paid by the Trustee to the holders of Bonds outstanding
on the date of the Determination which will mature or will be redeemed
prior to the redemption date provided for in this Section an amount equal
to the interest payable on each such Bond for each year, or any part
thereof, which shall have elapsed from the occurrence of the Event to and
through the date of stated maturity of such Bond or through the date of
redemption of such Bond prior to the redemption date provided for in this
Section.
Such purchase price shall also include expenses of redemption and
the fees and expenses of the Trustee and the paying agent(s).
An "Event of Taxability" shall mean the incurring of capital
expenditures in excess of those permitted in Section 103(b)(6)(D) of the
Code, or the taking of any action by the Company (or the failure to take any
action), or the making by the Company of any misrepresentation herein or in any
certificate required to be given in connection with the issuance, sale or
delivery of the Bonds, which has the effect of causing the interest payable on
the Bonds to become includable in the gross income of the holders of the Bonds
(other than a holder who is a "substantial user" or "related person" as such
terms are used in Section 103(b) of the Code).
A "Determination of Taxability" shall be deemed to have occurred on
the first to occur of the following:
(a) on that date when the Company files (in compliance with its
obligations hereunder) any statement, supplemental statement or other tax
schedule, return or document (whether pursuant to Treasury Regulations
Section 1.103-10(b)(2)(vi),
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as the same may be amended or supplemented, or otherwise) which discloses
that an Event shall have occurred (a "Supplemental Statement");
(b) on that date when the Company is advised in writing by the
Commissioner or any District Director of Internal Revenue that, based
upon the filings of the Company hereunder, or upon any review or audit
of the Company, or upon any other ground whatsoever, an Event shall have
occurred;
(c) on that date when the Company receives notice from the Trustee
that the Trustee has been advised by (i) any bondholder that the Internal
Revenue Service has assessed as includable in the gross income of such
bondholder the interest on his Bonds due to the occurrence of an Event,
or (ii) the Commissioner or any District Director of Internal Revenue
that the interest on the Bonds is includable in the gross income of any
taxpaying bondholder due to the occurrence of an Event;
(d) on that date when the Company is advised in writing by the
Commissioner or any District Director of Internal Revenue that there has
been issued a public or private ruling of the Internal Revenue Service or
a technical advice memorandum issued by the national office of the
Internal Revenue Service in which the Company has participated or has
been given the opportunity to participate, that the interest on the Bonds
is includable in the gross income of any taxpaying bondholder due to the
occurrence of an Event; or
(e) on that date when the Company is advised in writing that a
final Determination from which no further right of appeal exists by a
court of competent jurisdiction in the United States of America in a
proceeding with respect to which the Company has been given written
notice and an opportunity to participate and defend that the interest on
the Bonds is includable in the gross income of any taxpaying bondholder
due to the occurrence of an Event;
provided, however, no Determination shall occur unless the Company has been
afforded the opportunity, at its expense, to contest any such conclusion and/or
assessment and, further, no Determination shall occur until such contest, if
made, has been finally determined.
The Company shall give prompt written notice to the County and the Trustee
of (a) the filing by the Company of any Supplemental Statement, and (b) its
receipt of any oral or written advice from the Internal Revenue Service that an
Event has occurred.
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Promptly upon learning of the occurence of one or more of the events
described in (a) through (e) above (whether or not the same is being
contested), the Trustee shall cause notice thereof to be given to the
bondholders in the same manner as is provided in the Indenture for notices of
redemption. In such notice to bondholders, the Trustee may make provisions for
obtaining advice from bondholders, in such form as shall be deemed appropriate,
respecting relevant assessments made on such bondholders by the Internal Revenue
Service, so as to be able, if appropriate, to verify the existence, present or
future, of a Determination.
Not later than six (6) months after the date of a Determination, the
Company shall instruct the Trustee to apply the accelerated purchase price
payments paid by the Company as a result of such Determination, or, the
earliest possible date after the giving of the required notice of redemption
under the Indenture, to the redemption of Bonds or to the payment to the
holders of Bonds which will mature or will be redeemed prior to the redemption
date provided for in this Section, all in accordance with the requirements
hereinbefore set forth in this Section. A copy of such instructions shall be
forwarded by the Company to the County.
Upon the redemption date provided for in this Section, and provided there
has been deposited with the Trustee the total amount as required, such amount
shall constitute the total compensation due the County and the holders of the
Bonds as a result of an occurrence of such Determination, and the Company shall
not be deemed to be in default hereunder by reason of the occurrence of such
Determination.
Section 8.9. GRANT OF SECURITY INTEREST IN PROJECT EQUIPMENT. As
security for the purchase price payments and all other payments which shall be
or become due and payable hereunder, the Company hereby grants to the County a
security interest in the Project Equipment and all proceeds thereof and general
intangibles relating thereto. The security interest granted in this Section
shall not attach to any of the Project Equipment until the same is located in
the State.
ARTICLE IX.
ASSIGNMENT, MORTGAGING AND SELLING; REDEMPTION
----------------------------------------------
Section 9.1. ASSIGNMENT. This Agreement may be assigned by the Company
without the necessity of obtaining the consent of the County or the Trustee,
subject, however, to the following conditions:
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(a) no assignment (other than pursuant to Section 8.3)
shall relieve the Company from primary liability for any of its
obligations hereunder, and if any such assignment occurs the Company
shall continue to remain primarily liable for purchase price payments and
other payments required to be made pursuant to Section 5.2 and for
performance and observance of the other agreements on its part herein
provided to be performed and observed by it;
(b) the assignee shall assume the obligations of the Company
hereunder to the extent of the interest assigned;
(c) the Company shall, within thirty (30) days after the delivery
thereof, furnish or cause to be furnished to the County and to the
Trustee a true and complete copy of each such assignment, together with
any instrument of assumption; and
(d) the Guarantor shall provide a written confirmation to the
Trustee that the Guaranty shall continue in full force and effect
following such assignment.
Section 9.2. MORTGAGING OF PROJECT BY COUNTY TO THE TRUSTEE. The
County will mortgage the Project to the Trustee under the Indenture and will
assign and create a security interest with respect to its interest in and pledge
all purchase price payments, other payments and revenues derived hereunder or
otherwise arising out of or in connection with its ownership of the Project to
the Trustee pursuant to the Indenture, to the Trustee as security for the
payment of the principal of and the interest on the Bonds, but said mortgage,
assignment and pledge shall be subject and subordinate hereto.
Section 9.3. RESTRICTIONS ON SALE OF PROJECT BY COUNTY. The County
agrees that, except for the mortgage of the Project under the Indenture and the
assignment hereof and of the purchase price payments, other payments and
revenues to be derived hereunder or otherwise arising out of or in connection
with its ownership of the Project to the Trustee pursuant to the Indenture, it
shall not (a) sell (other than the sale contemplated herein), assign, transfer
or convey the Project during the term hereof, (b) create or suffer to be
created any debt, lien or charge on the purchase price payments, other payments
and revenues arising out of or in connection with its ownership of the Project,
or (c) take any other action which might reasonably be construed as tending to
cause or induce the levy or assessment of ad valorem taxes on its title in and
to the Project.
Section 9.4. REDEMPTION OF BONDS. The County, at the request at any
time of the Company and if the same are then
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redeemable, shall forthwith take all steps that may be necessary under the
applicable redemption provisions of the Indenture to effect redemption of all
or any portion of the Bonds, as may be specified by the Company, on the
earliest redemption date on which such redemption may be made under such
applicable provisions or upon the date set for the redemption by the Company
pursuant to Section 7.2 or 11.1. As long as the Company is not in default
hereunder and the County is not obligated to call Bonds pursuant to the terms
of the Indenture, the County shall not redeem any Bond prior to its stated
maturity unless requested to do so in writing by the Company.
Section 9.5. PREPAYMENT OF PURCHASE PRICE. There is expressly reserved
to the Company the right, and the Company is authorized and permitted, at any
time it may choose, so long as it is not in default hereunder, to prepay all or
any part of the purchase price payments and other payments due under Section
5.2 and the County agrees that the Trustee may accept such prepayment when the
same is tendered by the Company. All such prepayments shall be credited on the
purchase price payments and other payments required to be made pursuant to
Section 5.2, in the chronological order of their due dates and at the election
of the Company shall be used for the redemption or purchase of Bonds in the
manner and to the extent provided in the Indenture.
Section 9.6. REFERENCE TO BONDS INEFFECTIVE AFTER BONDS PAID. Upon
payment in full of the Bonds and all fees and charges of the Trustee, all
references herein to the Bonds and the Trustee shall be ineffective, and
neither the Trustee nor the holders of any of the Bonds shall thereafter have
any rights hereunder, saving and excepting those that shall have theretofore
vested. Reference is hereby made to Section 902 of the Indenture which sets
forth the conditions upon the existence or occurrence of which payment in full
of the Bonds shall be deemed to have been made.
Section 9.7. COUNTY'S ELECTION TO ISSUE BONDS PURSUANT TO SECTION
103(B)(6)(D) OF THE CODE. Prior to the date of issuance and delivery of the
Bonds, the County will have made all necessary filings to effect an election
with respect to the Bonds under Section 103(b)(6)(D) of the Code.
ARTICLE X.
EVENTS OF DEFAULT AND REMEDIES
------------------------------
Section 10.1. EVENTS OF DEFAULT DEFINED. The following shall be "events
of default" under this Agreement; and the term "event of default" shall mean,
whenever it is used herein, any one or more of the following events:
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(a) failure by the Company to make the payments as required under
Section 5.2 at the times specified therein and continuing for a period of
one (1) business day;
(b) failure by the Company to comply with the provisions of
Sections 8.8 and 12.1;
(c) failure by the Company to observe and perform any agreement
hereunder on its part to be observed and/or performed, other than as
referred to in subsections (a) or (b) of this Section, for a period of
thirty (30) days after written notice, specifying such failure and
requesting that it be remedied, given to the Company by the County or the
Trustee, unless the County and the Trustee shall agree in writing to an
extension of such time prior to its expiration; provided, however, if the
failure stated in the notice cannot be corrected within the applicable
period, the County and the Trustee will not unreasonably withhold their
consent to an extension of such time if it is possible to correct such
failure and corrective action is instituted by the Company within the
applicable period and diligently pursued until the failure is corrected;
and
(d) the dissolution or liquidation of the Company or the filing by
the Company of a voluntary petition in bankruptcy, or failure by the
Company promptly to lift or bond (if legally permissible) any execution,
garnishment or attachment of such consequence as will materially impair
its ability to carry on its operations at the Project, or the commission
by the Company of any act of bankruptcy, or adjudication of the Company
as a bankrupt, or general assignment by the Company for the benefit of
its creditors, or the entry by the Company into an agreement of
composition with its creditors, or the approval by a court of competent
jurisdiction of a petition applicable to the Company in any proceeding
for its reorganization instituted under the provisions of the Federal
bankruptcy statutes, as amended, or under any similar act which may
hereafter be enacted. The term "dissolution or liquidation of the
Company," as used in this subsection, shall not be construed to include
the cessation of the corporate existence of the Company resulting from a
merger or consolidation of the Company into or with another corporation
or a dissolution or liquidation of the Company following a transfer of
all or substantially all of its assets as an entirety, under the
conditions permitting such actions contained in Section 8.3.
The foregoing provisions of this Section are subject to the following
limitations: If by reason of FORCE MAJEURE the Company is unable in whole or
in part to carry out the agreements
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on its part herein contained, other than the agreements on the part of the
Company contained in Article V and Sections 6.3, 6.4, 8.8 and 12.1, the
failure to perform such agreements due to such inability shall not constitute an
event of default nor shall it become an event of default upon appropriate
notification to the Company and/or the passage of the stated period of time.
The term FORCE MAJEURE as used herein shall mean, without limitation, the
following: acts of God; strikes, lockouts or other industrial disturbances; acts
of public enemies; orders of any kind of the government of the United States of
America or of the State or any of their departments, agencies, political
subdivisions or officials, or any civil or military authority; insurrections;
riots; epidemics; landslides; lightning; earthquakes; fires; hurricanes; storms;
floods; washouts; droughts; arrests; restraint of government and people; civil
disturbances; explosions; breakage or accident to machinery, transmission pipes
or canals; partial or entire failure of utilities; or any other cause or event
not reasonably within the control of the Company. The Company agrees, however,
to remedy with all reasonable dispatch the cause or causes preventing the
Company from carrying out such agreements; provided, that the settlement of
strikes, lockouts and other industrial disturbances shall be within the sole
discretion of the Company, and the Company shall not be required to make
settlement of strikes, lockouts and other industrial disturbances by acceding to
the demands of the opposing party or parties when such course is, in the
judgment of the Company, unacceptable to the Company.
Section 10.2. REMEDIES. Whenever any event of default shall have
happened and be continuing, the County, or the Trustee as provided in the
Indenture, may take any one or more of the following remedial steps:
(a) the County or the Trustee may, at its option, declare all
purchase price payments and other payments required to be made pursuant
to Section 5.2 for the remainder of the term of this Agreement to be
immediately due and payable, whereupon the same shall become immediately
due and payable. If the County or the Trustee elects to exercise the
remedy afforded in this subsection (a) and accelerates all purchase price
payments and other payments required to be made pursuant to Section 5.2
for the remainder of the term of this Agreement, the amount then due and
payable by the Company as accelerated payments shall be the sum of (i)
the aggregate principal amount of the outstanding Bonds, and (ii) all
interest on the Bonds then due and to become due to maturity whether by
acceleration or otherwise. Such sums as may then become payable shall be
paid into the Bond Fund, and after the Bonds and accrued interest thereon
have been fully paid and any costs occasioned by such event of default
have been satisfied, any excess moneys in the Bond Fund shall be
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returned to the Company as an overpayment of the purchase price;
(b) the County or the Trustee may re-enter and take possession of
the Project without terminating this Agreement and without any liability
to the Company for such entry and repossession and use its best efforts
to lease or sell the Project for the account of the Company, holding the
Company liable for the difference in the amount realized from such lease
or sale and the purchase price payments and other payments required to be
made by the Company pursuant to the provisions of Section 5.2;
(c) the County or the Trustee may require the Company to assemble
the Project Equipment and make the same available at a place or places to
be designated and shall have the right, without notice, demand or legal
process, to come upon the Project Land and take possession of all or any
of the Project Equipment in such manner and as and on such terms as it
may choose, and otherwise the County or the Trustee may exercise with
respect to the Project Equipment the rights of a secured party under the
U.C.C.;
(d) the County or the Trustee may terminate this Agreement, exclude
the Company from possession of the Project and use its best efforts to
lease or sell the Project to another for the account of the Company,
holding the Company liable for all purchase price payments and other
payments due up to the effective date of such lease or sale;
(e) if any of the Bonds shall at the time be outstanding, the
County or the Trustee may require the Company to furnish copies of all of
its books and records, or pertinent extracts thereof, pertaining to the
Project;
(f) the County or the Trustee may take whatever action at law or in
equity may appear necessary or desirable to collect the purchase price
payments and other payments then due and thereafter to become due or to
enforce performance and observance of any agreement of the Company
hereunder; and
(g) the County or the Trustee may exercise any remedies provided
for in the Indenture and with respect to any security interests the
rights of a secured party under
the U.C.C.
Any amounts collected pursuant to action taken under this Section shall be paid
into the Bond Fund and applied in accordance with the provisions of the
Indenture or, if payment in full of the Bonds has been made, shall be paid to
the Company.
-44-
<PAGE> 129
Section 10.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the County or the Trustee is intended to be exclusive of any other
remedy or remedies, but each and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise
any right or power accruing upon the occurrence of any event of default shall
impair any such right or power or shall be construed to be a waiver thereof,
but any such right or power may be exercised from time to time and as often as
may be deemed expedient. In order to entitle the County or the Trustee to
exercise any remedy reserved in this Article, it shall not be necessary to give
any notice, other than such notice or notices as may be herein expressly
required. Such remedies as are reserved to the County in this Article shall
also extend to the Trustee, and the Trustee and the holders of the Bonds shall
be deemed third-party beneficiaries of all agreements herein contained.
Section 10.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. If there
should occur an event of default hereunder and the County or the Trustee should
employ attorneys or incur other expenses for the collection of purchase price
payments, other payments and revenues required hereunder or the enforcement of
performance or observance of any agreement on the part of the Company herein
contained, the Company agrees that it will on demand therefor pay to the County
or the Trustee the reasonable fee of such attorneys and such other reasonable
expenses so incurred by the County or the Trustee.
Section 10.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. If any
agreement contained herein should be breached by either party and thereafter
waived by the other party, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other breach hereunder.
Section 10.6. WAIVER OF APPRAISEMENT, VALUATION, ETC. If there should
occur an event of default hereunder, the Company agrees to waive, to the extent
it may lawfully do so, the benefit of all appraisement, valuation, stay,
extension or redemption laws or hereafter in force, and all right of
appraisement and redemption to which it may be entitled.
ARTICLE XI.
OPTIONS TO PREPAY THE PURCHASE PRICE
------------------------------------
Section 11.1. OPTION TO PREPAY UNDER CERTAIN CONDITIONS. The Company
shall have, and is hereby granted, the option to prepay
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<PAGE> 130
the purchase price for the Project and cause the Bonds to be called for
redemption, if any of the following events shall have occurred:
(a) the Building or the Project Equipment shall have been damaged
or destroyed to such an extent that in the judgment of the Company (i) it
cannot be reasonably restored within a period of nine (9) months to the
condition thereof immediately preceding such damage or destruction, (ii)
the Company is thereby prevented from carrying on its normal operations
at the Project for a period of nine (9) months, (iii) the cost of
restoration thereof would exceed by $100,000 the Net Proceeds of
insurance carried thereon pursuant to the requirements of Section 6.4,
plus the amounts for which the Company is self-insured with respect to
deductible amounts permitted under Section 6.4, or (iv) it would not be
economically feasible for the Company to replace, repair, rebuild or
restore the same, as determined by the Company in its discretion;
(b) title in and to, or the temporary use of, all or substantially
all of the Project shall have been taken under the exercise of the power
of eminent domain by any governmental authority, or other Person acting
under governmental authority (including such a taking as results in the
Company being thereby prevented from carrying on its normal operations at
the Project for a period of nine (9) months);
(c) as a result of any changes in the Constitution of the State or
the Constitution of the United States of America or by legislative or
administrative action (whether State or Federal) or by final decree,
judgment or order of any court or administrative body (whether State or
Federal), this Agreement shall have become void or unenforceable or
impossible of performance in accordance with the intent and purposes of
the parties as expressed herein, or unreasonable burdens or excessive
liabilities shall have been imposed on the County or the Company
including, without limitation, Federal, State or other ad valorem,
property, income or other taxes not being imposed on the date hereof;
(d) a change in the economic availability of raw materials, energy
sources, operating supplies or facilities necessary for the operation of
the Project for the purposes authorized herein or such technological or
other changes which in the judgment of the Company render the Project
uneconomic for such purposes; or
- 46 -
<PAGE> 131
(e) this Agreement is terminated prior to the expiration of the
initial term for any reason other than the occurrence of an event of
default.
To exercise any such option, the Company shall, within ninety (90) days
following the event authorizing the exercise of such option, or at any time
during the continuation of the condition referred to in subsection (d) above,
given written notice to the County and to the Trustee, if any of the Bonds
shall then be outstanding, and shall specify therein the date of closing such
purchase, which date shall be not less than forty-five (45) days nor more than
ninety (90) days from the date such notice is mailed, and in case of a
redemption of the Bonds in accordance with the provisions of the Indenture
shall make arrangements satisfactory to the Trustee for the giving of the
required notice of redemption. The purchase price which shall be paid to the
Trustee by the Company upon its exercise of the option granted in this Section
shall be the sum of the following:
(1) an amount of money which, when added to the moneys in the Bond
Fund, will be sufficient to pay and redeem all of the then outstanding
Bonds on the earliest applicable redemption date including, without
limitation, principal plus accrued interest thereon to said redemption
date, plus
(2) an amount of money equal to the Trustee's and the paying
agents' fees and expenses under the Indenture accrued and to accrue until
such final payment and redemption of the Bonds, plus
(3) the sum of ten dollars ($10.00) which shall be paid by the
Company to the Trustee.
Upon the exercise of the option granted in this Section any Net Proceeds of
insurance or condemnation awards shall be paid to the Company.
Section 11.2. ADDITIONAL OPTION TO PREPAY. The Company shall have,
and is hereby granted, the additional option to prepay the purchase price for
the Project and cause the Bonds to be called for redemption at the earliest
date.permitted under the Indenture by paying to the Trustee an amount which,
when added to the amount on deposit in the Bond Fund, will be sufficient to pay
and redeem all the outstanding Bonds in accordance with the provisions of the
Indenture (including, without limiting the generality of the foregoing,
principal, interest to maturity or earliest applicable redemption date, as the
case may be, redemption premium, if any, expenses of redemption and Trustee's
and paying agents' fees and expenses), and the Trustee shall be requested to
give the required notice of redemption at the earliest date permitted under the
- 47 -
<PAGE> 132
Indenture, and to make other arrangements satisfactory to the Trustee in
connection with such redemption.
Section 11.3. OPTION TO ACCELERATE PURCHASE OF UNIMPROVED LAND. The
Company shall have, and is hereby granted, an option to accelerate the purchase
of any unimproved portion of the Project Land (on which neither the Building
nor any Project Equipment is located but on which parking, transportation or
utility facilities may be located) at any time and from time to time at a
purchase price equal to $3,000 per acre of the portion of the Project Land to
be purchased, provided that it furnishes the County with the following:
(a) a written notice containing (i) an adequate legal description
of that portion of, or interest in, the Project Land with respect to
which such option is to be exercised, (ii) a statement that the Company
intends to exercise its option to purchase such portion of, or interest
in, the Project Land on a date stated, which shall not be less than
forty-five (45) days nor more than ninety (90) days from the date of such
notice, and (iii) a statement that the use to which it is intended that
such portion of, or interest in, the Project Land is to be devoted will
promote at least one of the public purposes of the County;
(b) a certificate of an Independent Engineer who is acceptable to
the Trustee, dated not more than ninety (90) days prior to the date of
the purchase and stating that, in the opinion of the Person signing such
certificate, (i) the portion of, or interest in, the Project Land with
respect to which the option is exercised is not needed for the operation
of the Project for the purpose hereinabove stated or that sufficient
right and title is reserved to the County to fulfill said needs, and (ii)
the purchase will not impair the utility of the Project for the purposes
for which it was designed to be used or most recently modified and will
not destroy the means of ingress thereto and egress therefrom; and
(c) an amount of money equal to the purchase price
computed as provided in this Section.
The County agrees that upon receipt of the notice, certificate and money
required in this Section to be furnished to it by the Company, the County will
promptly deliver the same to the Trustee for deposit in the Bond Fund and
secure from the Trustee a release from the liens and/or security interest
afforded by this Agreement and the Indenture of such portion of, or interest
in, the Project Land with respect to which the Company shall have exercised the
option granted to it in this Section subject to any right and title reserved in
and to the County and that thereafter such portion or
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<PAGE> 133
interest shall not be deemed to be Project Land. If the Company shall
exercise the option granted to it under this Section, the Company shall not be
entitled to any diminution in or postponement or abatement of the purchase
price payments and other payments required to be made pursuant to Section 5.2.
If the Company purchases any unimproved part of, or interest in, the
Project Land pursuant to this Section, the Company and the County agree that
all walls presently standing or hereafter erected on or contiguous to the
boundary line of the portion of, or interest in, the Project Land so purchased
shall be party walls and each party grants the other a 10-foot easement
adjacent to any such party wall for the purpose of inspection, maintenance,
repair and replacement thereof and the tying-in of new construction. If the
Company utilizes any party wall for the purpose of tying-in construction that
will be utilized under common control with the Project, the Company may also
tie in to the utility facilities on the Project Land for the purpose of serving
the new construction and may remove any non-loadbearing wall panels in the
party wall; provided, however, that if the property so purchased ceases to be
operated under common control with the Project, the Company agrees that it will
install non-loadbearing wall panels similar in quality to those that have been
removed and will provide separate utility services for the new construction.
No wall may be so utilized by the Company unless prior thereto the County has
been furnished with a certificate or an Independent Engineer acceptable to the
Trustee stating that the proposed utilization will not impair the usefulness of
the Project for the purposes for which it was designed to be used or recently
modified.
Section 11.4. RELATIVE POSITION OF OPTIONS AND INDENTURE. The options
granted to the Company in this Article, except under Section 11.3, shall be and
remain prior and superior to the Indenture and may be exercised whether or not
there exists an event of default hereunder, provided that the existence of such
event of default will not result in nonfulfillment of any condition to the
exercise of any such option.
ARTICLE XII.
OBLIGATION OF COMPANY
---------------------
Section 12.1. OBLIGATION OF COMPANY TO PREPAY THE PURCHASE PRICE UNDER
CERTAIN CIRCUMSTANCES. The Company shall be obligated to prepay the purchase
price prior to the expiration of this Agreement and prior to payment in full of
the Bonds (or prior to making provision for payment thereof in accordance with
the Indenture) if there should occur a Determination of Taxability as defined
in Section 8.8. Within six (6) months after the Company
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<PAGE> 134
receives notice of such Determination of Taxability the Company hereby
agrees to prepay the purchase price of the Project, and the County hereby
agrees to accept such prepayment. The purchase price which shall be paid to
the Trustee by the Company shall be the amounts set forth in Section 8.8.
Upon the occurrence of a Determination of Taxability, any options of the
Company to prepay the purchase price or to have the County redeem the Bonds
under any other redemption provision of the Indenture shall be superseded by
its obligation to prepay the purchase price of the Project under this Section
for the purchase price herein set forth.
ARTICLE XIII.
MISCELLANEOUS
-------------
Section 13.1. NOTICES. All notices, certificates or other communications
hereunder shall be sufficiently given and shall be deemed given when mailed by
registered or certified mail, return receipt requested, postage prepaid.
addressed as follows:
<TABLE>
<S> <C>
(a) If to the County Board of County Commissioners of
Taylor County, Florida
Taylor County Courthouse
Perry, Florida 32347
Attention: Chairman
(b) If to the Company CPG Products Corp.
c/o General Mills, Inc.
P. O. Box 1113
Minneapolis, Minnesota 55440
Attention: General Counsel
(c) If to the Trustee The First National Bank of
Columbus
P.O. Box 40
Columbus, Georgia 31902
Attention: Corporate Trust
Department
</TABLE>
A duplicate copy of each notice, certificate or other communication given
hereunder by the County, the Company or the Trustee to any one of the others
shall also be given to all of the others. The County, the Company and the
Trustee may, by notice given hereunder, designate any further or different
addresses to which subsequent notices, certificates or other communications
shall be sent.
- 50 -
<PAGE> 135
Section 13.2. BINDING EFFECT. This Agreement shall inure to the
benefit of and shall be binding upon the County, the Company and their
respective successors and assigns.
Section 13.3. SEVERABILITY. If any provision hereof shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision hereof.
Section 13.4. AMOUNTS REMAINING IN BOND FUND. Subject to and in
accordance with the terms and conditions of Section 510 of the Indenture,
certain surplus moneys remaining in the two accounts in the Bond Fund shall
belong to and be paid to the Company by the Trustee as an overpayment of the
purchase price for the Project.
Section 13.5. AMENDMENTS, CHANGES AND MODIFICATIONS. Except as
otherwise provided herein or in the Indenture, subsequent to the date of
issuance and delivery of the Bonds and prior to their payment in full, this
Agreement may not be effectively amended or terminated without the written
consent of the Trustee.
Section 13.6. EXECUTION COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts together shall constitute but one and
the same instrument.
Section 13.7. CAPTIONS. The captions and headings herein are for
convenience only and in no way define, limit or describe the scope or intent of
any provisions hereof.
Section 13.8. RECORDING OF AGREEMENT. This Agreement and every
assignment (other than the assignment in the Indenture to the Trustee)
and modification hereof shall be recorded in the Clerk's Office of the Circuit
Court of and for the County, or in such other office as may be at the time
provided by law as the proper place for such recordation.
Section 13.9. LAW GOVERNING CONSTRUCTION OF AGREEMENT. This Agreement
shall be governed by, and construed in accordance with, the laws of the State.
Section 13.10. NET OBLIGATION. The Company's obligation hereunder
shall be a "net obligation," and the Company shall pay absolutely net during
the term of this Agreement the purchase price payments and other payments
specified herein, without abatement, deduction or set-off other than those
herein expressly provided.
- 51 -
<PAGE> 136
IN WITNESS WHEREOF, the County and the Company have caused this
Agreement to be executed in their respective corporate names and their
respective corporate seals to be hereunto affixed and attested by their duly
authorized officers, all as of the date first above written.
TAYLOR COUNTY, FLORIDA
By:
-------------------------
(CORPORATE SEAL) Chairman, Board of County
Commissioners of Taylor
County, Florida
Attest:
- ----------------------------
Clerk, Circuit Court in and
for Taylor County, Florida
As to the County, signed and
sealed in the presence of:
- ----------------------------
Witness
- ----------------------------
Notary Public
My commission expires:
(NOTARIAL SEAL)
(Execution by the Company follows on page 56.)
- 52 -
<PAGE> 137
CPG PRODUCTS CORP.
By:
--------------
(CORPORATE SEAL) Vice President
Attest:
- ------------------------------
Secretary
As to the Company, signed and
sealed in the presence of:
- ------------------------------
Witness
- ------------------------------
Notary Public
My commission expires:
(NOTARIAL SEAL)
- 53 -
<PAGE> 138
ACKNOWLEDGMENT OF ISSUER
STATE OF FLORIDA
COUNTY OF TAYLOR
I, the undersigned, a Notary Public in and for said County in said State,
DO HEREBY CERTIFY that and
----------------------- -----------------------------,
whose names as Chairman of the Board of County Commissioners of Taylor
County, Florida, and the Clerk of the Circuit Court in and for Taylor County,
Florida, respectively are signed to the foregoing Agreement of Sale, and who
are known to me and known to be such officers, acknowledged before me under
oath that, being informed of the contents of said Agreement of Sale, they, in
their capacities as such officers and with full authority, executed the same
voluntarily for and as the act of said Board.
Given under my hand and seal of office.
----------------------
Notary Public
(SEAL) My commission expires:
- 54 -
<PAGE> 139
ACKNOWLEDGEMENT OF COMPANY
STATE OF MINNESOTA
COUNTY OF HENNEPIN
I, the undersigned Notary Public in and for said County in said State, DO
HEREBY CERTIFY that , whose name as
---------------------- --------------------,
of CPG PRODUCTS CORP. is signed to the foregoing Agreement of Sale, and who is
known to me and known to be such officer, acknowledged before me under oath
that, being informed of the contents of said Agreement of Sale, he, in his
capacity as such officer and with full authority, executed the same voluntarily
for and as the act of said corporation on the day the same bears date.
Given under my hand and seal of office.
-----------------------
Notary Public
(SEAL) My Commission Expires:
- 55 -
<PAGE> 140
EXHIBIT "A"
to
Agreement of Sale
between
Taylor County, Florida and
CPG Products Corp.
dated as of September 1, 1979
PROJECT LAND
------------
Parcel 1:
- --------
A tract of land on the north side of Dreamland Subdivision and south of a
Southern Railroad spur track described as follows: Begin at the southwest
corner of the southwest one quarter of the southwest one quarter of Section 25,
Township 4 South, Range 7 East, Perry, Taylor County, Florida, and run North 01
degrees 03 minutes West 503.70 feet to the south side of Southern Railroad, 50
feet from the center line thereof; thence along said south right-of-way line
North 67 degrees 59 minutes East 159.80 feet to the P.C. of a curve to the
right having a radius of 663.14 feet, arc distance 1195.33 feet, chord bearing
South 60 degrees 22 minutes 40 seconds East, chord distance 1039.96 feet to the
north side of Lot 1, Block H, Dreamland Subdivision as recorded in Plat Book 1,
page 51 of the public records of Taylor County, Florida, thence along north
line of Dreamland Subdivision South 87 degrees 17 minutes West 1044.13 feet to
the point of beginning and being part of the southwest one quarter of the
southwest one quarter of Section 25, Township 4 South, Range 7 East.
Containing 11.72 acres.
Parcel 2:
- --------
A survey of that part of the southwest one quarter of the northwest one quarter
of Section 25, Township 4 South, Range 7 East, being described as follows:
Commence at the southwest corner of the southwest one quarter of the northwest
one quarter of Section 25, Township 4 South, Range 7 East, Perry, Taylor
County, Florida and run North 01 degrees 03 minutes West 503.70 feet to the
south side of Southern Railroad 50 feet from the center line thereof; thence
along said south right-of-way line North 67 degrees 59 minutes East 159.80 feet
to the P.C. of a curve and the point of beginning; thence from said P.C. of a
curve to the right having a radius of 663.14 feet, arc distance 1,195.33 feet,
chord bearing 60 degrees 22 minutes 40 seconds East chord distance 1,039.96
feet to the north side of Lot 1, Block H, Dreamland Subdivision as recorded in
Plat Book 1, page 51 of the public records of Taylor County, Florida. Thence
North 87 degrees 17 minutes East along the north line of said subdivision 99.60
feet; thence North 0 degrees 07
- 56 -
<PAGE> 141
minutes 56 seconds West 895.60 feet to the South right-of-way line of Duval
Street; thence South 87 degrees 03 minutes 30 seconds West along said
right-of-way 103.03 feet to the P.C. of a curve to the left having a radius of
1,402.40 feet, arc distance 166.49, chord bearing South 83 degrees 40 minutes
West, chord distance 166.40 feet to the intersection of a curve to the right on
the southerly right-of-way line of Southern Railroad having a radius of
1,137.99 feet, arc distance 373.25 feet, chord bearing South 58 degrees 23
minutes 30 seconds West, chord distance 371.58 feet to the P.C. of said curve;
thence run South 68 degrees 03 minutes 22 seconds West among said southerly
right-of-way of railroad 449.27 feet to the point of beginning. Containing 7.27
acres.
(Subject to Permitted Encumbrances.)
- 57 -
<PAGE> 1
Exhibit 10.18
Bank of America
CABLE ADDRESS: CONIL BANK TELEX 02-5233 - SWIFT ADDRESS: CNTL US 44- TELEFAX
NUMBER: 987-6828
DATE: February 26, 1997
IRREVOCABLE DOCUMENTARY CREDIT NUMBER: C7319993
BENEFICIARY APPLICANT
ALLSTATE INSURANCE COMPANY
3075 SANDERS ROAD
NESTLE UK LTD. SUITE G5D
ST. GEORGE HOUSE NORTHBROOK, ILLINOIS 60062-7127
CROYDON, SURREY CR9 1NR, ENGLAND
ATTN: COMPANY SECRETARY
AMOUNT
USD 1,500,000.00
ONE MILLION FIVE HUNDRED THOUSAND
AND 00/100'S US DOLLARS
EXPIRATION
DECEMBER 31, 1998 AT OUR COUNTERS
GENTLEMEN:
AT THE REQUEST AND ON THE INSTRUCTIONS OF OUR CUSTOMER, ALLSTATE INSURANCE
COMPANY (THE "ACCOUNT PARTY"), WE HEREBY ESTABLISH IN YOUR FAVOR THIS
IRREVOCABLE STANDBY, NONTRANSFERABLE LETTER OF CREDIT IN THE ORIGINAL AMOUNT OF
USD $1,500,000.00 (ONE MILLION FIVE HUNDRED THOUSAND AND 00/100 UNITED STATES
DOLLARS ONLY).
SECTION 1. DEFINITIONS: THE FOLLOWING TERMS WHEN USED IN THIS LETTER OF
CREDIT SHALL HAVE THE FOLLOWING MEANINGS:
"ACCOUNT PARTY: IS DEFINED IN THE FIRST PARAGRAPH.
"ADDITIONAL LETTERS OF CREDIT" SHALL MEAN EACH OF THE FOLLOWING LETTERS OF
CREDIT: C7320476 ISSUED BY BANK OF AMERICA ILLINOIS FOR THE ACCOUNT OF
PETTIBONE CORPORATION, P372671 ISSUED BY THE CHASE MANHATTAN BANK FOR THE
ACCOUNT OF GERALD D. HOSIER, AND N 97 0095 ISSUED BY THE CANADIAN IMPERIAL BANK
OF COMMERCE FOR THE ACCOUNT OF TCW SHARED OPPORTUNITY FUNDS II L.P., EACH OF
WHICH IS BEING ISSUED CONCURRENTLY HEREWITH.
"AUTHORIZED OFFICER" SHALL MEAN ANY OF YOUR DIRECTORS WHOSE SIGNATURES SHALL
HAVE BEEN SATISFACTORILY CERTIFIED TO US.
<PAGE> 2
"BUSINESS DAY" SHALL MEAN ANY DAY ON WHICH WE ARE OPEN FOR THE PURPOSE OF
CONDUCTING COMMERCIAL BANKING BUSINESS AT OUR PAYMENT OFFICE.
"LOCAL TIME" MEANS "NEW YORK TIME".
"PAYMENT OFFICE" IS DEFINED IN SECTION 2.
"STATED AMOUNT" MEANS, AT ANY TIME, THE ORIGINAL AMOUNT OF THIS LETTER OF
CREDIT SET FORTH IN THE FIRST PARAGRAPH, AS SUCH AMOUNT HAS AT SUCH TIME BEEN
REDUCED IN ACCORDANCE WITH SECTION 4.
"STATED EXPIRY DATE" MEANS DECEMBER 31, 1998, OR, UPON OUR ADVICE TO
THIS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: C7319993
YOU AT LEAST FIVE BUSINESS DAYS PRIOR TO SUCH DATE THAT WE ARE EXTENDING THIS
LETTER OF CREDIT, OCTOBER 1, 2009; PROVIDED, HOWEVER, THAT, IN THE EVENT THAT
ALL THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE INDUSTRIAL REVENUE
BONDS ISSUED PURSUANT TO THE TRUST INDENTURE, DATED AS OF OCTOBER 1, 1979,
BETWEEN THE INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF KNOX AND THE FIRST
NATIONAL BANK OF COLUMBUS AND THE TRUST INDENTURE DATED AS OF SEPTEMBER 1,
1979, BETWEEN TAYLOR COUNTY, FLORIDA AND THE FIRST NATIONAL BANK OF COLUMBUS,
SHALL HAVE BEEN PAID IN FULL PRIOR TO DECEMBER 31, 1998 WE MAY INSTEAD EXTEND
THE STATED EXPIRY DATE TO SEPTEMBER 1, 2004.
SECTION 2. PRESENTATION: FUNDS UNDER THIS LETTER OF CREDIT WILL BE MADE
AVAILABLE TO YOU, IN LAWFUL CURRENCY OF THE UNITED STATES OF AMERICA, AGAINST
RECEIPT BY US OF YOUR WRITTEN CERTIFICATE IN THE FORM OF ATTACHMENT 1 HERETO,
APPROPRIATELY COMPLETED AND SIGNED BY AN AUTHORIZED OFFICER ACCOMPANIED BY A
PHOTOCOPY OF THIS LETTER OF CREDIT PRESENTATION OF EACH SUCH CERTIFICATE SHALL
BE MADE IN PERSON AT OUR OFFICE LOCATED AT 231 SOUTH LA SALLE STREET, CHICAGO,
ILLINOIS 60697, ATTN: LETTERS OF CREDIT DEPT., (OUR "PAYMENT OFFICE").
SECTION 3. PAYMENTS: DEMAND FOR PAYMENT IN LAWFUL MONEY OF THE UNITED STATES
OF AMERICA OF ALL OR ANY PORTION OF THE STATED AMOUNT MAY BE MADE BY YOU UNDER
THIS LETTER OF CREDIT AT ANY TIME DURING OUR BUSINESS HOURS AT OUR PAYMENT
OFFICE ON ANY BUSINESS DAY. IF ANY SUCH DEMAND FOR PAYMENT IS MADE BY YOU
HEREUNDER AT OR PRIOR TO 10:00 A.M. (LOCAL TIME) ON A BUSINESS DAY, AND
PROVIDED THAT SUCH DEMAND FOR PAYMENT AND THE DOCUMENTS PRESENTED IN CONNECTION
THEREWITH CONFORM TO THE TERMS AND CONDITIONS HEREOF, PAYMENT WILL BE MADE TO
YOU, OR TO YOUR DESIGNEE, OF THE AMOUNT DEMANDED, IN SAME DAY FUNDS, AT OUR
PAYMENT OFFICE NOT LATER THAN 11:00 A.M. (LOCAL TIME), ON THE THIRD SUCCEEDING
BUSINESS DAY. IF SUCH DEMAND FOR PAYMENT IS MADE BY YOU HEREUNDER AFTER 10:00
A.M. (LOCAL TIME) A BUSINESS DAY, AND PROVIDED THAT SUCH DEMAND FOR PAYMENT AND
THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH CONFORM TO THE TERMS AND
CONDITIONS HEREOF, PAYMENT SHALL BE MADE TO YOU, OR TO YOUR DESIGNEE, OF THE
AMOUNT DEMANDED, IN SAME DAY
-2-
<PAGE> 3
FUNDS, AT OUR PAYMENT OFFICE NOT LATER THAN 11:00 A.M. (LOCAL TIME), ON THE
FOURTH SUCCEEDING BUSINESS DAY. IF REQUESTED BY YOU, PAYMENT UNDER THIS LETTER
OF CREDIT WILL BE MADE BY WIRE TRANSFER OF SAME DAY FUNDS TO THE ACCOUNT
SPECIFIED IN YOUR DEMAND FOR PAYMENT. IF A DEMAND FOR PAYMENT MADE BY YOU
HEREUNDER DOES NOT, IN ANY INSTANCE, CONFORM TO THE TERMS AND CONDITIONS OF
THIS LETTER OF CREDIT, WE SHALL GIVE YOU PROMPT NOTICE THAT THE DEMAND FOR
PAYMENT WAS NOT EFFECTED IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS
LETTER OF CREDIT, STATING THE REASONS THEREFOR, AND THAT WE WILL (SUBJECT TO
YOUR FURTHER INSTRUCTIONS) HOLD ANY DOCUMENTS WHICH HAVE BEEN DELIVERED TO US
BY YOU. UPON BEING NOTIFIED THAT THE DEMAND FOR PAYMENT WAS NOT EFFECTED IN
CONFORMITY WITH THIS LETTER OF CREDIT, YOU MAY ATTEMPT TO CORRECT ANY SUCH
NON-CONFORMING DEMAND FOR PAYMENT TO THE EXTENT THAT YOU ARE THEN ENTITLED AND
ABLE TO DO SO.
SECTION 4. REDUCTION OF STATED AMOUNT: EACH PAYMENT MADE BY US HEREUNDER
SHALL PERMANENTLY REDUCE THE STATED AMOUNT BY THE AMOUNT OF SUCH PAYMENT, AND
NO DEMAND FOR PAYMENT HEREUNDER SHALL EXCEED THE STATED AMOUNT IN EFFECT OF
SUCH TIME. THE STATED AMOUNT OF THIS LETTER OF CREDIT SHALL ALSO BE
PERMANENTLY REDUCED FROM TIME TO TIME UPON OUR RECEIPT OF YOUR CERTIFICATION IN
THE FORM OF ATTACHMENT 2 HERETO, APPROPRIATELY COMPLETED AND SIGNED BY AN
AUTHORIZED OFFICER.
SECTION 5. DISCHARGE: ONLY YOU MAY MAKE A DEMAND FOR PAYMENT UNDER THIS
LETTER OF CREDIT. UPON THE PAYMENT TO YOU, TO YOUR DESIGNEE, OR TO YOUR
ACCOUNT OF THE AMOUNT DEMANDED HEREUNDER, WE SHALL BE FULLY DISCHARGED OF OUR
OBLIGATIONS UNDER THIS LETTER OF CREDIT TO THE EXTENT OF SUCH DEMAND FOR
PAYMENT, AND TO THE EXTENT OF SUCH PAYMENT, WE SHALL NOT THEREAFTER BE
OBLIGATED TO MAKE ANY FURTHER PAYMENT UNDER THIS LETTER OF CREDIT. BY PAYING
TO YOU, OR TO YOUR ACCOUNT ANY AMOUNT DEMANDED IN ACCORDANCE HEREWITH, WE MAKE
NO REPRESENTATION AS TO THE CORRECTNESS OF THE AMOUNT DEMANDED.
SECTION 6. TERMINATION: UPON THE EARLIEST OF:
(A) THE MAKING BY US OF THE FINAL PAYMENT AVAILABLE TO BE MADE HEREUNDER;
(B) THE CLOSE OF BUSINESS AT OUR PAYMENT OFFICE ON THE STATED EXPIRY DATE,
PROVIDED THAT THE ISSUER SHALL HONOR IN ACCORDANCE WITH THE TERMS HEREOF ANY
DEMAND FOR PAYMENT MADE ON THE STATED EXPIRY DATE IN COMPLIANCE WITH THE TERMS
HEREOF; OR
(C) RECEIPT BY US OF A CERTIFICATE SIGNED BY AN AUTHORIZED OFFICER STATED THAT
ALL OBLIGATIONS TO WHICH THIS LETTER OF CREDIT RELATES HAVE BEEN TERMINATED,
PAID OR OTHERWISE SATISFIED IN FULL;
THIS LETTER OF CREDIT SHALL AUTOMATICALLY TERMINATE. UPON ITS TERMINATION,
YOU SHALL PROMPTLY DELIVER THIS ORIGINAL LETTER OF CREDIT TO US FOR
CANCELLATION.
-3-
<PAGE> 4
SECTION 7. NOTICES, ETC.: COMMUNICATIONS WITH RESPECT TO THIS LETTER OF
CREDIT SHALL BE IN WRITING AND SHALL BE ADDRESSED TO US AT OUR PAYMENT OFFICE,
ATTENTION: LETTER OF CREDIT DEPT., SPECIFICALLY REFERRING THEREON TO THIS
LETTER OF CREDIT BY NUMBER, FOLLOWED BY COPIES TO THE ACCOUNT PARTY AT 3075
SANDERS ROAD, SUITE 65D NORTHBROOK, ILLINOIS 600062-7127 AND TOM'S FOODS, INC.
AT 900 EIGHTH STREET, COLUMBUS, GA 31902, ATTENTION: S. ALBERT GASTON.
SECTION 8. GOVERNING LAW: THIS LETTER OF CREDIT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER, AND SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE
OF NEW YORK, INCLUDING ARTICLE 5 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
THE STATE OF NEW YORK (THE "UCC"); PROVIDED, HOWEVER, THAT TO THE EXTENT OF ANY
INCONSISTENCY BETWEEN THE TERMS OF THIS LETTER OF CREDIT AND THE UCC, THE TERMS
OF THIS LETTER OF CREDIT SHALL GOVERN.
SECTION 9. MISCELLANEOUS: THIS LETTER OF CREDIT MAY NOT BE TRANSFERRED OR
ASSIGNED, EITHER IN WHOLE OR IN PART. THIS LETTER OF CREDIT SETS FORTH IN FULL
OUR UNDERTAKING, AND SUCH UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED,
AMENDED, AMPLIFIED, OR LIMITED BY REFERENCE TO ANY DOCUMENT, INSTRUMENT, OR
AGREEMENT REFERRED TO HEREIN.
THIS LETTER OF CREDIT IS ONE OF FOUR LETTERS OF CREDIT WHICH REPLACE THE LETTER
OF CREDIT DATED AUGUST 31, 1993 ISSUED BY CANADIAN IMPERIAL BANK OF COMMERCE,
LETTER OF CREDIT NO. SYN-93-10030 WHICH ITSELF REPLACES THE LETTER OF CREDIT
DATED JUNE 27, 1988 AS AMENDED ON MAY 13, 1993 ISSUED BY CANADIAN IMPERIAL BANK
OF COMMERCE, LETTER OF CREDIT NUMBER 114.88\9006.
IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS TRANSACTION,
PLEASE CALL 312-923-5949.
BANK OF AMERICA ILLINOIS
ORIGINAL
THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: C7319993
______________________________ ____________________________
FOR CASHIER FOR CASHIER
THIS DOCUMENT CONSISTS OF 4 PAGE(S)
-4-
<PAGE> 5
ATTACHMENT 1
CERTIFICATE OF DEMAND FOR PAYMENT
DATE
- -----------------------
- -----------------------
- -----------------------
ATTENTION: LETTER OF CREDIT DEPT.
RE: IRREVOCABLE STANDBY LETTER OF CREDIT NO.
--------------------------------
THE UNDERSIGNED, A DULY AUTHORIZED OFFICER OF NESTLE UK LTD. (THE
"BENEFICIARY"), HEREBY CERTIFIES TO _______________________________ (THE
"ISSUER") THAT:
(A) UNLESS OTHERWISE DEFINED, ALL CAPITALIZED TERMS USED HEREIN HAVE THE
MEANINGS ASSIGNED THERETO IN THE IRREVOCABLE STANDBY LETTER OF CREDIT NO.
_______ (THE "LETTER OF CREDIT"), DATED ________________, 1997, ISSUED BY
THE ISSUER ON THE APPLICATION OF ____________ (THE "ACCOUNT PARTY").
(B) THE BENEFICIARY IS MAKING A DEMAND FOR PAYMENT IN LAWFUL MONEY OF THE
UNITED STATES OF AMERICA UNDER THE LETTER OF CREDIT IN THE AMOUNT OF
_____________, WHICH WILL BE APPLIED TO PAYMENT OF THE OBLIGATIONS OF THE
BENEFICIARY TO GENERAL MILLS, INC. ("GM") OR CPG PRODUCTS CORP. ("CPG")
UNDER THAT CERTAIN GUARANTEE, DATED JULY 12, 1983, BY THE BENEFICIARY IN
FAVOR OF GM AND CPG (THE "GUARANTEE"). DEMAND WAS MADE ON THE BENEFICIARY
BY GM OR CPG UNDER THE GUARANTEE TO PAY THE AMOUNT REQUESTED HEREIN. THE
AMOUNT DEMANDED HEREBY DOES NOT ON THE DATE HEREOF, AND WILL NOT ON THE
DATE PAYMENT HEREUNDER IS REQUIRED TO BE MADE AFTER GIVING EFFECT TO ALL
OTHER AMOUNTS DEMANDED BUT THEN UNPAID UNDER THE LETTER OF CREDIT, EXCEED
THE STATED AMOUNT OF THE LETTER OF CREDIT.
(B) THE BENEFICIARY IS MAKING A DEMAND FOR PAYMENT IN LAWFUL MONEY OF THE
UNITED STATES OF AMERICA UNDER THE LETTER OF CREDIT IN THE AMOUNT OF
___________, WHICH IS THE ENTIRE STATED AMOUNT OF THE LETTER OF CREDIT AS
IN EFFECT ON THE DATE HEREOF, FOLLOWING THE ACCOUNT PARTY'S FAILURE TO
PROVIDE THE BENEFICIARY ON OR BEFORE THE SIXTH BUSINESS DAY PRECEDING
DECEMBER 31, 1998, WITH AN IRREVOCABLE LETTER OF CREDIT OR AN
UNCONDITIONAL GUARANTEE (EFFECTIVE ON OR BEFORE THE TERMINATION OF THE
LETTER OF CREDIT) FROM A SATISFACTORY BANK (AS DEFINED IN SECTION 6.05 OF
THE STOCK PURCHASE AGREEMENT DATED AS OF APRIL 26, 1988 BETWEEN ROWNTREE
-5-
<PAGE> 6
INC. AND TF ACQUISITION CORPORATION) DISCHARGING THE BENEFICIARY FROM, OR
INDEMNIFYING THE BENEFICIARY WITH RESPECT TO, ITS OBLIGATIONS UNDER THAT
CERTAIN GUARANTEE, DATED JULY 12, 1983, BY THE BENEFICIARY IN FAVOR OF
GENERAL MILLS, INC. OR CPG PRODUCTS CORP. THE DATE OF THIS DEMAND FOR
PAYMENT SHALL NOT BE MORE THAN FIVE BUSINESS DAYS PRIOR TO THE STATED
EXPIRY DATE.
(C) CONCURRENTLY HEREWITH, THE BENEFICIARY IS MAKING A PRO RATA DEMAND ON
EACH OF THE ADDITIONAL LETTERS OF CREDIT.
(D) UPON ITS RECEIPT OF THE AMOUNT DEMANDED UNDER THE LETTER OF CREDIT, THE
BENEFICIARY WILL
(I) APPLY SUCH AMOUNT DIRECTLY TO THE PAYMENT OF THE BENEFICIARY'S
OBLIGATIONS TO GM AND CPG UNDER THE GUARANTEE; AND
(II) HOLD SUCH AMOUNT FOR APPLICATION OF THE PAYMENT THE BENEFICIARY'S
OBLIGATIONS TO GENERAL MILLS, INC. AND CPG PRODUCTS CORP. UNDER THAT
CERTAIN GUARANTEE DATED JULY 12, 1983; AND
(III) IF AFTER THE PAYMENT OF SUCH AMOUNTS LETTER OF CREDIT IS TERMINATED,
DELIVER TO YOU THE ORIGINAL COPY OF THE LETTER OF CREDIT AND ALL
RELEASES AS YOU MAY REASONABLY REQUEST.
(E) [INSERT DISBURSEMENT INSTRUCTIONS.]
IN WITNESS WHEREOF, THE BENEFICIARY HAS CAUSED ITS AUTHORIZED OFFICER TO
EXECUTE AND DELIVER THIS CERTIFICATE AS OF THE _____ DAY OF ______________,
________.
NESTLE UK LTD.
BY ________________________________
TITLE
-6-
<PAGE> 7
ATTACHMENT 2
CERTIFICATE
RE: IRREVOCABLE LETTER OF CREDIT NO. ________
THE UNDERSIGNED, DULY AUTHORIZED OFFICER OF NESTLE U.K. LTD. (THE
"BENEFICIARY"), HEREBY CERTIFIES TO _____________________ ("ISSUER") AS
FOLLOWS WITH RESPECT TO THE ABOVE REFLECTED LETTER OF CREDIT (THE "LETTER
OF CREDIT"; TERMS DEFINED THEREIN AND NOT OTHERWISE DEFINED HEREIN BEING
USED HEREIN AS THEREIN DEFINED) IN FAVOR OF BENEFICIARY, THAT:
(1) THE BENEFICIARY HEREBY CONSENTS TO A REDUCTION OF THE STATED
AMOUNT OF THE LETTER OF CREDIT BY $______________.
(2) THE ISSUER IS HEREBY INSTRUCTED AND AUTHORIZED TO REDUCE THE
STATED AMOUNT OF LETTER OF CREDIT NO. _____________ BY THE AMOUNT SET
FORTH IN PARAGRAPH (1) ABOVE.
(3) EACH OF THE ADDITIONAL LETTERS OF CREDIT ARE ALSO BEING REDUCED
CONCURRENTLY HEREWITH ON A PRO RATA BASIS.
IN WITNESS WHEREOF THE BENEFICIARY HAS EXECUTED AND DELIVERED THIS CERTIFICATE
AS OF THE _____ DAY OF ________________________, 19___.
VERY TRULY YOURS,
NESTLE U.K. LTD.
BY: _____________________________
NAME:
TITLE:
-7-
<PAGE> 8
Bank of America
CABLE ADDRESS: CONIL BANK TELEX 02-5233 - SWIFT ADDRESS: CNTL US 44- TELFAX
NUMBER: 987-6828
DATE: ______________________
IRREVOCABLE DOCUMENTARY CREDIT NUMBER: _________________
BENEFICIARY APPLICANT
PETTIBONE CORPORATION
4225 NAPERVILLE ROAD
NESTLE UK LTD. LISLE, IL 60532
ST. GEORGE HOUSE
CROYDON, SURREY CR9 1NR, ENGLAND
ATTN: COMPANY SECRETARY
AMOUNT
USD 5,500,000.00
FIVE MILLION FIVE HUNDRED THOUSAND
AND 00/100'S US DOLLARS
EXPIRATION
DECEMBER 31, 1998 AT OUR COUNTERS
GENTLEMEN:
AT THE REQUEST AND ON THE INSTRUCTIONS OF OUR CUSTOMER, PETTIBONE CORPORATION
(THE "ACCOUNT PARTY"), WE HEREBY ESTABLISH IN YOUR FAVOR THIS IRREVOCABLE
STANDBY, NONTRANSFERABLE LETTER OF CREDIT IN THE ORIGINAL AMOUNT OF USD
$5,500,000.00 (FIVE MILLION FIVE HUNDRED THOUSAND AND 00/100 UNITED STATES
DOLLARS ONLY).
SECTION 1. DEFINITIONS: THE FOLLOWING TERMS WHEN USED IN THIS LETTER OF
CREDIT SHALL HAVE THE FOLLOWING MEANINGS:
"ACCOUNT PARTY: IS DEFINED IN THE FIRST PARAGRAPH.
"ADDITIONAL LETTERS OF CREDIT" SHALL MEAN EACH OF THE FOLLOWING LETTER OF
CREDIT: P372671 ISSUED BY THE CHASE MANHATTAN BANK FOR THE ACCOUNT OF GERALD D.
HOSIER, C7319993 ISSUED BY BANK OF AMERICA ILLINOIS FOR THE ACCOUNT OF ALLSTATE
INSURANCE COMPANY, AND N 97 0095 ISSUED BY THE CANADIAN IMPERIAL BANK OF
COMMERCE FOR THE ACCOUNT OF TCW SHARED OPPORTUNITY FUND II L.P., EACH OF WHICH
IS BEING ISSUED CONCURRENTLY HEREWITH.
<PAGE> 9
"AUTHORIZED OFFICER" SHALL MEAN ANY OF YOUR DIRECTORS WHOSE SIGNATURES SHALL
HAVE BEEN SATISFACTORILY CERTIFIED TO US.
"BUSINESS DAY" SHALL MEAN ANY DAY ON WHICH WE ARE OPEN FOR THE PURPOSE OF
CONDUCTING COMMERCIAL BANKING BUSINESS AT OUR PAYMENT OFFICE.
"LOCAL TIME" MEANS "NEW YORK TIME".
"PAYMENT OFFICE" IS DEFINED IN SECTION 2.
"STATED AMOUNT" MEANS, AT ANY TIME, THE ORIGINAL AMOUNT OF THIS LETTER OF
CREDIT SET FORTH IN THE FIRST PARAGRAPH, AS SUCH AMOUNT HAS AT SUCH TIME BEEN
REDUCED IN ACCORDANCE WITH SECTION 4.
"STATED EXPIRY DATE" MEANS DECEMBER 31, 1998, OR, UPON OUR ADVICE TO YOU AT
LEAST FIVE BUSINESS DAYS PRIOR TO SUCH DATE THAT WE ARE EXTENDING THIS LETTER
OF CREDIT, OCTOBER 1, 2009; PROVIDED, HOWEVER, THAT, IN THE EVENT THAT ALL THE
PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE INDUSTRIAL REVENUE BONDS
ISSUED PURSUANT TO THE TRUST INDENTURE, DATED AS OF OCTOBER 1, 1979, BETWEEN
THE INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF KNOX AND THE FIRST NATIONAL
BANK OF COLUMBUS AND THE TRUST INDENTURE DATED AS OF SEPTEMBER 1, 1979, BETWEEN
TAYLOR COUNTY, FLORIDA AND THE FIRST NATIONAL BANK OF COLUMBUS, SHALL HAVE BEEN
PAID IN FULL PRIOR TO DECEMBER 31, 1998 WE MAY INSTEAD EXTEND THE STATED
EXPIRY DATE TO SEPTEMBER 1, 2004.
SECTION 2. PRESENTATION: FUNDS UNDER THIS LETTER OF CREDIT WILL BE MADE
AVAILABLE TO YOU, IN LAWFUL CURRENCY OF THE UNITED STATES OF AMERICA, AGAINST
RECEIPT BY US OF YOUR WRITTEN CERTIFICATE IN THE FORM OF ATTACHMENT 1 HERETO,
APPROPRIATELY COMPLETED AND SIGNED BY AN AUTHORIZED OFFICER ACCOMPANIED BY A
PHOTOCOPY OF THIS LETTER OF CREDIT. PRESENTATION OF EACH SUCH CERTIFICATE
SHALL BE MADE IN PERSON AT OUR OFFICE LOCATED AT 231 SOUTH LA SALLE STREET,
CHICAGO, ILLINOIS 60697, ATTN: LETTERS OF CREDIT DEPT., (OUR "PAYMENT
OFFICE").
SECTION 3. PAYMENTS: DEMAND FOR PAYMENT IN LAWFUL MONEY OF THE UNITED STATES
OF AMERICA OF ALL OR ANY PORTION OF THE STATED AMOUNT MAY BE MADE BY YOU UNDER
THIS LETTER OF CREDIT AT ANY TIME DURING OUR BUSINESS HOURS AT OUR PAYMENT
OFFICE ON ANY BUSINESS DAY. IF ANY SUCH DEMAND FOR PAYMENT IS MADE BY YOU
HEREUNDER AT OR PRIOR TO 10:00 A.M. (LOCAL TIME) ON A BUSINESS DAY, AND
PROVIDED THAT SUCH DEMAND FOR PAYMENT AND THE DOCUMENTS PRESENTED IN CONNECTION
THEREWITH CONFORM TO THE TERMS AND CONDITIONS HEREOF, PAYMENT WILL BE MADE TO
YOU, OR TO YOUR DESIGNEE, OF THE AMOUNT DEMANDED, IN SAME DAY FUNDS, AT OUR
PAYMENT OFFICE NOT LATER THAN 11:00 A.M. (LOCAL TIME), ON THE THIRD SUCCEEDING
BUSINESS DAY. IF SUCH DEMAND FOR PAYMENT IS MADE BY YOU HEREUNDER AFTER 10:00
A.M. (LOCAL TIME) A BUSINESS DAY, AND PROVIDED THAT SUCH DEMAND FOR PAYMENT AND
THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH CONFORM TO THE TERMS AND
CONDITIONS HEREOF, PAYMENT WILL BE MADE TO YOU, OR TO YOUR DESIGNEE, OF THE
AMOUNT DEMANDED, IN SAME DAY FUNDS, AT OUR PAYMENT OFFICE NOT LATER THAN 11:00
A.M. (LOCAL TIME), ON THE THIRD SUCCEEDING BUSINESS DAY. IF SUCH DEMAND FOR
PAYMENT IS MADE BY YOU HEREUNDER AFTER 10:00 A.M. (LOCAL TIME) ON A BUSINESS
DAY, AND PROVIDED THAT SUCH DEMAND FOR PAYMENT AND THE DOCUMENT PRESENTED IN
CONNECTION THEREWITH CONFORM TO THE TERMS AND CONDITIONS HEREOF, PAYMENT SHALL
BE MADE TO YOU, OR TO YOUR DESIGNEE, OF THE AMOUNT DEMANDED, IN SAME DAY
-2-
<PAGE> 10
FUNDS, AT OUR PAYMENT OFFICE NOT LATER THAN 11:00 A.M. (LOCAL TIME), ON THE
FOURTH SUCCEEDING BUSINESS DAY. IF REQUESTED BY YOU, PAYMENT UNDER THIS
LETTER OF CREDIT WILL BE MADE BY WIRE TRANSFER OF SAME DAY FUNDS TO THE
ACCOUNT SPECIFIED IN YOUR DEMAND FOR PAYMENT. IF A DEMAND FOR PAYMENT MADE BY
YOU HEREUNDER DOES NOT, IN ANY INSTANCE, CONFORM TO THE TERMS AND CONDITIONS OF
THIS LETTER OF CREDIT, WE SHALL GIVE YOU PROMPT NOTICE THAT THE DEMAND FOR
PAYMENT WAS NOT EFFECTED IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS
LETTER OF CREDIT, STATING THE REASONS THEREFOR, AND THAT WE WILL (SUBJECT TO
YOUR FURTHER INSTRUCTIONS) HOLD ANY DOCUMENTS WHICH HAVE BEEN DELIVERED TO US
BY YOU. UPON BEING NOTIFIED THAT THE DEMAND FOR PAYMENT WAS NOT EFFECTED IN
CONFORMITY WITH THIS LETTER OF CREDIT, YOU MAY ATTEMPT TO CORRECT ANY SUCH
NON-CONFORMING DEMAND FOR PAYMENT TO THE EXTENT THAT YOU ARE THEN ENTITLED AND
ABLE TO DO SO.
SECTION 4. REDUCTION OF STATED AMOUNT: EACH PAYMENT MADE BY US HEREUNDER
SHALL PERMANENTLY REDUCE THE STATED AMOUNT BY THE AMOUNT OF SUCH PAYMENT, AND
NO DEMAND FOR PAYMENT HEREUNDER SHALL EXCEED THE STATED AMOUNT IN EFFECT OF
SUCH TIME. THE STATED AMOUNT OF THIS LETTER OF CREDIT SHALL ALSO BE
PERMANENTLY REDUCED FROM TIME TO TIME UPON OUR RECEIPT OF YOUR CERTIFICATION IN
THE FORM OF ATTACHMENT 2 HERETO, APPROPRIATELY COMPLETED AND SIGNED BY AN
AUTHORIZED OFFICER.
SECTION 5. DISCHARGE: ONLY YOU MAY MAKE A DEMAND FOR PAYMENT UNDER THIS
LETTER OF CREDIT. UPON THE PAYMENT TO YOU, TO YOUR DESIGNEE, OR TO YOUR
ACCOUNT OF THE AMOUNT DEMANDED HEREUNDER, WE SHALL BE FULLY DISCHARGED OF OUR
OBLIGATIONS UNDER THIS LETTER OF CREDIT TO THE EXTENT OF SUCH DEMAND FOR
PAYMENT, AND TO THE EXTENT OF SUCH PAYMENT, WE SHALL NOT THEREAFTER BE
OBLIGATED TO MAKE ANY FURTHER PAYMENT UNDER THIS LETTER OF CREDIT. BY PAYING
TO YOU, OR TO YOUR ACCOUNT ANY AMOUNT DEMANDED IN ACCORDANCE HEREWITH, WE MAKE
NO REPRESENTATION AS TO THE CORRECTNESS OF THE AMOUNT DEMANDED.
SECTION 6. TERMINATION: UPON THE EARLIEST OF:
(A) THE MAKING BY US OF THE FINAL PAYMENT AVAILABLE TO BE MADE HEREUNDER;
(B) THE CLOSE OF BUSINESS AT OUR PAYMENT OFFICE ON THE STATED EXPIRY DATE,
PROVIDED THAT THE ISSUER SHALL HONOR IN ACCORDANCE WITH THE TERMS HEREOF ANY
DEMAND FOR PAYMENT MADE ON THE STATED EXPIRY DATE IN COMPLIANCE WITH THE TERMS
HEREOF; OR
-3-
<PAGE> 11
(C) RECEIPT BY US OF A CERTIFICATE SIGNED BY AN AUTHORIZED OFFICER STATED THAT
ALL OBLIGATIONS TO WHICH THIS LETTER OF CREDIT RELATES HAVE BEEN TERMINATED,
PAID OR OTHERWISE SATISFIED IN FULL;
THIS LETTER OF CREDIT SHALL AUTOMATICALLY TERMINATE. UPON ITS TERMINATION YOU
SHALL PROMPTLY DELIVER THIS ORIGINAL LETTER OF CREDIT TO US FOR CANCELLATION.
SECTION 7. NOTICES, ETC.: COMMUNICATIONS WITH RESPECT TO THIS LETTER OF
CREDIT SHALL BE IN WRITING AND SHALL BE ADDRESSED TO US AT OUR PAYMENT OFFICE,
ATTENTION: LETTER OF CREDIT DEPT. SPECIFICALLY REFERRING THEREON TO THIS
LETTER OF CREDIT BY NUMBER, FOLLOWED BY COPIES TO THE ACCOUNT PARTY AT 3075
SANDERS ROAD, SUITE 65D, NORTHBROOK, ILLINOIS 600062-7127 AND TOM'S FOODS, INC.
AT 900 EIGHTH STREET, COLUMBUS, GA 31902, ATTENTION: S. ALBERT GASTON.
SECTION 8 GOVERNING LAW: THIS LETTER OF CREDIT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER, AND SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE
OF NEW YORK, INCLUDING ARTICLE 5 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
THE STATE OF NEW YORK (THE "UCC"); PROVIDED, HOWEVER, THAT TO THE EXTENT OF ANY
INCONSISTENCY BETWEEN THE TERMS OF THIS LETTER OF CREDIT AND THE UCC, THE TERMS
OF THIS LETTER OF CREDIT SHALL GOVERN.
SECTION 9 MISCELLANEOUS: THIS LETTER OF CREDIT MAY NOT BE TRANSFERRED OR
ASSIGNED, EITHER IN WHOLE OR IN PART. THIS LETTER OF CREDIT SETS FORTH IN FULL
OUR UNDERTAKING, AND SUCH UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED,
AMENDED, AMPLIFIED, OR LIMITED BY REFERENCE TO ANY DOCUMENT, INSTRUMENT, OR
AGREEMENT REFERRED TO HEREIN.
THIS LETTER OF CREDIT IS ONE OF FOUR LETTERS OF CREDIT WHICH REPLACE THE LETTER
OF CREDIT DATED AUGUST 31, 1993 ISSUED BY CANADIAN IMPERIAL BANK OF COMMERCE,
LETTER OF CREDIT NO. SYN-93-10030 WHICH ITSELF REPLACES THE LETTER OF CREDIT
DATED JUNE 27, 1988 AS AMENDED ON MAY 13, 1993 ISSUED BY CANADIAN IMPERIAL BANK
OF COMMERCE, LETTER OF CREDIT NUMBER 114.88\9006.
IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS TRANSACTION,
PLEASE CALL 312-923-5949.
BANK OF AMERICA ILLINOIS
ORIGINAL
______________________________ ________________________________
FOR CASHIER FOR CASHIER
THIS DOCUMENT CONSISTS OF 4 PAGE(S)
-4-
<PAGE> 12
ATTACHMENT 1
CERTIFICATE OF DEMAND FOR PAYMENT
DATE
__________________________________
__________________________________
__________________________________
ATTENTION: LETTER OF CREDIT DEPT.
RE: IRREVOCABLE STANDBY LETTER OF CREDIT NO. _______________________________
THE UNDERSIGNED, A DULY AUTHORIZED OFFICER OF NESTLE UK LTD. (THE
"BENEFICIARY"), HEREBY CERTIFIES TO __________________________________________
(THE "ISSUER") THAT:
(A) UNLESS OTHERWISE DEFINED, ALL CAPITALIZED TERMS USED HEREIN HAVE THE
MEANINGS ASSIGNED THERETO IN THE IRREVOCABLE STANDBY LETTER OF CREDIT NO.
_______ (THE "LETTER OF CREDIT"), DATED ________________, 199__, ISSUED BY
THE ISSUER ON THE APPLICATION OF ____________ (THE "ACCOUNT PARTY").
(B) THE BENEFICIARY IS MAKING A DEMAND FOR PAYMENT IN LAWFUL MONEY OF THE
UNITED STATES OF AMERICA UNDER THE LETTER OF CREDIT IN THE AMOUNT OF
_____________, WHICH WILL BE APPLIED TO PAYMENT OF THE OBLIGATIONS OF THE
BENEFICIARY TO GENERAL MILLS, INC. ("GM") OR CPG PRODUCTS CORP. ("CPG")
UNDER THAT CERTAIN GUARANTEE, DATED JULY 12, 1983, BY THE BENEFICIARY IN
FAVOR OF GM AND CPG (THE "GUARANTEE"). DEMAND WAS MADE ON THE BENEFICIARY
BY GM OR CPG UNDER THE GUARANTEE TO PAY THE AMOUNT REQUESTED HEREIN. THE
AMOUNT DEMANDED HEREBY DOES NOT ON THE DATE HEREOF, AND WILL NOT ON THE
DATE PAYMENT HEREIN, BE REQUIRED TO BE MADE AFTER GIVING EFFECT TO ALL
OTHER AMOUNTS DEMANDED BUT THEN UNPAID UNDER THE LETTER OF CREDIT, EXCEED
THE STATED AMOUNT OF THE LETTER OF CREDIT.
(B) THE BENEFICIARY IS MAKING A DEMAND FOR PAYMENT IN LAWFUL MONEY OF THE
UNITED STATES OF AMERICA UNDER THE LETTER OF CREDIT IN THE AMOUNT OF
___________, WHICH IS THE ENTIRE STATED AMOUNT OF THE LETTER OF CREDIT AS
IN EFFECT ON THE DATE HEREOF, FOLLOWING THE ACCOUNT PARTY'S FAILURE TO
PROVIDE THE BENEFICIARY ON OR BEFORE THE SIXTH BUSINESS DAY PRECEDING
DECEMBER 31, 1998, WITH AN IRREVOCABLE LETTER OF CREDIT OR AN
UNCONDITIONAL GUARANTEE (EFFECTIVE ON OR BEFORE THE TERMINATION OF THE
LETTER OF CREDIT) FROM A SATISFACTORY BANK (AS DEFINED IN SECTION 6.05 OF
THE STOCK PURCHASE AGREEMENT DATED AS OF APRIL 26, 1988 BETWEEN ROWNTREE
-5-
<PAGE> 13
INC. AND TF ACQUISITION CORPORATION) DISCHARGING THE BENEFICIARY FROM, OR
INDEMNIFYING THE BENEFICIARY WITH RESPECT TO, ITS OBLIGATIONS UNDER THAT
CERTAIN GUARANTEE, DATED JULY 12, 1983, BY THE BENEFICIARY IN FAVOR OF
GENERAL MILLS, INC. OR CPG PRODUCTS CORP. THE DATE OF THIS DEMAND FOR
PAYMENT SHALL NOT BE MORE THAN FIVE BUSINESS DAYS PRIOR TO THE STATED
EXPIRY DATE.
(C) CONCURRENTLY HEREWITH, THE BENEFICIARY IS MAKING A PRO RATA DEMAND ON
EACH OF THE ADDITIONAL LETTERS OF CREDIT.
(D) UPON ITS RECEIPT OF THE AMOUNT DEMANDED UNDER THE LETTER OF CREDIT, THE
BENEFICIARY WILL
(I) APPLY SUCH AMOUNT DIRECTLY TO THE PAYMENT OF THE BENEFICIARY'S
OBLIGATIONS TO GM AND CPG UNDER THE GUARANTEE; AND
(II) HOLD SUCH AMOUNT FOR APPLICATION OF THE PAYMENT THE
BENEFICIARY'S OBLIGATIONS TO GENERAL MILLS, INC. AND CPG PRODUCTS
CORP. UNDER THAT CERTAIN GUARANTEE DATED JULY 12, 1983; AND
(III) IF AFTER THE PAYMENT OF SUCH AMOUNTS LETTER OF CREDIT IS TERMINATED,
DELIVER TO YOU THE ORIGINAL COPY OF THE LETTER OF CREDIT AND ALL
RELEASES AS YOU MAY REASONABLY REQUEST.
(E) [INSERT DISBURSEMENT INSTRUCTIONS.]
IN WITNESS WHEREOF, THE BENEFICIARY HAS CAUSED ITS AUTHORIZED OFFICER TO
EXECUTE AND DELIVER THIS CERTIFICATE AS OF THE _____ DAY OF ______________,
________.
NESTLE UK LTD.
BY ________________________________
TITLE
-6-
<PAGE> 14
ATTACHMENT 2
CERTIFICATE
-----------
RE: IRREVOCABLE LETTER OF CREDIT NO. P-372671
THE UNDERSIGNED, DULY AUTHORIZED OFFICER OF NESTLE U.K. LTD. (THE
"BENEFICIARY"), HEREBY CERTIFIES TO _____________________ ("ISSUER") AS
FOLLOWS WITH RESPECT TO THE ABOVE REFLECTED LETTER OF CREDIT (THE "LETTER
OF CREDIT"; TERMS DEFINED THEREIN AND NOT OTHERWISE DEFINED HEREIN BEING
USED HEREIN AS THEREIN DEFINED) IN FAVOR OF BENEFICIARY, THAT:
(1) THE BENEFICIARY HEREBY CONSENTS TO A REDUCTION OF THE STATED
AMOUNT OF THE LETTER OF CREDIT BY $______________.
(2) THE ISSUER IS HEREBY INSTRUCTED AND AUTHORIZED TO REDUCE THE
STATED AMOUNT OF LETTER OF CREDIT NO. _____________ BY THE AMOUNT SET
FORTH IN PARAGRAPH (1) ABOVE.
(3) EACH OF THE ADDITIONAL LETTERS OF CREDIT ARE ALSO BEING REDUCED
CONCURRENTLY HEREWITH ON A PRO RATA BASIS.
IN WITNESS WHEREOF THE BENEFICIARY HAS EXECUTED AND DELIVERED THIS CERTIFICATE
AS OF THE _____ DAY OF ________________________, 19___.
VERY TRULY YOURS,
NESTLE U.K. LTD.
BY: _____________________________
NAME:
TITLE:
-7-
<PAGE> 15
The Chase Manhattan Bank
Irrevocable Standby Letter of Credit P 372671
Date: February 16, 1997
Beneficiary APPLICANT:
Nestle UK Ltd. Gerald D. Hosier
St. George's House 2020 Redmountain Road
Croydon, Surrey CR9 1NR Aspen, Colorado 81611
England
Attention: Company Secretary
Gentlemen:
At the request and on the instructions of our customer, Gerald D. Hosier (the
"Account Party"), we hereby establish in your favor this Irrevocable Standby,
Nontransferable Letter of Credit in the original amount of USD $2,000,000.00
(TWO MILLION UNITED STATES DOLLARS ONLY).
Section 1 Definitions. The following terms when used in this Letter of Credit
shall have the following meanings:
"Account Party" is defined in the first paragraph.
"Additional Letters of Credit" shall mean each of the following
letters of credit. C7320476 ISSUED BY BANK OF AMERICA ILLINOIS
FOR THE ACCOUNT OF PETTIBONE CORPORATION, C71319993 ISSUED BY BANK
OF AMERICA ILLINOIS FOR THE ACCOUNT OF ALLSTATE INSURANCE COMPANY,
AND N 97 0095 ISSUED BY CANADIAN IMPERIAL BANK OF COMMERCE FOR THE
ACCOUNT OF TCW SHARED OPPORTUNITY FUND II L.P., each of which is
being issued concurrently herewith.
"Authorized Officer" shall mean any of your directors whose
signature shall have been satisfactorily certified to us.
"Business Day" shall mean any day on which we are open for the
purpose of conducting commercial banking business at our payment
office.
"Local Time" means "New York Time."
<PAGE> 16
"Payment Office" is defined in Section 2.
"Stated Amount" means, at any time, the original amount of this
Letter of Credit set forth in the first paragraph, as such amount
has at such time been reduced in accordance with Section 4.
"Stated Expiry Date" means December 31, 1998, or, upon our advice
to you at least five business days prior to such date that we are
extending this Letter of Credit, October 1, 2009; provided,
however, that, in the event that all the principal of, premium, if
any, and interest on the Industrial Revenue Bonds issued pursuant
to the trust indenture, dated as of October 1, 1979, between the
Industrial Development Board of the County of Knox and the First
National Bank of Columbus and the trust indenture dated as of
September 1, 1979, between Taylor County, Florida and the First
National Bank of Columbus, shall have been paid in full prior to
December 31, 1998, we may instead extend the Stated Expiry Date to
September 1, 2004.
Section 2 Presentation. Funds under this Letter of Credit will be made
available to you, in lawful currency of the United States of America, against
receipt by us of your written certificate in the form of Attachment 1 hereto,
appropriately completed and signed by an Authorized Officer accompanied by a
photocopy of this Letter of Credit. Presentation of each such certificate
shall be made in person at our office located at 55 Water Street, New York, New
York 10041, Attention: Standby Letter of Credit Department, Room 1708 (our
"Payment Office").
Section 3 Payments. Demand for payment in lawful money of the United States
of America of all or any portion of the stated amount may be made by you under
this Letter of Credit at any time during our business hours at our Payment
Office on any Business Day. If any such demand for payment is made by you
hereunder at or prior to 10:00 a.m. (Local Time) on a Business Day, and
provided that such demand for payment and the documents presented in connection
therewith conform to the terms and conditions hereof, payment will be made to
you, or to your designee, of the amount demanded, in same day funds, at our
Payment Office not later than 11:00 a.m. (Local Time), on the third succeeding
Business day. If such demand for payment is made by you hereunder after 10:00
a.m. (Local Time) on a Business Day, and provided that such demand for payment
and the documents presented in connection therewith conform to the terms and
conditions hereof, payment shall be made to you, or to your designee, of the
amount demanded, in same day funds, at our Payment Office not
-2-
<PAGE> 17
later than 11:00 a.m. (Local Time), on the fourth succeeding Business Day.
If requested by you, payment under this Letter of Credit will be made by wire
transfer of same day funds to the account specified in your demand for payment.
If a demand for payment made by you hereunder does not, in any instance,
conform to the terms and conditions of this Letter of Credit, we shall give you
prompt notice that the demand for payment was not effected in accordance with
the terms and conditions of this Letter of Credit, stating the reasons
therefor, and that we will (subject to your further instructions) hold any
documents which have been delivered to us by you. Upon being notified that the
demand for payment was not effected in conformity with this Letter of Credit,
you may attempt to correct any such non-conforming demand for payment to the
extent that you are then entitled and able to do so.
Section 4 Reduction of Stated Amount. Each payment made by us hereunder shall
permanently reduce the Stated Amount by the amount of such payment, and no
demand for payment hereunder shall exceed the Stated Amount in effect of such
time. The Stated Amount of this Letter of Credit shall also be permanently
reduced from time to time upon our receipt of your certification in the form of
Attachment 2 hereto, appropriately completed and signed by an Authorized
Officer.
Section 5 Discharge. Only you may make a demand for payment under this Letter
of Credit. Upon the payment to you, to your designee, or to your account of
the amount demanded hereunder, we shall be fully discharged of our obligations
under this Letter of Credit to the extent of such demand for payment, and, to
the extent of such payment, we shall not thereafter be obligated to make any
further payments under this Letter of Credit. By paying to you, or to your
account any amount demanded in accordance herewith, we make no representation
as to the correctness of the amount demanded.
Section 6 Termination. Upon the earliest of:
(A) The making by us of the final payment available
to be made hereunder;
(B) The close of business at our Payment Office on
the State Expiry Date, provided that the Issuer shall
honor in accordance with the terms hereof any demand
for payment made on the Stated Expiry Date in
compliance with the terms hereof; or
-3-
<PAGE> 18
(C) Receipt by us of a certificate signed by an
Authorized Officer stated that all obligations to which
this Letter of Credit relates have been terminated, paid or
otherwise satisfied in full;
this Letter of Credit shall automatically terminate. Upon its termination you
shall promptly deliver this original Letter of Credit to us for cancellation.
Section 7 Notices, etc. Communications with respect to this Letter of Credit
shall be in writing and shall be addressed to us at our Payment Office,
Attention: Standby Letter of Credit Department Room 1708, specifically
referring thereon to this Letter of Credit by number, followed by copies of the
Account Party at 2020 Redmountain Road, Aspen, Colorado 81611 and Tom's Foods,
Inc. at 900 Eighth Street, Columbus, GA 31902, Attention: S. Albert Gaston.
Section 8 Governing Law. This Letter of Credit shall be deemed to be a
contract made under, and shall be governed by, the internal laws of the State
of New York, including Article 5 of the Uniform Commercial Code as in effect in
the State of New York (the "UCC"); provided, however, that to the extent of any
inconsistency between the terms of this Letter of Credit and the UCC, the terms
of this Letter of Credit shall govern.
Section 9 Miscellaneous. This Letter of Credit may not be transferred or
assigned, either in whole or in part. This Letter of Credit sets forth in full
our undertaking, and such undertaking shall not in any way be modified,
amended, amplified, or limited by reference to any document, instrument, or
agreement referred to herein.
This Letter of Credit is one of four Letters of Credit which replace the
Letter of Credit dated August 31, 1993 issued by Canadian Imperial Bank of
Commerce, Letter of Credit No. SYN-93-10030 which itself replaces the letter of
Credit dated June 27, 1988 as amended on May 13, 1993 issued by Canadian
Imperial Bank of Commerce, letter of credit number 114.88\9006.
Very Truly Yours,
The Chase Manhattan Bank
__________________________________
AUTHORIZED SIGNATURE
-4-
<PAGE> 19
ATTACHMENT 1
CERTIFICATE OF DEMAND FOR PAYMENT
Date:
The Chase Manhattan Bank
55 Water Street
New York, New York, 10041
Attention: Standby Letter of Credit
Department Room 1708
Re: IRREVOCABLE STANDBY LETTER OF CREDIT NO. P-372671
The undersigned, a duly Authorized Officer of Nestle UK Ltd. (the
"Beneficiary"), hereby certifies to The Chase Manhattan Bank (the "Issuer")
that:
(a) Unless otherwise defined, all capitalized terms used herein
have the meanings assigned thereto in the Irrevocable Standby Letter
of Credit No. _______ (the "Letter of Credit"), dated
________________, 199__, issued by the Issuer on the application of
____________ (the "Account Party").
(b) The Beneficiary is making a demand for payment in
lawful money of the United States of America under the Letter
of Credit in the amount of _____________, which will be
applied to payment of the obligations of the Beneficiary to
General Mills, Inc. ("GM") or CPG Products Corp. ("CPG")
under that certain Guarantee, dated July 12, 1983, by the
Beneficiary in favor of GM and CPG (the "Guarantee"). Demand
was made on the Beneficiary by GM or CPG under the Guarantee
to pay the amount requested herein. The amount demanded
hereby does not on the date hereof, and will not on the date
payment herein be required to be made after giving effect to
all other amounts demanded but then unpaid under the Letter of
Credit, exceed the Stated Amount of the Letter of Credit.
-5-
<PAGE> 20
1/** (b) The Beneficiary is making a demand for payment in lawful money of
the United States of America under the Letter of Credit in the
amount of ___________, which is the entire Stated Amount of the
Letter of Credit as in effect on the date hereof, following the
Account Party's failure to provide the Beneficiary on or before the
sixth Business Day preceding December 31, 1998, with an irrevocable
letter of credit or an unconditional guarantee (effective on or
before the termination of the Letter of Credit) from a Satisfactory
Bank (as defined in Section 6.05 of the Stock Purchase Agreement
dated as of April 26, 1988 between Rowntree Inc. and TF Acquisition
Corporation) discharging the Beneficiary from, or indemnifying the
Beneficiary with respect to, its obligations under that certain
Guarantee, dated July 12, 1983, by the Beneficiary in favor of
General Mills, Inc. or CPG Products Corp. The date of this demand
for payment shall not be more than five Business Days prior to the
Stated Expiry Date.
(c) Concurrently herewith, the Beneficiary is making a pro rata
demand on each of the Additional Letters of Credit.
(d) Upon its receipt of the amount demanded under the Letter of
Credit, the Beneficiary will apply such amount directly to the
payment of the Beneficiary's obligations to GM and CPG under the
Guarantee; and
** (i) hold such amount for application of the payment the
Beneficiary's obligations to General Mills, Inc. and CPG
Products Corp. under that certain Guarantee dated July 12,
1983; and
(ii) if after the payment of such amounts Letter of Credit is
terminated, delivery to you the original copy of the Letter
of Credit and all releases as you may reasonably request.
[Insert disbursement instructions.]
- -----------------------
1/**Select appropriate alternative. The second form of clause (i) should only
be used if the second form of clause (b) is used and no demand for payment has
been made under the Guarantee.
-6-
<PAGE> 21
IN WITNESS WHEREOF, the Beneficiary has caused its Authorized Officer to
execute and deliver this Certificate as of the _____ day of ______________,
________.
Nestle UK LTD.
By ________________________________
Title
-7-
<PAGE> 22
ATTACHMENT 2
Certificate
Re: Irrevocable Letter of Credit No. P-372671
The undersigned, duly authorized officer of Nestle U.K. Ltd. (the
"Beneficiary"), hereby certifies to _____________________ ("Issuer") as follows
with respect to the above reflected Letter of Credit (the "Letter of Credit";
terms defined therein and not otherwise defined herein being used herein as
therein defined) in favor of Beneficiary, that:
(1) The Beneficiary hereby consents to a reduction of the Stated
Amount of the Letter of Credit by $______________.
(2) The Issuer is hereby instructed and authorized to reduce the
Stated Amount of Letter of Credit No. _____________ by the amount
set forth in paragraph (1) above.
(3) Each of the Additional Letters of Credit are also being
reduced concurrently herewith on a pro rata basis.
In witness whereof the Beneficiary has executed and delivered this certificate
as of the _____ day of ________________________, 19___.
Very Truly Yours,
NESTLE U.K. LTD.
By: _____________________________
Name:
Title:
-8-
<PAGE> 23
February 27, 1997
IRREVOCABLE STANDBY LETTER OF CREDIT N 97 0095
BENEFICIARY APPLICANT:
Nestle UK Ltd. TCW Shared Opportunity Fund II, L.P.
St. George's House Trust Company of the West
Croydon, Surrey CR9 1NR 11100 Santa Monica Blvd., Suite 2000
England Los Angeles, CA 90025
Attention: Company Secretary
Gentlemen:
At the request and on the instructions of our customer, TCW Shared Opportunity
Fund II, L.P. (the "Account Party"), we hereby establish in your favor this
Irrevocable Standby, Nontransferable Letter of Credit in the original amount of
USD $1,000,000.00 (ONE MILLION UNITED STATES DOLLARS ONLY).
Section 1. Definitions. The following terms when used in this Letter of
Credit shall have the following meanings:
"Account Party" is defined in the first paragraph.
"Additional Letters of Credit" shall mean each of the following
letters of credit. C7320476 issued by Bank of America Illinois for
the account of Pettibone Corporation, C372671 issued by Bank of
America Illinois for the account of Gerald D. Hosier and C7319993
issued by Bank of America of Illinois for the account of Allstate
Insurance Company, each of which is being issued concurrently
herewith.
"Authorized Officer" shall mean any of your directors whose
signatures shall have been satisfactorily certified to us.
"Business Day" shall mean any day on which we are open for the
purpose of conducting commercial banking business at our payment
office.
"Local Time" means "New York Time".
"Payment Office" is defined in Section 2.
"Stated Amount" means, at any time, the original amount of this
Letter of Credit set forth in the first paragraph, as
<PAGE> 24
such amount has at such time been reduced in accordance with Section 4.
"Stated Expiry Date" means December 31, 1998, or, upon our advice to
you at least five business days prior to such date that we are
extending this Letter of Credit, October 1, 2009; Provided, However,
that, in the event that all the principal of, premium, if any, and
interest on the Industrial Revenue Bonds issued pursuant to the
trust indenture, dated as of October 1, 1979, between the Industrial
Development Board of the County of Knox and the First National Bank
of Columbus and the trust indenture dated as of September 1, 1979,
between Taylor County, Florida and the First National Bank of
Columbus, shall have been paid in full prior to December 31, 1998,
we may instead extend the Stated Expiry Date to September 1, 2004.
Section 2. Presentation. Funds under this Letter of Credit will be made
available to you, in lawful currency of the United States of America, against
receipt by us of your written certificate in the form of Attachment 1 hereto,
appropriately completed and signed by an Authorized Officer accompanied by a
photocopy of this Letter of Credit. Presentation of each such certificate
shall be made in person at our office located at 2727 Paces Ferry Road, Suite
1200, Building Two, Atlanta, Georgia, 30339, Attention: Letter of Credit
Department, (our "Payment Office").
Section 3. Payments. Demand for payment in lawful money of the United States
of America of all or any portion of the stated amount may be made by you under
this Letter of Credit at any time during our business hours at our Payment
Office on any Business Day. If any such demand for payment is made by you
hereunder at or prior to 10:00 a.m. (Local Time) on a Business Day, and
provided that such demand for payment and the documents presented in connection
therewith conform to the terms and conditions hereof, payment will be made to
you, or to your designee, of the amount demanded, in same day funds, at our
Payment Office not later than 11:00 a.m. (Local Time), on the third succeeding
Business Day. If such demand for payment is made by you hereunder after 10:00
a.m. (Local Time) on a Business Day, and provided that such demand for payment
and the documents presented in connection therewith conform to the terms and
conditions hereof, payment shall be made to you, or to your designee, of the
amount demanded, in same day funds, at our Payment Office not later than 11:00
a.m. (Local Time), on the fourth succeeding Business Day. If requested by you,
payment under this Letter of Credit will be made by wire transfer of same day
funds to the account specified in your demand for payment. If a demand for
payment made by you hereunder does not, in any instance, conform to the terms
and conditions of this Letter of Credit, we shall give you prompt notice that
the demand for payment was not effected in accordance with the terms and
conditions
<PAGE> 25
of this Letter of Credit, stating the reasons therefor, and that we will
(subject to your further instructions) hold any documents which have been
delivered to us by you. Upon being notified that the demand for payment was
not effected in conformity with this Letter of Credit, you may attempt to
correct any such non-conforming demand for payment to the extent that you are
then entitled and able to do so.
Section 4. Reduction of Stated Amount. Each payment made by us hereunder
shall permanently reduce the Stated Amount by the amount of such payment, and
no demand for payment hereunder shall exceed the Stated Amount in effect of
such time. The Stated Amount of this Letter of Credit shall also be
permanently reduced from time to time upon our receipt of your certification in
the form of Attachment 2 hereto, appropriately completed and signed by an
Authorized Officer.
Section 5 Discharge. Only you may make a demand for payment under this Letter
of Credit. Upon the payment to you, to your designee, or to your account of
the amount demanded hereunder, we shall be fully discharged of our obligations
under this Letter of Credit to the extent of such demand for payment, and, to
the extent of such payment, we shall not thereafter be obligated to make any
further payments under this Letter of Credit. By paying to you, or to your
account any amount demanded in accordance herewith, we make no representation
as to the correctness of the amount demanded.
Section 6 Termination. Upon the earliest of:
(A) The making by us of the final payment available to
be made hereunder;
(B) The close of business at our Payment Office on the
Stated Expiry Date, provided that the Issuer shall honor
in accordance with the terms hereof any demand for
payment made on the Stated Expiry Date in compliance with
the terms hereof; or
(C) Receipt by us of a certificate signed by an
Authorized Officer stated that all obligations to which
this Letter of Credit relates have been terminated, paid
or otherwise satisfied in full;
this Letter of Credit shall automatically terminate. Upon its termination you
shall promptly deliver this original Letter of Credit to us for cancellation.
Section 7 Notices, etc. Communications with respect to this Letter of Credit
shall be in writing and shall be addressed to us at our Payment Office,
Attention: Standby Letter of Credit Department Room 1708, specifically
referring thereon to this Letter of Credit by number, followed by copies of the
Account Party at Trust Company of
<PAGE> 26
the West, 11100 Santa Monica Blvd., Suite 2200, Los Angeles, CA, 90025
and Tom's Foods, Inc. at 900 Eighth Street, Columbus, GA 31902,
Attention: S. Albert Gaston.
Section 8 Governing Laws. This Letter of Credit shall be deemed to be a
contract made under, and shall be governed by, the internal laws of the State
of New York, including Article 5 of the Uniform Commercial Code as in effect in
the State of New York (the "UCC"); provided, however, that to the extent of any
inconsistency between the terms of this Letter of Credit and the UCC, the terms
of this Letter of Credit shall govern.
Section 9 Miscellaneous. This Letter of Credit may not be transferred or
assigned, either in whole or in part. This Letter of Credit sets forth in full
our undertaking, and such undertaking shall not in any way be modified,
amended, amplified, or limited by reference to any document, instrument, or
agreement referred to herein.
This Letter of Credit is one of four Letters of Credit which replace the
Letter of Credit dated August 31, 1993 issued by Canadian Imperial Bank of
Commerce, Letter of Credit No. SYN-93-10030 which itself replaces the letter of
Credit dated June 27, 1988 as amended on May 13, 1993 issued by Canadian
Imperial Bank of Commerce, letter of credit number 114.88\9006.
Very truly yours,
The Chase Manhattan Bank
__________________________________
AUTHORIZED SIGNATURE
<PAGE> 27
ATTACHMENT 1
CERTIFICATE OF DEMAND FOR PAYMENT
Date:
The Chase Manhattan Bank
55 Water Street
New York, New York, 10041
Attention: Standby Letter of Credit
Department Room 1708
Re: IRREVOCABLE STANDBY LETTER OF CREDIT NO. P-372671
The undersigned, a duly Authorized Officer of Nestle UK Ltd. (the
"Beneficiary"), hereby certifies to The Chase Manhattan Bank (the "Issuer")
that:
(a) Unless otherwise defined, all capitalized terms used herein
have the meanings assigned thereto in the Irrevocable Standby Letter
of Credit No. _______ (the "Letter of Credit"), dated
________________, 199__, issued by the Issuer on the application of
____________ (the "Account Party").
(b) The Beneficiary is making a demand for payment in
lawful money of the United States of America under the Letter
of Credit in the amount of _____________, which will be applied
to payment of the obligations of the Beneficiary to General
Mills, Inc. ("GM") or CPG Products Corp. ("CPG") under that
certain Guarantee, dated July 12, 1983, by the Beneficiary in
favor of GM and CPG (the "Guarantee"). Demand was made on the
Beneficiary by GM or CPG under the Guarantee to pay the amount
requested herein. The amount demanded hereby does not on the
date hereof, and will not on the date payment herein is
required to be made after giving effect to all other amounts
demanded but then unpaid under the Letter of Credit, exceed the
Stated Amount of the Letter of Credit.
<PAGE> 28
1/** (b) The Beneficiary is making a demand for payment in lawful money of
the United States of America under the Letter of Credit in
the amount of ___________, which is the entire Stated Amount of the
Letter of Credit as in effect on the date hereof, following the
Account Party's failure to provide the Beneficiary on or before the
sixth Business Day preceding December 31, 1998, with an irrevocable
letter of credit or an unconditional guarantee (effective on or
before the termination of the Letter of Credit) from a Satisfactory
Bank (as defined in Section 6.05 of the Stock Purchase Agreement
dated as of April 26, 1988 between Rowntree Inc. and TF Acquisition
Corporation) discharging the Beneficiary from, or indemnifying the
Beneficiary with respect to, its obligations under that certain
Guarantee, dated July b12, 1983, by the Beneficiary in favor of
General Mills, Inc. or CPG Products Corp. The date of this demand
for payment shall not be more than five Business Days prior to the
Stated Expiry Date.
(c) Concurrently herewith, the Beneficiary is making a pro rata
demand on each of the Additional Letters of Credit.
(d) Upon its receipt of the amount demanded under the Letter of
Credit, the Beneficiary will apply such amount directly to the
payment of the Beneficiary's obligations to GM and CPG under the
Guarantee; and
** (i) hold such amount for application of the payment the
Beneficiary's obligations to General Mills, Inc. and CPG
Products Corp. under that certain Guarantee dated July 12,
1983; and
(ii) if after the payment of such amounts Letter of
Credit is terminated, delivery to you the original copy of the
Letter of Credit and all releases as you may reasonably
request.
[Insert disbursement instructions.]
IN WITNESS WHEREOF, the Beneficiary has caused its Authorized Officer to
execute and deliver this Certificate as of the _____ day of ______________,
________.
Nestle UK LTD.
_______________________
1/**Select appropriate alternative. The second form of clause (i) should only
be used if the second form of clause (b) is used and no demand for payment
has been made under the Guarantee.
<PAGE> 29
By ________________________________
Title
<PAGE> 30
ATTACHMENT 2
Certificate
Re: Irrevocable Letter of Credit No. P-372671
The undersigned, duly authorized officer of Nestle U.K. Ltd. (the
"Beneficiary"), hereby certifies to _____________________ ("Issuer") as follows
with respect to the above reflected Letter of Credit (the "Letter of Credit";
terms defined therein and not otherwise defined herein being used herein as
therein defined) in favor of Beneficiary, that:
(1) The Beneficiary hereby consents to a reduction of the Stated
Amount of the Letter of Credit by $______________.
(2) The Issuer is hereby instructed and authorized to reduce the
Stated Amount of Letter of Credit No. _____________ by the amount set
forth in paragraph (1) above.
(3) Each of the Additional Letters of Credit are also being reduced
concurrently herewith on a pro rata basis.
In witness whereof the Beneficiary has executed and delivered this certificate
as of the _____ day of ________________________, 19___.
Very truly yours,
NESTLE U.K. LTD.
By: _____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made part of this
Registration Statement.
ARTHUR ANDERSEN LLP
February 9, 1998
<PAGE> 1
EXHIBIT 25
_______________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(1)_
________________________
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Terence Rawlins, Assistant Vice President
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
TOM'S FOODS, INC.
(Exact name of obligor as specified in its charter)
Delaware 58-1516963
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 EIGHTH STREET
COLUMBUS, GA 31902
(Address of principal executive office) (Zip code)
________________________
(Title of Indenture Securities)
TOM'S FOODS, INC.
10 1/2% Senior Subordinated Notes due 2004
_______________________________________
<PAGE> 2
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
The obligor is not an affiliate of the trustee.
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting
securities of the trustee:
As of December 22, 1997
Col. A Col. B
Title of Class Amount Outstanding
Not Applicable
2
<PAGE> 3
Item 4. Trusteeships under other indentures
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in
any other securities, of the obligor are outstanding, furnish the
following information:
(a) Title of the securities outstanding under each such other
indenture
Not Applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of
Section 310(b)(1) of the Act arises as a result of the
trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as
compared with the securities issued under such other indenture.
Not Applicable
Item 5. Interlocking directorates and similar relationships with the obligor
or underwriters.
If the trustee or any of the directors or executive officers of
the trustee is a director, officer, partner, employee, appointee,
or representative of the obligor or of any underwriter for the
obligor, identify each such person having any such connection and
state the nature of each such connection.
Not Applicable
Item 6. Voting securities of the trustee owned by the obligor or its
officials.
Furnish the following information as to the voting securities
of the trustee owned beneficially by the obligor and each director,
partner, and executive officer of the obligor:
As of December 22, 1997
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Name of Owner Title of Class Amount owned Percent of voting
beneficially securities represented by
amount given in Col. C
<S> <C> <C> <C>
- ------------- --------------- ------------- ------------------------
</TABLE>
Not Applicable
3
<PAGE> 4
Item 7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and
each director, partner and executive officer of each such underwriter:
As of December 22, 1997
<TABLE>
<S> <C> <C> <C>
Col. A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of Voting
beneficially securities represented by
amount given in Col. C
- ----------------- ----------------- ----------------- --------------------------
</TABLE>
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee
Furnish the following information as to securities of the obligor
owned beneficially or held as collateral security for obligations in
default by the trustee:
As of December 22, 1997
<TABLE>
<S> <C> <C> <C>
Col. A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
- ------------------ ------------------ ----------------------------- -----------------------------
</TABLE>
Not Applicable
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security
4
<PAGE> 5
for obligations in default any securities of an underwriter for the
obligor, furnish the following information as to each class of
securities of such underwriter any of which are so owned or held by
the trustee:
As of December 22, 1997
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
- ------------- -------------- ----------------------- -------------------------
<S> <C> <C> <C>
Not Applicable
</TABLE>
Item 10. Ownership or holdings by the trustee of voting securities of certain
affiliates or securityholders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the
knowledge of the trustee (1) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to
the voting securities of such person:
As of December 22, 1997
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
- ------------- -------------- ----------------------- -------------------------
<S> <C> <C> <C>
Not Applicable
</TABLE>
Item 11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the
knowledge of the trustee, owns 50 percent or more of the voting
securities of the obligor, furnish the following information as to
each class of securities of such any of which are so owned or held by
the trustee:
5
<PAGE> 6
As of December 22, 1997
<TABLE>
<CAPTION>
Col. A Col. B Col. C
Nature of Indebtedness Amount Outstanding Date Due
______________________ __________________ ________
<S> <C> <C>
</TABLE>
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted to
the trustee, furnish the following information:
As of December 22, 1997
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Name of Title of Class Amount owned Percent of voting
Owner beneficially or held as securities represented
collateral security by amount given in
for obligations in Col. C
default
______ _______________ ___________________ ______________________
<S> <C> <C> <C>
</TABLE>
Not Applicable
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of
any such default.
Not Applicable
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding
series of securities under the indenture, state whether
there has been a default under any such indenture or series,
identify the indenture or series affected, and explain the
nature of any such default.
Not Applicable
6
<PAGE> 7
Item 14. Affiliations with the Underwriters
If any underwriter is an affiliate of the trustee, describe
each such affiliation.
Not Applicable
Item 15. Foreign Trustees.
Identify the order or rule pursuant to which the foreign
trustee is authorized to act as sole trustee under indentures
qualified or to be qualified under the Act.
Not Applicable
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust
Company as amended to date. (See Exhibit 1A to
Form T-1, Securities and Exchange Commission File
No. 22-18460).
*2. A copy of the Certificate of Authority of the Trustee
to Commence Business (included in Exhibit I above).
*3. A copy of the Authorization of the Trustee, as amended
to date (See Exhibit 4 to Form T-1, Securities and
Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the Trustee, as
amended to date (See Exhibit 4 to Form T-1, Securities
and Exchange Commission File No. 22-19146).
7
<PAGE> 8
5. A copy of each Indenture referred to in Item 4, if the
Obligor is in default. Not applicable.
6. The consent of the United States institutional trustee
required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
The Exhibits thus designated are incorporated herein by reference as exhibits
hereto. Following the description of such Exhibits is a reference to the copy
of the Exhibit heretofore filed with the Securities and Exchange Commission, to
which there have been no amendments or changes.
NOTE
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said
item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment
to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
16 of this form since to the best knowledge of the trustee as indicated in Item
13, the obligor is not in default under any indenture under which the applicant
is trustee.
8
<PAGE> 9
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, IBJ Schroder Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility & qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 22nd day of December, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Terence Rawlins
____________________________
Terence Rawlins
Assistant Vice President
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
Offer to Exchange
10 1/2% Senior Secured Notes due November 1, 2004
For Any and All Outstanding
10 1/2% Senior Secured Notes due November 1, 2004
of
TOM'S FOODS INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME
ON MARCH 17, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE")
IF YOU WISH TO ACCEPT THE EXCHANGE OFFER,
THIS LETTER OF TRANSMITTAL SHOULD BE COMPLETED,
SIGNED AND SUBMITTED BY REGISTERED OR CERTIFIED MAIL,
BY FACSIMILE WITH ORIGINAL TO FOLLOW,
BY OVERNIGHT COURIER OR BY HAND TO:
IBJ SCHRODER BANK & TRUST COMPANY
Via Mail:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attn: Reorganization Operations Dept.
By Hand/Overnight Delivery:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
By Facsimile:
(212) 858-2611
Confirm by Telephone:
(212) 858-2103
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
By execution hereof, the undersigned acknowledges receipt of the Prospectus
dated February 13, 1998 (the "Prospectus") of Tom's Foods Inc. (the "Company")
which, together with this Letter of Transmittal and the instructions hereto (the
"Letter of Transmittal"), describes the Company's offer (the "Exchange Offer")
to exchange $1,000 in principal amount of a new series of notes known as 10 1/2%
Senior Secured Notes due November 1, 2004 (the "Exchange Notes") for each $1,000
in principal amount of outstanding 10 1/2% Senior Secured Notes due November 1,
2004 (the "Old Notes"). The terms of the Exchange Notes are identical in all
material respects (including principal amount, interest rate and maturity) to
the terms of the Old Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the offering of the
1
<PAGE> 2
Exchange Notes will have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and, therefore, the Exchange Notes will not bear
legends restricting the transfer thereof.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES FOR THEIR OLD
NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR OLD NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date may tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures."
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by such Holder; (ii) tender of Old Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in the Prospectus under "The Exchange
Offer--Book-Entry Transfer" by any financial institution that is a participant
in DTC and whose name appears on a security position listing as the owner of Old
Notes (such participants, acting on behalf of Holders, are referred to herein,
together with such Holders, as "Acting Holders"); or (iii) tender of Old Notes
is to be made according to the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." DELIVERY
OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Unless the context requires otherwise, the term "Holder" for purposes of
this Letter of Transmittal means any person: (i) in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder or (ii) whose Old Notes
are held of record by DTC who desires to deliver such Old Notes by book-entry
transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER
THEIR OLD NOTES MUST COMPLETE THIS LETTER IN ITS ENTIRETY.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS, THIS LETTER OF TRANSMITTAL OR THE NOTICE OF GUARANTEED DELIVERY MAY
BE DIRECTED TO THE EXCHANGE AGENT.
2
<PAGE> 3
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the schedule to this
Letter of Transmittal.
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- -----------------------------------------------------------
CERTIFICATE NUMBER(S)* AGGREGATE PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (ATTACH SIGNED LIST IF AMOUNT TENDERED
(PLEASE FILL IN) NECESSARY) (IF LESS THAN ALL)**
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
TOTAL
- -----------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless otherwise indicated, the Holder will be deemed to have tendered the full aggregate principal amount
represented by Old Notes. See Instruction 2.
- -----------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DEPOSITORY
TRUST COMPANY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
------------------------------------------------------------------------------
DTC Participant Number
------------------------------------------------------------------------------
Transaction Code Number
------------------------------------------------------------------------------
Name of Participant Contact Person
-------------------------------------------------------------------------------
Telephone number
------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s) of Old Notes
-------------------------------------------------------------------
Window Ticket No. (if any)
------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
------------------------------------------------------------
DTC Book-Entry Account Number
- --------------------------------------------------------------------------------
If Delivered by Book-Entry Transfer:
-------------------------------------------------------------------------------
Name of Tendering Institution
------------------------------------------------------------------------------
Transaction Code Number
------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
-----------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
3
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Old Notes tendered herewith, the undersigned hereby exchanges, sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Exchange
Agent also acts as the agent of the Company and as Trustee under the Indenture
for the Old Notes and the Exchange Notes) with respect to the tendered Old Notes
with full power of substitution to (i) deliver certificates for such Old Notes
to the Company, or transfer ownership of such Old Notes on the account books
maintained by DTC, together, in either such case, with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company and
(ii) present such Old Notes for transfer on the books of the Company and receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Old Notes, all in accordance with the terms of the Exchange Offer. The power of
attorney granted in this paragraph shall be deemed irrevocable and coupled with
an interest.
The undersigned represents and warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Old Notes tendered
hereby and to acquire Exchange Notes issuable upon the exchange of such tendered
Old Notes, and that, when the Old Notes are accepted for exchange, the Company
will acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
undersigned also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be necessary
or desirable to complete the exchange, sale, assignment and transfer of tendered
Old Notes or transfer ownership of such Old Notes on the account books
maintained by DTC.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer--Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Old Notes tendered hereby
and, in such event, certificates for such Old Notes not exchanged will be
returned (except as noted below with respect to tenders through DTC), without
expense, to the undersigned at the address shown below the signature of the
undersigned.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance upon interpretations by the staff of the Securities and Exchange
Commission set forth in no-action letters issued to third parties that the
Exchange Notes issued in exchange for the Old Notes pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by Holders
thereof (other than any such Holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such Holder's
business, such Holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and neither such Holder
nor any other such person is engaging in or intends to engage in a distribution
of such Exchange Notes. If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of the Exchange Notes. If the undersigned is a broker-dealer
that will receive Exchange Notes for its own account in exchange for Old Notes,
the undersigned represents that such Old Notes were acquired as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The undersigned represents to the Company that (i) the Exchange Notes
acquired by the Holder and any beneficial owners of Old Notes pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, (ii) neither the Holder nor any such
beneficial owner
4
<PAGE> 5
has an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, (iii) neither the Holder, nor such
beneficial owner, nor any such other person is engaged in or intends to engage
in a distribution of the Exchange Notes and (iv) neither the Holder nor any such
other person is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or, if such Holder is an affiliate, that such Holder
will comply with the registration and prospectus delivery requirements of the
Act to the extent applicable.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, bankruptcy or incapacity of the undersigned
and every obligation of the undersigned hereunder shall be binding upon the
heirs, personal representatives, successors and assigns of the undersigned.
TENDERED OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION
DATE.
Unless otherwise indicated under "Special Issuance Instructions,"
certificates representing the Exchange Notes issued in exchange for the Old
Notes accepted for exchange will be issued, and any Old Notes not tendered or
not exchanged will be returned, in the name(s) of the undersigned (or in either
such event in the case of Old Notes tendered by DTC, by credit to the account at
DTC). Similarly, unless otherwise indicated under "Special Delivery
Instructions," certificates representing the Exchange Notes issued in exchange
for the Old Notes accepted for exchange and any certificates for Old Notes not
tendered or not exchanged (and accompanying documents, as appropriate) will be
sent to the undersigned at the address shown below the undersigned's signatures,
unless, in either event, tender is being made through DTC. In the event that
both "Special Issuance Instructions" and "Special Delivery Instructions" are
completed, certificates representing the Exchange Notes issued in exchange for
the Old Notes accepted for exchange will be issued, and any Old Notes not
tendered or not exchanged will be returned, in the name(s) of, and said
certificates will be sent to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Old Notes from
the name of the registered Holder(s) thereof if the Company does not accept for
exchange any of the Old Notes so tendered.
5
<PAGE> 6
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES REGARDLESS
OF WHETHER OLD NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
tendered by a participant in DTC, exactly as such participant's name appears on
a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer or other person
acting in a fiduciary or representative capacity, such person must set forth his
or her full title below under "Capacity" and submit evidence satisfactory to the
Issuers of such person's authority to so act. See Instruction 3 herein.
If the signature appearing below is not of the registered Holder(s) of the
Old Notes, then the registered Holder(s) must sign a valid proxy.
X
- -------------------------------------------------
X
- -------------------------------------------------
Signature(s) of Holder(s) or Authorized Signatory
Name(s):
- -----------------------------------------
- ------------------------------------------------------
(Please Print)
Capacity:
- ------------------------------------------
Social Security No.:
- ------------------------------
Date:
- ----------------------------------------------
Date:
- ----------------------------------------------
Address:
- ------------------------------------------
- ------------------------------------------------------
(Including Zip Code)
Area Code and Telephone No.:
- ------------------
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN)
CERTAIN SIGNATURES MUST BE MEDALLION STAMP GUARANTEED BY AN ELIGIBLE INSTITUTION
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
- --------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number (including area code) of
Firm)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Printed Name)
- --------------------------------------------------------------------------------
(Title)
Date:
- -------------------------------------------------
<PAGE> 7
----------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTION 4 HEREIN)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered are to be issued in the name of, or the Exchange Notes issued
pursuant to the Exchange Offer are to be issued to the order of, someone other
than the person or persons whose signature(s) appear(s) within this Letter of
Transmittal or issued to an address different from that shown in the box
entitled "Description of Old Notes Tendered Herewith" within this Letter of
Transmittal, or if Old Notes tendered by book-entry transfer that are not
accepted for purchase are to be credited to a different account maintained at
DTC.
Name:
-------------------------------------------------
(Please Print)
Address:
-----------------------------------------------
(Please Print)
---------------------------------------------------------
Zip Code
---------------------------------------------------------
Taxpayer Identification or Social Security Number
(See Substitute Form W-9 herein)
---------------------------------------------------------
DTC Account Number
==========================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 4 HEREIN)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered or not accepted for purchase or the Exchange Notes issued
pursuant to the Exchange Offer are to be sent to someone other than the person
or persons whose signature(s) appear(s) within this Letter of Transmittal or
to an address different from that shown in the box entitled "Description of
Old Notes Tendered Herewith" within this Letter of Transmittal.
Name:
-------------------------------------------------
(Please Print)
Address:
-----------------------------------------------
(Please Print)
---------------------------------------------------------
Zip Code
---------------------------------------------------------
Taxpayer Identification or Social Security Number
(See Substitute Form W-9 herein)
----------------------------------------------------------
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR OLD
NOTES. Certificates for all physically delivered Old Notes or confirmation of
any book-entry transfer to the Exchange Agent's account at DTC of Old Notes
tendered by book-entry transfer, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof with original
to follow, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at its address set forth herein on or prior to
the Expiration Date.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE TENDERED OLD
NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER
AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS
RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IF SUCH
DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other required documents to the Exchange Agent on or
prior to the Expiration Date may tender their Old Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such
tender must be made by or through an Eligible Institution (as defined therein);
(ii) on or prior to the Expiration Date the Exchange Agent must have received
from such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the tendering Holder, the certificate number(s) of
such Old Notes (if available) and the principal amount of Old Notes tendered and
stating that the tender is being made thereby, and (iii) all tendered Old Notes
(or a confirmation of any book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC) as well as this Letter of Transmittal and all
other documents required by this Letter of Transmittal must be received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date, all as provided in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures."
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of Old Notes, nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that the Company determines are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering Holders,
unless otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted in
denominations of $1,000 and integral multiples in excess thereof. If less than
the entire principal amount of any Old Notes evidenced by a submitted
certificate is tendered, the tendering Holder should fill in the principal
amount tendered in the third
<PAGE> 9
column of the chart entitled "Description of Old Notes Tendered Herewith." The
entire principal amount of Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated. If the entire principal
amount of all Old Notes is not tendered, Old Notes for the principal amount of
Old Notes not tendered and a certificate or certificates representing Exchange
Notes issued in exchange for any Old Notes accepted will be sent to the Holder
at his or her registered address, unless otherwise indicated under "Special
Issuance Instructions" or "Special Delivery Instructions" or unless tender is
made through DTC, promptly after the Old Notes are accepted for exchange.
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable, except
that Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. To be effective, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m. Eastern Standard Time on the
Expiration Date. Any such notice of withdrawal must specify the person named in
the Letter of Transmittal as having tendered Old Notes to be withdrawn, the
certificate numbers of the Old Notes to be withdrawn, the principal amount of
Old Notes delivered for exchange, a statement that such Holder is withdrawing
its election to have such Old Notes exchanged, and the name of the registered
Holder of such Old Notes, and must be signed by the Holder in the same manner as
the original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee register the transfer of such Old Notes into the name of the
person(s) withdrawing the tender, and specify the name in which any such Old
Notes are to be registered, if different from the person having deposited the
Old Notes.
If certificates for Old Notes have been delivered or otherwise identified
to the Exchange Agent, then, prior to the release of such certificates, the
withdrawing Holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
Medallion Stamp guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at DTC to be credited with the withdrawn Old
Notes and otherwise comply with the procedures of such facility. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company in its sole discretion, which
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes
may be retendered by following one of the procedures described in the Prospectus
under "The Exchange Offer--Procedures for Tendering" at any time prior to the
Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at DTC pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with DTC for the Old Notes).
3. SIGNATURE ON LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered Holder(s) of the Old Notes tendered hereby, the signature must
correspond with name(s) as written on the face of certificates without
alteration, enlargement or any change whatsoever. If any of the Old Notes
tendered hereby are owned of record by two or more joint owners, all such owners
must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
If this Letter of Transmittal is signed by the registered Holder(s) of Old
Notes tendered hereby, such Holder(s) need not and should not endorse any
tendered Old Note, nor provide a separate bond power.
If this Letter of Transmittal is signed by a person other than the
registered Holder(s) of the Old Notes tendered, such Old Notes must either be
properly endorsed or accompanied by a properly completed separate
<PAGE> 10
bond power in form satisfactory to the Company and duly executed by the
registered Holder(s), in either case signed exactly as the name or names of the
registered Holder(s) appear(s) on the Old Notes, and with the signatures on the
bond power Medallion Stamp guaranteed by an Eligible Institution.
If this Letter of Transmittal, any certificates for Old Notes or separate
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority so to act must be submitted with this Letter of Transmittal.
Endorsements on certificates for Old Notes or signatures on separate bond
powers required by this Instruction 3 must be Medallion Stamp guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be Medallion Stamp
guaranteed by an Eligible Institution, unless the Old Notes are tendered: (i) by
a registered Holder who has not completed the box entitled, "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal;
or (ii) for the account of an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable spaces, the name and address to which Exchange Notes
or substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal (or in the case of tender of the Old
Notes through DTC, if different from DTC). In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
5. TRANSFER TAXES. The Company shall pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be registered or issued in the name of, any person other than the registered
Holder(s) of the Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of any person(s) other than the person(s) signing this
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered Holder or any other
person) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
6. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify, in whole or in part, any of the conditions to the Exchange
Offer set forth in the Prospectus.
7. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder whose
Old Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance, as well as requests for additional copies of the Prospectus and this
Letter of Transmittal, may be directed to the Exchange Agent at the address and
telephone number set forth herein. Holders may also contact their broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
IMPORTANT: This Letter of Transmittal or a facsimile thereof with original
to follow (together with certificates for old notes or confirmation of
book-entry transfer and all other required documents) or a notice of Guaranteed
Delivery must be received by the Exchange Agent on or prior to the Expiration
Date.
<PAGE> 11
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $50 penalty may be imposed by the Internal Revenue
Service, and payments made with respect to Old Notes purchased pursuant to the
Exchange Offer may be subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to the Holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is not
an additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the Exchange
Notes, the Holder is required to provide the Exchange Agent, with either: (i)
the Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Holder is awaiting a
TIN) and that (A) the Holder has not been notified by the Internal Revenue
Service that the Holder is subject to backup withholding as a result of failure
to report all interest or dividends or (B) the Internal Revenue Service has
notified the Holder that the Holder is no longer subject to backup withholding;
or (ii) an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Old Notes. If the Old Notes are held in more than one name or are held not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
<PAGE> 12
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY
- ------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT THE RIGHT
FORMW-9 AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number
or Employer
Identification Number
----------------------------
-------------------------------------------------------------------------------------------
DEPARTMENT OF THE
TREASURY PART 2--Certification. Under Penalties of Perjury, I certify that (1) The number shown on
INTERNAL REVENUE SERVICE this form is my correct Taxpayer Identification Number (or I am waiting for a number to
PAYER'S REQUEST FOR TAXPAYER be issued to me) and (2) I am not subject to backup withholding because I have not been
IDENTIFICATION NUMBER (TIN) notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding
as a result of failure to report all interest or dividends, or the IRS has notified me
that I am no longer subject to backup withholding.
-------------------------------------------------------------------------------------------
Certification Instructions--You must cross out item (2) PART 3--
in Part 2 above if you have been notified by the IRS Awaiting TIN [ ]
that you are subject to backup withholding because of
underreporting interest or dividends on your tax return.
However, if after being notified by the IRS that you
were subject to backup withholding you received another
notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item
(2).
SIGNATURE _____________________ DATE ________
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to
me, and either (a) I have mailed or delivered an application to receive a taxpayer identification
number to the appropriate Internal Revenue Service Center or Social Security Administration
Officer or (b) I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31 percent of all reportable
payments made to me thereafter will be withheld until I provide a number.
Signature Date
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<C> <C>
Via Mail: By Facsimile:
IBJ Schroder Bank & Trust Company (212) 858-2611
P.O. Box 84
Bowling Green Station Confirm by Telephone:
New York, NY 10274-0084 (212) 858-2103
Attn: Reorganization Operations Dept.
By Hand/Overnight Delivery:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
</TABLE>
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
OFFER TO EXCHANGE
10 1/2% SENIOR SECURED NOTES DUE NOVEMBER 1, 2004
FOR ANY AND ALL OUTSTANDING
10 1/2% SENIOR SECURED NOTES DUE NOVEMBER 1, 2004
OF
TOM'S FOODS INC.
As set forth in the Prospectus, dated February 13, 1998 (the "Prospectus"),
of Tom's Foods Inc. (the "Company"), and the accompanying Letter of Transmittal
and instructions thereto (the "Letter of Transmittal"), this form or one
substantially equivalent hereto must be used to accept the Company's offer to
exchange (the "Exchange Offer") 10 1/2% Senior Secured Notes due November 1,
2004 (the "Exchange Notes") for any and all of its outstanding 10 1/2% Senior
Secured Notes due November 1, 2004 (the "Old Notes") if (i) certificates
representing the Old Notes to be tendered for purchase and payment are not
immediately available, or (ii) time will not permit the Letter of Transmittal,
certificates representing such Old Notes or other required documents to reach
the Exchange Agent prior to the Expiration Date. This form may be delivered by
an Eligible Institution by mail or hand delivery, or transmitted via facsimile
with original to follow, to the Exchange Agent as set forth below. All
capitalized terms used herein but not defined herein shall have the meanings
ascribed to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON
MARCH 17, 1998 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF
OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION
DATE.
THE EXCHANGE AGENT:
IBJ SCHRODER BANK & TRUST COMPANY
Via Mail:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, NY 10274-0084
Attn: Reorganization Operations Dept.
By Hand/Overnight Delivery:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attn: Securities Processing Window,
Subcellar One, (SC-1)
By Facsimile:
(212) 858-2611
Confirm by Telephone:
(212) 858-2103
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be Medallion Stamp guaranteed by an
"Eligible Institution" under the instructions thereto, such signature guarantee
must appear in the applicable space provided in the signature box on the Letter
of Transmittal.
LADIES AND GENTLEMEN:
The undersigned hereby tenders(s) to the Company, upon the terms and
subject to the conditions set forth in the Exchange Offer and the Letter of
Transmittal, receipt of which is hereby acknowledged, the
<PAGE> 2
aggregate principal amount of Old Notes set forth below pursuant to the
guaranteed delivery procedures set forth in the Prospectus.
The undersigned understands that tenders of Old Notes will be accepted only
in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Notes pursuant to the Exchange Offer
may not be withdrawn after 5:00 p.m., Eastern Standard time on the Expiration
Date. Tenders of Old Notes may be also be withdrawn if the Exchange Offer is
terminated without any such Old Notes being purchased thereunder or as otherwise
provided in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Owner(s) or Authorized Signatory:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name(s) of Registered Holder(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Amount of Old Notes Tendered:
- --------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Certificate No(s). of Old Notes (if available):
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone No.:
- -------------------------------------------------------------------------------
If Old Notes will be delivered by book-entry
transfer at The Depository Trust Company, insert
Depository Account No.:
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appear on certificates for
Old Notes or on a security position identifying it (them) as the owner of Old
Notes, or by person(s) authorized to become registered Holder(s) by endorsements
and documents transmitted with this Notice of Guaranteed Delivery. If signature
is by a trustee, executor,
2
<PAGE> 3
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information.
Please print name(s) and address(es)
<TABLE>
<S> <C>
Name(s) ------------------------------------------------------------
------------------------------------------------------------
Capacity:
------------------------------------------------------------
Address(es):
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE
EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
3
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office, branch, agency or correspondent in the United
States, hereby guarantees that, within three New York Stock Exchange, Inc.
trading days after the Expiration Date, a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof), with any required signature
guarantees, together with certificates representing the Old Notes covered hereby
in proper form for transfer (or confirmation of the book-entry transfer of such
Old Notes into the Exchange Agent's account at the Depository Trust Company,
pursuant to the procedure for book-entry transfer set forth in the Prospectus)
and any other documents required by the Letter of Transmittal will be delivered
by undersigned to the Exchange Agent at its address set forth above.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SET
FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
Name of Firm:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Authorized Signature
Address:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Title:
- --------------------------------------------------------------------------------
Area Code and Telephone No.:
- -------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
4
<PAGE> 1
EXHIBIT 99.3
OFFER TO EXCHANGE
10 1/2% SENIOR SECURED NOTES DUE NOVEMBER 1, 2004
FOR ANY AND ALL OUTSTANDING
10 1/2% SENIOR SECURED NOTES DUE NOVEMBER 1, 2004
OF
TOM'S FOODS INC.
TO BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
We are enclosing herewith the material listed below relating to the offer
by Tom's Foods Inc., a Delaware corporation (the "Company") to exchange its
10 1/2% Senior Secured Notes due November 1, 2004 (the "Exchange Notes"), for a
like principal amount of its issued and outstanding 10 1/2% Senior Secured Notes
due November 1, 2004 (the "Old Notes") pursuant to an offering registered under
the Securities Act of 1933, as amended (the "Securities Act"), upon the terms
and subject to the conditions set forth in the Company's Prospectus, dated
February 13, 1998, and the related Letter of Transmittal (which together
constitute the "Exchange Offer").
The Exchange Offer provides a procedure for holders to tender the Old Notes
by means of guaranteed delivery.
The Exchange Offer will expire at 5:00 p.m., Eastern Standard time, on
March 17, 1998, unless extended (the "Expiration Date"). Tendered Old Notes may
be withdrawn at any time prior to 5:00 p.m. Eastern Standard time on the
Expiration Date, if such Old Notes have not previously been accepted for
exchange pursuant to the Exchange Offer.
Based on interpretations of the staff of the Securities and Exchange
Commission (the "SEC"), Exchange Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such holder is acquiring the
Exchange Notes in its ordinary course of business, such holder has no
arrangement or understanding with any person to participate in a distribution of
the Exchange Notes, and neither such holder nor any other such person is
engaging in or intends to engage in a distribution of such Exchange Notes.
Holders of Old Notes wishing to accept the Exchange Offer must represent to the
Company that such conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company has agreed that, for a period of 180 days after
the date of the Prospectus, it will make the Prospectus and any amendments or
supplements thereto required for compliance with the Securities Act available to
any broker-dealer for use in connection with any such resale.
THE EXCHANGE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF OLD NOTES
BEING TENDERED.
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes not theretofore accepted for exchange, and may terminate or amend the
Exchange Offer as provided in the Prospectus.
THE COMPANY RESERVES THE RIGHT NOT TO ACCEPT TENDERED OLD NOTES FROM ANY
TENDERING HOLDER IF THE COMPANY DETERMINES, IN ITS SOLE AND ABSOLUTE
<PAGE> 2
DISCRETION, THAT SUCH ACCEPTANCE COULD RESULT IN A VIOLATION OF APPLICABLE
SECURITIES LAWS.
For your information and for forwarding to your clients for whom you hold
Old Notes registered in your name or in the name of your nominee, enclosed
herewith are copies of the following documents:
1. Prospectus dated February 13, 1998;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder and/or DTC Participant from Beneficial
Owner;
5. Letter which may be sent to your clients for whose account you hold Old
Notes in your name or in the name of your nominee, to accompany the
instruction form referred to above, for obtaining such client's
instruction with regard to the Exchange Offer; and
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 of the Internal Revenue Service (attached to Letter
of Transmittal).
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
The Company will not pay any fee or commission to any broker or dealer or
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The Company
will pay or cause to be paid any transfer taxes payable on the transfer of Old
Notes to it, except as otherwise provided in Instruction 5 of the enclosed
Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer may be
addressed to, and additional copies of the enclosed materials may be obtained
from the Exchange Agent, IBJ Schroder Bank & Trust Company, at the telephone
number set forth below:
Telephone: (212) 858-2103
Very truly yours,
Tom's Foods Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF TOM'S FOODS INC. OR IBJ SCHRODER BANK & TRUST COMPANY OR AUTHORIZE YOU
TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE
EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS
CONTAINED THEREIN.
2
<PAGE> 1
EXHIBIT 99.4
INSTRUCTION TO REGISTERED HOLDER AND/OR
DTC PARTICIPANT FROM BENEFICIAL OWNER
OF
10 1/2% SENIOR SECURED NOTES DUE 2004
OF
TOM'S FOODS, INC.
TO REGISTERED HOLDER AND/OR DTC PARTICIPANT:
The undersigned hereby acknowledges receipt of the prospectus dated
February 13, 1998 (the "Prospectus") of Tom's Foods, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange 10 1/2% Senior Secured Notes due 2004 (the
"Exchange Notes") for any and all of its outstanding 10 1/2% Senior Secured
Notes due 2004 (the "Old Notes"). Capitalized terms used but not defined herein
have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or DTC participant, as to
the action to be taken by you relating to the Exchange Offer with respect to the
Old Notes held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (fill in amount):
$_____________________________________
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[ ] To TENDER the following Old Notes held by you for the account of
the undersigned (insert principal amount of Old Notes to be tendered, (if
any):
$_____________________________________
[ ] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
Exchange Notes acquired by the undersigned pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the undersigned, (ii) the
undersigned has no arrangement or understanding with any person to participate
in a distribution of such Exchange Notes, (iii) the undersigned is not engaged
in and does not intend to engage in a distribution of such Exchange Notes and
(iv) the undersigned is not an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"). If
the undersigned is a broker-dealer (whether or not it is also an "affiliate")
that will receive Exchange Notes for its account in exchange for Old Notes, it
represents that such Old Notes were acquired as a result of market-making
activities or other trading activities, and acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such exchange Notes. By acknowledging that it will deliver, and by
delivering, a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes, the undersigned is not deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
<PAGE> 2
SIGN HERE
Name of beneficial owner(s):____________________________________________________
Signature(s):___________________________________________________________________
Name(s) (please print):_________________________________________________________
Address:________________________________________________________________________
Telephone Number:_______________________________________________________________
Taxpayer identification or Social Security Number:
________________________________________________________________________________
________________________________________________________________________________
Date:___________________________________________________________________________
2
<PAGE> 1
EXHIBIT 99.6
OFFER FOR ANY AND ALL OUTSTANDING
10 1/2% SENIOR SECURED NOTES DUE NOVEMBER 1, 2004
IN EXCHANGE FOR
10 1/2% SENIOR SECURED NOTES DUE NOVEMBER 1, 2004
OF TOM'S FOODS INC.
February , 1998
TO OUR CLIENTS:
Enclosed for your consideration is the Prospectus dated February 13, 1998
(as the same may be amended from time to time, the "Prospectus") and a related
Letter of Transmittal (the "Letter of Transmittal," together with the
Prospectus, the "Exchange Offer") relating to the offer by Tom's Foods Inc. (the
"Company") to exchange any and all outstanding 10 1/2% Senior Secured Notes due
November 1, 2004 (the "Old Notes"), of the Company for a like aggregate
principal amount of 10 1/2% Senior Secured Notes due November 1, 2004 (the
"Exchange Notes"), of the Company.
Please note that the Exchange Offer will expire at 5:00 p.m., New York City
time, on March 17, 1998, unless extended.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
We are the registered holder of the Old Notes held by us for your account.
A tender of such Old Notes can be made only by us as the registered holder and
pursuant to your instructions. The Letter of Transmittal is furnished to you for
your information only and cannot be used by you to tender Old Notes held by us
for your account.
Accordingly, we request instructions as to whether you wish us to tender
any or all of the Old Notes held by us for your account, pursuant to the terms
and conditions set forth in the Exchange Offer. We also request that you confirm
that we may on your behalf make the representations contained in the Letter of
Transmittal that are to be made with respect to you as beneficial owner.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) any Exchange Notes to be received by it will
be acquired in the ordinary course of its business, (ii) at the time of the
commencement of the Exchange Offer, it has no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act of 1933, as amended (the "Securities Act")), of the Exchange
Notes in violation of the Securities Act, (iii) it is not an "affiliate" (as
defined in Rule 405 promulgated under the Securities Act) of the Company, (iv)
if such holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of the Exchange Notes and (v) if such
holder is a broker-dealer that will receive Exchange Notes for its own account
in exchange for Old Notes that were acquired as a result of market making or
other trading activities, that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes, such broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
Very Truly Yours,
