As filed with the Securities and Exchange Commission on June 21, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Royster-Clark, Inc.
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(Exact name of registrant as specified in its charter)
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Delaware 2875 76-0329525
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<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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10 Rockefeller Plaza - Suite 1120
New York, New York 10020
(212) 332-2965
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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See Table of Additional Registrants below
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Francis P. Jenkins, Jr.
Chairman of the Board and Chief Executive Officer
Royster-Clark, Inc.
10 Rockefeller Plaza - Suite 1120
New York, New York 10020
(212) 332-2965
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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With Copies to:
Craig L. Godshall, Esq.
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
(215) 994-4000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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 compliance with
General Instruction G, check the following box.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered Per Unit (1) Price (1) Registration Fee
--------------------------- ------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
10 1/4% First Mortgage Notes Due 2009.......... $200,000,000 100% $200,000,000 $55,600
Guarantees (2)................................. (3) (3) (3) (3)
</TABLE>
(1) Estimated pursuant to Rule 457(f) under the Securities Act of 1933, as
amended, solely for purposes of calculating the registration fee.
(2) The Company's parent entity, Royster-Clark Group, Inc. and the other
companies listed in the Table of Additional Registrants below have
guaranteed, jointly and severally, the 10 1/4% First Mortgage Notes Due 2009
being registered hereby. The Guarantors are registering the Guarantees.
Pursuant to rule 457(n) under the Securities Act of 1933, no registration
fee is required with respect to the Guarantees.
(3) Not applicable.
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The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
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 the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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Royster-Clark, Inc.
Table of Additional Registrants
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IRS
Primary Standard Employer
State of Industrial Classification Identification
Name Incorporation Code Number No.
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Royster-Clark Group, Inc....................... Delaware 2875 13-4055347
Royster-Clark AgriBusiness, Inc................ Delaware 5191 58-1599501
Royster-Clark Nitrogen, Inc.................... Delaware 2873 36-3536929
Royster-Clark Hutson, Inc...................... Kentucky 5191 61-0895190
Royster-Clark Resources LLC.................... Delaware 5191 22-3652274
Royster-Clark Realty LLC....................... Delaware 6512 22-3648552
Royster-Clark AgriBusiness Realty LLC.......... Delaware 6512 22-3648546
Royster-Clark Hutson's Realty LLC.............. Delaware 6512 22-3648548
Royster-Clark Nitrogen Realty LLC.............. Delaware 6512 22-3648549
</TABLE>
The address, including zip code, and telephone number, including area code,
of the principal offices of the additional registrants listed above (the
"Additional Registrants") is: 10 Rockefeller Plaza-Suite 1120, New York, New
York 10020; the telephone number at that address is (212) 332-2965.
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<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 21, 1999
PROSPECTUS
Offer to Exchange
10 1/4% First Mortgage Notes Due 2009 for all outstanding
10 1/4% First Mortgage Notes Due 2009
of
ROYSTER-CLARK, INC.
The Exchange Offer will expire at 5:00 P.M.,
New York City time, on , 1999, unless extended.
-------------------------
Terms of the Exchange Offer:
- We will exchange all Existing First Mortgage Notes that are validly
tendered and not withdrawn prior to the expiration of the Exchange
Offer.
- You may withdraw tenders of Existing First Mortgage Notes at any time
prior to the expiration of the Exchange Offer.
- We believe that the exchange of Existing First Mortgage Notes will not
be a taxable event for U.S. federal income tax purposes, but you
should see "Certain United States Federal Income Tax Considerations"
on page [ ] for more information.
- We will not receive any proceeds from the Exchange Offer.
- The terms of the Exchange First Mortgage Notes are substantially
identical to the Existing First Mortgage Notes, except that the
Exchange First Mortgage Notes are registered under the Securities Act
of 1933 and the transfer restrictions and registration rights
applicable to the Existing First Mortgage Notes do not apply to the
Exchange First Mortgage Notes.
-------------------------
See "Risk Factors" beginning on page 13 for a discussion of certain risks
that should be considered by holders prior to tendering their Existing First
Mortgage Notes.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is , 1999.
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any State where the offer or sale is not permitted.
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TABLE OF CONTENTS
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Page Page
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Forward-Looking Statements.........................iv Security Ownership of Certain Beneficial
Summary............................................ 1 Owners........................................... 57
Risk Factors.......................................13 Certain Relationships and Related
The Transactions...................................20 Transactions..................................... 59
Use of Proceeds....................................21 Description of Certain Other Indebtedness.......... 61
Capitalization.....................................22 Description of First Mortgage Notes................ 63
Selected Historical Financial Data.................23 Certain Federal Tax Consequences...................100
Management's Discussion and Analysis Plan of Distribution...............................103
of Financial Condition and Results of Legal Matters......................................104
Operations.......................................25 Experts............................................104
The Exchange Offer.................................32 Additional Information.............................104
Business...........................................40 Index to Unaudited Pro Forma Condensed
Management.........................................52 Consolidated Financial Statements................P-1
Index to Financial Statements......................F-1
</TABLE>
You should rely only on the information contained in this prospectus or to which
we have referred you in this prospectus. We have not authorized anyone to
provide you with information that is different. This prospectus may only be used
where it is legal to sell these securities. The information in this prospectus
may only be accurate on the date of this document.
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<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements regarding our and
our subsidiaries' expected financial position, business and financing plans are
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events. Although we
believe that the expectations reflected in such forward-looking statements are
reasonable, we cannot assure you that such expectations will prove to have been
correct. These forward-looking statements are subject to risks, uncertainties,
and assumptions about us, including, among other things, those relating to:
o conditions in and policies affecting the agriculture industry;
o weather;
o our high degree of leverage;
o our anticipated growth strategies, including future acquisitions;
o anticipated trends and conditions in our business, including
trends in the market;
o our ability to integrate acquired entities and achieve synergies;
o our ability to continue to control costs and maintain quality; and
o our ability to compete.
Our actual results may differ materially from those indicated by our
current plans as a result of these factors and other factors referenced in this
prospectus. Some of these factors are discussed in more detail elsewhere in this
prospectus including, without limitation, under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events and circumstances discussed in this prospectus might not occur.
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SUMMARY
The following summary contains basic information about the exchange offer
and is qualified in its entirety by the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this prospectus.
The terms "Royster-Clark," the "Company," "we," "our," "ours," and "us," as used
in this prospectus refer to Royster-Clark, Inc. and its subsidiaries as a
combined entity, including the three subsidiaries of IMC Global, Inc. acquired
in the Transactions, except where it is made clear that those terms refer only
to Royster-Clark, Inc. Unless otherwise indicated, the industry data, including
market share information, used in this prospectus comes from industry trade
journals and reports and other sources we believe are reliable. We cannot assure
you, however, as to the accuracy of such industry or market data. You are urged
to read this prospectus in its entirety before tendering your notes for
exchange.
THE EXCHANGE OFFER
On April 22, 1999, we issued and sold $200.0 million aggregate principal
amount of 10 1/4% First Mortgage Notes Due 2009, which we refer to as the
Existing First Mortgage Notes. In connection with that sale, we entered into a
registration rights agreement with the initial purchasers of the Existing First
Mortgage Notes in which we agreed, among other things, to deliver this
prospectus to you and to complete an exchange offer for the Existing First
Mortgage Notes. Pursuant to the registration rights agreement, we are offering
to exchange $200.0 million aggregate principal amount of our 10 1/4% First
Mortgage Notes Due 2009, which have been registered under the Securities Act,
which we refer to as the Exchange First Mortgage Notes, for a like aggregate
principal amount of our Existing First Mortgage Notes. We refer to this offer to
exchange Exchange First Mortgage Notes for Existing First Mortgage Notes in
accordance with the terms set forth in this prospectus and the accompanying
Letter of Transmittal as the Exchange Offer. You are entitled to exchange your
Existing First Mortgage Notes for Exchange First Mortgage Notes. The Exchange
First Mortgage Notes have substantially identical terms to the Existing First
Mortgage Notes. We urge you to read the discussions under the headings "The
Exchange Offer" and "The Exchange First Mortgage Notes" in this Summary for
further information regarding the Exchange Offer and the Exchange First Mortgage
Notes.
THE COMPANY
We are the largest independent retail and wholesale distributor of
fertilizer, seed, crop protection products and agronomic services to farmers in
the United States. We primarily focus on major farming regions in the East,
South and Midwest. Our value-added distribution business supplies a full range
of products and services to our retail and wholesale customers through 400
facilities consisting of retail farm centers, granulation, blending and seed
processing plants, and an integrated network of storage and distribution
terminals and warehouses. In addition, we operate two nitrogen manufacturing
plants that supply our distribution business with nitrogen fertilizer products.
We operate as a retailer and wholesaler of a complete package of products and
services to help farmers become more profitable, efficient and environmentally
sound. In 1998, we generated pro forma revenues of $1.0 billion and adjusted pro
forma EBITDA of $78.6 million.
Over 90% of our sales relate to the value-added distribution of crop
production inputs purchased from third parties and resold to retail and
wholesale customers. We realize a premium on these products and, as such, are
only partially exposed to fluctuations in nitrogen fertilizer prices. Less than
10% of our sales come from manufacturing fertilizer products.
Our integrated network of plants and distribution terminals and warehouses
allows us to efficiently process, distribute and store product close to the
end-user and to supply our customers on a timely basis during the compressed
planting seasons. In addition, we use port facilities on the Atlantic Ocean and
the Mississippi River to provide flexibility in product purchasing, including
the ability to access overseas markets when they offer lower prices than
domestic markets. Our widespread geographical presence in some of the country's
most important farming regions provides diversity that helps to insulate our
overall business from difficult farming conditions in any one particular area as
a result of poor weather or adverse market conditions for specific crops.
Our retail distribution operation includes approximately 330 Farmarkets
retail farm centers, including approximately 30 commission sales stores, located
in the East, South and Midwest. Our retail farm centers sell a complete line of
products to farmers, including fertilizer, seed and crop protection products. In
addition, our retail centers provide increasingly important services to farmers,
including custom blending and application of crop production inputs, crop
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<PAGE>
management services, precision farming and biotechnology crop system advisory
services. We believe that our position as a "one-stop supplier" has allowed us
to achieve a leading market share in our targeted markets.
Our wholesale distribution operation supplies a full range of fertilizer,
seed and crop protection products to customers in the Southeast and Midwest. Our
primary wholesale business includes the purchase of nitrogen, phosphate and
potash, three essential nutrients for plant growth, for resale to wholesale
customers. We process the majority of these crop nutrients into blended and
granulated fertilizer products and then sell them as higher value-added mixed
fertilizer.
We are the largest North American seller of granulated fertilizer,
operating seven granulation plants that process commodity fertilizer into high
value-added granulated fertilizer products with desirable agronomic traits. We
believe that our granulation plants are among the most efficient, low-cost
facilities in the industry. Granulated fertilizer products are used by farmers
who produce high-value specialty crops such as citrus fruits, vegetables,
tobacco, peanuts and cotton. We offer a full line of premium branded granulated
fertilizer products primarily under the Rainbow(R) name on a wholesale basis to
a network of approximately 900 dealers, as well as to some Farmarkets stores.
Rainbow products have developed a reputation for high quality during the 90
years they have been sold throughout the Southeast. We believe that the Rainbow
brand name provides us with a significant competitive advantage and growth
opportunities through selling other crop production inputs using this recognized
brand name.
We own and operate a fully integrated nitrogen manufacturing plant in East
Dubuque, Illinois that shipped approximately 620,000 tons of ammonia and
upgraded nitrogen products in 1998, and a smaller nitrogen manufacturing
facility in Cincinnati, Ohio that shipped approximately 120,000 tons of upgraded
nitrogen products in 1998. All of the nitrogen products manufactured in these
two facilities are sold through our wholesale distribution operation for either
agricultural or industrial purposes.
Competitive Strengths
We possess a number of competitive strengths that have allowed us to
develop and maintain a leading position in the distribution of crop production
inputs:
o Significant Market Share in Major Farming Regions. We believe
that we capture a leading market share in our principal market
areas, which are some of the country's most important farming
regions. We are one of the largest distributors of crop
production inputs in North America and are the largest
independent retail and wholesale distributor. We believe that our
emphasis on selling a full range of quality products and
consistently providing high quality service has enabled us to
achieve our market share.
o Extensive Infrastructure. We have an extensive infrastructure of
over 400 facilities, consisting of retail farm centers,
granulation, blending and seed processing plants and an
integrated network of storage and distribution terminals and
warehouses. In addition, we operate two nitrogen manufacturing
plants that supply our distribution business with nitrogen
fertilizer products. We believe our infrastructure provides us
with a significant competitive advantage over smaller, regional
competitors and deters new entrants into this capital intensive
market. Our extensive distribution network allows us to optimize
product purchasing and consistently provide products and services
to farmers on a timely basis.
o Well Positioned to Benefit from Continued Industry Consolidation.
We believe we are well positioned to compete in an industry
undergoing significant consolidation. The agricultural industry
has experienced significant consolidation among both farmers and
suppliers of crop production inputs. The number of retail farm
centers in North America declined from 25,000 in 1984 to 10,500
in 1998. As our industry continues to consolidate, we believe
that large, full service distribution companies will have a
competitive advantage in providing the link between farmers and
the leading crop production input suppliers. As crop production
inputs become increasingly technologically advanced, suppliers
are demanding that distribution companies provide full service
access to a broad range of farm customers.
o Experienced Management Team. We have a strong senior management
team with an average of over 14 years of experience in the crop
production inputs distribution business. In September 1994,
Francis P. Jenkins, Jr., our Chairman and Chief Executive
Officer, took over management control of Royster-Clark. He
installed our current management team, which has increased
revenues, improved operating results and successfully integrated
a number of strategic acquisitions.
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o Leading Producer of Premium, Branded Granulated Fertilizer. We
offer a full line of premium granulated fertilizer products sold
under the Super Rainbow(R), Rainbow and International(R) brand
names. We have developed customer loyalty to our premium branded
granulated fertilizer products by providing high-quality products
and service. Rainbow's reputation in the market and the quality
of our products have allowed us to realize a premium on these
products.
o Effective Systems and Controls. Our management team uses a
sophisticated information technology system to enhance the
efficiency of product sales and movement throughout our
distribution network. We operate point-of-sale computer systems
at each of our Farmarkets locations which provide daily reports.
We use these systems to provide data for inventory control,
budgeting, forecasting, working capital management, requirements
planning and internal controls.
INDUSTRY OVERVIEW
The market for crop production inputs, including fertilizer, seed and crop
protection products in the United States was approximately $26.4 billion in
1997, according to the National Agricultural Statistics Service. This market has
experienced steady growth over time, with a compounded annual growth rate of
approximately 5.6% from 1990 to 1997. Industry observers believe that a number
of fundamental factors will continue to drive the industry:
o Continued population growth will increase demand for food
worldwide;
o The gradual shift to free-market economies along with enhanced
wealth in emerging economies is creating higher standards of
living and, thus, dietary improvements. Improving diets will
increase consumption of meat and dairy products resulting in an
increase in worldwide demand for grain;
o Stable U.S. planted acreage; and
o A limited amount of arable land leads farmers to continue using
fertilizer, biotech seed and crop protection products to obtain
maximum yields on available land.
The crop production inputs distribution industry has consolidated
significantly over the past 10 years. This consolidation has been driven by a
number of factors, many of which are expected to intensify in the coming years:
o Increased farm size due to consolidation;
o Consolidation of the North American producers of fertilizer, seed
and crop protection products;
o Impact of biotechnology on farmers' purchasing requirements for
seed;
o Growing acceptance of precision agriculture;
o New role for the farmer in an integrated agricultural chain; and
o Increasingly stringent environmental, health and safety
regulations.
We believe that this industry consolidation will result in increasing
demands on crop production input distribution companies. Farmers are using
biotechnology and advanced crop management techniques in their effort to
increase profitability. Major seed companies continue to introduce evolving,
technologically advanced products. We believe that our full-service distribution
network will be well positioned to provide the key link between the farmer and
the major suppliers of crop production inputs.
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Our principal executive offices are located at 10 Rockefeller Plaza, Suite
1120, New York, New York 10020, and our telephone number is (212) 332-2965.
THE TRANSACTIONS
We offered the First Mortgage Notes as part of the financing for a series
of transactions which resulted in our current management and 399 Venture
Partners, Inc., an affiliate of Citicorp Venture Capital Ltd., owning
Royster-Clark and the AgriBusiness unit of IMC Global, Inc.
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Our management and 399 Ventures formed a new company, now known as
Royster-Clark Group, Inc. On April 22, 1999, this company acquired
Royster-Clark, Inc. from its previous owners and Royster-Clark acquired IMC
AgriBusiness Inc. (now known as Royster-Clark AgriBusiness, Inc.), Hutson's AG
Service, Inc. (now known as Royster-Clark Hutson, Inc.), and IMC Nitrogen
Company (now known as Royster-Clark Nitrogen, Inc.) from IMC Global, Inc. These
three IMC entities are referred to as "AgriBusiness."
To finance these transactions, Mr. Jenkins, our Chairman and Chief
Executive Officer, and some of the other members of our management team
contributed a portion of their interests in us for common and preferred stock of
Royster-Clark Group. 399 Ventures invested a total of $59.0 million in
Royster-Clark Group through the purchase of shares of common stock, preferred
stock and notes. As a result of these transactions, Mr. Jenkins, 399 Ventures
and certain other of our managers now own all of the stock of Royster-Clark
Group, which owns the combined operations of Royster-Clark and AgriBusiness.
Management, including Mr. Jenkins, owns approximately 28% of us, consisting of
20% of the common equity and an additional 8% through a new stock purchase plan.
The total transaction costs incurred totaled approximately $403.5 million,
consisting of $315.1 million to purchase AgriBusiness and Royster-Clark, $67.8
million to refinance existing debt and $20.6 million of transaction fees and
expenses. We have financed these costs with (1) $114.9 million of borrowings
under our senior secured credit facility, (2) $200.0 million of First Mortgage
Notes, and (3) an equity investment of $88.6 million from the Royster-Clark
Group.
The sources and uses are as follows (dollars in millions):
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Sources Uses
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Senior Secured Credit Facility (1)..... $114.9 Aggregate Purchase Price............ $315.1
First Mortgage Notes................... 200.0 Refinanced Debt..................... 67.8
Equity (2)............................. 88.6 Transaction Fees and Expenses(3).... 20.6
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Total................ $403.5 Total.............. $403.5
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(1) Reflects a March 31, 1999 effective date.
(2) Includes $19.6 million of management rollover equity and $20.0 million of
Royster-Clark Group junior subordinated non-cash pay notes maturing in
2010, owned by 399 Ventures and IMC Global, Inc.
(3) Includes transaction costs allocated to the purchase price of AgriBusiness
and Royster-Clark.
The acquisitions of Royster-Clark and AgriBusiness, the financing and all
related transactions are collectively referred to as the "Transactions." For
more information on the Transactions, see "The Transactions," "Use of Proceeds,"
"Certain Relationships and Related Transactions" and "Security Ownership of
Certain Beneficial Owners."
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THE EXCHANGE OFFER
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Securities Offered...................................... Up to $200,000,000 aggregate principal amount of
10 1/4% First Mortgage Notes due 2009. The terms of
the Exchange First Mortgage Notes and Existing First
Mortgage Notes are identical in all material respects,
except for certain transfer restrictions and
registration rights relating to the Existing First
Mortgage Notes.
The Exchange Offer...................................... We are offering the Exchange First Mortgage Notes to
you in exchange for a like principal amount of Existing
First Mortgage Notes. Existing First Mortgage Notes may
be exchanged only in integral multiples of $1,000. We
intend by the issuance of the Exchange First Mortgage
Notes to satisfy our obligations contained in the
registration rights agreement entered into with the
initial purchasers of the Existing First Mortgage Notes.
Expiration Date; Withdrawal of Tender.................. The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1999, or such later date and
time to which it may be extended by us. The tender of
Existing First Mortgage Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to the
Expiration Date. Any Existing First Mortgage Notes not
accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer.
Certain Conditions to the Exchange Offer .............. The Exchange Offer is subject to certain customary
conditions, which we may waive. See "The Exchange
Offer--Conditions."
Procedures for Tendering Existing First Mortgage If you wish to accept the Exchange Offer and tender
Notes................................................ your Existing First Mortgage Notes, you must complete,
sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with its instructions
and the instructions in this prospectus, and mail or
otherwise deliver such Letter of Transmittal, or such
facsimile, together with such Existing First Mortgage
Notes and any other required documentation, to the
Exchange Agent at the address set forth herein. See
"The Exchange Offer--Procedures for Tendering Existing
First Mortgage Notes."
Use of Proceeds........................................ We will not receive any proceeds from the Exchange
Offer.
Exchange Agent......................................... United States Trust Company of New York is serving as
the Exchange Agent in connection with the Exchange
Offer.
Federal Income Tax Consequences......................... The exchange of the Existing First Mortgage Notes for
the Exchange First Mortgage Notes in the Exchange Offer
should not be a taxable event for federal income tax
purposes. See "Certain Federal Tax Consequences."
</TABLE>
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<PAGE>
CONSEQUENCES OF EXCHANGING EXISTING FIRST MORTGAGE NOTES
PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Securities
and Exchange Commission to third parties in unrelated transactions, we are of
the view that holders of Existing First Mortgage Notes (other than any holder
who is an "affiliate" of our company within the meaning of Rule 405 under the
Securities Act) who exchange their Existing First Mortgage Notes for Exchange
First Mortgage Notes pursuant to the Exchange Offer generally may offer such
Exchange First Mortgage Notes for resale, resell such Exchange First Mortgage
Notes and otherwise transfer such Exchange First Mortgage Notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided:
o the Exchange First Mortgage Notes are acquired in the ordinary
course of the holders' business;
o the holders have no arrangement with any person to participate in
a distribution of such Exchange First Mortgage Notes; and
o neither the holder nor any other person is engaging in or intends
to engage in a distribution of the Exchange First Mortgage Notes.
Each broker-dealer that receives Exchange First Mortgage Notes for its own
account in exchange for Existing First Mortgage Notes must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange First
Mortgage Notes. See "Plan of Distribution." In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the Exchange First
Mortgage Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdiction or in compliance with an available
exemption from registration or qualification. If a holder of Existing First
Mortgage Notes does not exchange such Existing First Mortgage Notes for Exchange
First Mortgage Notes pursuant to the Exchange Offer, such Existing First
Mortgage Notes will continue to be subject to the restrictions on transfer
contained in the legend printed on the Existing First Mortgage Notes. In
general, the Existing First Mortgage 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. Holders of Existing First Mortgage Notes do not have any appraisal or
dissenters' rights under the Delaware General Corporation Law in connection with
the Exchange Offer. See "The Exchange Offer--Consequences of Failure to
Exchange; Resales of Exchange Notes."
The Existing First Mortgage Notes are currently eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkages (PORTAL)
market. Following commencement of the Exchange Offer but prior to its
consummation, the Existing First Mortgage Notes may continue to be traded in the
PORTAL market. Following consummation of the Exchange Offer, the Exchange First
Mortgage Notes will not be eligible for PORTAL trading.
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THE EXCHANGE FIRST MORTGAGE NOTES
The terms of the Exchange First Mortgage Notes and the Existing First
Mortgage Notes are identical in all material respects, except for certain
transfer restrictions and registration rights relating to the Existing First
Mortgage Notes. From time to time in this prospectus, the Existing First
Mortgage Notes and the Exchange First Mortgage Notes are referred to as the
"First Mortgage Notes."
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Issuer.................................................. Royster-Clark, Inc.
First Mortgage Notes Offered............................ $200,000,000 principal amount of 10 1/4% First Mortgage
Notes due 2009.
Maturity............................................... April 1, 2009.
Interest............................................... Interest on the Exchange First Mortgage Notes will
accrue at the rate of 10 1/4% per year, payable
semiannually in cash in arrears on April 1 and October 1,
commencing October 1, 1999.
Ranking................................................ The Exchange First Mortgage Notes are our senior
obligations. The Exchange First Mortgage Notes will
rank pari passu in right of payment with claims of our
creditors holding indebtedness or other liabilities
that are not expressly subordinated to the Exchange
First Mortgage Notes and will rank ahead of all of our
existing and future subordinated indebtedness.
Security............................................... The Exchange First Mortgage Notes will be secured by
(1) first mortgages on seventeen of our and our
subsidiaries' principal properties, related fixtures
and equipment and other related assets and (2) a pledge
of equity of certain of our newly-formed subsidiaries.
These new subsidiaries are limited purpose subsidiaries
which were formed to own approximately 280 properties
used in the business. The lenders under our senior
secured credit facility are secured by a first lien on
all of our accounts receivable, inventory, general
intangibles and all other assets, except for the assets
securing the Exchange First Mortgage Notes, and so have
a prior right in payment to the proceeds of that
collateral. The indenture permits us to sell an
additional $10.0 million of First Mortgage Notes which
will rank pari passu in right of payment and be equally
and ratably secured with the Existing First Mortgage
Notes being exchanged in this exchange offer. In
addition, the collateral release provisions of the
indenture permit the release of certain nitrogen
facilities without substitution of collateral under
certain circumstances. See "Description of First
Mortgage Notes--Repurchase at the Option of Holders--Sale
of Nitrogen Facility."
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C>
Guarantees............................................. Royster-Clark Group, Inc. and our existing subsidiaries
have agreed to fully and unconditionally guarantee the
Exchange First Mortgage Notes on a joint and several
basis. See "Description of First Mortgage Notes--Guarantees."
Except as set forth below, the Exchange First Mortgage
Notes (and any outstanding Existing First Mortgage
Notes) are not redeemable prior to April 1, 2004.
Thereafter, the First Mortgage Notes are redeemable,
in whole or in part, at the redemption prices set
forth in this prospectus, plus accrued and unpaid
interest and liquidated damages, if any, to the date
of redemption.
On or before April 1, 2002, we may redeem up to 35% of
the First Mortgage Notes originally issued at the
redemption prices described in "Description of First
Mortgage Notes--Optional Redemption."
Mandatory Redemption.................................... None.
Change of Control....................................... If we undergo a change of control, we must offer to
repurchase the First Mortgage Notes at a price equal to
101% of the principal amount of the notes plus accrued
and unpaid interest and liquidated damages, if any, to
the date of repurchase. See "Description of First
Mortgage Notes-Repurchase at the Option of Holders -
Change of Control."
Certain Covenants....................................... We have agreed to limit our ability and the ability of
our subsidiaries to, among others:
o incur additional indebtedness;
o pay dividends and make other restricted payments or
investments;
o create or incur certain liens on any of our assets
or property;
o engage in transactions with affiliates;
o make asset sales;
o enter into sale-leaseback transactions; and
o consolidate or merge with or into, or transfer
substantially all of our assets to, another company.
These limitations are subject to important exceptions
and qualifications. For more details, see "Description
of First Mortgage Notes."
For a more detailed discussion of the Exchange First Mortgage Notes, see
"Description of the First Mortgage Notes."
</TABLE>
-8-
<PAGE>
RISK FACTORS
You should carefully consider all of the information in this prospectus. In
particular, you should evaluate the specific risk factors set forth under "Risk
Factors," beginning on page 13 before deciding to tender your Existing First
Mortgage Notes in the Exchange Offer.
-9-
<PAGE>
SUMMARY SELECTED AND PRO FORMA HISTORICAL FINANCIAL DATA
(Dollars in thousands)
The following tables set forth summary pro forma financial data at March
31, 1999 and for the three months ended March 31, 1999 and the fiscal year ended
December 31, 1998, supplemental financial data for the five year period ended
December 31, 1998 and the three month periods ended March 31, 1998 and 1999, and
summary selected historical financial and other data for the five year period
ended December 31, 1998 and the three month periods ended March 31, 1998 and
1999. You should read the following information in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our unaudited pro forma financial statements of Royster-Clark
and AgriBusiness and related notes thereto included elsewhere in this
prospectus.
The following unaudited pro forma consolidated income statement data and
other data for the fiscal year ended December 31, 1998 and the three months
ended March 31, 1999 give effect to the Transactions and related financing as if
they had occurred at January 1, 1998. The unaudited pro forma consolidated
balance sheet data at March 31, 1999 gives effect to the Transactions and the
refinancing as if they had occurred on March 31, 1999. The summary unaduited
proforma financial statement data and other data do not purport to represent our
financial position or results of operations if such transactions had occurred on
such dates or to project the financial position or results of operations as of
any future date or for any future period.
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1998 March 31, 1999
----------------- ------------------
<S> <C> <C>
Income Statement Data:
Net sales ......................... $1,019,827 181,087
Gross profit ...................... 178,145 22,547
Operating income (loss) ........... 52,597 (9,849)
Other Data:
EBITDA(a) ......................... $ 76,086 (3,845)
Adjusted EBITDA(b) ................ 78,614 (3,845)
Depreciation and amortization ..... 23,489 6,004
Cash interest expense ............. 33,475 7,782
Capital expenditures .............. 32,245 6,664
Credit Ratios:
Adjusted EBITDA to interest expense 2.3x (0.5)x
Net debt to Adjusted EBITDA(c) .... 3.8x (83.8)x
Pro forma earnings (loss) to fixed
changes ......................... 1.5x (1.1)x
For the three months ended March 31, 1999, earnings are inadequate to cover
fixed charges by $17,631.
At March 31, 1999
-----------------
Balance Sheet Data:
Cash and cash equivalents ................ 82
Working capital .......................... 181,799
Property, plant and equipment ............ 175,576
Total assets ............................. 667,175
Long-term debt, less current portion ..... 319,562
Stockholders' equity ..................... 88,599
</TABLE>
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
Pro forma EBITDA ................................................ $76,086 $(3,845)
Additional adjustments:
Improved product purchasing economics ...................... 1,133 --
Revised equipment lease and repair cycle ................... 989 --
Increased manufacturing output ............................. 406 --
------- -------
Total additional pro forma adjustments ..................... 2,528 --
------- -------
Adjusted pro forma EBITDA .................................. $78,614 $(3,845)
======= =======
</TABLE>
-10-
<PAGE>
- ----------------------------
(a) EBITDA represents operating income (loss) plus depreciation and amortization
as calculated from information presented in our unaudited pro forma financial
statements. While EBITDA should not be construed as a substitute for operating
income or a better indicator of liquidity than cash flow from operating
activities, which are determined in accordance with generally accepted
accounting principles ("GAAP"), it is included to provide additional information
with respect to our ability to meet our future debt service, capital expenditure
and working capital requirements. In addition, we believe that certain investors
find EBITDA to be a useful tool for measuring our ability to service our debt.
EBITDA is not necessarily a measure of our ability to fund our cash needs.
(b) Adjusted EBITDA represents the pro forma EBITDA as calculated in (a) above
adjusted to reflect certain additional adjustments which we believe are relevant
in evaluating our future operating performance. The additional adjustments,
which reflect the estimated impact of our business and operating strategy, are
based on estimates and assumptions we made and believed to be reasonable but
that are inherently uncertain and subject to change. The following calculation
should not be viewed as indicative of actual or future results. The table
reflects the effect of these items on pro forma EBITDA.
(c) Net debt represents total debt less cash and cash equivalents. The ratio of
net debt to Adjusted EBITDA was calculated based on pro forma net debt as of
December 31, 1998 and March 31, 1999 of $297,875 and $322,073, respectively.
SUPPLEMENTAL FINANCIAL DATA
(Dollars in thousands)
The following supplemental financial data was computed by adding together
the historical results of Royster-Clark and AgriBusiness. No pro forma or other
synergy adjustments have been reflected. This supplemental financial data is
presented for purposes of additional analysis and is not intended to reflect the
historical combined operating results of the entities for the periods presented
or to reflect results of operations for any future period.
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended
---------------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 3/31/98 3/31/99
---------- ----------- ----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net Sales.......... $903,791 $1,015,252 $1,020,733 $1,100,213 $1,005,672 $181,584 $181,087
Gross profit....... 140,214 174,404 187,180 198,696 160,826 25,771 22,245
EBITDA............. 48,831 82,041 66,515 78,486 59,022 773 (5,958)
</TABLE>
-11-
<PAGE>
SUMMARY SELECTED FINANCIAL DATA
(Dollars in thousands)
The following table sets forth summary historical financial and other data
of Royster-Clark and AgriBusiness for each of the years in the five year period
ended December 31, 1998, and the three months ended March 31, 1998 and 1999.
The financial statements of Royster-Clark were audited by KPMG LLP for
fiscal years 1996, 1997 and 1998. The financial statements of AgriBusiness were
audited by Ernst & Young LLP for fiscal years 1996, 1997 and 1998. The selected
financial data of Royster-Clark for 1994 and 1995 and at March 31, 1999 and for
the three months ended March 31, 1998 and 1999 and AgriBusiness for 1994 and
1995 and at March 31, 1999 and for the three months ended March 31, 1998 and
1999 are derived from unaudited financial statements of the companies, which
have been prepared by the companies on a basis consistent with the audited
financial statements appearing elsewhere in this prospectus and, in the opinion
of management, include all adjustments necessary for a fair presentation of such
data.
<TABLE>
<CAPTION>
Royster-Clark Year Ended December 31, Three Months Ended
- ------------- ---------------------------------------------------------------- ------------------------
1994 1995 1996 1997 1998 03/31/98 03/31/99
---------- ------------ ------------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net Sales.......... $196,391 $207,552 $222,933 $227,613 $218,672 $41,284 $53,487
Gross profit....... 26,714 28,504 33,280 34,996 33,026 6,971 9,445
Operating income... 4,757 9,571 11,444 11,781 8,544 2,062 2,224
Net earnings....... 450 2,404 3,814 4,331 1,832 495 366
Other Data:
EBITDA(a).......... 7,031 11,741 13,615 14,086 11,222 2,673 2,942
Depreciation and
amortization....... 2,274 2,170 2,171 2,305 2,678 611 718
Capital
expenditures....... 1,027 1,977 1,442 2,029 2,145 1,021 964
</TABLE>
<TABLE>
<CAPTION>
At
At December 31, March 31,
------------------------------------------------------------------ -----------
1994 1995 1996 1997 1998 1999
----------- ----------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital.... $6,754 $7,372 $14,514 $26,253 $30,726 $ 62,312
Total assets....... 82,728 85,924 83,547 96,065 120,397 173,407
</TABLE>
<TABLE>
<CAPTION>
IMC AgriBusiness Year Ended December 31, Three Months Ended
- ---------------- ----------------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 03/31/98 03/31/99
----------- ----------- ------------ ------------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net Sales......... $707,400 $807,700 $797,800 $872,600 $787,000 $140,300 $ 127,600
Gross profit...... 113,500 145,900 153,900 163,700 127,800 18,800 12,800
Operating income
(loss)............ 26,900 52,000 35,500 43,600 24,500 (7,500) (15,000)
Net earnings
(loss)............ 15,900 24,900 12,800 18,800 5,300 (5,300) (10,600)
Other Data:
EBITDA(a)......... 41,800 70,300 52,900 64,400 47,800 (1,900) (8,900)
Depreciation and
amortization...... 14,900 18,300 17,400 20,800 23,300 5,600 6,100
Capital
expenditures...... 19,300 23,200 23,000 27,800 30,100 6,400 5,700
</TABLE>
<TABLE>
<CAPTION>
At
At December 31, March 31,
-------------------------------------------------------------------- -----------
1994 1995 1996 1997 1998 1999
----------- ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital.....$141,200......$174,800 $165,900 $165,900 $141,800 $128,100
Total assets.........359,100.......406,500 417,100 464,300 440,300 507,200
</TABLE>
- --------------------
(a) EBITDA represents operating income (loss) plus depreciation and
amortization. While EBITDA should not be construed as a substitute for
operating income or a better indicator of liquidity than cash flow from
operating activities, which are determined in accordance with generally
accepted accounting principles ("GAAP"), it is included to provide
additional information with respect to our ability to meet our future debt
service, capital expenditure and working capital requirements. In
addition, we believe that certain investors find EBITDA to be a useful
tool for measuring our ability to service our debt. EBITDA is not
necessarily a measure of the Company's ability to fund its cash needs.
-12-
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and other
information in this prospectus, including the risks described below, which apply
to the Existing First Mortgage Notes as well as the Exchange First Mortgage
Notes.
Consequences of Failure to Exchange.
The Existing First Mortgage Notes were not registered under the Securities
Act or under the securities laws of any state and may not be resold, offered for
resale or otherwise transferred unless they are subsequently registered or
resold pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws. If you do not exchange your
Existing First Mortgage Notes for Exchange First Mortgage Notes pursuant to the
Exchange Offer, you will not be able to resell, offer to resell or otherwise
transfer the Existing First Mortgage Notes unless they are registered under the
Securities Act or unless you resell them, offer to resell or otherwise transfer
them under an exemption from the registration requirements of, or in a
transaction not subject to, the Securities Act. In addition, we will no longer
be under an obligation to register the Existing First Mortgage Notes under the
Securities Act except in the limited circumstances provided under the
registration rights agreement. In addition, if you want to exchange your
Existing First Mortgage Notes in the Exchange Offer for the purpose of
participating in a distribution of the Exchange First Mortgage Notes, you may be
deemed to have received restricted securities, and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
Adverse Effect of Issuance of Exchange First Mortgage Notes on Market for
Existing First Mortgage Notes
To the extent that Existing First Mortgage Notes are tendered for exchange
and accepted in the Exchange Offer, the trading market for the untendered and
tendered but unaccepted Existing First Mortgage Notes could be adversely
affected.
Substantial Leverage
We are a highly leveraged company. The following table shows certain
important credit statistics giving effect to completion of the Transactions.
<TABLE>
<CAPTION>
At March 31, 1999
(Dollars in millions)
---------------------
<S> <C>
Pro forma total long-term debt........................ $ 322.2
Pro forma stockholders' equity........................ 88.6
Total debt as a percentage of total capitalization.... 78.4%
</TABLE>
Our high level of indebtedness could have important consequences to you.
For example, it could:
o limit our ability to obtain additional debt financing in the future for
working capital, capital expenditures, acquisitions or general corporate
purposes;
o increase our vulnerability to general adverse economic and industry
conditions;
o require us to dedicate a substantial portion of our cash flow from
operations to make interest payments on our indebtedness, reducing the
availability of our cash flow to fund capital expenditures, working
capital and other general corporate purposes;
o limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate, including limiting our
ability to take advantage of significant business opportunities; and
o place us at a competitive disadvantage as compared to some of our
competitors that have less debt.
Our ability to pay interest, principal and liquidated damages, if any, on
the First Mortgage Notes and principal and interest on our other debt
obligations will depend on our future performance. Our ability to generate cash
will depend on many factors which may be beyond our control, including general
economic, financial and regulatory conditions. If we cannot generate enough cash
flow in the future to service our debt, we may need to delay capital
-13-
<PAGE>
expenditures, refinance all or a portion of our debt, including the First
Mortgage Notes, obtain additional financing or sell assets. We might not be able
to implement any of these strategies on satisfactory terms or on a timely basis,
if at all. If we are unable to meet our debt service obligations or comply with
our covenants, a default under our debt agreements would result. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Integration of Operations
The Transactions will dramatically increase the sales, geographic scope and
management complexity of our business. We cannot assure you that we will
successfully integrate the Royster-Clark and AgriBusiness operations, that we
will effectively manage the combined operations or that cost savings will be
achieved. If we fail to integrate the operations of the businesses, if the
expected operating efficiencies from the Transactions do not materialize or if
the costs of the integration are higher than expected, our financial condition
and results of operations could be adversely affected. In addition, we expect to
evaluate and, where appropriate, pursue additional acquisition opportunities. We
cannot assure you, however, that suitable acquisition candidates will be
identified in the future, or that if identified and acquired, we will be able to
successfully integrate future acquisitions.
Additional Borrowings Available
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. Our senior secured credit facility permits
borrowings up to $275.0 million and all of those borrowings would rank pari
passu with the First Mortgage Notes and the subsidiary guarantees. If new debt
is added to our and our subsidiaries' current debt levels, the related risks
that we and they now face could intensify.
The indenture allows us to incur up to an additional $10.0 million of First
Mortgage Notes which will be secured on a pari passu basis with the First
Mortgage Notes originally issued in the offering. In addition, the indenture
will permit us, under certain circumstances, to incur additional indebtedness,
including indebtedness secured by assets that do not constitute collateral. See
"Description of First Mortgage Notes--Certain Covenants."
See "Capitalization," "Selected Historical Financial Data" and "Description
of First Mortgage Notes--Repurchase at the Option of Holders--Change of Control"
and "Description of Certain Other Indebtedness."
Restrictions Imposed by Indebtedness
Under the terms and conditions of the indenture governing the First
Mortgage Notes and our senior secured credit facility we have agreed to limit,
subject to certain exceptions, our ability to make certain investments, create
liens, make asset sales and merge with another company. These limitations, as
well as our highly leveraged position, could significantly limit our ability to
respond to changing business or economic conditions or to substantial declines
in operating results. A breach of any of these limitations could result in an
event of default under the indenture and the senior secured credit facility. Our
ability to comply with these limitations may be affected by events beyond our
control. See "Description of First Mortgage Notes" and "Description of Certain
Other Indebtedness."
Seasonal Nature and Volatility of our Business
Our business is seasonal, based upon the planting, growing and harvesting
cycles. Typically, over half of our sales occur during the second quarter of
each year during the spring planting season. Since interim period operating
results reflect the seasonal nature of our business, they are not indicative of
results expected for the full fiscal year. In addition, quarterly results can
vary significantly from one year to the next due primarily to weather-related
shifts in planting schedules and purchase patterns. We incur substantial
expenditures for fixed costs throughout the year and substantial expenditures
for inventory in advance of the spring planting season.
Our business can also be volatile as a result of a number of other factors,
the most important of which are weather patterns and field conditions,
particularly during periods of high fertilizer consumption, current and
projected grain stocks and prices and the United States government's
agricultural policy. Weather can have an impact on our business, especially if
weather-related problems occur during our compressed primary planting season
between March and June. Weather-related problems can also have an effect on our
fertilizer and crop protection products volume if farmers are forced to abandon,
defer or change their planting intentions. Grain stocks are, in turn, directly
influenced by weather conditions and worldwide production and consumption.
In 1998, poor weather had a significant negative effect on our business.
Abnormally poor weather conditions in advance of and during the spring planting
season hit virtually all of the major farming regions and had a significant
negative effect on our business. El Nino caused unusually high amounts of
precipitation (up to 172% increase over normal levels in some areas of the U.S.
Cornbelt) in our target markets immediately prior to and throughout the spring
-14-
<PAGE>
planting season. As a result, farmers were forced to either abandon or delay
their planting, which led to lower use of crop production inputs during the
shortened planting season.
Quantities of fertilizers imported to and exported from North America, and
current and projected grain inventories and prices that are influenced by U.S.
exports and world-wide grain markets, can also affect demand for our products.
U.S. governmental policies may directly or indirectly influence the number of
acres planted, the level of grain inventories, the mix of crops planted and crop
prices.
Finally, because of factors beyond our control, including the production
capacity of competitors, nitrogen fertilizer price levels can be volatile. In
1998, our financial results were adversely impacted as the nitrogen fertilizer
industry operated at a cyclical trough, with prices at their lowest level since
1992.
Limitations on Security Interest; Defects in Security Interests
The First Mortgage Notes are secured by the real property, fixtures,
equipment and related permits, licenses and patents more fully described under
"Description of First Mortgage Notes--Security." The security interest generally
is limited to (1) first mortgage liens on seventeen principal properties, we
refer to in this section as the Mortgaged Properties, owned by us and our
subsidiaries and (2) a pledge of all the outstanding interests in four limited
purpose subsidiaries that own or will own approximately 280 properties used in
our business which we refer to in this section as the Other Properties,
including substantially all of the owned Farmarkets and other owned facilities.
Certain liens, including landlord's, warehousemen's and materialmen's liens
and certain tax liens, may, as a matter of law, have priority over the liens and
security interests securing the First Mortgage Notes; however, with respect to
each of the Mortgaged Properties, a title insurance policy insures the holders
of the First Mortgage Notes against losses incurred as a result of past tax
liens and mechanics liens affecting the Mortgaged Properties.
At the close of the Transactions, the limited purpose subsidiaries did not
own all of the Other Properties (which number approximately 280). At the time of
the acquisition of AgriBusiness, we had not received title reports for fifty of
the Other Properties of AgriBusiness and approximately sixty-five of the Other
Properties of Royster-Clark. While deeds have been recorded that are intended to
convey all of the Other Properties to the limited purpose subsidiaries, the
title reports for many of these properties, when they were subsequently
received, indicated the need for correcting deeds or other correcting
instruments in order to properly convey many of the Other Properties to the
limited purpose subsidiaries. In addition, the title reports for many of the
Other Properties indicated some outstanding liens, encumbrances and defects in
title. We are working with the seller of AgriBusiness and other parties to
remove or correct all of these problems that we determine are material. We have
agreed, and the seller of AgriBusiness has agreed, to use best efforts to
complete the transfer of these properties to the limited purpose subsidiaries
and clear title as soon as possible. In addition, the seller of AgriBusiness has
agreed to a limited indemnity in favor of the holders of the First Mortgage
Notes for losses resulting from a failure to properly convey those 50 Other
Properties of AgriBusiness for which title reports were not available at the
time of the acquisition of AgriBusiness.
We also have unreleased monetary liens affecting four of the seventeen
Mortgaged Properties, and, encumbrances, encroachments or defects in the title
on five of the Mortgaged Properties not typical of a first mortgage financing,
and because of the complexity of the East Dubuque site, we have not yet been
able to complete a full survey. In addition, some sites lack needed permits or
agreements relating to rail serve and docking facilities. If a needed permit or
agreement for rail service or docking facilities can not be obtained, operations
at the affected facility may be interrupted or impaired. We have been working
with the seller of AgriBusiness, surveyors, title companies and third parties to
clear all of the matters affecting title, complete the remaining survey and
obtain permits and agreements for rail and dock facilities.
For two of the Mortgaged Properties, we were unable to obtain the optimal
owner's title insurance for each principal property to the effect that the use
of the property, the dimensions of the property and the location, type and
configuration of all improvements comply with applicable zoning laws (this
endorsement was unavailable for East Dubuque and Americus because the surveys
had not been completed at the time of acquisition of AgriBusiness; however, we
expect to obtain the endorsement for Americus now that the survey is completed;
and the zoning endorsement was unavailable for Mulberry under Florida's title
insurance laws, although our zoning report indicates that the property there is
in compliance with zoning).
The risk to holders of the First Mortgage Notes as to the one site still
not fully surveyed may be substantial:
o If the operations or layout of the facility do not comply with zoning
laws, it may have to cease operations or remove improvements. As a
result, the facility's collateral value consistent with its permitted
zoning use may be negligible; and
-15-
<PAGE>
o The facility may impermissibly encroach upon a property line or easement,
requiring removal and relocation of all or a portion of the improvements
at the facility.
For eleven of the Mortgaged Properties, although the title insurance policy
insures zoning compliance, our improvements are legally non-conforming, and
therefore may not be permitted to be restored in the current configuration after
a casualty.
No Assurance of Realizable Value from the Collateral
We have made no representation as to the value or sufficiency of the
collateral securing the First Mortgage Notes. Accordingly, we cannot assure you
that the proceeds from the sale of any of the collateral upon the collateral
agent's exercise of remedies following an event of default under the First
Mortgage Notes will be sufficient to redeem the required principal amount of the
First Mortgage Notes. In addition, the lenders under our senior secured credit
facility are secured by a first lien on all of our accounts receivable,
inventory, general intangibles and all of our and our subsidiaries' other
assets. Accordingly, the lenders have a prior right in payment to the proceeds
of the sale of any of their collateral. If the proceeds from a sale of the
collateral are not sufficient to make all payments due under the First Mortgage
Notes, the holders of the First Mortgage Notes will have only senior unsecured
claims against us.
Collateral Adversely Affected by Bankruptcy Proceedings
The right of the collateral agent to repossess and dispose of the
collateral upon acceleration of the First Mortgage Notes is likely to be
significantly impaired by bankruptcy law if a bankruptcy proceeding were to be
commenced by or against us prior to or possibly even after the collateral agent
has repossessed and disposed of the collateral. Under the bankruptcy code, a
secured creditor such as the collateral agent is prohibited from repossessing
its security from a debtor in a bankruptcy case, or from disposing of security
repossessed from such debtor, without bankruptcy court approval. Moreover,
bankruptcy law generally permits the debtor to continue to return and to use
collateral (and the proceeds, products, rents or profits of such collateral)
even though the debtor is in default under the applicable debt instruments,
provided generally that the secured creditor is given "adequate protection."
There is not a definition of the term "adequate protection" and because of the
broad discretionary powers of a bankruptcy court, it is impossible to predict
how long payments under the First Mortgage Notes could be delayed following
commencement of a bankruptcy case, whether or when the trustee would repossess
or dispose of the collateral or whether or to what extent holders of the First
Mortgage Notes would be compensated for any delay in payment or loss of value of
the collateral through the requirements of "adequate protection." Furthermore,
in the event the bankruptcy court determines that the value of the collateral is
not sufficient to repay all amounts due on the First Mortgage Notes, the holders
of the First Mortgage Notes would have "undersecured claims." Federal bankruptcy
laws do not permit the payment and/or accrual of interest, costs and attorneys'
fees for "undersecured claims" during the debtor's bankruptcy case.
Potential Environmental Liability of Secured Lenders
Lenders that hold a security interest in real property may, in certain
specific circumstances, be held liable under certain environmental laws for the
costs of remediating or preventing releases or threatened releases of hazardous
substances at the mortgaged property. While lenders that neither foreclose on
nor participate in the management of a mortgaged property (as interpreted under
applicable law) generally have not been subject to such liability, lenders that
take possession of a mortgaged property or that participate in the management of
a mortgaged property must carefully adhere to federal and state rules to avoid
liability. In this regard, the collateral agent, the trustee or the holders of
the First Mortgage Notes would need to evaluate the impact of these potential
liabilities before determining to foreclose on the mortgaged properties securing
such First Mortgage Notes and exercising other available remedies. In addition,
the collateral agent or the trustee, as the case may be, may decline to
foreclose upon the mortgaged properties or exercise remedies available to the
extent that they do not receive indemnification to their satisfaction from the
holders of the First Mortgage Notes. See "Description of First Mortgage
Notes--Security."
Volatility of Nitrogen Industry
In the recent past, nitrogen fertilizer prices have been volatile with
price changes from one growing season to the next. Nitrogen fertilizer is a
global commodity and can be subject to intense price competition from domestic
and foreign sources. The profitability of the nitrogen fertilizer products we
sell at retail and wholesale, and of our nitrogen manufacturing operations, are
dependent on the nitrogen fertilizer cycle. Industry experts believe that the
nitrogen fertilizer industry is currently at a cyclical low which has resulted
primarily from the following three factors. First, the introduction of new
nitrogen plants in 1998 resulted in nitrogen supply being in excess of demand.
Second, since May 1997, China, the largest consumer of nitrogen fertilizer,
significantly decreased purchasing nitrogen products in the international
markets. Third, as a result of the financial crisis in the former Soviet Union,
-16-
<PAGE>
nitrogen producers have been selling products in the international market at
below market prices in an effort to get hard currency. We believe there will be
continued weakness in the nitrogen market in 1999 as a result of these factors.
Operating Hazards and Uninsured Risks
In addition to pollution and other environmental risks (see "Environmental
Laws" below), we are subject to risks inherent in the nitrogen industry, such as
explosions, fires and chemical spills or releases. Any significant interruption
of operations at our principal nitrogen facilities could adversely affect us.
Although we maintain general liability insurance and property and business
interruption insurance, because of the nature of industry hazards, it is
possible that liabilities for pollution and other damages arising from a major
occurrence may not be covered by our insurance policies or could exceed
insurance coverages or policy limits. Also, insurance may not be available at
reasonable rates in the future. These liabilities, which could arise as a result
of injury or loss of life, severe damage to property and equipment, pollution or
other environmental damage or suspension of operations, could adversely affect
us.
Dependence on Suppliers
We are dependent upon third party suppliers for most of the materials used
in our business. We have entered into a long-term, ten year, supply contract
with two divisions of IMC Global to purchase (1) a majority of the phosphate we
need from IMC Agrico and (2) a majority of the potash we need from IMC Kalium.
We purchase the nitrogen we do not produce ourselves from several different
suppliers in the U.S. Any delay or extended interruption in the supply of any of
these materials or changes in pricing arrangements with our suppliers could
disrupt our operations. If such disruption continued for an extended period of
time, it could adversely affect us.
Competition
We operate in a highly competitive industry, particularly with respect to
price and service. Our principal competitors in the distribution of crop
production inputs include agricultural cooperatives, which have the largest
market share in a majority of the locations we serve, national fertilizer
producers, major grain companies and independent distributors and brokers. Some
of these competitors may have greater financial and marketing resources than we
do.
Reliance on Key Personnel
We believe that the success of our business strategy and our ability to
operate profitably depend on the continued employment of our senior management
team. The loss of the services of certain of these key executives could have a
material adverse effect on us. While our chief executive officer has an
employment contract, and we expect to enter into employment contracts with other
key employees, we cannot assure you that in the future we will be able to retain
our existing senior management, attract additional qualified executives or fill
new senior management positions or vacancies created by expansion or turnover.
Government Regulation
Existing and future government regulations may greatly influence how we
operate our business, our business strategy and, ultimately, our financial
viability. U.S. governmental policies may directly or indirectly influence the
number of acres planted, the level of grain inventories, the mix of crops
planted, crop prices and the amounts of and locations where fertilizers may be
applied. We cannot predict the future regulatory framework of our business.
Environmental Laws
As a producer and distributor of crop production inputs, we are subject to
federal, state and local environmental, health and safety laws and regulations.
These regulations govern our operations and our current and former use, storage,
handling, discharge and disposal of a variety of substances. Under certain
environmental laws, we could be held jointly and severally responsible for the
removal and remediation of any hazardous substance contamination at our
facilities, at neighboring properties that migrated from our facilities and at
third party waste disposal sites. We could also be held liable for any
consequences arising out of human exposure to such substances or other
environmental damage. We may incur substantial costs to comply with such
environmental, health and safety law requirements. We may also incur substantial
costs for liabilities arising from past releases of, or exposure to, hazardous
substances. In addition, we may discover currently unknown environmental
problems or conditions. Continued compliance with environmental laws or
unexpected liabilities and clean-up costs could result in future expenditures by
us that could adversely affect us.
-17-
<PAGE>
Year 2000 Compliance
The Year 2000 issue is the result of many computer programs being written
using two digits rather than four to define the applicable year. Computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
In addition, the computer systems of third parties with whom we regularly
deal, including among others, our customers and suppliers, could be disrupted or
fail, causing an interruption or decrease in our ability to continue our
operations. We do not currently have any information concerning the Year 2000
compliance status of our suppliers and customers.
We believe that our main accounting and administrative systems are Year
2000 compliant, and an effort is underway to ensure all ancillary systems will
also meet the Year 2000 deadline. We do not know whether any of the disruptions
described above will actually occur, or if they do occur, the effect they will
have on us. We may, however, have to bear further Year 2000 costs and expenses
which could have a material adverse effect on our business. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Financing Change of Control Offer
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding First Mortgage Notes.
However, it is possible that we will not have sufficient funds at the time of
the change of control to make the required repurchase of First Mortgage Notes or
that restrictions in our senior secured credit facility will not allow such
repurchases. In addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, would not
constitute a "Change of Control" under the indenture. See "Description of First
Mortgage Notes--Repurchase at the Option of Holders."
Fraudulent Conveyance Matters
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor if, among
other things, the guarantor, at the time it incurred the indebtedness evidenced
by its guarantee:
o received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; or
o was insolvent or rendered insolvent by reason of such incurrence; or
o was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
o intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
o the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets; or o if the present fair
saleable value of its assets were less than the amount that would be
required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature; or
o it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to its
guarantee of the First Mortgage Notes, will not be insolvent, will not have
unreasonably small capital for the business in which it is engaged and will not
have incurred debts beyond its ability to pay such debts as they mature. We
cannot assure you, however, as to what standard a court would apply in making
such determinations or that a court would agree with our conclusions in this
regard.
-18-
<PAGE>
No Prior Market for the Exchange First Mortgage Notes
The Existing First Mortgage Notes are currently eligible for trading in the
PORTAL market. The Exchange First Mortgage Notes are new securities for which
there is no established market. We do not intend to list the Exchange First
Mortgage Notes on any national securities exchange or to seek the admission
thereof to trading in the Nasdaq National Market System. The Initial Purchasers
have advised us that they intend to make a market in the Exchange First Mortgage
Notes (and the Existing First Mortgage Notes), but they are not obligated to
make this market and even if they do they may decide not to in the future.
If any of the Exchange First Mortgage Notes are traded after their initial
issuance, they may trade at a discount from their initial offering price.
Factors that could cause the First Mortgage Notes to trade at a discount include
prevailing interest rates, a decline in our credit worthiness, a weakness in the
market for high-yield securities and declining economic conditions generally or
in the agricultural markets.
-19-
<PAGE>
THE TRANSACTIONS
We offered the First Mortgage notes as part of the financing for a series
of transactions which resulted in our current management and 399 Ventures owning
Royster-Clark and the AgriBusiness unit of IMC Global, Inc.
Our management and 399 Ventures formed a new company, now known as
Royster-Clark Group, Inc. On April 22, 1999, this company acquired Royster-Clark
from its previous owners and Royster-Clark acquired IMC AgriBusiness Inc., (now
known as Royster-Clark AgriBusiness, Inc.), Hutson's AG Service, Inc. (now known
as Royster-Clark Hutson, Inc.) and IMC Nitrogen Company (now known as
Royster-Clark Nitrogen, Inc.) from IMC Global, Inc. These three IMC entities are
referred to as "AgriBusiness."
To finance these transactions, Mr. Jenkins and certain other members of our
management contributed a portion of their interests in Royster-Clark for common
and preferred stock of Royster-Clark Group. In connection with these
Transactions, Mr. Jenkins and some of the other current managers received cash
for a portion of their interests in Royster-Clark. 399 Ventures invested a total
of $59.0 million in Royster-Clark Group through the purchase of shares of common
stock, preferred stock and notes. As a result of these transactions, Mr.
Jenkins, 399 Ventures and certain other of our managers own all of the stock of
Royster-Clark Group which owns the combined operations of Royster-Clark and
AgriBusiness. Management, including Mr. Jenkins, now owns approximately 28% of
our stock, consisting of approximately 20% of the common equity and an
additional 8% through a new stock purchase plan.
The total transaction costs incurred approximate $403.5 million, consisting
of $315.1 million to purchase AgriBusiness and Royster-Clark, $67.8 million to
refinance existing debt and $20.6 million of estimated transaction fees and
expenses. These costs were financed with (1) approximately $114.9 million of
borrowings under the senior secured credit facility, (2) $200.0 million of First
Mortgage Notes, and (3) an equity investment of $88.6 million from Royster-Clark
Group.
Royster-Clark Group financed this equity investment with (1) $59.0 million
of cash financing from 399 Ventures, (2) $10.0 million of non-cash pay junior
subordinated notes purchased by IMC Global, and (3) $19.6 million of rollover
equity contributed by some of the members of our management, including Mr.
Jenkins.
The $59.0 million from 399 Ventures consisted of (1) $47.4 million of
equity contributed by 399 Ventures in the form of non-cash pay preferred stock,
(2) $1.6 million contributed by 399 Ventures in the form of common equity, and
(3) $10.0 million of non-cash pay junior subordinated notes purchased by 399
Ventures. Some of the members of Royster-Clark management contributed $19.6
million in rollover equity which consisted of (1) $14.7 million of non-cash pay
preferred stock, (2) $4.5 million of zero preferred stock and (3) $0.4 million
of common equity.
The acquisitions of Royster-Clark and AgriBusiness, the financing and all
related transactions are collectively referred to as "The Transactions." For
more information on the Transactions, see "Use of Proceeds," "Certain
Relationships and Related Transactions," and "Security Ownership of Certain
Beneficial Owners."
-20-
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the Exchange Offer. In consideration
for issuing the Exchange First Mortgage Notes, we will receive the Existing
First Mortgage Notes in like principal amount in exchange. The Existing First
Mortgage Notes surrendered in exchange for Exchange First Mortgage Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange First Mortgage Notes will not result in any increase in our
indebtedness. We have agreed to bear the expenses of the Exchange Offer. No
underwriter is being used in connection with the Exchange Offer.
The net proceeds we received from the sale of the Existing First Mortgage
Notes were approximately $190.8 million after deducting discounts and expenses.
We used the gross proceeds from the sale together with $114.9 million of
borrowings under the senior secured credit facility and $88.6 million of equity
financing from our parent (1) to consummate the acquisitions of AgriBusiness and
Royster-Clark, (2) to refinance existing debt of Royster-Clark and AgriBusiness,
(3) to pay $20.6 million in transaction fees and expenses and (4) for general
corporate purposes, including working capital.
As of March 31, 1999, Royster-Clark had $48.9 million outstanding under its
line of credit note with U.S. Bancorp Ag Credit, Inc. Interest under the line of
credit note was payable monthly at a fluctuating rate equal to the Reference
Rate (as quoted by the U.S. Bank National Association, Minneapolis, Minnesota),
plus one quarter of one percent (0.25%). As of March 31, 1999, AgriBusiness
owed $5.0 million to a seller of a business to AgriBusiness pursuant to a term
note due on June 2002, bearing interest at an annual rate of 7.25%. As of March
31, 1999, AgriBusiness owed $2.1 million on Decatur County-Bainbridge
Industrial Development Authority Bonds due on December 1, 2002 bearing interest
at a variable rate (3.9% on March 31, 1999).
-21-
<PAGE>
CAPITALIZATION
The following table sets forth on a consolidated basis our unaudited
consolidated cash, cash equivalents and capitalization as adjusted to give
effect to the offering and the application of the estimated net proceeds
received. See "Use of Proceeds." You should read this table along with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Selected Historical Financial Data," "Unaudited Pro Forma
Condensed Consolidated Financial Statements" and our consolidated financial
statements and the related notes thereto included elsewhere in this prospectus.
As of March 31, 1999
Pro Forma As Adjusted
---------------------
(In thousands)
Cash and cash equivalents .............................. $ 82
===============
Long-term debt (including current portion):
Senior secured credit facility(1) .................. 114,879
First Mortgage Notes due 2009....................... 200,000
Other long-term debt................................ 7,276
---------------
Total long-term debt ............................ 322,155
Stockholders' equity.................................... 88,599
---------------
Total capitalization ................................... $ 410,754
===============
- ------------------------
(1) The facility provides for up to $275.0 million in borrowings, subject to
availability.
-22-
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth supplemental financial data for each of the
years in the five year period ended December 31, 1998 and for each of the three
month periods ended March 31, 1998 and 1999, and summary selected historical
financial and other data of Royster-Clark and AgriBusiness for each of the years
in the five-year period ended December 31, 1998, and for each of the three month
periods ended March 31, 1998 and 1999 which have been derived from the financial
statements of Royster-Clark and AgriBusiness, respectively. The financial
statements of Royster-Clark were audited by KPMG LLP for fiscal years 1996, 1997
and 1998. The financial statements of AgriBusiness were audited by Ernst & Young
LLP for fiscal years 1996, 1997 and 1998. The selected financial data of
Royster-Clark for 1994 and 1995 and March 31, 1998 and 1999 and AgriBusiness for
1994 and 1995 and March 31, 1998 and 1999 are derived from unaudited financial
statements of the companies, which have been prepared by the companies on a
basis consistent with the audited financial statements appearing elsewhere
herein and, in the opinion of management, include all adjustments necessary for
a fair presentation of such data. The supplemental financial data has been
prepared as if the Transactions occurred as of January 1, 1994. The supplemental
financial data was computed by adding together the historical results of
Royster-Clark and AgriBusiness. No pro forma or other synergy adjustments have
been reflected. This supplemental financial data is presented for purposes of
additional analysis and is not intended to reflect the historical combined
operating results of the entities for the periods presented or to reflect
results of operations for any future period. The following information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the historical and unaudited pro forma
financial statements of Royster-Clark and AgriBusiness and related notes
included elsewhere herein.
SUPPLEMENTAL FINANCIAL DATA
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended
---------------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 03/31/98 03/31/99
----------- ----------- ------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales........ $903,791 $1,015,252 $1,020,733 $1,100,213 $1,005,672 $181,584 $181,087
Gross profit..... 140,214 174,404 187,180 198,696 160,826 25,771 22,245
EBITDA........... 48,831 82,041 66,515 78,486 59,022 763 (5,958)
</TABLE>
The following table sets forth summary selected historical financial and
other data of Royster-Clark and AgriBusiness for each of the years in the
five-year period ended December 31, 1998, and the three months ended March 31,
1998 and 1999.
<TABLE>
<CAPTION>
Royster-Clark Year Ended December 31, Three Months Ended
- ------------- -------------------------------------------------------------- ------------------------
1994 1995 1996 1997 1998 03/31/98 03/31/99
----------- ---------- ----------- ---------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales........... $196,391 $207,552 $222,933 $227,613 $218,672 $ 41,284 $53,487
Gross profit........ 26,714 28,504 33,280 34,996 33,026 6,971 9,445
Operating expenses.. 21,957 18,933 21,836 23,215 24,482 4,909 7,221
Operating income.... 4,757 9,571 11,444 11,781 8,544 2,062 2,224
Net earnings........ 450 2,404 3,814 4,331 1,832 495 366
Other Data:
EBITDA(1)........... 7,031 11,741 13,615 14,086 11,222 2,673 2,942
Depreciation and
amortization....... 2,274 2,170 2,171 2,305 2,678 611 718
Capital
expenditures....... 1,027 1,977 1,442 2,029 2,145 1,021 964
Ratio of earnings
to fixed
charges (2)........ 1.07 1.72 2.15 2.33 1.47 1.61 1.33
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
At
At December 31, March 31,
------------------------------------------------------------------- ----------
1994 1995 1996 1997 1998 1999
----------- ----------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents........ $ 28 $ 28 $ 28 $ 29 $ 42 $ 62,312
Working capital.... 6,754 7,372 14,514 26,253 30,726 30,226
Total assets....... 82,728 85,924 83,547 96,065 120,397 173,407
Long-term debt,
less current
portion............ 9,685 8,701 12,600 23,025 33,817 65,760
Redeemable
preferred stock.... 14,250 14,250 12,000 12,000 12,000 12,000
Common stock
subject to ESOP
put option......... 1,443 1,647 1,715 1,861 1,864 1,864
Stockholder's
equity............. 6,536 7,465 11,505 14,745 15,153 15,219
</TABLE>
<TABLE>
<CAPTION>
IMC AgriBusiness Year Ended December 31, Three Months Ended
- ---------------- ------------------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 03/31/98 03/31/99
----------- ----------- ----------- -------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales........... $707,400 $807,700 $797,800 $872,600 $787,000 $140,300 $ 127,600
Gross profit........ 113,500 145,900 153,900 163,700 127,800 18,800 12,800
Operating expenses.. 86,600 93,900 118,400 120,100 103,300 26,300 27,800
Operating income
(loss).............. 26,900 52,000 35,500 43,600 24,500 (7,500) (15,000)
Net earnings
(loss).................. 15,900 24,900 12,800 18,800 5,300 (5,300) (10,600)
Other Data:
EBITDA(1)........... 41,800 70,300 52,900 64,400 47,800 (1,900) (8,900)
Depreciation and
amortization...... 14,900 18,300 17,400 20,800 23,300 5,600 6,100
Capital
expenditures...... 19,300 23,200 23,000 27,800 30,100 6,400 5,700
Ratio of
earnings
(loss) to
fixed charges(2).. 3.37 3.92 2.49 2.96 1.46 (1.70) (3.74)
</TABLE>
For the three months ended March 31, 1998 and 1999, earnings were inadequate
to cover fixed charges by $9,847 and $18,200, respectively.
<TABLE>
<CAPTION>
At
At December 31, March 31,
----------------------------------------------------- ------------ -----------
1994 1995 1996 1997 1998 1999
----------- ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents......... $ 8,800 $ 6,200 $ 2,800 $ 5,400 $ 6,100 $ --
Working capital..... 141,200 174,800 165,900 165,900 141,800 128,100
Total assets........ 359,100 406,500 417,100 464,300 440,300 507,200
Long-term debt,
less current
portion............. 12,400 9,800 10,700 4,600 4,600 4,600
IMC Global
investment (3)...... 220,700 272,200 285,900 338,400 317,800 303,100
</TABLE>
- -------------------------
(1) EBITDA represents operating income (loss) plus depreciation and
amortization. While EBITDA should not be construed as a substitute for
operating income or a better indicator of liquidity than cash flow from
operating activities, which are determined in accordance with generally
accepted accounting principles ("GAAP"), it is included herein to
provide additional information with respect to our ability to meet our
future debt service, capital expenditure and working capital
requirements. In addition, we believe that certain investors find
EBITDA to be a useful tool for measuring our ability to service our
debt. EBITDA is not necessarily a measure of our ability to fund our
cash needs.
(2) The ratio of earnings (loss) to fixed charges is computed by adding
fixed charges to earnings (loss) before income taxes and dividing that
sum by the fixed charges. Fixed charges consist of interest (including
amortization costs) and a portion of rent expense that management
considers to be interest.
(3) IMC Global investment represents Global's net investment in
AgriBusiness and includes intercompany amounts due to Global.
-24-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the audited financial statements of Royster-Clark and AgriBusiness, including
the related notes, contained elsewhere in this prospectus. Prior to the
transactions described in this prospectus, Royster-Clark was operated as a
stand-alone company and AgriBusiness was operated as a subsidiary of IMC Global.
As described under "The Transactions," Royster-Clark and AgriBusiness were
combined in connection with the transactions described in this prospectus. As a
result, the historical financial information included in this prospectus does
not necessarily reflect what our financial position and results of operations
would have been had each company been operated as a combined company during the
periods presented. The offering and the transactions described in this
prospectus will prospectively affect our results of operations and financial
position in significant respects.
General
We are the largest independent retail and wholesale distributor of
fertilizer, seed, crop protection products and agronomic services. We primarily
focus on major farming regions in the East, South and Midwest. Our value-added
distribution business supplies a full range of products and services to our
retail and wholesale customers through 400 facilities consisting of retail farm
centers, granulation, blending and seed processing plants, and an integrated
network of storage and distribution terminals and warehouses. In addition, we
operate two nitrogen manufacturing plants that produce nitrogen-based fertilizer
that supply our distribution business with nitrogen fertilizer products from
natural gas and ammonia.
As a value-added distributor of products, we realize a profit margin on the
products that we supply on a retail or wholesale basis to our customers.
However, our business is affected by a number of factors, including weather
conditions and prevailing prices for fertilizer and other crop production
inputs.
Weather conditions can significantly impact our results of operations.
Adverse weather conditions during the planting seasons may force farmers to
either abandon or delay their planting, which may lead to lower use of
fertilizer, seed and crop protection products. During the 1998 spring planting
season, weather conditions were extremely poor due to the El Nino phenomenon
which caused unusually high amounts of precipitation in our target markets
leading to extremely wet field conditions.
Another factor affecting our business is the price for fertilizers. We
purchase nitrogen, phosphate and potash and resell these crop nutrients in
either their original form or after processing into blended and granulated
fertilizer products. Prices for phosphate and potash have been relatively stable
over the past several years. Nitrogen fertilizer prices have exhibited far more
volatility as the balance of supply and demand has a direct impact on products
such as ammonia, urea, ammonium nitrate and UAN solutions. In 1995, the nitrogen
industry reached a peak in the latest nitrogen price cycle and began to decline
during 1996. By the end of 1998, nitrogen prices reached their lowest levels in
over ten years. This decline in nitrogen prices is primarily the result of
recent capacity additions, a lack of demand from China, the largest consumer of
nitrogen fertilizer, and economic uncertainty associated with production coming
out of the former Soviet Union, as many producers are selling at prices below
the current market in order to obtain hard currency. Since most of the
fertilizer products we sell include some nitrogen, our net sales are impacted by
the prevailing market price of nitrogen fertilizer. We sell most of our
fertilizer products based on a margin above our raw material input prices. As a
result, as market prices decline in response to prevailing global pricing
conditions, the gross profit margin we realize on each ton sold declines. In
addition, the profitability of our two nitrogen manufacturing plants are
directly impacted by the level of nitrogen prices.
We have been working to combine and integrate the operations of
Royster-Clark and AgriBusiness. Our management plans to implement strategies
which have proven successful in the past, such as the use of teams to organize
field sales, an incentive structure based on return on assets and appropriate
information technology systems. We have identified concrete cost savings and
synergies which can be achieved as the result of the merger of Royster-Clark and
AgriBusiness. We intend to achieve these cost savings and synergies by: (1)
closing and combining locations; (2) eliminating redundant senior management and
administrative staff; (3) streamlining sales management through team approach;
and (4) managing employee benefits more effectively. We believe additional
savings can be achieved starting in 2000 by: (1) reducing equipment rental and
operation expenses by changing the equipment and vehicle replacement cycle and
(2) improving the margins on crop protection products by using the increased
buying power of our new combined company.
-25-
<PAGE>
Royster-Clark
Royster-Clark operates predominantly in the Southeast. Royster-Clark
operates a network of approximately 120 retail farm centers, including
approximately 30 commission sales stores, supported by seven granulation and
major blend plants and five storage and distribution facilities.
Results of Operations -- Royster-Clark
The following table sets forth certain information regarding
Royster-Clark's statement of operations as a percentage of total revenues.
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended March 31
---------------------------------------------- ----------------------------
1996 1997 1998 1998 1999
-------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net sales ........... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold .. 85.1 84.6 84.9 83.1 82.3
----- ----- ----- ----- -----
Gross profit ........ 14.9 15.4 15.1 16.9 17.7
Operating expenses .. 9.8 10.2 11.2 11.9 13.5
----- ----- ----- ----- -----
Operating income .... 5.1 5.2 3.9 5.0 4.2
Interest expense .... 2.2 2.1 2.5 3.0 3.0
----- ----- ----- ----- -----
Income before tax 2.9 3.1 1.4 2.0 1.2
Income tax expense... 1.2 1.2 0.6 0.8 0.5
----- ----- ----- ----- -----
Net income .......... 1.7% 1.9% 0.8% 1.2% 0.7%
===== ===== ===== ===== =====
EBITDA .............. 6.1% 6.2% 5.1% 6.5% 5.5%
</TABLE>
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31,
1998
Results for the quarter ended March 31 are not indicative of results for
the full year. While typically over half of our sales occur during the spring
planting season, weather and field conditions may have a material impact on
whether sales are recorded in the first or second quarter.
Net Sales. Royster-Clark's net sales were $53.5 million compared to $41.3
million in the same period last year, an increase of $12.2 million, or 29.5%.
The $12.2 million increase includes $8.1 million in sales from farm centers
purchased in the Lebanon Agricorp ("Lebanon") acquisition in December 1998.
Excluding the impact of the Lebanon acquisition, revenues increased by $4.1
million or 9.9%. This increase was achieved from volume increases in fertilizer
sales, despite price deflation from continued weakness in the market for
nitrogen products and other agricultural inputs.
Gross profit. Gross profit was $9.4 million compared to $7.0 million in the
same period last year, an increase of $2.4 million, or 34.3%, due primarily to
the Lebanon acquisition. The improvement in gross margin of 0.8 percentage
points reflects higher margin fertilizer sales from farm centers acquired in the
Lebanon acquisition. Vendor rebate income during the three months ended March
31, 1999 totaled $0.9 million compared to $1.5 million for the three months
ended March 31, 1998, a decrease of $0.6 million or 40% due primarily to higher
than expected crop year 1997 rebates which were received in the January 1, 1998
to March 31, 1998 period.
Operating expenses. Operating expenses were $7.2 million compared to $4.9
million in the same period last year, an increase of $2.3 million, or 46.9%.
Newly acquired farm centers from the Lebanon acquisition had operating expenses
of $2.3 million for the three months ended March 31, 1999, accounting for all of
the increase over the same period in the prior year.
Operating income. Operating income was $2.2 million compared to $2.1
million in the same period last year, an increase of $0.1 million, or 4.8%, as a
result of the higher gross profit offset by higher operating expenses.
Operating margins were 4.2% compared to 5.0% for the same period last year.
Interest expense. Interest expense was $1.6 million compared to $1.2
million in the same period last year, an increase of $0.4 million, or 33.3%,
primarily due to increased bank revolver balances as a result of increased
working capital financing needs brought about by the Lebanon acquisition.
Income tax expense. Income tax expense was $0.3 million compared to $0.4
million in the same period last year, a decrease of $0.1 million or 25.0%,
attributable to the decline in income before taxes for the three months ended
March 31, 1999 as compared to the same period last year. The effective tax rate
for the three months ended March 31, 1999 was 40.7% compared to 41.3% in the
same period last year.
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<PAGE>
Net income. Net income was $0.4 million compared to $0.5 million in the
same period last year, a decrease of $0.1 million, or 20.0%.
EBITDA. EBITDA was $2.9 million compared to $2.7 million in the same period
last year, an increase of $0.2 million, or 7.4%, as a result of the Lebanon
acquisition.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net sales. Royster-Clark's net sales were $218.7 million for 1998 compared
to $227.6 million for 1997, a decrease of $8.9 million or 3.9%. Fertilizer sales
declined $9.0 million, or 7.6%, primarily because of decreased sales of nitrogen
solutions driven by lower prices. Fertilizer volumes increased due to the
full-year contribution from the operations of Weaver Fertilizer, which was
acquired in September 1997, offset by wet field conditions in most of
Royster-Clark's markets during the spring planting season in 1998. Sales of crop
protection products decreased $3.1 million as the result of lower prices, while
seed sales increased $2.0 million.
Gross profit. Gross profit was $33.0 million for 1998 compared to $35.0
million for 1997, a decline of $2.0 million or 5.7%, due primarily to lower
sales. Gross margins were 15.1% for 1998 compared to 15.4% for 1997.
Operating expenses. Operating expenses were $24.5 million for 1998 compared
to $23.2 million for 1997, an increase of $1.3 million or 5.6%, primarily due to
the addition of the Weaver granulation plant which added $1.6 million in
additional expenses in 1998 compared to 1997.
Operating income. Operating income was $8.5 million for 1998 compared to
$11.8 million for 1997, a decline of $3.3 million or 28.0%, as the result of
lower gross profit and higher operating expenses. Operating margins were 3.9%
for 1998 compared to 5.2% for 1997.
Interest expense. Interest expense was $5.5 million for 1998 compared to
$4.7 million for 1997, an increase of $0.8 million or 17.0%, primarily due to
increased bank revolver balances as the result of slower inventory turns and
collections from poor market conditions in 1998.
Income tax expense. Income tax expense was $1.2 million for 1998 compared
to $2.8 million for 1997, a decline of $1.6 million attributable to the decline
in income before taxes in 1998. The effective tax rate in 1998 was 40.0%
compared to 39.1% in 1997.
Net income. Net income was $1.8 million for 1998 compared to $4.3 million
for 1997, a decline of $2.5 million or 58.1%.
EBITDA. EBITDA was $11.2 million for 1998 compared to $14.1 million for
1997, a decline of $2.9 million or 20.6%, as the result of lower gross profit
and higher operating expenses.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales. Royster-Clark's net sales were $227.6 million for 1997 compared
to $223.0 million for 1996, an increase of $4.6 million or 2.1%. Crop protection
products sales increased $4.2 million, or 6.1%, due to volume increases related
to favorable weather. Fertilizer sales decreased $2.0 million, or 1.9%. Average
fertilizer sales prices declined primarily from lower nitrogen solution prices.
Fertilizer volumes increased due to good spring weather and an increase in
tobacco acres planted during the year, offset by the impact of two hurricanes
which temporarily disabled one of Royster-Clark's granulation facilities.
Gross profit. Gross profit was $35.0 million for 1997 compared to $33.3
million for 1996, an increase of $1.7 million or 5.1%, due to higher sales.
Gross margins were 15.4% for 1997 compared to 14.9% for 1996.
Operating expenses. Operating expenses were $23.2 million for 1997 compared
to $21.8 million for 1996, an increase of $1.4 million or 6.4%. The increase in
operating expenses is primarily attributable to non-recurring severance
expenses, consulting expenses incurred in a software conversion project, and
increased bonuses and health care costs.
Operating income. Operating income was $11.8 million for 1997 compared to
$11.4 million for 1996, an increase of $0.4 million or 3.5%, as the result of
higher gross profit partially offset by higher operating expenses. Operating
margins were 5.2% for 1997 compared to 5.1% for 1996.
Interest expense. Interest expense was $4.7 million for 1997 compared with
$5.0 million for 1996, a decline of $0.3 million or 6.0%, primarily attributable
to lower interest rates and lower bank revolver balances as the result of
stronger cash flows.
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<PAGE>
Income tax expense. Income tax expense for 1997 was $2.8 million compared
to $2.6 million for 1996, an increase of $0.2 million. The effective tax rate in
1997 was 39.1% compared to 40.8% in 1996.
Net income. Net income was $4.3 million for 1997 compared to $3.8 million
for 1996, an increase of $0.5 million or 13.2%.
EBITDA. EBITDA was $14.1 million for 1997 compared to $13.6 million for
1996, an increase of $0.5 million or 3.7%, as the result of higher gross profit
partially offset by higher operating expenses.
AgriBusiness
AgriBusiness operates predominantly in the Midwest and Southeast.
AgriBusiness operates a network of over 250 facilities, including over 200
retail farm centers, five granulation plants, two nitrogen manufacturing plants
and a network of terminals, warehouses and distribution facilities.
AgriBusiness was initially formed in the mid-1980s. AgriBusiness acquired
the East Dubuque nitrogen manufacturing plant in 1987 and Mid-Ohio Chemical
Company in 1994. In 1996, AgriBusiness merged with the nitrogen business of
Vigoro and the Rainbow business of IMC Global as the result of the merger
between The Vigoro Corporation and IMC Global. AgriBusiness expanded its retail
and wholesale distribution system with the 1997 acquisition of Hutson's Ag
Service, Inc.
Results of Operations -- AgriBusiness
The following table sets forth certain information regarding AgriBusiness'
statement of operations as a percentage of total revenues.
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended March 31
------------------------------------- ---------------------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales....................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.............. 80.7 81.2 83.8 86.6 90.0
----- ----- ----- ----- -----
Gross profit.................... 19.3 18.8 16.2 13.4 10.0
Operating expenses.............. 14.9 13.8 13.1 18.7 21.8
----- ----- ----- ----- -----
Operating income (loss)......... 4.4 5.0 3.1 (5.3) (11.8)
Interest expense................ 1.6 1.5 1.7 2.1 2.4
Other expense (income).......... -- (0.1) 0.2 (0.2) 0.1
----- ----- ----- ----- -----
Income (loss) before tax........ 2.8 3.6 1.2 (7.2) (14.3)
Income tax expense (benefit).... 1.2 1.4 0.5 (3.4) (5.9)
----- ----- ----- ----- -----
Net income (loss)............... 1.6% 2.2% 0.7% (3.8)% (8.4)%
===== ===== ===== ===== =====
EBITDA.......................... 6.6% 7.4% 6.1% (1.4)% (7.0)%
</TABLE>
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31,
1998
Net Sales. AgriBusiness' net sales were $127.6 million compared to $140.3
million in the same period last year, a decline of $12.7 million, or 9.0%.
Fertilizer sales declined by $12.9 million or 10.6% due to declines in both
volume and average sales price. Fertilizer volumes decreased 5.7% resulting
primarily from the transfer of several large wholesale customers in the
Southeast to IMC Kalium and IMC Agrico, which was partially offset by wholesale
nitrogen volume increases resulting from mild weather in the Midwest which
encouraged early buying from dealers. Average sales price for AgriBusiness'
fertilizer products declined 2.2% due primarily to lower ammonia, nitrogen
solution and urea prices.
Gross profit. Gross profit was $12.8 million compared to $18.8 million in
the same period last year, a decline of $6.0 million, or 31.9%, due primarily to
lower sales volumes and depressed nitrogen fertilizer prices. Gross margins were
10.0% for the three months ended March 31, 1999 compared to 13.4% for the same
period last year due primarily to lower margins on both manufactured and resale
nitrogen products.
Operating expenses. Operating expenses were $27.8 million compared to $26.3
million in the same period last year, an increase of $1.5 million, or 5.7% due
primarily to increased employee compensation costs.
Operating loss. Operating loss was $15.0 million compared to $7.5 million
in the same period last year, a decline of $7.5 million, or 100%, as a result of
the lower gross profit and higher operating expenses.
Interest expense. Interest expense was $3.0 million compared to $2.9
million in the same period last year, an increase of $0.1 million, or 3.4%.
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<PAGE>
Other expense (income). Other expense was $0.1 million compared to other
income of $0.3 million in the same period last year, a decrease of $0.2 million,
or 66.7%.
Income tax benefit. Benefit from income taxes was $7.5 million compared to
$4.8 million in the same period last year, an increase of $2.7 million or 56.3%,
attributable to the increased loss before taxes for the three months ended March
31, 1999 as compared to the same period last year. The effective tax rate for
the three months ended March 31, 1999 was 41.4% compared to 47.5% in the same
period last year.
Net loss. Net loss was $10.6 million compared to $5.3 million in the same
period last year, a decline of $5.3 million, or 100%.
EBITDA. EBITDA was a loss of $8.9 million compared to a loss of $1.9
million in the same period last year, a decrease of $7.0 million, or 368.4%, as
a result of the lower margins and higher operating expenses.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net sales. AgriBusiness' net sales were $787.0 million for 1998 compared to
$872.6 million for 1997, a decline of $85.6 million or 9.8%. Fertilizer sales
declined $90.8 million, or 14.5%, due to declines in both volume and average
sales price. Fertilizer volume declined 10.0% due to abnormally wet field
conditions in most of AgriBusiness' markets during the spring planting season in
1998. Weather conditions during the 1998 spring planting season were extremely
poor due to the El Nino phenomenon which caused unusually high amounts of
precipitation in our target markets leading to extremely wet field conditions.
Average sales price for AgriBusiness' fertilizer products declined 5.0% due to
lower ammonia and nitrogen solution prices. The decline in fertilizer sales was
partially offset by a $7.8 million increase in seed sales at AgriBusiness'
retail centers.
Gross profit. Gross profit was $127.8 million for 1998 compared to $163.7
million for 1997, a decline of $35.9 million or 21.9%, due primarily to lower
sales and depressed nitrogen fertilizer prices. Gross margins were 16.2% for
1998 compared to 18.8% for 1997 due primarily to lower margins on both
manufactured and resale nitrogen products.
Operating expenses. Operating expenses were $103.3 million for 1998
compared to $120.1 million for 1997, a decline of $16.8 million or 14.0%, due
primarily to lower bad debts, commissions, employee benefit costs, insurance and
seasonal hiring.
Operating income. Operating income was $24.5 million for 1998 compared to
$43.6 million for 1997, a decline of $19.1 million or 43.8%, as the result of
lower gross profit partially offset by lower operating expenses. Operating
margins were 3.1% for 1998 compared to 5.0% for 1997.
Interest expense. Interest expense was $13.2 million for 1998 compared to
$13.3 million for 1997.
Other expense (income). Other expense was $1.9 million for 1998 compared to
$0.7 million in other income for 1997, primarily related to the loss on the sale
of a seed processing facility.
Provision for income taxes. Provision for income taxes was $4.1 million for
1998 compared to $12.2 million for 1997. The effective tax rate was 43.6% for
1998 compared to 39.4% for 1997.
Net earnings. Net earnings were $5.3 million for 1998 compared to $18.8
million for 1997, a decline of $13.5 million or 71.8%.
EBITDA. EBITDA was $47.8 million for 1998 compared to $64.4 million for
1997, a decline of $16.6 million or 25.8%, as the result of lower gross profit
partially offset by lower operating expenses.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales. AgriBusiness' net sales were $872.6 million for 1997 compared to
$797.8 million for 1996, an increase of $74.8 million or 9.4%. Fertilizer sales
increased $49.6 million, or 8.6%, due to a 9.2% increase in volume. This
increased volume was due primarily to retail and wholesale acquisitions made in
1997, which added 20 retail centers and several wholesale distribution
facilities. In addition, good field conditions in both the spring and fall of
1997 as the result of favorable weather conditions contributed to the volume
increase. The impact of acquisitions and good field conditions were partially
offset by the transfer of several large wholesale customers in the Southeast to
IMC Agrico and IMC Kalium. Average sales price for AgriBusiness' fertilizer
products were relatively flat. Crop protection product sales increased $16.6
million, or 12.8%, due to the retail acquisitions and good field conditions.
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<PAGE>
Gross profit. Gross profit was $163.7 million for 1997 compared to $153.9
million in 1996, an increase of $9.8 million or 6.4%, due primarily to higher
sales. Gross margins were 18.8% for 1997 compared to 19.3% for 1996 due to lower
margins on nitrogen solution and urea products as the result of lower prices.
Operating expenses. Operating expenses were $120.1 million for 1997
compared to $105.1 million for 1996, an increase of $15.0 million or 14.3%, due
primarily to retail and wholesale acquisitions made in 1997, higher bad debts
and higher employee benefit costs associated with new medical programs
implemented by IMC Global.
Operating income. Operating income was $43.6 million for 1997 compared to
$35.5 million for 1996, an increase of $8.1 million or 22.8%. Operating income
in 1996 was impacted by a $13.3 million merger and restructuring charge in
connection with the merger of IMC Global Inc. and The Vigoro Corporation,
consisting primarily of charges related to valuation of certain plant facilities
and other assets and environmental matters. Without the effect of the 1996
merger and restructuring charge, operating income decreased $5.2 million, as the
result of higher operating expenses partially offset by higher gross profit.
Operating margins were 5.0% for 1997 compared to 4.4% for 1996.
Interest expense. Interest expense was $13.3 million for 1997 compared to
$13.1 million for 1996. Higher debt levels associated with funding for the 1997
acquisitions were offset by lower interest rates.
Other income. Other income was $0.7 million for 1997 compared to $0.2
million for 1996.
Provision for income taxes. Provision for income taxes was $12.2 million
for 1997 compared to $9.8 million for 1996. The effective tax rate was 39.4% for
1997 compared to 43.4% for 1996.
Net earnings. Net earnings were $18.8 million for 1997 compared to $12.8
million for 1996, an increase of $6.0 million or 46.9%.
EBITDA. EBITDA was $64.4 million for 1997 compared to $52.9 million for
1996, an increase of $11.5 million or 21.7%. Without the effect of the 1996
merger and restructuring charge, EBITDA decreased $1.8 million, as the result of
higher operating expenses partially offset by higher gross profit.
Seasonality and Quarterly Results of Operations
The crop production inputs distribution business is seasonal, based upon
planting, growing and harvesting cycles. Typically, over half of our sales occur
during the spring planting season in the second quarter of each year. However,
depending on weather and field conditions, this period of peak activity can
begin several weeks earlier or later than normal, which may have a material
impact on whether sales are recorded in the first or second quarter.
The following tables present certain unaudited quarterly data for each of
the fiscal quarters in 1997 and 1998 for Royster-Clark and AgriBusiness. In the
opinion of Royster-Clark management, the quarterly information for Royster-Clark
has been prepared on the same basis as the audited financial statements
appearing elsewhere in this prospectus. The quarterly information for
AgriBusiness is derived from its audited financial statements appearing
elsewhere in this prospectus.
ROYSTER-CLARK
(In millions)
1997
-----------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Net sales............... $53.4 $117.6 $32.0 $24.6
Net earnings (loss)..... 1.6 6.3 (1.7) (1.8)
1998
-----------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Net sales............... $41.3 $126.7 $29.9 $20.7
Net earnings (loss)..... 0.5 5.7 (2.4) (2.0)
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<PAGE>
AGRIBUSINESS
(In millions)
1997
-----------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Net sales............... $139.9 $489.8 $ 98.8 $144.1
Net earnings (loss)..... (4.7) 38.2 (10.6) (4.1)
1998
-----------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Net sales............... $140.2 $428.5 $ 97.2 $121.1
Net earnings (loss)..... (5.8) 26.7 (9.5) (6.1)
Liquidity and Capital Resources
Our primary capital requirements will be for debt service, working capital,
capital expenditures and possible acquisitions. Our management believes that
cash generated from operations and borrowings under the new senior secured
credit facility will be sufficient to meet our capital needs in the foreseeable
future.
Capital expenditures were $6.7 million for the three months ended March 31,
1999 compared to $7.4 million for the three months ended March 31, 1998. These
capital expenditures were primarily for miscellaneous repair, maintenance and
environmental compliance projects. We anticipate total capital expenditures for
1999 will be $21.2 million.
Capital expenditures were $32.2 million for 1998 compared to $29.8 million
for 1997 and $24.4 million for 1996. Our capital expenditures relate primarily
to repair, maintenance and replacement projects at our various facilities.
However, capital expenditures in 1998 and 1997 also included an investment of
$14.6 million for a nitric acid facility at the East Dubuque nitrogen
manufacturing plant. The first $3.0 million was spent in 1997 and $11.6 million
was spent in 1998.
In connection with the consummation of the Transactions, we established a
senior secured credit facility maturing in 2004 which provides for up to $275.0
million in borrowings on a revolving basis, subject to and secured by accounts
receivable, inventories and other assets. The facility includes up to $10.0
million for letters of credit. This new facility contains certain financial and
operational covenants and other restrictions with which we must comply,
including a requirement to maintain certain financial ratios and limitations on
our ability to incur additional indebtedness. See "Description of Certain
Indebtedness."
Because of the seasonal nature of our business, our requirements for
working capital financing vary widely during the year, reaching a peak in late
spring and the trough in January. Our inventories increase from December through
March in preparation for the spring planting season and our receivables peak
around May since we generate the majority of our sales between March and June.
Our management believes that the capacity and other terms and conditions of our
new senior secured credit facility adequately addresses our seasonal borrowing
needs.
We have evaluated our administrative systems and facilities with respect to
computer problems arising from the Year 2000 issue. As a result of our
conversion in 1997 to Lawson enterprise software, which is Year 2000 compliant,
we believe we do not have any material Year 2000 issues with respect to our main
accounting and administrative systems. In addition to our mainframe
administrative systems, we use point-of-sale software on personal computers
located in our retail locations. Some of this software is not Year 2000
compliant. We have commissioned the programming of replacement point-of-sale
software that addresses the Year 2000 issue while adding improved features. We
will deploy this new package after the spring 1999 planting season. This
re-programming will cost approximately $100,000. The nitrogen manufacturing
facilities have been tested on a sub-system basis for Year 2000 problems. A full
system test will be conducted during the maintenance shutdown scheduled for
August 1999 to ensure Year 2000 readiness.
If the modifications and conversions we have planned to address Year 2000
compliance are not completed on a timely basis, or if our key suppliers,
customers or other third parties (such as railroads servicing our facilities)
have significant unresolved systems problems, there is a risk that Year 2000
could have a material impact on our operations. Potential sources of risk
include (a) the inability of key suppliers (or their suppliers) to be Year 2000
ready, which could result in delays in product deliveries from such suppliers,
(b) systems incompatibilities with key suppliers or customers resulting from
software conversions or other modifications and (c) our inability to modify or
replace systems on a timely basis.
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<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
We issued and sold the Existing First Mortgage Notes to the Initial
Purchasers on April 22, 1999. The Initial Purchasers subsequently sold the
Existing First Mortgage Notes to qualified institutional buyers in reliance on
Rule 144A under the Securities Act and outside the United States in compliance
with Regulation S of the Securities Act. Because the Existing First Mortgage
Notes are subject to certain transfer restrictions, our company and the Initial
Purchasers entered into a registration rights agreement dated April 22, 1999 (as
used in this and the next paragraph, the "Registration Rights Agreement"),
pursuant to which we agreed:
o within 60 days after the close of the original offering of the First
Mortgage Notes, to prepare and file with the Securities and Exchange
Commission a Registration Statement of which this prospectus is a
part;
o within 150 days after the close of the original offering of the First
Mortgage Notes, to use our best efforts to cause the Registration
Statement to be declared effective by the Commission;
o upon the effectiveness of the Registration Statement, to offer the
Exchange First Mortgage Notes in exchange for surrender of the
Existing First Mortgage Notes; and
o to keep the Exchange Offer open for not less than the minimum period
required under applicable federal and state securities laws, but in no
event less than 20 business days.
The Registration Statement is intended to satisfy in part our obligations with
respect to the Existing First Mortgage Notes under the Registration Rights
Agreement.
Under existing interpretations of the Securities and Exchange Commission,
the Exchange First Mortgage Notes will be freely transferable by holders other
than our affiliates after the Exchange Offer without further registration under
the Securities Act if the holder of the Exchange First Mortgage Notes represents
that:
o it is not an affiliate of the Company, as such term is interpreted by
the Securities and Exchange Commission;
o it has no arrangement or understanding with any person to participate
in the distribution of the Exchange First Mortgage Notes; and
o it is acquiring the Exchange First Mortgage Notes in the ordinary
course of its business.
However, broker-dealers ("Participating Broker-Dealers") receiving Exchange
First Mortgage Notes in the Exchange Offer will have a prospectus delivery
requirement with respect to resales of such Exchange First Mortgage Notes. The
Securities and Exchange Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to Exchange First Mortgage Notes (other than a resale of an unsold allotment
from the original sale of the Existing Notes) with this prospectus. Under the
Registration Rights Agreement, we are required to allow Participating
Broker-Dealers to use this prospectus in connection with the resale of such
Exchange First Mortgage Notes. Each broker-dealer that receives Exchange First
Mortgage Notes for its own account in exchange for Existing Notes, where such
First Mortgage Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange First
Mortgage Notes. See "Plan of Distribution."
Terms of The Exchange Offer; Period For Tendering Existing First Mortgage Notes
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), we will accept for exchange Existing First Mortgage Notes which
are properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used in the prospectus, the term "Expiration Date" means
5:00 p.m., New York City time, on __________, 1999. However, if we, in our
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<PAGE>
sole discretion, have extended the period of time for which the Exchange Offer
is open, the term "Expiration Date" means the latest time and date to which the
Exchange Offer is extended.
As of the date of this prospectus, $200.0 million aggregate principal
amount of the Existing First Mortgage Notes are outstanding. This prospectus,
together with the Letter of Transmittal, is first being sent on or about , 1999
to all holders of Existing First Mortgage Notes known to us. Our obligation to
accept Existing First Mortgage Notes for exchange pursuant to the Exchange Offer
is subject to certain conditions as set forth under "--Certain Conditions to the
Exchange Offer" below.
We expressly reserve the right, at any time or from time to time, to extend
the period of time during which the Exchange Offer is open, and thereby delay
acceptance for any exchange of any Existing First Mortgage Notes, by giving
notice of such extension to the holders of Existing First Mortgage Notes as
described below. During any such extension, all Existing First Mortgage Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by us. Any Existing First Mortgage Notes not accepted for
exchange for any reason will be returned without expense to the tendering holder
as promptly as practicable after the expiration or termination of the Exchange
Offer.
We expressly reserve the right to amend or terminate the Exchange Offer,
and not to accept for exchange any Existing First Mortgage Notes not previously
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified below under "--Certain Conditions to the Exchange
Offer." We will give notice of any extension, amendment, non-acceptance or
termination to the holders of the Existing First Mortgage Notes as promptly as
practicable, such notice in the case of any extension to be issued no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
Holders of Existing First Mortgage Notes do not have any appraisal or
dissenters' rights under the Delaware General Corporation Law in connection with
the Exchange Offer.
Procedures for Tendering Existing First Mortgage Notes
The tender to us of Existing First Mortgage Notes by a holder of Existing
First Mortgage Notes as set forth below and the acceptance of such tender by us
will constitute a binding agreement between the tendering holder and us upon the
terms and subject to the conditions set forth in this prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a holder who
wishes to tender Existing First Mortgage Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to United States Trust Company of New York at one of the addresses
set forth below under "--Exchange Agent" on or prior to the Expiration Date. In
addition, the Exchange Agent must receive:
o certificates for such Existing First Mortgage Notes along with the
Letter of Transmittal, or
o prior to the Expiration Date, a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Existing First Mortgage
Notes into the Exchange Agent's account at The Depository Trust
Company (the "Book-Entry Transfer Facility" or the "Depository")
pursuant to the procedure for book-entry transfer described below, or
o the holder must comply with the guaranteed delivery procedure
described below.
The method of delivery of Existing First Mortgage Notes, Letters of
Transmittal and all other required documents is at your election and risk. If
such delivery is by mail, we recommend that you use registered mail, properly
insured, with return receipt requested. In all cases, you should allow
sufficient time to assure timely delivery. You should not send Letters of
Transmittal or Existing First Mortgage Notes to us.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Existing First Mortgage Notes
surrendered for exchange are tendered:
o by a registered holder of the Existing First Mortgage Notes who has
not completed the box entitled "Special Issuance Instruction" or
"Special Delivery Instruction" on the Letter of Transmittal; or
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o for the account of an Eligible Institution (as defined below).
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 guarantees
must be by a firm which is a member of one of the following recognized signature
guarantee programs (an "Eligible Institution"); (1) The Securities Transfer
Agents Medallion Program (STAMP), (2) The New York Stock Exchange Medallion
Signature Program (MSF), or (iii) The Stock Exchange Medallion Program (SEMP).
If Existing First Mortgage Notes are registered in the name of a person other
than a signer of the Letter of Transmittal, the Existing First Mortgage Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by us in our sole discretion, duly executed by the registered holder
with the signature on such Existing First Mortgage Notes guaranteed by an
Eligible Institution.
Any beneficial owner whose Existing First Mortgage 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 owner's own behalf, such owner
must, prior to completing and executing the Letter of Transmittal and delivering
such owner's Existing First Mortgage Notes, either (1) make appropriate
arrangements to register ownership of the Existing First Mortgage Notes in such
owner's name or (2) obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing First Mortgage Notes tendered for exchange
will be determined by us in our sole discretion. This determination shall be
final and binding. We reserve the absolute right to reject any and all tenders
of any particular Existing First Mortgage Notes not properly tendered or to not
accept any particular Existing First Mortgage Notes which acceptance might, in
our judgment or our counsel's judgment, be unlawful. We also reserve the
absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Existing First Mortgage Notes either before
or after the Expiration Date (including the right to waive the ineligibility of
any holder who seeks to tender Existing First Mortgage Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer as
to any particular Existing First Mortgage Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions to
such Letter of Transmittal) by us shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Existing First Mortgage Notes for exchange must be cured within such reasonable
period of time as we shall determine. Neither we, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Existing First Mortgage Notes for
exchange, nor shall any of them incur any liability for failure to give such
notification.
If the Letter of Transmittal or any Existing First Mortgage Notes or powers
of attorney 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 us, proper evidence satisfactory to us of their authority to so
act must be submitted.
By tendering, each holder of Existing First Mortgage Notes will represent
to us in writing that, among other things:
o the Exchange First Mortgage Notes acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of business of the
holder and any beneficial holder;
o neither the holder nor any such beneficial holder has an arrangement
or understanding with any person to participate in the distribution of
such Exchange First Mortgage Notes; and
o neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of our company. If the
holder is not a broker-dealer, the holder must represent that it is
not engaged in nor does it intend to engage in a distribution of the
Exchange First Mortgage Notes.
If any holder or any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of ours, or is engaged in, or intends to engage
in, or has an arrangement or understanding with any person to participate in, a
distribution of such Exchange First Mortgage Notes to be acquired pursuant to
the Exchange Offer, such holder or any such other person (1) may not rely on the
applicable interpretations of the staff of the Securities and Exchange
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Commission and (2) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
If the holder is a broker-dealer, the holder must represent that it will
receive Exchange First Mortgage Notes for its own account in exchange for
Existing First Mortgage Notes that were acquired as a result of market-making
activities or other trading activities. Each broker-dealer that receives
Exchange First Mortgage Notes for its own account in exchange for Existing First
Mortgage Notes, where such Existing First Mortgage Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (an "Exchanging Dealer"), must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange First Mortgage Notes.
See "Plan of Distribution."
Acceptance of Existing First Mortgage Notes For Exchange; Delivery Of Exchange
First Mortgage Notes
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
we will accept, promptly after the Expiration Date, all Existing First Mortgage
Notes properly tendered, and will issue the Exchange First Mortgage Notes
promptly after acceptance of the Existing First Mortgage Notes. See "--Certain
Conditions to the Exchange Offer" below. For purposes of the Exchange Offer, we
shall be deemed to have accepted properly tendered Existing First Mortgage Notes
for exchange when, as and if we have given oral and written notice to the
Exchange Agent.
The Exchange First Mortgage Notes will bear interest from the most recent
date to which interest has been paid on the Existing First Mortgage Notes, or if
no interest has been paid on the Existing First Mortgage Notes, from April 22,
1999. Accordingly, registered holders of Exchange First Mortgage Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from April 22, 1999. Existing First Mortgage Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the Exchange
Offer. Holders of Existing First Mortgage Notes whose Existing First Mortgage
Notes are accepted for exchange will not receive any payment in respect of
accrued interest on such Existing First Mortgage Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer and will be deemed to have waived their rights to receive
such accrued interest on the Existing First Mortgage Notes.
In all cases, issuance of Exchange First Mortgage Notes for Existing First
Mortgage Notes that are accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of (1) certificates
for such Existing First Mortgage Notes or a timely Book-Entry Confirmation of
such Existing First Mortgage Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, (2) a properly completed and duly executed Letter
of Transmittal and (3) all other required documents. If any tendered Existing
First Mortgage Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Existing First Mortgage Notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged Existing First Mortgage Notes will be returned
without expense to the tendering holder of such Existing First Mortgage Notes
(or, in the case of Existing First Mortgage Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
non-exchanged Existing First Mortgage Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration of the Exchange Offer.
Book-Entry Transfer
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Existing First Mortgage Notes
by causing the Book-Entry Transfer Facility to transfer such Existing First
Mortgage Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Existing First Mortgage Notes may be
effected through book-entry transfer at the Book-Entry Transfer Facility, the
Letter of Transmittal or facsimile 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, unless such holder has
strictly complied with the guaranteed delivery procedures described below.
We understand that the Exchange Agent has confirmed with the Book-Entry
Transfer Facility that any financial institution that is a participant in the
Book-Entry Transfer Facility's system may utilize the Book-Entry Transfer
Facility's Automated Tender Offer Program ("ATOP") to tender Existing First
Mortgage Notes. We further understand that the Exchange Agent will request,
within two business days after the date the Exchange Offer commences, that the
Book-Entry Transfer Facility establish an account with respect to the Existing
First Mortgage Notes for the purpose of
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facilitating the Exchange Offer, and any participant may make book-entry
delivery of Existing First Mortgage Notes by causing the Book-Entry Transfer
Facility to transfer such Existing First Mortgage Notes into the Exchange
Agent's account in accordance with the Book-Entry Transfer Facility's ATOP
procedures for transfer. However, the exchange of the Existing First Mortgage
Notes so tendered will only be made after timely confirmation (a "Book-Entry
Confirmation") of such book-entry transfer and timely receipt by the Exchange
Agent of an Agent's Message (as defined in the next sentence), an appropriate
Letter of Transmittal with any required signature guarantee, and any other
documents required. The term "Agent's Message" means a message, transmitted by
the Book-Entry Transfer Facility and received by the Exchange Agent and forming
part of Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from a participant tendering
Existing First Mortgage Notes which are the subject of such Book-Entry
Confirmation and that such participant has received and agrees to be bound by
the terms of the Letter of Transmittal and that we may enforce such agreement
against such participant.
Guaranteed Delivery Procedures
If a registered holder of the Existing First Mortgage Notes desires to
tender such Existing First Mortgage Notes and the Existing First Mortgage Notes
are not immediately available, or time will not permit such holder's Existing
First Mortgage Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may nonetheless be effected if:
o the tender is made through an Eligible Institution;
o prior to the Expiration Date, the Exchange Agent received from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by us (by telegram,
telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Existing First Mortgage Notes
and the amount of Existing First Mortgage Notes tendered, stating that
the tender is being made thereby and guaranteeing that within five New
York Stock Exchange ("NYSE") trading days after the date of execution
of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Existing First Mortgage Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any
other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
o the certificates for all physically tendered Existing First Mortgage
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 five NYSE
trading days after the date of execution of the Notice of Guaranteed
Delivery.
Withdrawal Rights
Tenders of Existing First Mortgage Notes may be withdrawn at any time prior
to the Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent at one of the addresses set
forth below under "--Exchange Agent." Any such notice of withdrawal must:
o specify the name of the person having tendered the Existing First
Mortgage Notes to be withdrawn;
o identify the Existing First Mortgage Notes to be withdrawn (including
the principal amount of such Existing First Mortgage Notes); and
o where certificates for Existing First Mortgage Notes have been
transmitted specify the name in which such Existing First Mortgage
Notes are registered, if different from that of the withdrawing
holder.
If certificates for Existing First Mortgage 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 Existing First Mortgage 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
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Facility to be credited with the withdrawn Existing First Mortgage 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 us, whose determination shall be final and binding on all
parties. Any Existing First Mortgage Notes so withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the Exchange Offer. Any
Existing First Mortgage Notes which have been tendered for exchange but which
are not exchanged for any reason will be returned to the holder thereof without
cost to such holder (or in the case of Existing First Mortgage Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described above, such
Existing First Mortgage Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Existing First Mortgage Notes) as soon
as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Existing First Mortgage Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Existing First Mortgage Notes" above at any time on or prior to the
Expiration Date.
Certain Conditions To The Exchange Offer
Notwithstanding any other provision of the Exchange Offer, we shall not be
required to accept for exchange, or to issue Exchange First Mortgage Notes in
exchange for, any Existing First Mortgage Notes and may terminate or amend the
Exchange Offer if it any time before the acceptance of such Existing First
Mortgage Notes for exchange or the exchange of Exchange First Mortgage Notes for
such Existing First Mortgage Notes, we determine that:
o the Exchange Offer does not comply with any applicable law or any
applicable interpretation of the staff of the Securities and Exchange
Commission;
o we have not received all applicable governmental approvals; or
o any actions or proceedings of any governmental agency or court exist
which could materially impair our ability to consummate the Exchange
Offer.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in its
reasonable discretion. Our failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any Existing First Mortgage
Notes tendered, and no Exchange First Mortgage Notes will be issued in exchange
for any such Existing First Mortgage Notes, if at such time any stop order shall
be threatened or in effect with respect to the Registration Statement of which
this prospectus constitutes a part or the qualification of the Indenture under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). In any
such event we are required to use every reasonable effort to obtain the
withdrawal of any stop order at the earliest possible time.
Exchange Agent
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
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<TABLE>
<S> <C> <C>
By Hand, up to 4:30 p.m.: By Registered or Certified Mail: By Overnight Courier & By Hand after
United States Trust Company United States Trust Company 4:30 p.m. on the expiration date
of New York of New York only:
111 Broadway P.O. Box 844 United States Trust Company
Lower Level Attn: Corporate Trust Services of New York
Attn: Corporate Trust Services Cooper Station 770 Broadway, 13th Floor
New York, New York 10006 New York, New York New York, New York 10003
10276-0844 Attn: Corporate Trust Services
</TABLE>
By Facsimile:
(212) 420-6211
Confirm by Telephone:
(800) 548-6565
Delivery other than as set forth above will not constitute a valid
delivery.
Fees and Expenses
We will not make any payments to brokers, dealers or others soliciting
acceptances of the Exchange Offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone by
officers and employees of the Company.
The expenses to be incurred in connection with the Exchange Offer will be
paid by us. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
Accounting Treatment
The Exchange First Mortgage Notes will be recorded at the same carrying
amount as the Existing First Mortgage Notes, which is the principal amount as
reflected in our accounting records on the date of the exchange and,
accordingly, no gain or loss will be recognized. The debt issuance costs will be
capitalized and amortized to interest expense over the term of the Exchange
First Mortgage Notes.
Transfer Taxes
Holders who tender their Existing First Mortgage Notes for exchange will
not be obligated to pay any transfer taxes in connection therewith, except that
holders who instruct us to register Exchange First Mortgage Notes in the name
of, or request that Existing First Mortgage Notes not tendered or not accepted
in the Exchange Offer be returned to, a person other than the registered
tendering holder will be responsible for the payment of any applicable transfer
tax thereon.
Consequences Of Failure To Exchange; Resales Of Exchange First Mortgage Notes
Holders of Existing First Mortgage Notes who do not exchange their Existing
First Mortgage Notes for Exchange First Mortgage Notes in the Exchange Offer
will continue to be subject to the restrictions on transfer of such Existing
First Mortgage Notes as set forth in the legend thereon as a consequence of the
issuance of the Existing First Mortgage Notes pursuant to the exemptions from,
or in transactions not subject to, the registration requirements of, the
Securities Act and applicable state securities laws. Existing First Mortgage
Notes not exchanged pursuant to the Exchange Offer will continue to accrue
interest at 10 1/4% per annum and will otherwise remain outstanding in
accordance with their terms. Holders of Existing First Mortgage Notes do not
have any appraisal or dissenters' rights under the Delaware General Corporation
Law in connection with the Exchange Offer. In general, the Existing First
Mortgage 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. We do not currently
anticipate that we will register the resale of any Existing First Mortgage Notes
that remain outstanding after consummation of the Exchange Offer under the
Securities Act.
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Based on certain interpretive letters issued by the staff of the Securities
and Exchange Commission to third parties in unrelated transactions, we are of
the view that Exchange First Mortgage Notes issued pursuant to the Exchange
Offer may be offered for resale, resold or otherwise transferred by holders
thereof (other than (i) any such holder which is an "affiliate" of us within the
meaning of Rule 405 under the Securities Act or (ii) any broker-dealer that
purchases Notes from us to resell pursuant to Rule 144A or any other available
exemption) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange First Mortgage
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to participate in
the distribution of such Exchange First Mortgage Notes. If any holder has any
arrangement or understanding with respect to the distribution of the Exchange
First Mortgage Notes to be acquired pursuant to the Exchange Offer, such holder
(i) could not rely on the applicable interpretations of the staff of the
Securities and Exchange Commission and (ii) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. A broker-dealer who holds Existing First Mortgage
Notes that were acquired for its own account as a result of market-making or
other trading activities may be deemed to be an "underwriter" within the meaning
of the Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of Exchange
First Mortgage Notes. Each such broker-dealer that receives Exchange First
Mortgage Notes for its own account in exchange for Existing First Mortgage
Notes, where such Existing First Mortgage Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such Exchange First Mortgage Notes.
See "Plan of Distribution." We have not requested the staff of the Securities
and Exchange Commission to consider the Exchange Offer in the context of a
no-action letter, and there can be no assurance that the staff would take
positions similar to those taken in the interpretive letters referred to above
if we were to make such a no-action request.
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Exchange First Mortgage Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdictions or
an exemption from registration or qualification is available and is complied
with. We have agreed, pursuant to the Registration Rights Agreement to cause all
necessary filings in connection with the registration and qualification of the
Exchange First Mortgage Notes under the blue sky laws of such jurisdictions in
the United States as are necessary to permit consummation of the Exchange Offer.
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BUSINESS
General Overview
We are the largest independent retail and wholesale distributor of
fertilizer, seed, crop protection products and agronomic services to farmers in
the United States. We primarily focus on major farming regions in the East,
South and Midwest. Our value-added distribution business supplies a full range
of products and services to our retail and wholesale customers through 400
facilities, consisting of retail farm centers, granulation, blending and seed
processing plants, and an integrated network of storage and distribution
terminals and warehouses. In addition, we operate two nitrogen manufacturing
plants that supply our distribution business with nitrogen fertilizer products.
We operate as a retailer and wholesaler of a complete package of products and
services to help farmers become more profitable, efficient and environmentally
sound. In 1998, we generated pro forma revenues of $1.0 billion and adjusted pro
forma EBITDA of $78.6 million.
Over 90% of our revenues relate to the value-added distribution of crop
production inputs purchased from third parties and resold to retail and
wholesale customers. We realize a premium on these products and, as such, are
only partially exposed to fluctuations in nitrogen fertilizer prices. Less than
10% of our sales come from manufacturing fertilizer products.
Our integrated network of plants and storage and distribution terminals and
warehouses allows us to efficiently process, distribute and store product close
to the end-user and to supply our customers on a timely basis during the
compressed planting seasons. In addition, we use port facilities on the Atlantic
Ocean and the Mississippi River to provide flexibility in product purchasing,
including the ability to access overseas markets when they offer lower prices
than domestic markets. Our widespread geographical presence in some of the
country's most important farming regions provides diversity that helps to
insulate our overall business from difficult farming conditions in any one
particular area as a result of poor weather or adverse market conditions for
specific crops.
Our retail distribution operation includes approximately 330 Farmarkets
retail farm centers, including approximately 30 commission sales stores, located
in the East, South and Midwest. This extensive network comprises one of the
largest retailers of crop production inputs to farmers in North America. We
distinguish ourselves by using point-of-sale personal computer systems at each
Farmarkets location which are linked to a sophisticated software system at
headquarters to provide daily information for management analysis and control.
We also utilize proprietary electronic budgeting, forecasting and requirements
planning tools. Our retail farm centers sell a complete line of products to
farmers, including fertilizer, seed and crop protection products. In addition,
our retail centers provide increasingly important services to farmers, including
custom blending and application of crop production inputs, crop management
services, precision farming and biotechnology crop system advisory services.
Our wholesale distribution operation supplies a full range of fertilizer,
seed and crop protection products to customers in the Southeast and Midwest. Our
primary wholesale business includes the purchase of nitrogen, phosphate, and
potash, three essential nutrients, for plant growth, for resale to wholesale
customers. We process the majority of these crop nutrients into blended and
granulated fertilizer products and sell them as higher value-added mixed
fertilizer.
We are the largest North American seller of granulated fertilizer,
operating seven granulation plants that process commodity fertilizer into high
value-added granulated fertilizer products with desirable agronomic traits. We
believe that our granulation plants are among the most efficient, low cost
facilities in the industry. Granulated fertilizer products are used by farmers
who produce high-value specialty crops such as citrus fruits, vegetables,
tobacco, peanuts and cotton. We offer a full line of premium branded granulated
fertilizer products primarily under the Rainbow name on a wholesale basis to a
network of approximately 900 dealers, as well as to some regional Farmarkets
stores. Rainbow products have developed a reputation for high quality during the
90 years they have been sold throughout the Southeast. We believe that the
Rainbow brand name provides us with a significant competitive advantage and
growth opportunities through selling other crop production inputs using this
recognized brand name.
We own and operate a fully integrated nitrogen manufacturing plant in East
Dubuque, IL, that shipped approximately 620,000 tons of ammonia, and upgraded
nitrogen products in 1998 and a smaller nitrogen manufacturing facility in
Cincinnati, OH, that shipped approximately 120,000 tons of upgraded nitrogen
products in 1998. All of the nitrogen products manufactured in these two
facilities are sold through our wholesale distribution operation for either
agricultural or industrial purposes.
Royster-Clark, Inc. has a long history. W.S. Clark & Sons, Inc. began
operations in 1872 as a general mercantile company. The corporate antecedents of
Royster Company were formed in 1881 to exploit natural fertilizer resources
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<PAGE>
from South America. Royster-Clark, Inc. was formed in 1992 through the merger of
these two companies. The current management team assumed active control at
Royster-Clark in the summer of 1995. Since then, we have significantly improved
our revenue base and our profitability through improved management systems and
concepts and a series of acquisitions, most notably Lebanon Agricorp, Dixie
Guano, Inc. and Weaver Fertilizer.
AgriBusiness was initially formed in the mid-1980s as Vigoro Industries,
Inc. ("Vigoro"), through the leveraged buy-out of Kaiser Agricultural Chemicals
and Estech Branded Fertilizer, both retailers of agricultural inputs.
AgriBusiness acquired the East Dubuque nitrogen facility in 1987. Vigoro merged
with IMC Global in 1996 and then AgriBusiness was formed, combining the
Farmarkets and nitrogen businesses of Vigoro and the Rainbow business of IMC
Global. AgriBusiness significantly expanded its retail and wholesale
distribution system with the 1997 acquisition of Hutson's Ag Service, Inc., a
Kentucky-based crop production input distributor.
Competitive Strengths
We believe that our key competitive strengths are:
o Significant Market Share in Major Farming Regions. We believe that we
capture a leading market share in our principal market areas, which
are some of the country's most important farming regions. We are one
of the largest distributors of crop production inputs in North America
and are the largest independent retail and wholesale distributor. We
are a leading wholesale and retail distributor of fertilizer, seed,
crop protection products and agronomic services to farmers in the
East, South and Midwest regions of the United States. We also provide
a full range of services including custom blending, and application of
crop inputs, crop management services, precision farming and
biotechnology crop system advisory services, which have become
increasingly important to farmers. We believe that our emphasis on
selling a full range of quality products and consistently providing
high quality service has enabled us to achieve our market share.
o Extensive Infrastructure. We have an extensive infrastructure of over
400 facilities consisting of retail farm centers, granulation,
blending and seed processing plants and an integrated network of
storage and distribution terminals and warehouses. In addition, we
operate two nitrogen manufacturing plants that supply our distribution
business with nitrogen fertilizer products. We believe our installed
infrastructure provides us with a significant competitive advantage
over smaller, regional competitors and deters new entrants into this
capital intensive market. See "Business--Business Operations."
o Well Positioned To Benefit From Continued Industry Consolidation. We
believe we are well positioned to compete in an industry undergoing
significant consolidation. The agricultural industry has experienced
significant consolidation among both farmers and suppliers of crop
production inputs. The number of retail farm centers in North America
declined from 25,000 in 1984 to 10,500 in 1998 and is forecasted to
decline to 9,000 centers by 2000. As our industry continues to
consolidate, we believe that large, full service distribution
companies will have a competitive advantage in providing the link
between farmers and the leading crop production input suppliers. As
crop production inputs become increasingly technologically advanced,
suppliers are demanding that distribution companies provide full
service access to a broad range of farm customers.
o Experienced Management Team. We have a strong senior management team
with an average of over 14 years of experience in the crop production
inputs distribution business. In September 1994, Mr. Jenkins took over
management control of Royster-Clark. He installed our current
management team, which has increased revenues, improved operating
results and successfully integrated a number of strategic
acquisitions. We believe our current management understands the
requirements of farmers and can deliver value-added products and
services on a timely basis and understands the importance of
flexibility at the local level to adapt to local conditions. We
achieve the proper balance of central control and direction with local
flexibility by utilizing team management and appropriate incentive
programs.
In addition to a strong management team, we also employ 2,500 trained
and experienced employees, including approximately 400 Certified Crop
Advisers, who provide a critical link to the farmer and a significant
competitive advantage for us.
o Leading Producer of Premium, Branded Granulated Fertilizer. We offer a
full line of premium granulated fertilizer products sold under the
Super Rainbow(R), Rainbow and International(R) brand names. We have
developed customer loyalty to our premium branded granulated
fertilizer products by providing high-quality products and services.
Rainbow's reputation in the market and the quality of our products has
allowed us to realize a premium on these products.
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<PAGE>
o Effective Systems and Controls. Our management team uses a
sophisticated information technology system to enhance the efficiency
of product sales and movement throughout our distribution network. We
operate point-of-sale computer systems at each of our Farmarkets
locations which provide daily reports. We use these systems to provide
data for inventory control, budgeting, forecasting, working capital
management, requirements planning and internal controls.
Industry Overview
The market for crop production inputs, including fertilizer, seed and crop
protection products, in the United States was approximately $26.4 billion in
1997, according to the National Agricultural Statistics Service. This market has
experienced steady growth over time, with a compounded annual growth rate of
approximately 5.6% from 1990 to 1997.
Fertilizer
Fertilizer sales in the United States were approximately $10.9 billion in
1997. Fertilizers are added to soil to replace one or more deficient nutrients
necessary for plant growth. The primary ingredients in fertilizers are nitrogen,
phosphorous and potassium. Nitrogen is necessary to promote development of stems
and leaves. Potassium is essential for development of starches, sugars and
fiber, while phosphorus stimulates growth and formation of fruit and seed.
Depending on the crops grown and soil conditions, farmers will use some
combination of all three of these fertilizer ingredients, either in standard
form as nitrogen, phosphate or potash or in mixed fertilizer products.
Practically all crops grown in the United States today are produced with the use
of a commercial fertilizer since modern crop varieties and higher yields cannot
be sustained by organic methods.
The overall demand for fertilizer products has been consistent, with sales
increasing at a compounded annual growth rate of approximately 4% from 1990 to
1997. Volume for all fertilizer products has grown over the years, increasing
from 20.6 million short tons in 1990 to 22.3 million short tons in 1997. Prices
for phosphate and potash have remained relatively stable or increased in the
past several years. Nitrogen fertilizer prices have been quite volatile, and are
currently at a cyclical low due to recent capacity additions, lack of demand
from China and uncertainty associated with the former Soviet Union.
Crop Protection Products
Crop protection products, which generated $8.8 billion in 1997 sales,
include (i) fungicides, which guard against plant diseases; (ii) herbicides,
which keep weed infestations from depriving crops of plant nutrients and water;
and (iii) pesticides, which control insects. Crop protection products have grown
at an approximately 7.0% compounded annual growth rate from 1990 to 1997.
Advances in biotechnology may reduce some of the need for crop protection
products by, for example, adding a natural insect repellent to a plant's genetic
code.
Seed
Seed generated $6.7 billion of sales during 1997 in the United States. The
seed business is undergoing a major restructuring driven by developments in
biotech seed. According to a leading industry consultant, biotech programs
generated approximately $600.0 million in revenues in 1997 and are expected to
grow to approximately $4.0 billion by 2002, an approximately 46% compounded
annual growth rate. Seed with built-in resistance to insects or certain
herbicides have been developed, allowing a broader choice of herbicides to
eliminate weeds, and often decreasing the need for additional pesticide
applications. Cotton, soybean and corn farmers are already growing crops with
biotech seeds. Today, growers typically purchase seed from neighboring farmers
who bought seed for their own use and also acted as dealers for major seed
companies. As use of biotech seed continues to grow, farmer dealers are finding
it difficult to keep up with the increasing complexities of selling biotech
seed.
Services
Technological advances are expected to have a positive impact on
value-added agricultural services. These services range from the traditional
custom blending and application of crop inputs, to more sophisticated and
technologically advanced services, such as crop management services, precision
farming and biotechnology crop system advisory services.
Outlook for Crop Production Inputs
From 1990 to 1997, U.S. farm expenditures for fertilizer, seed and crop
protection products grew at a compounded annual growth rate of approximately
5.6%, with growth in seed exceeding other farm inputs in more recent years.
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Demand for fertilizer, seed and crop protection products, and agronomic
services is driven by a variety of factors, including the following:
o Continued population growth will increase demand for food worldwide:
Long-term demand for food is determined by population growth and
rising living standards in developing countries. According to the
World Bank, the world's population is expected to grow from 5.9
billion in 1998 to 6.8 billion in 2010, an increase of 15.3%. In
addition, one of the first improvements in living standards is
increased consumption of protein products, such as meat and dairy
products. In China, consumption of pork and chicken is projected to
increase approximately 40% over the next 10-year period. The growth in
the demand for meat will significantly increase worldwide demand for
grain since grain is a major animal feed. These trends are resulting
in increased demand for U.S. export food products and, in turn, strong
demand for fertilizer, seed and crop protection products.
o Stable U.S. planted acreage: Demand for fertilizer, seed and crop
protection products in the United States is expected to remain
relatively stable over the next several years. While industry experts
expect that the level of acreage planted for certain crops may decline
in 1999, the overall outlook is for a modest increase in total planted
acreage. We believe that the passage of the Federal Agricultural
Improvement and Reform (FAIR) Act in 1996 expanded growers' freedom to
determine which crops to plant and in what quantities.
o Limited amount of arable land: As populations continue to grow and
diets improve in developing countries, the world will require
increasing amounts of food. Despite improving farming practices, there
is a limited amount of arable land. As a result, farmers will continue
to use fertilizers, biotech seed and crop protection products to
obtain maximum yields on available land.
Trends in the Crop Production Inputs Distribution Industry
The crop production inputs distribution industry has consolidated
significantly over the past 10 years. In 1984, there were approximately 25,000
farm centers operating in North America, compared to approximately 10,500
centers today. Industry experts project that the consolidation trend will
continue and that approximately 9,000 retail dealers will remain in operation in
2000. This consolidation is expected to be led by major dealer networks. The
continuing consolidation of the crop production inputs distribution industry is
driven by a number of factors, many of which are expected to intensify in the
coming years.
o Increased farm size due to consolidation will result in larger and
more sophisticated buyers of crop production inputs who will
increasingly rely on retail distributors, who can act as a "one-stop
supplier" of crop production inputs and services.
o Consolidation of the North American fertilizer and seed industry will
continue to push retail distributors to increase size in order to deal
more effectively with larger suppliers.
o Biotechnology will change the farmers' purchasing requirements for
seed and will require a shift in the distribution channels from the
traditional farmer dealer to more sophisticated farm center networks
which can provide a higher level of service and a broader array of
technology-oriented products to the farmer.
o Growing acceptance of precision agriculture will redefine the way
farming decisions are made and will require farm retail distributors
to commit significant resources to both equipment and training.
Precision agriculture includes site-specific farming utilizing field
mapping with global positioning satellite technology, grid soil
sampling and variable rate application technology to more effectively
utilize crop inputs and measure crop productivity.
o New role for the farmer in an integrated agricultural chain. New
developments in biotechnology will result in increased demand for
specialized, value-added crops and will shift crop output decisions
from the farmer to the end-user. As farmers seek the technology and
information necessary to compete, they will rely increasingly on
expert farm center professionals. To access these farmers, major crop
production input providers will seek to establish closer ties with
leading farm center networks.
o Increasingly stringent environmental, health and safety regulations
will continue to increase the cost and complexity of compliance for
farmers and crop production input distributors, favoring larger retail
dealership networks that can spread the fixed costs of compliance.
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Business Operations
We have an extensive agricultural product infrastructure of over 400
facilities, consisting of retail farm centers, granulation, blending and seed
processing plants and an integrated network of storage and distribution
terminals and warehouses. In addition, we operate two nitrogen manufacturing
plants that supply our distribution business with nitrogen fertilizer products.
We believe our infrastructure provides us with a significant competitive
advantage over smaller, regional competitors and deters new entrants into this
capital intensive market. Our facilities cover the major farming markets in the
East, South and Midwest. We believe this market presence provides a number of
competitive advantages, including: (1) allows us to supply some of the country's
largest buyers of crop production inputs, (2) provides the opportunity to
distribute product for some of the major, leading farm input producers who are
seeking broad distribution of their products; and (3) provides market diversity
that helps to insulate the overall business from difficult farming conditions as
a result of poor weather in any one particular market or adverse market
conditions for a specific crop. In addition, we use port facilities on the
Atlantic Ocean and the Mississippi River to provide flexibility in product
purchasing, including the ability to access overseas markets when they offer
lower prices than the domestic markets.
We have instituted central management controls and utilize our logistical
expertise and sophisticated information technology systems to manage our
extensive businesses and facilities network. We understand the importance of
flexibility at the local level to adapt to local conditions. We aim to achieve
the proper balance of central control and direction with local flexibility by
utilizing team management and appropriate incentive programs.
We operate approximately 330 Farmarkets retail farm centers, including
approximately 30 commission sales stores, making us one of the largest retailers
of crop production inputs to farmers in North America. Farmarkets retail centers
market their products and services primarily to end users, the farmers. Retail
centers typically service farmers within a 15 to 25 mile radius of their
locations. We operate centers predominantly in the Midwest to service corn and
soybean farmers and in the Southeast to service farmers focused on
higher-value-added crops, including cotton, peanuts, tobacco and vegetables. We
believe that we capture a leading market share in our principal market areas.
We sell a complete line of products to farmers, including fertilizer, seed
and crop protection products. In addition, we provide services which are
increasingly important to farmers, including custom blending and application of
crop inputs, crop management services, precision farming and biotechnology crop
system advisory services. Each Farmarkets location tailors its product offering
to the specific needs of farmers within its service area. While we provide a
complete line of products and services, fertilizer represents the majority of
Farmarkets' business, accounting for approximately 67% of its 1998 revenues.
We also distribute a full range of crop protection products in our retail
locations. For the convenience of our customers, Farmarkets retail centers carry
large inventories of herbicides, insecticides, fungicides and other products
which target pest problems affecting commercial farm crops. This capability
allows our retail centers to be a "one-stop supplier" for farmers who need a
complete package of crop protection services, including technical advice on
products, sale and delivery of these products and field application.
We also contract with area farmers to grow certified seed products which
are processed and bagged in a number of Farmarkets' facilities. As such, we have
placed an emphasis on new seed technology and provide a complete range of seed
to farmers through local retail centers. Increasingly, our seed product is
prepared for leading seed companies, and sold under their private labels. For
example, we were one of the first outside companies to grow, process, bag and
distribute Roundup Ready soybeans for Monsanto. Roundup Ready is a popular new
biotechnology product which allows the soybean to tolerate Roundup, a popular
crop protection product. We believe that seed technology based on genetic
engineering is an important growth area for agriculture.
In addition to selling traditional crop production inputs, Farmarkets
retail centers provide agronomic services to farmers. These services range from
the traditional custom blending and application of crop nutrients to meet the
needs of individual farmers, to more sophisticated and technologically advanced
services, precision farming and biotechnology crop system advisory services. We
also offer tailored, high technology agricultural crop management advisory
services on a fee basis such as soil sampling, pest level monitoring and yield
monitoring using global position systems satellite grids and satellite-linked
variable rate spreaders and applicators to take advantage of the data.
We operate point-of-sale computer systems at each of our Farmarkets
locations which provide daily information. We use these systems to provide data
for inventory control, budgeting, forecasting, working capital management,
requirements planning and internal controls. Modern management concepts such as
organizing field sales by relying on teams of retail center managers are also
utilized.
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Our wholesale distribution operation supplies a full range of fertilizer,
seed and crop protection products to customers in the Southeast and Midwest. Our
primary wholesale business includes the purchase of nitrogen, phosphate and
potash, three essential nutrients for plant growth, for resale to wholesale
customers. We process the majority of these crop nutrients into blended and
granulated fertilizer products and then sell them as higher value-added mixed
fertilizers.
We are the largest North American seller of granulated fertilizer. We have
been a leading manufacturer and distributor of premium, branded granulated
fertilizers with our primary market focus in the Southeastern farming regions.
These products are marketed under the Super Rainbow, Rainbow, International,
Bonanza, Gold Dollar and Weaver brand names. Granulated fertilizer products are
used by farmers who produce high value specialty crops, such as citrus fruits,
vegetables, tobacco, peanuts and cotton. Farmers growing these crops are willing
to invest more in premium crop nutrients, such as granulated fertilizers.
We operate seven granulation plants which produce homogenized NPK
(nitrogen, phosphate and potash) products. We believe that we are among the most
efficient, low-cost producer of granulated fertilizers in the U.S. market. We
have a cost-effective production process that uses potash, phosphate and
nitrogen to manufacture high value-added granulated fertilizer products with
excellent agronomic traits.
We also offer a range of products with slightly different nutrient contents
within each branded, blended product category. The ability to offer a range of
fertilizer blends helps us accommodate the needs of farmers growing a variety of
specialty crops under different soil conditions. We also produce custom products
to meet the specific needs of large customers.
We distribute our wholesale products in the southeastern United States
through a network of over 900 dealers. Typically, our products represent 25% to
45% of a dealer's annual product turnover. We have supplied granulated
fertilizer product to some members of our network for over 50 years. These
customer relationships provide a competitive advantage today and a platform for
future growth. As part of integrating the businesses, we will provide a broader
array of products and services through our dealer network. For example, we
recently started offering precision farming services through selected dealers.
Another key part of our wholesale business is a network of terminals and
storage facilities located in the Midwest. This integrated network services
customers throughout Iowa, Missouri, Wisconsin, Minnesota, Illinois, Indiana,
Michigan, Ohio, Pennsylvania, New York, West Virginia and Kentucky. When selling
nitrogen fertilizer products, the East Dubuque and Cincinnati plants' proximity
to our wholesale business terminals provides a freight cost advantage over other
suppliers, some of which must transport from the Gulf Coast region or Trinidad.
In addition to lowering freight costs, the location of our wholesale business'
supply terminals helps us meet the needs of customers in the Midwest in a timely
manner.
We have developed a customer base throughout the Midwest in both the
agricultural and industrial markets. In aggregate, our wholesale business
services approximately 1,200 customers in the region. Our wholesale business'
agricultural customer base is diverse and is composed of small family-owned
distributors and several national chains. The industrial customer base is
smaller and less seasonal than the agricultural customers, yet growing at a more
rapid pace. On average, customers have conducted business with us and our
affiliates for over 15 years.
We are a producer of nitrogen fertilizer and industrial products which are
sold through our wholesale distribution network. We own and operate a fully
integrated nitrogen manufacturing plant in East Dubuque, IL, which produces
nitrogen products for both the agricultural and industrial markets. This plant
is designed to produce anhydrous ammonia, nitric acid, ammonium nitrate
solution, liquid and granular urea, nitrogen solutions (UAN) and carbon dioxide.
This plant can be modified to optimize the product mix according to swings in
demand and pricing for its various products.
Located in the heart of the Midwest, we believe that the East Dubuque plant
enjoys a significant freight cost advantage relative to competing facilities
servicing the region, including an estimated $20 per ton freight advantage over
competing suppliers located in the Gulf Coast region, and a $55 per ton
advantage over new facilities which came on-stream in Trinidad in 1998.
The East Dubuque facility has operated at full capacity during the past ten
years. Through product-exchange agreements with other nitrogen producers in the
Midwest, we reduce transportation costs by limiting the East Dubuque service
area to customers within a 100-mile radius of the plant. We often source
products from competitors' facilities on a cost-efficient basis for Farmarkets
retail centers outside the East Dubuque service area. Such swap arrangements,
coupled with the extensive fertilizer storage capacity in our overall system,
have enabled us to optimize production on a year-round basis and minimize
transportation costs.
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We also have a non-integrated nitrogen production facility in Cincinnati,
OH. This plant purchases anhydrous ammonia and manufactures nitric acid and
ammonium nitrate (AN) liquor for industrial use and UAN solutions for the
agriculture market. The industrial market represents approximately 25% of sales
of manufactured nitrogen products. Since the industrial business is non-
seasonal, these sales provide a year-round revenue source. In 1996, 1997 and
1998, less than 10% of our sales came from manufacturing fertilizer products.
We believe that we are well-positioned relative to our competitors in the
nitrogen fertilizer production and distribution business. While our
profitability is influenced by fluctuations in nitrogen prices, our strategic
location in the heart of the Midwest, extensive terminal and warehouse systems,
complimentary wholesale distribution channels and industrial customer
concentration mitigate some of the impact of nitrogen price fluctuations.
Seasonality
Our business is seasonal, based upon the planting, growing and harvesting
cycles. Typically, over half of our sales occur during the second quarter of
each year, during the spring planting season. As a result of the seasonality of
sales, we experience significant fluctuations in our revenues, income and net
working capital levels. See "Risk Factors--Seasonal Nature and Volatility of our
Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Competition
The market for the distribution of fertilizer, seed and crop protection
products and agronomic services is highly competitive. We believe our products
and services are well positioned in both the retail and wholesale agricultural
market sectors and in the industrial market sector. We compete in the retail
business primarily by providing competitive prices for a comprehensive line of
products and, in our management's opinion, superior services. Currently there
are approximately 10,500 farm retail centers in North America, operated by three
primary types of distribution organizations. Principal competitors in
agricultural crop production inputs distribution include agricultural
cooperatives, which have the largest market share in a majority of the locations
served by us, national fertilizer producers, major grain companies and
independent distributors and brokers. As shown in the following chart, we are
the largest independent distributor in North America.
PROFILE OF MAJOR AGRICULTURAL DEALER NETWORKS
<TABLE>
<CAPTION>
% of Revenues
States ------------------------------
Focus Retail with Retail Fertilizer Crop Seed
Company Name Regions(1) Outlets Outlets Protection
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Large independent distributors
Royster-Clark(b).............. C, S, SE, E 330(c) 18 67% 22% 6%
Wilbur-Ellis.................. W 179 15 31 63 6
John Taylor Fertilizer........ W 12 1 44 55 1
Miles Farm Supply............. C, S 22 3 50 29 13
The McGregor Co............... W 34 NA 60 33 6
Jimmy Sanders................. S, SE 35 4 21 62 16
Kova Fertilizer............... C 10 1 51 39 3
Brandt Consolidated........... C 9 1 51 41 1
Major producers
Terra Industries (d).......... C, S, SE 409 36 46% 46% 4%
United Agri Products(e)....... W, C, SE 300 46 20 78 2
Agrium........................ W, C 232 22 48 43 2
Helena Chemical............... W, C, SE 230 47 14 82 4
Simplot Soilbuilders.......... W 85 13 45 45 10
Cargill....................... P, C 72 12 52 30 9
Cooperatives
Farmland Industries........... W, C 1,400 NA 46% 49% 5%
AgWay ........................ E 515 10 67 13 4
Growmark...................... C 500 3 19 18 7
Countrymark................... C 400 3 22 15 8
Southern States............... SE, S 360 6 56 25 16
Tennessee Farmers............. S 153 1 62 23 15
Cenex/Land O'Lakes(d)......... C, W 65 10 54 36 4
</TABLE>
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(a) Cornbelt ("C"), East ("E"), Plains ("P"), South ("S"), Southeast ("SE") and
West ("W").
(b) Pro forma for the Transactions.
(c) Includes approximately 30 commission sales stores.
(d) Does not give effect to the announced sale of the distribution business of
Terra Industries to Cenex/Land O'Lakes.
(e) Division of Con Agra.
Source: Farm Chemicals, December 1998 and Company estimates.
Management Information Systems
Our finance and information technology departments are responsible for all
our financial reporting, information technology and systems, treasury and cash
management, financial analysis and budgeting, state tax filings, and credit and
risk management. In addition, the finance department performs financial modeling
and analysis, due diligence and contract negotiations for acquisitions.
We operate point-of-sale computer systems at each of our Farmarkets
locations which provide daily reports. We use these systems to provide data for
inventory control, budgeting, forecasting, working capital management,
requirements planning and internal controls.
Raw Materials and Supplies
We purchase our fertilizer, seed and crop protection products primarily
from the major North American producers.
Fertilizer, nitrogen, phosphate and potash are global commodities which can
be purchased from multiple suppliers. In connection with the Transactions, we
have entered into a long-term supply agreement with two divisions of IMC Global,
IMC Agrico for phosphate and IMC Kalium for potash products. Pricing is
determined based on market prices with discounts based on volume. Approximately
74% of the wholesale business' nitrogen products are sourced from the East
Dubuque and Cincinnati facilities. We purchase the nitrogen we do not produce
from multiple suppliers.
We act as a leading distributor of crop protection products for all the
major agricultural chemical companies, purchasing crop protection products at
the chemical companies' distributor price and receiving a distributor and dealer
cash rebate based on the volume and type of products. The cash rebate is
typically paid near the end of the calendar year but may be advanced monthly
with the balance paid at year-end.
Our major raw material in the manufacture of nitrogen products is natural
gas. The East Dubuque plant's annual gas purchases are approximately 11.2
billion cubic feet. We purchase natural gas monthly on a combination of
firm-supply, fixed-priced and market-priced long-term contracts. We are able to
purchase natural gas at competitive prices due to our connection to the Northern
Illinois Gas (Nicor) distribution system and its proximity to the Northern
Natural Gas pipeline.
The Cincinnati plant purchases anhydrous ammonia for production of nitric
acid and other upgraded nitrogen products. Anhydrous ammonia is purchased under
contract from one primary supplier in the region, but could be purchased from a
variety of other suppliers in the region. The product is delivered to the plant
by barge and rail.
Employees and Labor Relations
We employ approximately 2,145 non-unionized and salaried employees, 230
unionized employees and approximately 900 temporary employees during seasonal
periods. We believe we have good relations with our employees.
Several union contracts will expire in the summer of 1999. We believe that
we will be able to obtain new union contracts at that time. We are not aware of
any significant work stoppages in the past. Additionally, our management has a
good relationship with union employees and has historically experienced low
turnover.
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Properties
We have an extensive infrastructure of over 400 facilities, consisting of
retail farm centers, granulation, blend, seed processing and manufacturing
plants and an integrated network of warehouses and terminals. Our facilities
cover the major farming markets in the East, South and Midwest.
The following table sets forth certain information regarding our principal
production and storage facilities. The First Mortgage Notes will be secured by
mortgages on all of the following properties:
Location Type of Facility
-------- ----------------
East Dubuque, Illinois........... Nitrogen plant (ammonia, urea, amonium nitrate
and nitric acid plant)
Cincinnati, Ohio................. Nitrogen plant (nitric acid, amonium nitrate
and nitrogen solutions plant)
Madison, Wisconsin............... Granulation plant
Norfolk, Virginia................ Granulation plant
Americus, Georgia................ Granulation plant
Florence, Alabama................ Granulation plant
Hartsville, South Carolina....... Granulation plant
Winston-Salem, North Carolina.... Granulation plant
Columbus, Ohio................... Granulation plant
Washington, North Carolina....... Seed production and processing facility
Mulberry, Florida................ Blend plants
Washington, Courthouse, Ohio..... Blend plant
Mt. Sterling, Ohio............... Blend plant
Tifton, Georgia.................. Blend plant
Marseilles, Illinois............. Large storage terminal
Murray, Kentucky................. Large storage terminal
Wilmington, North Carolina....... Large storage terminal
Nitrogen Plants
East Dubuque, Illinois Plant. The East Dubuque plant is located on
approximately 208 acres on the Mississippi River. It was designed to produce
anhydrous ammonia, nitric acid, ammonium nitrate solution, liquid and granular
urea, nitrogen solutions (UAN) and carbon dioxide. The facility can be modified
to optimize the mix of production according to fluctuations in demand and
pricing for its various products. The plant has a total annual production
capacity of 1.1 million tons, of which 0.5 million tons are used in the
production of upgraded nitrogen fertilizer products and 0.6 million tons are
sold as final products. Certain modifications have resulted in increased annual
capacity from the original nameplate capacity of 219,000 tons of ammonia to the
current capacity of 299,000 tons of ammonia. In addition, the recent completion
of a $17.0 million nitric acid facility will increase nitric acid capacity by
62,000 tons. The additional nitric acid capacity will increase UAN solution
capacity and help to minimize dependence on outside suppliers.
Cincinnati, Ohio Plant. The Cincinnati plant is located on an 92 acre site.
This plant purchases anhydrous ammonia and manufactures nitric acid and ammonium
nitrate (AN) liquor for industrial use and UAN solutions for the agriculture
market. Since the industrial business is non-seasonal, this plant provides a
year-round revenue source. In 1998, the facility shipped approximately 120,000
tons of upgraded nitrogen products. The plant has 16 main storage tanks with a
total capacity of approximately 12.8 million gallons.
Granulation Plants
Madison, Wisconsin Plant. The Madison plant has a production capacity of
90,000 tons and a storage capacity of 18,000 tons and is located on a 26 acre
site.
Norfolk, Virginia Plant. The Norfolk plant has production capacity of
approximately 80,000 tons of granulated fertilizer and approximately 30,000 tons
of single superphosphate. The facility includes approximately 25,000 tons of
bulk storage capacity for raw materials and finished products. The plant is
located on approximately 24 acres of land.
Americus, Georgia Plant. The Americus plant has a production capacity of
approximately 200,000 tons of granulated fertilizer and approximately 35,000
tons of single superphosphate. The facility includes approximately
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32,000 tons of bulk storage capacity for raw materials and finished product. The
plant is located on approximately 156 acres of land.
Florence, Alabama Plant. The Florence plant has a production capacity of
approximately 145,000 tons of granulated fertilizer and approximately 10,000
tons of single superphosphate. The facility includes approximately 13,000 tons
of bulk storage capacity for raw materials and finished product. The plant is
located on approximately 15 acres of land.
Hartsville, South Carolina Plant. The Hartsville plant has a production
capacity of approximately 222,600 tons of granulated fertilizer and
approximately 25,000 tons of single superphosphate. The facility includes
approximately 23,000 tons of bulk storage capacity for raw materials and
finished product. The plant is located on approximately 29 acres of land.
Winston-Salem, North Carolina Plant. The Winston-Salem plant has a
production capacity of approximately 132,000 tons and approximately 17,600 tons
of bulk storage capacity for raw materials and finished product. The plant is
located on approximately 11 acres of land.
Columbus, Ohio Plant. The Columbus plant has a production capacity of
approximately 65,000 tons and approximately 15,000 tons of bulk storage capacity
for raw materials and finished product. The plant is located on approximately 10
acres of land.
Seed Production and Processing Facilities
Washington, North Carolina Facility. The Washington facility has a
production capacity of approximately 600,000 bags of seed split between wheat
seed and soybean seed. In addition to seed-processing equipment located in a
production building, the facility also includes 12 bulk grain bins with a
capacity of 44,000 bushels and warehouse facilities for approximately 60,000
bags of finished product. The soybean capacity of this facility is largely
contracted by Monsanto for the production of Roundup Ready seed. The plant is
located on approximately 6 acres of land.
Blend Plants
Mulberry, Florida Plants. The Mulberry plants have a combined production
capacity of approximately 70,000 tons of dry mix, approximately 15,000 tons of
bagged mix and approximately 20,000 tons of storage capacity. The main plant is
located on approximately 40 acres of land.
Washington C.H., Ohio Plant. The Washington Court House plant has a
production capacity of approximately 100,000 tons of dry fertilizer products,
approximately 24,000 tons of bagged fertilizer products and approximately 37,600
tons of storage capacity. The plant is located on approximately 29 acres of
land.
Mt. Sterling, Ohio Plant. The Mt. Sterling plant has a production capacity
of approximately 30,000 tons of liquid fertilizer products and a storage
capacity of approximately 18,000 tons. This plant is located on approximately 11
acres of land.
Tifton, Georgia Plant. The Tifton plant has a production capacity of
approximately 45,000 tons of liquid fertilizer products, approximately 18,000
tons of bagged dry fertilizer products and a storage capacity of approximately
20,000 tons. The plant is located on approximately 6 acres of land.
Large Storage Terminals
Marseilles, Illinois Terminal. The Marseilles terminal has a storage
capacity of approximately 64,500 tons. The terminal consists of two warehouses
and six storage tanks located on 141 acres.
Murray, Kentucky Terminal. The Murray terminal consists of a warehouse, a
storage dome and an office building located on approximately 31 acres of land.
Wilmington, North Carolina Terminal. The Wilmington, North Carolina
facility is currently used as a granulation plant. During the summer of 1999, we
expect to consolidate the granulation operations into our other granulation
plants and use the facility as a terminal. The plant has a production capacity
of 80,000 tons and a storage capacity of 37,000 tons. The facility is located on
approximately 30 acres of land.
Other Properties
The First Mortgage Notes are secured by first mortgages on our seventeen
principal facilities. In addition to these seventeen facilities, we own
approximately 280 Farmarkets retail farm centers and other production, storage
and distribution facilities. Substantially all of these approximately 280 owned
properties will be owned by one of our
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special purpose subsidiaries. The special purpose subsidiaries are limited
liability companies that conduct no operations other than leasing the properties
to us and our other subsidiaries. Our special purpose subsidiaries are not
permitted to incur other indebtedness for borrowed money, except for limited
intercompany indebtedness. See the "Description of First Mortgage Notes."
A typical Farmarket is located in or near a small farming community and the
land required is generally three to four acres. The main building would normally
include office space for two or three people, an area to receive customers and
indoor warehousing of 5,000 to 10,000 square feet for crop protection products
and seeds. Typically, there is a second full building used for the storage of
bulk fertilizers and materials. A majority of Farmarkets also have a fertilizer
blender facility, usually dry but sometimes liquid, where fertilizer materials
are blended to produce bulk fertilizer products.
In addition to the assets and properties we own, we lease warehouses and
terminals from third parties. The holders of the First Mortgage Notes will not
have any security interests in these leased facilities. These facilities enhance
our ability to source products to retail centers and wholesale customers
throughout the year, especially during the high-volume spring season.
Environmental Matters
Our facilities and operations are subject to a wide variety of federal,
state and local environmental laws, regulations and ordinances, including those
related to air emissions, water discharges and chemical and hazardous waste
management and disposal ("Environmental Laws"). Our operations also are governed
by laws relating to workplace safety and worker health and safety, primarily the
rules of the Occupational Safety and Health Administration and the United States
Department of Transportation ("Employee Safety Laws"). We believe that our
operations are in compliance in all material respects with current requirements
under Environmental Laws and Employee Safety Laws.
Certain Environmental Laws hold current owners or operators of land or
businesses liable for their own and for previous owners' or operators' releases
of hazardous or toxic substances, materials or wastes, pollutants or
contaminants, including petroleum and petroleum products ("Hazardous
Substances"). Because of our operations, the history of industrial or commercial
uses at some of our facilities, the operations of predecessor owners or
operators of certain of the businesses, and the use, production and release of
Hazardous Substances at these sites, we are affected by the liability provisions
of Environmental Laws. Many of our facilities have experienced some level of
regulatory scrutiny in the past and are or may be subject to further regulatory
inspections, future requests for investigation or liability for Hazardous
Substance management practices.
We are in the process of responding to the presence of Hazardous
Substances, including nitrates, phosphorous and pesticides in soils and/or
groundwater at a number of sites. At other locations, although releases of
fertilizers or other Hazardous Substances have been documented, we and our
environmental consultants have concluded that no further action is currently
required, although we have not confirmed this position with the appropriate
regulators. In addition, we have also removed or closed underground storage
tanks from some of our facilities and, in certain instances, are responding to
historic releases at these locations. In total, both voluntary and government
ordered cleanups of releases of Hazardous Substances are planned or being
performed at approximately forty (40) sites. Also, subject to the limitations
described below, indemnity may be available for all locations for which response
actions are planned or required. The cost of these on-going and potential
response actions is not expected to have a material adverse effect on our
business, financial condition or results of operations.
The Comprehensive Environmental Response, Compensation and Liability Act,
as amended ("CERCLA"), provides for responses to, and, in certain instances,
joint and several liability for releases of, certain Hazardous Substances into
the environment. We have been identified as a potentially responsible party
("PRP") under CERCLA for five off-site locations to date. We believe we are a de
minimis party or not liable at all for those sites. We have not incurred any
significant costs relating to these matters, and we do not believe that we will
incur material costs in the future in responding to conditions at these sites.
In connection with our acquisition of AgriBusiness assets, we obtained
indemnities for certain claims related to on-site and off-site environmental
conditions and violations of Environmental Laws which existed or arose prior to
the acquisition. This indemnity is subject to a $4,500,000 deductible, certain
time limitations, and an overall cap on all indemnities. In connection with the
Transactions, we also obtained indemnities for certain claims related to on-site
and off-site environmental conditions and violations of Environmental Laws which
existed or arose in relation to the Royster-Clark facilities prior to the
closing date of this offering. That indemnity is subject to an overall
$2,000,000 deductible, certain time limitations, and an overall cap of
$5,000,000 on all indemnities. In connection with our acquisition of assets from
the Lebanon Chemical Corporation, we obtained indemnities for certain claims
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<PAGE>
related to on-site and off-site environmental conditions and violations of
Environmental Laws which arose prior to the acquisition. This indemnity is
subject to certain deductibles, caps, cost sharing and time limitations
depending on the subject matter of the environmental claim. As part of our
indemnity obligation, Lebanon is required to respond to environmental conditions
at five of our facilities.
Based on our experience to date, we believe that the future cost of
compliance with existing Environmental Laws (including liability for known
environmental claims) will not have a material adverse effect on our business,
financial condition or results of operations. However, future events, such as
changes in existing laws and regulations or their interpretation, may give rise
to additional compliance costs or liabilities that could have a material adverse
effect on our business, financial condition or results of operations. Compliance
with more stringent laws or regulations, as well as stricter or different
interpretations of existing laws, may require additional expenditures by us that
could be material.
Legal Proceedings
We are subject to periodic litigation in the ordinary course of our
business, including lawsuits brought by employees and former employees alleging
discriminatory termination practices. We cannot assure you that future
litigation alleging discrimination in our termination practices would not
adversely affect our financial condition or results of operations.
Other than with respect to the foregoing matters, we do not believe that
there are any pending or threatened legal proceedings, including ordinary
litigation incidental to the conduct of our business and the ownership of our
properties, that, if adversely determined, would adversely affect us.
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<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to our
directors and key employees.
Directors and Key Employees
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Francis P. Jenkins, Jr. ... 56 Chairman of the Board and Chief Executive Officer
G. Kenneth Moshenek........ 47 President and Chief Operating Officer
Max Baer................... 66 Managing Director, Materials and Purchasing
Kenneth Carter............. 53 Managing Director, Human Resources
John Diesch................ 42 Managing Director, Nitrogen Division
Thomas Ergish.............. 50 Managing Director, Logistics
Gary L. Floyd.............. 45 Managing Director, Crop Protection and Seed
Michael J. Galvin.......... 36 Managing Director, Credit and Farm Financing
Larry D. Graham............ 46 Managing Director, Rainbow Division
Paul M. Murphy............. 54 Managing Director, Financial Planning
Robert Paarlberg........... 53 Managing Director, Information Technology
William Pirkle............. 37 Managing Director, Environmental, Health and Safety
Frederick I. Sharp......... 63 Managing Director and Chief Administrative Officer
Steven A. Sheline.......... 43 Managing Director, Mid-West Wholesale Division
Brian S. Turner............ 47 Managing Director, Sales and Marketing
Walter R. Vance............ 43 Managing Director, Finance
Thomas F. McWilliams....... 56 Director
Randolph G. Abood.......... 48 Director
</TABLE>
Francis P. Jenkins, Jr. is the Chairman of the Board and Chief Executive
Officer of the Company, and has been Chairman and Chief Executive Officer of
Royster-Clark Group since January 1999. From 1994 to 1999, Mr. Jenkins served as
Chairman of the Board and Chief Executive Officer of Royster-Clark. From 1992
until 1994, Mr. Jenkins served as a director and Chairman of the Audit Committee
for Royster-Clark. From 1988 to 1992, he served as Chairman of the Board of
Royster-Clark. From 1979 to 1988, Mr. Jenkins was employed by The First Boston
Corporation where he was one of the four members of the Executive Committee,
co-managed First Boston's Equity Capital Investments and was the Principal
Financial Officer. Prior to that position, he had responsibility for all
security sales, trading and research, as well as holding positions as a Managing
Director and a member of the Management Committee. Mr. Jenkins currently serves
on the Board of Trustees of Babson College, as the Chairman of its Alumni and
Development Committee and as a member of the Executive Committee of the Board.
G. Kenneth Moshenek is the President and Chief Operating Officer of the
Company. Mr. Moshenek has served as President of Royster-Clark since December
1997, has served as Chief Operating Officer since 1995 and was a director from
August 1997 until April 1999. From August 1997 until April 1999 he served as
Chief Investment Officer of Royster-Clark. Prior to that he held several
positions during his tenure with Royster-Clark including Senior Vice President
of Sales and Marketing, from September 1994 until July 1995, Vice President and
Divisional Sales Manager from 1992 until September 1994 and a Division Manager
from 1990 to 1992. Mr. Moshenek joined W.S. Clark & Sons, Inc. in 1981. Mr.
Moshenek started his career in the fertilizer industry in 1976 when he joined
Smith Douglass, Inc., a division of Borden. Mr. Moshenek currently serves on the
Board of Directors of The Fertilizer Institute and is a member of the Board's
Executive Committee. He also serves as a member of the Board of Directors of the
International Fertilizer Roundtable, and has recently been elected a member of
the Board of Directors of the Agricultural Retailers Association, Inc. and is a
member of the North Carolina Agribusiness Council Inc. as well as the North
Carolina Governor's Committee for Environmental Education.
Max Baer is the Managing Director of Materials and Purchasing. From 1995
until 1999, Mr. Baer served as Chief Purchasing Officer for Royster-Clark and as
a director of Royster-Clark since 1997. From 1992 until 1995, he
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served as Chief Purchasing Officer where he assumed leadership of
Royster-Clark's fertilizer materials procurement and conducted its international
trading activities. From 1978 until 1992, Mr. Baer served as Vice President of
International Marketing. Mr. Baer began his career with Smith Douglass, Inc.
where he served in the fertilizer materials purchasing group. Mr. Baer has
worked in the fertilizer industry for 40 years.
Kenneth Carter is the Managing Director of Human Resources. From 1997 to
1999, Mr. Carter served as the Vice President of Human Resources for
AgriBusiness. Prior to joining AgriBusiness, he served as Vice President of
Human Resources from 1994 until 1997 for Sunbeam Outdoor Products and from 1990
to 1994 served as the Vice President of Human Resources and Corporate
Compensation and Benefits Manager for Litton Industries (Material Handling
Systems).
John Diesch is the Managing Director, Nitrogen Division. From 1998 to 1999,
Mr. Diesch served as the Vice President and General Manager of Nitrogen
Production and Distribution for AgriBusiness. He also served as the Manager for
the Cincinnati, Ohio Nitrogen Plant and Nitrogen Terminals from 1996 until 1998
and joined Vigoro Industries, Inc. in 1991 as the Cincinnati, Ohio Plant
Manager. Prior to joining Vigoro Industries, Inc., Mr. Diesch held several
positions in the chemical industry, including Plant Manager, Production Manager
and Process Engineer.
Thomas Ergish is the Managing Director of Logistics. From 1997 to 1999, Mr.
Ergish served as the Vice President of Human Resources and Distribution. He
joined Royster-Clark in 1996 as the Director of Logistics. Prior to joining
Royster-Clark, Mr. Ergish held the position of Materials Manager for the Sara
Lee Corporation and held several positions in the transportation and logistics
area during his 14 year tenure with Sara Lee. Mr. Ergish has been certified in
the American Production and Inventory Control Society as a Certified Integrated
Resource Manager.
Gary L. Floyd is the Managing Director of Crop Protection and Seed. From
1992 to 1999, Mr. Floyd managed Royster-Clark's Crop Protection business and
served as the Vice President of Crop Protection and Seed from 1997 to 1999. He
also served as a District Manager from 1990 to 1992 and Manager of Planning and
Development, Crop Protection from 1987 until 1990. Mr. Floyd began his career in
the fertilizer and chemical industry as a North Carolina Agricultural Extension
Agent in 1980 and joined Ciba-Geigy's agricultural division in 1984 as a Sales
Representative. Mr. Floyd is a member and Past President of the North Carolina
Crop Protection Association and a member of the Southern Crop Protection
Association.
Michael J. Galvin is the Managing Director of Credit and Farm Financing.
From 1996 until 1999, Mr. Galvin served as Vice President and General Credit
Manager of Royster-Clark. Prior to 1996, Mr. Galvin was a Vice President and
Regional Market Manager for Centura Bank. Mr. Galvin began his career in 1985 as
a national bank examiner with the Comptroller of the Currency's office. Mr.
Galvin has over 14 years experience in banking and credit. He is currently a
member of the National Association of Credit Managers Atlantic Agricultural
Conference.
Larry D. Graham is the Managing Director of Rainbow Division. From 1996
until 1999, Mr. Graham was employed by AgriBusiness first serving as Senior Vice
President with the Rainbow Division and then Senior Vice President--Sales. From
1994 until 1996, he served as General Manager--Rainbow. From 1977 until 1994, he
served in various positions with IMC Global, including Area Manager, Area Sales
Manager and Sales Supervisor.
Paul M. Murphy is the Managing Director of Financial Planning. From 1996
until 1999, he served as Vice President of Planning and Analysis and Secretary
of Royster-Clark. From 1992 until 1996, he served as a Divisional Controller of
Royster-Clark. From 1981 until 1992, Mr. Murphy served several companies in
Europe and the United States and from 1969 until 1981, he was at General
Electric, where he served in a lead financial and accounting role for GE's
Information Services business in Europe.
Robert Paarlberg is the Managing Director of Information Technology. From
1997 To 1999, Mr. Paarlberg served as Director of Information Systems for
AgriBusiness. From 1979 to 1997, he held varying management and technical
positions with AgriBusiness and its predecessors, including Infrastructure
Architect, Manager of Financial Systems, Manager of Microcomputer and
Telecommunication Development and Senior Analyst. Prior to joining AgriBusiness,
Mr. Paarlberg was a financial internal auditor for various companies. He has
served on the Corporate Advisory Board of PC Week and hosted a radio show called
Computer Talk for seven years.
William Pirkle is the Managing Director of Environmental, Health and
Safety. From 1996 until 1999, Mr. Pirkle served as the Southeast Environmental
Administrator for AgriBusiness. From 1990 to 1996 he served as Quality Control
Coordinator and Safety Administrator for the Rainbow Division of IMC Global.
Prior to joining IMC Global, Mr. Pirkle served as Plant Manager for Simplex
Nails from 1987 until 1990 and as the Quality Control Manager for Interface
Flooring from 1985 until 1987.
Frederick I. Sharp, effective July 6, 1999, will be the Managing Director,
Chief Administrative Officer. Prior to joining Royster-Clark in July 1999, Mr.
Sharp served as the Vice President of Human Resources for Western Union
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from 1992 to 1999. He has also served as the Vice President of Search
Fulfillment and Business Development for Haebrecht Associates from 1986 to 1992,
Vice President of Human Resources for American Express Travel Related Services,
Inc. from 1983 to 1986, Management Consultant for Towers, Perrin, Foster &
Crosby from 1981 to 1983 and Vice President of Corporate Personnel for Avis,
Inc. from 1976 until 1981.
Steven A. Sheline is the Managing Director, Midwest Wholesale Division.
From 1995 to 1999, Mr. Sheline served as the Senior Vice President of the
Madison Division of Royster-Clark with responsibilities for both wholesale sales
and the production facility at Madison, Wisconsin. Prior to that he held several
positions during his tenure with Royster-Clark including General Manager of the
Madison Division from 1988 until 1995, Division Sales Manager from 1985 until
1988, Wholesale Salesperson from 1983 until 1985, Controller for the Midwest
Division from 1981 until 1983, and joined the Company as an Accountant for the
Midwest Division in 1979. Mr. Sheline currently serves on the Board of Directors
of the Wisconsin Fertilizer and Chemical Association.
Brian S. Turner is the Managing Director of Sales and Marketing. From
November 1997 until March 1999, he was employed by Hydro Agri North American as
Director of Marketing Development. From 1996 until November 1997, he held the
position of Vice President--Marketing with IMC Global, where he was responsible
for all North American sales activity as well as the distribution, product
management and customer service functions. From 1994 until 1996, Mr. Turner was
Vice President of North American Sales of the IMC fertilizer group. During his
tenure with the IMC, he served in several positions with the Rainbow Division
including Vice President and General Manager from 1991 until 1994, Area Manager
from 1985 until 1991, Sales Supervisor from 1982 until 1985 and Territory Sales
Representative from 1977 until 1982.
Walter R. Vance is the Managing Director of Finance. From 1995 until 1999,
Mr. Vance served as Vice President and Chief Financial Officer of Royster-Clark
and from 1992 until 1995, he was Vice President and Corporate Controller. Mr.
Vance joined Royster-Clark in 1991 where he served as Controller until 1992.
From 1987 until 1991, he was the Controller of Northwest Hardware. Prior to
1987, he served as Senior Accountant of Royster-Clark for three years.
Thomas F. McWilliams is a Director of the Company and has been a Director
of Royster-Clark Group since January 1999. Mr. McWilliams is a Managing Director
of Citicorp Venture Capital Ltd. and has served on its Investment Committee
since 1984. He is also a Vice President and a member of the Investment Committee
for 399 Venture Partners, Inc. He serves on the Boards of Chase Industries,
Pen-Tab Industries, Ergo Science, Airxcel, Inc., HydroChem Holding, Inc., MMI
Products, Inc., along with various other companies which have no public
securities outstanding. Mr. McWilliams served as a director of Rax Restaurants
when it filed for bankruptcy in 1996.
Randolph G. Abood is a Director of the Company and has been a Director of
Royster-Clark Group since January 1999. Mr. Abood is a self-employed attorney,
and since 1994, Mr. Abood has served as General Counsel for Royster-Clark. From
1976 until 1996, Mr. Abood practiced law with the firm of Satterlee Stephens
Burke & Burke (and its predecessor firm). He became a partner of the firm in
1983 and head of its tax department. Mr. Abood is also the manager and owner of
The Ninigret Group, L.C., a Utah limited liability company that develops,
constructs and co-owns real estate, including Ninigret Park, a 178 acre business
park in Salt Lake City. Mr. Abood also serves on the Board of Directors of
Equity Oil Company.
Compensation of Directors
The directors do not receive any compensation for their services as
directors. Directors are elected annually to serve until the next annual meeting
or until their successors have been elected and qualified. The stockholders have
entered into a stockholders' agreement governing the election of directors. See
"Certain Relationships and Related Transactions."
Executive Compensation
The following table summarizes the compensation paid or accrued for the
fiscal year ended December 31, 1998 to our executive officers (each such person
being referred to as a "Named Executive Officer").
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<PAGE>
SUMMARY COMPENSATION TABLE
Annual Compensation
for Fiscal Year Ended
December 31, 1998
<TABLE>
<CAPTION>
All other(1) Total
Name and Principal Position Salary 1998 Bonus Compensation Compensation
- --------------------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Francis P. Jenkins, Jr.,
Chairman and Chief
Executive Officer....................... $275,053.04 $120,000.00 -- $395,053.04
G. Kenneth Moshenek,
President and Chief
Operating Officer....................... 136,725.40 80,000.00 $2,175.05 218,900.45
Walter Vance, Managing
Director, Finance....................... 95,473.68 40,000.00 2,541.63 138,015.31
</TABLE>
- ----------
(1) Includes employer matching contributions from our 401(K) Plan
Employment Agreements
In connection with the Transactions, Mr. Jenkins entered into a five-year
employment agreement with our parent, Royster-Clark Group and with us (the
"Jenkins Agreement"). Mr. Jenkins will serve as Chief Executive Officer of
Royster-Clark Group and of the Company and will receive an annual base salary of
$500,000, which will be subject to annual merit increases as determined by the
Royster-Clark Group Board of Directors. In addition to the annual base salary,
Mr. Jenkins will be entitled to (1) participate in an annual performance bonus
plan based on individual criteria and/or executive incentive programs to be
determined from time to time by the Royster-Clark Group Board of Directors and
(2) receive standard company benefits provided to executive officers from time
to time. In addition to standard company benefits, Royster-Clark Group has
agreed to provide up to $50,000 to Mr. Jenkins to obtain a life insurance policy
for the benefit of his wife and family. The Jenkins Agreement is terminable by
the Royster-Clark Group with or without cause. In the event that the Jenkins
Agreement is terminated without cause and provided that Mr. Jenkins complies
with certain confidentiality and non-competition covenants, Mr. Jenkins will be
entitled to receive all payments due as base salary during the remainder of his
employment term and to receive a pro rata portion of any bonus for the year in
which he is terminated. During his employment term and for two years thereafter,
Mr. Jenkins will be subject to a non-competition covenant.
We and Royster-Clark Group expect to enter into employment agreements with
other key employees.
Stock Options
The following table sets forth the number of options to purchase shares of
common stock held, as of the closing of the Transactions, by the Named Executive
Officers.
Number of Shares of Common Stock
Underlying Unexercised Options
--------------------------------
Exercisable Unexercisable
----------- -------------
Francis P. Jenkins, Jr. ................ -- --
G. Kenneth Moshenek .................... 17,792 0
Walter Vance ........................... 4,720 0
Employee Savings and Investment Plan
We maintain a defined contribution Employee Savings and Investment Plan
(the "Savings Plan") covering substantially all our full-time employees.
Participants may contribute, on a pre-tax basis, up to 18% of their salary. We
may, at our discretion, make matching contributions to the Savings Plan on
behalf of each participant who makes elective contributions to the Savings Plan
in an amount equal to a percentage of the participant's elective contributions.
We also may, at our discretion, make profit sharing contributions to the Savings
Plan on behalf of all participants who are eligible to share in such
contributions actively employed on the last day of the plan year. In 1998, we
made matching contributions on behalf of Mr. Moshenek of $2,175.05 and on behalf
of Mr. Vance of $2,541.63.
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Employee Stock Ownership Plan
We have maintained a noncontributory employee stock ownership plan (the
"ESOP") for substantially all full-time employees. An employee is eligible to
participate upon completion of one hour of service on or before March 31, 1992
or upon completion of one year of service. At our discretion, we may make
contributions on the behalf of participants to the plan from our current or
accumulated net profit or out of our capital surplus which is invested primarily
in our common stock. Contributions are determined and made at the discretion of
the Board of Directors and, at a minimum, must be sufficient to service the ESOP
trust debt. When contributions are made to the plan, each participant will share
in the contributions on a pro-rata basis determined on the basis of individual
compensation and total participants compensation. Upon retirement, participants
will receive the value of the amounts which have accumulated in their account in
the form of company stock or property. There were no contributions made for the
years ended June 30, 1996, 1997 or 1998. In connection with a reverse stock
split that occurred on the date the Transactions were consummated, the shares of
the Company Stock held by the ESOP became a fractional share interest that was
purchased by the Company for cash. As of the closing of the Transactions, Mr.
Jenkins had an account balance of $1,710 for his interests in the ESOP, Mr.
Moshenek had an account balance of $24,510 for his interests in the ESOP and Mr.
Vance had an account balance of $27,075 for his interests in the ESOP.
1995 Stock Option Plan
We have maintained a Stock Option Plan (the "Stock Option Plan") for our
eligible key employees and directors enabling them to acquire our common stock
in the form of incentive stock options and of non-qualified stock options.
Eligible employees under the Stock Option Plan include our directors and
employees (including officers) and consultants to us who are deemed to have or
have rendered significant services and contributed to our success. We did not
grant any options under the Stock Option Plan in 1998. All options granted under
the Stock Option Plan vested upon consummation of the Transactions and were
cashed out or rolled over as options under the 1999 Restricted Stock Purchase
Plan. Messrs. Moshenek, Vance and Abood have each rolled over their options into
the 1999 Restricted Stock Purchase Plan. See "--1999 Restricted Stock Purchase
Plan" and see "Certain Relationships and Related Transactions."
1999 Restricted Stock Purchase and Option Plan
Under the 1999 Restricted Stock Purchase and Option Plan of Royster-Clark
Group, Inc. (the "1999 Restricted Stock Purchase Plan"), 200,000 shares of
Royster-Clark Group common stock have been reserved for issuance in the form of
restricted share grants to current and future management of Royster-Clark Group
and 39,380 shares of Class A Common Stock, 14,795 shares of Series A Preferred
Stock and 8,320 shares of Series B Preferred Stock have been reserved for
issuance pursuant to the exercise of stock options rolled over from the 1995
Stock Option Plan. Shares issued under the 1999 Restricted Stock Purchase Plan
are subject to certain restrictions on transfer of shares as provided in the
Stockholders' Agreement described below in "Certain Relationships and Related
Transactions," including the right of Royster-Clark Group to repurchase certain
shares upon termination of a stockholder's employment prior to the fifth
anniversary of the closing, at a formula price. All options granted under the
existing 1995 Stock Option Plan have been cashed out or rolled over as options
under the 1999 Restricted Stock Purchase Plan on terms similar to the options
under the 1995 Stock Option Plan, except that upon exercise the holder will
receive the consideration he would have received if he had owned stock outright
prior to the Transactions.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Principal Shareholders
All of our outstanding capital stock is owned by Royster-Clark Group. The
following table sets forth information with respect to the beneficial ownership
of the Royster-Clark Group common stock as of the closing of the Transactions by
(1) each person or entity who owns five percent or more thereof, (2) each of our
directors who is a stockholder, (3) our Chief Executive Officer and the other
executive officers named in "Management--Executive Compensation" above who are
stockholders, and (4) all of our directors and executive officers as a group.
NUMBER AND PERCENT OF SHARES
<TABLE>
<CAPTION>
Number and Percent of Shares
------------------------------------------------------------------
Royster-Clark Group Royster-Clark Group
Class A Common Stock Class B Common Stock
Name of ---------------------------- ----------------------------
Beneficial Owners Number Percent(1) Number Percent
----------------- ------- ---------- --------- -------
<S> <C> <C> <C> <C>
399 Venture Partners, Inc........... 360,000(2) 46.9% 1,231,600(3) 100%
399 Park Avenue
New York, New York 10043
Francis P. Jenkins, Jr.............. 305,638(4) 39.8 -- --
c/o Royster-Clark, Inc.
10 Rockefeller Plaza-Suite 1120
New York, New York 10020
G. Kenneth Moshenek................. 19,727(5) 2.6 -- --
c/o Royster-Clark, Inc.
10 Rockefeller Plaza-Suite 1120
New York, New York 10020
Walter Vance........................ 5,713(6) * -- --
c/o Royster-Clark, Inc.
P.O. Box 250
Tarboro, North Carolina 27886
Thomas F. McWilliams(7)............. -- -- -- --
c/o 399 Venture Partners, Inc.
399 Park Avenue
New York, New York 10043
Randolph G. Abood................... 12,617(8) 1.6 -- --
c/o Royster-Clark, Inc.
10 Rockefeller Plaza-Suite 1120
New York, New York 10020
All directors and executive
officers as a group (5 persons)... 343,695 44.7% -- --
</TABLE>
- ----------
* Less than one percent
(1) All percentages do not give effect to the shares of Royster-Clark Group
Class A issuable upon conversion of Royster-Clark Group Class B Common
Stock. See "--Royster-Clark Group Common Stock."
(2) Does not include shares of Royster-Clark Group Class A Common Stock
issuable upon conversion of Royster-Clark Group Class B Common Stock. See
"--Royster-Clark Group Common Stock."
(3) Does not include shares of Royster-Clark Group Class B Stock issuable upon
conversion of Royster-Clark Group Class A Common Stock. See
"--Royster-Clark Group Common Stock."
(4) Includes shares pledged to secure a promissory note in the amount of $1.8
million.
(5) Includes 17,792 shares subject to options that are currently exercisable.
(6) Includes 4,720 shares subject to options that are currently exercisable.
(7) Does not include shares of Royster-Clark Group owned by 399 Venture
Partners, Inc.
(8) Includes shares pledged to secure two promissory notes, each in the amount
of $220,000.
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<PAGE>
Royster-Clark Group Common Stock
The Certificate of Incorporation of Royster-Clark Group provides that
Royster-Clark Group may issue 4,000,000 shares of common stock, divided into two
classes consisting of 2,000,000 shares of Class A Common Stock and 2,000,000
shares of Class B Common Stock. The holders of Class A Common Stock are entitled
to one vote for each share held of record on all matters submitted to a vote of
the stockholders. Except as required by law, the holders of Class B common stock
have no voting rights. Under the Certificate of Incorporation of Royster-Clark
Group, a holder of either class of common stock may convert any or all of his
shares into an equal number of shares of the other class of common stock;
provided that in the case of a conversion from Class B Common Stock, which is
nonvoting, into Class A Common Stock, which is voting, the holder of shares to
be converted would be permitted under applicable law to hold the total number of
shares of Class A Common Stock which would be held after giving effect to the
conversion.
In addition to the common stock, 399 Ventures owns a $10 million
subordinated note of Royster-Clark Group (that does not require cash interest
payments) and 474,504 shares of Royster-Clark Group preferred stock and Messrs.
Jenkins, Moshenek, Vance and Abood own (or will have the right to acquire upon
exercise of options) approximately 172,146, 11,376, 3,289 and 14,800 shares of
Royster-Clark Group preferred stock, respectively, in two series. The total
number of shares of Royster-Clark Group preferred stock outstanding after
completion of the Transactions was approximately 682,014 shares.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Transactions, 399 Ventures, Mr. Jenkins and other
members of management entered into a series of arrangements and agreements to
reflect their investments in Royster-Clark Group, our corporate parent, and the
arrangements among themselves as stockholders of Royster-Clark Group.
To effect the acquisitions of AgriBusiness and Royster-Clark, 399 Ventures
purchased a $22.2 million 4 1/2% convertible subordinated note from us on March
31, 1999. This note was contributed by 399 Ventures to the capital of
Royster-Clark Group and in turn contributed by Royster-Clark Group back to us at
the closing of this financing. In addition, we effected a number of transactions
involving holders of our stock and stock options: we redeemed shares of stock
from a group of stockholders who did not wish to be continuing investors in
Royster-Clark Group for an aggregate amount of approximately $712,000. We
redeemed 23,677 common-equivalent shares of our stock held by Mr. Jenkins for a
price of approximately $6.8 million. We redeemed shares of our stock from
certain other stockholders, including Messrs. Moshenek, Vance and Abood, who
wished to remain investors in Royster-Clark Group for an aggregage amount of
approximately $1.5 million. Certain holders of options to acquire our common
stock, including Messrs. Moshenek, Vance and Abood, elected to exchange their
options for options issued under Royster-Clark Group's 1999 Restricted Stock
Purchase Plan. In connection with the closing of the Transactions, we also
effected a reverse stock split that resulted in cash payments in lieu of
fractional share interests to holders of existing stock options who did not
elect to exchange their options for options in Royster-Clark Group and to our
Employee Stock Ownership Plan in aggregate amounts of approximately $649,000 and
$2.9 million, respectively. Overall, in connection with the Transactions,
Messrs. Jenkins, Moshenek, Vance and Abood each received, or have the right to
receive upon exercise of options, approximately $6.8 million, $42,000, $22,000
and $276,000 in cash, respectively, and $17.5 million, $1.2 million, $335,000
and $1.5 million in securities of our parent, respectively. All of our
stockholders who elected to continue as investors in Royster-Clark Group,
including these individuals, received an aggregate of $8.3 million in cash and
$23.5 million in securities of our parent, including securities issuable upon
exercise of options.
In connection with the Transactions, Mr. Jenkins, 399 Ventures and other
key employees entered into a series of agreements as detailed below.
Royster-Clark Group, 399 Ventures, Mr. Jenkins and management stockholders
entered into a Securities Purchase and Holders Agreement (the "Stockholders'
Agreement") containing certain agreements with respect to our common stock and
corporate governance.
The Stockholders' Agreement provides that the Board of Directors of
Royster-Clark Group will be composed of up to five directors, which will include
two individuals designated by Mr. Jenkins, two individuals designated by 399
Ventures, and the remaining director will be an independent director designated
by the vote of a majority of the other four directors. 399 Ventures has only
designated one director at this time, and the independent director has not yet
been selected.
The Stockholders' Agreement also contains certain provisions which, with
some exceptions, restrict the ability of the stockholders to transfer any
Royster-Clark Group common stock except pursuant to the terms of the
Stockholders' Agreement. If holders of more than 50% of the Royster-Clark Group
common stock approve the merger or consolidation of Royster-Clark Group or the
sale of substantially all its assets, each stockholder has agreed to consent to
such sale and, if such sale includes the sale of stock, each stockholder has
agreed to sell all of such stockholder's Royster-Clark Group common stock on the
terms and conditions approved by holders of a majority of the Royster-Clark
Group common stock then outstanding. In the event Royster-Clark Group proposes
to sell (other than for certain limited exceptions) any equity securities,
Royster-Clark Group must first offer to each of the other shareholders a pro
rata portion of such shares. Subject to certain limitations, neither Mr. Jenkins
nor 399 Ventures may sell any of their shares of Royster-Clark Group common
stock without offering the other stockholders a pro rata opportunity to
participate in such sale.
The Stockholders' Agreement also provides for certain additional
restrictions on transfer of shares (other than shares issued upon exercise of
outstanding options) under the 1999 Restricted Stock Purchase Plan, including
the right of Royster-Clark Group to repurchase some shares upon termination of
employment of a holder of shares under the plan prior to the fifth anniversary
of the closing, at a formula price, and the grant of a right of first refusal in
favor of Royster-Clark Group in the event a holder of shares under the plan
elects to transfer shares of Royster-Clark Group common stock.
The stockholders of Royster-Clark Group also entered into a Preferred
Stockholders' Agreement containing certain agreements regarding their future
relationships and their rights and obligations with respect to the Royster-Clark
Group's preferred stock. Under the Preferred Stockholders' Agreement an investor
cannot transfer shares of preferred stock unless all other investors are offered
an equal opportunity to participate in such transaction on a pro rata basis.
Under some circumstances, holders of preferred stock may be required to join in
a sale of all the preferred stock to a third party.
Royster-Clark Group, 399 Ventures and the other stockholders of
Royster-Clark Group entered into a Registration Rights Agreement. Under the
Registration Rights Agreement, at any time after six months after the
Royster-Clark Group has completed an initial public offering, 399 Ventures and
Mr. Jenkins will each have demand registration rights. The parties to the
Registration Rights Agreement will also have "piggyback" registration rights
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which, subject to certain exceptions, allow them to participate in a public
offering of common stock. Registration expenses of the selling stockholders
(other than underwriting fees, brokerage fees and transfer taxes applicable to
the shares sold by such stockholders or the fees and expenses of any accountants
or other representatives retained by a selling stockholder) will be paid by
Royster-Clark Group.
In addition to these arrangements, Mr. Abood serves as General Counsel to
the Company and is paid on a fee basis for the time he spends on Company
matters. During 1997 and 1998, we paid Mr. Abood approximately $150,000 and
$177,000, respectively, for services rendered.
S. Clark Jenkins, the brother of Francis P. Jenkins, Jr., was formerly the
President of the Company. We have a non-compete agreement with Clark Jenkins,
effective December 1, 1997, that pays him $20,833 per month through December 31,
1999. In addition, Clark Jenkins received payments of approximately $210,000 in
1997 under a previous agreement.
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DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
Senior Secured Credit Facility
The following is a summary of certain indebtedness of our company. To the
extent such summary contains descriptions of the senior secured credit facility,
such descriptions do not purport to be complete and are qualified in their
entirety by reference to the senior secured credit facility. A copy of the
senior secured credit facility is filed as an exhibit to the registration
statement of which this prospectus constitutes a part.
In connection with the Transactions, we entered into the senior secured
credit facility with a syndicate of financial institutions, as lenders, led by
DLJ Capital Funding, as arranger and syndication agent, J.P. Morgan Securities,
Inc., as documentation agent, and U.S. Bancorp Ag Credit, Inc., as
administrative agent. The following summary describes certain provisions
relating to the senior secured credit facility.
Lenders have agreed to extend credit to us on a revolving basis at any time
and from time to time for a period of five years following the closing of the
Transactions in an aggregate principal amount of $275.0 million, of which up to
$10 million will be available as a letter of credit sub-facility. Availability
under the senior secured credit facility is subject to various conditions
precedent typical of bank loans, including, among other things, the absence of
any material adverse change on our part and our subsidiaries, taken as a whole.
Additionally, the maximum principal amount of outstanding borrowings under the
senior secured credit facility may not exceed the lesser of (i) $275 million and
(ii) a borrowing base comprised of a percentage of the value of all (a) eligible
inventory, (b) eligible accounts receivable, (c) prepaid inventory and (d)
rebate receivables (as each such term is defined in the credit agreement) of us
and our domestic subsidiaries. We used borrowings under the senior secured
credit facility together with the First Mortgage Notes to (i) purchase
AgriBusiness, (ii) purchase Royster-Clark, (iii) refinance existing debt of
Royster-Clark and AgriBusiness, (iv) pay fees and expenses in connection with
the transactions and (v) provide for working capital and other general corporate
purposes.
The obligations under the senior secured credit facility are secured by (i)
a first priority perfected lien on all of our accounts receivable, inventory,
general intangibles and other tangible and intangible property and assets and
those of our direct and indirect subsidiaries (except for the principal
properties and related fixtures and equipment, and other related assets (the
"Fixed Assets") securing the First Mortgage Notes) and (ii) all of our capital
stock and all the capital stock of our direct and indirect subsidiaries;
provided that (x) no more than 65% of the equity interests of non-U.S.
subsidiaries held by us or our domestic subsidiaries will be required to be
pledged as security and (y) the equity interests of the limited purpose
subsidiaries formed to own our real estate (other than principal mortgaged
properties) and which secure the First Mortgage Notes will not secure the senior
secured credit facility. We will also, pursuant to cash collateral arrangements
satisfactory to the syndication agent and the administrative agent, provide full
cash dominion over our cash management accounts to the administrative agent on
behalf of the lenders under the senior secured credit facility. The senior
secured credit facility ranks pari passu with the First Mortgage Notes in right
of payment.
At our option, loans outstanding under the senior secured credit facility
will bear interest at the administrative agent's (i) alternate base rate plus
1.50% or (ii) reserve-adjusted London Interbank Offered Rate plus 2.75%, in
either case for the first twelve months following the closing date and,
thereafter, will be determined by a leverage-based pricing grid. The credit
agreement also provides that a commitment fee of 0.50% per annum is payable
(quarterly in arrears) on the daily average unutilized amount of the senior
secured credit facility for the first twelve months following the closing, and
thereafter will also be determined by a leverage-based pricing grid.
The senior secured credit facility contains representations and warranties,
negative and affirmative covenants, conditions and events of default which are
customarily required for similar financings. The material restrictive covenants
include restrictions and limitations on dividends, capital expenditures, liens,
leases, incurrence of debt, transactions with affiliates, investments and
certain payments, and on mergers, acquisitions, consolidations and asset sales.
Furthermore, we are required to maintain compliance with certain financial
covenants such as a leverage ratio, minimum net worth, an interest coverage
ratio, a current ratio and a fixed charge coverage ratio.
Events of default under the senior secured credit facility include, among
other things, (i) failure to pay principal or interest when due; (ii) violation
of covenants; (iii) failure of any representation or warranty to be true in all
material respects when made; (iv) cross payment default or non-payment default
permitting acceleration with respect to or acceleration of certain indebtedness;
(v) change of ownership or control; (vi) certain events of bankruptcy; (vii)
certain judgment defaults; and (viii) certain ERISA events.
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At our option, we may prepay loans and reduce the amounts available to us
under the senior secured credit facility at any time, without premium or
penalty. Subject to certain exceptions, we must prepay the senior secured credit
facility and, in certain circumstances, reduce the commitments thereunder (with
customary exceptions to be agreed), in an amount equal to:
(i) 100% of the proceeds received by us or any of our subsidiaries
from the sale of property or assets (tangible and intangible, and other
than Fixed Assets) of such person;
(ii) 100% of the insurance recoveries or condemnation awards received
by us or any of our subsidiaries from the destruction or condemnation of
property or assets (tangible and intangible, and other than Fixed Assets)
of such person;
(iii) 100% of the proceeds received by us or any of our subsidiaries
from the sale or issuance by such person of debt securities; and
(iv) 50% of the proceeds received by us or any of our subsidiaries
from the sale or issuance of equity securities of such person.
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DESCRIPTION OF FIRST MORTGAGE NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Company" refers only to Royster-Clark, Inc. and not to any of its subsidiaries.
The Company issued the Existing First Mortgage Notes under the Indenture
(the "Indenture") among itself, the Guarantors and U.S. Trust Company of New
York, as trustee (the "Trustee"). The terms of the Indenture apply to the
Existing First Mortgage Notes and to the Exchange First Mortgage Notes for which
you may tender your Existing First Mortgage pursuant to the Exchange Offer (all
such First Mortgage Notes being collectively referred to in this section as the
"First Mortgage Notes"). The terms of the First Mortgage Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The following description is a summary of the material provisions of the
Indenture and the Registration Rights Agreement. It does not restate those
agreements in their entirety. We urge you to read the Indenture and the
Registration Rights Agreement because they, and not this description, define
your rights as holders of the First Mortgage Notes.
Brief Description of the First Mortgage Notes and the Guarantees
The First Mortgage Notes
The First Mortgage Notes:
o are general obligations of the Company;
o are secured by:
(1) first mortgages on 17 of the Company's and its subsidiaries'
principal properties and related fixtures and equipment and other related
assets; and
(2) all of the equity interests of Royster-Clark Realty LLC,
Royster-Clark AgriBusiness Realty LLC, Royster-Clark Nitrogen Realty LLC
and Royster-Clark Hutson's Realty LLC (collectively, the "Special Purpose
Restricted Subsidiaries"), the Company's subsidiaries that own or will own
approximately 280 properties used in our business, including substantially
all of the owned Farmarkets and other facilities;
o are senior in right of payment to any future subordinated Indebtedness
of the Company; and
o are unconditionally guaranteed by the Guarantors.
The Guarantees
The First Mortgage Notes are guaranteed by Royster-Clark Group, Inc.
("Royster-Clark Group") and all of the Restricted Subsidiaries of the Company.
The Guarantees of the First Mortgage Notes:
o are general unsecured obligations of each Guarantor;
o are pari passu in right of payment with all existing and future Senior
Debt of each Guarantor, including their guarantees of the Credit
Agreement; and
o are senior in right of payment with any future senior subordinated
Indebtedness of each Guarantor.
Other:
A majority of the Company's operations are expected to be conducted through
its subsidiaries and, therefore, the Company will depend on the cash flow of its
subsidiaries to meet its obligations, including its obligations under the First
Mortgage Notes. The Company is also the borrower under the Credit Agreement,
which is secured by:
o all of the accounts receivable, inventory, general intangibles and
other tangible and intangible property and assets of the Company and
its subsidiaries, other than the assets securing the First Mortgage
Notes;
o all of the Company's common stock; and
o all of the common stock of the Company's subsidiaries (other than
Royster-Clark Realty LLC, Royster-Clark AgriBusiness Realty LLC,
Royster-Clark Nitrogen Realty LLC and Royster-Clark Hutson's Realty
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LLC, our Special Purpose Restricted Subsidiaries, that own or will own
approximately 280 properties used in our business, including
substantially all of the owned Farmarkets and other facilities). The
equity interests of the four companies are pledged to secure the First
Mortgage Notes.
The First Mortgage Notes are effectively subordinated in right of payment
to the Credit Agreement to the extent of the collateral which secures the Credit
Agreement.
The Company's obligations under the Credit Agreement are guaranteed by
Royster-Clark Group and all of the Restricted Subsidiaries (other than the
Special Purpose Restricted Subsidiaries) of the Company. The guarantees of the
Credit Agreement are pari passu in right of payment with the Guarantees of the
First Mortgage Notes.
Unless otherwise stated, for purposes of this "Description of First
Mortgage Notes" and the Indenture, Royster-Clark Group will be treated as a
Restricted Subsidiary.
Principal, Maturity and Interest
The Company issued First Mortgage Notes initially in the principal amount
of $200.0 million. The Company will issue First Mortgage Notes in denominations
of $1,000 and integral multiples of $1,000. The First Mortgage Notes will mature
on April 1, 2009. We are permitted to issue up to an additional $10 million
First Mortgage Notes under the Indenture ("Additional Notes"). Any such
Additional Notes that are actually issued will be treated as issued and
outstanding First Mortgage Notes (and as the same class as the initial First
Mortgage Notes) for all purposes of the Indenture and this "Description of the
Notes," unless the context indicates otherwise.
Interest on the First Mortgage Notes will accrue at the rate of 10 1/4% per
annum and will be payable semiannually in arrears on April 1 and October 1,
commencing on October 1, 1999. The Company will make each interest payment to
the Holders of record on the immediately preceding March 15 and September 15,
beginning September 15, 1999.
Interest on the First Mortgage Notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Methods of Receiving Payments on the First Mortgage Notes
If a Holder has given wire transfer instructions to the Company, the
Company will pay all principal, interest (including Liquidated Damages) and
premium, if any, on those First Mortgage Notes in accordance with those
instructions. All other payments on First Mortgage Notes will be made at the
office or agency of the Paying Agent and Registrar within the City and State of
New York unless the Company elects to make interest payments by check mailed to
the Holders at their addresses set forth in the register of Holders.
Paying Agent and Registrar for the First Mortgage Notes
The Trustee will initially act as Paying Agent and Registrar. The Company
may change the Paying Agent or Registrar without prior notice to the Holders,
and the Company or any of its Subsidiaries may act as Paying Agent or Registrar.
Transfer and Exchange
A Holder may transfer or exchange First Mortgage Notes in accordance with
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any First Mortgage Note selected for redemption. Also, the Company is not
required to transfer or exchange any First Mortgage Note for a period of 15 days
before a selection of First Mortgage Notes to be redeemed.
The registered Holder of a First Mortgage Note will be treated as the owner
of it for all purposes.
Guarantees
The Guarantors have agreed to jointly and severally guarantee the Company's
obligations under the First Mortgage Notes. The obligations of each Guarantor
under its Guarantee is limited as necessary to prevent that Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk
Factors--Fraudulent Conveyance Matters."
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A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person, other than the Company or
another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such
consolidation or merger assumes all the obligations of that Guarantor
under the Indenture, its Guarantee and the Registration Rights
Agreement pursuant to a supplemental indenture satisfactory to the
Trustee; or
(b) the Net Proceeds of such sale or other disposition are
applied in accordance with the "Asset Sale" provisions of the
Indenture.
The Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation) to a Person that is not (either before or after
giving effect to such transaction) a Restricted Subsidiary of the Company,
if the Guarantor applies the Net Proceeds of that sale or other disposition
in accordance with the "Asset Sale" provisions of the Indenture; or
(2) in connection with any sale of all of the Capital Stock of a
Guarantor to a Person that is not (either before or after giving effect to
such transaction) a Restricted Subsidiary of the Company, if the Company
applies the Net Proceeds of that sale in accordance with the "Asset Sale"
provisions of the Indenture; or
(3) if the Company designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary.
See "--Repurchase at the Option of Holders--Asset Sales."
Security
The obligations of the Company under the First Mortgage Notes are secured
by:
(1) a first priority security interest in the property, plant and
equipment and certain related assets of the Company and its subsidiaries
(collectively, the "PP&E"), constituting 17 of the principal granulation,
seed production, processing and nitrogen plants of the Company and its
subsidiaries; and
(2) a pledge (the "Pledge") of all of the equity interests of
Royster-Clark Realty LLC, Royster-Clark AgriBusiness LLC, Royster-Clark
Nitrogen Realty LLC and Royster-Clark Hutson's Realty LLC, our Special
Purpose Restricted Subsidiaries that own or will own approximately 280
properties used in our business, including substantially all of the
Farmarkets and other owned facilities.
The PP&E and Pledge are referred to collectively as the "Collateral." The
Collateral does not include the following assets (collectively, the "Excluded
Assets"), which secure the Company's and the Guarantors' obligations under the
Credit Agreement: all of the accounts receivable, inventory, general intangibles
and other tangible and intangible property and assets of the Company and its
subsidiaries and the common stock of the Company and its subsidiaries (other
than the Pledge relating to the four limited liability companies that own
substantially all of the owned retail farm markets).
The Pledge was granted to the Trustee, as collateral agent for and on
behalf of the holders of the First Mortgage Notes (in such capacity, the
"Collateral Agent"), pursuant to the Indenture. The Company and its Restricted
Subsidiaries entered into a Mortgage Agreement (the "Mortgage") providing for
the grant by the Company and its Restricted Subsidiaries to the Collateral Agent
for the ratable benefit of the holders of the First Mortgage Notes of a mortgage
in the portion of the PP&E constituting real property and the improvements
thereon. The Company and its Restricted Subsidiaries entered into a security and
pledge agreement (the "Security Agreement" and, together with the Mortgage, the
"Security Agreements") providing for the Pledge and the grant by the Company and
its Restricted Subsidiaries to the Collateral Agent for the ratable benefit of
the Holders of the First Mortgage Notes of a first priority security interest in
the portion of the PP&E constituting equipment and certain other assets of the
Company and its Restricted Subsidiaries, other than the Excluded Assets. Such
mortgage and security interests will secure the payment and performance when due
of all of the obligations of the Company and the Guarantors under the Indenture
and the First Mortgage Notes as provided in the Security Agreements.
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Because of delays in the issuance of the title reports on a number of the
properties to be owned by the Special Purpose Restricted Subsidiaries, we have
not been able to prepare deeds to transfer these properties. IMC Global, Inc.
has agreed to indemnify the Collateral Agent for the benefit of the holders of
the First Mortgage Notes and the Special Purpose Restricted Subsidiaries against
certain losses if such properties are not transferred to the Special Purpose
Restricted Subsidiaries.
Any indemnity proceeds received by the Collateral Agent or the Special
Purpose Restricted Subsidiaries from IMC Global, Inc. under these indemnity
arrangements shall be applied or invested as provided for in the second and
third paragraphs of the covenant "Asset Sales." However, if the aggregate amount
of indemnity proceeds exceeds $5.0 million, the Company will make an Asset Sale
Offer to all Holders of First Mortgage Notes as provided for in the fourth
paragraph of the covenant "Asset Sales."
The collateral release provisions of the Indenture permit the release of a
Nitrogen Facility without substitution of collateral if an offer is made to
repurchase First Mortgage Notes under certain circumstances. See "Repurchase at
the Option of Holders--Sale of Nitrogen Facility."
The Company is planning to merge two of the limited purpose subsidiaries
into the remaining two limited purpose subsidiaries. Such mergers will not
adversely affect the value of the Collateral.
So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions, the Company and its Subsidiaries are
entitled to exercise any voting and other consensual rights pertaining to the
Collateral pledged by them.
Upon the occurrence and during the continuance of an Event of Default and a
declaration of an acceleration of the First Mortgage Notes:
(1) all rights of the Company to exercise such voting and other
consensual rights shall cease, and all such rights shall become vested in
the Collateral Agent, which, to the extent permitted by law, shall have the
sole right to exercise such voting and other consensual rights;
(2) all rights of the Company to receive any cash dividends, interest
and other payments made upon or with respect to the Collateral will cease
and such cash dividends, interest and other payments will be paid to the
Collateral Agent; and
(3) the Collateral Agent may sell the Collateral or any part thereof
in accordance with the terms of the Security Agreements. All funds
distributed under the Security Agreements and received by the Collateral
Agent for the benefit of the Holders of the First Mortgage Notes will be
distributed by the Collateral Agent in accordance with the provisions of
the Indenture.
The Collateral Agent will determine the circumstances and manner in which
the Collateral shall be disposed of, including, but not limited to, the
determination of whether to release all or any portion of the Collateral from
the liens created by the Security Agreements and whether to foreclose on the
Collateral following an Event of Default and a declaration of acceleration of
the First Mortgage Notes.
The Security Agreements shall be terminated upon the full and final payment
and performance of all Obligations of the Company under the Indenture and the
First Mortgage Notes and of the Guarantors under the Indenture and the
Guarantees.
Optional Redemption
At any time prior to April 1, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of First Mortgage
Notes originally issued under the Indenture at a redemption price of 110.25% of
the principal amount thereof, plus accrued and unpaid interest (including
Liquidated Damages) to the redemption date, with the net cash proceeds of one or
more Public Equity Offerings; provided that:
(1) at least 65% of the aggregate principal amount of First Mortgage
Notes originally issued under the Indenture remains outstanding immediately
after the occurrence of such redemption (excluding First Mortgage Notes
held by the Company and its Subsidiaries); and
(2) the redemption must occur within 45 days of the date of the
closing of such Public Equity Offering.
Except pursuant to the preceding paragraph, the First Mortgage Notes will
not be redeemable at the Company's option prior to April 1, 2004.
After April 1, 2004, the Company may redeem all or a part of the First
Mortgage Notes upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
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below plus accrued and unpaid interest (including Liquidated Damages) thereon,
to the applicable redemption date, if redeemed during the twelve-month period
beginning on April 1 of the years indicated below:
Year Percentage
---- ----------
2004............................................... 105.125%
2005............................................... 103.417%
2006............................................... 101.708%
2007 and thereafter................................ 100.000%
Mandatory Redemption
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the First Mortgage Notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of First Mortgage Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of that Holder's First Mortgage Notes
pursuant to a Change of Control Offer on the terms set forth in the Indenture.
In the Change of Control Offer, the Company will offer a Change of Control
Payment in cash equal to 101% of the aggregate principal amount of First
Mortgage Notes repurchased plus accrued and unpaid interest (including
Liquidated Damages) thereon, to the date of purchase. Within ten days following
any Change of Control, the Company will mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase First Mortgage Notes on the Change of Control Payment
Date specified in such notice which date shall be no earlier than 30 days and no
later than 60 days from the date such notice is mailed, pursuant to the
procedures required by the Indenture and described in such notice. 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 the First
Mortgage Notes as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with the Change of
Control provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Change of Control provisions of the Indenture by virtue of
such conflict.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all First Mortgage Notes or portions thereof
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all First Mortgage Notes or portions thereof
so tendered; and
(3) deliver or cause to be delivered to the Trustee the First Mortgage
Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of First Mortgage Notes or portions thereof
being purchased by the Company.
The Paying Agent will promptly mail to each Holder of First Mortgage Notes
so tendered the Change of Control Payment for such First Mortgage Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new First Mortgage Note equal in principal amount to any
unpurchased portion of the First Mortgage Notes surrendered, if any; provided
that each such new First Mortgage Note will be in a principal amount of $1,000
or an integral multiple thereof.
The provisions described above that require the Company to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the First Mortgage Notes to
require that the Company repurchase or redeem the First Mortgage Notes in the
event of a takeover, recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all First Mortgage Notes validly tendered and not withdrawn under such
Change of Control Offer.
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The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of the Company and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of First Mortgage Notes to require the Company to repurchase such First
Mortgage Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of the Company and its Subsidiaries
taken as a whole to another Person or group may be uncertain.
Asset Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries, to consummate an Asset Sale other than transfers of Receivables to
a Receivables Subsidiary in connection with a Receivables Transaction and
regulatory divestitures required in connection with acquisitions unless:
(1) the Company (or the 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 or Equity Interests issued or sold or
otherwise disposed of;
(2) such fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash. For purposes of this
provision, each of the following shall be deemed to be cash:
(a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the First Mortgage
Notes or any Subsidiary Guarantee) that are assumed by the transferee
of any such assets pursuant to a customary assumption agreement; and
(b) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that
are within 45 days converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received in that
conversion); provided, however, that the 75% limitation referred to
above shall not apply to any Asset Sale in which the cash or Cash
Equivalents portion of the consideration received therefore is equal
to or greater than what the net after-tax proceeds would have been had
such Asset Sale complied with the aforementioned 75% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds at its option:
(1) to repay Senior Debt and, if the Senior Debt repaid is revolving
credit Indebtedness, to correspondingly reduce commitments with respect
thereto;
(2) to acquire all or substantially all of the assets of, or a
majority of the Voting Stock of, another Permitted Business;
(3) to make a capital expenditure; or
(4) to acquire other long-term assets that are used or useful in a
Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will make
an Asset Sale Offer to all Holders of First Mortgage Notes and all holders of
other Indebtedness that is pari passu with the First Mortgage Notes containing
provisions similar to those set forth in the Indenture with respect to offers to
purchase or redeem with the proceeds of sales of assets to purchase the maximum
principal amount of First Mortgage Notes and such other pari passu Indebtedness
that may be purchased out of the Excess Proceeds. The offer price in any Asset
Sale Offer will be equal to 100% of principal amount plus accrued and unpaid
interest (including Liquidated Damages), if any, to the date of purchase, and
will be payable in cash. If any Excess Proceeds remain after consummation of an
Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. If the aggregate principal amount of
First Mortgage Notes and such other pari passu Indebtedness tendered into such
Asset Sale Offer exceeds the amount of Excess Proceeds, the
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Trustee shall select the First Mortgage Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis based on the principal amount
of First Mortgage Notes and such other pari passu Indebtedness tendered. Upon
completion of each Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
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 each
repurchase of First Mortgage Notes pursuant to an Asset Sale Offer. To the
extent that the provisions of any securities laws or regulations conflict with
the Asset Sales provisions of the Indenture, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Asset Sale provisions of the Indenture by
virtue of such conflict.
The agreements governing the Company's other Indebtedness contain
prohibitions of certain events, including events that would constitute a Change
of Control or an Asset Sale. In addition, the exercise by the Holders of First
Mortgage Notes of their right to require the Company to repurchase the First
Mortgage Notes upon a Change of Control or an Asset Sale could cause a default
under these other agreements, even if the Change of Control or Asset Sale itself
does not, due to the financial effect of such repurchases on the Company.
Finally, the Company's ability to pay cash to the Holders of First Mortgage
Notes upon a repurchase may be limited by the Company's then existing financial
resources. See "Risk Factors--Financing Change of Control Offer."
Sale of Nitrogen Facility
Upon the sale of a Nitrogen Facility (or the capital stock of the Guarantor
owning such facility), holders of First Mortgage Notes will have the right to
require the Company to repurchase ratably with the Net Proceeds of such sale all
outstanding First Mortgage Notes, in whole or in part, at a repurchase price
equal to the Permitted Sale Repurchase Price, according to the procedures set
forth in "Repurchase at the Option of Holders--Change of Control." "Permitted
Sale Repurchase Price" means an amount equal to, as determined by an Independent
Investment Banker, the sum of the present values of the remaining scheduled
payments of interest and the scheduled payment of principal thereon, discounted
to the repurchase date on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Special Adjusted Treasury Rate, plus accrued and
unpaid interest thereon and Liquidated Damages, if any, to the repurchase date.
All of the consideration received by the Company or a Restricted Subsidiary
from the sale of a Nitrogen Facility shall be in the form of cash. Any proceeds
from the sale of a Nitrogen Facility remaining after the repurchase of First
Mortgage Notes as provided above shall be applied to permanently repay Senior
Debt and, if the Senior Debt repaid is revolving credit Indebtedness, shall
permanently reduce commitments with respect thereto.
Selection and Notice
If less than all of the First Mortgage Notes are to be redeemed at any
time, the Trustee will select First Mortgage Notes for redemption as follows:
(1) if the First Mortgage Notes are listed, in compliance with the
requirements of the principal national securities exchange on which the
First Mortgage Notes are listed; or
(2) if the First Mortgage Notes are not so listed, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and
appropriate.
No First Mortgage Notes of $1,000 or less shall be redeemed in part.
Notices 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 First Mortgage
Notes to be redeemed at its registered address. Notices of redemption may not be
conditional.
If any First Mortgage Note is to be redeemed in part only, the notice of
redemption that relates to that First Mortgage Note shall state the portion of
the principal amount thereof to be redeemed. A new First Mortgage Note in
principal amount equal to the unredeemed portion of the original First Mortgage
Note will be issued in the name of the Holder thereof upon cancellation of the
original First Mortgage Note. First Mortgage Notes called for redemption become
due on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on First Mortgage Notes or portions of them called for
redemption.
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Certain Covenants
Restricted Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any
of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or Royster-Clark
Group or to the Company or a Restricted Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company (other than Equity Interests
owned by Royster-Clark Group, the Company or any Wholly Owned Restricted
Subsidiary of the Company);
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the First Mortgage Notes or the Subsidiary Guarantees,
except a payment of interest or principal at the Stated Maturity thereof;
or
(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above being collectively
referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (2), (3), (4), (5), (6), (7), (8) and (12) of the next
succeeding paragraph) is less than the sum, without duplication, of
(a) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the date
of the Indenture to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by the
Company since the date of the Indenture as a contribution to its
common equity capital or from the issue or sale of Equity Interests of
the Company (other than Disqualified Stock) or from the issue or sale
of convertible or exchangeable Disqualified Stock or convertible or
exchangeable debt securities of the Company that have been converted
into or exchanged for such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to a
Subsidiary of the Company), plus
(c) to the extent that any Restricted Investment that was made
after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash (or the non-cash proceeds have been
converted to cash), the lesser of (i) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition,
if any) and (ii) the initial amount of such Restricted Investment,
plus
(d) if any Unrestricted Subsidiary is redesignated as a
Restricted Subsidiary, the lesser of (i) the fair market value of the
Company's ownership interest in such redesignated Subsidiary (as
determined in good faith by the Board of Directors) as of the date of
its redesignation or (ii) the fair market value when made of all
Investments subsequent to the date of the indenture previously
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made by the Company and its Restricted Subsidiaries in such
redesignated Subsidiary but only to the extent that such Investments
were treated as a Restricted Payment (other than any Restricted
Payment made pursuant to clauses (1) through (12) below).
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any
Restricted Subsidiary or of any Equity Interests of the Company or any
Restricted Subsidiary in exchange for, or out of the net cash proceeds of
the substantially concurrent sale or issuance (other than to a Restricted
Subsidiary of the Company) of, Equity Interests of the Company (other than
Disqualified Stock) or from the net cash proceeds of an equity capital
contribution to the Company; provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (3) (b) of
the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Restricted Subsidiary with
the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness;
(4) the payment of any dividend by a Subsidiary of the Company to the
holders of its common Equity Interests on a pro rata basis;
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary
of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $250,000 in any twelve-month
period plus the amount received by the Company or any Restricted Subsidiary
of the Company from any member of management for the purchase of any Equity
Interests of the Company or any Restricted Subsidiary of the Company during
such twelve-month period; provided that any amounts so received for such
purchases shall be excluded from clause (3)(b) of the preceding paragraph
to the extent of any such repurchase, redemption or other acquisition or
retirement for value;
(6) Permitted Investments;
(7) repurchase of Equity Interests deemed to occur upon exercise of
stock options to the extent that such Equity Interests represent a portion
of the exercise price of such options;
(8) any loans, advances, distributions or payments from the Company to
any Restricted Subsidiary, or any loans, advances, distributions or
payments by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary; provided, however, that any such loans, advances, distributions
or payments must be expressly subordinated to the prior payment in full in
cash of all Obligations with respect to the First Mortgage Notes;
(9) the defeasance, redemption, repurchase or other acquisition of any
Indebtedness subordinated or pari passu in right of payment to the First
Mortgage Notes at a purchase price not greater than 101% of the principal
amount of such Indebtedness, plus any accrued and unpaid interest thereon,
in the event of a Change of Control; provided that prior to or
contemporaneously with such repurchase, the Company has made the Change of
Control Offer with respect to the First Mortgage Notes and has repurchased
all First Mortgage Notes validly tendered for payment and not withdrawn in
connection with such Change of Control Offer;
(10) other Restricted Payments in an aggregate amount not to exceed
$5.0 million;
(11) any Investments in a joint venture or in a Permitted Business in
an aggregate amount not to exceed $10.0 million; or
(12) the declaration or payment of dividends or advances to
Royster-Clark Group for expenses incurred by Royster-Clark Group in its
capacity as a holding company that are attributable to the operations of
the Company and its Restricted Subsidiaries, including, without limitation,
(a) fees and expenses paid to members of the Board of Directors of
Royster-Clark Group, (b) general corporate overhead expenses of
Royster-Clark Group directly and exclusively attributable to the ownership
and/or business and operations of the Company and
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its Restricted Subsidiaries, not to exceed $100,000 in any fiscal year or
$500,000 in any fiscal year if Royster-Clark Group is a public reporting
company under the Securities Exchange Act of 1934, (c) foreign, federal,
state or local tax liabilities paid by Royster-Clark Group directly and
exclusively attributable to the ownership and/or business and operations of
the Company and its Restricted Subsidiaries (other than Royster-Clark
Group), (d) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of Royster-Clark Group held by any member
or former member of Royster-Clark Group's or the Company's (or any of their
Restricted Subsidiaries') Board of Directors or any present or former
officer, employee or director of Royster-Clark Group, the Company or any
Restricted Subsidiary pursuant to any management equity subscription
agreement or stock option agreement, directly and exclusively attributable
to the ownership and/or business and operations of the Company and its
Restricted Subsidiaries (other than Royster-Clark Group), provided that the
aggregate amount paid pursuant to this clause (d) does not exceed in any
fiscal year $250,000, plus the aggregate cash proceeds received by the
Company or Royster-Clark Group from any reissuance of Equity Interests by
Royster-Clark Group or the Company to employees, officers or directors of
Royster-Clark Group, the Company or any Restricted Subsidiary during such
fiscal year provided that any cash proceeds received from any such
reissuance shall be excluded from clause (3)(b) of the preceding paragraph,
to the extent of any such repurchase, redemption, or other acquisition or
retirement for value, (e) customary and reasonable accounting, legal or
other professional or administrative expenses directly and exclusively
attributable to the ownership and/or business and operations of the Company
and its Restricted Subsidiaries (other than Royster-Clark Group), and (f)
reasonable fees, offering costs and related expenses associated with any
registration statements filed with the Commission; provided, however, the
aggregate amount paid pursuant to the foregoing clauses (a) and (e) does
not exceed $500,000 in any fiscal year.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $5.0 million. 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 is permitted and setting forth
the basis upon which the calculations required by this "Restricted Payments"
covenant were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
The Board of Directors may designate any Restricted Subsidiary (other than
any of the Special Purpose Restricted Subsidiaries) to be an Unrestricted
Subsidiary if such designation would not cause a Default. For purposes of making
such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the fair market value of
such Investments at the time of such designation (as determined in good faith by
the Board of Directors). Such designation shall only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
For purposes of determining compliance with this covenant, in the event
that a Restricted Payment meets the criteria of more than one of the exceptions
described in (1) through (12) above or is entitled to be made pursuant to the
first paragraph of this covenant, the Company shall, in its sole discretion,
classify such Restricted Payment in any manner that complies with this covenant.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of Preferred Stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue Disqualified Stock, and the Restricted Subsidiaries (other than
the Special Purpose Restricted Subsidiaries) may incur Indebtedness or issue
Preferred Stock, if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1.0 determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the
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additional Indebtedness had been incurred or the Preferred Stock or Disqualified
Stock had been issued, as the case may be, at the beginning of such four-quarter
period.
If such four quarter period includes any period prior to the date of the
Indenture, the financial statements for such prior period shall be prepared on a
pro forma basis giving effect to the Transactions in accordance with Article 11
of Regulation S-X under the Securities Act.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by the Company and any Restricted Subsidiary (other
than the Special Purpose Restricted Subsidiaries) of Indebtedness under
Credit Facilities in an aggregate principal amount at any one time
outstanding under this clause (1) not to exceed the Borrowing Base, less
the aggregate amount of all mandatory reductions required by the covenants
described under "Repurchase at the Option of Holders--Asset Sales," and
"Repurchase at the Option of Holders--Sale of Nitrogen Facility" that have
actually been made since the date of the Indenture; provided, that the
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (1) need not constitute Permitted
Refinancing Indebtedness;
(2) the incurrence by the Company and its Restricted Subsidiaries
(other than the Special Purpose Restricted Subsidiaries) of the Existing
Indebtedness;
(3) the incurrence by the Company and the Restricted Subsidiaries of
Indebtedness represented by the First Mortgage Notes to be issued on the
date of the Indenture and the Exchange First Mortgage Notes to be issued
pursuant to the Registration Rights Agreements (including, in each case,
the Subsidiary Guarantees);
(4) the incurrence by the Company or any of its Restricted
Subsidiaries (other than the Special Purpose Restricted Subsidiaries) of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph of this covenant or clauses (2), (3),
(4), (9) or (16) of this paragraph;
(5) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly Owned Restricted Subsidiaries; provided, however, that:
(a) if the Company or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the
First Mortgage Notes, in the case of the Company, or the Guarantee, in
the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other
than the Company or a Restricted Subsidiary thereof and (ii) any sale
or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Restricted Subsidiary thereof
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be,
that was not permitted by this clause (5);
(6) the incurrence by the Company or any of its Restricted
Subsidiaries (other than the Special Purpose Restricted Subsidiaries) of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(7) the guarantee by the Company or any of its Restricted Subsidiaries
(other than the Special Purpose Restricted Subsidiaries) of Indebtedness of
the Company or a Restricted Subsidiary of the Company that was permitted to
be incurred by another provision of this covenant;
(8) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness
or an issuance of Disqualified Stock for purposes of this covenant;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued; and
(9) the incurrence by the Company or any of its Restricted
Subsidiaries (other than the Special Purpose Restricted Subsidiaries) of
additional Indebtedness in an aggregate principal amount (or accreted
value,
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as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (9), not to exceed $20.0 million;
(10) the incurrence by the Company or any of its Restricted
Subsidiaries (other than the Special Purpose Restricted Subsidiaries) of
obligations that are incurred for the purpose of fixing or hedging currency
risk or the value of commodities or foreign currencies purchased or
received by the Company or any Restricted Subsidiary in the ordinary course
of business in amounts reasonably related to the Company's business and not
for speculative purposes;
(11) Indebtedness of the Company or a Restricted Subsidiary (other
than the Special Purpose Restricted Subsidiaries) owed to (including
obligations in respect of letters of credit for the benefit of) any Person
in connection with worker's compensation, health, disability or other
employee benefits or property, casualty or liability insurance provided by
such Person to the Company or such Restricted Subsidiary, pursuant to
reimbursement or indemnification obligations to such Person, in each case
incurred in the ordinary course of business and consistent with past
practices;
(12) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary (other than the Special Purpose Restricted
Subsidiaries) providing for indemnification, adjustment of purchase price
or similar obligations, in each case, incurred or assumed in connection
with the disposition of any business, asset or Equity Interests; provided
that the maximum aggregate liability of all such Indebtedness shall at no
time exceed the gross proceeds actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
(13) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
(other than the Special Purpose Restricted Subsidiaries) in the ordinary
course of business;
(14) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt or such Subsidiary ceases to be an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company;
(15) the incurrence of Indebtedness (other than by the Special Purpose
Restricted Subsidiaries) in connection with Receivables Transactions; and
(16) the incurrence by Royster-Clark Group, Inc. of Indebtedness
represented by (a) the non-cash pay subordinated notes issued to IMC
Global, 399 Ventures and Management Investors to consummate the
Transactions and (b) the 4 1/2% convertible subordinated note issued to 399
Ventures on March 31, 1999 to effect the acquisitions of AgriBusiness and
Royster-Clark.
The Company will not incur any Indebtedness (including Permitted Debt) that
is contractually subordinated in right of payment to any other Indebtedness of
the Company unless such Indebtedness is also contractually subordinated in right
of payment to the First Mortgage Notes on substantially identical terms;
provided, however, that no Indebtedness of the Company shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of the
Company solely by virtue of being unsecured.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (16) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company will be permitted to classify such item of Indebtedness on the date of
its incurrence, or reclassify all or a portion of such item of Indebtedness, in
any manner that complies with this covenant. Indebtedness under Credit
Facilities outstanding on the date on which First Mortgage Notes are first
issued and authenticated under the Indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (1) of the
definition of Permitted Debt.
Notwithstanding any of the foregoing, the Special Purpose Restricted
Subsidiaries will not incur any Indebtedness except for Permitted Debt
specifically provided for in clauses (3) and (5) of this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant.
Liens
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind securing the Collateral or Indebtedness, Attributable
Debt or trade payables on any asset now owned or hereafter acquired, except
Permitted Liens; provided, however that in
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addition to creating Permitted Liens on its properties or assets, the Company
and any of its Restricted Subsidiaries may create any Lien upon any of their
properties or assets (including but not limited to any capital stock of its
Subsidiaries) if the First Mortgage Notes are equally and ratably secured.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to the Company or any of its Restricted Subsidiaries, or with respect to
any other interest or participation in, or measured by, its profits, or pay
any indebtedness owed to the Company or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
However, the preceding restrictions will not apply to Royster-Clark Group,
Inc. and to encumbrances or restrictions existing under or by reason of:
(1) Existing Indebtedness and the Credit Facilities as in effect on
the date of the Indenture and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings
are no more restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in such Existing
Indebtedness, as in effect on the date of the Indenture;
(2) the Indenture, the Guarantees and the First Mortgage Notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture
to be incurred;
(5) customary non-assignment provisions in leases or other agreements
entered into in the ordinary course of business and consistent with past
practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary or all or substantially all of the assets of such Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending such sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements,
stock sale agreements and other similar agreements entered into in the
ordinary course of business;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(12) permitted mortgage or construction financing that imposes
restrictions on the property acquired or improved;
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(13) encumbrances or restrictions imposed by amendments to the
contracts, agreements or obligations referred to in the foregoing clauses
(1) through (12) if not materially more restrictive in the aggregate than
the contract, agreement or obligation in question prior to its amendment;
(14) protective liens filed in connection with sale-leaseback
transactions permitted under "--Sale and Leaseback Transactions;" and
(15) Indebtedness permitted to be incurred pursuant to clauses (11),
(13) and (15) of the second paragraph of the covenant "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
Merger, Consolidation, or Sale of Assets
Royster-Clark Group and the Company may not, directly or indirectly: (1)
consolidate or merge with or into another Person (whether or not Royster-Clark
Group or the Company is the surviving corporation); or (2) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company and its Restricted Subsidiaries taken as a
whole, in one or more related transactions, to another Person; unless in the
case of each of Royster-Clark Group and the Company:
(1) either: (a) Royster-Clark Group or the Company is the surviving
corporation; or (b) the Person formed by or surviving any such
consolidation or merger (if other than Royster-Clark Group or the Company)
or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;
(2) the Person formed by or surviving any such consolidation or merger
(if other than Royster-Clark Group or the Company) or the Person to which
such sale, assignment, transfer, conveyance or other disposition shall have
been made assumes all the obligations of Royster-Clark Group or the Company
under the First Mortgage Notes, the Indenture and the Registration Rights
Agreement pursuant to agreements reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) Royster-Clark Group or the Company or the Person formed by or
surviving any such consolidation or merger (if other than Royster-Clark
Group or the Company), or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made:
(a) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of
Royster-Clark Group or the Company immediately preceding the
transaction; and
(b) will, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the same
had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock."
In addition, Royster-Clark Group and the Company may not, directly or
indirectly, lease all or substantially all of its properties or assets, in one
or more related transactions, to any other Person. This "Merger, Consolidation,
or Sale of Assets" covenant will not apply to a sale, assignment, transfer,
conveyance or other disposition of assets between or among Royster-Clark Group,
the Company and any of its Wholly Owned Subsidiaries and any of the Guarantors.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of
interrelated or contractually related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, a resolution of
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the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with this covenant
and that such Affiliate Transaction has been approved by a majority of
the disinterested members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of
interrelated or contractually related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or
investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement, compensation or employee benefit
arrangements, incentive arrangements and customary director fees (including
grants of stock, stock options or other Equity Interests) entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such
Restricted Subsidiary;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) transactions with a Person that is an Affiliate of Royster-Clark
Group or the Company solely because Royster-Clark Group or the Company owns
an Equity Interest in such Person;
(4) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of Royster-Clark Group or the Company;
(5) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments;" and
(6) customary loans, advances, fees and compensation paid to, and
indemnity provided on behalf of, officers, directors, employees or
consultant of the Company or any of its Restricted Subsidiaries.
Additional Subsidiary Guarantees
If the Company or any of its Subsidiaries acquires or creates another
Restricted Subsidiary after the date of the Indenture, then that newly acquired
or created Restricted Subsidiary must become a Guarantor and execute a
supplemental indenture and deliver an Opinion of Counsel to the Trustee within
10 Business Days of the date on which it was acquired or created.
Notwithstanding the foregoing, in the event the Company or any of its
Subsidiaries acquires or creates a Restricted Subsidiary which is organized
under the laws of a jurisdiction other than the United States or a political
subdivision thereof, and if the issuance of a Guarantee by such Restricted
Subsidiary would result in the imposition of a tax or similar governmental
charge, such foreign Restricted Subsidiary shall not be required to be a
Guarantor.
Sale and Leaseback Transactions
The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company or any Restricted Subsidiary may enter into a sale and leaseback
transaction if:
(1) the Company or that Restricted Subsidiary, as applicable, could
have incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under the covenant
described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock;"
(2) the gross cash proceeds of that sale and leaseback transaction are
at least equal to the fair market value, as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to
the Trustee, of the property that is the subject of that sale and leaseback
transaction; and
(3) the transfer of assets in that sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales."
Limitation on Issuances and Sales of Equity Interests in Wholly Owned
Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries (other than Royster-Clark Group) to, transfer, convey, sell, lease
or otherwise dispose of any Equity Interests in any Wholly Owned Restricted
Subsidiary of the Company to any Person (other than the Company or a Wholly
Owned Restricted Subsidiary of the Company), unless:
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(1) such transfer, conveyance, sale, lease or other disposition is of
all the Equity Interests in such Wholly Owned Restricted Subsidiary; and
the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above
under the caption "--Repurchase at the Option of Holders--Asset Sales;" or
(2) such transfer, conveyance, sale, lease or other disposition is of
less than all the Capital Stock of such Wholly Owned Restricted Subsidiary,
such formerly Wholly Owned Restricted Subsidiary has been duly designated
as an Unrestricted Subsidiary and no longer constitutes a Restricted
Subsidiary after such sale, the Company could have made an Investment in
the retained shares of such formerly Wholly Owned Restricted Subsidiary at
the time of such sale in accordance with the covenant described above under
"--Restricted Payments" and the cash Net Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with
the covenant described above under the caption "--Repurchase at the Option
of Holders--Asset Sales."
In addition, the Company will not permit any Wholly Owned Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
Advances to Subsidiaries
All advances to Royster-Clark Group and Subsidiaries of the Company made by
the Company after the date of the Indenture will be evidenced by intercompany
notes in favor of the Company. These intercompany notes will be subordinated to
the Guarantees and the First Mortgage Notes.
Payments for Consent
Royster-Clark Group and the Company will not, and will not permit any of
their Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of First Mortgage Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the First Mortgage Notes unless such
consideration is offered to be paid and is paid to all Holders of the First
Mortgage Notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
Reports
Whether or not required by the Commission, so long as any First Mortgage
Notes are outstanding, the Company will furnish to the Holders of First Mortgage
Notes, within the time periods specified in the Commission's rules and
regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on
the annual financial statements by the Company's certified independent
accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports.
In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the Commission,
the Company will file a copy of all information and reports referred to in
clauses (1) and (2) above with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company and the Guarantors have agreed that, for so long as any First Mortgage
Notes remain outstanding, they will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
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Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest (including
Liquidated Damages) on the First Mortgage Notes;
(2) default in payment when due of the principal of, or premium, if
any, on the First Mortgage Notes;
(3) failure by the Company or any of its Restricted Subsidiaries to
comply with the provisions described under the captions "--Repurchase at
the Option of Holders--Change of Control," "--Repurchase at the Option of
Holders--Asset Sales," "--Repurchase at the Option of Holders--Sale of
Nitrogen Facility," "--Certain Covenants--Restricted Payments," "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" or
"--Certain Covenants--Merger, Consolidation or Sale of Assets;"
(4) failure by the Company or any of its Restricted Subsidiaries for
60 days after notice by the Trustee or holders of at least 25% in principal
amount of the First Mortgage Notes outstanding to comply with any of the
other agreements in the Indenture;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, if that default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
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 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 $10.0 million or more;
(6) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $10.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days;
(7) breach by the Company or any Restricted Subsidiary of any
representation or warranty or agreement set forth in the Security
Agreements, the repudiation by the Company or any Restricted Subsidiary of
any obligations under the Security Agreements or the unenforceability of
the Security Agreements against the Company or any Restricted Subsidiary
for any reason;
(8) except as permitted by the Indenture, any Guarantee shall be held
in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Guarantee; and
(9) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Restricted Subsidiary
that is a Significant Subsidiary or any group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, all outstanding First
Mortgage Notes will become due and payable immediately without further action or
notice. If any other Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding First
Mortgage Notes may declare all the First Mortgage Notes to be due and payable
immediately.
Holders of the First Mortgage Notes may not enforce the Indenture or the
First Mortgage Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
First Mortgage Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the First Mortgage Notes notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest (or Liquidated
Damages)) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the First
Mortgage Notes then outstanding by notice to the Trustee may on behalf of the
Holders of all of the First Mortgage Notes waive any existing Default or Event
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of Default and its consequences under the Indenture except a continuing Default
or Event of Default in the payment of interest (or Liquidated Damages) on, or
the principal of, the First Mortgage Notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the First Mortgage Notes pursuant
to the optional redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted by
law upon the acceleration of the First Mortgage Notes. If an Event of Default
occurs prior to April 1, 2004 by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding the prohibition on redemption of the First Mortgage Notes prior to
April 1, 2004 then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the First Mortgage Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, the Company is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or the Guarantors under the First Mortgage Notes, the Indenture, the
Guarantees, or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of First Mortgage Notes by accepting
a First Mortgage Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the First Mortgage Notes.
The waiver may not be effective to waive liabilities under the federal
securities laws.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding First Mortgage Notes and
all obligations of the Guarantors discharged with respect to their Subsidiary
Guarantees ("Legal Defeasance") except for:
(1) the rights of Holders of outstanding First Mortgage Notes to
receive payments in respect of the principal of, or interest (including
Liquidated Damages), if any, on such First Mortgage Notes when such
payments are due from the trust referred to below;
(2) the Company's obligations with respect to the First Mortgage Notes
concerning issuing temporary First Mortgage Notes, registration of First
Mortgage Notes, mutilated, destroyed, lost or stolen First Mortgage Notes
and the maintenance of an office or agency for payment and money for
security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's obligations in connection therewith; and
(4) 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 and the Guarantors released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants shall not constitute
a Default or Event of Default with respect to the First Mortgage Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the First Mortgage Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the First Mortgage Notes, cash in U.S.
dollars, non-callable Government Securities, 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,
or interest and premium (including Liquidated Damages), if any, on the
outstanding First Mortgage Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must
specify whether the First Mortgage Notes are being defeased to maturity or
to a particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel 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
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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 outstanding First Mortgage 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;
(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that the Holders of the outstanding First Mortgage Notes
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;
(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to
such deposit); or (b) 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;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an Opinion of
Counsel to the effect that, assuming no intervening bankruptcy of the
Company or any Guarantor between the date of deposit and the 91st day
following the deposit and assuming that no Holder is an "insider" of the
Company under applicable bankruptcy law, 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;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of First Mortgage Notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture or
the First Mortgage Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the First Mortgage Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, First Mortgage
Notes), and any existing default or compliance with any provision of the
Indenture or the First Mortgage Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding First Mortgage
Notes (including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, First Mortgage Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any First Mortgage Notes held by a non-consenting Holder):
(1) reduce the principal amount of First Mortgage Notes whose Holders
must consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any First
Mortgage Note or alter the provisions with respect to the redemption of the
First Mortgage Notes (other than provisions relating to the covenants
described above under the caption "--Repurchase at the Option of Holders,"
except the provisions under the subheading "Sale of Nitrogen Facility");
(3) reduce the rate of or change the time for payment of interest on
any Note;
(4) waive a Default or Event of Default in the payment of principal
of, or interest (or Liquidated Damages) or premium, if any, on the First
Mortgage Notes (except a rescission of acceleration of the First Mortgage
Notes by the Holders of at least a majority in aggregate principal amount
of the First Mortgage Notes and a waiver of the payment default that
resulted from such acceleration);
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(5) make any First Mortgage Note payable in money other than that
stated in the First Mortgage Notes;
(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of First Mortgage Notes
to receive payments of principal of, or interest (or Liquidated Damages) or
premium, if any, on the First Mortgage Notes;
(7) waive a redemption payment with respect to any First Mortgage Note
(other than a payment required by one of the covenants described above
under the caption "--Repurchase at the Option of Holders");
(8) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or the Indenture, except in accordance with the terms
of the Indenture; or
(9) make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any Holder of First
Mortgage Notes, the Company, the Guarantors and the Trustee may amend or
supplement the Indenture or the First Mortgage Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated First Mortgage Notes in addition to
or in place of certificated First Mortgage Notes;
(3) to provide for the assumption of the Company's obligations to
Holders of First Mortgage Notes in the case of a merger or consolidation or
sale of all or substantially all of the Company's assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of First Mortgage Notes or that does not adversely
affect the legal rights under the Indenture of any such Holder; or
(5) to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture
Act.
The Collateral Agent and the Company can (i) amend the Security Agreements
or (ii) release any of the Collateral from a Lien or the Security Agreements
(except in accordance with the provisions thereof) only with the consent of
holders of at least 75% in aggregate principal amount of the outstanding First
Mortgage Notes.
Concerning the Trustee
If the Trustee becomes a creditor of the Company or any Guarantor, the
Indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding First
Mortgage Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur and be continuing, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of First Mortgage Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
Book-Entry, Delivery and Form
The Existing First Mortgage Notes were, and the Exchange First Mortgage
Notes will be, issued in the form of one or more global notes (the "Global
Notes") deposited with, or on behalf of, the Trustee, as custodian for The
Depository Trust Company ("DTC"), in New York, New York, and registered in the
name of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC. Except as set forth below, the Global Notes may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Notes may
not be exchanged for First Mortgage Notes in certificated form except in the
limited circumstances described below. See "--Exchange of Book-Entry First
Mortgage Notes for Certificated First Mortgage Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of First Mortgage Notes
in certificated form.
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Depository Procedures
The following description of the operations and procedures of DTC,
Euroclear System ("Euroclear")and Cedel, S.A. ("Cedel") are provided solely as a
matter of convenience. These operations and procedures are solely within the
control of the respective settlement systems and are subject to changes by them.
The Company takes no responsibility for these operations and procedures and
urges investors to contact the system or their participants directly to discuss
these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established
by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).
Investors in the Global Notes who are Participants in DTC's system may hold
their interests therein directly through DTC. Investors in the Global Notes who
are not Participants may hold their interests therein indirectly through
organizations (including Euroclear and Cedel) which are Participants in such
system. Investors in the Global Notes may hold their interests therein directly
through Euroclear or Cedel, if they are participants in such systems, or
indirectly through organizations that are participants in such systems.
Euroclear and Cedel will hold interests in the Global Notes on behalf of their
participants through customers' securities accounts in their respective names on
the books of their respective depositories, which are Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear, and Citibank,
N.A., as operator of Cedel. All interests in a Global Note, including those held
through Euroclear or Cedel, may be subject to the procedures and requirements of
DTC. Those interests held through Euroclear or Cedel may also be subject to the
procedures and requirements of such systems. The laws of some states require
that certain Persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer beneficial interests in a
Global Note to such Persons will be limited to that extent. Because DTC can act
only on behalf of Participants, which in turn act on behalf of Indirect
Participants, the ability of a Person having beneficial interests in a Global
Note to pledge such interests to Persons that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the Global Notes will not
have First Mortgage Notes registered in their names, will not receive physical
delivery of First Mortgage Notes in certificated form and will not be considered
the registered owners or "Holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, and interest and premium and
Liquidated Damages, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the Persons in whose names the First Mortgage Notes,
including the Global Notes, are registered as the owners thereof for the purpose
of receiving payments and for all other purposes. Consequently, neither the
Company, the Trustee nor any agent of the Company or the Trustee has or will
have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes; or
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(2) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the First Mortgage Notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date unless DTC has reason to believe it will
not receive payment on such payment date. Each relevant Participant is credited
with an amount proportionate to its beneficial ownership of an interest in the
principal amount of the relevant security as shown on the records of DTC.
Payments by the Participants and the Indirect Participants to the beneficial
owners of First Mortgage Notes will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Trustee or
the Company. Neither the Company nor the Trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of the First
Mortgage Notes, and the Company and the Trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all
purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and Cedel will be effected in accordance with their
respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
First Mortgage Notes described herein, cross-market transfers between the
Participants in DTC, on the one hand, and Euroclear or Cedel participants, on
the other hand, will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or Cedel, as the case may be, by its respective depository;
however, such cross-market transactions will require delivery of instructions to
Euroclear or Cedel, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or Cedel, as the case may be, will, if
the transaction meets its settlement requirements, deliver instructions to its
respective depository to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Note in DTC, and making
or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositories for Euroclear or Cedel.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of First Mortgage Notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global Notes
and only in respect of such portion of the aggregate principal amount of the
First Mortgage Notes as to which such Participant or Participants has or have
given such direction. However, if there is an Event of Default under the First
Mortgage Notes, DTC reserves the right to exchange the Global Notes for legended
First Mortgage Notes in certificated form, and to distribute such First Mortgage
Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to continue
to perform such procedures, and may discontinue such procedures at any time.
Neither the Company nor the Trustee nor any of their respective agents will have
any responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated First Mortgage Notes
A Global Note is exchangeable for definitive First Mortgage Notes in
registered certificated form ("Certificated First Mortgage Notes") if:
(1) DTC (a) notifies the Company that it is unwilling or unable to
continue as depository for the Global Notes and the Company fails to
appoint a successor depository or (b) has ceased to be a clearing agency
registered under the Exchange Act;
(2) the Company, at its option, notifies the Trustee in writing that
it elects to cause the issuance of the Certificated First Mortgage Notes;
or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the First Mortgage Notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated First Mortgage Notes upon prior written notice given to the Trustee
by or on behalf of DTC in accordance with the Indenture. In all cases,
Certificated First Mortgage Notes delivered in exchange for any Global Note or
beneficial interests in Global Notes
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will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depository (in accordance with its customary
procedures).
Exchange of Certificated First Mortgage Notes for Global Notes
Certificated First Mortgage Notes may not be exchanged for beneficial
interests in any Global Note unless the transferor first delivers to the Trustee
a written certificate (in the form provided in the Indenture) to the effect that
such transfer will comply with the appropriate transfer restrictions applicable
to such First Mortgage Notes.
Same Day Settlement and Payment
The Company will make payments in respect of the First Mortgage Notes
represented by the Global Notes (including principal, premium, if any, and
interest (including Liquidated Damages, if any)) by wire transfer of immediately
available funds to the accounts specified by the Global Note Holder. The Company
will make all payments of principal, premium, if any, and interest (including
Liquidated Damages, if any) with respect to Certificated First Mortgage Notes by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof or, if no such account is specified, by mailing a check to each
such Holder's registered address.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
Registration Rights; Liquidated Damages
The following description is a summary of the material provisions of the
Registration Rights Agreement. It does not restate that agreement in its
entirety. We urge you to read the proposed form of Registration Rights Agreement
in its entirety because it, and not this description, defines your registration
rights as Holders of these First Mortgage Notes. See "--Additional Information."
Pursuant to the Registration Rights Agreement, the Company and the
Guarantors have agreed to file with the Commission the Exchange Offer
Registration Statement on the appropriate form under the Securities Act with
respect to the Exchange First Mortgage Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company and the Guarantors will offer
to the Holders of Transfer Restricted Securities pursuant to the Exchange Offer
who are able to make certain representations the opportunity to exchange their
Transfer Restricted Securities for Exchange First Mortgage Notes.
If:
(1) the Company and the Guarantors are not
(a) required to file the Exchange Offer Registration Statement;
or
(b) permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission
policy; or
(2) any Holder of Transfer Restricted Securities notifies the Company
prior to the 20th day following consummation of the Exchange Offer that:
(a) it is prohibited by law or Commission policy from
participating in the Exchange Offer; or
(b) it may not resell the Exchange First Mortgage Notes acquired
by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such
resales; or
(c) it is a broker-dealer and owns Existing First Mortgage Notes
acquired directly from the Company or an affiliate of the Company,
the Company and the Guarantors will file with the Commission a Shelf
Registration Statement to cover resales of the Existing First Mortgage Notes by
the Holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement.
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The Company and the Guarantors have agreed to use their best efforts to
cause the applicable registration statement to be declared effective as promptly
as possible by the Commission.
For purposes of the preceding, "Transfer Restricted Securities" means each
First Mortgage Note until:
(1) the date on which such Existing First Mortgage Note has been
exchanged by a Person other than a broker-dealer for an Exchange First
Mortgage Note in the Exchange Offer;
(2) following the exchange by a broker-dealer in the Exchange
Offer of a First Mortgage Note for an Exchange First Mortgage Note,
the date on which such Exchange First Mortgage Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement;
(3) the date on which such Existing First Mortgage Note has been
effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement; or
(4) the date on which such Existing First Mortgage Note is
distributed to the public pursuant to Rule 144 under the Securities
Act.
The Registration Rights Agreement provides that:
(1) the Company and the Guarantors file an Exchange Offer
Registration Statement with the Commission on or prior to 60 days
after the closing of the offering;
(2) the Company and the Guarantors use their best efforts to have
the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 150 days after the closing of the offering;
(3) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, the Company and the Guarantors
(a) commence the Exchange Offer; and
(b) use their best efforts to issue on or prior to 30
business days, or longer, if required by the federal securities
laws, after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission, Exchange
First Mortgage Notes in exchange for all Existing First Mortgage
Notes tendered prior thereto in the Exchange Offer; and
(4) if obligated to file the Shelf Registration Statement, the Company
and the Guarantors use their best efforts to file the Shelf Registration
Statement with the Commission on or prior to 60 days after such filing
obligation arises and to cause the Shelf Registration to be declared
effective by the Commission on or prior to 120 days after such obligation
arises.
If:
(1) the Company and the Guarantors fail to file any of the
registration statements required by the Registration Rights Agreement on or
before the date specified for such filing; or
(2) any of such registration statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness
(the "Effectiveness Target Date"); or
(3) the Company and the Guarantors fail to consummate the Exchange
Offer within 30 business days or longer, if required by federal securities
laws, of the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement; or
(4) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights
Agreement (each such event referred to in clauses (1) through (4) above, a
"Registration Default"),
then the Company and the Guarantors will pay Liquidated Damages to each Holder
of First Mortgage Notes, with respect to the first 90-day period immediately
following the occurrence of the first Registration Default in an amount equal to
$.05 per week per $1,000 principal amount of First Mortgage Notes held by such
Holder.
The amount of Liquidated Damages will increase by an additional $.05 per
week per $1,000 principal amount of First Mortgage Notes with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages for all Registration Defaults of $.50 per
week per $1,000 principal amount of First Mortgage Notes.
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All accrued Liquidated Damages will be paid by the Company and the
Guarantors on each Damages Payment Date to the Global Note Holder by wire
transfer of immediately available funds or by federal funds check and to Holders
of Certificated First Mortgage Notes by wire transfer to the accounts specified
by them or by mailing checks to their registered addresses if no such accounts
have been specified.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
Holders of Existing First Mortgage Notes will be required to make certain
representations to the Company (as described in the Registration Rights
Agreement) in order to participate in the Exchange Offer and will be required to
deliver certain information to be used in connection with the Shelf Registration
Statement and to provide comments on the Shelf Registration Statement within the
time periods set forth in the Registration Rights Agreement in order to have
their Existing First Mortgage Notes included in the Shelf Registration Statement
and benefit from the provisions regarding Liquidated Damages set forth above. By
acquiring Transfer Restricted Securities, a Holder will be deemed to have agreed
to indemnify the Company and the Guarantors against certain losses arising out
of information furnished by such Holder in writing for inclusion in any Shelf
Registration Statement. Holders of Existing First Mortgage Notes will also be
required to suspend their use of the prospectus included in the Shelf
Registration Statement under certain circumstances upon receipt of written
notice to that effect from the Company.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"399 Ventures" means 399 Venture Partners, Inc., an affiliate of Citicorp
Venture Capital Ltd.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary of such
specified Person, whether or not such Indebtedness is incurred in
connection with, or in contemplation of, such other Person merging with or
into, or becoming a Restricted Subsidiary of, such specified Person;
provided, that Indebtedness of such other Person that is redeemed,
defeased, retired or otherwise repaid at the time, or immediately upon
consummation, of the transaction by which such other person is merged with
or into or became a Restricted Subsidiary of such Person shall not be
Acquired Debt; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliatee" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory and equipment in the ordinary course
of business consistent with past practices and other than a Receivables
Transaction; provided that the sale, conveyance or other disposition of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Repurchase at the Option of
Holders--Change of Control" and/or the provisions described above under the
caption "--Certain Covenants--Merger, Consolidation or Sale of Assets" and
not by the provisions of the Asset Sale covenant; provided further, that
(a) the sale, conveyance or other disposition of all or substantially all
of the assets constituting the Company's East Dubuque, Illinois nitrogen
facility or of the Equity Interests of any subsidiary which directly or
indirectly owns such facility or (b) the sale, conveyance or other
disposition of all or substantially all of the assets constituting such
East Dubuque facility together with all or substantially all of the assets
constituting the Company's Cincinnati, Ohio nitrogen facility or any
Subsidiary or Subsidiaries which own directly or indirectly such
facilities, in each case in accordance with the Security Agreements, shall
be governed by the provisions of the Indenture described under the caption
"--Repurchase at the Option of Holders--Sale of Nitrogen Facilities" and
not by the provisions of the Asset Sale covenant; and
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(2) the issuance of Equity Interests by any of the Company's
Restricted Subsidiaries or the sale of Equity Interests in any of its
Restricted Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
(2) a transfer of assets between or among the Company and its Wholly
Owned Subsidiaries,
(3) an issuance of Equity Interests by a Wholly Owned Subsidiary to
the Company or to another Wholly Owned Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business including dispositions of
assets that are obsolete or no longer useful in the business consistent
with past practices;
(5) the sale or other disposition of cash or Cash Equivalents; and
(6) a Restricted Payment or Permitted Investment that is permitted by
the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the Board of Directors of the
general partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
"Borrowing Base" means, as of any date, an amount equal to:
(1) 80% (or 85% during the months of September, October and November)
of the face amount of net regular accounts receivable owned by the Company
and its Restricted Subsidiaries determined in accordance with GAAP; plus
(2) 70% (or 75% during the months of September, October and November)
of the face amount of net crop/extended term receivables owned by the
Company and its Subsidiaries determined by the Company in good faith and in
accordance with past practice; plus
(3) 65% (or 70% during the months of September, October and November)
of the net book value of all inventory owned by the Company and its
Restricted Subsidiaries determined in accordance with GAAP.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
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(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than six months from the
date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any lender party to the Credit Agreement or
with any domestic commercial bank having capital and surplus in excess of
$500.0 million and a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) obligations issued or fully guaranteed by any state of the United
States or any political subdivision of any such state or any public
instrumentality thereof maturing within six months from the date of
acquisition thereof and at the time of acquisition, having one of the two
highest ratings obtainable from either Moody's Investors Service, Inc. or
Standard & Poor's Rating Services;
(6) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in each
case maturing within six months after the date of acquisition; and
(7) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (6) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
properties or assets of the Company and its Subsidiaries taken as a whole
to any "person" (as that term is used in Section 13(d)(3) of the Exchange
Act) other than the Company, any Wholly-Owned Restricted Subsidiary of the
Company, a Principal or a Related Party of a Principal;
(2) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the Beneficial Owner, directly or indirectly, of more than
50% of the Voting Stock and the stock convertible into Voting Stock of the
Company, measured by voting power rather than number of shares;
(4) during any period in which neither the Company nor Royster-Clark
Group is a public reporting company under the Securities and Exchange Act
of 1934, as amended, the consummation of the first transaction (including,
without limitation, any merger or consolidation) the result of which is
that any "person" (as defined above) becomes the Beneficial Owner, directly
or indirectly, of more of the Voting Stock and stock convertible into
Voting Stock of the Company (measured by voting power rather than number of
shares) than is at the time Beneficially Owned by CVC, 399 Ventures and
their Related Parties in the aggregate; or
(5) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
April 1, 2009 that would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining life of the First Mortgage
Notes.
"Comparable Treasury Price" means, with respect to any date of redemption,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such date of redemption, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for
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U.S. Government Securities," or (ii) if such release (or any successor release)
is not published or does not contain such prices on such business day, the
average of the Reference Treasury Dealer Quotations.
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss
realized by such Person or any of its Restricted Subsidiaries in connection
with an Asset Sale, to the extent such losses were deducted in computing
such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net of the effect of all payments made or received pursuant
to Hedging Obligations), to the extent that any such expense was deducted
in computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; minus
(5) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Restricted Subsidiary of the Company shall be added to Consolidated Net
Income to compute Consolidated Cash Flow of the Company only to the extent that
a corresponding amount would be permitted at the date of determination to be
dividend to the Company by such Restricted Subsidiary without prior governmental
approval (that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends
or distributions paid in cash to the specified Person or a Wholly Owned
Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; and
(4) the cumulative effect of a change in accounting principles shall
be excluded.
"Consolidated Net Worth" means, with respect to any specified Person as of
any date, the sum of:
(1) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries (not including Royster-Clark
Group with respect to the Company) as of such date; plus
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(2) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of the
Indenture; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"Credit Agreement" means that certain Credit Agreement, to be dated as of
April 22, 1999, by and among the Company, DLJ Capital Funding as manager and
syndication agent and the parties thereto, providing for up to $275.0 million of
revolving credit borrowings, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"CVC" means Citicorp Venture Capital Ltd., a New York corporation, or any
successor thereto by merger or consolidation.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the First Mortgage Notes mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the Company to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $7.1 million in aggregate principal
amount of Indebtedness of the Company and its Restricted Subsidiaries (other
than Indebtedness under the Credit Agreement) in existence on the date of the
Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any specified Person for any period,
the sum, without duplication, of:
(1) the consolidated interest expense (other than accretion of
interest on the non-cash pay subordinated notes issued to IMC Global, 399
Ventures and Management Investors for purposes of calculating the Fixed
Charges of Royster-Clark Group) of such Person and its Restricted
Subsidiaries (other than Royster-Clark Group for purposes of computing
consolidated interest expense for any Person other than Royster-Clark
Group) for such period, whether paid or accrued, including, without
limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net of the effect of all payments made or received pursuant to Hedging
Obligations; plus
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(2) the consolidated interest of such Person and its Restricted
Subsidiaries (other than Royster-Clark Group for purposes of computing
consolidated interest capitalized for any Person other than Royster-Clark
Group) that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries (other than
Royster-Clark Group for purposes of computing such amount for any Person
other than Royster-Clark Group) or secured by a Lien on assets of such
Person or one of its Restricted Subsidiaries (other than Royster-Clark
Group for purposes of computing such amount for any Person other than
Royster-Clark Group), whether or not such Guarantee or Lien is called upon;
plus
(4) the product of (a) all dividends, whether paid or accrued, whether
or not in cash, on any series of preferred stock of such Person or any of
its Restricted Subsidiaries (other than Royster-Clark Group for purposes of
computing such amount for any Person other than Royster-Clark Group), other
than dividends on Equity Interests payable solely in Equity Interests of
the Company (other than Disqualified Stock) or to the Company or a
Restricted Subsidiary of the Company, times (b) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in
accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the specified Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary
working capital borrowings) or issues, repurchases or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated and on or prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable four-quarter reference
period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of
its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated on a
pro forma basis in accordance with Regulation S-X under the Securities Act,
but without giving effect to clause (3) of the proviso set forth in the
definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded;
and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted Subsidiaries
following the Calculation Date.
"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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of:
(1) Royster-Clark Group, Inc.; and
(2) any other subsidiary that executes a Guarantee in accordance with
the provisions of the Indenture;
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and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with the Issuer.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; provided that
an acquisition of assets, Equity Interests or other securities by the Company or
any of its Restricted Subsidiaries for consideration consisting solely of Equity
Interests (other than Disqualified Stock) of the Company or Royster-Clark Group
shall not be deemed to be an Investment. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Restricted 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 Equity Interests of such Restricted Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "--Certain Covenants--Restricted
Payments." The acquisition by the Company or any Restricted Subsidiary of the
Company of a Person that holds an Investment in a third Person shall be deemed
to be an Investment by the Company or such Restricted Subsidiary in such third
Person in an amount equal to the fair market value of the Investment held by the
acquired Person in such third Person in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"Jenkins" means Francis P. Jenkins, Jr.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
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including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Management Investors" means the officers and employees of Royster-Clark
Group, the Company or any Subsidiary of the Company who hold Voting Stock of
Royster-Clark Group or the Company.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale; or (b) the disposition of any securities by such Person or any
of its Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale or sale of a
Nitrogen Facility (including, without limitation, any cash received upon the
sale or other disposition of any non-cash consideration received in any Asset
Sale or sale of a Nitrogen Facility), net of the direct costs relating to such
Asset Sale or sale of a Nitrogen Facility, including, without limitation, legal,
accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, and amounts required to
be applied to the repayment of Indebtedness and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"Nitrogen Facility" means either (1) the Company's nitrogen manufacturing
plant in East Dubuque, IL (the "East Dubuque Plant") or (2) the East Dubuque
Plant and the Company's nitrogen production facility in Cincinnati, OH.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness (other than the First
Mortgage Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company of any of its Restricted
Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means the fertilizer, seed, crop protection and
agronomic services businesses, any of the businesses engaged in by the Company
and its Restricted Subsidiaries on the date of the Indenture and such other
business activities which are incidental or related thereto.
"Permitted Investments" means:
(1) any Investment in the Company or in a Wholly Owned Subsidiary of
the Company that is a Guarantor;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Subsidiary of the Company in
a Person, if as a result of such Investment:
(a) such Person becomes a Wholly Owned Subsidiary of the Company
and a Guarantor; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or
is liquidated into, the Company or a Wholly Owned Subsidiary of the
Company that is a Guarantor;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales";
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(5) any acquisition of stock or assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Company
or Royster-Clark Group;
(6) Hedging Obligations;
(7) Investments in securities of trade creditors or customers received
in settlement of obligations or pursuant to a plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers;
(8) investments existing on the date of the Indenture;
(9) loans and advances to officers, directors, members and employees
for business-related travel expenses, moving expenses and other similar
expenses, in each case, incurred in the ordinary course of business and
consistent with past practices; and
(10) Investments consisting of intercompany loans or capital
contributions from the Company and its Wholly-Owned Restricted Subsidiaries
to Wholly-Owned Restricted Subsidiaries so long as the intercompany loans
are subordinated to the First Mortgage Notes.
"Permitted Liens" means:
(1) Liens of the Company and any Restricted Subsidiary securing
Indebtedness and other Obligations under Credit Facilities that were
securing Senior Debt that was permitted by the terms of the Indenture to be
incurred;
(2) Liens in favor of the Company or the Restricted Subsidiaries;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with or acquired by the Company or any
Subsidiary of the Company; provided that such Liens were in existence prior
to the contemplation of such merger or consolidation or acquisition and do
not extend to any assets other than those of the Person merged into or
consolidated with or acquired by the Company or the Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such Liens were
in existence prior to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, bid bonds, payment bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business;
(6) Liens existing on the date of the Indenture;
(7) Liens to secure Senior Debt that was permitted by the Indenture to
be incurred provided such Liens are permitted by the Security Agreements;
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(9) Liens incurred in the ordinary course of business of the Company
or any Subsidiary of the Company with respect to obligations that do not
exceed $10.0 million at any one time outstanding;
(10) Liens on assets of Unrestricted Subsidiaries that (A) secure
Non-Recourse Debt of Unrestricted Subsidiaries or (B) are incurred in
connection with a Receivables Transaction;
(11) Liens on any property or asset acquired by the Company or any of
its Restricted Subsidiaries in favor of the seller of such property or
asset and construction mortgages on property, in each case, created within
six months after the date of acquisition, construction or improvement of
such property or asset by the Company or such Restricted Subsidiary to
secure the purchase price or other obligation of the Company or such
Restricted Subsidiary to the seller of such property or asset or the
construction or improvement cost of such property in an amount up to the
total cost of the acquisition, construction or improvement of such property
or asset; provided that in each case, such Lien does not extend to any
other property or asset of the Company and its Restricted Subsidiaries;
(12) Liens incurred or pledges and deposits made in connection with
worker's compensation, unemployment insurance and other social security
benefits;
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(13) Liens imposed by law, such as mechanics', carriers',
warehouseman's, materialmen's, and vendors' Liens, incurred in good faith
in the ordinary course of business with respect to amounts not yet
delinquent or being contested in good faith by appropriate proceedings if a
reserve or other appropriate provisions, if any, as shall be required by
GAAP shall have been made therefor;
(14) zoning restrictions, easements, licenses, covenants,
reservations, restrictions on the use of real property or minor
irregularities of title incident thereto that do not, in the aggregate,
materially detract from the value of the property or the assets of the
Company or impair the use of such property in the operation of the business
of the Company or any of its Restricted Subsidiaries;
(15) Liens of landlords or mortgages of landlords, arising solely by
operation of law, on fixtures and movable property located on premises
leased by the Company or any of its Restricted Subsidiaries in the ordinary
course of business;
(16) financing statements granted with respect to personal property
leased by the Company and its Restricted Subsidiaries pursuant to leases
considered operating leases in accordance with GAAP, provided that such
financing statements are granted solely in connection with such leases;
(17) judgment Liens to the extent that such judgments do not cause or
constitute a Default or an Event of Default;
(18) Liens securing Permitted Refinancing Indebtedness incurred to
refinance Indebtedness that has been secured by a Lien permitted under this
Indenture; provided that any such Lien shall not extend to or cover any
assets or property not securing the Indebtedness so refinanced;
(19) Liens in favor of the First Mortgage Notes created pursuant to
the terms of the Pledge Agreements; and
(20) Liens to secure Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or any Restricted Subsidiary to the extent such Indebtedness is
permitted to be incurred by the covenant entitled "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"
covering only such assets; and
(21) any extension or renewal, or successive extensions or renewals,
in whole or in part, of Liens permitted pursuant to the foregoing clauses
(1) through (20); provided that no such extension or renewal Lien shall (A)
secure more than the amount of Indebtedness or other obligations secured by
the Lien being so extended or renewed or (B) extend to any property or
assets not subject to the Lien being so extended or renewed.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) except for Indebtedness used to extend, refinance, renew, replace,
defease or refund the Credit Facilities, the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not
exceed the principal amount (or accreted value, if applicable), of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus all accrued interest thereon and the amount of all customary
expenses and premiums incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the First
Mortgage Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the First Mortgage Notes on terms at least as
favorable to the Holders of First Mortgage Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
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"Principals" means (i) 399 Ventures, Jenkins and the Management Investors
and (ii) any Related Party of a person referred to in clause (i).
"Receivables" means, with respect to any Person or entity, all of the
following property and interests in property of such Person or entity, whether
now existing or existing in the future of hereafter acquired or arising: (i)
accounts, (ii) accounts receivable incurred in the ordinary course of business,
including without limitation, all rights to payment created by or arising from
sales of goods, leases of goods or the rendition of services no matter how
evidenced, whether or not earned by performance, (iii) all rights to any goods
or merchandise represented by any of the foregoing after creation of the
foregoing, including, without limitation, returned or repossessed goods, (iv)
all reserves and credit balances with respect to any such accounts receivable or
account debtors, (v) all letters of credit, security, or guarantees for any of
the foregoing, (vi) all insurance policies or reports relating to any of the
foregoing, (viii) all proceeds of the foregoing and (ix) all books and records
relating to any of the foregoing.
"Receivables Subsidiary" means an Unrestricted Subsidiary exclusively
engaged in Receivables Transactions and activities related thereto; provided,
however, that (i) at no time shall the Company and its Subsidiaries have more
than one Receivables Subsidiary and (ii) all Indebtedness or other borrowings of
such Unrestricted Subsidiary shall be Non-Recourse Debt.
"Receivables Transaction" means (i) the sale or other disposition to a
third party of Receivables or an interest therein, or (ii) the sale or other
disposition of Receivables or an interest therein to a Receivables Subsidiary
followed by a financing transaction in connection with such sale or disposition
of such Receivables (whether such financing transaction is effected by such
Receivables Subsidiary or by a third party to whom such Receivables Subsidiary
sells such Receivables or interest therein); provided that in each of the
foregoing, the Company or its Subsidiaries receive cash of at least 60% of the
aggregate principal amount of any Receivables financed in such transaction.
"Reference Treasury Dealer" means, for the First Mortgage Notes, each of
(x) Donaldson, Lufkin & Jenrette Securities Corporation, or its successors;
provided, however, that if the foregoing shall not be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), the Company
shall substitute therefor another Primary Treasury Dealer and (y) a Primary
Treasury Dealer selected by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any date of redemption, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such date of redemption.
"Related Party" (a) with respect to each of CVC and 399 Ventures (i) any of
its direct or indirect wholly owned subsidiaries and any officer, director or
employee of CVC, 399 Ventures or any of their wholly owned subsidiaries; (ii)
any spouse, parent or lineal descendant of a parent (including by adoption and
stepchildren) of the officers, directors and employees referred to in clause
(a)(i) above; (iii) any trust, corporation or partnership 80% of the
beneficiaries, stockholders or partners of which consists of one or more of the
persons described in clause (a)(i) or (ii) above and (iv) any charitable trust
the grantor of which consists of one or more of the persons described in clause
(a)(i), (ii) or (iii) above; and (b) with respect to each of Jenkins and the
Management Investors, (i) any spouse or lineal descendant (including by adoption
and stepchildren) of such person, (ii) any trust, corporation or partnership 80%
of the beneficiaries, stockholders or partners of which consists of Jenkins, or
the Management Investors or any of the persons described in clause (b)(i) above
or any combination thereof, and (iii) any charitable trust the grantor of which
consists of Jenkins, or the Management Investors or one or more of the persons
described in clause (b)(i) or (ii) above or any combination thereof.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the referent Person that is
not an Unrestricted Subsidiary.
"Senior Debt" means:
(1) all Indebtedness of the Company or any Restricted Subsidiary
outstanding under Credit Facilities and all Hedging Obligations with
respect thereto;
(2) any other Indebtedness of the Company or any Restricted Subsidiary
permitted to be incurred under the terms of the Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides
that it is on a parity with or subordinated in right of payment to the
First Mortgage Notes or any Guarantee; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
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Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or
owing by the Company;
(2) any Indebtedness of the Company to any of its Restricted
Subsidiaries or other Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of
the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Special Adjusted Treasury Rate" means, with respect to any date of
redemption, the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such date of redemption, plus 0.75%.
"Special Purpose Restricted Subsidiaries" means each of Royster-Clark
Realty LLC, Royster-Clark AgriBusiness Realty LLC, Royster-Clark Nitrogen
Realty, LLC and Royster-Clark Hutson's Realty LLC.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means any Subsidiary of the Company (other than
the Special Purpose Restricted Subsidiaries) that is designated by the Board of
Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only
to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not a party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary that those that might be obtained at the time from Persons who
are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director
or executive officer of the Company or any of its Restricted Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under the
caption "--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date and, if such
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Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "Incurrence of Indebtedness and Issuance of
Preferred Stock," the Company shall be in default of such covenant. The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (1) such Indebtedness is permitted under
the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period; and (2) no Default or Event of Default would be in existence
following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any specified Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person but shall
not in any event include Royster-Clark Group.
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CERTAIN FEDERAL TAX CONSEQUENCES
Scope of Discussion
The following discussion summarizes the material United States federal
income tax consequences of the Exchange Offer to a holder of Existing First
Mortgage Notes that is an individual citizen or resident of the United States or
a United States corporation that purchased the Existing First Mortgage Notes
pursuant to their original issue. This discussion is based on the Internal
Revenue Code of 1986, as amended to the date hereof (the "Code""), existing and
proposed Treasury regulations, and judicial and administrative determinations,
all of which are subject to change at any time, possibly on a retroactive basis.
The following relates only to the Existing First Mortgage Notes, and the
Exchange First Mortgage Notes received in exchange for the Existing First
Mortgage Notes, that are held as "capital assets" within the meaning of Section
1221 of the Code. It does not discuss state, local, or foreign tax consequences,
nor does it discuss tax consequences to subsequent purchasers (persons who did
not purchase the Existing First Mortgage Notes pursuant to their original
issue), or to categories of holders that are subject to special rules, such as
tax-exempt organizations, insurance companies, banks and dealers in stocks and
securities. Tax consequences may vary depending on the particular status of an
investor. No rulings will be sought from the Internal Revenue Service with
respect to the federal income tax consequences of the Exchange Offer.
This section does not purport to deal with all aspects of federal income
taxation that may be relevant to an investor's decision to exchange Existing
First Mortgage Notes for Exchange First Mortgage Notes. Each investor should
consult with its own tax advisor concerning the application of the federal
income tax laws and other tax laws to its particular situation before
determining whether to exchange Existing First Mortgage Notes for Exchange First
Mortgage Notes.
United States Holders
If you are a "United States Holder," as defined below, this section applies
to you. Otherwise, the next section, "Non-United States Holders," applies to
you.
Definition of United States Holder. You are a "United States Holder" if you
hold the First Mortgage Notes and you are:
o a citizen or resident of the United States, including an alien
individual who is a lawful permanent resident of the United States or
meets the "substantial presence" test under Section 7701(b) of the
Code;
o a corporation or partnership created or organized in the United States
or under the laws of the United States or of any political subdivision
of the United States;
o an estate, the income of which is subject to United States federal
income tax regardless of its source; or
o a trust, if a United States court can exercise primary supervision
over the administration of the trust and one or more United States
persons can control all substantial decisions of the trust, or if the
trust was in existence on August 20, 1996 and has elected to continue
to be treated as a United States person.
The Exchange Offer
The exchange of Existing First Mortgage Notes pursuant to the Exchange
Offer should be treated as a continuation of the corresponding Existing First
Mortgage Notes because the terms of the Exchange First Mortgage Notes are not
materially different from the terms of the Existing First Mortgage Notes.
Accordingly, such exchange should not constitute a taxable event to U.S.
Holders, and therefore:
o no gain or loss should be realized by U.S. Holders upon receipt of an
Exchange First Mortgage Note;
o the holding period of the Exchange First Mortgage Note should include
the holding period of the Existing First Mortgage Note for which the
Exchange First Mortgage Note was exchanged; and
o the adjusted tax basis of the Exchange First Mortgage Note should be
the same as the adjusted tax basis of the Existing First Mortgage Note
for which the Exchange First Mortgage Note was exchanged immediately
before the exchange.
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Stated Interest
Stated interest on a First Mortgage Note will be taxable to a U.S. Holder
as ordinary interest income at the time that such interest accrues or is
received, in accordance with the U.S. Holder's regular method of accounting for
federal income tax purposes. The First Mortgage Notes are not considered to have
been issued with original issue discount for federal income tax purposes.
Sale, Exchange or Retirement of the First Mortgage Notes
A U.S. Holder's tax basis in a First Mortgage Note generally will be its
cost. A U.S. Holder generally will recognize gain or loss on the sale, exchange
or retirement of a First Mortgage Note in an amount equal to the difference
between the amount realized on the sale, exchange or retirement and the tax
basis of the First Mortgage Note. Gain or loss recognized on the sale, exchange
or retirement of a First Mortgage Note (excluding amounts received in respect of
accrued interest which will be taxable as ordinary interest income) generally
will be capital gain or loss, and will be long-term capital gain or loss if the
First Mortgage Note was held for more than one year.
Backup Withholding
Under certain circumstances, a U.S. Holder of a First Mortgage Note may be
subject to "backup withholding" at a 31% rate with respect to payments of
interest on a First Mortgage Note or the gross proceeds from the disposition of
a First Mortgage Note.
This withholding generally applies if the U.S. Holder fails to furnish his
or her social security number or other taxpayer identification number in the
specified manner and in certain circumstances. Any amount withheld from a
payment to a U.S. Holder under the backup withholding rules is allowable as a
credit against such U.S. Holder's federal income tax liability, provided that
the required information is furnished to the IRS. Corporations and certain other
entities described in the Code and Treasury regulations are exempt from backup
withholding if their exempt status is properly established.
Non-United States Holders
Definition of Non-United States Holder. A "Non-United States Holder" is any
person other than a United States Holder. Please note that if you are subject to
United States federal income tax on a net basis on income or gain with respect
to a First Mortgage Note because such income or gain is effectively connected
with the conduct of a United States trade or business, this disclosure does not
cover the United States federal tax rules that apply to you.
Interest.
Portfolio Interest Exemption. You will generally not have to pay United
States federal income tax on interest paid on the First Mortgage Notes because
of the "portfolio interest exemption" if either:
o you represent that you are not a United States person for United
States federal income tax purposes and you provide your name and
address to us or our paying agent on a properly executed IRS Form W-8
(or a suitable substitute form) signed under penalties of perjury; or
o a securities clearing organization, bank, or other financial
institution that holds customers' securities in the ordinary course of
its business holds the First Mortgage Note on your behalf, certifies
to us or our agent under penalties of perjury that it has received IRS
Form W-8 (or a suitable substitute) from you or from another
qualifying financial institution intermediary, and provides a copy to
us or our agent.
You will not, however, qualify for the portfolio interest exemption
described above if:
o you own, actually or constructively, 10% or more of the total combined
voting power of all classes of our capital stock;
o you are a controlled foreign corporation with respect to which we are
a "related person" within the meaning of Section 864(d)(4) of the
Code; and
o you are a bank receiving interest described in Section 881(c)(3)(A) of
the Code.
Withholding Tax if the Interest Is Not Portfolio Interest. If you do not
claim, or do not qualify for, the benefit of the portfolio interest exemption,
you may be subject to a 30% withholding tax on interest payments made on the
First Mortgage Notes. However, you may be able to claim the benefit of a reduced
withholding tax rate under an applicable income tax treaty. The required
information for claiming treaty benefits is generally submitted, under current
regulations, on Form 1001. Successor forms will require additional information,
as discussed below under the heading "Non-United States Holders-New Withholding
Regulations."
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Reporting. We may report annually to the IRS and to you the amount of
interest paid to, and the tax withheld, if any, with respect to you.
Sale or Other Disposition of the First Mortgage Notes. You will generally
not be subject to United States federal income tax or withholding tax on gain
recognized on a sale, exchange, redemption, retirement, or other disposition of
a First Mortgage Note. You may, however, be subject to tax on such gain if:
o you are an individual who was present in the United States for 183
days or more in the taxable year of the disposition, in which case you
may have to pay a United States federal income tax of 30% (or a
reduced treaty rate) on such gain, and you may also be subject to
withholding tax; or
o you are an individual who is a former citizen or resident of the
United States, your loss of citizenship or residency occurred within
the last ten years (and, if you are a former resident, on or after
February 6, 1995), and it had as one of its principal purposes the
avoidance of United States tax, in which case you may be taxed on the
net gain derived from the sale under the graduated United States
federal income tax rates that are applicable to United States citizens
and resident aliens, and you may be subject to withholding under
certain circumstances.
United States Federal Estate Taxes. If you qualify for the portfolio
interest exemption under the rules described above when you die, the First
Mortgage Notes will not be included in your estate for United States federal
estate tax purposes.
Backup Withholding and Information Reporting.
Payments From United States Office. If you receive payments of interest or
principal directly from us or through the United States office of a custodian,
nominee, agent or broker, there is a possibility that you will be subject to
both backup withholding at a rate of 31% and information reporting.
With respect to interest payments made on the First Mortgage Notes,
however, backup withholding and information reporting will not apply if you
certify, generally on a Form W-8 or substitute form, that you are not a United
States person in the manner described above under the heading "Non-United States
Holders-Interest."
Moreover, with respect to proceeds received on the sale, exchange,
redemption, or other disposition of a First Mortgage Note, backup withholding or
information reporting generally will not apply if you properly provide,
generally on Form W-8 or a substitute form, a statement that you are an "exempt
foreign person" for purposes of the broker reporting rules, and other required
information. If you are not subject to United States federal income or
withholding tax on the sale or other disposition of a First Mortgage Note, as
described above under the heading "Non-United States-Sale or Other Disposition
of First Mortgage Notes," you will generally qualify as an "exempt foreign
person" for purposes of the broker reporting rules.
Payments From Foreign Office. If payments of principal and interest are
made to you outside the United States by or through the foreign office of your
foreign custodian, nominee or other agent, or if you receive the proceeds of the
sale of a First Mortgage Note through a foreign office of a "broker," as defined
in the pertinent United States Treasury Regulations, you will generally not be
subject to backup withholding or information reporting. You will, however, be
subject to backup withholding and information reporting if the foreign
custodian, nominee, agent or broker has actual knowledge or reason to know that
the payee is a United States person. You will also be subject to information
reporting, but not backup withholding, if the payment is made by a foreign
office of a custodian, nominee, agent or broker that is a United States person
or a controlled foreign corporation for United States federal income tax
purposes, or that derives 50% or more of its gross income from the conduct of a
United States trade or business for a specified three year period, unless the
broker has in its records documentary evidence that you are a Non-United States
Holder and certain other conditions are met.
Refunds. Any amounts withheld under the backup withholding rules may be
refunded or credited against the Non-United States Holder's United States
federal income tax liability, provided that the required information is
furnished to the IRS.
New Withholding Regulations. New regulations relating to withholding tax on
income paid to foreign persons (the "New Withholding Regulations") will
generally be effective for payments made after December 31, 2000. The New
Withholding Regulations modify and, in general, unify the way in which you
establish your status as a non-United States "beneficial owner" eligible for
withholding exemptions including the portfolio interest exemption, a reduced
treaty rate or an exemption from backup withholding. For example, the new
regulations will require new forms, which you will generally have to provide
earlier than you would have had to provide replacements for expiring existing
forms.
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The New Withholding Regulations clarify withholding agents' reliance
standards. They also require additional certifications for claiming treaty
benefits. The New Withholding Regulations also provide somewhat different
procedures for foreign intermediaries and flow-through entities (such as foreign
partnerships) to claim the benefit of applicable exemptions on behalf of
non-United States beneficial owners for which or for whom they receive payments.
The New Withholding Regulations also amend the foreign broker office definition
as it applies to partnerships.
When you purchase the First Mortgage Notes, you will be required to submit
certification that complies with the Treasury Regulations now in effect in order
to obtain an available exemption from or reduction in withholding tax. The New
Withholding Regulations provide that certifications satisfying the requirements
of the New Withholding Regulations will be deemed to satisfy the requirement of
the Treasury Regulations now in effect. In any case, you must provide
certifications that comply with the provisions of the New Withholding
Regulations, where required, not later than December 31, 2000, if you remain as
a holder of the First Mortgage Notes on such date, unless you receive payments
on the First Mortgage Notes through a qualified intermediary (as defined in the
New Withholding Regulations) that has provided a proper certification on your
behalf. If you are a Non-United States Holder claiming benefit under an income
tax treaty (and not relying on the portfolio interest exemption), you should be
aware that you may be required to obtain a taxpayer identification number and to
certify your eligibility under the applicable treaty's limitations on benefits
article in order to comply with the New Withholding Regulations' certification
requirements.
The New Withholding Regulations are complex and this summary does not
completely describe them. Please consult your tax advisor to determine how the
New Withholding Regulations will affect your particular circumstances.
PLAN OF DISTRIBUTION
Each broker-dealer that holds Existing First Mortgage Notes that were
acquired for its own account as a result of market making or other trading
activities (other than Existing First Mortgage Notes acquired directly from the
Company or any affiliate of the Company), may exchange Existing First Mortgage
Notes for Exchange First Mortgage Notes in the Exchange Offer. However, any such
broker-dealer may be deemed to be an "underwriter" within the meaning of such
term under the Securities Act and must, therefore, acknowledge that it will
deliver a prospectus in connection with any resale of Exchange First Mortgage
Notes received in the Exchange Offer. This 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 First Mortgage Notes received in exchange for Existing
First Mortgage Notes where such Existing First Mortgage Notes were acquired as a
result of market-making activities or other trading activities. We have agreed
that, for a period of 210 days after the effective date of this prospectus, we
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of Exchange First Mortgage
Notes by broker-dealers. Exchange First Mortgage 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 First
Mortgage 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 or the purchasers of any
such Exchange First Mortgage Notes. Any broker-dealer that resells Exchange
First Mortgage Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such Exchange First Mortgage Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange First Mortgage Notes and any commission 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, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the holders of the First Mortgage
Notes) other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the securities (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
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LEGAL MATTERS
Certain legal matters with respect to the Exchange First Mortgage Notes
offered hereby will be passed upon for us by Dechert Price & Rhoads,
Philadelphia, Pennsylvania.
EXPERTS
Our financial statements as of December 31, 1997 and 1998, and for each of
the years in the three-year period ended December 31, 1998, have been included
in this prospectus and the Registration Statement in reliance upon the report of
KPMG LLP, independent certified public accountants, which report is included
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
In addition, the combined financial statements of AgriBusiness as of
December 31, 1997 and 1998 and for each of the years in the three year period
ended December 31, 1998, have been included in this prospectus and the
Registration Statement in reliance upon the report of Ernst & Young LLP,
independent certified public accountants, which report is included elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
We have filed with the Commission a registration statement on Form S-4
under the Securities Act of 1933, covering the First Mortgage Notes to be issued
in the exchange offer (File No. 333-_______). This prospectus, which is a part
of the registration statement, does not contain all of the information included
in the registration statement. Any statement made in this prospectus concerning
the contents of any contract, agreement or other document is not necessarily
complete. For further information with respect to our company and the notes to
be issued in the Exchange Offer, please reference the registration statement,
including its exhibits. If we have filed any contract, agreement or other
document as an exhibit to the registration statement, you should read the
exhibit for a more complete understanding of the documents or matter involved.
Pursuant to the indenture, we have agreed that, whether or not we are
required to do so by the rules and regulations of the Commission, for so long as
any of the Existing First Mortgage Notes or Exchange First Mortgage Notes
(collectively, the "First Mortgage Notes") remain outstanding, we will furnish
to the holders of the First Mortgage Notes and file with the Commission (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if we were
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by our certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if we were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, we will also agree to file a copy of all such information and
reports with the Commission for public availability (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, for so long as any
of the First Mortgage Notes remain outstanding, we have agreed to make available
to any prospective purchaser of the First Mortgage Notes or beneficial owner of
the First Mortgage Notes in connection with any sale thereof, the information
required by Rule 144A(d)(4) under the Securities Act. Any such request should be
directed to us at 10 Rockefeller Plaza, Suite 1120, New York, New York 10020.
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INDEX TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Unaudited Pro Forma Condensed Consolidated Financial Statements........................... P-2
Unaudited Pro Forma Condensed Consolidated Balance Sheet.................................. P-3
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet......................... P-4
Unaudited Pro Forma Condensed Consolidated Statements of Operations....................... P-10
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations.............. P-12
</TABLE>
P-1
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet and
statements of operations (collectively, "the pro forma financial statements")
have been prepared as if our capitalization and the establishment of the senior
secured credit facility, the issuance of $200 million of First Mortgage Notes
and the acquisitions of Royster-Clark, Inc. and AgriBusiness occurred as of
March 31, 1999 for purposes of the pro forma balance sheet and as of January 1,
1998 for purposes of the pro forma statements of operations for the year ended
December 31, 1998 and three months ended March 31, 1999. The pro forma financial
statements do not purport to represent our financial position or results of
operations if such transactions had occurred on such dates or to project
financial position or results of operations as of any future date or for any
future period.
The pro forma financial statements and accompanying notes should be read in
conjunction with the historical financial statements and the notes thereto of
Royster-Clark, Inc. and AgriBusiness included elsewhere in this prospectus.
P-2
<PAGE>
ROYSTER-CLARK, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Acquisition and
Capitalization of Acquisition of Royster-Clark,
Royster-Clark, Inc. AgriBusiness Reclassification Inc. Pro Forma
--------------------- ------------------- --------------------- ---------------
(note 2) (note 3)
<S> <C> <C> <C> <C>
ASSETS
Cash ............................ $ 42 $ 40 $ -- $ 82
Receivables, net ................ 40,011 79,324 -- 119,335
Inventories ..................... 91,831 212,720 -- 304,551
Prepaid expenses ................ 3,987 449 -- 4,436
Deferred income taxes ........... 440 8,176 -- 8,616
--------- --------- --------- ---------
Total current assets ......... 136,311 300,709 -- 437,020
Property, plant and
equipment, net ............... 56,241 119,335 -- 175,576
Goodwill, net ................... 16,941 -- -- 16,941
Deferred financing costs ........ 6,900 9,182 -- 16,082
Deferred income taxes ........... -- 31,204 (13,000) 18,204
Other assets, net ............... 598 2,754 -- 3,352
--------- --------- --------- ---------
$ 216,991 $ 463,184 $ (13,000) $ 667,175
========= ========= ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 93 $ 2,500 $ -- $ 2,593
Customer deposits ............... 23,326 73,028 -- 96,354
Accounts payable ................ 44,612 84,044 -- 128,656
Accrued expenses ................ 6,795 20,823 -- 27,618
--------- --------- --------- ---------
Total current liabilities .... 74,826 180,395 -- 255,221
--------- --------- --------- ---------
Senior Secured Credit Facility .. 50,190 64,689 -- 114,879
First Mortgage Notes ............ -- 200,000 -- 200,000
Long-term debt .................. 83 4,600 -- 4,683
Deferred income taxes ........... 13,000 -- (13,000) --
Other long-term liabilities ..... 293 3,500 -- 3,793
--------- --------- --------- ---------
Total liabilities ............ 138,392 453,184 (13,000) 578,576
--------- --------- --------- ---------
Stockholders' equity:
Additional paid-in capital ...... 78,599 10,000 -- 88,599
--------- --------- --------- ---------
Total stockholders' equity ... 78,599 10,000 -- 88,599
--------- --------- ========= ---------
$ 216,991 $ 463,184 $ (13,000) $ 667,175
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma
condensed consolidated balance sheet.
P-3
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(Dollars in thousands except share and per share amounts)
(1) Capitalization of Royster-Clark Group
Royster-Clark Group was formed for the purpose of acquiring all of the
outstanding stock of Royster-Clark, Inc. and to enable Royster-Clark, Inc. to
purchase AgriBusiness.
Royster-Clark Group, is a holding company with no operations independent of
those of Royster-Clark, Inc. Although Royster-Clark, Inc. is not legally liable
for the obligations of Royster-Clark Group, the ability of Royster-Clark Group
to meet its obligations is dependent on Royster-Clark, Inc.'s ability to pay
dividends to Royster-Clark Group, in an amount sufficient to service these
obligations, including dividend payments on Royster-Clark Group's preferred
stock, and principal and interest payments on its Royster-Clark Group junior
subordinated notes. The following paragraphs summarize the terms of
Royster-Clark Group's outstanding securities.
Royster-Clark Group has issued $20,000 of junior subordinated notes. The
notes pay interest in kind at an annual rate of 12%. The maturity of the notes
will be 11 years after the closing date. Of these notes, $10,000, which
represents the notes issued to IMC Global, are exchangeable after three years
for First Mortgage Notes, subject to compliance with the terms of the debt
obligations of Royster-Clark, Inc. The terms of the indenture and the other debt
obligations currently prohibit such exchange.
Royster-Clark Group has also issued 62,193 shares of 12% Series A Senior
Cumulative Compounding Preferred Stock (the "Senior Preferred Stock") with a
$0.01 per share par value and a liquidation value of $1,000 per share. Dividends
shall be payable annually at the rate of $120 per share per annum when, as and
if declared by the Board of Directors. Additional dividends accrue on unpaid
dividends. In the event that Royster-Clark Group shall be liquidated, dissolved
or wound up, whether voluntarily or involuntarily, after all creditors of
Royster-Clark Group shall have been paid in full, the holders of the Senior
Preferred Stock shall be entitled to receive an amount equal to $1,000 in cash
per share plus an amount equal to full cumulative dividends accrued and unpaid
before any proceeds are paid to the holders of the Series B Junior Preferred
Stock (the "Junior Preferred Stock") or the Royster-Clark Group common stock.
In addition, Royster-Clark Group has issued 8,319 shares of Junior
Preferred Stock with a $0.01 per share par value and a liquidation value of
$1,000 per share. The holders of the Junior Preferred Stock shall not be
entitled to receive any dividends until 2004. Thereafter, the holders of the
Junior Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors, cash dividends at the rate of $120 per share. Dividends,
when entitled, shall be cumulative. In the event that Royster-Clark Group shall
be liquidated, dissolved or wound up, whether voluntarily or involuntarily,
after all creditors of Royster-Clark Group shall have been paid in full and the
holders of any Senior Preferred Stock have been paid, the holders of the Junior
Preferred Stock shall be entitled to receive an amount equal to $1,000 in cash
per share plus an amount equal to cumulative dividends accrued and unpaid before
any proceeds are paid to the holders of the Royster-Clark Group common stock.
Royster-Clark Group has also issued 20,000 shares of no par common stock
with a stated value of $2,000. The common stock will be issued in two series,
Class A and Class B, with 10,000 shares of each class having been authorized.
The rights and privileges will be identical between the two classes except with
regards to voting rights. The holders of Class A common stock shall have the
general right to vote for all purposes while the holders of Class B common stock
shall have no voting rights.
P-4
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET--(Continued)
(Dollars in thousands)
(2) Acquisition and Capitalization of Royster-Clark, Inc. and Establishment of
Senior Secured Credit Facility
Pro forma adjustments relating to the acquisition and capitalization of
Royster-Clark, Inc. and the establishment of the senior secured credit facility
are as follows:
<TABLE>
<CAPTION>
Royster-
Clark, Inc. Royster-
March 31, Pro Forma Clark, Inc.
1999 Adjustments Pro Forma
--------------- ------------- -------------
(a) (b)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash .................................. $ 42 $ -- $ 42
Receivables, net ...................... 40,011 -- 40,011
Inventories ........................... 91,831 -- 91,831
Prepaid expenses ...................... 4,956 (969) 3,987
Deferred income taxes ................. 440 -- 440
--------- --------- ---------
Total current assets ............. 137,280 (969) 136,311
Property, plant and equipment, net ...... 29,458 26,783 56,241
Goodwill, net ........................... 5,787 11,154 16,941
Deferred financing costs ................ -- 6,900 6,900
Other assets, net ....................... 882 (284) 598
--------- --------- ---------
$ 173,407 $ 43,584 $ 216,991
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ..... $ 2,166 $ (2,073) $ 93
Customer deposits ..................... 23,326 -- 23,326
Accounts payable ...................... 44,612 -- 44,612
Accrued expenses ...................... 4,864 1,931 6,795
--------- --------- ---------
Total current liabilities ........ 74,968 (142) 74,826
--------- --------- ---------
Senior Secured Credit Facility .......... -- 50,190 50,190
Long-term debt .......................... 65,760 (65,677) 83
Deferred income taxes ................... 3,303 9,697 13,000
Other long-term liabilities ............. 293 -- 293
--------- --------- ---------
Total liabilities ................ 144,324 (5,932) 138,392
--------- --------- ---------
Common stock subject to ESOP put option . 1,864 (1,864) --
Redeemable preferred stock .............. 12,000 (12,000) --
Stockholders' equity:
Common stock .......................... 1 (1) --
Additional paid-in capital ............ 10,220 68,379 78,599
Retained earnings ..................... 7,430 (7,430) --
Common stock subject to ESOP put option (1,864) 1,864 --
--------- --------- ---------
15,787 62,812 78,599
Treasury stock ........................ (568) 568 --
--------- --------- ---------
Total stockholders' equity ....... 15,219 63,380 78,599
--------- --------- ---------
$ 173,407 $ 43,584 $ 216,991
========= ========= =========
</TABLE>
P-5
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET--(Continued)
(Dollars in thousands)
(a) Royster-Clark, Inc. Historical
The amounts presented under the heading "Royster-Clark, Inc. March 31,
1999" are taken from the Royster-Clark, Inc. balance sheet as of March 31, 1999,
included elsewhere in this prospectus.
(b) Pro forma Adjustments
The following summarizes the pro forma adjustments made to the
Royster-Clark, Inc. March 31, 1999 balance sheet.
(i) Royster Clark, Inc. Acquisition Accounting
Royster-Clark Group acquired all of the outstanding stock of Royster-Clark,
Inc. for $55,681, consisting of $1,300 in direct costs of the acquisition,
$34,825 in cash and Royster-Clark Group securities with an estimated value of
$19,556. The acquisition was consummated on April 22, 1999 with an effective
date of April 1, 1999. The acquisition has been accounted for as a purchase. As
a result, the assets and liabilities have been adjusted to their fair values,
with the excess purchase price over the fair value assigned to goodwill. The
following summarizes the pro forma preliminary allocation of the purchase price.
Assets purchased:
Cash ........................... $ 42
Receivables, net ............... 40,011
Inventories .................... 91,831
Prepaid expenses ............... 3,987
Deferred income taxes .......... 440
Property and equipment ......... 56,241
Goodwill ....................... 16,941
Other assets ................... 598
--------
Total assets purchased ... 210,091
--------
Liabilities assumed:
Customer deposits .............. 23,326
Accounts payable ............... 44,612
Accrued expenses ............... 5,253
Long-term debt, including
current portion .............. 67,926
Deferred income taxes .......... 13,000
Other liabilities .............. 293
--------
Total liabilities assumed 154,410
--------
Purchase price .......... $ 55,681
========
Subsequent to the acquisition, Royster-Clark Group will contribute $22,918
in cash to Royster-Clark, Inc.
(ii) Refinancing of Royster-Clark Long-Term Debt
Subsequent to the acquisition, Royster-Clark, Inc. will refinance all of
its long-term debt, with the exception of capital lease obligations, using the
contributed cash and proceeds from the credit facility.
P-6
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET--(Continued)
(Dollars in thousands)
(c) Establishment of Senior Secured Credit Facility
Concurrently with the formation of Royster-Clark Group and the acquisitions
of Royster-Clark, Inc. and Agribusiness, Royster-Clark, Inc. established a
senior secured credit facility. The senior secured credit facility allows
Royster-Clark, Inc. to borrow up to $275,000, subject to certain borrowing base
limitations. The senior secured credit facility matures in five years and bears
interest at LIBOR + 2.75%. The senior secured credit facility is secured by (1)
a first priority lien on all accounts receivable, inventory, general intangibles
and all other assets of Royster-Clark, Inc. and its subsidiaries, (except for
the collateral securing the First Mortgage Notes, including the principal
properties, related fixtures and equipment, and other related assets securing
the First Mortgage Notes), (2) all the common stock of Royster-Clark, Inc. and
(3) all the common stock of Royster-Clark, Inc.'s subsidiaries except for the
equity interests of four special purpose subsidiaries pledged to secure the
First Mortgage Notes. Royster-Clark Group and all direct and indirect
subsidiaries of Royster-Clark, Inc. will guarantee the senior secured credit
facility (other than the four special purpose subsidiaries whose stock is
pledged to secure the First Mortgage Notes). The agreement governing the senior
secured credit facility contains covenants, which include but are not limited
to, limitations on additional indebtedness, limitations on liens, and
limitations on capital expenditures.
As a result of the establishment of the senior secured credit facility,
Royster-Clark, Inc. incurred an estimated $6,900 of deferred financing costs,
which will be amortized on a straight-line basis over the life of the senior
secured credit facility.
P-7
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET--(Continued)
(Dollars in thousands)
(3) Acquisition of AgriBusiness
Pro forma adjustments relating to the acquisition of AgriBusiness are as
follows:
<TABLE>
<CAPTION>
AgriBusiness
March 31, Pro Forma AgriBusiness
1999 Adjustments Pro Forma
-------------- -------------- --------------
(a) (b)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ............................... $ 40 $ -- $ 40
Receivables, net ................... 79,324 -- 79,324
Inventories ........................ 214,770 (2,050) 212,720
Prepaid expenses ................... 693 (244) 449
Deferred income taxes .............. -- 8,176 8,176
--------- --------- ---------
Total current assets .......... 294,827 5,882 300,709
Property, plant and equipment, net ... 157,791 (38,456) 119,335
Goodwill, net ........................ 51,258 (51,258) --
Deferred financing costs ............. -- 9,182 9,182
Deferred income taxes ................ -- 31,204 31,204
Other assets ......................... 3,323 (569) 2,754
--------- --------- ---------
$ 507,199 $ (44,015) $ 463,184
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .. $ 2,500 $ -- $ 2,500
Payable to affiliates .............. 19,100 (19,100) --
Customer deposits .................. -- 73,028 73,028
Accounts payable ................... 138,537 (54,493) 84,044
Accrued expenses ................... 6,578 14,245 20,823
--------- --------- ---------
Total current liabilities ..... 166,715 13,680 180,395
--------- --------- ---------
Senior Secured Credit Facility ....... -- 64,689 64,689
First Mortgage Notes ................. -- 200,000 200,000
Long-term debt ....................... 4,600 -- 4,600
Deferred income taxes ................ 29,600 (29,600) --
Other long-term liabilities .......... 3,231 269 3,500
--------- --------- ---------
Total liabilities ............. 204,146 249,038 453,184
--------- --------- ---------
Stockholders' equity ................. 303,053 (293,053) 10,000
--------- --------- ---------
$ 507,199 $ (44,015) $ 463,184
========= ========= =========
</TABLE>
(a) AgriBusiness Historical
The amounts presented under the heading "AgriBusiness March 31, 1999" are
taken from the AgriBusiness combined balance sheet as of March 31, 1999,
included elsewhere in this prospectus. Reclassifications of $19,100 for
affiliated payables and $73,028 for customer deposits have been made in order to
conform to the Royster-Clark, Inc. balance sheet classifications.
P-8
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET--(Continued)
(Dollars in thousands)
(b) Pro forma Adjustments
The following summarizes the pro forma adjustments made to the AgriBusiness
March 31, 1999 balance sheet.
Royster-Clark, Inc. acquired AgriBusiness through the acquisition of all of
the outstanding common stock of its component entities for $265,507, including
$3,200 in direct costs of the acquisition. The acquisition has been accounted
for as a purchase, and as a result all of the assets and liabilities have been
adjusted to their fair values. Because the fair values of the assets purchased
and the liabilities assumed exceed the purchase price, the fair values of the
long-term assets have been reduced. The following summarizes the pro forma
preliminary allocation of the purchase price.
Assets purchased:
Cash ........................... $ 40
Receivables, net ............... 79,324
Inventories .................... 212,720
Prepaid expenses ............... 449
Property and equipment ......... 119,335
Deferred income taxes .......... 39,380
Other assets ................... 2,754
--------
Total assets purchased .. 454,002
--------
Liabilities assumed:
Accounts payable ............... 84,044
Customer deposits .............. 73,028
Accrued expenses ............... 20,823
Long-term debt ................. 7,100
Other liabilities .............. 3,500
--------
Total liabilities assumed 188,495
--------
Purchase price paid ..... $265,507
========
The acquisition was financed with proceeds from the Credit Facility, the
issuance of $200,000 in First Mortgage Notes and $10,000 of Royster-Clark Group
junior subordinated notes as described in note 1.
The First Mortgage Notes mature in ten years and bear interest at 10.25%
payable semi-annually in arrears. The First Mortgage Notes are secured by the
principal properties, related fixtures and equipment and other related assets,
and a pledge of equity of certain of our newly formed subsidiaries and are
unconditionally guaranteed by Royster-Clark Group and all subsidiaries thereof.
Except as set forth below, the First Mortgage Notes are not redeemable
prior to April 1, 2004. Thereafter, the First Mortgage Notes are redeemable in
whole or in part, at Royster-Clark, Inc.'s option at a 5.125% premium, declining
ratably to par on April 1, 2007, plus accrued and unpaid interest, if any, to
the date of redemption. In addition, if the common stock or other equity of
Royster-Clark, Inc. is sold in a public offering in the first three years after
the issue date, Royster-Clark, Inc. may use the proceeds to redeem up to 35% of
the aggregate principal amount of the First Mortgage Notes. In the case of a
change in control, Royster-Clark, Inc. must offer to repurchase the First
Mortgage Notes at a price equal to 101% of the principal amount of the notes
plus accrued and unpaid interest, if any, to the date of repurchase.
The First Mortgage Notes are subject to certain covenants, including
restrictions on dividend payments and retirement of equity interests, incurrence
of new indebtedness or preferred stock, and certain transactions with
affiliates.
In conjunction with the issuance of the First Mortgage Notes,
Royster-Clark, Inc. incurred $9,182 of deferred financing costs, which will be
amortized using the interest method over the term of the First Mortgage Notes.
P-9
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
Acquisition of Acquisition of Royster-Clark, Inc.
Royster-Clark, Inc. AgriBusiness Pro Forma
---------------------- --------------------- ----------------------
(note 1) (note 2)
<S> <C> <C> <C>
Net sales ................... $ 286,351 $ 733,476 $1,019,827
Depreciation and amortization 1,760 7,754 9,514
Other cost of sales ......... 238,859 593,309 832,168
---------- ---------- ----------
Gross profit ................ 45,732 132,413 178,145
Depreciation and amortization 7,113 6,862 13,975
Other selling, general and
administrative expenses ... 31,323 80,250 111,573
---------- ---------- ----------
Operating income ............ 7,296 45,301 52,597
Interest expense ............ 5,217 28,258 33,475
Other expense, net .......... -- 1,857 1,857
---------- ---------- ----------
Income before income taxes .. 2,079 15,186 17,265
Income tax expense .......... 842 5,923 6,765
========== ========== ==========
Net income .................. $ 1,237 $ 9,263 $ 10,500
========== ========== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated statements of operations.
P-10
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
Three Months Ended March 31, 1999
(Dollars in Thousands)
<TABLE>
<CAPTION>
Acquisition of Acqusition of Royster-Clark, Inc.
Royster-Clark, Inc. AgriBusiness Pro Forma
---------------------- --------------------- ----------------------
(note 1) (note 2)
<S> <C> <C> <C>
Net sales ................... $ 53,487 $ 127,600 $ 181,087
Depreciation and amortization 440 1,975 2,415
Other cost of sales ......... 43,839 112,286 156,125
--------- --------- ---------
Gross profit ................ 9,208 13,339 22,547
Depreciation and amortization 1,811 1,778 3,589
Other selling, general and
administrative expenses ... 6,706 22,101 28,807
--------- --------- ---------
Operating income (loss) ..... 691 (10,540) (9,849)
Interest expense ............ 1,082 6,700 7,782
Other expense, net .......... -- 100 100
--------- --------- ---------
Loss before income taxes .... (391) (17,340) (17,731)
Income tax benefit .......... 152 6,763 6,915
========= ========= =========
Net loss .................... $ (239) $ (10,577) $ (10,816)
========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated statements of operations.
P-11
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(1) Acquisition of Royster-Clark, Inc.
Pro forma adjustments relating to the acquisition of Royster-Clark, Inc.
are as follows:
For the Year Ended December 31, 1998:
<TABLE>
<CAPTION>
Historical
-------------------------------------- Royster
Royster- Consummated Pro Forma Clark, Inc.
Clark, Inc. Transactions Adjustments Pro Forma
----------------- ----------------- ------------------ -----------------
(a) (b) (c)
<S> <C> <C> <C> <C>
Net sales........................ $ 218,672 $ 67,679 $ -- $ 286,351
Depreciation and amortization.... 729 61 970 1,760
Other cost of sales.............. 184,917 53,942 -- 238,859
----------------- ----------------- ------------------ -----------------
Gross profit.................. 33,026 13,676 (970) 45,732
Depreciation and amortization.... 1,949 779 4,385 7,113
Other selling, general and
administrative expenses....... 22,533 11,067 (2,277) 31,323
----------------- ----------------- ------------------ -----------------
Operating income.............. 8,544 1,830 (3,078) 7,296
Interest expense................. 5,489 1,924 (2,196) 5,217
----------------- ----------------- ------------------ -----------------
Earnings (loss) before income
taxes....................... 3,055 (94) (882) 2,079
Income tax expense (benefit)..... 1,223 (37) (344) 842
================= ================= ================== =================
Net earnings (loss)........... $ 1,832 $ (57) $ (538) $ 1,237
================= ================= ================== =================
</TABLE>
P-12
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
(Dollars in thousands)
For the Three Months Ended March 31, 1999:
<TABLE>
<CAPTION>
Historical Royster-
Royster- Pro Forma Clark, Inc.
Clark, Inc. Adjustments Pro Forma
-------------------- --------------------- ---------------------
(a) (c)
<S> <C> <C> <C>
Net sales.................................. $ 53,487 $ -- $ 53,487
Depreciation and amortization.............. 203 237 440
Other cost of sales........................ 43,839 -- 43,839
-------------------- --------------------- ---------------------
Gross profit.......................... 9,445 (237) 9,208
Depreciation and amortization.............. 515 1,296 1,811
Other selling, general and administrative
expenses................................. 6,706 -- 6,706
-------------------- --------------------- ---------------------
Operating income...................... 2,224 (1,533) 691
Interest expense........................... 1,607 (525) 1,082
-------------------- --------------------- ---------------------
Earnings (loss) before income taxes... 617 (1,008) (391)
Income tax expense (benefit)............... 251 (403) (152)
==================== ===================== =====================
Net earnings (loss)................... $ 366 $ (605) $ (239)
==================== ===================== =====================
</TABLE>
(a) Royster-Clark Historical
The amounts presented under the heading "Royster -Clark, Inc.
Historical" are taken from the Royster-Clark, Inc. historical statements of
income for the year ended December 31, 1998 and the three months ended
March 31, 1999, included elsewhere in this prospectus. Certain detail has
been provided to enhance the pro forma information.
(b) Consummated Transactions Historical
During 1998, Royster-Clark, Inc. acquired certain assets from Lebanon
Chemical Corporation ("Lebanon") and Dixie Guano, Inc. ("Dixie") in two
separate transactions. The assets purchased are engaged in the business of
operating wholesale and retail fertilizer outlets, primarily in Maryland,
Delaware, Virginia and North Carolina. These transactions were accounted
for as purchases. As a result, the results of operations for Lebanon and
Dixie have been included from the date of acquisition. The historical
components of net sales, cost of sales, operating and other expenses and
net earnings (loss) from January 1, 1998 through the date of acquisition
have been reflected under the column "Consummated Transactions" in the
accompanying December 31, 1998 Unaudited Pro Forma Condensed Consolidated
Statement of Operations as follows:
Operating Net
Date Net Cost of and Other Earnings
Acquired Sales Sales Expenses, net (Loss)
-------- ----- ----- ------------- ------
Dixie 7/16/98 $3,188 2,820 330 23
Lebanon 12/14/98 64,491 51,183 13,440 (80)
------ ------ ------ ----
$67,679 54,003 13,770 (57)
======= ====== ====== ====
(c) Pro forma Adjustments
The following summarizes the pro forma adjustments made to the
Royster-Clark, Inc. historical statements of operations.
(i) The impact on depreciation and amortization of adjusting to the fair
values of property and equipment, goodwill and other intangibles on
the Lebanon and Dixie acquisitions as well as the acquisition of
Royster Clark, Inc. have been included in the pro forma adjustments.
The effect has been allocated between cost of sales and selling,
general and administrative expenses. In addition, amortization of the
$6,900 of deferred financing costs incurred in the establishment of
the senior
P-13
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
(Dollars in thousands)
secured credit facility has been reflected for the year ended December
31, 1998 and the three months ended March 31, 1999.
(ii) The pro forma adjustment for the year ended December 31, 1998 to other
selling, general and administrative expenses represents the
elimination of certain historical costs and expenses subsequent to the
acquisitions of Lebanon and Dixie. These adjustments include the
elimination of costs of $1,138 associated with the Lebanon corporate
headquarters and one regional office which were closed subsequent to
the acquisition; the elimination of $669 of incremental employee
benefit and insurance costs as compared to the cost of coverage after
integration into the Royster-Clark, Inc. programs; and the elimination
of $180 of costs associated with the implementation of Royster-Clark,
Inc.'s point of sale system in the Lebanon facilities resulting in the
elimination of dedicated data lines utilized by the Lebanon point of
sale system; and the elimination of certain other costs directly
attributable to the acquisitions of $290. There are no pro forma
adjustments to other selling, general and administrative expenses for
the three months ended March 31, 1999.
(iii) The pro forma adjustment to interest expense for the year ended
December 31, 1998 and the three months ended March 31, 1999, reflects
the refinancing of the existing Royster-Clark, Inc. long-term debt
using available cash and the proceeds from the Credit Facility.
(iv) The pro forma adjustment to income tax expense for the year ended
December 31, 1998 and the three months ended March 31, 1999,
represents the tax effect of the pro forma adjustments described above
calculated at an estimated composite tax rate of 39%.
P-14
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
(Dollars in thousands)
(2) Acquisition of AgriBusiness
Pro forma adjustments relating to the acquisition of AgriBusiness are as
follows:
For the Year Ended December 31, 1998:
<TABLE>
<CAPTION>
Pro Forma
-------------------------------------
Eliminated
Divisions &
AgriBusiness Closed Other AgriBusiness
Historical Locations Adjustments Pro Forma
----------------- ----------------- ---------------- -----------------
(a) (b) (c)
<S> <C> <C> <C> <C>
Net sales........................ $ 786,967 $ (53,491) $ -- $ 733,476
Depreciation and amortization.... 11,900 -- (4,146) 7,754
Other cost of sales.............. 647,256 (50,823) (3,124) 593,309
----------------- ----------------- ---------------- -----------------
Gross profit................ 127,811 (2,668) 7,270 132,413
Depreciation and amortization.... 11,400 -- (4,538) 6,862
Other selling, general and
administrative expenses..... 91,901 (1,779) (9,872) 80,250
----------------- ----------------- ---------------- -----------------
Operating income............ 24,510 (889) 21,680 45,301
Interest expense................. 13,217 -- 15,041 28,258
Other expense, net............... 1,857 -- -- 1,857
----------------- ----------------- ---------------- -----------------
Earnings before income
taxes....................... 9,436 (889) 6,639 15,186
Income tax expense (benefit)..... 4,100 (347) 2,170 5,923
----------------- ----------------- ---------------- -----------------
Net earnings................ $ 5,336 $ (542) $ 4,469 $ 9,263
================= ================= ================ =================
</TABLE>
P-15
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
(Dollars in thousands)
For the Three Months Ended March 31, 1999:
<TABLE>
<CAPTION>
AgriBusiness Pro Forma AgriBusiness
Historical Adjustments Pro Forma
-------------------- -------------------- --------------------
(a) (c)
<S> <C> <C> <C>
Net sales.................................. $ 127,600 $ -- $ 127,600
Depreciation and amortization.............. 1,940 35 1,975
Other cost of sales........................ 112,860 (574) 112,286
-------------------- -------------------- --------------------
Gross profit.......................... 12,800 539 13,339
Depreciation and amortization.............. 4,160 (2,382) 1,778
Other selling, general and administrative
expenses.............................. 23,640 (1,539) 22,101
-------------------- -------------------- --------------------
Operating income (loss)............... (15,000) 4,460 (10,540)
Interest expense........................... 3,000 3,700 6,700
Other expense, net......................... 100 -- 100
-------------------- -------------------- --------------------
Earnings (loss) before income taxes... (18,100) 760 (17,340)
Income tax expense (benefit)............... (7,500) 737 (6,763)
-------------------- -------------------- --------------------
Net earnings (loss)................... $ (10,600) $ 23 $ (10,577)
==================== ==================== ====================
</TABLE>
(a) Agribusiness Historical
The amounts presented under the heading "AgriBusiness Historical" are taken
from the AgriBusiness historical combined statements of earnings (loss) for
the year ended December 31, 1998 and the three months ended March 31, 1999,
included elsewhere in this prospectus. Certain detail has been provided to
enhance the pro forma information.
(b) Eliminated Divisions and Closed Locations
Wholesale purchasers of fertilizer materials were transferred from
AgriBusiness to IMC Global beginning in the third quarter of 1998, and as a
result, they do not represent a component of the acquired entity. Pro forma
adjustments for the year ended December 31, 1998 to sales, cost of sales,
and other expenses are required to eliminate the operating results for this
portion of the business. In addition, in connection with the acquisition of
AgriBusiness, management identified six AgriBusiness locations for closure.
Pro forma adjustments to sales, cost of sales, and other expenses are also
required to eliminate the operating results for these locations. These
adjustments can be summarized as follows:
P-16
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
(Dollars in thousands)
Selling, Income
General and (loss)
Net Cost of Administrative before
Sales Sales Expenses Taxes
----- ----- -------- -----
Wholesale business........... $45,947 44,424 200 1,323
Closed locations............. 7,544 6,399 1,579 (434)
------- ------- ----- -----
$53,491 50,823 1,779 889
====== ====== ===== ===
(c) Other Adjustments
The following summarizes the pro forma adjustments made to the AgriBusiness
Historical statement of operations.
(i) The impact on depreciation and amortization of adjusting to the
post acquisition carrying values of property and equipment and
goodwill on the proposed acquisition of Agribusiness has been
included in the pro forma adjustments. In addition, amortization
has been provided on the deferred financing costs incurred in
conjunction with the issuance of the First Mortgage Notes. The
combined effect for the year ended December 31, 1998 of $8,514
has been allocated as $3,976 to cost of sales and $4,538 to
selling, general and administrative expenses. The combined effect
for the three months ended March 31, 1999 of $2,303 has been
allocated as an increase of $79 to cost of sales and a decrease
of $2,382 to selling, general and administrative expenses.
(ii) In connection with the acquisition, Royster-Clark, Inc. plans to
close one of two production plants located in close proximity to
each other. Pro forma adjustments of $170 and $44 to depreciation
and $1,446 and $404 to other cost of sales have been provided to
reflect the estimated cost reductions for the year ended December
31, 1998 and three months ended March 31, 1999, respectively.
(iii) The remaining pro forma adjustments to other cost of sales and
other selling, general and administrative expenses represent the
elimination of certain historical costs and expenses. These
adjustments for the year ended December 31, 1998 and three months
ended March 31, 1999, respectively, include payroll cost and
benefits amounting to $6,516 and $1,200 associated with the
elimination of 89 positions; elimination of $800 and $0 in costs
associated with the former practice of outsourcing human resource
functions for seasonal labor; and the elimination of $4,234 and
$509 of incremental employee benefit and insurance costs as
compared to the cost of coverage after integration into
Royster-Clark, Inc.'s programs, including the elimination of the
administrative allocation from IMC Global and the rollback to
1997 benefit levels as provided in the purchase agreement. The
effect has been allocated between cost of sales and selling,
general and administrative expenses.
(iv) The pro forma adjustments to interest expense for the year ended
December 31, 1998 and three months ended March 31, 1999, reflects
the incremental interest expense on the First Mortgage Notes and
the Senior Secured Credit Facility.
(v) The pro forma adjustments to income tax expense (benefit) for the
year ended December 31, 1998 and three months ended March 31,
1999, represents the tax effect of the pro forma adjustments
described above, calculated at a rate to yield an estimated
composite tax rate of 39%.
P-17
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page
<S> <C>
(1) Royster-Clark, Inc.
Report of KPMG LLP, independent auditors....................................................... F-2
Balance Sheets of Royster-Clark, Inc. as of December 31, 1997 and 1998......................... F-3
Statements of Income of Royster-Clark, Inc. for the years ended December 31, 1996, 1997
and 1998 .................................................................................... F-4
Statements of Stockholders' Equity of Royster-Clark, Inc. for the years ended December 31,
1997 and 1998................................................................................ F-5
Statements of Cash Flows of Royster-Clark, Inc. for the years ended December 31, 1996, 1997 and
1996, 1998.................................................................................. F-6
Notes to Financial Statements of Royster-Clark, Inc............................................ F-8
Unaudited Balance Sheet of Royster-Clark, Inc. as of March 31, 1999............................ F-24
Unaudited Statements of Income of Royster-Clark, Inc. for the three months ended
March 31, 1998 and 1999...................................................................... F-25
Unaudited Statement of Stockholders' Equity of Royster-Clark, Inc. for the three months ended
March 31, 1999............................................................................... F-26
Unaudited Statements of Cash Flows of Royster-Clark, Inc. for the three months ended
March 31, 1998 and 1999...................................................................... F-27
Notes to Unaudited Financial Statements of Royster-Clark, Inc.................................. F-28
(2) AgriBusiness
Report of Ernst & Young LLP, independent auditors.............................................. F-30
Combined Balance Sheets of AgriBusiness as of December 31, 1997 and 1998....................... F-31
Combined Statements of Earnings of AgriBusiness for the years ended December 31, 1996, 1997
and 1998..................................................................................... F-32
Combined Statements of Cash Flows of AgriBusiness for the years ended December 31, 1996,
1997 and 1998................................................................................ F-33
Notes to Combined Financial Statements of AgriBusiness......................................... F-34
Unaudited Combined Balance Sheet of AgriBusiness as of March 31, 1999.......................... F-48
Unaudited Combined Statements of Loss of AgriBusiness for the Three Months Ended March 31,
1998 and 1999................................................................................ F-49
Unaudited Combined Statements of Cash Flows of AgriBusiness for the Three Months Ended
March 31, 1998 and 1999...................................................................... F-50
Notes to the Unaudited Combined Financial Statements of AgriBusiness........................... F-51
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors
Royster-Clark, Inc.:
We have audited the accompanying balance sheets of Royster-Clark, Inc. as of
December 31, 1998 and 1997, and the related statements of income, stockholders'
equity and cash flows for each of the years in the three year period ended
December 31, 1998. 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 Royster-Clark, Inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the years in the three year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
February 10, 1999
Norfolk, Virginia
F-2
<PAGE>
ROYSTER-CLARK, INC.
BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
As of December 31,
------------------------------
1997 1998
-------------- ------------
<S> <C> <C>
ASSETS
Current Asset:
Cash ...................................................................... $ 29 $ 42
Trade accounts receivable, net of allowance for doubtful accounts
of $1,800 in 1997 and $1,800 in 1998 (note 5) ......................... 15,862 23,569
Other receivables (note 13) ............................................... 1,934 2,561
Inventories (notes 2, 4 and 6) ............................................ 45,512 55,205
Prepaid expenses .......................................................... 2,577 2,720
Income taxes receivable (note 8) .......................................... -- 307
Deferred tax asset (note 8) ............................................... 749 269
--------- ---------
Total current assets ................................................ 66,663 84,673
--------- ---------
Property, plant and equipment, net (notes 2, 5 and 6) ........................ 22,601 29,106
Goodwill, net of accumulated amortization of $959 and $1,132 at
December 31, 1997 and 1998, respectively ................................... 6,004 5,831
Other assets, net (notes 2 and 6) ............................................ 797 787
--------- ---------
$ 96,065 $ 120,397
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt (note 6) ........................... $ 2,034 $ 2,182
Customer deposits (note 14) ............................................... 20,307 24,362
Accounts payable (note 13) ................................................ 15,280 24,140
Accrued expenses (notes 11, 12 and 15) .................................... 2,405 3,263
Income taxes payable (note 8) ............................................. 384 --
--------- ---------
Total current liabilities ........................................... 40,410 53,947
Long-term debt, excluding current installments (note 6) ...................... 23,025 33,817
Deferred income taxes (note 8) ............................................... 3,433 3,323
Other long-term liabilities .................................................. 591 293
--------- ---------
Total liabilities ................................................... $ 67,459 $ 91,380
--------- ---------
Cumulative redeemable preferred stock, Series B $0.01 par value, (liquidation
value $1,000 per share). Authorized 500,000 shares, 12,000 shares issued and
outstanding at December 31, 1997 and
1998, (note 11) ............................................................ $ 12,000 $ 12,000
Common stock subject to ESOP put option (note 12) ............................ 1,861 1,864
Stockholders' equity (notes 11 and 12):
Common stock, $0.01 par value. Authorized 1,000,000 shares; 120,487 shares
issued and 118,167 outstanding and 120,497 shares issued and 116,975
outstanding at December 31, 1997 and 1998, respectively ................. 1 1
Additional paid-in capital ................................................ 10,218 10,220
Retained earnings ......................................................... 6,732 7,364
Common stock subject to put option (11,280 shares at $165 per
share in 1997 and 10,078 shares at $185 per share in 1998) .............. (1,861) (1,864)
--------- ---------
15,090 15,721
Less treasury stock, 2,320 and 3,522 common shares at December
31, 1997 and 1998, respectively, at cost ................................ (345) (568)
--------- ---------
Total stockholders' equity .......................................... 14,745 15,153
--------- ---------
Commitments, contingencies and subsequent event (notes 9, 10, 11,
12, 15 and 16) ............................................................. $ 96,065 $ 120,397
========= =========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ROYSTER-CLARK, INC.
STATEMENTS OF INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1996 1997 1998
---------------- ------------------ --------------
<S> <C> <C> <C>
Net sales .................................. $222,933 $227,613 $218,672
Cost of sales (note 13) .................... 189,653 192,617 185,646
-------- -------- --------
Gross profit .......................... 33,280 34,996 33,026
Selling, general and administrative expenses 21,836 23,215 24,482
-------- -------- --------
Operating income ...................... 11,444 11,781 8,544
-------- -------- --------
Interest expense (note 14) ................. 5,004 4,672 5,489
-------- -------- --------
Income before income taxes ............ 6,440 7,109 3,055
Income tax expense (note 8) ................ 2,626 2,778 1,223
======== ======== ========
Net income ............................ $ 3,814 $ 4,331 $ 1,832
======== ======== ========
</TABLE>
F-4
See accompanying notes to financial statements.
<PAGE>
ROYSTER-CLARK, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Common Stock Common
Issued Additional Stock
-------------------------- paid-in Retained subject to
Shares Amount capital earnings put option
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ........... 117,170 $ 1 $ 7,815 $ 987 $ (1,647)
Net income ............................. -- -- -- 3,814 --
Dividends declared Series B preferred
stock, $100 per share from January 1,
1996 to December 31, 1996 ........... -- -- -- (1,200) --
Exercise of stock options (note 12) .... 123 -- 16 -- --
Change in common stock subject to put
option ............................. -- -- -- -- (68)
Treasury stock--Purchase of terminated
employee shares in the Employee Stock
Ownership Plan ...................... -- -- -- -- --
Purchase of Series A preferred stock ... -- -- 1,973 -- --
-------- -------- -------- -------- --------
Balance at December 31, 1996 ........... 117,293 1 9,804 3,601 (1,715)
Net income ............................. -- -- -- 4,331 --
Dividends declared--Series B preferred
stock, $100 per share from January 1,
1997 to December 31, 1997 ........... -- -- -- (1,200) --
Exercise of stock options (note 12) .... 3,194 -- 414 -- --
Change in common stock subject to put .. -- -- -- -- (146)
option
Treasury stock--Purchase of terminated
employee shares in the Employee Stock -- -- -- -- --
Ownership Plan
-------- -------- -------- -------- --------
Balance at December 31, 1997 ........... 120,487 1 10,218 6,732 (1,861)
Net income ............................. -- -- -- 1,832 --
Dividends declared--Series B preferred
stock, $100 per share from January 1,
1998 to December 31, 1998 ........... -- -- -- (1,200) --
Exercise of stock options (note 12) .... 10 -- 2 -- --
Change in common stock subject to put
option .............................. -- -- -- -- (3)
Treasury stock--Purchase of terminated
employee shares in the Employee Stock
Ownership Plan ...................... -- -- -- -- --
-------- -------- -------- -------- --------
Balance at December 31, 1998 ........... 120,497 $ 1 $ 10,220 $ 7,364 $ (1,864)
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock Total
------------------------------ Stockholders'
Shares Amount equity
-------------- -------------- --------------
<S> <C> <C> <C>
Balance at December 31, 1995 ........... $ (528) (82) $ 7,074
Net income ............................. -- -- 3,814
Dividends declared Series B preferred
stock, $100 per share from January 1,
1996 to December 31, 1996 ........... -- -- (1,200)
Exercise of stock options (note 12) .... -- -- 16
Change in common stock subject to put
option .............................. -- -- (68)
Treasury stock--Purchase of terminated
employee shares in the Employee Stock
Ownership Plan ...................... (825) (104) (104)
Purchase of Series A preferred stock ... -- -- 1,973
-------- -------- --------
Balance at December 31, 1996 ........... (1,353) (186) 11,505
Net income ............................. -- -- 4,331
Dividends declared--Series B preferred
stock, $100 per share from January 1,
1997 to December 31, 1997 ........... -- -- (1,200)
Exercise of stock options (note 12) .... -- -- 414
Change in common stock subject to put
option .............................. -- -- (146)
Treasury stock--Purchase of terminated
employee shares in the Employee Stock
Ownership Plan ...................... (967) (159) (159)
-------- -------- --------
Balance at December 31, 1997 ........... (2,320) (345) 14,745
Net income ............................. -- -- 1,832
Dividends declared--Series B preferred
stock, $100 per share from January 1,
1998 to December 31, 1998 ........... -- -- (1,200)
Exercise of stock options (note 12) .... -- -- 2
Change in common stock subject to put
option .............................. -- -- (3)
Treasury stock--Purchase of terminated
employee shares in the Employee Stock
Ownership Plan ...................... (1,202) (223) (223)
-------- -------- --------
Balance at December 31, 1998 ........... $ (3,522) $ (568) $ 15,153
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ROYSTER-CLARK, INC.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------
1996 1997 1998
--------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ............................................ $ 3,814 $ 4,331 $ 1,832
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Increase in allowance for doubtful accounts ........... 615 383 --
Depreciation and amortization ......................... 2,171 2,305 2,678
Gain on sale of fixed assets .......................... (59) (132) (25)
Change in deferred income taxes ....................... 254 (531) 370
Changes in operating assets and liabilities
increasing (decreasing) cash:
Trade accounts receivable .......................... 3,262 (3,393) 4,367
Other receivables .................................. (3,082) 1,065 (627)
Inventories ........................................ 1,760 (7,770) (3,401)
Prepaid expenses ................................... (94) (1) (33)
Income taxes receivable ............................ -- -- (307)
Other assets ....................................... (256) (567) 49
Customer deposits .................................. 4,396 1,235 4,055
Accounts payable ................................... 3,406 (1,500) 8,860
Accrued expenses ................................... -- (286) 753
Income taxes payable ............................... 545 (743) (384)
Other long-term liabilities ........................ (3) 258 (298)
--------- --------- ---------
Total adjustments ................................ $ 12,915 $ (9,677) $ 16,057
--------- --------- ---------
Net cash provided by (used in)
operating activities .......................... $ 16,729 $ (5,346) $ 17,889
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment ....................................... $ 323 $ 773 $ 130
Purchases of property, plant and
equipment ........................................... (1,442) (2,029) (2,145)
Acquisitions (notes 2 and 3) ......................... -- (810) (25,194)
--------- --------- ---------
Net cash used in investing activities ............ $ (1,119) $ (2,066) $ (27,209)
--------- --------- ---------
Cash flows from financing activities:
Payments on revolving note payable to bank ............ $(258,145) $(239,309) $(247,243)
Borrowings on revolving note payable to bank .......... 245,697 249,876 248,600
Principal payments on long-term debt .................. (1,748) (2,187) (2,042)
Proceeds from long-term debt .......................... -- -- 11,625
Debt issuance costs ................................... -- -- (291)
Purchase of preferred stock ........................... (125) -- --
Dividend payments ..................................... (1,200) (1,223) (1,095)
Stock options exercised ............................... 16 414 2
Payments to acquire treasury stock .................... (104) (159) (223)
--------- --------- ---------
Net cash provided by (used in) financing activities . $ (15,609) $ 7,412 $ 9,333
--------- --------- ---------
Net increase in cash .................................... 1 -- 13
Cash at beginning of year ............................... 28 29 29
--------- --------- ---------
Cash at end of year ..................................... $ 29 $ 29 $ 42
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest ................ $ 5,068 $ 4,625 $ 5,546
========= ========= =========
Cash paid during the year for income taxes ............ $ 2,011 $ 4,035 $ 1,544
========= ========= =========
</TABLE>
F-6
(continued)
<PAGE>
ROYSTER-CLARK, INC.
STATEMENTS OF CASH FLOWS - (continued)
Years ended December 31, 1996, 1997 and 1998
(Dollars in thousands)
Supplemental disclosure of noncash investing and financing activities:
On June 27, 1996, the Company purchased all of its Series A cumulative
redeemable preferred stock of $2,250 by paying $125 in cash and writing off a
$152 nontrade receivable from the Series A cumulative redeemable preferred
stockholder.
As discussed in note 3 to the financial statements, in 1997 the Company
purchased certain assets of Weaver Fertilizer Company (Weaver). Part of the
purchase price was settled with a note payable to Weaver of $1,890.
As discussed in note 2 to the financial statements, in 1998 the Company
completed an acquisition of the division of Lebanon Chemical Corporation known
as Lebanon Agricorp. In conjunction with this transaction, the Company assumed
accrued liabilities of $1,935.
See accompanying notes to financial statements.
F-7
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
(1) Summary of Significant Accounting Policies
(a) Business
Royster-Clark (the "Company") sells fertilizer materials, mixed
fertilizers, crop protection chemicals, seeds and other farm supplies to
farmers, dealers and fertilizer blenders and distributors through retail farm
service centers, wholesale distribution facilities and independent commission
agents.
(b) Concentration of Credit Risk
The Company's primary area of operations includes North Carolina, South
Carolina, Virginia, and Wisconsin. Approximately 80 percent of the Company's
sales are made between March and July. No single customer or group of affiliated
customers accounted for more than 10 percent of the Companys net sales.
(c) Trade Accounts Receivable
The Company provides allowances for doubtful accounts receivable equal to
estimated collection losses. The estimated collection losses are based on actual
collection experience and on management's opinion of the current status of
existing receivables.
(d) Other Receivables
Other receivables primarily include vendor rebates on chemical and seed
products under programs with suppliers. Vendor rebates are accrued at the time
of sale of the related product.
(e) Inventories
Inventories are stated at the lower of cost or market, with cost being
determined by the weighted-average actual method, in which a first-in, first-out
flow is assumed. Costs directly associated with warehousing and distribution are
capitalized into crop protection and seed inventories. Total warehousing and
distribution costs capitalized into inventories amounted to $515 and $680 at
December 31, 1997 and 1998, respectively.
(f) Derivatives
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is required to be adopted after June
15, 1999. Because of the Company's minimal use of derivatives, management does
not anticipate that the adoption of SFAS No. 133 will have a significant effect
on earnings or the financial position of the Company.
F-8
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
(g) Property, Plant and Equipment
Property, plant and equipment are stated at cost. All assets are
depreciated using the straight-line method using the following criteria, which
is the estimated useful life of the asset:
Year of life Years of life
if new if used
-------------- -------------
Building and land improvements................. 40 25
Machinery and equipment........................ 10-20 7-15
Furniture, fixtures and office equipment....... 5-7 5-7
(h) Goodwill and Other Assets
Goodwill represents the excess purchase price over the estimated fair value
at the date of acquisition of the net assets acquired and is being amortized
using the straight-line method over a period of 40 years.
Other assets are comprised of debt issuance costs and intangibles related
to the acquisitions discussed in notes 2 and 3. The debt issuance costs are
being amortized over the term of the debt facility. The intangibles are being
amortized on a straight-line basis over their estimated useful lives, which
range from 1 to 5 years.
(i) Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Deferred income tax assets and liabilities are recognized for the
estimated future tax consequences of "temporary differences" by applying enacted
statutory tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.
(j) Stock-Based Employee Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, encourages, but does
not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and provide the pro forma disclosure provisions of SFAS 123.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the estimated fair value of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock.
F-9
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
(k) Impairment of Long-Lived Assets
The Company reviews long-lived assets and certain identifiable intangible
assets for impairment when events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Estimated future
undiscounted cash flows associated with the asset are compared to the asset's
carrying amount to determine if a write-down to market or discounted cash flow
value is required. Assets and certain identifiable intangibles to be disposed of
are reported at the lower of carrying amount or fair value less costs to sell.
(l) Accrued Environmental Costs
The Company's activities include the manufacture and blending of crop
nutrients and the sale of pesticide products. These operations are subject to
extensive federal, state, and local environmental regulations, including laws
related to air and water quality, management of hazardous and solid wastes and
management and handling of raw materials and crop protection products.
Expenditures that relate to an existing condition caused by past operations of
the Company or prior owners, and which do not contribute to current or future
revenue generation, are charged to operations.
In 1997, the Company adopted Statement of Position (SOP 96-1),
Environmental Remediation Liabilities, promulgated by the American Institute of
Certified Public Accountants, which provides guidance for the accrual of
environmental remediation costs. Adoption of this statement did not have a
material effect on the Companys financial statements. There were no accrued
environmental costs at December 31, 1997.
In December 1998, the Company recorded an accrual of $335 for environmental
costs related to required remediation and monitoring of groundwater
contamination at certain sites acquired in 1998 (note 2).
(m) Revenue recognition
Sales revenue is recognized when the product is shipped to the customer or
a service is performed.
(n) Use of Estimates
Management of the Company has made a number of estimates and assumptions
that affect the reported amount of assets and liabilities at the date of the
financial statements, the reported amounts of revenues and expenses during the
reported period, and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.
F-10
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
(o) Reclassifications
Certain reclassifications have been made to the financial statements as of
December 31, 1997 and for the years ended December 31, 1997 and 1996 in order to
conform with the financial statement presentation as of and for the year ended
December 31, 1998.
(2) Lebanon and Dixie Acquisitions
On December 14, 1998, the Company acquired substantially all of the
property, plant and equipment, inventories and accounts receivable of the
division of Lebanon Chemical Corporation known as Lebanon Agricorp ("Lebanon"),
which owned and operated fertilizer retail and wholesale outlets as well as
distribution and storage facilities primarily in Maryland, Virginia, Delaware,
and North Carolina. The acquisition was accounted for by the purchase method of
accounting and the accompanying financial statements include the operating
results of Lebanon from the date of acquisition. The acquisition cost for the
purchase was allocated on the basis of the estimated fair value of assets
acquired and liabilities assumed, as well as certain intangible assets of $341
which are being amortized over their estimated useful lives.
The acquisition can be summarized as follows:
Amount
------
Assets purchased, including debt issuance costs
paid of $141................................... $22,686
Liabilities assumed, including accrued vacation,
environmental costs and closing costs.......... (1,935)
-------
Costs of acquisition.......................... $20,751
=======
The purchase price paid for accounts receivable was 75 percent of the face
value. Any collections in excess of this amount and/or accounts uncollected by
April 1, 1999 will revert to Lebanon. In addition, the acquisition agreement
contains certain purchase commitments (note 14).
On July 16, 1998, the Company acquired certain assets from Dixie Guano,
Inc. ("Dixie"), which owned and operated two retail outlets in southern
Virginia. The acquisition price paid was $2,543. The acquisition was accounted
for by the purchase method of accounting, and the accompanying financial
statements include the operating results of Dixie from the date of acquisition.
Assets purchased included accounts receivable, inventory, property, plant, and
equipment. In addition, a portion of the purchase price was allocated to
intangible assets including a noncompete agreement. The noncompete agreement is
being amortized over the period of the agreement.
The following unaudited pro forma consolidated income statement information
combines the consolidated historical results of the Company with the historical
results of Lebanon and Dixie for the years ended December 31, 1997 and 1998, as
if each transaction was consummated on January 1, 1997.
F-11
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
This unaudited pro forma information does not purport to be indicative of
the results that would have occurred had the transactions taken place at the
beginning of the periods presented or of future results.
Pro Forma (Unaudited)
Year Ended December 31,
---------------------------------
1997 1998
---- ----
--------- ---------
Net sales ................................. $ 296,374 $ 286,280
--------- ---------
Gross profit ........................... 51,375 47,039
Selling general and administrative expenses (36,319) (35,843)
--------- ---------
Operating income ....................... 15,056 11,196
Interest expense .......................... (6,877) (7,633)
--------- ---------
Income before income taxes ............. 8,179 3,563
Provision for income taxes ................ (3,197) (1,422)
========= =========
Net income ............................. $ 4,982 $ 2,141
========= =========
The unaudited pro forma information reflects adjustments related to the
elimination of duplicative operating costs associated with Lebanon's corporate
headquarters and one regional office; reduction of employee benefit and
insurance costs of Lebanon and Dixie as compared to the cost of coverage after
integration into the Royster-Clark programs; the elimination of costs associated
with the implementation of Royster-Clark's point-of-sale system in the Lebanon
distribution facilities resulting in the elimination of dedicated data lines
utilized by the Lebanon point-of-sale system; reduction in depreciation expense
to reflect the writedown of assets acquired from Lebanon; interest expense
related to acquisition debt; and income taxes on the pro forma adjustments at an
assumed effective rate of 39 percent.
(3) Other Acquisitions
In September 1997, the Company purchased certain assets of Weaver, a
manufacturing and retail fertilizer outlet in southeastern Virginia, for $3,218,
including a cash payment of $1,328 and a note payable to Weaver of $1,890. The
acquisition was accounted for by the purchase method of accounting. Assets
purchased included inventory and property, plant and equipment. In addition, a
portion of the purchase price was allocated to intangible assets including a
noncompete agreement. The noncompete agreement is being amortized over the
period of the agreement.
Effective January 1, 1998, the Company purchased certain assets of Harmony,
Inc., a retail fertilizer outlet in North Carolina, for $106. The acquisition
was accounted for by the purchase method of accounting, and the accompanying
financial statements include the operating results from the date of acquisition.
Sales and net income during 1998 were $1,376 and $62, respectively. Assets
purchased included inventory and equipment.
F-12
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
(4) Inventories
Inventories at December 31, 1997 and 1998, consist of the following:
1997 1998
---- ----
Crop protection chemicals............. $18,500 $31,084
Fertilizers........................... 6,849 7,621
Raw materials......................... 16,199 11,490
Seeds................................. 1,448 2,198
Sandries and other.................... 2,516 2,812
----------------- ------------------
$45,512 $55,205
================= ==================
(5) Property, Plant, and Equipment
Property, plant, and equipment at December 31, 1997 and 1998 consist of the
following:
1997 1998
---- ----
Land ................................. $ 4,884 $ 6,742
Buildings............................. 10,459 13,935
Machinery and equipment............... 15,729 18,723
Construction-in-progress.............. 646 761
---------------- -----------------
31,718 40,161
Less accumulated depreciation......... 9,117 11,055
---------------- -----------------
Net property, plant, and equipment $22,601 $29,106
================ =================
Included in land and buildings above, are assets held for sale which are
carried at their estimated net realizable value, less estimated costs to sell.
The carrying value of these assets was $230 and $810 at December 31, 1997 and
1998, respectively.
F-13
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
(6) Long-Term Debt
Long-term debt at December 31, 1997 and 1998, consists of the
following:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Bank revolving loan which provides for borrowings up to $90,000 bearing
interest due monthly at prime plus 0.25% (8.0%), due November 30, 2000
The loan is secured by accounts receivable, inventories, equipment,
general intangibles, real estate, and
other property .......................................................... $17,873 $19,220
Bank term loan bearing interest due monthly at prime plus 0.75% (8.5%)
Principal payments of $125 are due monthly with maturity on December 31,
2008. The note is secured by accounts receivable, inventories, equipment,
general intangibles, real
estate, and other property .............................................. 4,732 15,000
Mortgage note payable, variable interest rate adjusted annually based on
the weekly average yield of U.S. Treasury securities of one year maturity
plus 3.5% (8.75%), capped at 15%. Principal and interest payments,
currently $4, are due monthly with a
maturity on November 1, 2003 ............................................ 230 199
Note payable, bearing interest at prime rate (7.75%) due
quarterly. Annual principal payments of $540, with $810 payable
at maturity on September 30, 2000 ...................................... 1,890 1,350
Other .................................................................... 334 230
------- -------
Total long-term debt .................................................. 25,059 35,999
Less current installments ................................................ 2,034 2,182
------- -------
Long-term debt, excluding current installments ........................... $23,025 $33,817
======= =======
</TABLE>
The prime interest rate at December 31, 1997 and 1998 was 8.50 percent and
7.75 percent, respectively.
F-14
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
Aggregate annual principal payments due under the terms of the long-term debt
for the five fiscal years subsequent to December 31, 1998 and thereafter are as
follows:
Other
Revolving Long-term
loan debt Total
--------------- -------------- ----------
1999 ........... $ -- $ 2,182 $ 2,182
2000 ........... 19,220 2,390 21,610
2001 ........... -- 1,588 1,588
2002 ........... -- 1,549 1,549
2003 ........... -- 1,541 1,541
Thereafter...... -- 7,529 7,529
------- ------- -------
Total........ $19,220 $16,779 $35,999
======= ======= =======
The bank term and revolving loan agreements contain restrictions related to
maintenance of minimum financial ratios, net worth, capital expenditures,
incurrence of debt, disposal of assets, and payment of dividends.
(7) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of the Company's financial instruments at December 31, 1997 and 1998. FASB
Statement No. 107, Disclosures about Fair Value of Financial Instruments,
defines the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing parties.
Cash, trade accounts receivables, other receivables, customer deposits,
accounts payable, accrued expenses: The carrying amounts approximate fair value
because of the short maturity of those instruments.
Long-term debt: The fair value of the Company's long-term debt is estimated
by discounting the future cash flows of each instrument at rates currently
offered to the Company for similar debt instruments of comparable maturities by
the Company's bankers. Based on this criteria, the carrying amounts approximate
fair value.
F-15
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
(8) Income Taxes
Components of income tax expense (benefit) for the years ended December 31,
1996, 1997 and 1998, include:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
December 31, 1996:
Federal............................................. $ 1,564 $ 576 $ 2,140
State............................................... 355 131 486
----------- ----------- -----------
$ 1,919 $ 707 $ 2,626
=========== =========== ===========
December 31, 1997:
Federal............................................. $ 2,668 $ (429) $ 2,239
State............................................... 641 (102) 539
----------- ------------ -----------
$ 3,309 $ (531) $ 2,778
=========== ============ ===========
December 31, 1998:
Federal............................................. $ 697 $ 299 $ 996
State............................................... 156 71 227
----------- ----------- -----------
$ 853 $ 370 $ 1,223
=========== =========== ===========
</TABLE>
The effective income tax rate for 1996, 1997 and 1998 of 40.8 percent, 39.1
percent and 40 percent, respectively, differs from the "expected" federal
statutory income tax rate of 34 percent due to the following:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Expected income tax expense......................... $ 2,190 $ 2,417 $ 1,039
Nondeductible expenses, including goodwill, meals and
entertainment.................................... 90 72 71
State taxes, net of federal benefit................. 321 356 113
Other............................................... 26 (67) -
----------- ----------- ----------
Income tax expense............................. $ 2,626 $ 2,778 $ 1,223
=========== ========== ==========
</TABLE>
F-16
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
The tax effects of temporary differences between the financial statement
carrying amounts and tax basis of assets and liabilities that give rise to
significant portions of deferred taxes at December 31, 1997 and 1998, relate to
the following:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Trade accounts receivable, due to allowance for doubtful accounts and
discounts........................................................ $ 755 $ 702
Accrued expenses, due to accrued vacation and certain other accruals
for financial statement purposes................................. 557 352
Other long-term liabilities......................................... 150 114
--------- -----------
$ 1,462 $ 1,168
========= ===========
Deferred tax liabilities:
Other receivables, due to accrual for financial statement purposes
for product rebates............................................... $ (563) $ (710)
Property, plant and equipment....................................... (2,724) (2,707)
Other assets........................................................ (859) (805)
--------- -----------
(4,146) (4,222)
--------- -----------
Net deferred tax liabilities...................................... $ (2,684) $ (3,054)
========= ===========
Net deferred taxes are included in the balance sheets in the following captions:
1997 1998
---- ----
Deferred income tax asset--current...................................... $ 749 $ 269
Deferred income tax liability--long-term............................... (3,433) (3,323)
----------- -----------
$ (2,684) $ (3,054)
========= ===========
</TABLE>
It is management's belief that the results of future operations will
generate sufficient taxable income to realize the deferred tax assets.
(9) Operating Leases
Future minimum lease payments under noncancelable operating leases as of
December 31, 1998 are as follows:
Year Ending Amount
------
1999..................................................... $ 3,651
2000..................................................... 2,440
2001..................................................... 1,428
2002..................................................... 795
2003..................................................... 351
----------
Total minimum lease payments.................... $ 8,665
=========
F-17
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
Rental expense for all operating leases was approximately $2,085, $2,341
and $2,999 for the years ended December 31, 1996, 1997 and 1998, respectively.
(10) Stockholders Equity
(a) Dividends
The Company's ability to pay cash dividends is dependent on, but not
limited to, the following factors: the Company's financial condition, its cash
requirements, and restrictions on the payment of dividends in accordance with
the Company's long-term debt agreements and preferred stock.
(b) Voting Rights
Each share of common stock entitles the holder to one vote in the election
of directors and all other matters submitted to a vote of the stockholders of
the Company.
(11) Cumulative Redeemable Preferred Stock
(a) Cumulative Redeemable Preferred Series B Stock
Dividends
Dividends on the Series B preferred stock, subject to certain restrictions
under the Company's long-term debt agreements, shall be declared and paid in
cash quarterly. Cumulative dividends, whether declared or not, accumulate at an
annual rate of $100 per share.
During the years ended December 31, 1997 and 1998, $1,200 in dividends were
declared on the Series B preferred stock. At December 31, 1997 and 1998, there
were no dividends in arrears on the Series B preferred stock, as unpaid declared
dividends of $172 and $300 at December 31, 1997 and 1998, respectively, are
included in accrued expenses in the accompanying balance sheets.
Interest on unpaid Series B preferred stock dividends compounds at 10
percent per annum. At December 31, 1997 and 1998, there was no accrued interest
related to the Series B preferred stock.
Voting Rights
Holders of preferred stock have no voting rights except those to which they
are entitled under mandatory provisions of the laws of the State of Delaware.
Liquidation
In the event of any liquidation of the Company, holders of the Series B
preferred stock will be entitled to receive a full liquidation preference of
$1,000 per share, together with any accrued and unpaid dividends, before the
distribution of any assets to the holders of common stock.
F-18
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS--(continued)
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
Optional Redemption
Subject to certain long-term debt agreement restrictions, the Series B
preferred stock may be redeemed, at the option of the Company and at any time
after February 15, 2000, in whole or in part, at the redemption price of $1,000
per share plus all accrued and unpaid dividends as compounded through the
redemption date.
Mandatory Redemption
Subject to certain long-term debt agreement restrictions, any holder of
Series B preferred stock may require the Company to redeem all or any portion of
such holders Series B preferred stock at any time after February 15, 2000, in
whole or part, at the redemption price of $1,000 per share plus all accrued and
unpaid dividends through the date of redemption.
Conversion
The Series B preferred stock outstanding at December 31, 1998 is
convertible into voting common stock at the conversion price of $180 per share.
(b) Cumulative Redeemable Preferred Series A Stock
On June 27, 1996, the Company purchased all of its Series A cumulative
redeemable preferred stock of $2,250 by paying $125 in cash and writing off a
$152 nontrade receivable from the Series A cumulative redeemable preferred
stockholder.
(12) Employee Benefit Plans
(a) Employee Savings and Investment Plan
The Company maintains a defined contribution Employee Savings and
Investment Plan (ESIP) covering substantially all full-time employees of the
Company. Participants are allowed to contribute to the ESIP up to 18 percent of
their salary on a pre-tax basis, up to the maximum allowed under Internal
Revenue Service regulations. The Company makes contributions to the ESIP at the
discretion of the Board of Directors. The Company made contributions of $97,
$206 and $208 to the ESIP during the years ended December 31, 1996, 1997 and
1998, respectively.
(b) Profit Sharing Plan
The Company maintains a Profit Sharing Plan (PSP) covering all full-time
employees of the Company. An employee is eligible to participate if they are
employed on a full-time basis as of the beginning of the fiscal year or if they
are employed prior to the beginning of the third quarter of the fiscal year.
Profit sharing is calculated as of the end of each fiscal year. The amount
available for profit sharing, if any, for each fiscal year is determined by a
committee of the Board of
F-19
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
Directors in accordance with the provisions of the PSP. The Company made
contributions of $968, $1,271 and $851 during the years ended December 31, 1996,
1997 and 1998, respectively.
(c) Employee Stock Ownership Plan
The Company maintains a noncontributory employee stock ownership plan
(ESOP) for substantially all full-time employees. An employee is eligible to
participate upon completion of one hour of service on or before March 31, 1992
or upon completion of one year of service. Contributions are determined at the
discretion of the Board of Directors. There were no contributions made during
the years ended December 31, 1996, 1997, and 1998.
The ESOP contains a put option which allows a withdrawing participant to
require the Company to purchase his or her shares if the shares are not readily
tradeable on an established market. Since there was no established market at
December 31, 1997 and 1998, 11,280 and 10,078 common shares, respectively, were
valued at their estimated fair value based on the most recent available
independent valuation. Consequently, at December 31, 1997 and 1998, $1,861 and
$1,864, respectively, has been classified outside of stockholders' equity.
(d) 1992 Stock Option Plan
The Company maintains a 1992 Stock Option Plan (SOP) for eligible key
employees and directors of the Company. Under the SOP, the Company may grant
either nonqualified options (NO) or incentive stock options (ISO) to purchase
shares of common stock. The option exercise price per share for NOs and ISOs is
determined by the Executive Committee of the Board of Directors and, in the case
of ISOs, may not be less than 100 percent of the fair market value on the date
the ISO is granted. In the case of an ISO granted to a stockholder who owns
stock having more than 10 percent of the combined voting power of all classes of
stock of the Company, the option exercise price per share may not be less than
110 percent of the fair market value on the date the ISO is granted. The
Executive Committee also determines the exercise period for any options granted.
The following grants have been made under the SOP:
Grant date Number of options Exercise price
---------- ----------------- --------------
March 15, 1995 5,278 $105
October 1, 1996 4,000 $126
October 1, 1997 6,000 $165
F-20
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
Stock option activity during the years indicated is as follows:
Number of Weighted-average
shares exercise price
---------------- -----------------
Balance at December 31, 1995 5,218 $ 105.00
Granted .................. 4,000 126.00
Exercised ................ 123 105.00
Forfeited ................ -- --
------ -------
Balance at December 31, 1996 9,095 114.35
Granted .................. 6,000 165.00
Exercised ................ 3,194 110.70
Forfeited ................ -- --
------ -------
Balance at December 31, 1997 11,901 140.78
Granted .................. -- --
Exercised ................ 10 105.00
Forfeited ................ -- --
====== =======
Balance at December 31, 1998 11,891 $ 140.81
====== =======
At December 31, 1996, 1997 and 1998, vested and exercisable options
outstanding were 5,462, 4,985 and 7,600, respectively, at a weighted-average
exercise price of $109.33, $121.63 and $132.07, respectively.
The following table summarizes information about stock options outstanding
at December 31, 1998:
Options Outstanding
-------------------------------------- Weighted-Avg.
Range of Number Weighted-Avg. Remaining
Prices Outstanding Exercise Price Contractual Life
------ ----------- -------------- ----------------
$105.00 to $126.00 5,891 $116.17 7.0 years
$165.00 6,000 $165.00 8.8 years
The Company applies APB Opinion No. 25 in accounting for its stock options.
Pro forma information regarding net income per share is required by SFAS No. 123
and has been determined as if the Company had accounted for its employee stock
options under the fair value method of that statement. The fair value of the
stock options under SFAS No. 123 was determined by using the minimum value
method using the following assumptions:
Risk-free interest rate................. 5-6%
Weighted-average expected life.......... 10 years
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting period. Had the
Company determined compensation cost based on the fair value for its stock
options under SFAS No. 123, the Company's net income for 1996, 1997 and 1998
would have been decreased to the pro forma amounts indicated below:
F-21
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
1996 1997 1998
---- ---- ----
As reported............................ $3,814 $4,331 $1,832
====== ====== ======
Pro forma.............................. $3,706 $4,265 $1,713
====== ====== ======
(13) Related Party Transactions
During the years ended December 31, 1996, 1997 and 1998, the Company
purchased, under normal terms, approximately $3,208, $3,540 and $3,620 of
product from a supplier who is a stockholder in the Company. At December 31,
1997 and 1998, the Company had accounts payable to this supplier of
approximately $23 and $43, respectively.
At December 31, 1997, there was $20,600 due from officers or employees,
which was included in other receivables in the accompanying balance sheet. There
were no amounts due from officers or employees at December 31, 1998.
(14) Customer Deposits
The Company accepts customer deposits as interest-bearing deposits.
Customer deposits are refundable upon demand in either cash or product. Interest
rates paid on customer accounts vary based on economic conditions and are posted
at the locations where the Company accepts customer deposits. The interest rate
accruing on customer deposits for each of the three years ended December 31,
1996, 1997 and 1998 was approximately 9 percent. In December 1998, the rate was
changed to 8.5%. Interest expense on customer deposits totaled approximately
$547, $764 and $920 for the years ended December 31, 1996, 1997 and 1998,
respectively.
Certain customer deposits are from officers or employees of the Company. At
December 31, 1997 and 1998, these deposits from related parties totaled $2,179
and $1,366, respectively.
(15) Commitments and Contingencies
Under the terms of the Lebanon Purchase & Sale Agreement (note 2), the
Company is required to purchase ammoniated fertilizer products from Lebanon at
prices approximating market rates ranging from $145 to $155 per ton in the
following quantities:
Year Ending Tons
----------- ----
1999................................................ 20,000
2000................................................ 15,000
2001................................................ 9,000
------
Total minimum purchases............................. 44,000
======
F-22
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997 and 1998
(Dollars in thousands, except share and per share amounts)
From time to time, the Company has had claims asserted against it by
regulatory agencies or private parties for environmental matters and has
incurred obligations for investigation or remedial actions with respect to
certain of such matters. In addition, the Company is subject to various claims
and legal matters which have arisen in the ordinary course of its business.
Although there can be no assurance as to the ultimate disposition of these
matters, it is the opinion of the Companys management that any such claims
asserted or obligations incurred to date will not result in a material adverse
effect upon the results of operations or financial position of the Company.
(16) Subsequent Events
On January 21, 1999, the Company and Citicorp Venture Capital Ltd. ("CVC"
or the "Sponsor") signed a definitive purchase agreement to acquire (the
"Acquisition") IMC Agribusiness, Inc., Hutson's Ag Service, Inc. and IMC
Nitrogen Company (collectively, "AgriBusiness") from IMC Global Inc. (the
"Seller").
The Company intends to acquire AgriBusiness for approximately $300,000.
AgriBusiness had net sales and net income of $787,000 and $5,300 during the year
ended December 31, 1998, respectively.
Plans call for the Acquisition to be completed by way of merger between
Royster-Clark and AgriBusiness and a cash equity infusion by CVC.
F-23
<PAGE>
ROYSTER-CLARK, INC.
UNAUDITED BALANCE SHEET
(Dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
As of
March 31, 1999
--------------
<S> <C>
Assets
Current assets:
Cash ........................................................................ $ 42
Trade accounts receivable, net of allowance
for doubtful accounts of $1,872 ........................................... 36,920
Other receivables ........................................................... 3,091
Inventories ................................................................. 91,831
Prepaid expenses ............................................................ 4,956
Income taxes receivable ..................................................... --
Deferred tax asset .......................................................... 440
---------
Total current assets ........................................... 137,280
---------
Property, plant and equipment, net ............................................... 29,458
Goodwill, net of accumulated amortization of $1,176 .............................. 5,787
Other assets, net ................................................................ 882
---------
173,407
=========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt ...................................... 2,166
Customer deposits ........................................................... 23,326
Accounts payable ............................................................ 44,612
Accrued expenses ............................................................ 4,864
---------
Total current liabilities ...................................... 74,968
Long-term debt, excluding current installments ................................... 65,760
Deferred income taxes ............................................................ 3,303
Other long-term liabilities ...................................................... 293
---------
Total liabilities .............................................. 144,324
=========
Cumulative redeemable preferred stock, Series B $.01 par value, (liquidation value
$1,000 per share). Authorized 500,000 shares, 12,000 shares issued and
outstanding ................................................................. 12,000
Common stock subject to ESOP put option .......................................... 1,864
Stockholders' equity:
Common stock, $.01 par value. Authorized 1,000,000 shares; 120,497 shares
issued and 116,975 outstanding .............................................. 1
Additional paid-in capital ....................................................... 10,220
Retained earnings ................................................................ 7,430
Common stock subject to put option (10,078 shares
at $185 per share) .......................................................... (1,864)
---------
15,787
Less treasury stock, 3,522 common shares ......................................... (568)
---------
Total stockholders' equity ..................................... 15,219
Commitments, contingencies and subsequent event .................................. ---------
$ 173,407
=========
</TABLE>
See accompanying notes to unaudited financial statements.
F-24
<PAGE>
ROYSTER-CLARK, INC.
UNAUDITED STATEMENTS OF INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------------------
1998 1999
---------------------- -----------------------
<S> <C> <C>
Net sales .................................. $41,284 $53,487
Cost of sales .............................. 34,313 44,042
------- -------
Gross profit ...................... 6,971 9,445
Selling, general and administrative expenses 4,909 7,221
------- -------
Operating income .................. 2,062 2,224
------- -------
Interest expense ........................... 1,219 1,607
------- -------
Income before income taxes ........ 843 617
Income tax expense ......................... 348 251
======= =======
Net income ........................ $ 495 $ 366
======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
F-25
<PAGE>
ROYSTER-CLARK, INC.
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 1999
(Dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Common Stock Issued Additional Common Stock
------------------------------ paid-in Retained subject to
Shares Amount capital earnings put option
------------ -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 .......... 120,497 1 10,220 7,364 (1,864)
Net income ............................ -- -- -- 366 --
Dividends declared - Series B preferred
stock, $100 per share from
January 1, 1999 to March 31, 1999 .. -- -- -- (300) --
-------- -------- -------- -------- --------
Balance at March 31, 1999 ............. 120,497 $ 1 $ 10,220 $ 7,430 $ (1,864)
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock Total
------------------------------ stockholders'
Shares Amount equity
------------ ------------- --------------
<S> <C> <C> <C>
Balance at December 31, 1998 .......... (3,522) (568) 15,153
Net income ............................ -- -- 366
Dividends declared - Series B preferred
stock, $100 per share from
January 1, 1999 to March 31, 1999 .. -- -- (300)
-------- -------- --------
Balance at March 31, 1999 ............. $ (3,522) $ (568) $ 15,219
======== ======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
F-26
<PAGE>
ROYSTER-CLARK, INC.
Unaudited Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1998 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................... $ 495 $ 366
Adjustments to reconcile net income to net cash
used in operating activities:
Increase in allowance for doubtful accounts .......... 72 94
Depreciation and amortization ........................ 611 718
Gain on sale of fixed assets ......................... (31) (6)
Change in deferred income taxes ...................... (464) (191)
Changes in operating assets and liabilities increasing
(decreasing) cash:
Trade accounts receivable ................... (12,312) (13,445)
Other receivables ........................... 317 (530)
Inventories ................................. (38,191) (36,626)
Prepaid expenses ............................ (1,656) (2,236)
Income taxes receivable ..................... -- 307
Other assets ................................ 57 (159)
Customer deposits ........................... 725 (1,036)
Accounts payable ............................ 20,812 20,346
Accrued expenses ............................ 379 1,496
Income taxes payable ........................ 431 126
Other long-term liabilities ................. (280) --
----------- -----------
Total adjustments ....................... $ (29,530) $ (31,142)
----------- -----------
Net cash used in operating activities ... $ (29,035) $ (30,776)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment ...... $ 99 $ 8
Purchases of property, plant and equipment ............... (1,021) (964)
----------- -----------
Net cash used in investing activities ... $ (922) $ (956)
----------- -----------
Cash flows from financing activities:
Payments on revolving note payable to bank ............... $ (47,211) $ (64,725)
Borrowings on revolving note payable to bank ............. 77,746 97,089
Principal payments on long-term debt ..................... (385) (437)
Dividend payments ........................................ (195) (195)
Stock options exercised .................................. 2 --
----------- -----------
Net cash provided by financing activities $ 29,957 $ 31,732
----------- -----------
Net increase in cash .......................................... -- --
Cash at beginning of period ................................... 29 42
----------- -----------
Cash at end of period ......................................... $ 29 $ 42
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest ................. $ 1,208,720 $ 1,462,729
=========== ===========
Cash paid during the period for income taxes ............. $ 416,800 $ 11,198
=========== ===========
</TABLE>
See accompanying notes to unaudited financial statements
F-27
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
March 31, 1999
(Dollars in thousands, except share and per share amounts)
(1) Unaudited Interim Financial Statements
In the opinion of management, the accompanying unaudited interim
financial statements of Royster-Clark, Inc. (the "Company") are
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and pursuant to the
requirements for reporting on Form 10-Q and Article 10 of Regulation
S-X. Accordingly, certain disclosures accompanying annual financial
statements prepared in accordance with GAAP are omitted. In the opinion
of management, all adjustments, consisting of normal recurring accruals
necessary for the fair presentation of financial statements for the
interim period, have been included. The current period's results of
operations are not necessarily indicative of results that ultimately
may be achieved for the year.
(2) Description of Business
Royster-Clark (the Company) sells fertilizer materials, mixed
fertilizers, crop protection chemicals, seeds and other farm supplies
to farmers, dealers and fertilizer blenders and distributors through
retail farm service centers, wholesale distribution facilities and
independent commission agents.
(3) Inventory
Inventories are stated at the lower of cost or market, with cost
being determined by the weighted-average actual method, in which a
first-in, first-out flow is assumed. Costs directly associated with
warehousing and distribution are capitalized into crop protection and
seed inventories. Total warehousing and distribution costs capitalized
into inventories amounted to $1,297. Inventory amounts at March 31,
1999 were as follows:
Chemicals $41,947
Fertilizers 17,890
Fertilizer Materials 14,778
Seeds 14,211
Sundry 3,005
---------
$91,831
=========
F-28
<PAGE>
ROYSTER-CLARK, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
March 31, 1999
(Dollars in thousands, except share and per share amounts)
(4) Commitments, Contingencies and Subsequent Events
(a) Purchase Commitments
Under the terms of the Lebanon Purchase & Sale Agreement, the Company is
required to purchase ammoniated fertilizer products from Lebanon at
prices approximating market rates ranging from $145 to $155 per ton in
the following quantities:
Year ending Tons
----------- ----
1999 20,000
2000 15,000
2001 9,000
------
Total minimum purchases 44,000
======
(b) Legal and Regulatory Matters
From time to time, the Company has had claims asserted against it by
regulatory agencies or private parties for environmental matters and has
incurred obligations for investigation or remedial actions with respect
to certain of such matters. In addition, the Company is subject to
various claims and legal matters which have arisen in the ordinary course
of its business. Although there can be no assurance as to the ultimate
disposition of these matters, it is the opinion of the Company's
management that any such claims asserted or obligations incurred to date
will not result in a material adverse effect upon the results of
operations or financial position of the Company.
(c) Pending Acquisition
On January 21, 1999, the Company and Citicorp Venture Capital, Ltd.
("CVC" or the "Sponsor") signed a definitive purchase agreement to
acquire (the "Acquisition") IMC Agribusiness, Inc., Hutson's Ag
Services, Inc. and IMC Nitrogen Inc. (collectively, "AgriBusiness")
from IMC Global Inc. (the "Seller").
The Company intends to acquire AgriBusiness for approximately $300,000.
AgriBusiness had net sales and net income of $787,000 and $5,300 during
the year ended December 31, 1998. AgriBusiness net sales and net loss for
the quarter ended March 31, 1999 were $127,600 and $10,600 respectively.
Plans call for the Acquisition to be completed by way of merger between
Royster-Clark and AgriBusiness.
F-29
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
IMC Global Inc.
We have audited the accompanying combined balance sheets of IMC
AgriBusiness (a Business Unit of IMC Global Inc.) as of December 31, 1998 and
1997, and the related combined statements of earnings and cash flows for each of
the three years in the period ended December 31, 1998. 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 combined financial position of IMC AgriBusiness at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
January 18, 1999
St. Louis, Missouri
F-30
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
--------------------------------------------
1997 1998
--------------------- ---------------------
(In millions)
<S> <C> <C>
ASSETS
Current Assets:
Cash .......................................................... $ 5.4 $ 6.1
Accounts receivable, net of allowance for doubtful accounts of
$4.3 in 1997 and $3.7 in 1998 ............................... 76.2 63.7
Inventories ................................................... 174.1 157.1
Other current assets .......................................... .8 .5
------ ------
Total current assets ..................................... 256.5 227.4
------ ------
Property, plant, and equipment, net .............................. 150.5 157.8
Goodwill, net of accumulated amortization of $4.6 in 1997 and $6.0
in 1998 ........................................................ 51.9 51.5
Other assets ..................................................... 5.4 3.6
------ ------
$ 464.3 $ 440.3
====== ======
LIABILITIES AND IMC GLOBAL INVESTMENT
Current Liabilities:
Accounts payable .............................................. $ 45.8 $ 47.1
Payable to affiliates ......................................... 21.8 24.7
Accrued liabilities ........................................... 12.5 11.3
Current maturities of long-term debt .......................... 10.5 2.5
------ ------
Total current liabilities ................................ 90.6 85.6
Long-term debt, less current maturities .......................... 4.6 4.6
Deferred income taxes ............................................ 26.1 28.8
Other noncurrent liabilities ..................................... 4.6 3.5
------ ------
Total liabilities ........................................ 125.9 122.5
IMC Global investment ............................................ 338.4 317.8
------ ------
$ 464.3 $ 440.3
====== ======
</TABLE>
See accompanying notes.
F-31
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
COMBINED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------
1996 1997 1998
----------- -------------- -----------
(In millions)
<S> <C> <C> <C>
Net sales....................................... $797.8 $872.6 $787.0
Cost of goods sold.............................. 643.9 708.9 659.2
----- ----- -----
Gross margin.................................... 153.9 163.7 127.8
Selling, general, and administrative expenses... 105.1 120.1 103.3
Merger and restructuring charge................. 13.3 - -
---- ----- -----
Operating earnings.............................. 35.5 43.6 24.5
Other expense (income):
Interest expense............................. 13.1 13.3 13.2
Other, net................................... (0.2) (0.7) 1.9
----- ----- ------
Earnings before taxes........................... 22.6 31.0 9.4
Provision for income taxes...................... 9.8 12.2 4.1
----- ----- -----
Net earnings.................................... $12.8 $18.8 $5.3
===== ===== ====
</TABLE>
See accompanying notes.
F-32
<PAGE>
IMC AGRIBUSINESS,
(a Business Unit of IMC Global Inc.)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------------------------
1996 1997 1998
--------------------- --------------------- ---------------------
(In millions)
<S> <C> <C> <C>
Operating activities
Net Earnings .............................. $ 12.8 $ 18.8 $ 5.3
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation ............................ 15.3 18.7 21.6
Amortization ............................ 2.1 2.1 1.7
Restructuring charge .................... 13.3 -- --
Deferred income taxes ................... (4.8) 3.3 2.7
Other ................................... -- 0.2 1.4
Changes in operating assets and
liabilities:
Accounts receivable ................... 9.5 23.6 12.5
Inventories ........................... 8.9 19.9 17.1
Other current assets .................. (1.1) (2.1) 0.3
Accounts payable ...................... (19.6) (44.6) 1.3
Payable to affiliates ................. 12.7 5.2 2.9
Accrued liabilities ................... (5.5) (2.6) (1.1)
----- ----- -----
Net cash provided by
operating activities ............. 43.6 42.5 65.7
----- ----- -----
Investing activities
Purchases of property, plant, and
equipment, net .......................... (23.0) (27.8) (30.1)
Acquisitions, net of cash acquired ........ (22.9) (50.8) (1.0)
----- ----- -----
Net cash used in investing activities (45.9) (78.6) (31.1)
----- ----- -----
Financing activities
Proceeds from long-term borrowings and
notes ................................... 0.5 5.2 --
Principal payments on long-term ........... (2.5) (0.2) (8.0)
borrowings and notes ....................
Net advances from (to) IMC Global ......... 0.9 33.7 (25.9)
----- ----- -----
Net cash provided by (used in)
financing activities ................ (1.1) 38.7 (33.9)
----- ----- -----
Increase (decrease) in cash .................. (3.4) 2.6 0.7
Cash at beginning of year .................... 6.2 2.8 5.4
----- ----- -----
Cash at end of year .......................... $ 2.8 $ 5.4 $ 6.1
===== ===== =====
</TABLE>
See accompanying notes.
F-33
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998
1. Summary of Significant Accounting Policies
Description of Company and Basis of Presentation
IMC AgriBusiness (the "Company") is a leading supplier of crop production
inputs and services to farmers and retail dealers primarily in the midwestern
and southeastern United States. The Company is a business unit of IMC Global
Inc. (Global) and was formed on July 1, 1996 in connection with the merger of
Global and The Vigoro Corporation (TVC) (Vigoro Merger), which was accounted for
as a pooling of interests. Accordingly, the Company's financial statements prior
to the merger are restated on a combined basis to reflect the Vigoro Merger.
The combined financial statements of the Company reflect the assets,
liabilities, sales, and expenses of the following legal entities: (i) IMC
AgriBusiness, except for IMC Vigoro, the consumer products business unit of
Global, (ii) IMC Nitrogen, Inc., and (iii) Hutson's Ag Services, Inc. All
significant intercompany accounts and transactions between these legal entities
have been eliminated. The Company is not a legal entity, and therefore, the
combined financial statements do not reflect shareholder's equity. The Global
investment represents Global's net investment in the Company and includes
intercompany loans due to Global.
Excluded from the accompanying combined financial statements are certain
real estate investments and FAP, Inc. (a wholly owned subsidiary of TVC), which
consists of a purchased ammonia plant that has not been placed into service. The
net book value of these excluded assets approximated $7.3 million at December
31, 1998. The accompanying combined financial statements have been prepared in
connection with Global's plans to divest the Company. These assets are not
included in the assets to be divested.
Certain amounts in the combined financial statements for periods prior to
December 31, 1998 have been reclassified to conform to the current presentation.
Change in Fiscal Year
Effective with the year ended December 31, 1997, the Company changed from a
June 30 fiscal year-end in order to permit more effective business planning,
including annual budgeting, government reporting, and audit functions, as well
as to align statistical and financial reporting with competitors.
F-34
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Use of Estimates
Management is required to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Cash
The Company's cash is centralized with Global, and the Company transmits
substantially all available cash to Global on a daily basis. Cash on the balance
sheets represents funds which are deposited in the Company's accounts but are
not available to transmit to Global.
Concentration of Credit Risk
The Company sells its products and services to farmers or retail dealers
primarily in the midwestern and southeastern United States. No single customer
or group of affiliated customers accounted for more than 10 percent of the
Company's net sales.
Inventories
Inventories are valued at the lower of cost or market (net realizable
value). Cost for substantially all of the Company's inventories is calculated on
a FIFO (first-in, first-out) or average cost basis.
Property, Plant, and Equipment
Property, plant, and equipment are carried at cost. Expenditures for major
replacements and improvements are capitalized, except for turnarounds.
Turnarounds are large-scale maintenance projects that are performed regularly,
usually every 18 to 24 months. Expenditures for turnarounds are deferred when
incurred and amortized into cost of goods sold on a straight-line basis,
generally over an 18-month period. The deferred portion of the turnaround
expenditures is classified in other assets.
Depreciation is computed on a straight-line basis over the estimated useful
life of the asset as follows: buildings, 10 to 20 years; machinery and
equipment, 3 to 10 years.
In 1997, 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." The statement requires the recognition of
an impairment loss on a long-lived asset held for use when events and
circumstances indicate that the estimate of undiscounted future cash flows
expected to be generated by the asset are less than its carrying amount.
Adoption of this statement did not have a material effect on the Company's
financial statements.
F-35
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
Sales revenue is recognized when the product is shipped to the customer or
a service is performed. Shipments to independent warehouses are recorded in
inventory and recognized as sales revenue when the product is shipped to a
customer.
Goodwill
Goodwill, representing the excess of purchase cost over the fair value of
net assets acquired, is generally amortized using the straight-line method over
periods not exceeding 40 years. The Company periodically evaluates the
realizability of goodwill based on projected undiscounted cash flows and
operating income of each business having material goodwill balances.
Stock-Based Compensation Plans
Officers and key managers of the Company participate in various stock
option plans sponsored by Global. Under these plans, employees may be granted
non-qualified stock options. The Company has elected to continue to account for
these stock-based compensation plans under the provisions of Accounting
Principles Board Opinion No. 25 (APB No. 25). Accordingly, no compensation cost
has been charged to earnings for options granted, as the option price equals the
market price on the date of grant for all options. The pro forma disclosures
under SFAS No. 123 have not been made, as this information is not deemed
relevant to the operating results of the Company.
Accrued Environmental Costs
The Company's activities include the manufacturing and blending of crop
nutrients and the blending of crop nutrients with pesticide products. These
operations are subject to extensive federal, state, provincial, and local
environmental regulations, including laws related to air and water quality,
management of hazardous and solid wastes, and management and handling of raw
materials and products. Expenditures that relate to an existing condition caused
by past operations of the Company or prior landowners and that do not contribute
to current or future revenue generation are charged to operations.
Liabilities are recorded for identified sites when (i) litigation has
commenced or (ii) a claim or assessment has been asserted or is probable and the
likelihood of an unfavorable outcome is probable.
In 1997, the Company adopted Statement of Position (SOP) 96-1,
"Environmental Remediation Liabilities," promulgated by the American Institute
of Certified Public Accountants, which provides guidance for the accrual of
environmental remediation costs. Adoption of this statement did not have a
material effect on the Company's financial statements.
F-36
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Derivatives
The Company is exposed to fluctuations in the purchase price of certain
grain products, primarily soybeans, corn, and wheat, and certain fertilizer
products. The Company periodically enters into futures contracts in order to
minimize these risks, but not for speculative purposes. The Company held no
material futures contracts at December 31, 1997 or 1998.
Pending Adoption of New Accounting Standard
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 1999. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new statement will have a significant effect on earnings or the
financial position of the Company.
2. Transactions With IMC Global Inc. and Affiliates
Global provides certain administrative functions to the Company, including
audit, income tax planning and compliance, employee benefit plan design and
compliance, environmental health and safety consulting, and property and
casualty insurance administration. These services are provided to the Company
without charge, and therefore, the cost of such services is not included in the
accompanying combined financial statements. Management of the Company believes
that the total incremental cost of these services is not significant.
The Company purchases substantially all of its phosphate and potash
fertilizers from affiliates of Global at market-based prices, and these
purchases totaled $190 million, $219 million, and $216 million in 1996, 1997,
and 1998, respectively.
Borrowing needs for working capital and other corporate purposes of the
Company are funded by Global. Intercompany loans and balances with Global and
affiliates totaled $222.6 million and $194.2 million at December 31, 1997 and
1998, respectively, and are included in the Global investment. Interest expense
on the intercompany loans and balances is at a variable borrowing rate (weighted
average rate of 5.8 percent for 1998) and totaled $11.3 million, $11.5 million,
and $11.8 million in 1996, 1997, and 1998, respectively. Cash payments to Global
for interest were $11.7 million, $11.4 million, and $12.6 million in 1996, 1997,
and 1998, respectively.
F-37
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Changes in the Global investment were as follows (in millions):
Balance at December 31, 1995............................. $272.2
Net earnings ......................................... 12.8
Net advances from Global.............................. .9
--
Balance at December 31, 1996............................. 285.9
Net earnings.......................................... 18.8
Net advances from Global.............................. 33.7
----
Balance at December 31, 1997............................. 338.4
Net earnings.......................................... 5.3
Net advances to Global................................ (25.9)
------
Balance at December 31, 1998............................. $317.8
======
3. Inventories
Inventories as of December 31 were as follows:
1997 1998
--------------------
(In millions)
Products ............................................. $166.3 $150.3
Operating materials and supplies...................... 7.8 6.8
------ ------
$174.1 $157.1
====== ======
4. Property, Plant, and Equipment
The Company's investment in property, plant, and equipment as of December
31 is summarized as follows:
1997 1998
--------------------
(In millions)
Land.................................................. $21.9 $22.6
Buildings and improvements............................ 47.9 49.7
Machinery and equipment............................... 158.2 187.3
Construction in process............................... 10.6 2.8
------ ------
238.6 262.4
Less accumulated depreciation (88.1) (104.6)
------- --------
$150.5 $157.8
====== ======
F-38
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. Other Assets
Other assets as of December 31 were as follows:
1997 1998
-----------------------------
(In millions)
Investments in joint ventures ............... $2.4 $2.1
Deferred turnarounds......................... 1.1 0.5
Notes receivable............................. 1.1 0.6
Other........................................ 0.8 0.4
---- ----
$5.4 $3.6
==== ====
6. Accounts Payable
Accounts payable as of December 31 were as follows:
1997 1998
-----------------------------
(In millions)
Trade accounts payable....................... $21.7 $27.1
Customer prepayments......................... 11.9 11.4
Outstanding bank drafts...................... 12.2 8.6
----- -----
$45.8 $47.1
===== =====
7. Merger and Restructuring Charge
In connection with the Vigoro Merger, Global adopted a plan to restructure
its business operations into a decentralized organizational structure with
stand-alone business units. This restructuring resulted in staff reductions and
related severance benefits. In addition, in connection with the restructuring,
the Company undertook a detailed review of its accounting records and valuation
of various assets and liabilities. As a result, in 1996 the Company recorded
charges totaling $13.3 million comprised of (i) $6.7 million related to the
valuation of certain plant facilities and other obsolete assets, (ii) $4.3
million for environmental matters, (iii) $0.4 million related to employee and
severance costs, and (iv) $1.9 million for other matters. The majority of these
charges were noncash-related. The balances, primarily consisting of
environmental liabilities, of this reserve at December 31, 1997 and 1998, were
$4.6 million and $4.0 million, respectively. Actual cash expenditures accounted
for $0.1 million of the change in the reserve during 1998, with the remaining
reduction due to the revision of estimates determined in prior periods and other
non-cash charges.
F-39
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
8. Other Expense (Income)
Other expense (income) consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1997 1998
------------------------------------------------
(In millions)
<S> <C> <C> <C>
Loss on sale of seed-processing facility $ -- $ -- $ 1.3
Divestiture expenses ................... $ -- $ -- 0.3
Interest income ........................ (0.3) (0.3) (0.3)
Other, net ............................. 0.1 (0.4) 0.4
---- ---- ----
$ (0.2) $ (0.7) $ 1.9
==== ==== ====
</TABLE>
9. Business Acquisitions
In January 1996, the Company acquired several retail distribution units
from Agri Supply Company, Inc. for 267,000 shares of TVC common stock with a
market value of approximately $15.0 million and $3.5 million in cash.
Goodwill of $10.0 million was recorded from this purchase.
Effective May 1, 1997, the Company acquired Hutson's Ag Services, Inc., a
retail distribution company, and Hutson Company, Inc., a storage terminal
company, for approximately $28.0 million in cash, a $5.0 million note, and
208,364 shares of Global's common stock with a market value of approximately
$8.0 million. Goodwill of $16.0 million was recorded related to this
transaction. Also during 1997, the Company acquired several additional retail
distribution units for approximately $11.0 million in cash and recorded goodwill
from these purchases of $5.0 million.
During 1998, the Company acquired one retail distribution unit for
approximately $1.0 million in cash. Goodwill of $0.4 million was recorded from
this purchase.
All of these acquisitions were accounted for under the purchase method of
accounting, and accordingly, results of operations for the acquired businesses
have been included in the Company's statements of earnings since the respective
dates of acquisition.
10. Long-Term Debt
Long-term debt at December 31 consisted of the following:
1997 1998
-----------------------
(In millions)
Note payable........................................ $5.0 $5.0
Industrial development and revenue bonds............ 10.1 2.1
---- -----
15.1 7.1
Less current maturities............................. 10.5 2.5
---- ----
$4.6 $4.6
==== ====
F-40
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the Company's purchase of Hutson Company, Inc. in 1997,
the Company entered into a $5.0 million note payable, due in June 2002, bearing
interest at an annual rate of 7.25 percent. The note payable contains provisions
which allow the holder to demand payment in full if a change in the Company's
ownership occurs or demand payment for 50 percent of the note's balance if the
individual federal long-term capital gains tax rate is reduced below 28 percent.
Because the capital gains tax rate has been reduced below 28 percent, $2.5
million of the note payable has been classified as a current liability in the
accompanying combined balance sheet.
Interest on the industrial revenue bond is variable and based on short-term
rates for tax-exempt securities (3.9 percent at December 31, 1998). The bond is
secured by a letter of credit that is renewed annually by the Company. There
were no amounts outstanding under the letter of credit at December 31, 1997 or
1998, respectively.
As of December 31, 1998, the estimated fair value of the Company's
long-term debt approximates its carrying value. The fair value was calculated in
accordance with the requirements of SFAS No. 107, "Disclosures of Fair Value of
Financial Instruments," and was estimated by discounting the future cash flows
using rates currently available to the Company for debt instruments with similar
terms and remaining maturities.
Maturities for the next four years are as follows (in millions):
1999..................................... $2.5
2000..................................... --
2001..................................... --
2002..................................... 4.6
----
$7.1
Interest paid on third-party debt totalled $1.9 million, $2.3 million, and
$2.0 million in 1996, 1997, and 1998, respectively.
11. Retirement Plans
The majority of the Company's employees participate in defined contribution
pension and savings plans (Plans) sponsored by Global, whereby participants are
permitted to defer a portion of their compensation. The Company's contributions
to the Plans are based on a percentage of wages earned by the eligible employees
or by matching a percentage of employee contributions. The majority of employees
not covered by the Plans are included in plans under collective bargaining
agreements or a defined benefit pension plan sponsored by Global. The Company
contributions are based on the applicable provisions of each plan. Total pension
and savings expense was $3.9 million, $3.5 million, and $4.6 million in 1996,
1997, and 1998, respectively.
12. Postemployment and Postretirement Benefit Plans
Through plans sponsored by Global or the Company, workers' compensation and
disability are provided to certain former or inactive employees after employment
but before retirement. The Company's expense related to funding these benefits
was not significant.
F-41
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Effective January 1, 1998, substantially all employees were offered certain
postretirement health benefits under Global's postretirement plan based on years
of service. The Company's expense related to funding these benefits was not
significant.
13. Income Taxes
The Company is included in the consolidated income tax return filed by
Global. However, the income tax provision and deferred tax accounts appearing in
the accompanying combined financial statements reflect the results of the
Company as a separate entity on a stand-alone basis.
The following is a summary of the provision for income taxes and deferred
income taxes, a reconciliation of the U.S. statutory income tax rate to the
effective income tax rate, and the components of deferred tax assets and
liabilities.
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1997 1998
----------------- ----------------- -----------------
(In millions except percentages)
<S> <C> <C> <C>
Provision for income taxes:
Current ...................................... $ 14.6 $ 8.9 $ 1.4
Deferred ..................................... (4.8) 3.3 2.7
----- ----- -----
$ 9.8 $ 12.2 $ 4.1
===== ===== =====
Effective income tax rate reconciliation:
Federal tax at U.S. statutory income tax rate $ 7.9 $ 10.9 $ 3.3
Increase (decrease) resulting from:
State income taxes, net of federal tax benefit 0.8 1.0 0.3
Amortization of goodwill ..................... 0.5 0.4 0.5
Other ........................................ 0.6 (0.1) --
----- ----- -----
$ 9.8 $ 12.2 $ 4.1
===== ===== =====
Effective income tax rate ....................... 43.0% 39.4% 44.1%
===== ===== =====
</TABLE>
F-42
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
December 31,
1997 1998
-------------------------------------------
(in millions)
<S> <C> <C>
Components of deferred tax assets and liabilities:
Deferred tax assets
Allowance for doubtful accounts ............. $ 2.0 $ 1.4
Other noncurrent liabilities ................ 2.4 1.3
Other ....................................... 1.0 1.0
----- ----
Total deferred tax assets ...................... 5.4 3.7
Deferred tax liabilities:
Property, plant and equipment ............... 30.9 31.9
Other ....................................... 0.6 0.6
----- ----
Total deferred tax liabilities ................. 31.5 32.5
----- ----
Net deferred tax liability ....................... $26.1 $28.8
===== ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the amounts of assets and liabilities for accounting purposes and the
amounts used for income tax purposes.
Income taxes paid net of refunds received were $2.4 million, $3.1 million,
and $0.2 million for 1996, 1997, and 1998, respectively. Global files a
consolidated tax return for federal income tax purposes. As such, included in
income taxes paid were amounts paid to Global of $1.1 million in 1997. No tax
payments, net of refunds, were made to Global in 1998 or 1996.
14. Long-Term Incentive Plan
Certain officers of the Company participate in a long-term incentive plan
sponsored by Global and established in 1997. Under the plan, officers may be
awarded stock or cash upon achievement of specified objectives over a three-year
period beginning July 1, 1996. Final payouts are made at the discretion of the
Compensation Committee of Global's Board of Directors, whose members are not
participants in the Plan. Approximately $1.5 million was expensed in 1997 for
performance awards earned for the relevant period under the plan. No expense was
recorded under the plan in 1998 or 1996.
15. Commitments
The Company purchases natural gas under fixed-price contracts which range
from three to ten years. Natural gas purchases related to these long-term
purchase commitments were $15.2 million, $12.6 million, and $13.6 million in
1996, 1997, and 1998, respectively.
The Company leases office facilities, rail cars, and various types of
equipment under operating leases whose terms range from 3 to 15 years. Rental
expense was $8.4 million, $11.1 million, and $12.8 million in 1996, 1997, and
1998, respectively.
F-43
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Summarized below is a schedule of future minimum long-term purchase
commitments and minimum lease payments under noncancelable operating leases as
of December 31, 1998:
Operating
Purchase Lease
Commitments Commitments
------------------------------------------
(In millions)
1999............................ $20.6 $ 7.3
2000............................ 15.7 6.3
2001............................ 7.4 5.1
2002............................ 3.9 3.6
2003............................ 1.7 2.6
Subsequent years................ 3.7 3.2
--- ---
$53.0 $28.1
===== =====
16. Contingencies
The historical use and handling of regulated chemical substances and crop
nutrient products in the normal course of the Company's business have resulted
in contamination at facilities presently or previously owned or operated by the
Company. The Company has also purchased facilities that were contaminated by
previous owners through their use and handling of regulated chemical substances.
Spills or other unintended releases of regulated substances have occurred in the
past and potentially could occur in the future, possibly requiring the Company
to undertake or fund cleanup efforts. At some locations, the Company has agreed,
pursuant to consent orders with the appropriate governmental agencies, to
undertake certain investigations (which currently are in progress) to determine
whether remedial action may be required to address contamination.
The Company believes that, pursuant to several indemnification agreements,
it is entitled to at least partial, and in many instances complete,
indemnification for a portion of the costs that may be expended by the Company
to remedy environmental issues at certain facilities. These agreements address
issues that resulted from activities occurring prior to the Company's
acquisition of facilities or businesses from certain other public and private
entities. The Company has already received and anticipates receiving amounts
pursuant to the indemnification agreements for certain of its expenses incurred
to date and to be incurred in the future.
Recorded environmental liabilities at December 31, 1997 and 1998, for the
estimated cost of cleanup efforts of identified contamination were $4.6 million
and $3.5 million, respectively, and are included in noncurrent liabilities in
the accompanying combined balance sheets. Actual cash expenditures accounted for
$0.5 million of the change in the reserve during 1998, with the remaining
reduction due to the revision of estimates determined in prior periods and other
noncash charges.
The Company is subject to various claims arising out of the conduct of its
business, including environmental matters. While the ultimate resolution of
these claims against the Company cannot be predicted with certainty, management
of the Company believes that the resolution of these matters will not have a
material adverse effect on its combined financial condition or results of
operations.
F-44
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
17. Operating Segments
The Company's reportable segments are strategic business segments that
operate through distinct distribution networks and in some cases different
geographic areas. They are managed separately because each business requires
different marketing and operational strategies.
The Company has three reportable segments: Retail, Rainbow, and IMC
Nitrogen. The Company's Retail segment supplies crop production inputs and
services to farmers primarily in the midwestern and southeastern United States
through its retail farm centers (Farmarkets). The Company's Rainbow segment is
primarily a producer and wholesaler of premium granulated fertilizers in the
southeastern United States. IMC Nitrogen is a producer and wholesale marketer of
fertilizers in the eastern cornbelt and operates a fully integrated nitrogen
plant.
F-45
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. There are no significant
intersegment sales. The Company evaluates performance based on operating
earnings of the respective business segment. Segment information for the years
1996, 1997, and 1998 was as follows (in millions):
<TABLE>
<CAPTION>
IMC
Retail Rainbow Nitrogen Other(1) Total
------------ ------------- ------------ ------------- -------------
1996
<S> <C> <C> <C> <C> <C>
Net sales............................. $361.7 $298.0 $138.1 $ - $797.8
Gross margins......................... 75.8 38.7 39.4 - 153.9
Operating earnings.................... 3.2 16.4 29.2 (13.3) 35.5
Depreciation and amortization......... 13.5 1.0 2.9 - 17.4
Total assets.......................... 222.9 82.0 108.8 3.4 417.1
Capital expenditures.................. 14.4 0.7 7.9 - 23.0
<CAPTION>
1997
<S> <C> <C> <C> <C> <C>
Net sales............................. $439.7 $275.6 $157.3 $ - $872.6
Gross margins......................... 97.8 32.9 33.0 - 163.7
Operating earnings.................... 10.9 9.9 22.8 .- 43.6
Depreciation and amortization......... 14.3 1.7 4.8 - 20.8
Total assets.......................... 286.4 79.0 94.6 4.3 464.3
Capital expenditures.................. 14.7 3.2 9.9 - 27.8
<CAPTION>
1998
<S> <C> <C> <C> <C> <C>
Net sales............................. $410.1 $243.3 $133.6 $ - $787.0
Gross margins......................... 85.9 26.1 15.8 - 127.8
Operating earnings.................... 7.1 9.4 8.0 .- 24.5
Depreciation and amortization......... 15.7 1.9 5.7 - 23.3
Total assets.......................... 264.9 71.1 100.5 3.8 440.3
Capital expenditures.................. 9.1 2.5 18.5 - 30.1
</TABLE>
(1) Includes miscellaneous assets not associated with a reportable segment and
in 1996 certain merger and restructuring charges.
18. Quarterly Financial Data (Unaudited) (in millions)
<TABLE>
<CAPTION>
1997
-----------------------------------------------------------------------------
March 31 June 30 September 30 December 31 Year
<S> <C> <C> <C> <C> <C>
Net sales..................... $139.9 $489.8 $98.8 $144.1 $872.6
Operating earnings (loss)..... (4.9) 66.8 (14.8) (3.5) 43.6
Net earnings (loss) (4.7) 38.2 (10.6) (4.1) 18.8
<CAPTION>
1998
-----------------------------------------------------------------------------
March 31 June 30 September 30 December 31 Year
<S> <C> <C> <C> <C> <C>
Net sales..................... $140.2 $428.5 $97.2 $121.1 $787.0
Operating earnings (loss)..... (7.6) 51.1 (13.8) (5.2) 24.5
Net earnings (loss)........... (5.8) 26.7 (9.5) (6.1) 5.3
</TABLE>
F-46
<PAGE>
IMC AGRIBUSINESS
(a Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
19. Subsequent Event (Unaudited)
On January 21, 1999, Global signed a definitive agreement to sell the
Company. The assets and liabilities on the accompanying balance sheet are
reflected at historical cost and do not reflect any adjustments in connection
with this transaction. This transaction is expected to close in the first
quarter of 1999.
F-47
<PAGE>
IMC AgriBusiness
(a Business Unit of IMC Global Inc.)
UNAUDITED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
March 31,
1999
-------------------------
(In millions)
<S> <C>
ASSETS
Current Assets:
Cash ....................................................... $ --
Accounts receivables, net of allowance for doubtful accounts
of $4.1 .................................................. 79.3
Inventories ................................................ 214.8
Other current assets ....................................... 0.7
-------
Total current assets ................................... 294.8
Property, plant and equipment, net .............................. 157.8
Goodwill, net of accumulated amortization of $6.4 ............... 51.3
Other assets .................................................... 3.3
-------
$ 507.2
=======
LIABILITIES AND IMC GLOBAL INVESTMENT
Current Liabilities:
Accounts payable ........................................... $ 138.5
Payable to affiliates ...................................... 19.1
Accrued liabilities ........................................ 6.6
Current maturities of long-term debt ....................... 2.5
-------
Total current liabilities .............................. 166.7
Long-term debt, less current maturities ......................... 4.6
Deferred income taxes ........................................... 29.6
Other noncurrent liabilities .................................... 3.2
-------
Total liabilities ...................................... 204.1
IMC Global Investment ........................................... 303.1
-------
$ 507.2
=======
</TABLE>
See accompanying notes.
<PAGE>
IMC AgriBusiness
(a Business Unit of IMC Global Inc.)
UNAUDITED COMBINED STATEMENTS OF LOSS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------------------
1998 1999
----------------------- ------------------------
(in millions)
<S> <C> <C>
Net sales .................................. $ 140.3 $ 127.6
Cost of goods sold ......................... 121.5 114.8
-------- --------
Gross margin ............................... 18.8 12.8
Selling, general and administrative expenses 26.3 27.8
-------- --------
Operating loss ............................. (7.5) (15.0)
Other expense (income):
Interest expense ........................ 2.9 3.0
Other, net .............................. (0.3) 0.1
-------- --------
2.6 3.1
-------- --------
Loss before taxes .......................... (10.1) (18.1)
Benefit from income taxes .................. (4.8) (7.5)
======== ========
Net loss ................................... $ (5.3) $ (10.6)
======== ========
</TABLE>
See accompanying notes.
F-49
<PAGE>
IMC AGRIBUSINESS,
(a Business Unit of IMC Global Inc.)
UNAUDITED COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------------------
1998 1999
------------------------- -----------------------
(In millions)
<S> <C> <C>
Operating activities:
Net loss ................................................ $ (5.3) $ (10.6)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation .......................................... 5.2 5.7
Amortization .......................................... 0.4 0.4
Deferred income taxes ................................. 0.1 0.8
Other ................................................. 0.7 (0.2)
Changes in operating assets and liabilities:
Accounts receivables ................................ (12.8) (15.6)
Inventories ......................................... (85.1) (57.7)
Other current assets ................................ (0.2) (0.2)
Accounts payable .................................... 103.7 91.4
Payables to affiliates .............................. (1.6) (5.6)
Accrued liabilities ................................. (1.3) (4.7)
------ -----
Net cash provided by operating activities ......... $ 3.8 $ 3.7
------ -----
Investing activities:
Purchases of property, plant and equipment, net ......... (6.4) (5.7)
Acquisitions, net of cash acquired ...................... (1.0) --
------ -----
Net cash used in investing activities ............. (7.4) (5.7)
------ -----
Financing activities:
Principal payments on long-term borrowings .............. (3.7) --
Net advances from (to) IMC Global ....................... 3.9 (4.1)
------ -----
Net cash provided by (used in) financing activities . 0.2 (4.1)
------ -----
Decrease in cash ........................................... (3.4) (6.1)
Cash - beginning of period ................................. 5.4 6.1
------ -----
Cash - end of period ....................................... $ 2.0 $ --
====== =====
</TABLE>
See accompanying notes.
F-50
<PAGE>
IMC AGRIBUSINESS
(A Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS
March 31, 1999
($ in millions)
1. Basis of Presentation
The unaudited interim condensed combined financial statements of IMC
AgriBusiness (a business unit of IMC Global Inc.) do not include all disclosures
normally provided in annual financial statements. These financial statements
should be read in conjunction with the Company's audited combined financial
statements for the year ended December 31, 1998. In the opinion of management,
all adjustments considered necessary for a fair presentation of the unaudited
interim combined financial statements have been included therein and are of a
normal recurring nature. Certain 1998 amounts have been reclassified to conform
to the 1999 presentation. Interim results are not necessarily indicative of the
results expected for the full year.
2. IMC Global Investment
Changes in the IMC Global Investment were as follows:
Balance at December 31, 1998 ................... $ 317.8
Net loss ................................... (10.6)
Net advances to Global ..................... (4.1)
--------
Balance at March 31, 1999 ...................... $ 303.1
========
3. Inventories
Inventories were as follows:
March 31,
1999
----
Products .................................................. $ 208.0
Operating materials and supplies .......................... 6.8
-------
$ 214.8
=======
F-51
<PAGE>
IMC AGRIBUSINESS
(A Business Unit of IMC Global Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
March 31, 1999
($ in millions)
4. Operating Segments
<TABLE>
<CAPTION>
Three months ended March 31, 1998
Retail Rainbow Nitrogen Other (a) Total
------ ------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
Net sales from external customers......... $41.9 $73.2 $25.2 $- $140.3
Gross margins............................. 6.5 9.4 2.9 - 18.8
Operating income (loss)................... (13.1) 4.7 0.9 - (7.5)
Depreciation and amortization............. 3.6 0.6 1.4 - 5.6
Total assets.............................. 309.5 112.3 134.3 4.0 560.1
Capital expenditures...................... 1.5 0.8 4.1 - 6.4
<CAPTION>
Three months ended March 31, 1999
Retail Rainbow Nitrogen Other (a) Total
------ ------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
Net sales from external customers.......... $39.9 $55.9 $31.8 $- $127.6
Gross margins............................. 4.7 6.5 1.6 - 12.8
Operating income (loss)................... (16.1) 2.0 (0.9) - (15.0)
Depreciation and amortization............. 3.7 0.6 1.8 - 6.1
Total assets.............................. 300.7 91.3 110.8 4.4 507.2
Capital expenditures...................... 4.3 0.5 0.9 - 5.7
</TABLE>
(a) Includes miscellaneous assets not associated with a reportable segment
5. Subsequent Event
On April 21, 1999, IMC Global Inc. sold the Company to Royster-Clark, Inc. The
assets and liabilities on the accompanying balance sheet are reflected at
historical cost and do not reflect any adjustments in connection with the sale.
F-52
<PAGE>
Schedule 1
ROYSTER-CLARK, INC.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
Balance, Amounts
Beginning Charged to Balance,
of Year Expense Deduction End of Year
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996 $ 802,401 $1,509,338 $ (894,465) $1,417,274
Year Ended December 31, 1997 $1,417,274 $ 687,706 $ (304,980) $1,800,000
Year Ended December 31, 1998 $1,800,000 $ 451,259 $ (451,259) $1,800,000
</TABLE>
S-1
<PAGE>
Schedule 2
IMC AGRIBUSINESS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
Balance, Amounts
Beginning Charged to Balance,
of Year Expense Deduction End of Year
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996 $2,828,287 $3,687,300 $(2,406,772) $4,108,815
Year Ended December 31, 1997 $4,108,815 $4,177,554 $(3,956,848) $4,329,521
Year Ended December 31, 1998 $4,329,521 $ 905,138 $(1,550,731) $3,683,928
</TABLE>
S-2
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides in relevant
part that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. The certificate of incorporation of IMC
AgriBusiness, Inc. and the bylaws of IMC AgriBusiness, Inc., IMC Nitrogen
Company and Hutson's Ag Service, Inc. contain indemnification provisions
permitted by Section 145 of the Delaware General Corporation Law.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper. Each of the Bylaws of IMC AgriBusiness, Inc. and IMC Nitrogen Company
contain indemnification provisions permitted by Section 145 of the Delaware
General Corporation Law.
Section 145 also provides that to the extent a director, officer, employee
or agent of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to above, or defense of any
claim issue or matter therein, he shall be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection therewith. The Bylaws of Hutson's Ag Service, Inc. expressly include
such a provision.
Furthermore, Section 145 provides that nothing in the above-described
provisions shall be deemed exclusive of any other rights to indemnification or
advancement of expenses to which any person may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
The Bylaws of the Company provide for the indemnification of any person
entitled to indemnity under law, to the fullest extent permitted by law.
The Bylaws of Royster-Clark Group provide for the indemnification of any
person who was or is party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director or officer of the company or a constituent
corporation absorbed in a consolidation or merger, or is or was serving at the
request of the company or a constituent corporation absorbed in a consolidation
or merger, as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or is or was a director or officer of the
company serving at its request as an administrator, trustee or other fiduciary
of one or more of the employee benefit plans of the company or other enterprise,
against expenses (including attorneys' fees), liability and loss actually and
reasonably incurred or suffered by such person in connection with such
proceeding, whether or not the indemnified liability arises or arose from any
threatened, pending or completed proceeding by or in the right of the company,
except to the extent that such indemnification is prohibited by applicable law.
Section 102(b)(7) of the Delaware General Corporation Law provides that a
corporation may in its certificate of incorporation eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director except for
liability: for any breach of the director's duty of loyalty to the corporation
or its stockholders; for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; under Section 174 of the
Delaware General Corporation Law (pertaining to certain prohibited acts
including unlawful payment of dividends or unlawful purchase or redemption of
the corporation's capital stock); or for any transaction from which the director
derived an improper personal benefit. The Certificate of Incorporation of each
of the Company, Royster-Clark Group, IMC Nitrogen Company and IMC AgriBusiness,
Inc., contains a provision so limiting the personal liability of directors.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.01 Stock Purchase Agreement dated January 21, 1999 by and among
IMC Global Inc., The Vigoro Corporation and R-C Delaware
Acquisition Inc.*
2.02 First Amendment to the Stock Purchase Agreement dated as of April 13, 1999 among IMC Global Inc.,
The Vigoro Corporation and R-C Delaware Acquisition Inc.
3.01 Restated Certificate of Incorporation of the Company.
3.02 Certificate of Amendment of Restated Certificate of Incorporation of the Company.
3.03 Amended and Restated Bylaws of the Company.
3.04 Amended and Restated Certificate of Incorporation of Royster-Clark Group, Inc.
3.05 Bylaws of Royster-Clark Group, Inc.
3.06 Certificate of Incorporation of IMC AgriBusiness Inc.
3.07 Certificate of Amendment to Certificate of Incorporation of IMC AgriBusiness Inc.
3.08 Bylaws of IMC AgriBusiness Inc.
3.09 Certificate of Incorporation of IMC Nitrogen Company.
3.10 Certificate of Amendment to Certificate of Incorporation of IMC Nitrogen Company.
3.11 Bylaws of IMC Nitrogen Company.
3.12 Articles of Incorporation of Hutson's Ag Service, Inc.
3.13 Certificate of Amendment to Certificate of Incorporation of Hutson's Ag Service, Inc.
3.14 Bylaws of Hutson's Ag Service, Inc.
3.15 Certificate of Formation of Royster-Clark Resources LLC.
3.16 Limited Liability Company Agreement of Royster-Clark Resources LLC.
3.17 Certificate of Formation of Royster-Clark Realty LLC.
3.18 Limited Liability Company Agreement of Royster-Clark Realty LLC.
3.19 Certificate of Formation of Royster-Clark AgriBusiness Realty LLC.
3.20 Limited Liability Company Agreement of Royster-Clark AgriBusiness Realty LLC.
3.21 Certificate of Formation of Royster-Clark Hutson's Realty LLC.
3.22 Limited Liability Company Agreement of Royster-Clark Hutson's Realty LLC.
3.23 Certificate of Formation of Royster-Clark Nitrogen Realty LLC.
3.24 Limited Liability Company Agreement of Royster-Clark Nitrogen Realty LLC.
4.01 Indenture dated as of April 22, 1999 by and among the Company,
the Guarantors, and the United States Trust Company of New
York, as Trustee.
4.02 Form of 10-1/4% First Mortgage Note Due 2009 (included in Exhibit 4.01).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
4.03 Registration Rights Agreement dated as of April 22, 1999 by and among the Company, the Guarantors,
and Donaldson, Lufkin & Jenrette Securities Corporation and J.P. Morgan Securities Inc. (each an
"Initial Purchaser").
4.04 Exchange Agreement dated as of April 22, 1999 among 399 Venture Partners, Inc., Francis P. Jenkins,
Jr., Royster-Clark, Inc. and Royster-Clark Group, Inc.
4.05 Registration Rights Agreement dated as of April 22, 1999 by and among Royster-Clark Group, Inc.,
399 Venture Partners, Inc., and other stockholders of Royster-Clark Group, Inc.
4.06 Securities Purchase and Holders Agreement dated as of April 22, 1999 by and among Francis P.
Jenkins, Jr., 399 Ventures, and certain management stockholders.
4.07 Preferred Stockholders' Agreement dated as of April 22, 1999 by and among 399 Venture Partners,
Inc. and certain management Stockholders.
5.01 Opinion of Dechert Price & Rhoads.
10.01 Credit Agreement dated as of April 22, 1999 by and among the Company, the Guarantors, various
lenders, DLJ Capital Funding, as arranger and syndication agent, J.P. Morgan Securities Inc.,
as documentation agent and U.S. Bancorp Ag Credit, Inc., as administrative agent.
10.02 Purchase Agreement dated April 15, 1999 among the Company, the Guarantors and the Initial
Purchasers.
10.03 Supply Agreement dated as of April 22, 1999 among IMC Kalium Ltd., IMC-Agrico Company and the
Company. Portions of this exhibit have been omitted pursuant to a request for confidential treatment.**
10.04 Company Employee Savings and Investment Plan.
10.05 Royster-Clark Group, Inc. 1999 Restricted Stock Purchase and Option Plan.
10.06 Employment Agreement dated as of April 22, 1999 by and among Francis P. Jenkins, Jr., Royster-Clark
Group, Inc. and Royster-Clark, Inc.
10.07 Master Conveyance Agreement dated as of April 22, 1999 by and among IMC Global Inc., The Vigoro
Corporation, the Company and United States Trust Company of New York
12.01 Statement of Computation of Ratio of Earnings to Fixed Charges.
21.01 Subsidiaries of the Company and the Additional Registrants.
23.01 Consent of Dechert Price & Rhoads (included in the opinion filed as Exhibit 5.01).
23.02 Consent of KPMG LLP.
23.03 Consent of Ernst & Young LLP.
24.01 Power of Attorney (included on each of the signature pages).
25.01 Statement of Eligibility and Qualification of United States Trust Company of New York on Form T- 1.
27.1 Financial Data Schedule - Royster-Clark, Inc.
27.2 Financial Data Schedule - AgriBusiness.
99.01 Form of Letter of Transmittal.
99.02 Notice of Guaranteed Delivery.
99.03 Schedule 1 - Allowance for Doubtful Accounts-Royster-Clark, Inc.
99.04 Schedule 1 - Allowance for Doubtful Accounts-AgriBusiness.
</TABLE>
- ---------------
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this
Agreement are omitted. The Exhibit contains a list identifying the
contents of all schedules and the Registrants agree to furnish
supplementally copies of such schedules to the Commission upon request.
** Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
- ---------------
(b) Financial Statement Schedules. Included as Exhibits 99.03 and 99.04 of
Item 21(a).
II-3
<PAGE>
Item 22. Undertakings
(a) Each of the undersigned registrants hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the 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) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent 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 the registration
statement or any material change to such information in the
registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; and
(3) 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
each registrant pursuant to the foregoing provisions, or otherwise, each
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants 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, each registrant will, unless in the opinion of its 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.
(c) Each of the undersigned registrants 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 this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(d) Each of the undersigned registrants hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the corporation being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on the 21st day of June 1999.
ROYSTER-CLARK, INC.
By: /s/ Francis P. Jenkins, Jr.
----------------------------------
Francis P. Jenkins, Jr.
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Francis P. Jenkins, Jr.,
G. Kenneth Moshenek, Randolph G. Abood and Frederick I. Sharp, any of whom may
act without the joinder of either of the others, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on June 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Francis P. Jenkins, Jr. Chairman of the Board of Directors and Chief Executive
- --------------------------- Officer (principal executive officer)
Francis P. Jenkins, Jr.
/s/ Walter R. Vance Managing Director, Finance (principal financial officer
- --------------------------- and principal accounting officer)
Walter R. Vance
/s/ Thomas F. McWilliams Director
- ---------------------------
Thomas F. McWilliams
/s/ Randolph G. Abood Director
- ---------------------------
Randolph G. Abood
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on the 21st day of June 1999.
ROYSTER-CLARK, INC.
By: /s/ Francis P. Jenkins, Jr.
----------------------------------
Francis P. Jenkins, Jr.
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Francis P. Jenkins, Jr.,
G. Kenneth Moshenek, Randolph G. Abood and Frederick I. Sharp, any of whom may
act without the joinder of either of the others, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on June 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Francis P. Jenkins, Jr. Chairman of the Board of Directors and Chief Executive
- --------------------------- Officer (principal executive officer)
Francis P. Jenkins, Jr.
/s/ Walter R. Vance Managing Director, Finance (principal financial officer
- --------------------------- and principal accounting officer)
Walter R. Vance
/s/ Thomas F. McWilliams Director
- ---------------------------
Thomas F. McWilliams
/s/ Randolph G. Abood Director
- ---------------------------
Randolph G. Abood
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on the 21st day of June 1999.
ROYSTER-CLARK AGRIBUSINESS, INC.
By: /s/ Francis P. Jenkins, Jr.
----------------------------------
Francis P. Jenkins, Jr.
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Francis P. Jenkins, Jr.,
G. Kenneth Moshenek, Randolph G. Abood and Frederick I. Sharp, any of whom may
act without the joinder of either of the others, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on June 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Francis P. Jenkins, Jr. Chairman of the Board of Directors and Chief Executive
- --------------------------- Officer (principal executive officer)
Francis P. Jenkins, Jr.
/s/ Walter R. Vance Treasurer (principal financial officer and principal
- --------------------------- accounting officer)
Walter R. Vance
/s/ G. Kenneth Moshenek Director
- ---------------------------
G. Kenneth Moshenek
/s/ Randolph G. Abood Director
- ---------------------------
Randolph G. Abood
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the below-named Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York, on the 21st day of June 1999.
ROYSTER-CLARK NITROGEN, INC.
By: /s/ Francis P. Jenkins, Jr.
----------------------------------
Francis P. Jenkins, Jr.
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Francis P. Jenkins, Jr.,
G. Kenneth Moshenek, Randolph G. Abood and Frederick I. Sharp, any of whom may
act without the joinder of either of the others, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on June 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Francis P. Jenkins, Jr. Chairman of the Board of Directors and Chief Executive
- --------------------------- Officer (principal executive officer)
Francis P. Jenkins, Jr.
/s/ Walter R. Vance Treasurer (principal financial officer and principal
- --------------------------- accounting officer)
Walter R. Vance
/s/ G. Kenneth Moshenek Director
- ---------------------------
G. Kenneth Moshenek
/s/ Randolph G. Abood Director
- ---------------------------
Randolph G. Abood
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on the 21st day of June 1999.
ROYSTER-CLARK HUTSON, INC.
By: /s/ Francis P. Jenkins, Jr.
----------------------------------
Francis P. Jenkins, Jr.
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Francis P. Jenkins, Jr.,
G. Kenneth Moshenek, Randolph G. Abood and Frederick I. Sharp, any of whom may
act without the joinder of either of the others, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on June 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Francis P. Jenkins, Jr. Chairman of the Board of Directors and Chief Executive
- --------------------------- Officer (principal executive officer)
Francis P. Jenkins, Jr.
/s/ Walter R. Vance Treasurer (principal financial officer and principal
- --------------------------- accounting officer)
Walter R. Vance
/s/ G. Kenneth Moshenek Director
- ---------------------------
G. Kenneth Moshenek
/s/ Randolph G. Abood Director
- ---------------------------
Randolph G. Abood
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on the 21st day of June 1999.
ROYSTER-CLARK RESOURCES LLC
By: /s/ Francis P. Jenkins, Jr.
-----------------------------
Francis P. Jenkins, Jr.
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Francis P. Jenkins, Jr.,
G. Kenneth Moshenek, Randolph G. Abood and Frederick I. Sharp, any of whom may
act without the joinder of either of the others, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on June 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Francis P. Jenkins, Jr. Chief Executive Officer (principal executive officer)
- --------------------------------
Francis P. Jenkins, Jr.
/s/ Walter R. Vance Vice President (principal financial officer and
- -------------------------------- principal accounting officer)
Walter R. Vance
Royster-Clark AgriBusiness, Inc., sole member
By: /s/ Francis P. Jenkins, Jr. Chief Executive Officer
---------------------------
Francis P. Jenkins, Jr.
/s/ G. Kenneth Moshenek Director of Royster-Clark AgriBusiness, Inc., sole
- ------------------------------- member
G. Kenneth Moshenek
/s/ Randolph G. Abood Director of Royster-Clark AgriBusiness, Inc., sole
- ------------------------------- member
Randolph G. Abood
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on the 21st day of June 1999.
ROYSTER-CLARK REALTY LLC
By: /s/ Francis P. Jenkins, Jr.
---------------------------
Francis P. Jenkins, Jr.
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Francis P. Jenkins, Jr.,
G. Kenneth Moshenek, Randolph G. Abood and Frederick I. Sharp, any of whom may
act without the joinder of either of the others, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on June 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Francis P. Jenkins, Jr. Chief Executive Officer (principal executive officer)
- --------------------------------
Francis P. Jenkins, Jr.
/s/ Walter R. Vance Vice President (principal financial officer and
- -------------------------------- principal accounting officer)
Walter R. Vance
Royster-Clark, Inc., sole member
By: /s/ Francis P. Jenkins, Jr. Chief Executive Officer
---------------------------
Francis P. Jenkins, Jr.
/s/ Thomas F. McWilliams Director of Royster-Clark, Inc., sole member
- -------------------------------
Thomas F. McWilliams
/s/ Randolph G. Abood Director of Royster-Clark, Inc., sole member
- -------------------------------
Randolph G. Abood
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on the 21st day of June 1999.
ROYSTER-CLARK AGRIBUSINESS REALTY LLC
By: /s/ Francis P. Jenkins, Jr.
-------------------------------
Francis P. Jenkins, Jr.
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Francis P. Jenkins, Jr.,
G. Kenneth Moshenek, Randolph G. Abood and Frederick I. Sharp, any of whom may
act without the joinder of either of the others, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on June 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Francis P. Jenkins, Jr. Chief Executive Officer (principal executive officer)
- -------------------------------------
Francis P. Jenkins, Jr.
/s/ Walter R. Vance Vice President (principal financial officer and
- ------------------------------------- principal accounting officer)
Walter R. Vance
Royster-Clark AgriBusiness, Inc., sole member
By: /s/ Francis P. Jenkins, Jr. Chief Executive Officer
--------------------------------
Francis P. Jenkins, Jr.
/s/ G. Kenneth Moshenek Director of Royster-Clark AgriBusiness, Inc., sole
- ------------------------------------ member
G. Kenneth Moshenek
/s/ Randolph G. Abood Director of Royster-Clark AgriBusiness, Inc., sole
- ------------------------------------ member
Randolph G. Abood
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on the 21st day of June 1999.
ROYSTER-CLARK HUTSON'S REALTY LLC
By: /s/ Francis P. Jenkins, Jr.
--------------------------------
Francis P. Jenkins, Jr.
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Francis P. Jenkins, Jr.,
G. Kenneth Moshenek, Randolph G. Abood and Frederick I. Sharp, any of whom may
act without the joinder of either of the others, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on June 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Francis P. Jenkins, Jr. Chief Executive Officer (principal executive officer)
- ---------------------------------
Francis P. Jenkins, Jr.
/s/ Walter R. Vance Vice President (principal financial officer and
- --------------------------------- principal accounting officer)
Walter R. Vance
Royster-Clark Hutson, Inc., sole member
By: /s/ Francis P. Jenkins, Jr. Chief Executive Officer
---------------------------------
Francis P. Jenkins, Jr.
/s/ G. Kenneth Moshenek Director of Royster-Clark Hutson, Inc., sole member
- -------------------------------------
G. Kenneth Moshenek
/s/ Randolph G. Abood Director of Royster-Clark Hutson, Inc., sole member
- -------------------------------------
Randolph G. Abood
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on the 21st day of June 1999.
ROYSTER-CLARK NITROGEN REALTY LLC
By: /s/ Francis P. Jenkins, Jr.
-------------------------------
Francis P. Jenkins, Jr.
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Francis P. Jenkins, Jr.,
G. Kenneth Moshenek, Randolph G. Abood and Frederick I. Sharp, any of whom may
act without the joinder of either of the others, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities at the above-named Registrant on June 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Francis P. Jenkins, Jr. Chief Executive Officer (principal executive officer)
- ---------------------------------
Francis P. Jenkins, Jr.
/s/ Walter R. Vance Vice President (principal financial officer and
- --------------------------------- principal accounting officer)
Walter R. Vance
Royster-Clark Nitrogen, Inc.,
sole member
By: /s/ Francis P. Jenkins, Jr. Chief Executive Officer
-----------------------------
Francis P. Jenkins, Jr.
/s/ G. Kenneth Moshenek Director of Royster-Clark Nitrogen, Inc., sole member
- ---------------------------------
G. Kenneth Moshenek
/s/ Randolph G. Abood Director of Royster-Clark Nitrogen, Inc., sole member
- ---------------------------------
Randolph G. Abood
</TABLE>
II-14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
2.01 Stock Purchase Agreement dated January 21, 1999 by and among IMC Global Inc., The Vigoro
Corporation and R-C Delaware Acquisition Inc.*
2.02 First Amendment to the Stock Purchase Agreement dated as of April 13, 1999 among IMC Global
Inc., The Vigoro Corporation and R-C Delaware Acquisition Inc.
3.01 Restated Certificate of Incorporation of the Company.
3.02 Certificate of Amendment of Restated Certificate of Incorporation of the Company.
3.03 Amended and Restated Bylaws of the Company.
3.04 Amended and Restated Certificate of Incorporation of Royster-Clark Group, Inc.
3.05 Bylaws of Royster-Clark Group, Inc.
3.06 Certificate of Incorporation of IMC AgriBusiness Inc.
3.07 Certificate of Amendment to Certificate of Incorporation of IMC AgriBusiness Inc.
3.08 Bylaws of IMC AgriBusiness Inc.
3.09 Certificate of Incorporation of IMC Nitrogen Company.
3.10 Certificate of Amendment to Certificate of Incorporation of IMC Nitrogen Company.
3.11 Bylaws of IMC Nitrogen Company.
3.12 Articles of Incorporation of Hutson's Ag Service, Inc.
3.13 Certificate of Amendment to Certificate of Incorporation of Hutson's Ag Service, Inc.
3.14 Bylaws of Hutson's Ag Service, Inc.
3.15 Certificate of Formation of Royster-Clark Resources LLC.
3.16 Limited Liability Company Agreement of Royster-Clark Resources LLC.
3.17 Certificate of Formation of Royster-Clark Realty LLC.
3.18 Limited Liability Company Agreement of Royster-Clark Realty LLC.
3.19 Certificate of Formation of Royster-Clark AgriBusiness Realty LLC.
3.20 Limited Liability Company Agreement of Royster-Clark AgriBusiness Realty LLC.
3.21 Certificate of Formation of Royster-Clark Hutson's Realty LLC.
3.22 Limited Liability Company Agreement of Royster-Clark Hutson's Realty LLC.
3.23 Certificate of Formation of Royster-Clark Nitrogen Realty LLC.
3.24 Limited Liability Company Agreement of Royster-Clark Nitrogen Realty LLC.
4.01 Indenture dated as of April 22, 1999 by and among the Company, the Guarantors, and the
United States Trust Company of New York, as Trustee.
4.02 Form of 10-1/4% First Mortgage Note Due 2009 (Included in Exhibit 4.01).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
4.03 Registration Rights Agreement dated as of April 22, 1999 by and among the Company, the
Guarantors, and Donaldson, Lufkin & Jenrette Securities Corporation and J.P. Morgan
Securities Inc. (each an "Initial Purchaser").
4.04 Exchange Agreement dated as of April 22, 1999 among 399 Venture Partners, Inc., Francis P.
Jenkins, Jr., Royster-Clark, Inc. and Royster-Clark Group, Inc.
4.05 Registration Rights Agreement dated as of April 22, 1999 by and among Royster-Clark Group,
Inc., 399 Ventures Partners, Inc., and other stockholders of Royster-Clark Group, Inc.
4.06 Securities Purchase and Holders Agreement dated as of April 22, 1999 by and among 399
Venture Partners, Inc. and certain management stockholders.
4.07 Preferred Stockholders' Agreement dated as of April 22, 1999 by and among 399 Venture
Partners, Inc. and certain management stockholders.
5.01 Opinion of Dechert Price & Rhoads.
10.01 Credit Agreement dated as of April 22, 1999 by and among the Company, the Guarantors,
various lenders, DLJ Capital Funding, as arranger and syndication agent, J.P. Morgan
Securities Inc., as documentation agent and U.S. Bancorp Ag Credit, Inc., as
administrative agent.
10.02 Purchase Agreement dated April 15, 1999 among the Company, the Guarantors and the Initial
Purchasers.
10.03 Supply Agreement dated as of April 22, 1999 among IMC Kalium Ltd., IMC-Agrico Company and
the Company. Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.**
10.04 Company Employee Savings and Investment Plan.
10.05 Royster-Clark Group, Inc. 1999 Restricted Stock Purchase and Option Plan.
10.06 Employment Agreement dated as of April 22, 1999 by and among Francis P. Jenkins, Jr.,
Royster-Clark Group, Inc. and Royster-Clark, Inc.
10.07 Master Conveyance Agreement dated as of April 22, 1999 by and among IMC Global Inc., the
Vigoro Corporation, the Company and the United States Trust Company of New York
12.01 Statement of Computation of Ratio of Earnings to Fixed Charges.
21.01 Subsidiaries of the Company and the Additional Registrants.
23.01 Consent of Dechert Price & Rhoads (included in the opinion filed as Exhibit 5.01).
23.02 Consent of KPMG LLP.
23.03 Consent of Ernst & Young LLP.
24.01 Power of Attorney (included on each of the signature pages).
25.01 Statement of Eligibility and Qualification of United States Trust Company of New York on
Form T- 1.
27.1 Financial Data Schedule - Royster-Clark, Inc.
27.2 Financial Data Schedule - AgriBusiness.
99.01 Form of Letter of Transmittal.
99.02 Notice of Guaranteed Delivery.
99.03 Schedule 1 - Allowance for Doubtful Accounts-Royster-Clark, Inc.
99.04 Schedule 1 - Allowance for Doubtful Accounts-AgriBusiness.
</TABLE>
- ---------------
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this
Agreement are omitted. The Exhibit contains a list identifying the
contents of all schedules and the Registrants agree to furnish
supplementally copies of such schedules to the Commission upon request.
** Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 21, 1999
AMONG
IMC GLOBAL INC.,
THE VIGORO CORPORATION, AS SELLER,
AND
R-C DELAWARE ACQUISITION INC., AS PURCHASER
<PAGE>
TABLE OF CONTENTS
(not part of this Agreement)
<TABLE>
<S> <C> <C>
ARTICLE I Purchase and Sale of the Shares; Closing and Manner of Payment............ 1
1.1 Purchase and Sale of the Shares........................................... 1
1.2 Purchase Price............................................................ 1
1.3 Adjustments to the Purchase Price......................................... 2
1.4 Manner of Payment of the Purchase Price................................... 2
1.5 Determination of Final Adjustment Amount.................................. 4
1.6 Disputes Regarding Closing Balance Sheet.................................. 5
1.7 Inventories............................................................... 6
1.8 Manner of Delivery of the Shares.......................................... 6
1.9 Time and Place of Closing................................................. 6
ARTICLE II Representations and Warranties............................................ 6
2.1 General Statement......................................................... 6
2.2 Representations and Warranties of Purchaser............................... 7
2.2.1 Organization....................................................... 7
2.2.2 Power and Authority................................................ 7
2.2.3 Execution and Delivery by Purchaser................................ 7
2.2.4 Authorization...................................................... 7
2.2.5 Conflict........................................................... 7
2.2.6 Finder's Fees...................................................... 8
2.2.7 Solvency........................................................... 8
2.2.8 Securities Law Matters............................................. 8
2.2.9 Necessary Funds.................................................... 8
2.3 Representations and Warranties of IMC Global and Seller................... 9
2.3.1 Organization....................................................... 9
2.3.2 Good Standing...................................................... 9
2.3.3 Power and Authority................................................ 9
2.3.4 Execution and Delivery by Seller and its Affiliates................ 9
2.3.5 Authorization...................................................... 10
2.3.6 Conflict........................................................... 10
2.3.7 Subsidiaries....................................................... 10
2.3.8 Capitalization..................................................... 11
2.3.9 Financial Statements............................................... 11
2.3.10 Absence of Liens................................................... 12
2.3.11 Tax Matters........................................................ 12
2.3.12 Absence of Changes................................................. 13
2.3.13 Contracts.......................................................... 14
2.3.14 Enforceability of Contracts........................................ 16
2.3.15 Permits............................................................ 16
2.3.16 Employee Benefit Plans............................................. 16
2.3.17 List of Employees.................................................. 17
2.3.18 Union Representation and Labor..................................... 17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
2.3.19 Insurance.......................................................... 18
2.3.20 Litigation and Claims.............................................. 18
2.3.21 Compliance with Law................................................ 18
2.3.22 Environmental Matters.............................................. 19
2.3.23 Real Estate........................................................ 21
2.3.24 Intellectual Property.............................................. 22
2.3.25 Finder's Fees...................................................... 23
2.3.26 Assets............................................................. 24
2.3.27 Product Warranty................................................... 24
2.3.28 Top Customers and Suppliers........................................ 24
2.3.29 No Undisclosed Liabilities......................................... 24
2.3.30 Limitation on Warranties........................................... 25
2.3.31 Definition of Knowledge............................................ 25
ARTICLE III Conduct Prior to the Closing.............................................. 25
3.1 General .................................................................. 25
3.2 Obligations of Seller and IMC Global...................................... 25
3.3 Purchaser's Obligations................................................... 27
3.4 Joint Obligations......................................................... 28
ARTICLE IV Conditions to Closing..................................................... 29
4.1 Conditions to Obligations of IMC Global and Seller........................ 29
4.2 Conditions to Purchaser's Obligations..................................... 29
ARTICLE V Closing................................................................... 30
5.1 Form of Documents......................................................... 30
5.2 Purchaser's Deliveries.................................................... 31
5.3 IMC Global's and Seller's Deliveries...................................... 32
5.4 Other Transactions Occurring at the Closing............................... 32
ARTICLE VI Post-Closing Agreements................................................... 33
6.1 Post-Closing Agreements................................................... 33
6.2 Inspection of Records..................................................... 33
6.3 Confidentiality........................................................... 34
6.4 Use of Trademarks......................................................... 34
6.5 Further Assurances........................................................ 35
6.6 Non-Competition; Non-Solicitation......................................... 35
6.7 Tax Matters............................................................... 36
6.7.1 Tax Sharing Agreement.............................................. 36
6.7.2 Filing of Returns.................................................. 36
6.7.3 Allocations Relating to Taxes...................................... 37
6.7.4 Tax Indemnity...................................................... 38
6.7.5 Refunds and Credits................................................ 38
6.7.6 Section 338(h)(10) Election; Price Allocation...................... 39
6.7.7 Transfer Taxes..................................................... 40
6.7.8 Contest Provisions................................................. 40
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
6.8 Agreement to Defend and Indemnify......................................... 40
6.9 Employee Benefits......................................................... 41
6.9.1 Future Benefits.................................................... 41
6.9.2 Welfare Benefits................................................... 41
6.9.3 Service Credit..................................................... 41
6.9.4 Specific Assumption of Severance Agreements........................ 42
6.9.5 Assumption of Retirement Plans for Certain Union Employees......... 42
6.9.6 Transfer of Plan Account Balances.................................. 42
6.9.7 Non-Prohibition on Termination of Employment....................... 43
6.10 Registration and Legend................................................... 43
ARTICLE VII Indemnification........................................................... 43
7.1 General................................................................... 43
7.2 Certain Definitions....................................................... 43
7.2.1 "Damages".......................................................... 43
7.2.2 "Environmental Claim............................................... 44
7.2.3 "Indemnified Party"................................................ 44
7.2.4 "Indemnified Party"................................................ 44
7.2.5 "Third Party Claim"................................................ 44
7.3 IMC Global's and Seller's Indemnification Obligations..................... 44
7.4 Survival of IMC Global's and Seller's Indemnification Obligations......... 47
7.5 Limitation on Seller's Indemnification Obligations........................ 47
7.6 Purchaser's Indemnification Covenants..................................... 47
7.7 Indemnification Procedures................................................ 48
7.8 Cooperation on Environmental Claims....................................... 50
7.8.1 Purchaser's Rights to Remedial Action.............................. 50
7.8.2 Seller's Rights to Remedial Action................................. 50
7.8.3 Minimization of Remedial Action Costs and Disruption of Operation.. 51
7.9 Mitigation................................................................ 51
7.10 Indemnification Exclusive Remedy.......................................... 51
ARTICLE VIII Effect of Termination/Proceeding.......................................... 52
8.1 General .................................................................. 52
8.2 Right to Terminate........................................................ 52
8.3 Certain Effects of Termination............................................ 52
8.4 Remedies ................................................................. 53
8.5 Right to Damages.......................................................... 53
8.6 Non-Solicitation.......................................................... 53
ARTICLE IX Miscellaneous............................................................. 54
9.1 Fees ..................................................................... 54
9.2 Publicity ............................................................... 54
9.3 Notices .................................................................. 54
9.4 Entire Agreement; Interpretation.......................................... 55
9.5 Non-Waiver ............................................................... 56
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
9.6 Counterparts.............................................................. 56
9.7 Severability.............................................................. 56
9.8 Binding Effect; Benefit................................................... 57
9.9 Assignability............................................................. 57
9.10 Governmental Reporting.................................................... 57
9.11 Applicable Law............................................................ 57
9.12 Waiver of Trial by Jury................................................... 57
9.13 Consent to Jurisdiction................................................... 57
9.14 Amendments ............................................................... 57
9.15 Construction.............................................................. 58
</TABLE>
iv
<PAGE>
TABLE OF DEFINED TERMS
(not part of this Agreement)
Defined Term Where Found
- ------------ --------------
Adjusted GAAP Principles 1.5(h)
Affiliate 1.5(d)
Agreed Rate 1.4.3
Agreement Preamble
AgriBusiness Recitals
Ancillary Documents 2.3.3
Arbitrating Accountant 1.6(b)
Assets 2.3.10
Business Recitals
CERCLA 2.3.22(a)(ii)
Claim Notice 7.7.1
Closing 1.8
Closing Balance Sheet 1.5
Closing Date 1.8
Code 2.3.11(a)
Commitment Letter 2.2.9
Company Recitals
Company Member 1.5(d)
Company Member Software 2.3.24(e)
Compensation Plans 2.3.16(a)(iii)
Competing Business 6.6.1
Confidentiality Letter 3.3.1
Contaminant 2.3.22(a)(i)
Contract 2.3.14
control 1.5(d)
Court Order 2.2.5(a)
Damages 7.2.1
Dispute 1.6(a)
Dispute Notice 1.6(a)
Dispute Period 1.6(a)
Drop-Dead Date 8.2.2
Employee 6.9.1
Employee Benefit Plans 2.3.16(a)
Encumbrance 2.3.6
Environmental Claim 7.2.7
Environmental Laws 2.3.22(a)(ii)
Environmental Permits 2.3.22(a)(iii)
Environmental Representations and Warranties 2.3.22(g)
ERISA 2.3.16(a)(i)
v
<PAGE>
Defined Term Where Found
- ------------ --------------
Estimated Purchase Price 1.4.1
Executive Severance Agreement 6.9.4
Final Adjustment Amount 1.4.3
Final Indebtedness 1.4.3
Final Target Amount 1.4.3
Final Working Capital 1.4.3
Financial Statements 2.3.9
GAAP 1.5
Guaranties 3.3.3
HSR Condition 8.2.2
Hutson Recitals
IMC Global Preamble
IMC Nitrogen Recitals
IMC Ops 6.9.5
IMC Plan 6.9.6
including 9.15
Indebtedness 1.2
Indemnified Persons 6.8
Indemnified Party 7.2.4 & 7.2.5
Indemnifying Party 7.2.4 & 7.2.5
Intellectual Property 2.3.24
Interim Financial Statement Date 2.3.9
Interim Financial Statements 2.3.9
IRS 2.3.16(b)
J.P. Morgan 2.3.25
Joint Defense Agreement 3.3.2
Knowledge of Seller 2.3.26
Leased Premises 2.3.23(b)
Litigation Condition 7.7.3(a)
Mark 6.4
Material Adverse Effect 2.3.2
Material Consents 3.2.2
Modified Aggregate Deemed Sale Price 6.7.6(b)
MSDS Claims 7.2.2
1998 Financials 4.2.7
Owned Premises 2.3.23
Pension Plans 2.3.16(a)(i)
Permits 2.3.15
Permitted Liens 2.3.10
Phosphate Warehousing Agreement 5.4.4
Plan Employee 6.9.6
vi
<PAGE>
Defined Term Where Found
- ------------ --------------
Process Safety Management Claims 7.2.7
Purchaser Preamble
Purchaser Account Plan 6.96
Purchaser Ancillary Documents 2.2.2
Purchaser Indemnitee 7.3
Real Estate 2.3.23
Release 2.3.22(a)(iv)
Remedial Action 2.3.22(a)(v)
Requirements of Law 2.2.5(a)
Return 2.3.11(a)
Royster-Clark 3.3.1
Securities Act 2.2.8
Section 338(h)(10) Election 6.7.6(a)
Seller Preamble
Seller Ancillary Documents 2.3.3
Seller Group 6.7.4(a)
Seller Indemnitee 7.6
Seller's Knowledge 2.3.22(vi) &
2.3.26
Shares Recitals
Subsidiaries 2.3.7
Supply Agreement 5.4.3
Target Amount 1.3(a)
Tax 2.3.11(a)
Tax Sharing Agreement 6.7.1
Third Party Claim 7.2.6
Trademarks 2.3.24
Transferred Accounts 6.9.6
Transportation Claims 7.2.7
Unrelated Assets and Liabilities Transfers 3.2.5(e)
Phosphate Warehousing Agreement 5.4.4
Warehousing Agreement 5.4.4
Welfare Plans 2.3.16(a)(ii)
Working Capital 1.3
vii
<PAGE>
TABLE OF EXHIBITS
(not part of this Agreement)
Exhibit A - Note Term Sheet
Exhibit B - Material Consents
Exhibit C - 1998 Unaudited Financials
Exhibit D - Form of Opinion Delivered by Purchaser
Exhibit E - Form of Opinion Delivered by Seller
Exhibit F - Form of Release by Company Group Members
Exhibit G - Form of Release by Seller
Exhibit H - Form of Supply Agreement
Exhibit I - Form of Warehousing Agreement for Phosphate
Exhibit J - Form of Warehousing Agreement for Potash
Exhibit K - Execution Severance Agreement
viii
<PAGE>
TABLE OF SCHEDULES
(not part of this Agreement)
1.2 Indebtedness
1.3 Working Capital
1.4 Purchase Price Example
2.3.2 Good Standing
2.3.5 Authorization
2.3.6 Conflict
2.3.7 Subsidiaries
2.3.8 Capitalization
2.3.9 Financial Statements
2.3.10 Absence of Liens
2.3.11 Tax Matters
2.3.12 Absence of Changes
2.3.13 Contracts
2.3.16 Employee Benefit Plans
2.3.17 List of Employees
2.3.18 Union Representations and Relations
2.3.19 Insurance
2.3.20 Litigation and Claims
2.3.21 Compliance with Law
2.3.22 Environmental Matters
2.3.23 Real Estate
2.3.24 Intellectual Property
2.3.26 Sufficiency of Assets; Assets of Affiliates; Inventory
2.3.27 Product Warranty
2.3.28 Customers and Suppliers
2.3.29 Undisclosed Liabilities
3.2.5 Conduct Prior To Closing
3.3.3 Letters of Credit; Guarantees
6.4 Use of Trademarks
6.6.1 Restricted Wholesale Crop Production Inputs
6.9.4 Severance Agreements
ix
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as of
January 21, 1999 among IMC GLOBAL INC., a Delaware corporation ("IMC Global"),
THE VIGORO CORPORATION, a Delaware corporation ("Seller"), and R-C DELAWARE
ACQUISITION INC., a Delaware corporation ("Purchaser").
R E C I T A L S
A. Seller owns all of the outstanding capital stock of IMC AgriBusiness
Inc., a Delaware corporation ("AgriBusiness"), Hutson's Ag Services, Inc., a
Kentucky corporation ("Hutson"), and IMC Nitrogen Inc., a Delaware corporation
("IMC Nitrogen" and, together with Hutson, AgriBusiness and their respective
subsidiaries following consummation of the Unrelated Assets and Liabilities
Transfers, the "Company").
B. The Company is engaged in the manufacture or purchase and sale (through
wholesale and retail channels) of crop production inputs and services (the
"Business").
C. Purchaser desires to purchase all of the outstanding shares of capital
stock of AgriBusiness, Hutson and IMC Nitrogen (collectively, the "Shares"), and
Seller desires to sell the Shares, on the terms and subject to the conditions
herein contained.
A G R E E M E N T S
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
Purchase and Sale of the Shares; Closing and Manner of Payment
1.1 Purchase and Sale of the Shares. On the terms and subject to the
conditions contained in this Agreement, at the Closing Seller shall sell, and
Purchaser shall purchase, the Shares free and clear of all Encumbrances.
1.2 Purchase Price. The aggregate purchase price of the Shares shall be
equal to $300,000,000, less the aggregate amount outstanding as of the close of
business on the business day immediately preceding the Closing Date of
Indebtedness of the Company, subject to adjustment pursuant to Section 1.3 (the
"Purchase Price"). As used in this Agreement, "Indebtedness" means, without
duplication, (a) all indebtedness of the Company for borrowed money, (b) all
obligations of the Company evidenced by notes, bonds, debentures or other
similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by any of the Company Members (even though the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (d) all obligations of the Company as
lessee under leases that have been recorded as capital leases in accordance with
GAAP, (e) all obligations of the Company for the deferred purchase price of
property or services (excluding trade payables incurred in the ordinary course
<PAGE>
of business), (f) all Indebtedness of the type referred to in clauses (a)
through (e) above guaranteed directly or indirectly in any manner by any of the
Company Members and set forth on Schedule 1.2 to the Disclosure Schedules, (g)
all Indebtedness of the type referred to in clauses (a) through (e) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any lien on property (including,
without limitation, accounts and contract rights) owned by the Company, even
though the Company has not assumed or become liable for the payment of such
Indebtedness, and (h) all accrued but unpaid interest (or interest equivalent)
to the date of determination, and all accrued but unpaid prepayment premiums or
penalties, related to any items of Indebtedness of the type referred to in
clauses (a) through (g) above (unless otherwise reflected in Working Capital).
1.3 Adjustments to the Purchase Price. The Purchase Price shall be:
(a) increased by the amount by which Working Capital as of the close of
business on the day before the Closing Date, as reflected on the Closing Date
Balance Sheet, exceeds the average month-end Working Capital for the 12-month
period ending on December 31, 1998 (the "Final Month-End") (the Working Capital
for each month-end for the 11-month period ended November 30, 1998 being set
forth in Schedule 1.3) (the "Target Amount"); or
(b) reduced by the amount by which the Target Amount exceeds Working
Capital as of the day before the Closing Date, as reflected on the Closing Date
Balance Sheet.
As used herein, "Working Capital" shall mean the amount for the Company equal to
all "current assets" minus all "current liabilities," as such "current
liabilities" and "current assets" are properly accrued and reflected on the
books and records of the Company in accordance with the Adjusted GAAP Principles
(as hereinafter defined).
1.4 Manner of Payment of the Purchase Price.
1.4.1 No less than three business days prior to the Closing Date,
Seller shall deliver to Purchaser in writing a good faith estimate of (w) the
Purchase Price, which estimate shall take into account the adjustments to the
Purchase Price required pursuant to Section 1.3 utilizing the most recent
financial information available (the "Estimated Purchase Price"), (x) the
estimated Indebtedness as of the business day immediately preceding the Closing
Date ("Estimated Indebtedness"), (y) the estimated Target Amount ("Estimated
Target Amount") and (z) the estimated Working Capital as of the Closing Date
("Estimated Working Capital"), together with (a) a statement of the calculation
of the Estimated Purchase Price, Estimated Indebtedness, Estimated Target Amount
and Estimated Working Capital, (b) the financial information used to derive the
Estimated Purchase Price, Estimated Indebtedness, Estimated Target Amount and
Estimated Working Capital and (c) a certificate signed by Seller to the effect
that each of the Estimated Purchase Price, Estimated Indebtedness, Estimated
Target Amount and Estimated Working Capital was determined in good faith in
accordance with the Adjusted GAAP Principles. The Estimated Purchase Price shall
be based upon the foregoing estimate, subject to the consent of Purchaser, such
consent not to be unreasonably withheld or delayed.
2
<PAGE>
1.4.2 At the Closing, Purchaser shall (i) deliver a duly executed note
(the "Note"), in form and substance reasonably satisfactory to Seller and
Purchaser containing the terms set forth in the term sheet attached hereto as
Exhibit A, payable to Seller in the aggregate principal amount of $150,000,000
and (ii) pay the Estimated Purchase Price less the aggregate principal amount of
the Note to Seller by wire transfer to such account as Seller shall designate by
written notice delivered to Purchaser not later than three days prior to the
Closing Date.
1.4.3 Following the Closing, the parties shall determine the final
Purchase Price, taking into account the adjustments to the Purchase Price
required pursuant to Section 1.3 and the criteria set forth in Sections 1.5, 1.6
and 1.7. Following the determination of the Final Target Amount, Final Working
Capital and Final Indebtedness, the Purchase Price shall be adjusted as follows:
(a) The Purchase Price shall be increased dollar for dollar by the
amount by which the Estimated Target Amount exceeds the Final Target Amount;
(b) The Purchase Price shall be reduced dollar for dollar by the amount
by which the Final Target Amount exceeds the Estimated Target Amount;
(c) The Purchase Price shall be increased dollar for dollar by the
amount by which the Final Working Capital exceeds the Estimated Working Capital;
(d) The Purchase Price shall be reduced dollar for dollar by the amount
by which the Estimated Working Capital exceeds the Final Working Capital;
(e) The Purchase Price shall be increased dollar for dollar by the
amount by which the Estimated Indebtedness exceeds the Final Indebtedness; and
(f) The Purchase Price shall be reduced dollar for dollar by the amount
by which the Final Indebtedness exceeds the Estimated Indebtedness.
The cumulative net adjustment to the Purchase Price pursuant to (a) through (f)
of this Section 1.4.3, whether positive or negative, is the "Final Adjustment
Amount." Within 5 days after the Closing Balance Sheet becomes final and binding
upon the parties, (i) if the net effect pursuant hereto is an increase in the
Purchase Price, Purchaser shall pay to Seller, by wire transfer of immediately
available funds, an amount in cash equal to such Final Adjustment Amount, and
(ii) if the net effect pursuant hereto is a decrease in the Purchase Price,
Seller shall pay to Purchaser, by wire transfer of immediately available funds,
an amount in cash equal to such Final Adjustment Amount, in either case under
clause (i) or (ii) of this Section 1.4.3, together with interest thereon from
the Closing Date to the date of actual payment at the Agreed Rate.
As used herein, "Final Target Amount", "Final Working Capital" and
"Final Indebtedness" shall mean (a) in the case of the Final Target Amount, the
quotient obtained by dividing the sum of the Working Capital derived from the
audited balance sheet as of the Final Month-End contemplated in Section 4.2.6
(as agreed to by the parties prior to Closing applying the same principles used
to determine the Working Capital Amounts set forth in Schedule 1.3) and the
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Working Capital for each month-end in the 11-month period set forth in Schedule
1.3 by 12; and (b) in respect of the Final Working Capital and the Final
Indebtedness, the Working Capital and Indebtedness (x) as shown in the Closing
Balance Sheet if no Dispute Notice with respect thereto is duly and timely
delivered pursuant to Section 1.6(a) or (y) if such a Dispute Notice is so
delivered, as agreed by Seller and Purchaser pursuant to Section 1.6 or, in the
absence of such agreement, as shown in the Arbitrating Accountant's calculation
delivered pursuant to Section 1.6.
The "Agreed Rate" shall be equal to 8.5% per annum.
Schedule 1.4 of the Disclosure Schedules contains an example of the
calculation of the Purchase Price as if the transactions contemplated hereby had
been closed on January 1, 1999.
1.5 Determination of Final Adjustment Amount. The Final Working Capital and
the Final Indebtedness shall be determined from a balance sheet of the Business
as of the close of business on the business day immediately preceding the
Closing Date (the "Closing Balance Sheet"). The Closing Balance Sheet shall be
prepared by Purchaser. The Closing Balance Sheet shall be prepared in accordance
with generally accepted accounting principles applied in a manner consistent
with the accounting principles and practices applied in the preparation of the
Financial Statements ("GAAP"); provided, however, that:
(a) the Closing Balance Sheet shall be a balance sheet of the Business;
(b) the Closing Balance Sheet shall contain all normal year-end
adjustments which would be required if the Closing were to occur on the last day
of the Company's fiscal year;
(c) inventories reflected on the Closing Balance Sheet shall be
determined and valued as provided in Section 1.7;
(d) the Closing Balance Sheet shall exclude all cash (other than petty
cash and other miscellaneous amounts) owned by the Company and transferred to
Seller and its Affiliates as part of the internal cash policies of IMC Global
(it being understood that Seller shall remove all such cash prior to the
Closing). As used herein, an "Affiliate" is any person or entity which controls,
is controlled by or is under common control with another person; provided,
however, that no entity that constitutes a part of the Company or any subsidiary
thereof (each, a "Company Member") shall be deemed to be an Affiliate of any
other Company Member. For purposes of the preceding sentence, the term "control"
means the power, direct or indirect, to direct or cause the direction of the
management and policies of a person or entity through voting securities,
contract or otherwise. In the case of Seller, the term Affiliate shall include
IMC Global and those entities in which IMC Global directly or indirectly owns
more than 50% of such entity's equity interests;
(e) all Indebtedness shall be excluded from the calculation of current
liabilities;
(f) any receivables or payables owed by or owed to Seller or its
Affiliates (other than trade payables incurred in the ordinary course of
business with Seller's Affiliates) shall not be reflected in the Closing Balance
Sheet;
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(g) the Closing Balance Sheet shall reflect the Unrelated Assets and
Liabilities Transfers;
(h) the Closing Balance Sheet shall include the $2,500,000 reserve for
other long-term liabilities for environmental matters included in the Interim
Financial Statements;
(i) Taxes shall not be taken into account;
(j) cash overdrafts shall be treated as a current liability;
(k) the Closing Balance Sheet shall not include any liability for
accrued vacation and, in accordance with the historic practices of the Business,
shall not reflect the equipment leases of the Company as capital leases; and
(l) in addition to the methods historically used by the Business in
determining the reserve for bad debts, individual receivables may be evaluated
on a case-by-case basis to determine collectability and the appropriate reserve
without regard to any standard of materiality under GAAP.
GAAP as so adjusted by the foregoing provisions of this Section 1.5 is referred
to herein as the "Adjusted GAAP Principles." Purchaser shall deliver the Closing
Balance Sheet to be delivered to Seller not later than ninety days after the
Closing Date. Purchaser shall cause the Company to make available to Seller and
its representatives such books, records, other information (including work
papers) and personnel of the Company which Seller may reasonably request in
order to review the Closing Balance Sheet. During preparation of the Closing
Balance Sheet and during the Dispute Period, Purchaser shall make available the
work papers used in the preparation of the Closing Balance Sheet to Seller and
its representatives.
1.6 Disputes Regarding Closing Balance Sheet. Disputes with respect to the
Closing Balance Sheet shall be resolved as follows:
(a) Seller shall have 45 days after receipt of the Closing Balance
Sheet from Purchaser (the "Dispute Period") to dispute any of the elements of or
amounts reflected on the Closing Balance Sheet but only on the basis that such
amounts were not presented in accordance with the Adjusted GAAP Principles (a
"Dispute"). If Seller does not give to Purchaser written notice of a Dispute
within the Dispute Period (a "Dispute Notice"), the Closing Balance Sheet shall
be deemed to have been accepted and agreed to by Seller in the form in which it
was delivered by Purchaser and shall be final and binding upon the parties
hereto. If Seller has a Dispute, Seller shall give Purchaser a Dispute Notice
within the Dispute Period, setting forth in reasonable detail the elements and
amounts with which it disagrees. Within 30 days after delivery of such Dispute
Notice, the parties hereto shall attempt to resolve such Dispute and agree in
writing upon the final content of the disputed Closing Balance Sheet.
(b) If Seller and Purchaser are unable to resolve any Dispute within
the 30-day period after Purchaser's receipt of a Dispute Notice, Purchaser and
Seller shall promptly engage a nationally recognized certified public accounting
firm not engaged by Purchaser, Seller or their
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respective Affiliates (the "Arbitrating Accountant"). In connection with the
resolution of any Dispute, the Arbitrating Accountant shall have access to all
documents, records, work papers, facilities and personnel necessary to perform
its function as arbitrator. The Arbitrating Accountant's function shall be to
conform the Closing Balance Sheet to the Adjusted GAAP Principles. The
Arbitrating Accountant shall allow Seller and Purchaser to present their
respective positions regarding the Dispute and shall thereafter as promptly as
possible (but not later than 60 days) following the engagement of the
Arbitrating Accountant, provide the parties hereto a written determination of
the Dispute. Such written determination shall be final and binding upon the
parties hereto and judgment may be entered on the award. Purchaser shall pay a
portion of the fees and expenses of the Arbitrating Accountant in an amount
determined by multiplying the total amount of such fees and expenses by a
fraction the numerator of which is the amount awarded to Seller by the
Arbitrating Accountant and the denominator of which is aggregate amount which is
the subject matter of the Dispute, and Seller shall pay the balance of such fees
and expenses. Upon the resolution of all Disputes, the Closing Balance Sheet
shall be revised to reflect such resolution and, as so revised, shall be final
and binding for purposes of this Agreement.
1.7 Inventories. Seller shall coordinate with Purchaser a taking of the
physical inventory at substantially all of the locations of the Business, which
inventory shall be completed as near as practicable to, but not later than one
week before, the Closing. Prior to Closing, the parties shall agree on a value
of such inventory at the lower of cost or market, taking into account
qualitative factors, including salability and obsolescence. Inventories shall be
valued in the Closing Balance Sheet based upon such agreed valuation, as
adjusted to reflect changes from the date of such agreed valuation to the close
of business on the business day immediately preceding the Closing Date.
1.8 Manner of Delivery of the Shares. At the Closing, Seller shall deliver
to Purchaser certificates evidencing the Shares duly endorsed in blank, or
accompanied by valid stock powers duly executed in blank, in proper form for
transfer.
1.9 Time and Place of Closing. The transactions contemplated by this
Agreement and the Ancillary Documents shall be consummated (the "Closing") at
the offices of Sidley & Austin, One First National Plaza, Chicago, Illinois
60603 on a date and at a time agreed upon by Seller and Purchaser, but in no
event later than the third business day after the conditions set forth in
Article IV have been satisfied or, if permitted by applicable law, waived. The
date on which the Closing occurs in accordance with the preceding sentence is
referred to in this Agreement as the "Closing Date."
ARTICLE II
Representations and Warranties
2.1 General Statement. The parties make the representations and warranties
to each other which are set forth in this Article II. All such representations
and warranties shall survive the Closing to the extent contemplated by Article
VII (and none shall merge into any instrument of conveyance).
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2.2 Representations and Warranties of Purchaser. Purchaser represents and
warrants to IMC Global and Seller as follows:
2.2.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation.
2.2.2 Power and Authority. Purchaser has full corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other agreements, instruments, documents and certificates to be executed
and/or delivered pursuant to this Agreement by Purchaser (collectively, the
"Purchaser Ancillary Documents").
2.2.3 Execution and Delivery by Purchaser. The execution and delivery
of this Agreement by Purchaser, the execution and/or delivery of the Purchaser
Ancillary Documents and the performance by Purchaser of its obligations under
this Agreement and the Purchaser Ancillary Documents have been duly authorized
and approved by all requisite corporate action. This Agreement has been duly
executed and delivered by Purchaser and, assuming the valid authorization,
execution and delivery of this Agreement by Seller, constitutes the legal, valid
and binding obligation of Purchaser enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors' rights and to general
equity principles. Each of the Purchaser Ancillary Documents, upon execution and
delivery by Purchaser and assuming the valid authorization, execution and
delivery thereof by the other party or parties thereto, will be a legal, valid
and binding obligation of Purchaser enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors' rights and to general
equity principles.
2.2.4 Authorization. Except for (a) filings under the HSR Act, (b)
filings under Environmental Permits as may be necessary to reflect the change of
control of the Company contemplated hereby and (c) such consents,
authorizations, orders, approvals, filings or registrations the failure of which
to be obtained or made would not prevent the consummation of any of the
transactions contemplated hereby, no consent, authorization, order or approval
of, or filing or registration with, any person, including any governmental
authority or other regulatory agency, is required for or in connection with the
execution and delivery of this Agreement by Purchaser, the execution and/or
delivery of the Purchaser Ancillary Documents and the consummation by Purchaser
of the transactions contemplated hereby or thereby.
2.2.5 Conflict.
(a) Assuming the receipt of all necessary consents and approvals and
the filing of all necessary documents as described in Section 2.2.4, neither the
execution and delivery of this Agreement or any of the Purchaser Ancillary
Documents or the consummation of any of the transactions contemplated hereby or
thereby nor compliance with or fulfillment of the terms, conditions and
provisions hereof or thereof will result in a breach of the terms, conditions or
provisions of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default), an event
of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under (1) the charter or by-laws of Purchaser,
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(2) any note, instrument, mortgage, lease, franchise or financial obligation or
any other agreement or instrument to which Purchaser is a party or any of its
properties is subject or by which Purchaser or any of its assets may be bound or
affected, (3) any judgment, order, award or decree of any foreign, federal,
state, local or other court or tribunal and any award in any arbitration
proceeding ("Court Order") to which Purchaser is a party or by which it is bound
or (4) any foreign, federal, state or local laws, statutes, regulations, rules,
codes or ordinances enacted, adopted, issued or promulgated by any governmental
body ("Requirements of Law") affecting Purchaser, other than, in the case of
clauses (2), (3) and (4) above, any such breaches, defaults or rights that,
individually or in the aggregate, would not prevent the consummation of any of
the transactions contemplated hereby.
2.2.6 Finder's Fees. Neither Purchaser nor any of its Affiliates has
dealt with any person, firm or entity entitled to a broker's commission,
finder's fee, investment banker's fee or similar payment for arranging the
transactions contemplated hereby or by the Ancillary Documents or introducing
the parties to each other for which IMC Global or Seller could become liable or
obligated.
2.2.7 Solvency. Assuming the accuracy of Seller's representations and
warranties, immediately after giving effect to the consummation of the
transactions contemplated hereby and by the Ancillary Documents and the
incurrence of any indebtedness herewith or therewith, the assets of the Company
will exceed its liabilities. In connection with the consummation of the
transactions contemplated hereby and by the Ancillary Documents and the
incurrence of any indebtedness herewith or therewith, Purchaser does not intend
that the Company would incur, and does not believe that the Company will incur,
debts that would be beyond the Company's ability to pay as such debts mature.
2.2.8 Securities Law Matters. Purchaser is acquiring the Shares for its
own account for investment and with no present intention of distributing or
reselling the Shares or any part thereof in any transaction which would
constitute a "distribution" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
2.2.9 Necessary Funds. Purchaser has received a commitment letter (the
"Commitment Letter") with respect to an aggregate $275 million of debt financing
relating to the transactions contemplated by this Agreement (the "Debt
Financing"). A copy of the Commitment Letter has been delivered to Seller. The
Commitment Letter is in full force and effect in accordance with its terms as of
the date hereof. The proposed stockholders of Purchaser have in the aggregate no
less than $67 million of committed, but undrawn, equity capital that is
available for, and, concurrent with the consummation of the Debt Financing,
shall be contributed to, Purchaser as equity (the "Equity Financing" and,
together with the Debt Financing, the "Financing"). The Financing is sufficient
in amount to enable Buyer to pay the Purchase Price and, based upon information
provided by Purchaser to Seller, to provide for currently anticipated working
capital needs of the Company as of Closing.
2.3 Representations and Warranties of IMC Global and Seller. IMC Global and
Seller jointly and severally represent and warrant to Purchaser that:
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2.3.1 Organization. Each of the Company Members, Seller and IMC Global
is a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation.
2.3.2 Good Standing. Each of the Company Members is duly qualified to
transact business and is in good standing as a foreign corporation in the
jurisdictions set forth on Schedule 2.3.2 of the Disclosure Schedule, which
jurisdictions are the only jurisdictions wherein the character of the properties
owned or leased or the nature of the activities conducted by each of them makes
such qualification necessary, except where the failure to so qualify,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. For purposes of this Agreement, "Material Adverse
Effect" means a material adverse effect on the business, properties, assets or
liabilities, results of operations or financial condition of the Company taken
as a whole, other than changes relating to or resulting from (a) the public
disclosure of the transactions contemplated by this Agreement or (b) any
condition or matter described in the Disclosure Schedules that is specifically
identified as potentially involving a Material Adverse Effect.
2.3.3 Power and Authority. Each of IMC Global and Seller has full
corporate power and authority to execute, deliver and perform its obligations
under this Agreement, and each of IMC Global, Seller and their Affiliates has
full corporate power and authority to execute, deliver and perform its
obligations under the other agreements, instruments, documents and certificates
to be executed and/or delivered pursuant to this Agreement by Seller or its
Affiliates, respectively ("Seller Ancillary Documents"; and, together with the
Purchaser Ancillary Documents, the "Ancillary Documents").
2.3.4 Execution and Delivery by Seller and its Affiliates. The
execution and delivery of this Agreement by each of IMC Global and Seller, the
execution and/or delivery of the Seller Ancillary Documents and the performance
by each of IMC Global and Seller of its obligations under this Agreement and the
Seller Ancillary Documents have been duly authorized and approved by all
requisite corporate action. This Agreement has been duly executed and delivered
by each of IMC Global and Seller and, assuming the valid authorization,
execution and delivery of this Agreement by Purchaser, constitutes the legal,
valid and binding obligation of each of IMC Global and Seller enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application relating to or affecting
creditors' rights and to general equity principles. Each of the Seller Ancillary
Documents, upon execution and delivery by IMC Global, Seller or an Affiliate of
Seller, as the case may be, and assuming the valid authorization, execution and
delivery by the other party or parties thereto, will be a legal, valid and
binding obligation of IMC Global, Seller or such Affiliate enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application relating to or affecting
creditors' rights and to general equity principles.
2.3.5 Authorization. Except as set forth in Schedule 2.3.5 of the
Disclosure Schedules and except for (a) filings under the HSR Act, (b) filings
under Environmental Permits as may be necessary to reflect the change of control
of the Company contemplated hereby, and (c) such consents, authorizations,
orders, approvals, filings or registrations the failure of which to be obtained
or made would not reasonably be expected to have a Material Adverse Effect or
would not prevent
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the consummation of any of the transactions contemplated hereby, no consent,
authorization, order or approval of, or filing or registration with, any person,
including any governmental authority or other regulatory agency, is required for
or in connection with the execution and delivery of this Agreement by IMC Global
or Seller, the execution and/or delivery of the Seller Ancillary Documents and
the consummation by IMC Global or Seller and their Affiliates of the
transactions contemplated hereby or thereby.
2.3.6 Conflict. Assuming the receipt of all necessary consents and
approvals and the filing of all necessary documents as described in Section
2.3.5, except as set forth in Schedule 2.3.6 of the Disclosure Schedules,
neither the execution and delivery of this Agreement or any of the Seller
Ancillary Documents or the consummation of any of the transactions contemplated
hereby or thereby nor compliance with or fulfillment of the terms, conditions
and provisions hereof or thereof will result in a breach of the terms,
conditions or provisions of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a default),
an event of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation or imposition
of any lien, claim, charge, security interest, mortgage, pledge, easement,
conditional sale or other title retention agreement, defect in title or other
restrictions of a similar kind ("Encumbrance") upon any of the Shares or any of
the assets of the Company, under (1) the charter or by-laws of IMC Global,
Seller or any Company Member, (2) any note, instrument, mortgage, lease,
franchise or financial obligation or any other agreement or instrument to which
IMC Global, Seller or any Company Member is a party or by which IMC Global,
Seller or any Company Member or any of their assets may be bound or affected,
(3) any Court Order to which IMC Global, Seller or any Company Member is a party
or by which IMC Global, Seller or any Company Member is bound, (4) any
Requirements of Law affecting IMC Global, Seller or any Company Member or (5)
any Permits, other than, in the case of clauses (2), (3), (4) and (5) above, any
such breaches, defaults, rights or Encumbrances that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect or
would not prevent the consummation of any of the transactions contemplated
hereby.
2.3.7 Subsidiaries. None of the Company Members, directly or
indirectly, owns any of the stock of, or any other interest in, any other
corporation, partnership or business entity other than the entities listed on
Schedule 2.3.7 of the Disclosure Schedules (collectively, the "Subsidiaries").
2.3.8 Capitalization. The authorized capital of:
(a) AgriBusiness consists of 1,000 shares of common stock, no par
value per share, of which 939.71 shares are issued and outstanding;
(b) Hutson consists of 11,000 shares of common stock, no par
value per share, of which 11,000 shares are issued and outstanding; and
(c) IMC Nitrogen consists of 1,000 shares of common stock, no par
value per share, of which 985 shares are issued and outstanding.
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Except as described above in this Section 2.3.8 or as set forth in Schedule 2.38
of the Disclosure Schedules, there are no shares of capital stock of
AgriBusiness, Hutson or IMC Nitrogen of any other class authorized, issued or
outstanding. All of the issued and outstanding shares of capital stock of
AgriBusiness, Hutson and IMC Nitrogen have been validly issued, are fully paid
and nonassessable, are owned beneficially and of record by Seller, and were not
issued in violation of the terms of any agreement or other understanding binding
upon Seller. Seller owns all the issued and outstanding shares of capital stock
of AgriBusiness, Hutson and IMC Nitrogen free and clear of all Encumbrances or
restrictions on transfer. None of IMC Global, Seller or any of the Company
Members is a party to any voting trust, proxy or other voting agreement or
understanding with respect to the voting capital stock of any of the Company
Members. There are no outstanding subscriptions, options, warrants, purchase
rights (including preemptive rights), calls, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock of AgriBusiness, Hutson or IMC Nitrogen obligating any of the
Company Members to issue, sell, transfer or otherwise dispose of any securities
of any kind. The capital stock of the Company Members was issued in compliance
with the applicable federal and state securities laws.
2.3.9 Financial Statements. Schedule 2.3.9 of the Disclosure Schedules
contains copies of the audited balance sheets, statements of earnings and
statements of cash flows (together with any supplementary information thereto)
of the Business as of and for the fiscal years ended December 31, 1995, 1996 and
1997. The financial statements described in the preceding sentence are referred
to herein as the "Financial Statements." Schedule 2.3.9 of the Disclosure
Schedules also contains copies of the unaudited balance sheets, statements of
income and cash flows of the Business, each as of and for the nine-month period
ended September 30, 1998 (the "Interim Financial Statement Date"). The financial
statements described in the preceding sentence are referred to herein as the
"Interim Financial Statements." The Financial Statements and the Interim
Financial Statements are derived from the books and records of the Company and
have been prepared in conformity with GAAP and present fairly in accordance with
GAAP, in all material respects, the financial position of the Business, as of
the dates thereof and the results of operations and cash flows of the Business,
for the periods covered by said statements, except (x) as disclosed in Schedule
2.3.9 of the Disclosure Schedules, (y) in the case of the Interim Financial
Statements, for normal year-end adjustments, none of which are material, and (z)
in the case of the Interim Financial Statements, for the omission of footnote
disclosures required by GAAP.
2.3.10 Absence of Liens. Except for assets disposed of in the ordinary
course of business, the Company has valid title to or a valid leasehold in, or a
contractual or common law right to use, each item of equipment, machinery,
inventory, tools and other tangible personal property reflected on the Interim
Financial Statements and used in the conduct of the Business ("Assets") free and
clear of any Encumbrances, except for the following: (a) liens for Taxes and
other governmental charges and assessments which are not yet due and payable,
(b) liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return of money bonds and similar
obligations, and (d) other liens or imperfections on Assets which are not
material in amount
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or do not materially detract from the value of or materially impair the existing
use of the Assets affected by such lien or imperfection (collectively,
"Permitted Liens").
2.3.11 Tax Matters.
(a) As used in this Agreement the term (i) "Taxes" means all federal,
state, provincial, local, foreign and other income, sales, use, ad valorem,
value added, transfer, withholding, payroll, real property or other taxes, fees,
assessments or similar charges of any kind, together with any interest and any
penalties, with respect thereto; (ii) the term "Tax" means any one of the
foregoing Taxes; (iii) the term "Code" means the Internal Revenue Code of 1986,
as amended; and (iv) the term "Returns" means all returns, declarations,
reports, statements, and other documents required to be filed in respect of
Taxes (the term "Return" meaning any one of the foregoing Returns).
(b) Except as described in Schedule 2.3.11 of the Disclosure Schedules,
(i) there have been filed on a timely basis, all material Returns required to be
filed by or on behalf of each Company Member; (ii) no extension of time within
which to file any such Return has been requested or granted; (iii) there are no
unpaid tax assessments, notifications of intention to examine or waivers of the
applicable statutes of limitation with respect to material Tax liabilities of
any Company Member; and (iv) no Company Member has been notified in writing of
any Return filing obligation or proposed Tax liability by any taxing authority
with which it does not file Returns.
(c) Except as described in Schedule 2.3.11 of the Disclosure Schedules,
(i) with respect to all amounts in respect of Taxes imposed upon any Company
Member, or for which any Company Member is liable to taxing authorities, with
respect to all taxable periods or portions of periods ending on or before the
Closing Date, all applicable Tax laws have been complied with in all material
respects, all amounts required to be paid to taxing authorities as shown on
Returns filed with such authorities on or before the date hereof have been paid,
all amounts required to be paid to taxing authorities after the date hereof and
on or before the Closing Date to be shown on Returns to be filed with such
authorities will timely be paid; (ii) there are no ongoing examinations by any
taxing authority of any Company Member; (iii) there is currently in effect no
consent agreement under section 341(f) of the Code, private ruling concerning
Taxes from any taxing authority, or closing agreement concerning Taxes with any
taxing authority that could affect the Tax liability of any Company Member for
any period after the Closing Date; (iv) no Company Member is required to make
any adjustments under section 481 of the Code (or any comparable provision of
state, local or foreign law) by reason of a change of accounting method; and (v)
none of the Company Members is a partner in any entity considered to be a
partnership for U.S. federal income tax purposes.
(d) Except as described in Schedule 2.3.11 of the Disclosure Schedules,
each Company Member is a member of a selling consolidated group (within the
meaning of section 338(h)(10)(B) of the Code) of which IMC Global is the common
parent.
(e) Except as provided under Treas. Reg. section 1.1502-6 (or any
similar provision of state, local or foreign law) and except as described in
Schedule 2.3.11 of the Disclosure Schedules, no Company Member has any liability
for or any obligation to pay Taxes of any other person as a transferee or
successor, by contract, or otherwise.
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(f) This Section 2.3.11 contains the exclusive representations and
warranties of Seller and IMC Global with regard to the subject matter addressed
herein.
2.3.12 Absence of Changes. Since the Interim Financial Statement Date
there has been no change, event or circumstance which, individually or in the
aggregate, has had a Material Adverse Effect. Except as set forth on Schedule
2.3.12 of the Disclosure Schedules, since the Interim Financial Statement Date,
the Company has conducted the Business only in the ordinary course. Without
limiting the generality of the foregoing, since the Interim Financial Statement
Date, except for the Unrelated Assets and Liabilities Transfer and except as set
forth in Schedule 2.3.12 of the Disclosure Schedule:
(a) none of the Company Members has made or authorized any additions to
or sold, leased, transferred or assigned any assets or properties, tangible or
intangible, with a fair market value of more than $250,000, except in the
ordinary course of its business;
(b) none of the Company Members has mortgaged, pledged or subjected to
any Encumbrance (except Permitted Liens) any of its assets or properties
(whether tangible or intangible) other than in the ordinary course of its
business;
(c) no party (including any of the Company Members) has accelerated,
terminated, made material modifications to or canceled any agreement referred to
in Section 2.3.13 or any other material agreement, contract, lease, license or
Permit to which any of the Company members is a party or by which any of them is
bound;
(d) none of the Company Members has made or authorized any material
capital expenditures in excess of the budgeted amount for capital expenditures
previously provided by Seller;
(e) none of the Company Members or any of its Affiliates has discharged
or satisfied any Encumbrance or paid any material obligation or material
liability (fixed or contingent) other than in the ordinary course of business;
(f) there has been no change made or authorized in the charter or
bylaws (or similar governing documents) of any of the Company Members and none
of the Company Members has merged with or into or consolidated with any other
entity, or voluntarily or involuntarily dissolved or liquidated or changed or
agreed to change in any manner the rights of its outstanding capital stock;
(g) none of the Company Members has purchased, redeemed, issued, sold
or otherwise acquired or disposed of any of its capital stock or any evidence of
indebtedness or other of its securities, or granted any options, warrants or
other rights to purchase or obtain (including upon conversion, exchange or
exercise) any of its capital stock or any evidence of indebtedness or other of
its securities, or declared any dividend or made any payment or other
distribution on its capital stock (other than cash dividends or distributions);
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(h) none of the Company Members has granted any increase in the
compensation payable or to become payable to any of its directors or officers,
except for normal annual increases in the ordinary course of business consistent
with past practice, or entered into any other transaction with any of its
directors or officers other than reimbursement of reasonable business expenses
incurred in the ordinary course of business;
(i) none of the Company Members has adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance or other plan,
contract or commitment for the benefit of any of its directors and officers or
any other employee or group of employees (or taken any such action with respect
to any other Employee Benefit Plan), except in the ordinary course of its
business;
(j) none of the Company Members has made any change in its method of
accounting;
(k) none of the Company Members has entered into any transactions with
any Affiliate of Seller or its Subsidiaries (other than another Company Member),
except in the ordinary course of business as described in Schedule 2.3.26;
(l) none of the Company Members has changed or modified in any material
respect its existing credit, collection and payment policies, procedures and
practices with respect to accounts receivable and accounts payable;
(m) none of the Company Members has suffered any damage, destruction,
loss or claim, whether or not covered by insurance, in excess of $500,000; and
(n) none of the Company Members has entered into any agreement or
arrangement with respect to, or otherwise committed to, any of the foregoing.
2.3.13 Contracts. Schedule 2.3.13 of the Disclosure Schedules contains
a listing of the following undischarged written (or, to the knowledge of Seller,
oral) contracts, agreements, leases and other instruments to which a Company
Member is a party:
(a) agreements for the employment for any period of time whatsoever, or
in regard to the employment, or restricting the employment, including any
termination, severance or change in control agreements of any employee of any
Company Member who earns more than $75,000 per year;
(b) consulting agreements where the payment thereunder is in excess of
$100,000 per year and which have an unexpired term in excess of one year;
(c) collective bargaining agreements;
(d) contracts or arrangements providing for bonuses, options, deferred
compensation or stock appreciation rights;
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(e) leases or subleases, either as lessee or sublessee, lessor or
sublessor, of personal property, where the lease or sublease provides for an
annual rent in excess of $100,000 and has an unexpired term in excess of one
year;
(f) service agreements affecting any of the assets of any Company
Member where the charges are reasonably expected to be in excess of $100,000 and
which has an unexpired term as of the Closing Date in excess of one year;
(g) loan agreements, promissory notes, indentures, bonds, security
agreements, guarantees or obligations for borrowed money or other instruments
involving Indebtedness in an amount in excess of $100,000;
(h) any partnership, joint venture or other similar agreement or
arrangement;
(i) any agreement containing any covenant or provision prohibiting any
Company Member from engaging in any line or type of business (except for such
agreements which shall not apply to any Company Member upon Closing) or
competing with any person;
(j) any agreement under which it has advanced or loaned any amount to
any of its directors, officers and employees outside the ordinary course of its
business;
(k) any agreement under which a sale of any of the Real Estate that is
material to the operation of the Business is pending;
(l) any indemnification agreement by any Company Member running to any
person that involves, individually or in the aggregate, a contingent liability
of a Company Member of $100,000 or more, other than in connection with customer
contracts, agreements entered into in the ordinary course of business or with
respect to directors or executive officers of the Company;
(m) any long-term or continuing agreements or arrangements with respect
to discounts or allowances or extended payment terms that provide for the
receipt or expenditure following the Closing Date of more than $500,000, other
than purchase orders and sales orders in the ordinary course of business; or
(n) any other agreements that provide for the receipt or expenditure
following the Closing Date of more than $500,000, other than purchase orders and
sales orders in the ordinary course of business.
2.3.14 Enforceability of Contracts. All agreements, leases, subleases,
licenses and other instruments described in Section 2.3.13 and Schedules 2.3.23
and 2.3.24 (collectively, "Contracts") are valid and in full force and effect,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors' rights and to general
equity principles. No default (or an event which would, with the passage of time
or the giving of notice or both, constitute a default) by any Company Member has
occurred thereunder and, to Seller's knowledge, no default (or an event which
would, with the passage of time or the giving of notice or both, constitute a
default) by the other contracting parties has occurred thereunder, which
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default, individually or in the aggregate with other defaults, would reasonably
be expected to have a Material Adverse Effect.
2.3.15 Permits. The Company Members hold, own or possess all licenses,
permits, registrations and government approvals (other than Environmental
Permits, which are exclusively provided for in Section 2.3.22) which are
required in order for them to conduct their respective businesses as conducted
immediately prior to the date of this Agreement where the failure to possess
such Permits, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect (collectively, the "Permits"). All Permits have
been duly obtained and are in full force and effect. The Company Members are in
compliance with the terms and conditions of the Permits in all material
respects. There are no proceedings pending or, to the knowledge of Seller,
threatened seeking to revoke, cancel or suspend, or to adversely modify any of
the Permits.
2.3.16 Employee Benefit Plans.
(a) The Disclosure Schedules contain a true and complete list of each
(i) employee pension benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (collectively, the
"Pension Plans"), (ii) employee welfare benefit plan (as defined in Section 3(1)
of ERISA) (collectively, the "Welfare Plans") and (iii) bonus, deferred
compensation, and severance plan which does not constitute a Welfare Plan
(collectively, the "Compensation Plans") maintained, contributed to or required
to be contributed to by Seller or the Company for the benefit of employees of
the Company. The Pension Plans, the Welfare Plans and the Compensation Plans
sometimes are referred to herein collectively as the "Employee Benefit Plans".
(b) All Employee Benefit Plans comply in all material respects with
ERISA, the Code (including the requirements of Code section 401(a) to the extent
any Pension Plan is intended to conform to that section) and other Requirements
of Law. A favorable determination as to the qualification under Code section
401(a) of each of the Pension Plans intended to be qualified under such section
has been made by the Internal Revenue Service ("IRS") or a request for a
favorable determination has been or will be filed within the remedial amendment
period applicable thereto.
(c) Neither the Company nor any Affiliate of a Company Member (as
determined under Code Section 414(b), (c), (m) or (o) of the Code) has taken any
action, nor has any event occurred, that has resulted or will likely result in
any liability under Section 302(c) or Title IV of ERISA, including any
withdrawal liability with respect to any "multiemployer plan" as defined in
Section 4001(a) of ERISA, which liability could reasonably be expected to become
a liability of Purchaser or any Affiliate of Purchaser (including, but not
limited to, the Company) following the Closing.
(d) Seller has furnished to Purchaser the most recent actuarial report
with respect to each Employee Benefit Plan that is a defined benefit pension
plan, as defined by Section 3(35) of ERISA. The information supplied to the
actuary by Seller for use in preparing those reports was complete and accurate
in all material respects and Seller has no knowledge that the conclusions
expressed in those reports are incorrect.
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(e) This Section 2.3.16 contains exclusive representations and
warranties of Seller and IMC Global with respect to employee benefit matters.
The preceding sentence shall, however, not be construed to limit Purchaser's
ability to rely on the relevant provisions of Sections 2.3.9, 2.3.10, 2.3.12(c),
2.3.12(i), 2.3.13(c) or 2.3.20 with respect to employee benefit matters. Seller
has furnished to Purchaser (1) the amount of any contingent withdrawal liability
to which the Company or Purchaser could become subject by reason of a
transaction described in ERISA Section 4204 and (2) the amount of any withdrawal
liability that would be incurred under ERISA Section 4201 et seq. in the event
of a complete withdrawal on the Closing Date from any multiemployer plan, as
defined in ERISA Section 4001(a), to which the Company could reasonably expect
to be required to contribute after Closing, whether by reason of this Agreement
or operation of law.
2.3.17 List of Employees. Schedule 2.3.17 of the Disclosure Schedules
contains a list of all employees of the Company Members as of July 1, 1998,
whose annual salaries exceed $75,000 and said list correctly reflects their
employer, base salaries, dates of employment and positions.
2.3.18 Union Representation and Labor. There is no labor strike,
dispute, slow-down or work stoppage actually pending or, to the knowledge of
Seller, threatened, against or involving any of the Company Members other than
disputes with individual employees in which the liability of the Company Members
is not reasonably expected to exceed $100,000. Except as set forth on Schedule
2.3.18 of the Disclosure Schedules, none of the employees of the Company Members
is covered by any collective bargaining agreement, and no collective bargaining
agreement is currently being negotiated by any of the Company Members. There is
no request for union representation pending or, to Seller's knowledge, overtly
threatened against the business of any Company Member which, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 2.3.18 of the Disclosure Schedules, no Company
Member has labor negotiations in process with any labor union or other labor
organization relating to the Business. The Company is not, and has not been in
the last three years, engaged in any grievance or unfair labor practice that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. There is not, and in the last three years there has
been no, charge pending or, to the knowledge of Seller, threatened against any
of the Company Members alleging unlawful discrimination in employment practices
before any court or agency that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, and there is no charge
of or proceeding with regard to any unfair labor practice against any of the
Company Members pending before the National Labor Relations Board.
2.3.19 Insurance. Schedule 2.3.19 of the Disclosure Schedules contains
a description of all policies of fire, liability, workers' compensation and
other forms of insurance providing insurance coverage to or for any of the
Company Members, and the name of the owner of each such policy. All such
policies are outstanding and in full force and effect. All premiums with respect
thereto have been paid when due and no notice of cancellation or termination has
been received with respect to any such policy. There is no default with respect
to any provision contained in any such policy, nor has there not been any
failure to give any notice or present any claim under any such policy in a
timely fashion or in the manner or detail required by the policy. Except as set
forth in Schedule 2.3.19 of the Disclosure Schedules, there are no outstanding
claims under such
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policies. Except as set forth in Schedule 2.3.19 of the Disclosure Schedules,
Seller and the Company Members have not been refused any insurance coverage, nor
has their coverage been limited by any insurance carrier to which it has applied
for insurance or with which it has carried insurance during the last five years,
except where such coverage has been obtained from an alternative source under
commercially reasonable terms. Except as disclosed in Schedule 2.3.19 of the
Disclosure Schedules, on and after May 31, 1998, all products liability and
general liability policies maintained by or for the benefit of the Company
Members have been "occurrence" policies and not "claims made" policies. All such
policies and the coverage provided thereunder will continue to be in full force
and effect through the Closing Date (but, except in the case of coverage under
those policies owned solely by any of the Company Members, if any, the coverage
provided to or for the Company Members thereunder may be canceled as of the
Closing Date).
2.3.20 Litigation and Claims. Except as set forth on Schedule 2.3.20 to
the Disclosure Schedules, there is no litigation, action, suit, claim or
proceeding (including arbitration proceedings) or investigation pending, in law
or in equity, and there are no proceedings, reviews or governmental
investigations before any commission or other administrative authority, pending
or, to Seller's knowledge, threatened and no notice, citation, summons or order
(including arbitration orders or awards) has been served upon and no penalty has
been assessed against the Company, or any of their respective officers,
directors or Affiliates, with respect to or affecting the present or former
operations, business, products, sales practices or financial condition of any
Company Member or with respect to or affecting the Shares or Seller's rights
thereto which, if decided adversely to such member, would reasonably be expected
to have a Material Adverse Effect or prevent the consummation of the
transactions contemplated hereby.
2.3.21 Compliance with Law. Except as set forth on Schedule 2.3.21 to
the Disclosure Schedules, no Company Member is in violation of, or delinquent in
respect to, any Requirements of Law to which the property, assets, personnel or
business activities of the Company are subject. Except as set forth on Schedule
2.3.21 to the Disclosure Schedules, no investigation, review, inquiry or
proceeding by any governmental body with respect to the Company Members is
pending or, to the knowledge of Seller, threatened.
2.3.22 Environmental Matters.
(a) For the purpose of this Agreement:
(i) "Contaminant" means any waste, pollutant, hazardous substance,
contaminant extremely hazardous substance, hazardous material, toxic substance,
or hazardous waste, as such terms are defined under any Environmental Laws,
including, without limitation: (i) asbestos or asbestos-containing material;
(ii) polychlorinated biphenyls; (iii) any radioactive waste or material; or (iv)
any petroleum or petroleum-derived substance or waste;
(ii) "Environmental Laws" means any federal, provincial, state,
local, or foreign law, rule or regulation, ordinance, code, permit, order,
decree, common law or civil code principle or other binding determination of any
governmental authority directed to, addressing or imposing liability or
standards of conduct with respect to:
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protection of the environment; Releases or threatened Releases of Contaminants
into the environment; occupational and public safety and health; transportation
of goods; or the manufacture, processing, distribution, use, treatment, storage,
disposal, or handling of Contaminants, in each case as in effect as of the date
hereof (including the reauthorization, reissuance, redesignation or renaming
thereof). Environmental Laws include, without limitation, the Clean Air Act, as
amended (42 U.S.C. 7401 et seq.); the Clean Water Act, as amended (33 U.S.C.
1251 et seq.); the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), as amended (42 U.S.C. 9601 et seq.); the
Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. 6901 et
seq.); the Toxic Substances Control Act, as amended (15 U.S.C. 2601 et seq.);
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et seq.);
the Occupational Health and Safety Act, as amended (29 U.S.C. 651 et seq.); the
Hazardous Materials Transportation Act, as amended (49 U.S.C. 1801 et seq.); and
any corresponding state statutes and any regulations adopted by the United
States Environmental Protection Agency, the United States Occupational, Health
and Safety Administration or the United States Department of Transportation or
the states pursuant to any of the above;
(iii) "Environmental Permits" means all material licenses, permits,
registrations, governmental approvals, agreements and consents and other
authorizations which are required under Environmental Laws to operate the
Business as currently conducted;
(iv) "Release" means release, spill, emission, leaking, pumping,
injection, deposit (including the placement of contaminated media on or offsite
for any purpose), disposal, discharge, dispersal, escape, leaching, or migration
into or presence in the environment; and
(v) "Remedial Action" means actions required under CERCLA or any
other Environmental Laws to (i) clean up, remove, treat, remediate, or in any
other way address Contaminants in the environment; (ii) prevent the Release or
threatened Release or minimize the further Release of Contaminants; (iii)
investigate and determine if a remedial response is needed and to design such a
response; or (iv) perform post-remedial investigation, monitoring, operation,
maintenance, and care relating thereto.
(vi) "Seller's knowledge" means, for purposes of this Section, the
actual knowledge as of the date hereof or as of the Closing Date (as the case
may be) of James Anfield, Carolyn W. Merritt, Robert M. Van Patten, Donald D.
Roberts, Michael Neal. and of Seller's and any Company Group Member's
environmental, health and safety staff.
(b) To Seller's knowledge and except as set forth in Schedule 2.3.22 of
the Disclosure Schedules, (i) the Company Members hold and are in compliance
with all Environmental Permits required under all applicable Environmental Laws
as of the date hereof in connection with the Business, and all of such
Environmental Permits are in full force and effect, except for such permits
which the Company's failure to hold would not reasonably be expected to have a
Material
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Adverse Effect, and (ii) the Company Members are not and, for the past five
years, have not been in violation of any Environmental Law, except for such
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect and except for such past violations
which have been fully settled, corrected or otherwise resolved.
(c) To Seller's knowledge and except as set forth in Schedule 2.3.22 of
the Disclosure Schedules, no Real Estate or any other property for which Seller
or any Company Member has or may have legal obligations is currently subject to
any pending or threatened investigation by, order from or written agreement with
any governmental entity or third party respecting: (i) any violation of any
Environmental Law; (ii) any Remedial Action; or (iii) any claim of Damage
arising from the Release or threatened Release of a Contaminant into the
environment.
(d) To Seller's knowledge and except as set forth in Schedule 2.3.22 of
the Disclosure Schedules, neither Seller, with respect to the Company, nor any
Company Member is a party to or subject to any pending or threatened judicial or
administrative proceeding, order, judgment, decree, or settlement alleging a
violation of or liability or obligation under any Environmental Law, the
enforcement of which, the compliance with, or the ongoing obligations of which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except such orders, judgments, decrees, or settlements
as have been fully resolved according to the terms thereof.
(e) To Seller's knowledge and except as set forth in Schedule 2.3.22 of
the Disclosure Schedules, there have been no Releases or threatened Releases at
any of the Real Property during the periods of time that such Real Property was
owned or operated by Seller or the Company Members, except for such Releases or
threatened Releases which, individually or in the aggregate, have not and would
not reasonably be expected to have a Material Adverse Effect.
(f) To Seller's knowledge and except as set forth in Schedule 2.3.22 of
the Disclosure Schedules, the Real Estate is free from any underground storage
tanks for which Remedial Action or Actions are required by any Environmental
Law, except for such Remedial Actions which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
(g) To Seller's knowledge, Seller has provided Purchaser access to all
environmental reports and data prepared by or on behalf of the Seller or any
Company Member that disclose material environmental conditions or material
violations of Environmental Law at the Real Estate.
(h) Other than post-Closing filings under Environmental Permits that
may be necessary to reflect the change of control of the Company contemplated
hereby, neither the execution and delivery of this Agreement or any of the
Seller Ancillary Documents or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment of the terms,
conditions and provisions hereof or thereof will result in a breach of the
terms, conditions or provisions of, or constitute a default (or an event which
would, with the passage of time or the giving of notice or both, constitute a
default), an event of default or an event creating rights of acceleration,
termination or cancellation or a loss of rights under, or result in the creation
or imposition of any
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Encumbrance upon any of the Shares or any of the assets of the Company, under
any Environmental Permit, other than any such breaches, defaults, rights or
Encumbrances that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect or would not prevent the consummation
of any of the transactions contemplated hereby.
(i) This Section 2.3.22 (collectively, the "Environmental
Representations and Warranties") contains the exclusive representations
and warranties of Seller and IMC Global with regard to Environmental
Laws, Environmental Permits and any other environmental matters in this
Agreement.
2.3.23 Real Estate. (a) One or more Company Members owns interests in
real estate identified in Schedule 2.3.23 of the Disclosure Schedules (the
"Owned Premises"). With respect to each such parcel of owned real property:
(i) the applicable Company Member has good and marketable title
to the parcel of real property, free and clear of any Encumbrance,
easement, covenant or other restriction, except for Encumbrances,
easements, covenants and other restrictions of record which do not
affect materially and adversely the current use, occupancy or
marketability of title, of the property subject thereto;
(ii) there are no pending or, to the knowledge of the Seller,
threatened condemnation, expropriation, eminent domain or other similar
proceedings, lawsuits or administrative actions relating to the
property which materially and adversely affect the current use or
occupancy thereof;
(iii) except as set forth in Schedule 2.3.23 of the Disclosure
Schedules, there are no outstanding written or, to the knowledge of
Seller, oral rights, agreements, options or rights of first refusal to
purchase the parcel of real property, or any portion thereof or
interest therein, which have been granted to any other person; and
(iv) to the knowledge of Seller, there are not parties (other
than the respective Company Member) in possession of or holding any
rights to take possession of the parcel of real property, other than
tenants under any leases disclosed in Schedule 2.3.23 of the Disclosure
Schedules who are in possession of space to which they are entitled and
other than any parties holding rights, the exercise of which would not
materially and adversely affect the current use or occupancy of the
real property subject thereto.
(b) One or more Company Members leases or subleases interests in real
estate identified in Schedule 2.3.23 of the Disclosure Schedules (the "Leased
Premises"; and, together with the Owned Premises, the "Real Estate"). With
respect to each such parcel of leased or subleased real property, except as set
forth in Schedule 2.3.23 of the Disclosure Schedules, a Company Member is the
lessee of each of the Leased Premises, and no party other than a Company Member
has any right to possession, occupancy or use of any of the Leased Premises. A
copy of each lease relating to the Leased Premises has been made available to
Purchaser, together with all amendments and
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modifications thereto and subordination, attornment or non-disturbance
agreements in respect thereof.
2.3.24 Intellectual Property.
(a) Each material (i) trademark, service mark, slogan, trade name,
trade dress and the like (collectively, and together with the associated
goodwill of each, "Trademarks") held by the Company exclusively in connection
with the Business, including information regarding each registration and pending
application to register any such Trademarks; (ii) patent on and pending
application to patent any technology or design used exclusively in connection
with the Business; (iii) registration of and application to register any
copyright held by the Company exclusively in connection with the Business; and
(iv) license of rights in Trademarks, patents, copyrights, unpatented
formulations and know-how, whether to or by any Company Member, is listed in
Schedule 2.3.24 of the Disclosure Schedules. The scheduled rights are referred
to herein collectively as the "Intellectual Property."
(b) To Seller's knowledge, the patents, Trademark registrations and
copyright registrations for all Intellectual Property are valid and in full
force, are held of record in the applicable Company Member's name free and clear
of all Encumbrances (other than liens or imperfections which are not material in
amount and do not materially detract from the value of or materially impair the
existing use of the patents, Trademark registrations and copyright registrations
affected by such lien or imperfection), and are not the subject of any
outstanding injunction, judgment, order, decree, ruling or charge, or any
pending or, to Seller's knowledge, threatened action, suit, investigation,
charge, complaint, claim, demand or cancellation or reexamination proceedings or
any other proceeding challenging their extent, validity, legality,
enforceability, use or ownership of the item. All fees or other costs necessary
for maintaining the same in full force and effect, including but not limited to
maintenance fees, annuities and renewal fees, which are due and payable on or
prior to the Closing Date have been paid. A Company Member is the applicant of
record in all patent applications, and applications for Trademark and copyright
registration for all Intellectual Property, and except as set forth in Schedule
2.3.24 of the Disclosure Schedules, to Seller's knowledge, no opposition,
extension of time to oppose, interference, rejection, or refusal to register has
been received in connection with any such application.
(c) Schedule 2.3.24 of the Disclosure Schedules identifies each item of
Intellectual Property that any third party owns (other than Seller) or licenses
(including Seller) as licensee and that any of the Company Members uses pursuant
to license, sublicense, agreement or permission. With respect to each item of
Intellectual Property required to be so identified in the Disclosure Schedules,
none of the Company Members has granted any sublicense or similar right with
respect to the license, sublicense, agreement or permission.
(d) None of the trade secrets, know-how, or other confidential or
proprietary information of the Company Members has been disclosed to any person
unless such disclosure was, in respect of the Business, made pursuant to a
confidentiality agreement, except for any such disclosures which would not
reasonably be expected to have a Material Adverse Effect.
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(e) The Company Members collectively own, license or have a right to
use all material computer hardware, software and data processing systems used in
connection with the operation of the Business (collectively, the "Company Member
Software") which are listed in Schedule 2.3.24 of the Disclosure Schedules.
There are no material malfunctions with respect to the Company Member Software
as currently used by the Company Members. Except as set forth in Schedule 2.3.24
of the Disclosure Schedules, to the knowledge of Seller, Computer Member
Software owned by the Company Members is capable of accurately processing,
calculating, manipulating, storing, and exchanging date/time data from, into,
and between the twentieth and twenty-first centuries, including, without
limitation, the years 1999 and 2000 and any leap year calculations, provided
that all other information technology used in combination with such Company
Member Software properly exchanges date/time data with such Company Member
Software.
(f) (i) To Seller's knowledge, no other firm, corporation, association
or person claims the right to use on or in connection with similar or closely
related goods and in the United States, any mark which is identical or
confusingly similar to any of the Trademarks; (ii) there are no pending or, to
the knowledge of Seller, threatened claims of any third party (other than a
licensor of Intellectual Property to a Company Member) asserting ownership
rights in any of the Intellectual Property; (iii) there are no pending or, to
the knowledge of Seller, threatened claims that the use by any Company Member of
any Intellectual Property infringes any right of any third party; and (iv) to
Seller's knowledge, no third party is infringing any of the rights of any
Company Member in any of the Intellectual Property, in each case, except for
matters not reasonably expected to have a Material Adverse Effect.
(g) This Section 2.3.24 contains the exclusive representations and
warranties of Seller and IMC Global with regard to the subject matter addressed
herein. The preceding sentence shall, however, not be construed to limit
Purchaser's ability to rely on the relevant provisions of Sections 2.3.12(a),
2.3.12(c), 2.3.12(k), 2.3.13(i) or 2.3.13(l).
2.3.25 Finder's Fees. With the exception of J.P. Morgan Securities Inc.
("J.P. Morgan"), neither Seller nor any of their Affiliates nor the Company has
dealt with any person, firm or entity entitled to a broker's commission,
finder's fee, investment banker's fee or similar payment for arranging the
transactions contemplated hereby or by the Ancillary Documents or introducing
the parties to each other for which Purchaser or any Company Member could become
liable or obliged.
2.3.26 Assets
(a) Sufficiency of Assets. Except as set forth in Schedule 2.3.26 of
the Disclosure Schedules, the assets owned or leased by the Company Members or
which the Company Members have a contractual right to use, together with the
Company's Intellectual Property, include all of the assets used in or otherwise
necessary for the conduct of the Business as currently conducted. Except as set
forth in Schedule 2.3.26 of the Disclosure Schedules, the Assets are in good
condition and repair in all material respects, subject to normal wear and tear.
To the knowledge of Seller, no additional assets, including following the
Closing, additional Intellectual Property,
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accounts receivable or fixed assets, will be necessary in order to operate the
Business on a stand-alone basis as currently operated.
(b) Assets of Affiliates. Schedule 2.3.26 of the Disclosure Schedules
sets forth a description of all services provided by IMC Global, Seller or any
of their Affiliates with respect to the Business utilizing either (i) assets not
included in the Assets or (ii) employees other than the Employees and the manner
in which the costs of providing such services have been allocated to the
Business.
(c) Inventory. The inventory of each of the Company Members is of a
quality and quantity which is usable or saleable in the ordinary course of its
business consistent with the Company Member's past experience and practice,
except to the extent of the reserve for inventory writedown reflected in the
Interim Financial Statements. Since the Interim Financial Statement date, the
inventory of the Company Members has been replenished in a normal and customary
manner consistent with past practices. Except as set forth in Schedule 2.3.26 of
the Disclosure Schedule, no inventory is held on consignment by or for the
Company Members.
2.3.27 Product Warranty. Except as set forth in Schedule 2.3.27 of the
Disclosure Schedules, none of the Company Members has made written (or, to the
knowledge of Seller, oral) warranties with respect to the quality or absence of
defects of its products which it has sold and which are in force as of the date
hereof.
2.3.28 Top Customers and Suppliers. Schedule 2.3.28 of the Disclosure
Schedules sets forth a complete and correct list of the top 10 customers and top
10 suppliers by dollar volume of the Company Members, taken as a whole, during
the fiscal year ended December 31, 1997. Except as set forth in Schedule 2.3.28
of the Disclosure Schedules and except in the ordinary course, to the knowledge
of the Seller none of such customers or suppliers intends to cease doing
business with any of the Company Members or to significantly reduce the general
level of business it is currently doing with the Company Members.
2.3.29 No Undisclosed Liabilities. Except for liabilities and
obligations (a) set forth in the consolidated balance sheet (including notes
thereto) included in the Interim Financial Statements, (b) described or
identified in Schedule 2.3.29 of the Disclosure Schedules, (c) reflected in the
1998 Financials (including Indebtedness) or (d) incurred in the ordinary course
of business since the Interim Financial Statement Date and reflected as a
liability on the books of account of the Company Members, the Company Members
are not subject to any indebtedness, obligation or liability (contingent or
otherwise). Notwithstanding the foregoing, no representation and warranty is
made pursuant to this Section 2.3.29 with respect to any matter that is
specifically addressed by another representation or warranty contained in this
Section 2.3 or any certificate delivered pursuant hereto.
2.3.30 Limitation on Warranties. Each of IMC Global and Seller makes no
representations or warranties except as set forth herein or in any certificate
delivered pursuant hereto. Purchaser acknowledges that it has conducted an
independent investigation of the financial condition, assets, liabilities,
properties and projected operations of the Company (including with respect to
environmental matters) in making its determination as to the propriety of the
transaction
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contemplated by this Agreement, and in entering into this Agreement, has relied
solely on the results of said investigation and on the representations and
warranties of Seller expressly contained in this Agreement. Seller shall be
deemed to have made a misrepresentation with respect to or breach of the
representations and warranties in this Agreement with respect to any tax matter,
employee benefit matter, environmental matter or intellectual property matter
only if such matter breaches Section 2.3.11 (in the case of tax matters), 2.3.16
(in the case of employee benefit matters), 2.3.22 (in the case of environmental
matters) or 2.3.24 (intellectual property matters) of this Agreement,
respectively (it being understood that the other representations and warranties
in this Agreement shall not apply to such matters).
2.3.31 Definition of Knowledge. Except as otherwise provided herein,
for the purposes of this Agreement, the knowledge of Seller shall be deemed to
be limited to (and the phrases "Seller's knowledge", "knowledge of Seller" or
words of similar import mean) the actual knowledge as of the date hereof or as
of the Closing Date (as the case may be) of, Albert Allen, James Anfield, James
Bausch, Ken Carter, Paul Collins, Joel Dunbar, Larry Graham, Carolyn Merritt,
Mike Neal, Don Roberts, Robert Van Patten, Lynn White and Gerard Winterbottom.
ARTICLE III
Conduct Prior to the Closing
3.1 General. IMC Global, Seller and Purchaser shall have the rights and
obligations with respect to the period between the date hereof and the Closing
Date which are set forth in the remainder of this Article III.
3.2 Obligations of Seller and IMC Global. The following are the joint and
several obligations of IMC Global and Seller:
3.2.1 Seller shall cause the Company to give to Purchaser's officers,
employees, and other authorized representatives and financing sources reasonable
access during normal business hours to all of the properties (subject to
Sections 3.3.1 and 3.3.2), books, Returns, contracts, documents, insurance
policies, records and personnel of or with respect to the Company or Seller that
relate to the Business and shall furnish to Purchaser and such persons as
Purchaser shall designate to Seller such documents and copies of documents and
all information as Purchaser or such persons may at any time and from time to
time. In furtherance of the foregoing, Seller shall, and shall cause each of the
Company Members to, provide Purchaser and its financing sources and their
respective agents and representatives with full access to any and all of its
management personnel, accountants, representatives, premises, properties,
contracts, commitments, books, records and other information during regular
Business hours, and shall furnish such financial and operating data,
projections, forecasts, business plans, strategic plans and other data relating
to the Business as Purchaser and its financing sources and its agents and
representatives shall reasonably request; provided, however, that IMC Global and
Seller shall not be required to violate any obligation of confidentiality to
which IMC Global, Seller or any Company Member is subject or to waive any
privilege which any of them may possess in discharging their obligations
pursuant to this Section 3.2.1. Seller shall use its reasonable best efforts to
cause the officers, employees, consultants
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agents, accountants and attorneys to cooperate fully with Purchaser, its
financing sources, agents and representatives in connection with the financing
of the transactions contemplated hereby, including the preparation of any
offering documents related thereto. Purchaser agrees that such investigation
shall be conducted in such a manner as not to interfere unreasonably with the
operations of the Company, IMC Global or Seller.
3.2.2 IMC Global and Seller shall use reasonable efforts (and Purchaser
shall cooperate with IMC Global and Seller) to cause the Company to obtain the
approvals, authorizations, exemptions, waivers and consents to the consummation
of the transactions contemplated hereby under or with respect to (a) each
contract, lease, agreement, Permit, Environmental Permit, and other instrument
and (b) each foreign, federal, state or local governmental approval, in each
case, which is enumerated in Exhibit B attached hereto (collectively, the
"Material Consents"); provided, however, that such action shall not include any
requirement of IMC Global, Seller, any of their Affiliates or the Company to
expend money, commence or participate in any litigation or offer or grant any
accommodation (financial or otherwise) to any third party.
3.2.3 Seller shall cause the Company to carry on the Business in the
ordinary course of business, except as expressly permitted by this Agreement.
3.2.4 Seller shall give prompt written notice to Purchaser in the event
its representations and warranties are discovered to be untrue as of the time
made or in the event Seller determines that such representations and warranties
shall be untrue as if made at and as of the Closing Date. Except as set forth in
Section 9.4, no disclosure by Seller pursuant to this Section 3.2.4 shall be
deemed to amend or supplement the Disclosure Schedules or to cure any
misrepresentation or breach of warranty.
3.2.5 Without the prior written consent of Purchaser, Seller shall
cause the Company Members not to, other than in the ordinary course of business
or as set forth in Schedule 3.2.4 of the Disclosure Schedules:
(a) amend their respective certificates or articles of
incorporation or by-laws, partnership agreements or other
organizational documents;
(b) make any change in the authorized capital stock of any
Company Member or issue any shares of stock of any class or issue or
become a party to any subscriptions, warrants, rights, options,
convertible securities or other agreements or commitments of any
character relating to the issued or unissued capital stock of any
Company Member, or to other equity securities of any Company Member, or
grant any stock appreciation or similar rights;
(c) institute any material increase or otherwise materially
change the compensation payable to or to become payable to any
employee, officer or agent of any Company Member;
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(d) incur or commit to incur any capital expenditures not set
forth in Schedule 3.2.4(d) of the Disclosure Schedules or not included
with the Company's capital spending plan for its current fiscal year in
excess of $2,500,000 in the aggregate;
(e) sell, transfer or otherwise dispose of any asset or property
(including sales or transfers to Affiliates), except (i) for sales of
inventory and for transfers of cash in payment of the liabilities of
any Company Member, and (ii) the transactions described on Schedule
3.2.5(e) of the Disclosure Schedules (the "Unrelated Assets and
Liabilities Transfers") which transactions shall occur concurrent with
the Closing through dividend or otherwise;
(f) enter into any lease, contract or commitment which, if taken
prior to the date hereof, would be required to be disclosed in Schedule
2.3.13 of the Disclosure Schedules;
(g) take any action or omit to take any action which will result
in a violation of any applicable law which, if taken prior to the date
hereof, would be required to be disclosed in Schedule 2.3.21 of the
Disclosure Schedules;
(h) prepay any material obligation which, if taken prior to the
date hereof, would be required to be disclosed in Schedule 2.3.12 of
the Disclosure Schedules; or
(i) borrow any money;
(j) take any action to change accounting policies or procedures
(including procedures with respect to revenue recognition, payments of
accounts payable and collection of accounts receivable) except as
required by GAAP; or
(k) enter into any agreement to do any of the foregoing.
3.3 Purchaser's Obligations. The following are the obligations of
Purchaser:
3.3.1 Purchaser shall comply with the obligations of the proposed
stockholder of Purchaser under that certain letter agreement, dated June 8,
1998, between such proposed stockholder and J.P. Morgan, as agent for IMC Global
(the "Confidentiality Letter"), and shall use its reasonable best efforts to
cause Royster-Clark, Inc. ("Royster-Clark") to comply with Royster-Clark's
obligations under that certain letter agreement, dated June 30, 1998, between
Royster-Clark and J.P. Morgan, as agent for IMC Global.
3.3.2 Purchaser shall comply with the obligations of the proposed
stockholder referred to Section 3.3.1 and Royster-Clark under that certain
Environmental Joint Defense Agreement dated August 17, 1998 among such proposed
stockholder, Royster-Clark and AgriBusiness (the "Joint Defense Agreement"). In
addition, subject to Requirements of Law, Purchaser shall not, without Seller's
written consent, disclose the contents or the existence of any of the Phase I
and Phase II environmental assessments conducted by Purchaser with respect to
the Business to any person other than Seller and its representatives. Purchaser
shall not conduct any such
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investigation or testing without Seller's specific prior written consent and
without giving Seller or its representatives a reasonable opportunity to be
present at the time of any such investigation or testing.
3.3.3 At or prior to Closing, Purchaser shall (i) obtain letters of
credit in replacement of the letters of credit of Seller or any Affiliate set
forth in Schedule 3.3.3 of the Disclosure Schedules (the "Guaranties"), which
shall be in such form and from such financial institutions satisfactory to the
holder of such Guaranty, and (ii) cause Seller or such Affiliate to be fully
released, as of the Closing Date, in respect of all obligations under such
Guarantees.
3.4 Joint Obligations. The following shall apply with equal force to IMC
Global and Seller, jointly and severally, and to Purchaser:
3.4.1 Subject to the terms and conditions of this Agreement, each of
the parties hereto shall use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate the transactions contemplated hereby and by the
Ancillary Documents as soon as practicable. Each of the parties hereto shall use
all reasonable efforts to cause the termination or the reduction of the face
amount of certain letters of credit obtained by or on behalf of one or more
Company Members related to expired insurance policies of the Business.
3.4.2 As promptly as practicable after the date hereof, Purchaser and
Seller shall file with the Federal Trade Commission and the Antitrust Division
of the Department of Justice the notifications and other information required to
be filed under the HSR Act with respect to the transactions contemplated hereby.
Each party warrants that all such filings by it will be, as of the date filed,
true and accurate in all material respects and in material compliance with the
requirements of the HSR Act and any such rules and regulations. Each of
Purchaser and Seller agrees to make available to the other such information as
each of them may reasonably request relative to its business, assets and
property as may be required of each of them to file any additional information
requested by such agencies under the HSR Act.
ARTICLE IV
Conditions to Closing
4.1 Conditions to Obligations of IMC Global and Seller. The obligations of
IMC Global and Seller to close the transactions contemplated hereby and by the
Ancillary Documents is subject to the fulfillment or, if permitted by applicable
law, waiver by IMC Global and Seller of all of the following conditions on or
prior to the Closing Date:
4.1.1 The representations and warranties made by Purchaser shall be
true and correct on the Closing Date as if originally made on and as of the
Closing Date (except to the extent that they expressly relate to an earlier
date), except for changes therein permitted by this Agreement or resulting from
any transaction consented to in writing by Seller or any transaction permitted
by this Agreement and other than breaches of representations and warranties
which are not reasonably expected to have a Material Adverse Effect.
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4.1.2 There shall not have been any breach by Purchaser in the
performance of any of its covenants and agreements herein which shall not have
been remedied or cured (it being understood that Purchaser shall be given a
reasonable opportunity to remedy or cure any such breach), other than breaches
which are not reasonably expected to have a Material Adverse Effect.
4.1.3 The waiting period under the HSR Act shall have expired or been
terminated, and no injunction or restraining order shall have been issued by any
court of competent jurisdiction and be in effect which restrains or prohibits
any material transaction contemplated hereby.
4.1.4 No action, suit or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation.
4.1.5 Seller and its Affiliates shall have been released from liability
with respect to each of the Guaranties, all in accordance with Section 3.3.3.
4.2 Conditions to Purchaser's Obligations. The obligation of Purchaser to
close the transactions contemplated hereby and by the Ancillary Documents is
subject to the fulfillment or, if permitted by applicable law, waiver by
Purchaser of all of the following conditions on or prior to the Closing Date:
4.2.1 Each of the representations and warranties made in Section 2.3
(i) that is qualified as to materiality shall be true on and as of the Closing
Date with the same effect as though made or given on and as of the Closing Date
and (ii) that is not qualified with respect to materiality shall be true in all
material respects on and as of the Closing Date with the same effect as though
made or given on and as of the Closing Date, except, in any case, for changes
therein specifically permitted by this Agreement or as expressly consented to in
writing by Purchaser or resulting from any transaction permitted by this
Agreement and other than breaches of representations and warranties (except any
representation or warranty in Section 2.3.1, Section 2.3.3, Section 2.3.4 and
Section 2.3.8) that are not, individually or in the aggregate, reasonably
expected to have a Material Adverse Effect.
4.2.2 There shall not have been any breach by Seller in the performance
of any of its covenants and agreements herein which shall not have been remedied
or cured (it being understood that Seller shall be given a reasonable
opportunity to remedy or cure any such breach), other than breaches which are
not reasonably expected to have a Material Adverse Effect (without giving effect
to any limitation as to "materiality" or "Material Adverse Effect" as set forth
therein).
4.2.3 The waiting period under the HSR Act shall have expired or been
terminated, and no injunction or restraining order shall have been issued by any
court of competent jurisdiction and be in effect which restrains or prohibits
any material transaction contemplated hereby.
4.2.4 The Seller or one of the Company Members shall have procured all
Material Consents.
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4.2.5 No action, suit or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect materially and adversely the right of Purchaser to own
the Company Members' Shares and to control the Company Members, (D) affect
materially and adversely the right of the Company Members (taken as a whole) to
own their assets and to operate their businesses (and no such injunction,
judgment, order, decree, ruling or charge shall be in effect) or (E) otherwise
would reasonably be expected to have a Material Adverse Effect on the Company
Members.
4.2.6 Seller shall have delivered to Purchaser audited consolidated
financial statements for the Business complying with the requirements of
Regulation S-X promulgated under the Securities Act of 1933 as of and for the
12-month period ended December 31, 1998 (the "1998 Financials").
4.2.7 The 1998 Financials shall (i) be generally consistent in all
material respects with the financial statements attached as Exhibit C hereto,
(ii) not reflect any material changes in liabilities, net sales or operating
income before income, taxes, depreciation and amortization from the financial
statements attached as Exhibit C hereto and (ii) not contain any material
disclosures in the footnotes thereto not set forth in (a) the Financial
Statements or (b) disclosed in any of the Schedules hereto.
4.2.8 Purchaser shall have received the Debt Financing contemplated by,
and on substantially the same terms and conditions set forth in, the Commitment
Letter; provided, however, that, if the terms of the Debt Financing are changed
pursuant to the ninth paragraph of the Commitment Letter, such changed terms
shall have been reasonably acceptable to Purchaser; and provided, further, that
this condition shall be unavailable to Purchaser if the Debt Financing is not
received primarily by reason of Purchaser's failure to receive (i) the Equity
Financing or (ii) adequate assurances regarding the future receipt of the Equity
Financing.
ARTICLE V
Closing
5.1 Form of Documents. At the Closing, the parties shall deliver the
documents, and shall perform the acts, which are set forth in this Article V.
5.2 Purchaser's Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Sections 4.2, Purchaser shall execute and/or deliver to
IMC Global and Seller all of the following:
5.2.1 The Note, duly executed by Purchaser, in the aggregate principal
amount equal to $150,000,000.
5.2.2 The Estimated Purchase Price less the aggregate principal amount
of the Note by wire transfer of immediately available funds.
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5.2.3 A certified copy of Purchaser's charter and by-laws.
5.2.4 A certificate of good standing of Purchaser, issued not earlier
than twenty 20 days prior to the Closing Date by the Secretary of State of
Delaware.
5.2.5 An incumbency certificate with respect to the officers of
Purchaser executing this Agreement, and any Purchaser Ancillary Document
delivered hereunder, on behalf of Purchaser.
5.2.6 A certified copy of resolutions of Purchaser's board of
directors, authorizing the execution, delivery and performance of this
Agreement, and any other document delivered by Purchaser hereunder.
5.2.7 A closing certificate executed by the President of Purchaser (or
any other authorized officer of Purchaser), on behalf of Purchaser, as to the
matters described in Sections 4.1.1 and 4.1.2 and stating that all documents to
be executed and delivered by Purchaser at the Closing have been executed and
delivered by duly authorized officers of Purchaser.
5.2.8 Documents suitable for filing to change the name of AgriBusiness
and IMC Nitrogen to names that do not contain any reference to "IMC"; provided,
that Seller may, at its option, satisfy this condition by changing the name of
AgriBusiness and IMC Nitrogen to names (which do not contain reference to "IMC")
which shall be provided to Seller by Purchaser at least five days prior to the
Closing Date.
5.2.9 A legal opinion in the form attached hereto as Exhibit D.
5.3 IMC Global's and Seller's Deliveries. Subject to the fulfillment or
waiver of the conditions set forth in Sections 4.1, IMC Global and Seller shall
execute or deliver to Purchaser all of the following:
5.3.1 Certified copies of the charter and by-laws of IMC Global,
Seller, AgriBusiness, Hutson and IMC Nitrogen.
5.3.2 Certificates of good standing of IMC Global, Seller, AgriBusiness
and IMC Nitrogen issued not earlier than 20 days prior to the Closing Date by
the Secretary of State of Delaware, and of Hutson issued not earlier than 20
days prior to the Closing Date by the Secretary of State of Kentucky.
5.3.3 Certificates representing all outstanding shares of stock of
AgriBusiness, Hutson and IMC Nitrogen, in each case duly endorsed in blank or
with duly executed stock powers attached.
5.3.4 A closing certificate executed by the President of IMC Global (or
any other authorized officer of IMC Global), on behalf of IMC Global and Seller,
as to the matters described in Section 4.2.1 and 4.2.2. and stating that all
documents to be executed by Seller or the Company and delivered at the Closing
have been executed and delivered by duly authorized officers of Seller, the
Company or an Affiliate of Seller (as the case may be);
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5.3.5 The written resignations, effective as of the Closing Date, of
the directors and officers of AgriBusiness, Hutson and IMC Nitrogen.
5.3.6 The minute books and stock records of AgriBusiness, Hutson, IMC
Nitrogen and the Subsidiaries.
5.3.7 A legal opinion in the form attached hereto as Exhibit E.
5.3.8 An incumbency certificate with respect to the officers of Seller
and IMC executing this Agreement, and any Seller Ancillary Document delivered
hereunder, on behalf of Seller or IMC.
5.4 Other Transactions Occurring at the Closing. In addition to the
deliveries to be made at the Closing pursuant to Sections 5.2 and 5.3:
5.4.1 Seller and the Company shall complete the Unrelated Asset and
Liabilities Transfers.
5.4.2 Each Company Member will enter into a release in a form attached
hereto as Exhibit F, whereby such Company Member will irrevocably discharge and
forever release IMC Global, Seller and their respective shareholders, directors,
officers and employees (in their capacities as shareholders, directors, officers
and employees of each of Seller and such Company Member) from any and all
liabilities, obligations, actions, causes of action, claims or other matters,
whether known or unknown, arising or accruing on or prior to the Closing Date,
other than those claims arising from this Agreement or the Ancillary Documents
or reflected on the Closing Balance Sheet.
5.4.3 Seller will enter into a release in a form attached hereto as
Exhibit G, whereby Seller will irrevocably discharge and forever release each
Company Member and their respective shareholders, directors, officers and
employees (in their capacities as shareholders, directors, officers and
employees of each of Seller and such Company Member) from any and all
liabilities, obligations, actions, causes of action, claims or other matters,
whether known or unknown, arising or accruing on or prior to the Closing Date,
other than those claims arising from this Agreement or the Ancillary Documents
or reflected on the Closing Balance Sheet.
5.4.4 The Company, IMC Kalium Ltd. and IMC-Agrico Company will enter
into a Supply Agreement in the form attached as Exhibit H hereto (the "Supply
Agreement).
5.4.5 The Company and IMC-Agrico Company will enter into a Warehousing
Agreement in the form attached as Exhibit I hereto (the "Phosphate Warehousing
Agreement").
5.4.6 The Company and IMC Kalium Ltd. will enter into a Warehousing
Agreement in the form attached as Exhibit J hereto (the "Potash Warehousing
Agreement" and, together with the Phosphate Warehousing Agreement, collectively,
the "Warehousing Agreements" or, individually, a "Warehousing Agreement").
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ARTICLE VI
Post-Closing Agreements
6.1 Post-Closing Agreements. From and after the Closing, the parties shall
have the respective rights and obligations which are set forth in the remainder
of this Article VI.
6.2 Inspection of Records.
(a) For a period of seven years after the Closing Date, IMC Global,
Seller and their representatives shall have reasonable access to all of the
books and records of the Company to the extent that such access may reasonably
be required by IMC Global and Seller in connection with matters relating to or
affected by the operations of the Company prior to the Closing Date. Such access
shall be afforded by Purchaser upon receipt of reasonable advance notice and
during normal business hours. IMC Global and Seller shall be solely responsible
for any costs or expenses incurred by such party pursuant to this Section
6.2(a). If Purchaser or the Company shall desire to dispose of any of such books
and records prior to the expiration of such seven-year period, Purchaser shall,
prior to such disposition, give IMC Global and Seller a reasonable opportunity,
at Seller' expense, to segregate and remove such books and records as such party
may select.
(b) For a period of seven years after the Closing Date, Purchaser and
its representatives shall have reasonable access to all of the books and records
relating to the Company which IMC Global, Seller or any of their Affiliates may
retain after the Closing Date. Such access shall be afforded by IMC Global,
Seller and their Affiliates upon receipt of reasonable advance notice and during
normal business hours. Purchaser shall be solely responsible for any costs and
expenses incurred by it pursuant to this Section 6.2(b). If IMC Global, Seller
or any of their Affiliates shall desire to dispose of any of such books and
records prior to the expiration of such seven-year period, such persons shall,
prior to such disposition, give Purchaser a reasonable opportunity, at
Purchaser's expense, to segregate and remove such books and records as Purchaser
may select.
6.3 Confidentiality. From and after the Closing, IMC Global and Seller
shall, and shall cause their subsidiaries, employees and agents to, keep
confidential and not disclose to any other person or use for their own benefit
or the benefit of any other person, any information regarding the business and
affairs of the Company Members. The obligation of IMC Global and Seller under
this Section 6.3 shall not apply to information which: (i) is or becomes
generally available to the public without breach of the commitment provided for
in this Section 6.3; (ii) was otherwise available to IMC Global and Seller or
any of their Affiliates on a non-confidential basis; (iii) was independently
developed by IMC Global, Seller or any Affiliate of Seller as demonstrated by
written or other tangible evidence in existence prior to the date hereof (other
than in connection with Seller's ownership and operation of the Business); (iv)
is currently being used by any Affiliate of IMC Global or Seller as demonstrated
by written or other tangible evidence in existence prior to the date hereof
(other than in connection with Seller's ownership and operation of the
Business); or (v) is required to be disclosed by law, order or regulation of a
court or tribunal or government or disclosures necessary to implement the
provisions of this Agreement or to comply with the accounting and Securities
Exchange Commission disclosure obligations or the rules of any stock exchange or
over-the-counter market; provided, however, that, in the case of clause (v)
above, IMC
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Global and Seller shall provide Purchaser as much advance notice of the
possibility of such disclosure as practical so Purchaser may attempt to stop
such disclosure or obtain a protective order concerning such disclosure.
6.4 Use of Trademarks. IMC Global and Seller are not conveying ownership
rights or granting Purchaser or the Company a license to use any of the
tradenames or trademarks of IMC Global or any Affiliate of IMC Global and, after
the Closing, Purchaser shall not permit the Company or any Affiliate of the
Company to use in any manner the names or marks of IMC Global or any Affiliate
of IMC Global or any word that is similar in sound or appearance to such names
or marks; provided, however, IMC Global grants to Purchaser and each Company
Member for a period of 90 days (180 days in respect of signage) following the
Closing Date, a non-exclusive, non-transferrable, fully-paid and royalty-free
license to use the "IMC" name and logo set forth on Schedule 6.4 of the
Disclosure Schedules (the "Mark") in the Business, as such Business is conducted
as of the Closing Date, in connection with the transition of the names used by
the Business to new names. Notwithstanding the foregoing, Purchaser and the
Company shall use reasonable efforts to change all references to the Mark used
by the Company as soon as practicable following the Closing Date, and shall make
clear in all correspondence and communications made by Purchaser, the Company
and the Business that the Company is no longer owned by Seller or IMC Global.
Purchaser agrees that the products and services the Company offers in connection
with the Mark during the term of the license granted above shall be of a
comparable quality to those currently being offered by Seller and IMC Global in
connection with the Mark. Purchaser agrees that Seller's remedies at law for any
breach or threat of breach by Purchaser of the provisions of this Section 6.4
will be inadequate, and that Seller shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Section 6.4 and to
enforce specifically the terms and provisions hereof, in addition to any other
remedy to which Seller may be entitled at law or equity.
6.5 Further Assurances. The parties shall execute such further documents,
and perform such further acts, as may be reasonably necessary to transfer and
convey the Shares to Purchaser, on the terms herein contained, and to otherwise
comply with the terms of this Agreement and consummate the transactions
contemplated hereby and by the Ancillary Documents.
6.6 Non-Competition; Non-Solicitation.
6.6.1 In consideration of the benefits of this Agreement to Seller and
in order to induce Purchaser to enter into this Agreement, each of IMC Global
and Seller, jointly and severally, hereby covenants and agrees that from and
after the Closing and until the third anniversary of the Closing Date, it shall
not, and shall cause its subsidiaries not to, directly or indirectly, as a
partner, stockholder, director, consultant, joint venturer, investor or in any
other capacity, engage in, or own, manage, operate or control, or participate in
the ownership, management, operation or control of, any business or entity which
engages anywhere in the United States of America in (x) the sale of crop
production inputs and services at retail or (y) the sale of the crop production
inputs set forth in Schedule 6.6.1 at wholesale (a "Competing Business");
provided, however, that nothing herein shall prohibit IMC Global, Seller or any
of their subsidiaries from (i) owning not more than 5.0% of any class of
securities of a publicly traded entity in a Competing Business, (ii) acquiring
and following such acquisition, actively engaging in, any business enterprise
partially engaged in a Competing
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Business, so long as not more than 20% of the fair market value of such
business, as determined in good faith by the Board of Directors of IMC Global
and certified to Purchaser by an officer of IMC Global, is attributable to such
Competing Business, (iii) acquiring, and following such acquisition, actively
engaging in, any business enterprise partially engaged in a Competing Business,
provided that if more than 20% of the fair market value of such business, as
determined in good faith by the Board of Directors of IMC Global and certified
to Purchaser by an officer of IMC Global, is attributable to such Competing
Business, then such business shall divest itself of the subsidiary, division,
group, franchise or segment which engages in such Competing Business as soon as
practicable after the date of such acquisition, and provided, further, that with
respect to any purchase intended to be accounted for as a pooling of interests
under GAAP or treated for federal income tax purposes as a tax-free
reorganization, no such divestiture shall be required until, in the reasonable
opinion of the acquiror, such divestiture would no longer endanger the
accounting of such acquisition as a pooling of interests under GAAP or the
treatment for federal income tax purposes of such acquisition as a tax-free
reorganization, or (iv) engaging in any activity or services of the type
currently being performed by IMC Global, Seller and their Affiliates (other than
any Company Member).
6.6.2 From the date hereof until the third anniversary of the Closing
Date, each of IMC Global and Seller, jointly and severally, shall not, and shall
cause its subsidiaries and representatives not to, without prior written
approval of Purchaser, directly or indirectly, solicit for employment any
current officer, senior manager, general manager, sales or technical employee of
the Company; provided, however, that the foregoing shall not prevent IMC Global,
Seller or any of their Affiliates from hiring any such person (i) who contacts
the IMC Global, Seller or their Affiliates on his or her own initiative without
solicitation from any of IMC Global, Seller or their Affiliates, (ii) in
connection with general employment advertisements published in magazines,
journals, newspapers and other publications that are not targeted at the Company
or any of the Company's employees or (iii) who has been discharged by the
Company prior to any such solicitation.
6.6.3 IMC Global and Seller acknowledge that given the nature of the
Business the covenants contained in this Section 6.6 contain reasonable
limitations as to time, geographic area and scope of activity to be restrained,
and do not impose a greater restraint than is necessary to protect and preserve
for the benefit of Purchaser the goodwill of the company and to protect the
legitimate business interests of the Company. If, however, this Section 6.6 is
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too long a period of time or over too large a geographic
area or by reason of its being too extensive in any other respect or for any
other reason it will be interpreted to extend only over the longest period of
time for which it may be enforceable and/or over the largest geographic area as
to which it may be enforceable and/or to the maximum extent in all other aspects
as to which it may be enforceable, all as determined by such court and in such
action.
6.6.4 IMC Global and Seller agree that Purchaser's remedies at law for
any breach or threat of breach by IMC Global or Seller of the provisions of this
Section 6.6 will be inadequate, and that Purchaser shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this Section
6.6 and to enforce specifically the terms and provisions hereof, in addition
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to any other remedy to which Purchaser may be entitled at law or equity. In the
event of litigation regarding this Section 6.6, the prevailing party in such
litigation shall, in addition to any other remedies that prevailing party may
obtain in such litigation, be entitled to recover from the other party all
reasonable legal fees and out-of-pocket expenses incurred by such party in
enforcing or defending its rights hereunder.
6.7 Tax Matters.
6.7.1 Tax Sharing Agreement. IMC Global, Seller and each Company Member
shall cause any tax sharing agreements, arrangements or practices between any
Company Member and IMC Global or any Affiliate of IMC Global (collectively, the
"Tax Sharing Agreement") to be terminated as of the day before the Closing Date
as it pertains to each Company Member, and the obligations of the parties, IMC
Global and its Affiliates with respect to Taxes shall be governed exclusively by
this Agreement.
6.7.2 Filing of Returns.
(a) For all taxable periods of the Company Members ending on or prior
to the Closing Date, the parties shall cause the Company Members to join in IMC
Global's consolidated federal income Returns and, in jurisdictions requiring or
permitting combined reporting with IMC Global or any of its Affiliates, to join
in combined Returns for such jurisdictions, in accordance with current
practices, and Seller shall cause the Taxes shown on such Returns to be paid.
(b) Seller shall cause the Company Members to file all other Returns
for taxable periods ending on or before the Closing Date and all Returns (other
than income Tax Returns) on which the Unrelated Assets and Liabilities Transfers
are required to be reported, and Seller shall pay all Taxes attributable to such
periods and events. Purchaser shall make available to Seller such books and
records of the Company as are reasonably necessary for Seller to prepare such
Returns. Purchaser shall have the right to review such Returns prior to filing
and Purchaser shall cause an authorized officer of the Company Members to
execute such Returns, provided such Returns have been prepared in accordance
with applicable law.
(c) Purchaser shall cause the Company Members to file all Returns for
their taxable periods ending after the Closing Date. Purchaser shall cause the
Taxes shown on such Returns to be paid, subject to being reimbursed by Seller
for any Taxes attributable to the portion of any Straddle Period which precedes
or includes the Closing Date.
All Returns referred to in this Section 6.7.2 shall be filed in a timely manner
and in proper form. Purchaser shall prepare and provide Seller with copies of
each Return (or the relevant portions thereof) reflecting any obligations of
Seller with respect to any taxable period of any Company Member which begins
before and ends after the Closing Date (a "Straddle Period") at least 30 days
prior to the due date for filing such Return, and Seller shall have the right to
review and to grant or withhold approval of such Returns (which approval shall
not unreasonably be withheld) prior to the filing thereof. Seller shall
reimburse Purchaser for Taxes attributable to the portion of any Straddle Period
that precedes the Closing Date, as determined under the principles set forth in
Section 6.7.3. Seller shall make such reimbursement payment to Purchaser no
later than the date the return for any
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such Straddle Period is due. Purchaser and Seller shall attempt in good faith
mutually to resolve any disagreements regarding such Returns prior to the due
date for filing thereof. None of Purchaser or any Affiliate of Purchaser shall
(or shall cause or permit any Company Member to) amend, refile or otherwise
modify (or grant an extension of any statute of limitation with respect to) any
Tax Return relating in whole or in part to any Company Member with respect to
any taxable year or period or portion of a period ending on or before the
Closing Date without the prior written consent of Seller, which consent shall
not be unreasonably withheld.
6.7.3 Allocations Relating to Taxes. Taxes shall be allocated between
Seller and Purchaser as follows:
(a) For federal income Tax purposes, the taxable year of the Company
Members shall end as of the close of the Closing Date and, with respect to all
other Taxes, Seller and Purchaser shall, unless prohibited by applicable law,
close the taxable period of the Company Members as of the close of the Closing
Date. Neither Seller nor Purchaser shall take any position inconsistent with the
preceding sentence on any Return.
(b) Any allocation of income or deductions required to determine any
Taxes attributable to the various portions of any taxable period shall be made
by means of an interim closing of the books and records of the Company Members
as of the close of the applicable date, provided that exemptions, allowances,
deductions (including depreciation and amortization deductions), and any Taxes
(such as property, sales or similar Taxes) that are calculated on an annual or
periodic basis shall be allocated pro rata among the days in such taxable
period. Any disagreements regarding the allocations shall be promptly resolved
in an arbitration conducted by the Arbitrating Accountant, whose decision shall
be binding on the parties and whose fees shall be borne equally by Seller and
Purchaser.
(c) Any transaction occurring outside the ordinary course of business
and not caused by Seller or its Affiliates on the Closing Date after the
Closing, except with respect to any Section 338(h)(10) Election, shall be
treated as occurring on the day following the Closing Date. Purchaser shall not,
and shall not permit any Company Member to, engage in any transaction out of the
ordinary course of business or to make any election (other than a Section
338(h)(10) Election) that, after the Closing, would cause additional income to
be realized or recognized for income Tax purposes by any Company Member on the
Closing Date.
6.7.4 Tax Indemnity.
(a) Seller shall pay and shall indemnify and hold Purchaser, the
Company Members and their Affiliates harmless against: (i) any Tax liability of
any Company Member that is attributable to any Tax period or portion of a
Straddle Period ending on or before the Closing Date; (ii) any Tax liability
resulting from the application of Treas. Reg. section 1.1502-6 (or comparable
provision of state, local or foreign law), of IMC Global and the members of its
consolidated return group (collectively, the "Seller Group," which shall not
include any Company Member following the Closing Date), or of any other
consolidated group of which any Company Member was a member prior to the Closing
Date; and (iii) any Tax liability attributable to the Unrelated Assets and
Liabilities Transfers.
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(b) Purchaser shall pay and shall indemnify and hold Seller and its
Affiliates harmless against any Tax liability of any Company Member that is
attributable to any taxable period or portion of a Straddle Period beginning on
or after the Closing Date or that is attributable to any transaction occurring
outside the ordinary course of business and not caused by Seller or its
Affiliates on the Closing Date after the Closing, other than Taxes arising on
account of any Section 338(h)(10) Election.
(c) This Section 6.7.4 shall be applied in accordance with the
indemnification procedures of Section 7.7 to the extent possible.
6.7.5 Refunds and Credits. Seller shall be entitled to any refunds or
credits of any Taxes of the Company Members allocable to periods ending on or
before the Closing Date. Purchaser shall be entitled to any refunds or credits
of any Taxes of the Company Members for periods beginning after the Closing
Date. Refunds and credits allocable to periods beginning before and ending after
the Closing Date shall be equitably divided between the parties in accordance
with the principles in this Section 6.7.
6.7.6 Section 338(h)(10) Election; Price Allocation. With respect to
the acquisition of the Company Members:
(a) At the election of Purchaser, Purchaser and the Seller Group shall
make an election under Section 338(h)(10) of the Code and the Treasury
Regulations promulgated thereunder (and any comparable election under state,
local or foreign Tax law) for each Company Member designated by Purchaser for
which such election is permissible (a "Section 338(h)(10) Election"). The
parties shall report, in connection with the determination of income, franchise
or other Taxes measured by net income, the transactions being undertaken
pursuant to this Agreement in a manner consistent with each Section 338(h)(10)
Election, if any;
(b) If any Section 338(h)(10) Election is made, the following
procedures shall apply. Purchaser, Seller and the Company shall cooperate fully
with each other in the making of each Section 338(h)(10) Election. In
particular, and not by way of limitation, in order to effect a Section
338(h)(10) Election, Purchaser shall, and Seller shall cause IMC Global to,
jointly execute necessary copies of Internal Revenue Service Form 8023 and all
attachments required to be filed therewith pursuant to applicable Treasury
regulations. Purchaser, no later than 150 days after the Closing Date, shall
provide Seller with a valuation statement reflecting, as of the Closing Date,
the fair market values of all of the assets and the amount of the liabilities
and obligations of each Company Member for which an election has been made, with
a determination of "modified aggregate deemed sale price" (as determined in
accordance with Treas. Reg. section 1.338(h)(10)-1(f)) for the assets of each
affected Company Member and an allocation of the "modified aggregate deemed sale
price" among the assets of each affected Company Member. If a Section 338(h)(10)
Election is not made for a Company Member, Purchaser, no later than 150 days
after the Closing Date, shall provide Seller with a valuation statement
reflecting an allocation of a portion of the Purchase Price to the stock of such
Company Member. Subject to the following provisions of this paragraph (b),
Purchaser shall, and Seller shall cause IMC Global to, file and shall cause
members of their respective affiliated groups (within the meaning of Section
1504 of the Code or any similar
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group defined under a similar provision of state, local or foreign law) to file,
all Returns and statements, forms and schedules in connection therewith in a
manner consistent with such valuations, determinations and allocations and shall
take no position contrary thereto unless required to do so by applicable Tax
laws. Seller shall have the right to review any appraisal upon which such
valuations are based and to grant or reasonably withhold approval of such
valuations and any such forms and schedules relating to such valuations, prior
to the filing of such Returns, statements, forms and schedules. Any disputes
regarding the valuation statement or the preparation, execution or filing of the
forms and documents required in connection with making any Section 338(h)(10)
Election shall be resolved in an arbitration to be conducted by the Arbitrating
Accountant, whose fees shall be borne equally by Seller and Purchaser. Each of
the parties to this Agreement shall be bound by the decision of the Arbitrating
Accountant rendered in such arbitration. To the extent permitted by state, local
or foreign Tax laws, the principles of this Section 6.7.6(b) shall also apply
with respect to a Section 338(h)(10) Election under state, local or foreign law.
(c) The parties agree that a violation of this Section 6.7.6 is a
proper subject of injunctive relief.
6.7.7 Transfer Taxes. Notwithstanding anything herein to the contrary,
Purchaser and Seller shall each pay, and shall indemnify the other party and its
Affiliates against, fifty percent of any real property transfer Tax, sales Tax,
use Tax, stamp Tax, stock transfer Tax, or other similar Tax imposed on the
transactions contemplated by this Agreement, provided, however, that Seller
shall be solely responsible for and shall indemnify Purchaser and its Affiliates
against all Transfer Taxes attributable to the Unrelated Assets and Liabilities
Transfers.
6.7.8 Contest Provisions. Purchaser shall promptly, but in no event
later than 10 days after receipt, notify Seller in writing upon receipt by
Purchaser, any of its Affiliates, any Company Member or any Subsidiary of notice
of any pending or threatened federal, state, local or foreign Tax audits,
examinations or assessments which might affect the Tax liabilities for which
Seller may be liable pursuant to this Agreement.
Seller shall have the sole right to represent each Company Member and
each Subsidiary's interests in any Tax audit or administrative or court
proceeding relating to taxable periods ending on or before the Closing Date or
otherwise relating to Taxes for which Seller may be liable pursuant to this
Agreement, and to employ counsel of its choice at its expense. In the case of a
period beginning before and ending after the Closing Date, Seller shall be
entitled to participate at its expense in any Tax audit or administrative or
court proceeding relating (in whole or in part) to Taxes attributable to the
portion of such period ending on and including the Closing Date and, with the
written consent of Purchaser and at Seller's sole expense, may assume the entire
control of such audit or proceeding. None of Purchaser, any of its Affiliates,
any Company Member or any Subsidiary may settle any Tax claim for any Taxes for
which Seller may be liable pursuant to this Agreement, without the prior written
consent of Seller, which consent may not be unreasonably withheld.
From the date hereof, Seller shall not make or terminate any Tax
election, settle or compromise any Tax dispute, or enter into any closing
agreement if such action would materially
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increase the Taxes of any Company Member for any taxable period after the
Closing Date without the prior written consent of Purchaser, which consent may
not be unreasonably withheld.
6.8 Agreement to Defend and Indemnify. Without prejudicing its right to
indemnification under Article VII hereof, Purchaser acknowledges and accepts as
contract rights (and agrees to cause each Company Member to honor in accordance
with their terms) the provisions of each Company Member's charter and/or by-laws
or other organizational documents as in effect on the date hereof with respect
to indemnification of officers, directors, employees and agents of each Company
Member (collectively, "Indemnified Persons") (including provisions relating to
contribution, advancement of expenses and the like), and agrees that, for a
period of six years after the Closing Date, the indemnity provisions of the
charter and by-laws or other organizational documents of each Company Member, to
the extent such Company Member is still in existence, shall not be modified or
amended except as required by law, unless such modification or amendment expands
the rights of the Indemnified Persons to indemnification (including with respect
to contribution, advancement of expenses and the like).
6.9 Employee Benefits.
6.9.1 Future Benefits. During the 180-day period immediately following
the Closing, Purchaser shall cause to be provided to each of the employees who
were employed by the Company immediately prior to the Closing and continue or
terminate employment with the Company or Purchaser or any of their Affiliates
(an "Employee," and collectively, the "Employees") benefits no less favorable in
the aggregate than the benefits (including Employee Benefit Plans, vacation pay,
holiday pay, sick pay, salary continuation, fringe benefits and other benefit
plans or arrangements) that were being provided by the Company to similarly
situated employees during the first calendar quarter of 1997. During the 180-day
period immediately following the Closing, Purchaser shall cause to be provided
to each of the Employees compensation (including base salary, incentive pay and
bonuses) no less favorable in the aggregate than the compensation provided to
the Employee by the Company immediately prior to the Closing Date. During the
one-year period immediately following the Closing, Purchaser shall cause to be
maintained for each Employee whose employment with the Company or Purchaser or
any of their Affiliates is terminated after the Closing (other than the
Employees who are parties to the Severance Agreements listed on Schedule 6.9.4
of the Disclosure Schedule) severance which is no less favorable than under the
severance guidelines of the Company as applied to the class of employees of
which such Employee is a part on the date hereof.
6.9.2 Welfare Benefits. To the extent such claims and liabilities are
reflected on the Closing Balance Sheet, Purchaser shall cause Seller to be
reimbursed for all claims and liabilities under the Welfare Plans maintained by
IMC Global and its Affiliates and attributable to Employees and their spouses
and dependents, which have not been paid as of the Closing Date. Effective on
the Closing Date, Purchaser shall provide group health plan coverage (including
retiree medical benefits, if any) to the Employees and cause Employees and their
dependents to be provided with group health plan coverage without any waiting
period and without any exclusion or limitation with respect to any pre-existing
condition within the meaning of Section 4980B(f)(2)(B)(iv)(1) of the Code.
Purchaser shall be responsible for satisfying COBRA continuation of coverage
rights
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pursuant to Section 4980B of the Code or Part 6 of Title I of ERISA with respect
to each individual who was an employee of the Company or a spouse or dependent
of any such employee with respect to any qualifying event occurring on or after
the Closing Date.
6.9.3 Service Credit. Purchaser shall cause service with the Company,
Seller or IMC Global or any of their Affiliates (or their respective
predecessors) prior to the Closing Date and not otherwise excluded under the
terms of any of Seller's Employee Benefit Plans to be treated as service for all
benefit plans and arrangements described in Section 6.9.1 for all purposes under
such benefit plans and arrangements, including for purposes of pre-existing
conditions limitations, waiting period and vesting requirements and, to the
extent such amounts are reflected on the Closing Balance Sheet, shall cause all
benefits accrued by any Employee under any Employee Benefit Plan or other
benefit plan or arrangement prior to the Closing Date to be provided to such
Employee; provided, however, that this Section 6.9.3 shall not require credit
for any prior service be given for benefit accrual purposes under any defined
benefit pension plan established on or after the Closing Date or result in a
duplication of benefits.
6.9.4 Specific Assumption of Severance Agreements. Effective on the
Closing, Purchaser expressly and unconditionally assumes and agrees to perform
the obligations under the Severance Agreements listed on Schedule 6.9.4 of the
Disclosure Schedules. Notwithstanding the foregoing, in respect of the Severance
Agreement attached as Exhibit K hereto, as the same exists on the Closing Date
(the "Executive Severance Agreement"), IMC Global and Seller, jointly and
severally, agree to reimburse Purchaser for 50% of any Severance Benefits (as
defined in the Executive Severance Agreement) paid by Purchaser as a result of
the termination by the Executive (as so defined) of such Executive's employment
during the 180 days after the Closing Date.
6.9.5 Assumption of Retirement Plans for Certain Union Employees.
Effective as of the Closing, Purchaser shall assume sponsorship and be
substituted for IMC Global Operations Inc. ("IMC Ops") under Retirement Plan for
Hourly Employees of IMC Ops represented by Local #14981, United Steelworkers of
America at Americus, Georgia; Retirement Plan for Hourly Employees of IMC Ops
represented by Local #233, International Chemical Workers Union (Florence);
Retirement Plan for Hourly Employees of IMC Global Ops at the Mulberry Rainbow
Plant Represented by Local #35, International Chemical Workers Union; Retirement
Plan for Hourly Employees of IMC Global Ops represented by Local #899,
International Chemical Workers Union (Tifton); Retirement Plan for Hourly
Employees of IMC Global Ops represented by Local #774, International Chemical
Workers Union (Tupelo) and shall assume all of IMC Ops' rights, duties and
obligations with respect to such plans.
6.9.6 Transfer of Plan Account Balances. As soon as reasonably
practicable after the Closing Date, Purchaser shall establish one or more
defined contribution plans (the "Purchaser Account Plan") effective as of the
Closing Date. Purchaser Account Plan shall, concurrently with, and to the extent
of, receipt of assets as hereinafter provided, assume the account balances in
the IMC Global Inc. Profit Sharing and Savings Plan and the Savings Plan for
Union Hourly Employees of IMC Ops (collectively, "IMC Plan") as of the date of
transfer of each person ("Plan Employee") who:
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(a) was at any time a participant in the IMC Plan; and
(b) was employed by the Company on the Closing Date.
As soon as reasonably practicable following the Closing Date, Seller shall cause
the IMC Plan to transfer to the Purchaser Account Plan an aggregate amount equal
to the account balances of Plan Employees valued as of the most recent
accounting date prior to the date of transfer ("Transferred Accounts"). Seller
shall cause the transfer to the Purchaser Account Plan, either in cash, in-kind
assets or a combination of cash and in-kind assets, as agreed to by Seller and
Purchaser. Purchaser shall establish a trust or other funding entity for the
purpose of receiving such assets from the IMC Plan. Such transfers of assets
shall be made only after Purchaser and Seller have supplied each other with
reasonable assurance that the Purchaser Account Plan in Purchaser's case, and
the IMC Plan in Seller's case is a qualified plan meeting the requirements of
Section 401(a) of the Code. Purchaser and Seller shall each ensure that the
transfer set forth above shall comply with provisions of Code Sections 411(d)(6)
and 414(1) and Section 204(h) and 208 of ERISA.
6.9.7 Non-Prohibition on Termination of Employment. Nothing in this
Section 6.9 shall prevent Purchaser, the Company or their Affiliates from
terminating the employment of any Employee at anytime.
6.10 Registration and Legend. Purchaser agrees and understands that the
Shares have not been, and will not be, registered under the Securities Act or
the securities laws of any state and that the Shares may be sold or disposed of
only in one or more transactions registered under the Securities Act and
applicable state securities laws or as to which an exemption from the
registration requirements of the Securities Act and applicable state securities
laws is available. Purchaser acknowledges and agrees that no person has any
right to require Seller to cause the registration of any of the Shares. The
certificates representing the Shares shall contain a legend similar to the
following and other legends necessary or appropriate under applicable state
securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
A REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS WITH RESPECT TO SUCH SHARES IS EFFECTIVE OR UNLESS THE
COMPANY IS IN RECEIPT OF AN OPINION OF COUNSEL SATISFACTORY TO IT TO
THE EFFECT THAT SUCH SHARES MAY BE SOLD WITHOUT REGISTRATION UNDER THE
ACT AND SUCH LAWS.
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ARTICLE VII
Indemnification
7.1 General. From and after the Closing, the parties shall indemnify each
other as provided in this Article VII. All payments made by Purchaser or Seller,
as the case may be, under this Article VII shall be treated as adjustments to
the Purchase Price for all Tax purposes.
7.2 Certain Definitions. As used in this Agreement, the following terms
shall have the indicated meanings:
7.2.1 "Damages" shall mean all losses, damages (including, with respect
to Environmental Claims, costs of Remedial Actions), awards, fines, penalties,
deficiencies, judgments, costs, expenses and fees (including reasonable
attorneys' fees, accountants' fees, court costs and all other reasonable
expenses incurred in investigating or defending any litigation or proceeding,
commenced or threatened), resulting from, arising out of or incident to any of
the indemnifiable items in this Article VII. Damages, however, shall be net of:
(i) any federal, state, or local income tax benefits actually realized by the
Indemnified Party as a result of the matter for which indemnification is sought
offset by any additional tax burden actually suffered by the Indemnified Party
as a result of the matter giving rise to indemnification; provided that no
Indemnified Party shall be required solely for the purpose of realizing a
benefit to take any tax position that could have an adverse effect on such
Indemnified Party if taken; and provided, further, that the Indemnified Party
shall not be required to disclose its (or its Affiliates) tax returns, work
papers or other information with respect to the preparation of such returns, but
shall be required to disclose the foregoing only to a nationally recognized
accounting firm that agrees to disclose only its conclusions to the Indemnifying
Party that accrues to or is realized by the Indemnified Party in respect of the
matter for which a claim is asserted; (ii) any proceeds received by the
Indemnified Party from any separate indemnification or contribution from or
against any person or entity; and (iii) insurance proceeds or coverage pursuant
to any insurance (including title insurance) held by the Indemnified Party or
its Affiliates and covering the event for which indemnification is sought or
insurance proceeds recovered from any other person or entity by the
Indemnifiable Party (less any costs, expenses, premium increases or taxes
incurred in connection therewith).
7.2.2 "Environmental Claim" shall mean any Third Party Claim arising
under any Environmental Law; provided that Environmental Claims shall not
include any enforcement actions by any government agency following the Closing
Date with respect to, or related to compliance of the Business on or prior to
the Closing Date with "process safety management regulations" (as defined under
29 C.F.R. 1910.119) ("Process Safety Management Claims") or state or federal
laws or regulations concerning the transportation of hazardous materials
("Transportation Claims").
7.2.3 "Indemnified Party" shall mean, with respect to a particular
matter, a party hereto seeking indemnification from another party hereto
pursuant to this Article VII.
7.2.4 "Indemnifying Party" shall mean, with respect to a particular
matter, a party against whom indemnification under this Article VII is sought by
an Indemnified Party.
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7.2.5 "Third Party Claim" shall mean any claim, action, suit,
proceeding, investigation, judicial or administrative order, or like matter
which is asserted, requested or threatened by, or initiated at the request of, a
person other than the parties hereto and their Affiliates, their successors and
permitted assigns, against any Indemnified Party.
7.3 IMC Global's and Seller's Indemnification Obligations. IMC Global and
Seller shall, jointly and severally, indemnify, defend and hold harmless
Purchaser, each Company Member, the officers, directors, shareholders, employees
and Affiliates thereof and their successors and permitted assigns (each referred
to in this Agreement as a "Purchaser Indemnitee" and, collectively, the
"Purchaser Indemnitees") against and from all Damages sustained or incurred, by
any Purchaser Indemnitee, as a result of or arising out of:
7.3.1 any inaccuracy in or breach of any representation and warranty
made by IMC Global or Seller in Section 2.3 or in any Seller Ancillary Document
(other than the Supply Agreement or any Warehousing Agreement) delivered to
Purchaser in connection herewith (other than any representation and warranty
made with respect to the Environmental Representations and Warranties or Section
2.3.29);
7.3.2 any breach by IMC Global or Seller of, or failure of IMC Global
or Seller to comply with any of the covenants or obligations under this
Agreement or in any Seller Ancillary Document (other than the Supply Agreement
or any Warehousing Agreement) to be performed by IMC Global or Seller;
7.3.3 any inaccuracy in or breach of any of the Environmental
Representations and Warranties, whether made pursuant to this Agreement or in
the certificate delivered to Purchaser pursuant to Section 5.3.4;
7.3.4 any Environmental Claim solely to the extent that such
Environmental Claim is associated with, arises from, or relates to (a)
conditions existing prior to the Closing Date on the Real Estate, (b) conditions
existing prior to the Closing Date on real estate (other than the Real Estate)
formerly owned, leased or operated by any Company Member or any of their
predecessors, (c) the operation of the Business or the operation of the
businesses of any Company Member predecessor prior to the Closing Date or (d)
the offsite disposal, transportation, recycling or Release or threatened Release
of any Contaminants as a result of the Company Members' operations, or those of
their predecessors, before the Closing Date, in each case, including
Environmental Claims for a Release or threatened Release of any Contaminant on,
in, at, to, beneath or from the Real Estate before the Closing Date (whether or
not such Environmental Claim also constitutes a breach of the Environmental
Representations and Warranties); provided that Purchaser's activities (including
communications), other than those activities required by Environmental Law, have
not directly or indirectly triggered or caused to be ripened such Environmental
Claim (it being understood that Purchaser Indemnitees' right to indemnification
under this Section 7.3.4 shall not be nullified or limited by Purchaser
Indemnitees' compliance with Environmental Laws, including the conduct of
investigations, in connection with facility operations, expansion or closure
activities or the sale of the Business or other reasonable, good faith
activities in connection with the operation of the Business in the ordinary
course);
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7.3.5 any Process Safety Management Claim or Transportation Claim
solely to the extent that (i) Damages from such claim consist of monetary fines
or penalties levied by a government agency and (ii) such claim is associated
with, arises from, or relates to operation of the Business prior to the Closing
Date; or
7.3.6 the assets or liabilities transferred in the Unrelated Asset and
Liability Transfer; or
7.3.7 any inaccuracy in or breach of any representation or warranty
made by IMC Global or Seller in Section 2.3.29 or in respect thereof under the
certificate delivered to Purchaser pursuant to Section 5.3.4.
7.3.8 Notwithstanding the foregoing provisions of this Section 7.3:
(a) IMC Global and Seller shall be required to indemnify and hold
harmless Purchaser Indemnitees pursuant to Sections 7.3.1 and 7.3.2
only to the extent that the aggregate amount of Damages incurred by
Purchaser Indemnitees pursuant to Sections 7.3.1 or 7.3.2 exceeds
$4,000,000 (it being understood that such $4,000,000 shall constitute a
"deductible" for which IMC Global and Seller bear no indemnification
responsibility and that such "deductible" shall be separate from and
independent of any other such "deductible" set forth in this
Agreement).
(b) IMC Global and Seller shall be required to indemnify and hold
harmless Purchaser Indemnitees pursuant to Sections 7.3.3, 7.3.4 and
7.3.5 only to the extent that the aggregate amount of Damages incurred
by Purchaser Indemnitees pursuant to Sections 7.3.3, 7.3.4 or 7.3.5
exceeds $4,500,000 (it being understood that such $4,500,000 shall
constitute a "deductible" for which IMC Global and Seller bear no
indemnification responsibility and that such "deductible" shall be
separate from and independent of any other such deductible set forth in
this Agreement).
(c) IMC Global and Seller shall be required to indemnify and hold
harmless Purchaser Indemnitees pursuant to Section 7.3.7 only to the
extent that Damages incurred by Purchaser Indemnitees related to each
individual claim or series of related claims pursuant to Section 7.3.7
exceeds $100,000 (it being understood that such $100,000 shall
constitute a "deductible" for which IMC Global and Seller bear no
indemnification responsibility and that such "deductible" shall be
separate from and independent of any other such deductible set forth in
this Agreement).
(d) IMC Global and Seller shall be required to indemnify and hold
harmless Purchaser Indemnitees under this Section 7.3 only to the
extent that the aggregate amount required to be paid by IMC Global and
Seller pursuant to this Section 7.3 does not exceed 10% of the Purchase
Price.
(e) Notwithstanding the foregoing the limitations contained in
clauses (a), (b), (c) and (d) of this Section 7.3.8 shall not apply to
any Damages: (i) sustained or incurred by any Purchaser Indemnitee as a
result of or arising out of any breach of any
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representation or warranty in Section 2.3.1, Section 2.3.3, Section
2.3.4, Section 2.3.8 or Section 2.3.11; (ii) sustained or incurred by
any Purchaser Indemnitee as a result of or arising out of any breach of
or failure to comply with any covenant or obligation in Articles I,
VII, VI or IX or Section 5.4.1; (iii) subject to indemnification
pursuant to Section 7.3.6; or (iv) resulting or arising from an
intentional or willful breach by IMC Global or Seller of any
representation or warranty in Section 2.3 or any covenant under this
Agreement or any Seller Ancillary Agreement (other than the Supply
Agreement or any Warehousing Agreement) which would constitute common
law fraud.
7.4 Survival of IMC Global's and Seller's Indemnification Obligations. The
indemnification provided for in Section 7.3 shall terminate 18 months after the
Closing Date (and no claims shall be made by any Purchaser Indemnitee under this
Section 7.3 thereafter), except that the indemnification by IMC Global and
Seller shall continue as to:
(i) the covenants of IMC Global and Seller set forth in Article I or
Article VI shall survive for the periods of time set forth therein or, if
no period of time is set forth, such covenants shall survive indefinitely;
(ii) claims for indemnification for breaches of representations and
warranties set forth in Section 2.3.1, Section 2.3.3, Section 2.3.4,
Section 2.3.8, Section 2.3.11 and Section 2.3.16 which survive until the
expiration of the applicable statute of limitations;
(iii) claims for indemnification under Sections 7.3.3, 7.3.4(a),
7.3.4(c) and 7.3.5 which shall survive until the fifth anniversary of the
Closing Date;
(iv) claims for indemnification under Sections 7.3.4(b), 7.3.4(d) and
7.3.6 which shall survive indefinitely; and
(v) any Damages of which any Purchaser Indemnitee has notified IMC
Global and Seller in accordance with the requirements of Section 7.7 on or
prior to the date such indemnification would otherwise terminate in
accordance with this Section 7.4, as to which the obligation of IMC Global
and Seller shall continue until the liability of IMC Global and Seller
shall have been determined pursuant to this Article VII, and IMC Global and
Seller shall have reimbursed all Purchaser Indemnitees for the full amount
of such Damages that are payable in accordance with this Article VII.
7.5 Limitation on Seller's Indemnification Obligations. In addition to the
other applicable limitations on Seller's indemnification obligations set forth
elsewhere in this Article VII, Seller shall not be required to indemnify and
hold harmless Purchaser Indemnitees under Section 7.3 to the extent and in the
dollar amount such matter is the subject of a specific reserve set forth in the
Closing Balance Sheet as a current liability. In the event that Seller is
conducting any defense against a Third Party Claim for which Purchaser has
sought indemnification under Section 7.3, expenses incurred by Seller in
connection therewith, including legal costs and expenses, shall constitute
Purchaser Indemnitee Damages for purposes of determining the maximum aggregate
amount to be paid by Seller pursuant to Section 7.3.
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7.6 Purchaser's Indemnification Covenants. Purchaser shall indemnify,
defend and hold harmless Seller, its Affiliates and their respective officers,
directors, shareholders, employees and successors and assigns (individually, a
"Seller Indemnitee" and, collectively, the "Seller Indemnitees"), against and
from all Damages sustained or incurred by any Seller Indemnitee as a result of
or arising out of or by virtue of:
7.6.1 any inaccuracy in or breach of any representation and warranty
made by Purchaser to Seller herein or in any Purchaser Ancillary Document
delivered (other than the Supply Agreement or any Warehousing Agreement)
delivered to Seller in connection herewith, unless Seller had knowledge of such
inaccuracy or breach as of the Closing Date;
7.6.2 any breach by Purchaser of, or failure by Purchaser to comply
with, any of the covenants or obligations under this Agreement or any Purchaser
Ancillary Document (other than the Supply Agreement or any Warehousing
Agreement) to be performed by Purchaser, unless Seller had knowledge of such
breach or failure as of the Closing Date; or
7.6.3 any Environmental Claim solely to the extent that such
Environmental Claim is associated with, arises from or relates to (a) conditions
arising on the Real Estate on or after the Closing Date, (b) the operation of
the Company on or after the Closing Date or (c) the off-site disposal or Release
of any Contaminants on or after the Closing Date, in each case, including
Environmental Claims for a Release or threatened Release of any Contaminant on,
in, at, to, beneath or from the Real Estate on or after the Closing Date.
7.7 Indemnification Procedures.
7.7.1 An Indemnified Party shall give prompt written notice to the
Indemnifying Party of the assertion of any claim for indemnification (a "Claim
Notice"). Notice shall set forth, with reasonable specificity, the facts and
circumstances of any such claim for indemnification or Third Party Claim and the
grounds for which indemnification is sought and shall include in such Claim
Notice (if then known) the amount or the method of computation of the amount of
such claim, and a reference to the provision of this Agreement or any other
agreement, document or instrument executed hereunder or in connection herewith
upon which such claim is based; provided, however, that a Claim Notice in
respect of any action at law or suit in equity by or against a third Person as
to which indemnification will be sought shall be subject to the provisions of
Sections 7.7.3.
7.7.2 After the giving of any Claim Notice, the amount of
indemnification to which an Indemnified Party shall be entitled under this
Article VII shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnifying Party; (ii) by a final judgment or decree
of any court of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnifying Party shall agree. The judgment or decree
of a court shall be deemed final when the time for appeal, if any, shall have
expired and no appeal shall have been taken or when all appeals taken shall have
been finally determined. The Indemnified Party shall have the burden of proof in
establishing the amount of Damages suffered by it.
7.7.3 (a) In order for a party to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
Third Party Claim, the Indemnified
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Party must notify the Indemnifying Party in writing, and in reasonable detail,
of the Third Party Claim within 20 days after receipt by such Indemnified Party
of written notice of the Third Party Claim. Thereafter, the Indemnified Party
shall deliver to the Indemnifying Party, within 10 business days after the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnifying Party relating to the
Third Party Claim. Notwithstanding the foregoing, should a party be physically
served with a complaint with regard to a Third Party Claim, the Indemnified
Party must notify the Indemnifying Party with a copy of the complaint within 10
business days after receipt thereof and shall deliver to the Indemnifying Party
within seven business days after the receipt of such complaint copies of notices
and documents (including court papers) received by the Indemnified Party
relating to the Third Party Claim. Failure to notify the Indemnifying Party
shall not relieve the Indemnifying Party of its indemnity obligation, except to
the extent the Indemnifying Party is actually prejudiced in its defense of the
action by such failure. Subject to attorney-client privilege, the parties hereto
agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such legal proceeding, claim or demand. Except
as hereinafter provided in this Section 7.7, the Indemnified Party shall not,
and the Indemnifying Party shall, have the right using counsel reasonably
acceptable to the Indemnified Party to contest, defend, litigate or settle any
such Third Party Claim which involves (and continues to involve) solely monetary
damages; provided that the Indemnifying Party shall have notified the
Indemnified Party in writing of its intention to do so within 90 days of the
Indemnified Party having given notice of the Third Party Claim to the
Indemnifying Party and provided further that (i) the Indemnifying Party
expressly agrees in such notice to the Indemnified Party that, if the Third
Party Claim is adversely determined, the Indemnifying Party shall have an
obligation to indemnify against such Third Party Claim; (ii) the defense of such
Third Party Claim by the Indemnifying Party will not, in the reasonable opinion
of the Indemnified Party, reasonably be likely to have a Material Adverse
Effect; and (iii) the Indemnifying Party shall diligently address the Third
Party Claim (the conditions set forth in clauses (i), (ii) and (iii) being
collectively referred to as the "Litigation Conditions"). The Indemnified Party
shall have the right to participate in, and to be represented by counsel at its
own expense, in any such contest, defense, litigation or settlement conducted by
the Indemnifying Party, provided that the Indemnified Party shall be entitled to
reimbursement therefor if the Indemnifying Party shall lose its right to
contest, defend, litigate and settle the Third Party Claim.
(b) The Indemnifying Party shall not be entitled, or shall lose its
right, to contest, defend, litigate and settle the Third Party Claim if the
Indemnified Party shall give written notice to the Indemnifying Party of any
objection thereto based upon the Litigation Conditions. The Indemnifying Party,
if it shall have assumed the defense of any Third Party Claim as provided in
this Agreement, shall not consent to a settlement of, or the entry of any
judgment arising from, any such Third Party Claim, enter into any compromise or
settlement which commits the Indemnified Party to take, or to forbear to take,
any action or which does not provide for a complete release by such third party
of the Indemnified Party without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld or delayed).
Notwithstanding the foregoing, the Indemnified Party shall have the right to
pay, settle or compromise any such Third Party Claim, provided that, in such
event, the Indemnified Party shall waive any right to indemnity therefor.
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(c) If an Indemnified Party is entitled to indemnification against a
Third Party Claim, and the Indemnifying Party fails to accept a tender of, or
assume the defense of, a Third Party Claim pursuant to this Section 7.2, or if,
in accordance with Section 7.2.3(b), the Indemnifying Party shall not be
entitled, or shall lose its right, to contest, defend, litigate and settle such
a Third Party Claim or if such Third Party Claim involves equitable or other
non-monetary relief, the Indemnified Party shall have the right to contest,
defend and litigate such Third Party Claim; provided that the Indemnifying Party
shall have the right to participate in, and to be represented by counsel (at its
own expense) in any such contest, defense, litigation or settlement conducted by
the Indemnified Party. The Indemnified Party, if it shall have assumed the
defense of any Third Party Claim as provided in this Agreement, shall not
consent to a settlement of, or the entry of any judgment arising from, any such
Third Party Claim, enter into any compromise or settlement which commits the
Indemnifying Party to take, or to forbear to take, any action (other than the
payment of money) without the prior written consent of the Indemnifying Party
(which consent shall not be unreasonably withheld or delayed).
7.7.4 In any case where an Indemnified Party recovers from third
Persons any amount in respect of a matter with respect to which an Indemnifying
Party has indemnified it pursuant to this Article VII, such Indemnified Party
shall promptly pay over to the Indemnifying Party the amount so recovered (after
deducting therefrom the full amount of the expenses incurred by it in procuring
such recovery), but not in excess of the sum of (i) any amount previously so
paid by the Indemnifying Party to or on behalf of the Indemnified Party in
respect of such matter and (ii) any amount expended by the Indemnifying Party in
pursuing or defending any claim arising out of such matter.
7.8 Cooperation on Environmental Claims.
7.8.1 Purchaser's Rights to Remedial Action. In addition to the
provisions of Section 7.7, if any claim for indemnification is sought against
IMC Global or Seller with respect to any Environmental Claim, the resolution of
which involves or includes Remedial Action at Real Estate owned, leased, or
operated by Purchaser at the time such Remedial Action is to be conducted,
Purchaser may, in its discretion, elect to assume full control over any Remedial
Action in connection with any such claim. Upon such election, Purchaser shall:
(i) after Seller gives reasonable notice, permit representatives of Seller
(including advisors and consultants) to visit and inspect from time to time any
properties to which the Environmental Claim relates; (ii) after Seller gives
reasonable notice, allow Seller to enter on such properties from time to time
for the purpose of conducting such environmental tests as Seller may reasonably
desire with respect to the Environmental Claim; all during normal business hours
and at Seller's expense; and (iii) prior to submission to any government agency,
provide Seller with a reasonable opportunity to review and approve, which
approval shall not be unreasonably withheld, all proposals, reports,
submissions, data, correspondence, or other documents. Purchaser may, at its
discretion, elect to allow Seller to assume full control over Remedial Action
upon providing written notice to Seller of such election and upon providing
Seller with sufficient opportunity to assume such control. In the event that
Purchaser shall refuse to cooperate as set forth in this Section 7.8.1 and
Section 7.8.2 with respect to the taking of a Remedial Action with respect to an
Environmental Claim, Seller shall have no further liability to Purchaser with
respect to the Environmental Claim.
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7.8.2 Seller's Rights to Remedial Action. If Purchaser elects to allow
Seller to assume full control over Remedial Actions pursuant to Section 7.8.1,
Purchaser shall: (i) provide Seller with access to the Real Estate at all
reasonable times to enable Seller to perform such Remedial Action; provided that
unless required by a final government order, Seller shall not undertake a
Remedial Action or other action in settlement of a claim that would materially
and adversely affect Purchaser's or the Company's operations at the Real Estate
unless consented to by Purchaser; (ii) furnish Seller with such relevant
records, information, reports, studies, data, and cost estimates in Purchaser's
or the Company's possession; and (iii) attend such conferences, proceedings,
hearings, trials, or appeals regarding any Remedial Action or any Environmental
Claim as Seller shall reasonably request with sufficient advance notice. For any
Seller performed Remedial Actions, Seller shall: (i) provide Purchaser with
reasonable advance notice to allow Purchaser to attend any conferences,
proceedings, hearings, trials, or appeals regarding any Remedial Action; and
(ii) prior to submission to any government agency, provide Purchaser with a
reasonable opportunity to review and approve, which approval shall not be
unreasonably withheld, all proposals, reports, submissions, data,
correspondence, or other documents.
7.8.3 Minimization of Remedial Action Costs and Disruption of
Operation. Seller and Purchaser Indemnitees agree to use their best efforts to
minimize costs of Remedial Actions and minimize disruption of operations with
respect to Environmental Claims, and, in deciding among various alternative
courses of remedial action, due consideration shall be given to minimization of
costs and the minimization of interference with the ongoing operations and to
the prompt resolution of the Environmental Claim; provided, however, that if any
Remedial Action subject to indemnification hereunder is reasonably expected to
have a Material Adverse Effect, Seller shall compensate Purchaser and/or the
Company Members therefor. Purchaser will make available its employees at each
site and equipment and other fixed assets purchased hereunder and located at
such site to assist in the remediation work to the extent such employees and
equipment are reasonably capable of doing such work and permitted to do so under
Environmental Law; provided, however, that no such employee shall be required to
assist in the remediation effort if to do so will materially diminish such
employee's availability to perform and be utilized for such employee's normal
job purpose or would otherwise materially interfere with Purchaser's operations.
7.9 Mitigation. Each of the parties agrees to take all reasonable steps
(taking into account the nature of the event or condition, and the other demands
on the time and attention of the officers of each respective party) to mitigate
their respective Damages upon and after becoming aware of any event or condition
which could reasonably be expected to give rise to any Damages that are
indemnifiable hereunder; provided that such mitigation shall not interfere with
or disrupt in any material respect the business or operations of a party.
7.10 Indemnification Exclusive Remedy. Except to the extent remedies cannot
be waived as a matter of law and except for injunctive relief pursuant to
Sections 6.4, 6.6 or 6.7.6(c), if the Closing occurs, indemnification pursuant
to the provisions of this Article VII shall be the exclusive remedy of the
parties for any misrepresentation or breach of any representation, warranty,
agreement or covenant contained herein or in any Ancillary Document (other than
the Supply Agreement or any Warehousing Agreement) (it being understood that,
without limiting the generality of the foregoing, (a) no action in tort or
strict liability may be maintained by any Indemnified Party, (b) the only
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action which may be asserted by any Indemnified Party with respect to any
Environmental Claim shall be a contract action to enforce, or to recover Damages
pursuant to, this Article VII, and (c) each of IMC, Seller and Purchaser, for
itself and the other Purchaser Indemnitees or Seller Indemnitees, as the case
may be, hereby waives any and all statutory rights, including rights of
contribution or indemnification that any of them might otherwise be entitled to
under any federal, state or local law (including Environmental Laws (including
CERCLA)).
ARTICLE VIII
Effect of Termination/Proceeding
8.1 General. The parties shall have the rights and remedies with respect to
the termination and/or enforcement of this Agreement which are set forth in this
Article VIII.
8.2 Right to Terminate. Anything to the contrary herein notwithstanding,
this Agreement and the transactions contemplated hereby may be terminated at any
time prior to the Closing:
8.2.1 by the mutual written consent of Purchaser and Seller;
8.2.2 by prompt notice given in accordance with Section 9.3, by either
of such parties if the Closing shall not have occurred at or before 11:59 p.m.
on March 31, 1999 (the "Drop-Deal Date"); provided, however, that, by prompt
notice given in accordance with Section 9.3 no later than March 26, 1999, either
of such parties may extend the Drop-Dead Date to April 30, 1999 if the Closing
has not occurred solely as a result of the failure to have been obtained any of
the Material Consents, which failure has not been cured or waived; and provided,
further, that the right to extend the Drop-Dead Date or terminate this Agreement
under this Section 8.2.2 shall not be available to (a) any party whose failure
to fulfill any of its obligations under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or prior to the aforesaid
date or (b) Purchaser unless the waiting period under the HSR Act applicable to
the transaction set forth herein has expired or been earlier terminated at or
prior to the time of such notice (the "HSR Condition"); or
8.2.3 by Purchaser or Seller if any court of competent jurisdiction in
the United States or other United States governmental body shall have issued a
final and non-appealable order, decree or ruling permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby.
8.3 Certain Effects of Termination. In the event of the termination of this
Agreement by either Seller or Purchaser as provided in Section 8.2:
8.3.1 each party, if so requested by the other party, will return
promptly every document furnished to it by the other party (or any subsidiary,
division, associate or Affiliate of such other party) in connection with the
transactions contemplated hereby, whether so obtained before or after the
execution of this Agreement, and any copies thereof (except for copies of
documents publicly available) which may have been made, and will use reasonable
efforts to cause its representatives and any representatives of financial
institutions and investors and others to whom
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such documents were furnished promptly to return such documents and any copies
thereof any of them may have made; and
8.3.2 the Confidentiality Letter and the Joint Defense Agreement shall
remain in effect.
This Section 8.3 shall survive any termination of this Agreement.
8.4 Remedies. Notwithstanding any termination right granted in Section 8.2,
in the event of the nonfulfillment of any condition to a party's closing
obligations, in the alternative, such party may elect to do one of the
following:
8.4.1 proceed to close despite the nonfulfillment of any closing
condition, it being understood that consummation of the Closing shall be deemed
a waiver of a breach of any representation, warranty, agreement or covenant or
of such party's rights and remedies with respect thereto to the extent that such
party shall have knowledge of such breach and the Closing shall nonetheless
occur;
8.4.2 decline to close, terminate this Agreement as provided in Section
8.2, and thereafter seek damages to the extent permitted in Section 8.5; or
8.4.3 seek specific performance of the obligations of the other party,
each party hereby agreeing that in the event of any breach by such party of this
Agreement, remedies at law for any such breach will be inadequate, and that such
non-breaching party shall be entitled to enforce specifically the terms and
provisions hereof, in addition to any other remedy to which such non-breaching
party may be entitled at law or equity.
8.5 Right to Damages. If this Agreement is terminated pursuant to
Section 8.2, neither party hereto shall have any claim against the other except
as set forth in Section 8.7 or, if the circumstances giving rise to such
termination were caused by the other party's willful failure to comply with a
material covenant set forth herein, such termination shall not be deemed or
construed as limiting or denying any legal or equitable right or remedy of said
party.
8.6 Non-Solicitation. If this Agreement is terminated, neither
Purchaser nor any of its Affiliates will, for a period of one year thereafter,
without the prior written approval of Seller, directly or indirectly solicit,
induce or attempt to persuade any person who is an employee of the Company on
the date hereof or at any time hereafter that precedes such termination, to
terminate his or her employment with the Company. Purchaser agrees that Seller's
remedies at law for any breach or threat of breach by Seller of the provisions
of this Section 8.6 will be inadequate, and that Seller shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this Section
8.6 and to enforce specifically the terms and provisions hereof, in addition to
any other remedy to which Purchaser may be entitled at law or in equity. It is
the intent and understanding of each party hereto that if, in any action before
any court or agency legally empowered to enforce this Section 8.6, any term,
restriction, covenant or promise in this Section 8.6 is found to be unreasonable
and for that reason unenforceable, then such term, restriction, covenant or
promise shall be deemed modified to the extent necessary to make it enforceable
by such court or agency.
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ARTICLE IX
Miscellaneous
9.1 Fees. Seller shall pay all fees and expenses charged by J.P. Morgan.
All filing fees incurred in connection with filings under the HSR Act and any
other applicable antitrust laws and regulations shall be the sole responsibility
of Purchaser. Each party hereto shall bear all fees and expenses incurred by
such party in connection with, relating to or arising out of the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including financial
advisors', attorneys', accountants' and other professional fees and expenses;
provided, however, that Seller shall pay such fees and expenses incurred by any
Company Member prior to the Closing Date.
9.2 Publicity. Except as otherwise required by law or applicable stock
exchange rules, press releases and other publicity concerning this transaction
shall be made only with the prior agreement of Seller and Purchaser (and in any
event, Seller and Purchaser shall use all reasonable efforts to consult and
agree with each other with respect to the content of any such required press
release or other publicity); provided, however, that the foregoing shall not
preclude communications or disclosures necessary to implement the provisions of
this Agreement.
9.3 Notices. All notices required or permitted to be given hereunder shall
be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three business days after being deposited in the United
States mail, postage prepaid, registered or certified mail, return receipt
requested. Notices delivered by hand, by facsimile, or by nationally recognized
private courier shall be deemed given on the first business day following
receipt; provided, however, that a notice delivered by facsimile shall only be
effective if such notice is also delivered by hand, or deposited in the United
States mail, postage prepaid, registered or certified mail, on or before two
business days after its delivery by facsimile. All notices shall be addressed as
follows:
If to Seller:
c/o IMC Global Inc.2100 Sanders Road
Northbrook, Illinois 60062-6146
Attention: General Counsel
Fax: (847) 205-4916
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: David J. Zampa, Esq.
Fax: (312) 853-7036
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If to Purchaser:
Chief Executive Officer
Royster-Clark, Inc.
10 Rockefeller Plaza, Suite 1120
New York, New York 10020
Attention: Francis P. Jenkins, Jr.
Fax: (212) 332-2999
and
c/o Citicorp Venture Capital
399 Park Avenue, 14th Floor, Zone 4
New York, New York 10043
Attention: Thomas McWilliams
Fax: (212) 888-2940
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Craig Godshall, Esq.
Fax: (212) 994-2222
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 9.3.
9.4 Entire Agreement; Interpretation. This Agreement, the Joint Defense
Agreement, the Ancillary Documents, and the Confidentiality Letter constitute
the entire agreement between the parties and shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns. Articles, titles and headings to sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement. The
Disclosure Schedules and Exhibits referred to herein shall be construed with and
as an integral part of this Agreement to the same extent as if they were set
forth verbatim herein. Any amendments, or alternative or supplementary
provisions, to this Agreement must be made in writing and duly executed by an
authorized representative or agent of each of the parties hereto. Neither the
specification of any dollar amount in any representation or warranty contained
in this Agreement nor the inclusion of any specific item in the Disclosure
Schedules is intended to imply that such amount, or higher or lower amounts, or
the item so included or other items, are or are not material, and no party shall
use the fact of the setting forth of any such amount or the inclusion or
omission of any such item in any dispute or controversy between the parties as
to whether any obligation, item or matter not described herein or included in
54
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the Disclosure Schedules is or is not material for purposes of this Agreement.
Unless this Agreement specifically provides otherwise, neither the specification
of any item or matter in any representation or warranty contained in this
Agreement nor the inclusion of any specific item in the Disclosure Schedules is
intended to imply that such item or matter, or other items or matters, are or
are not in the ordinary course of business, and no party shall use the fact of
the setting forth or the inclusion of any such item or matter in any dispute or
controversy between the parties as to whether any obligation, item or matter not
described herein or included in the Disclosure Schedules is or is not in the
ordinary course of business for purposes of this Agreement. Seller may once not
later than 20 days after the date hereof (or, in the event the Closing shall not
have occurred prior to the date set forth in Section 8.2.2, then once per 30
days thereafter) by notice in accordance with the terms of this Agreement,
supplement or amend the Disclosure Schedules, in order to add information
arising from events after the date hereof. No such supplement or amendment shall
be evidence, in and of itself, that the representations and warranties in the
Agreement are no longer true and correct in accordance with their terms. It is
specifically agreed that the Disclosure Schedules may be so supplemented or
amended to add immaterial, as well as material, items thereto. No such
supplemental or amended Disclosure Schedules shall be deemed to cure any breach
for purposes of Section 4.2. If, however, the Closing occurs, any such
supplement or amendment will be effective to cure and correct for all other
purposes any breach of any representation, warranty, covenant or agreement which
would have existed if Seller had not made such supplement or amendment, and all
references to the Disclosure Schedules which are supplemented or amended as
provided in this Section 9.4 shall for all purposes after the Closing be deemed
to be a reference to the Disclosure Schedules as so supplemented or amended.
9.5 Non-Waiver. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.
9.6 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed to be an original, and all such counterparts shall
constitute but one instrument.
9.7 Severability. The invalidity of any provision of this Agreement or
portion of a provision shall not affect the validity of any other provision of
this Agreement or the remaining portion of the applicable provision.
9.8 Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and their successors and permitted
assigns. Except as set forth in Section 6.8 or in respect of any Purchaser
Indemnitee or Seller Indemnitee which is not a party hereto, nothing in this
Agreement, express or implied, shall confer on any person other than the parties
hereto, and their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
including third party beneficiary rights.
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9.9 Assignability. This Agreement shall not be assignable by Purchaser
without the prior written consent of Seller; provided, however, that Purchaser
may assign its rights hereunder to Royster-Clark, any Affiliates of Purchaser,
to any successor to its business, or as collateral security to any person
providing financing to Purchaser to consummate the transactions contemplated
hereunder; provided further, however, that no such assignment shall relieve
Purchaser of its obligations hereunder.
9.10 Governmental Reporting. Anything to the contrary in this Agreement
notwithstanding, nothing in this Agreement shall be construed to mean that a
party hereto or other person must make or file, or cooperate in the making or
filing of, any return or report to any governmental authority in any manner that
such person or such party reasonably believes or reasonably is advised is not in
accordance with law.
9.11 Applicable Law. This Agreement shall be governed and controlled as to
validity, enforcement, interpretation, construction, effect and in all other
respects by the internal laws of the State of New York applicable to contracts
made in that State.
9.12 Waiver of Trial by Jury. Each of the parties hereto waives the right
to a jury trial in connection with any suit, action or proceeding seeking
enforcement of such party's rights under this Agreement.
9.13 Consent to Jurisdiction. This Agreement has been executed and
delivered in and shall be deemed to have been made in Chicago, Illinois. Seller
and Purchaser each agrees to the exclusive jurisdiction of any state or Federal
court within the City of Chicago, with respect to any claim or cause of action
arising under or relating to this Agreement, and waives personal service of any
and all process upon it, and consents that all services of process be made by
hand, by registered mail or certified mail, return receipt requested, directed
to it at its address as set forth in Section 9.3, and service so made shall be
deemed to be completed when received. Seller and Purchaser each waive any
objection based on forum non conveniens and waive any objection to venue of any
action instituted hereunder. Nothing in this paragraph shall affect the right of
Seller or Purchaser to serve legal process in any other manner permitted by law.
9.14 Amendments. This Agreement shall not be modified or amended except
pursuant to an instrument in writing executed and delivered on behalf of each of
the parties hereto.
9.15 Construction. The titles and headings contained in this Agreement are
for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement. The term "including" means "including, without
limitation".
*****
56
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IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement
on the date first above written.
IMC GLOBAL INC.
By: /s/ Lynn F. White
-------------------------------
Its: Sr. V.P.-Corporate Development
-------------------------------
THE VIGORO CORPORATION
By: /s/ Lynn F. White
-------------------------------
Its: Sr. V.P.-Corporate Development
-------------------------------
R-C DELAWARE ACQUISITION INC.
By: /s/ Francis P. Jenkins, Jr.
-------------------------------
Its: President
-------------------------------
57
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT ("First Amendment") is
made and entered into as of April 13, 1999 among IMC GLOBAL INC., a Delaware
corporation ("IMC Global"), THE VIGORO CORPORATION, a Delaware corporation
("Seller"), and R-C DELAWARE ACQUISITION INC., a Delaware corporation
("Purchaser").
W I T N E S S E T H:
WHEREAS, IMC Global, Seller and Purchaser have entered into the Stock
Purchase Agreement, dated as of January 21, 1999 (the "Agreement"), providing
for the sale of the Shares to Purchaser;
WHEREAS, Purchaser has indicated to IMC Global and Seller that it expects
an offering of debt securities of an Affiliate of Purchaser, the proceeds of
which will fund, in part, the Purchase Price, to be consummated during the week
of April 19;
WHEREAS, IMC Global, Seller and Purchaser desire to amend the Agreement in
certain respects in accordance with Section 9.14 thereof; and
WHEREAS, capitalized terms not defined herein shall have the respective
meanings set forth in the Agreement.
NOW, THEREFORE, in consideration of the premises and of the agreements
herein contained, the parties hereto agree as follows:
SECTION 2. Amendments to Agreement. Effective as of the date hereof, the
Agreement is amended as follows:
2.1. The first sentence of Section 1.2 of the Agreement is hereby amended
by deleting such sentence in its entirety and substituting therefor the
following:
The aggregate purchase price of the Shares shall be equal to $300,000,000,
less the aggregate amount outstanding as of the close of business on March
31, 1999 of Indebtedness of the Company, subject to adjustment pursuant to
Section 1.3 (the "Purchase Price").
2.2. Each reference to "Closing Balance Sheet" in any provision of the
Agreement that is not amended pursuant to the terms hereof shall be deemed to
refer to the "March-End Balance Sheet", as defined pursuant to Section 1.5 of
the Agreement, as amended hereby.
<PAGE>
2.3. The first sentence of Section 1.3 of the Agreement is hereby amended
by deleting such sentence in its entirety and substituting therefor the
following:
The Purchase Price shall be:
(a) (x) increased by the amount by which Working Capital as of the
close of business on March 31, 1999, as reflected on the March-End Balance
Sheet, exceeds $160,180,000 (the "Target Amount"); or (y) reduced by the
amount by which the Target Amount exceeds Working Capital as of the close
of business on March 31, 1999, as reflected on the March-End Balance Sheet;
(b) increased by an amount equal to 7.0% per annum (based on a 360-day
year) of the Purchase Price, as so adjusted by clause (a) above, for the
period from April 1, 1999 through the Closing Date (the "Carrying Cost");
and
(c) increased by the amount of cash advances from Seller or its
Affiliates to the Company for the period from April 1 through the Closing
Date to cover overdrafts (the "Post-March 31 Advances").
2.4. The first sentence of Section 1.4.1 of the Agreement is hereby amended
by deleting such sentence in its entirety and substituting therefor the
following:
No less than three business days prior to the Closing Date, Seller shall
deliver to Purchaser in writing a good faith estimate of (v) the Purchase
Price, which estimate shall take into account the adjustments to the
Purchase Price required pursuant to Section 1.3 utilizing the most recent
financial information available (the "Estimated Purchase Price"), (w) the
estimated Indebtedness as of March 31, 1999 ("Estimated Indebtedness"), (x)
the estimated Carry Cost ("Estimated Carrying Cost"), (y) the estimated
Working Capital as of March 31, 1999 ("Estimated Working Capital") and (z)
the estimated Post-March 31 Advances ("Estimated Post-March 31 Advances"),
together with (a) a statement of the calculation of the items set forth in
clauses (v) through (z) above, (b) the financial information used to derive
the items set forth in clauses (v) through (z) above and (c) a certificate
signed by Seller to the effect that each of the items set forth in clauses
(v) through (z) above was determined in good faith in accordance with the
Adjusted GAAP Principles.
2.5. Section 1.4.2 of the Agreement is hereby amended by deleting the
reference therein to "$150,000,000" and substituting therefor a reference to
"$10,000,000".
2.6. Section 1.4.3 is hereby amended by:
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(x) deleting the second and third sentences of the first paragraph in their
entirety and substituting therefor the following:
Following the determination of the Final Working Capital, Final
Indebtedness, Final Carrying Cost and Final Post-March 31 Advances, the
Purchase Price shall be adjusted as follows:
(a) The Purchase Price shall be increased dollar for dollar by the
amount by which the Final Working Capital exceeds the Estimated Working
Capital;
(b) The Purchase Price shall be reduced dollar for dollar by the
amount by which the Estimated Working Capital exceeds the Final Working
Capital;
(c) The Purchase Price shall be increased dollar for dollar by the
amount by which the Estimated Indebtedness exceeds the Final Indebtedness;
(d) The Purchase Price shall be reduced dollar for dollar by the
amount by which the Final Indebtedness exceeds the Estimated Indebtedness;
(e) The Purchase Price shall be increased dollar for dollar by the
amount by which the Final Carrying Cost exceeds the Estimated Carrying
Cost;
(f) The Purchase Price shall be reduced dollar for dollar by the
amount by which the Estimated Carrying Cost exceeds the Final Carrying
Cost;
(g) The Purchase Price shall be increased dollar for dollar by the
amount by which the Final Post-March 31 Advances exceed the Estimated
Post-March 31 Advances; and
(h) The Purchase Price shall be reduced dollar for dollar by the
amount by which the Estimated Post-March 31 Advances exceed the Final
Post-March 31 Advances.
The cumulative net adjustment to the Purchase Price pursuant to (a) through
(h) of this Section 1.4.3, whether positive or negative, is the "Final
Adjustment Amount."
and
(y) deleting the second paragraph thereof and substituting therefor the
following:
As used herein, "Final Working Capital", "Final Indebtedness", "Final
Post-March 31 Advances" and "Final Carrying Cost" shall mean (a) in respect
of the Final Working Capital, the Final Indebtedness and the Final
Post-March 31 Advances, the Working Capital, Indebtedness and Post-March 31
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Advances (x) as shown in the March-End Balance Sheet and as set forth in
the certificate of Purchaser delivered pursuant to Section 1.5 if no
Dispute Notice with respect thereto is duly and timely delivered pursuant
to Section 1.6(a) or (y) if such a Dispute Notice is so delivered, as
agreed by Seller and Purchaser pursuant to Section 1.6 or, in the absence
of such agreement, as shown in the Arbitrating Accountant's calculation
delivered pursuant to Section 1.6; and (b) in respect of the Final Carrying
Cost, the amount equal to 7.0% per annum (based on a 360-day year) of the
Purchase Price, as adjusted by the adjustments set forth in clauses (a)
through (d) of this Section 1.4.3, for the period from April 1, 1999
through the Closing Date.
2.7. The first sentence of Section 1.5 of the Agreement is hereby amended
by deleting such sentence in its entirety and substituting therefor the
following:
The Final Working Capital and the Final Indebtedness shall be determined
from a balance sheet of the Business as of the close of business on March
31, 1999 (the "March-End Balance Sheet").
2.8. Section 1.5(b) of the Agreement is hereby amended by deleting such
clause in its entirety and substituting therefor the following:
(b) the March-End Balance Sheet shall contain all normal year-end
adjustments which would be required if March 31, 1999 was the last day of
the Company's fiscal year;
2.9. The first clause of Section 1.5(d) of the Agreement is hereby amended
by deleting such clause in its entirety and substituting therefor the following:
(d) the March-End Balance Sheet shall exclude all cash (other than
petty cash and other miscellaneous amounts) owned by the Company and
transferred to Seller and its Affiliates as part of the internal cash
policies of IMC Global (it being understood that Seller shall remove all
such cash as of the close of business on March 31, 1999);
2.10. The last three sentences of Section 1.5 of the Agreement and Section
1.6 of the Agreement are hereby amended by deleting them in their entirety and
substituting therefor the following:
Purchaser shall deliver the March-End Balance Sheet to be delivered to
Seller and a certificate of Purchaser setting forth the Post-March 31
Advances not later than ninety days after the Closing Date. Purchaser shall
cause the Company to make available to Seller and its representatives such
books, records, other information (including work papers) and personnel of
the Company which Seller may reasonably request in order to review the
March-End Balance Sheet and such
4
<PAGE>
certificate. During preparation of the March-End Balance Sheet and the
certificate setting forth the Post-March 31 Advances and during the Dispute
Period, Purchaser shall make available the work papers used in the
preparation of the March-End Balance Sheet and such certificate to Seller
and its representatives.
1.6 Disputes Regarding March-End Balance Sheet and Post-March 31
Advances. Disputes with respect to the March-End Balance Sheet and the
certificate of Purchaser setting forth the Post-March 31 Advances shall be
resolved as follows:
(a) Seller shall have 45 days after receipt of the March-End
Balance Sheet and the certificate setting for the Post-March 31 Advances
from Purchaser (the "Dispute Period") to dispute any of the elements of or
amounts thereof (a "Dispute"). If Seller does not give to Purchaser written
notice of a Dispute within the Dispute Period (a "Dispute Notice"), the
March-End Balance Sheet and the certificate of Purchaser setting forth the
Post-March 31 Advances shall be deemed to have been accepted and agreed to
by Seller in the form in which it was delivered by Purchaser and shall be
final and binding upon the parties hereto. If Seller has a Dispute, Seller
shall give Purchaser a Dispute Notice within the Dispute Period, setting
forth in reasonable detail the elements and amounts with which it
disagrees. Within 30 days after delivery of such Dispute Notice, the
parties hereto shall attempt to resolve such Dispute and agree in writing
upon the final content of the disputed March-End Balance Sheet and
certificate setting forth the Post-March 31 Advances.
(b) If Seller and Purchaser are unable to resolve any Dispute
within the 30-day period after Purchaser's receipt of a Dispute Notice,
Purchaser and Seller shall promptly engage a nationally recognized
certified public accounting firm not engaged by Purchaser, Seller or their
respective Affiliates (the "Arbitrating Accountant"). In connection with
the resolution of any Dispute, the Arbitrating Accountant shall have access
to all documents, records, work papers, facilities and personnel necessary
to perform its function as arbitrator. The Arbitrating Accountant's
function shall be to conform the March-End Balance Sheet to the Adjusted
GAAP Principles and determine the actual amount of Post-March 31 Advances
in accordance with GAAP. The Arbitrating Accountant shall allow Seller and
Purchaser to present their respective positions regarding the Dispute and
shall thereafter as promptly as possible (but not later than 60 days)
following the engagement of the Arbitrating Accountant, provide the parties
hereto a written determination of the Dispute. Such written determination
shall be final and binding upon the parties hereto and judgment may be
entered on the award. Purchaser shall pay a portion of the fees and
expenses of the Arbitrating Accountant in an amount determined by
multiplying the total amount of such fees and expenses by a fraction the
numerator of which is the amount awarded to Seller by the Arbitrating
Accountant and the denominator of which is the aggregate amount which is
the subject matter of the Dispute, and Seller shall pay the balance
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<PAGE>
of such fees and expenses. Upon the resolution of all Disputes, the
March-End Balance Sheet and the certificate setting forth the Post-March 31
Advances shall be revised to reflect such resolution and, as so revised,
shall be final and binding for purposes of this Agreement.
2.11. Section 1.7 of the Agreement is hereby amended by deleting the
provisions thereof in their entirety and substituting therefor the following:
Seller shall coordinate with Purchaser a taking of the physical inventory
at substantially all of the locations of the Business, which inventory
shall be substantially completed not later than April 9, 1999. In
connection with the preparation of the March-End Balance Sheet, the parties
shall agree on a value of such inventory at the lower of cost or market,
taking into account qualitative factors, including salability and
obsolescence. Inventories shall be valued in the March-End Balance Sheet
based upon such agreed valuation.
2.12. Section 1.9 of the Agreement is hereby amended by deleting the
provisions thereof in their entirety and substituting therefor the following:
The transactions contemplated by this Agreement and the Ancillary Documents
shall be consummated (the "Closing") at the offices of Sidley & Austin, One
First National Plaza, Chicago, Illinois 60603, at 10:00 a.m., on April 23,
1999, or on such later date and time agreed upon by Seller and Purchaser,
but in no event later than the third business day after the conditions set
forth in Article IV have been satisfied or, if permitted by applicable law,
waived. The date on which the Closing occurs in accordance with the
preceding sentence is referred to in this Agreement as the "Closing Date.
2.13. Section 3.2.5 of the Agreement is hereby amended by deleting the "or"
at the end of clause (j) thereof, changing clause (k) thereof to clause (l) and
inserting between such clauses the following:
(k) from April 1, 1999 through the Closing Date, declare, set aside or
pay any dividends on, or make any other actual, constructive or deemed
distributions in respect of, any of its capital stock, or otherwise make
any payments to Seller (other than in respect of the Unrelated Asset and
Liabilities Transfers, trade payables incurred in the ordinary course of
business, premiums due in respect of the Welfare Plans to the extent
related to such period or as otherwise agreed to by Purchaser); or
2.14. Section 5.2.1 of the Agreement is hereby amended by deleting the
reference therein to "150,000,000" and substituting therefor a reference to
"$10,000,000".
2.15. Section 6.7 of the Agreement is hereby amended by deleting the
provisions thereof in their entirety and substituting therefor the contents of
Annex A hereto.
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2.16. Section 6.9.6 of the Agreement is hereby amended by adding the
following immediately after the third sentence thereof:
Seller and the administrator of the IMC Plan ("Seller's Plan
Administrator") agree that individuals who are participants in the IMC
Plan, as amended and restated effective January 1, 1998, and who are
employed by the Company before the Closing Date and continue to be so
employed thereafter, will not be entitled to a contribution to that Plan
under Section 5.1(b) thereof for the Plan Year 1999 because, as the IMC
Plan is interpreted by Seller and Seller's Plan Administrator, they will
neither be Eligible Employees as that term is defined by the IMC Plan at
the end of the 1999 Plan Year, nor will they have incurred a termination of
employment under any of the circumstances listed in Section 5.1(b)(ii) of
the IMC Plan.
2.17. Section 8.2.2 of the Agreement is hereby amended by deleting the
provisions thereof in their entirety and substituting therefor the following:
by prompt notice given in accordance with Section 9.3, by either of such
parties if the Closing shall not have occurred at or before 11:59 p.m. on
April 23, 1999; provided, however, that the right to terminate this
Agreement under this Section 8.2.2 shall not be available to any party
whose failure to fulfill any of its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
prior to the aforesaid date; or
2.18. Seller shall, and shall cause all of its Affiliates to, turn over to
the Company any payments received by Seller or any Affiliate on or after April
1, 1999 and properly payable to the Company.
2.19. The Unrelated Assets and Liabilities shall be deemed to include the
items set forth on Annex B hereto.
2.20. The term sheet set forth in Exhibit A of the Agreement is hereby
deleted and replaced by the term sheet set forth in Annex C hereto.
2.21. If the Closing shall not have occurred at or before 11:59 p.m. on
April 23, 1999, then the provisions of Sections 2.1 through 2.10, 2.13, 2.15,
2.16 and 2.18 hereof shall be of no further force and effect and the provisions
of the Agreement shall be deemed reinstated as they existed prior to this First
Amendment and Seller, IMC Global and Purchaser shall have no obligation to
consummate the transactions under the Agreement, as amended hereby, and both
Seller and Purchaser shall have the right to terminate the Agreement, as amended
hereby.
7
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IN WITNESS WHEREOF, the parties have executed this First Amendment on the
date first above written.
IMC GLOBAL INC.
By: /s/ Lynn F. White
------------------------------------
Its: Sr. Vice President
------------------------------------
THE VIGORO CORPORATION
By: /s/ Lynn F. White
------------------------------------
Its: Sr. Vice President
------------------------------------
R-C DELAWARE ACQUISITION INC.
By: /s/ Francis P. Jenkins, Jr.
------------------------------------
Its: President
------------------------------------
8
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Annex A
6.7 Tax Matters.
6.7.1 Tax Sharing Agreement. IMC Global, Seller and each Company Member
shall cause any tax sharing agreements, arrangements or practices between any
Company Member and IMC Global or any Affiliate of IMC Global (collectively, the
"Tax Sharing Agreement") to be terminated as of March 31, 1999 as it pertains to
each Company Member, and the obligations of the parties, IMC Global and its
Affiliates with respect to Taxes shall be governed exclusively by this
Agreement.
6.7.2 Filing of Returns.
(a) For all taxable periods of the Company Members ending on or
prior to the Closing Date, the parties shall cause the Company Members
to join in IMC Global's consolidated federal income Returns and, in
jurisdictions requiring or permitting combined reporting with IMC
Global or any of its Affiliates, to join in combined Returns for such
jurisdictions, in accordance with current practices, and Seller shall
cause the Taxes shown on such Returns to be paid, subject to Seller's
right to indemnification by Purchaser for such Taxes for the period
from (and including) April 1, 1999 through (and including) the Closing
Date, excluding any such Taxes payable as a result of the making of a
Section 338(h)(10) Election (as defined below). Purchaser shall be
obligated to indemnify Seller for federal, state and local income tax
for any Company Member for the period from (and including) April 1,
1999 through (and including) the Closing Date only if Seller shall have
realized a taxable loss with respect to the sale of stock of such
Company Member to the Purchaser and a Section 338(h)(10) Election is
not made with respect to such Company Member (or such election shall
have been revoked or withdrawn). All indemnification payments hereunder
shall be treated as an adjustment to the Purchase Price for all tax
purposes.
(b) Seller shall cause the Company Members to file all other
Returns for taxable periods ending on or before the Closing Date and
all Returns (other than income Tax Returns) on which the Unrelated
Assets and Liabilities Transfers are required to be reported, and
Seller shall pay all Taxes attributable to such periods and events,
subject to Seller's right to indemnification by Purchaser for such
Taxes for the period from (and including) April 1, 1999 through (and
including) the Closing Date, excluding (i) any such Taxes payable as a
result of the making of a Section 338(h)(10) Election and (ii) any such
Taxes payable with respect to Unrelated Assets and Liabilities
Transfers. Purchaser shall make available to Seller such books and
records of the Company as are reasonably necessary for Seller to
prepare such Returns. Purchaser shall have the right to review such
Returns prior to filing and Purchaser shall cause an authorized officer
of the Company Members to execute such Returns, provided such Returns
have been prepared in accordance with applicable law.
(c) Purchaser shall cause the Company Members to file all Returns
for their taxable periods ending after the Closing Date. Purchaser
shall
9
<PAGE>
cause the Taxes shown on such Returns to be paid, subject to being
reimbursed by Seller for any Taxes attributable to the portion of any
Straddle Period which precedes or includes March 31, 1999.
All Returns referred to in this Section 6.7.2 shall be filed in a timely manner
and in proper form. Purchaser shall prepare and provide Seller with copies of
each Return (or the relevant portions thereof) to be filed by Purchaser which
reflect any obligations of Seller with respect to any taxable period (or portion
thereof) of any Company Member which begins before and ends after the Closing
Date (a "Straddle Period") at least 30 days prior to the due date for filing
such Return, and Seller shall have the right to review and to grant or withhold
approval of such Returns (which approval shall not unreasonably be withheld)
prior to the filing thereof. Seller shall reimburse Purchaser for Taxes to be
paid by Purchaser hereunder and which are attributable to the portion of any
Straddle Period that precedes April 1, 1999, as determined under the principles
set forth in Section 6.7.3. Seller shall make such reimbursement payment to
Purchaser no later than the date the return for any such Straddle Period is due.
Purchaser and Seller shall attempt in good faith mutually to resolve any
disagreements regarding such Returns prior to the due date for filing thereof.
None of Purchaser or any Affiliate of Purchaser shall (or shall cause or permit
any Company Member to) amend, refile or otherwise modify (or grant an extension
of any statute of limitation with respect to) any Tax Return relating in whole
or in part to any Company Member with respect to any taxable year or period or
portion of a period ending on or before the Closing Date without the prior
written consent of Seller, which consent shall not be unreasonably withheld.
6.7.3 Allocations Relating to Taxes. Taxes shall be allocated between
Seller and Purchaser as follows:
(a) For federal income Tax purposes, the taxable year of the
Company Members shall end as of the close of the Closing Date and, with
respect to all other Taxes, Seller and Purchaser shall, unless
prohibited by applicable law, close the taxable period of the Company
Members as of the close of the Closing Date. Neither Seller nor
Purchaser shall take any position inconsistent with the preceding
sentence on any Return. However, for purposes of the allocation of
Taxes for any taxable year of the Company Members which includes (but
does not end on) March 31, 1999, such year shall be divided into two
segments, one ending on March 31, 1999 and the other beginning on
April 1, 1999.
(b) Any allocation of income or deductions required to determine
any Taxes attributable to the various portions of any taxable period
shall be made by means of an interim closing of the books and records
of the Company Members as of the close of the applicable date, provided
that exemptions, allowances, deductions (including depreciation and
amortization deductions), and any Taxes (such as property, sales or
similar Taxes) that are calculated on an annual or periodic basis shall
be allocated pro rata among the days in such taxable period and, for
purposes of determining Purchaser's indemnification obligation with
respect to income Taxes for the portion of the Straddle Period
commencing April 1, 1999, such Taxes shall be conclusively presumed to
be computed at an aggregate federal, state, local and foreign income
tax rate of 38.5% on the taxable
10
<PAGE>
income for the portion of the Straddle Period from (and including)
April 1, 1999 through (and including) the close of business on the last
day of the month in which the Closing occurs multiplied by a fraction
the numerator of which is the number of days from (and including) April
1, 1999 through (and including) the Closing Date and the denominator or
which is the number of days from (and including) April 1, 1999 through
(and including) the last day of the month in which the Closing occurs.
Any disagreements regarding the allocations shall be promptly resolved
in an arbitration conducted by the Arbitrating Accountant, whose
decision shall be binding on the parties and whose fees shall be borne
equally by Seller and Purchaser.
(c) Any transaction occurring outside the ordinary course of
business and not caused by Seller or its Affiliates on the Closing Date
after the Closing, except with respect to any Section 338(h)(10)
Election, shall be treated as occurring on the day following the
Closing Date. Purchaser shall not, and shall not permit any Company
Member to, engage in any transaction out of the ordinary course of
business or to make any election (other than a Section 338(h)(10)
Election) that, after the Closing, would cause additional income to be
realized or recognized for income Tax purposes by any Company Member on
or before March 31, 1999.
6.7.4 Tax Indemnity.
(a) Seller shall pay and shall indemnify and hold Purchaser, the
Company Members and their Affiliates harmless against: (i) any Tax
liability of any Company Member that is attributable to any Tax period
or portion of a Straddle Period ending on or before March 31, 1999;
(ii) any Tax liability resulting from the application of Treas. Reg.
section 1.1502-6 (or comparable provision of state, local or foreign
law), to IMC Global and the members of its consolidated return group
(collectively, the "Seller Group," which shall not include any Company
Member following the Closing Date), or of any other consolidated group
of which any Company Member was a member on or before the Closing Date;
and (iii) any Tax liability attributable to the Unrelated Assets and
Liabilities Transfers or Taxes arising on account of any Section
338(h)(10) Election.
(b) Purchaser shall pay and shall indemnify and hold Seller and
its Affiliates harmless against any Tax liability of any Company Member
that is attributable to any taxable period or portion of a Straddle
Period beginning on or after April 1, 1999 or that is attributable to
any transaction occurring outside the ordinary course of business and
not caused by Seller or its Affiliates on the Closing Date after the
Closing, other than Taxes arising on account of any Section 338(h)(10)
Election or any such Taxes payable with respect to Unrelated Assets and
Liabilities Transfers. Purchaser shall be obligated to indemnify Seller
for federal, state and local income tax for any Company Member for the
period from (and including) April 1, 1999 through (and including) the
Closing Date only if Seller shall have realized a taxable loss with
respect to the sale of stock of such Company Member to Purchaser and a
Section 338(h)(10) Election is not made with respect to such Company
Member (or such election shall have been revoked
11
<PAGE>
or withdrawn). All indemnification payments hereunder shall be treated
as an adjustment to the Purchase Price for all tax purposes.
(c) This Section 6.7.4 shall be applied in accordance with the
indemnification procedures of Section 7.7 to the extent possible.
6.7.5 Refunds and Credits. Seller shall be entitled to any refunds
or credits of any Taxes of the Company Members allocable to periods ending on or
before March 31, 1999. Purchaser shall be entitled to any refunds or credits of
any Taxes of the Company Members for periods beginning after March 31, 1999.
Refunds and credits allocable to periods beginning before and ending after March
31, 1999 shall be equitably divided between the parties in accordance with the
principles in this Section 6.7.
6.7.6 Section 338(h)(10) Election; Price Allocation. With respect to
the acquisition of the Company Members:
(a) At the election of Purchaser, Purchaser and the Seller Group
shall make an election under Section 338(h)(10) of the Code and the
Treasury Regulations promulgated thereunder (and any comparable
election under state, local or foreign Tax law) for each Company Member
designated by Purchaser for which such election is permissible (a
"Section 338(h)(10) Election"). The parties shall report, in connection
with the determination of income, franchise or other Taxes measured by
net income, the transactions being undertaken pursuant to this
Agreement in a manner consistent with each Section 338(h)(10) Election,
if any.
(b) If any Section 338(h)(10) Election is made, the following
procedures shall apply. Purchaser, Seller and the Company shall
cooperate fully with each other in the making of each Section
338(h)(10) Election. In particular, and not by way of limitation, in
order to effect a Section 338(h)(10) Election, Purchaser shall, and
Seller shall cause IMC Global to, jointly execute necessary copies of
Internal Revenue Service Form 8023 and all attachments required to be
filed therewith pursuant to applicable Treasury regulations. Purchaser,
no later than 150 days after the Closing Date, shall provide Seller
with a valuation statement reflecting, as of the Closing Date, the fair
market values of all of the assets and the amount of the liabilities
and obligations of each Company Member for which an election has been
made, with a determination of "modified aggregate deemed sale price"
(as determined in accordance with Treas. Reg. section
1.338(h)(10)-1(f)) for the assets of each affected Company Member and
an allocation of the "modified aggregate deemed sale price" among the
assets of each affected Company Member. If a Section 338(h)(10)
Election is not made for a Company Member, Purchaser, no later than 150
days after the Closing Date, shall provide Seller with a valuation
statement reflecting an allocation of a portion of the Purchase Price
to the stock of such Company Member. Subject to the following
provisions of this paragraph (b), Purchaser shall, and Seller shall
cause IMC Global to, file and shall cause members of their respective
affiliated groups (within the meaning of Section 1504 of the Code or
any similar group defined under a similar provision of state, local or
foreign law) to file, all Returns and statements, forms
12
<PAGE>
and schedules in connection therewith in a manner consistent with such
valuations, determinations and allocations and shall take no position
contrary thereto unless required to do so by applicable Tax laws.
Seller shall have the right to review any appraisal upon which such
valuations are based and to grant or reasonably withhold approval of
such valuations and any such forms and schedules relating to such
valuations, prior to the filing of such Returns, statements, forms and
schedules. Any disputes regarding the valuation statement or the
preparation, execution or filing of the forms and documents required in
connection with making any Section 338(h)(10) Election shall be
resolved in an arbitration to be conducted by the Arbitrating
Accountant, whose fees shall be borne equally by Seller and Purchaser.
Each of the parties to this Agreement shall be bound by the decision of
the Arbitrating Accountant rendered in such arbitration. To the extent
permitted by state, local or foreign Tax laws, the principles of this
Section 6.7.6(b) shall also apply with respect to a Section 338(h)(10)
Election under state, local or foreign law.
(c) The parties agree that a violation of this Section 6.7.6 is a
proper subject of injunctive relief.
6.7.7 Transfer Taxes. Notwithstanding anything herein to the
contrary, Purchaser and Seller shall each pay, and shall indemnify the other
party and its Affiliates against, fifty percent of any real property transfer
Tax, sales Tax, use Tax, stamp Tax, stock transfer Tax, or other similar Tax
imposed on the transactions contemplated by this Agreement, provided, however,
that Seller shall be solely responsible for and shall indemnify Purchaser and
its Affiliates against all Transfer Taxes attributable to the Unrelated Assets
and Liabilities Transfers.
6.7.8 Contest Provisions. Purchaser shall promptly, but in no event
later than 10 days after receipt, notify Seller in writing upon receipt by
Purchaser, any of its Affiliates, any Company Member or any Subsidiary of notice
of any pending or threatened federal, state, local or foreign Tax audits,
examinations or assessments which might affect the Tax liabilities for which
Seller may be liable pursuant to this Agreement.
Seller shall have the sole right to represent each Company Member and
each Subsidiary's interests in any Tax audit or administrative or court
proceeding relating to taxable periods ending on or before the Closing Date or
otherwise relating to Taxes for which Seller may be liable pursuant to this
Agreement, and to employ counsel of its choice at its expense. In the case of a
period beginning before and ending after March 31, 1999, Seller shall be
entitled to participate at its expense in any Tax audit or administrative or
court proceeding relating (in whole or in part) to Taxes attributable to the
portion of such period ending on and including March 31, 1999 and, with the
written consent of Purchaser and at Seller's sole expense, may assume the entire
control of such audit or proceeding. None of Purchaser, any of its Affiliates,
any Company Member or any Subsidiary may settle any Tax claim for any Taxes for
which Seller may be liable pursuant to this Agreement, without the prior written
consent of Seller, which consent may not be unreasonably withheld.
13
<PAGE>
From the date hereof, Seller shall not make or terminate any Tax
election, settle or compromise any Tax dispute, or enter into any closing
agreement if such action would materially increase the Taxes of any Company
Member for any taxable period after March 31, 1999 without the prior written
consent of Purchaser, which consent may not be unreasonably withheld.
14
<PAGE>
Annex B
Unrelated Assets and Liabilities
1. Agreement dated as of May 1, 1998 between IMC AgriBusiness Inc. and
Agrinutrients Technology Group, Inc., a Virginia corporation.
2. The ice-melter trademarks identified on Schedule A attached hereto.
3. The WATERSHED trademark, U.S. Registration Number 1,730,489.
4. The DOLIRON trademark, U.S. Registration Number 1,982,681.
5. The KOOS trademark, U.S. Registration Number 1,924,942.
6. U.S. Patent No. 5,556,634, entitled "Preparation of Near-Neutral Anionic
Salt Feed Minerals."
7. Seller Retained Pro Receivables, Buyer Purchased Pro Receivables, Seller
Retained Consumer Receivables, Buyer Purchased Consumer Receivables, Vigoro
Ice Melter Receivables and the Kalium Receivables, in each case, as defined
in the Asset Purchase Agreement dated as of April 2, 1998 among Vigoro
Acquisition Corp., IMC AgriBusiness Inc. and IMC Kalium Canada Ltd.
15
<PAGE>
Schedule A
================================================================================
Mark Country Registration or Serial Number
- --------------------------------------------------------------------------------
CAL-PRO U.S. 2,146,710
- --------------------------------------------------------------------------------
CALPRO Canada 821,118
(Pending)
- --------------------------------------------------------------------------------
FUSION U.S. 2,059,927
- --------------------------------------------------------------------------------
HOLIDAY U.S. 1,808,285
- --------------------------------------------------------------------------------
KOOS U.S. 1,924,942
- --------------------------------------------------------------------------------
MG 104 U.S. 1,651,248
- --------------------------------------------------------------------------------
NITRO-BITE Canada TMA 495,464
- --------------------------------------------------------------------------------
NITRO-BITE U.S. 2,029,236
- --------------------------------------------------------------------------------
PLUS 20 Canada TMA 498,334
- --------------------------------------------------------------------------------
PLUS 20 U.S. 2,046,643
- --------------------------------------------------------------------------------
SAFE GRIP Canada TMA 454,152
- --------------------------------------------------------------------------------
SAFE GRIP U.S. 1,830,963
- --------------------------------------------------------------------------------
SAFE STEP Canada TMA 266,767
- --------------------------------------------------------------------------------
SNOW 'N SLEET U.S. 1,787,299
- --------------------------------------------------------------------------------
ULTRA 100 Canada 803,675 (Pending)
- --------------------------------------------------------------------------------
ULTRA 100 U.S. 2,042,435
- --------------------------------------------------------------------------------
WINTER STORM Canada TMA 453,332
- --------------------------------------------------------------------------------
WINTER STORM U.S. 1,808,289
================================================================================
16
<PAGE>
Annex C
Note Term Sheet
17
RESTATED
CERTIFICATE OF INCORPORATION
OF
ROYSTER-CLARK, INC.
(Pursuant to Sections 242 and 245 of the General Corporation Law)
THE UNDERSIGNED, S. Clark Jenkins and Randolph G. Abood, being the duly
elected President and Assistant Secretary, respectively, of Royster-Clark, Inc.,
a Delaware corporation (the "Corporation"), for the purposes of amending and
restating the Certificate of Incorporation pursuant to Section 242 and 245 of
the General Corporation Law, DO HEREBY CERTIFY THAT:
1.The name of the Corporation is Royster-Clark, Inc. The Corporation was
originally incorporated in the State of Delaware on January 22, 1991 under the
name "Royster (FMG) Acquisition Corporation."
2.Upon due notice, at a meeting on September 15, 1994, at which a quorum
was present and acting throughout, the Board of Directors of the Corporation
adopted a resolution setting forth a proposed amendment to the Corporations
Certificate of Incorporation reducing the number of authorized, yet unissued
shares of the Corporation and declared the advisability of adopting such
amendment.
<PAGE>
3. The proposed amendment were presented in a Written Consent of the
Shareholders as follows:
RESOLVED, that the first paragraph of Article FOURTH of the Certificate of
Incorporation be amended as follows and that such amendment be incorporated
in a Restated Certificate of Incorporation.
The total number of shares of capital stock that the corporation
shall have the authority to issue is 400,000, which shall consist of
350,000 shares of Common Stock, par value $0.01 per share, and 50,000
shares of Preferred Stock, par value $0.01 per share.
4. Pursuant to Section 228 of the General Corporation Law, Written Consents
representing the holders of at least a majority of all the outstanding shares
entitled to vote thereon were executed on September 15, 1994.
5. The foregoing amendment shall become effective on the date of the filing
of this Certificate with the office of the Secretary of State of Delaware.
***
6. The Certificate of Incorporation, as amended, is hereby restated as
follows:
ARTICLE I
The name of the corporation is Royster-Clark, Inc.
ARTICLE II
The registered agent of the corporation is The Corporation Trust Company.
The address of such registered agent in the State of Delaware is Corporation
Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware
19801.
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<PAGE>
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of capital stock that the corporation shall have
the authority to issue is 400,000, which shall consist of 350,000 shares of
Common Stock, par value $0.01 per share, and 50,000 shares of Preferred Stock,
par value $0.01 per share.
The shares of Preferred Stock may be divided into and issued in series. The
board of directors of the corporation shall have the authority to establish
series of unissued shares of Preferred Stock by fixing and determining the
designations and the powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, of the shares of any series so established.
The board of directors also shall have the authority to increase (but not above
the total number of authorized shares of Preferred Stock) or decrease (but not
below the number of shares thereof then outstanding) the number of shares of
each series of Preferred Stock. The Preferred Stock of each such series shall
have such voting powers (full, limited or none) and such designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issue of such
series of Preferred Stock adopted by the board of directors.
Except as otherwise provided in any resolution or resolutions adopted by
the board of directors providing for the time of any particular series of
preferred Stock, any shares of Preferred Stock redeemed or otherwise acquired by
the corporation shall assume the status of authorized but unissued Preferred
-3-
<PAGE>
Stock, shall be unclassified as to series, and subject to the provision of this
Article IV and to any restrictions contained in any resolution or resolutions
adopted by the board of directors providing for the issue of any such series of
Preferred Stock, may thereafter be reissued in the same manner as other
authorized by unissued shares of Preferred Stock.
Except as otherwise specifically required by law or as specifically
provided in any resolution or resolutions adopted by the board of directors
providing for the issue of any particular series of Preferred Stock, the
exclusive voting power of the corporation shall be vested in the Common Stock.
Each outstanding share of Common Stock shall entitle the holder thereof to one
vote on each matter submitted to a vote at all meetings of the stockholders of
the corporation.
The Certificates of Designation, Preference and Rights of the Series A
Cumulative Redeemable Preferred Stock and the Series B Cumulative Convertible
Preferred Stock are appended to this Certificate as Appendix A and Appendix B,
respectively.
ARTICLE V
In furtherance and not in limitation of the powers conferred by statute,
the board of directors is expressly authorized to adopt, amend or repeal the
Bylaws of the Corporation.
ARTICLE VI
Elections of directors need not be by written ballot except and to the
extent provided in the bylaws of the corporation.
Meetings of stockholders may be held within or without the State of
Delaware as the bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes of the State of Delaware)
outside the State of Delaware at such place or places as may be designated from
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<PAGE>
time to time by the board of directors or in the bylaws of the corporation.
ARTICLE VII
To the maximum extent permitted by the laws of the State of Delaware, no
director of the corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
ARTICLE VIII
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by the laws of the State of Delaware, and to add additional
provisions authorized by such laws as are then in force. All rights conferred on
the directors or stockholders of the corporation herein or in any amendment
hereof are granted subject to this reservation.
***
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed this 15th day of September, 1994 by its authorized
officers who affirm that the statements made herein are true and correct under
the penalties of perjury.
/s/ S. Clark Jenkins
--------------------------------------
S. Clark Jenkins, President
/s/ Randolph G. Abood
--------------------------------------
Randolph G. Abood, Assistant Secretary
--------------------------------------
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<PAGE>
APPENDIX A
CERTIFICATE OF THE DESIGNATION,
PREFERENCE AND RIGHTS OF
THE SERIES A CUMULATIVE REDEEMABLE
PREFERRED STOCK, PAR VALUE $0.01 PER SHARE
Pursuant to Section 151 of the
General Corporate Law of the
State of Delaware
The following resolution was duly adopted by the Board of Directors of
Royster-Clark, Inc., a Delaware corporation (the "Corporation"), pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, on September 15, 1994:
RESOLVED, that the Certificate of the Designation,
Preferences and Rights of the Series A Cumulative Redeemable
Preferred Stock, par value $0.01 per share, be restated in
its entirety without amendment and appended to the
Certificate of Amendment and Restatement of the Certificate
of Incorporation.
The designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of the Series A Cumulative Redeemable Preferred Stock, par value
$0.01 per share (in addition to the designation, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, set forth in the Certificate of
Incorporation of the Corporation which are applicable to the Preferred Stock) as
fixed by The Certificate of the Designation, Preferences and Rights of the
Series A Cumulative Redeemable Preferred Stock, Par Value $0.01 Per Share, which
was adopted by the Board of Directors of Royster (FMG) Acquisition Corporation,
a Delaware corporation (the "Corporation") and the successor in interest to
Royster-Clark, Inc., on December 27, 1991, pursuant to the provisions of Section
151 of the General Corporation Law of the State of Delaware, are as follows:
1. Designation and Number of Shares. The designation of said series of the
Preferred Stock authorized by this resolution shall be "Series A Cumulative
Redeemable Preferred Stock" (the "Series A Preferred Stock"). The maximum number
of shares of Series A Preferred Stock shall be 2,250.
2. Accrual and Payment of Dividends.
a. Subject to Paragraph 8, holders of record of shares of Series A
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors out of funds legally available for the payment of
dividends, cumulative dividends at the annual rate of $50.00 per share
through January 14, 1994; $75.00 per share from January 15, 1994 through
<PAGE>
January 14, 1996; $100.00 per share from January 15, 1996 through January
14, 1998; and $150.00 per share commencing on January 15, 1998 and
thereafter, less in each case, any Liability Amounts applied pursuant to
Paragraph 8, and no more, payable in cash in equal semi-annual payments.
Subject to Paragraph 8, such dividends shall be payable on the last
business day of each December and June (hereinafter referred to as
"Dividend Payment Date") commencing June 30, 1992 to persons who are
holders of record on the immediately preceding December 15 or June 15, as
the case may be (a "Record Date"). Subject to Paragraph 8, such dividends
with respect to any share of Series A Preferred Stock shall be cumulative
and accrue (whether or not declared) from the date of issue thereof.
b. So long as any of the Series A Preferred Stock is outstanding, the
Corporation will not declare or pay or set apart for payment any dividends
(other than a dividend in Common Stock or in any other class of stock
ranking junior to the Series A Preferred Stock both as to dividends and
upon liquidation) or make any other distribution on the Common Stock or any
other class of stock of the Corporation ranking junior to the Series A
Preferred Stock either as to dividends or upon liquidation (together with
the Common Stock, the "Junior Securities") and will not, directly or
indirectly, redeem, purchase or otherwise acquire for value, or set apart
funds for payment with respect to the redemption, purchase or acquisition
of, any shares of any such junior class or any warrants, rights, calls or
options exercitable for or convertible into such junior class, unless,
subject to Paragraph 8, all dividends on the Series A Preferred Stock for
all Dividend Payment Dates prior to and concurrent with the payment with
respect to any such dividend, distribution, redemption, purchase or
acquisition as to such junior class shall have been paid in full or
declared and a sum sufficient for the payment thereof placed by the
Corporation in an irrevocable trust with a bank or trust company (having
capital and surplus of not less than $300,000,000) for the benefit of the
holders of the Series A Preferred Stock.
3. Liquidation
a. The shares of Series A Preferred Stock shall be preferred over the
shares of Common Stock or other securities of the Corporation; provided,
however, that the shares of Series A Preferred Stock shall rank on a parity
with any series of Preferred Stock hereafter issued by the corporation
whose terms provide specifically that such series will rank on a parity
with the Series A Preferred Stock (together with any Series A Preferred
Stock issued after the redemption or repurchase thereof, the "Parity
Securities") as to assets, and shall rank junior to any series of preferred
stock now or hereafter issued by the Corporation whose terms provide
-2-
<PAGE>
specifically that such series will rank senior to the Series A Preferred
Stock ("Senior Securities") as to assets. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Series A Preferred Stock shall be entitled
to receive out of the assets of the Corporation available for distribution
to its stockholders, whether from capital, surplus or earnings, before any
distribution is made to holders of shares of Common Stock or other Junior
Securities, on a parity with the Parity Securities, and after payment in
full to all holders of Senior Securities, an amount equal to $1,000 per
share plus all dividends (whether or not earned or declared) accrued and
unpaid on the shares of Series A Preferred Stock to the date payment is
made. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of shares of Series A Preferred Stock are
insufficient to pay in full the preferential amount aforesaid, then such
assets, or the proceeds thereof, shall be distributable among such holders
ratably in accordance with the respective amount which would be payable on
such shares of Series A Preferred Stock if all amounts payable thereon were
payable in full.
b. For the purposes of this Paragraph 3, neither the voluntary sale,
lease, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration ) of all or substantially all the
property or assets of the Corporation, nor the consolidation or merger of
the Corporation with one or more other corporations, shall be deemed to be
a liquidation, dissolution or winding up, voluntary or involuntary, unless
such voluntary sale, lease, conveyance, exchange or transfer shall be in
connection with a plan of liquidation, dissolution or winding up of the
Corporation.
4. Redemption. The Series A Preferred Stock shall not be redeemable except
that any time after the initial issuance of the Series A Preferred Stock, the
Corporation may, at its sole option but at any time in whole or from time to
time in part, redeem shares of Series A Preferred Stock then outstanding in
accordance with Paragraph 5 (the "Optional Redemption") at the redemption price
of 100% of liquidation value together with accrued and unpaid dividends through
the redemption date, less all Liability Amounts applied pursuant to Paragraph 8
("Optional Redemption Price"). In the event of any such redemption the Board of
Directors shall, by resolution, fix the redemption date which date shall be no
more than 60 and not less than 30 days from the date the Corporation notifies
the holders of the Optional Redemption pursuant to Paragraph 5.a hereof for such
shares.
5. Terms of Redemption.
a. Not more than 60 and not less than 30 days prior to the date fixed
for an Optional Redemption, a notice of the time, date and place thereof
shall be sent by first class mail to holders of record of the shares so to
be redeemed in such manner as may be prescribed by the Board of Directors.
If less than all the
-3-
<PAGE>
shares of Series A Preferred Stock are to be redeemed, the Corporation
shall select the shares of Series A Preferred Stock to be redeemed pro rata
or by lot.
b. The corporation may deposit the aggregate redemption price of
Series A Preferred Stock to be redeemed (less than portion of the
redemption price representing a Liability Amount applied pursuant to
Paragraph 8) in trust with a bank or trust company (having capital and
surplus of not less than $300,000,000) prior to the redemption date. Upon
making such deposit, or if no such deposit is made, then upon such
redemption date (provided that payment thereof, in cash or by application
of any Liability Amount, is made available by the Corporation on the
redemption date) holders of the Series A Preferred Stock to be redeemed on
such date shall cease to be stockholders with respect to such shares and
thereafter such shares shall no longer be transferable on the books of the
Corporation and such holders shall have no interest in or claim against the
Corporation with respect to such shares except the right to receive payment
of the redemption price (in cash or by application of any Liability Amount)
upon surrender of their certificates. Any funds deposited and unclaimed at
the end of two years from the date fixed for redemption shall be repaid to
the Corporation upon its request, after which repayment the holders of
shares to have been redeemed shall look only to the Corporation for payment
of the redemption price. The Board of Directors shall cause the transfer
books of the Corporation to be closed as to shares to be redeemed pursuant
to Paragraph 4 and may cause the transfer books of the Corporation to be
closed after sending out the notice required by Paragraph 5.a hereof.
c. Any redemption of the Series A Preferred Stock under any Optional
Redemption shall be accomplished out of funds legally available for such
purpose at the redemption price (after giving effect to the application of
any Liability Amount) and in the manner and with the effect provided in
this Paragraph 5.
d. Upon any redemption of shares of Series A Preferred Stock, the
shares of Series A Preferred Stock so redeemed shall have the status of
authorized and unissued shares of Preferred Stock, unclassified as to
series, and the number of shares of Preferred Stock which the Corporation
shall have authority to issue shall not be decreased by the redemption of
shares of Series A Preferred Stock.
6. Voting. The holders of shares of Series A Preferred Stock shall have no
voting rights whatsoever, except such voting rights to which they are entitled
under mandatory provisions of the laws of the State of Delaware. To the extent
permitted by the laws of the State of Delaware, in any case where the holders of
shares of Series A Preferred Stock are entitled to vote:
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a. In exercising such voting rights, each share of Series A Preferred
Stock shall be entitled to one vote for each $1,000 liquidation value,
notwithstanding any greater or lesser general voting powers of one or more
series of Preferred Stock. To the extent permitted by the laws of the State
of Delaware, in any case where the holders of shares of Series A Preferred
Stock are entitled to voting rights, such holders shall vote as a class
with the holders of common Stock.
b. So long as any shares of the Series A Preferred Stock remain
outstanding, in any case where the holders of shares of Series A Preferred
Stock are entitled to voting rights as a class with respect to any matter
under mandatory provisions of the laws of the State of Delaware, such
matter shall be determined by the affirmative vote at a meeting or the
written consent with or without a meeting of the holders of at least a
majority in number of shares of the Series A Preferred Stock then
outstanding unless a greater majority is required under mandatory
provisions of the laws of the State of Delaware.
c. Notwithstanding anything in Subparagrah 6.a or 6.b to the contrary,
no holder of any shares of Series A Preferred Stock shall be entitled to
such voting rights, and such holder will be prohibited from exercising such
voting rights, to the extent that such holder will be prohibited from
exercising such voting rights, to the extent that such holders being
entitled to such voting rights would cause such holder or its affiliates to
be in violation of any law, regulation, order, rule or other requirement of
any government authority restricting or prohibiting such holder or its
affiliates from owning, directly or indirectly, or controlling or having
the power to control or have the power to vote the Series A Preferred
Stock. Any shares which the Board of Directors of the Corporation shall
have been notified in writing by any such holder are not permitted in
accordance with this Subparagraph 6.c to be voted shall be excluded for
purposes of determining whether the required votes shall have been obtained
or whether a quorum has been obtained on any matter to be voted upon by the
holders of Series A Preferred Stock pursuant to this Paragraph 6. The Board
of Directors shall be entitled conclusively to rely on such written notice.
7. No Consent for Certain Actions. No consent (other than as may be
provided in Paragraph 6) of holders of the Series A Preferred Stock shall be
required for (among other things) (a) the creation of any indebtedness of any
kind of the Corporation, (b) the creation or issuance of any class of stock of
the Corporation, including Junior Securities, Parity Securities and Senior
Securities; provided that any issuance of Parity Security or Senior Securities
to any holder of Common Stock of the Corporation or such holder's affiliates
shall be on terms at least as favorable to the Corporation as those which could
be obtained from unaffiliated third parties in an arm's length transaction or
(c) any increase or decrease in the amount of authorized or issued Common Stock
or any increase, decrease or change in the par value thereof. The Corporation
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shall give to the holders or record of the shares of Series A Preferred Stock,
within thirty (30) days after the occurrence of any of the event described in
clauses (b) and (c) of this Section 7, written notice of such event.
8. Right to Apply Liability Amounts. The Corporation shall be entitled to
the extent set forth below to apply against dividends and redemption payments
and other amounts otherwise due on the Series A Preferred Stock any and all
amounts owing and unpaid when due ("Liabilities") for which any "Seller" is
liable to the Corporation under that certain Asset Purchase Agreement dated
November 27, 1991 among Royster Company, Debtor and Debtor-in-Possession
("Royster"), Royster Mid-Atlantic Company, Debtor and Debtor-in-Possession, and
R/K Agri Service, Inc., Debtor and Debtor-in-Possession, and the Corporation
(the "Purchase Agreement").
a. As to all claims for Liabilities, the Corporation shall, in good
faith and with a reasonable basis therefor, deliver to Royster by first
class mail a written statement containing a description of the asserted
Liability ("Statement"), and shall give Royster access to, or shall deliver
to Royster, such other information in the possession of the Corporation
with respect to the asserted Liability as Royster may reasonably request.
If the final amount of the asserted Liability is not known by the
Corporation at the time of delivery of the Statement, the Statement may
contain the Corporation's good faith estimate of the amount of such
Liability and an undertaking to amend such Statement within a reasonable
time after the final amount of the asserted Liability becomes known to the
Corporation. No such estimate shall be a limitation on the amount of such
asserted Liability or limit the right of the Corporation hereunder to apply
the full amount thereof. At any time before the claims covered by a
Statement are resolved, the Corporation may amend a Statement to account
for any increase or decrease in the amount of an asserted Liability set
forth therein. Any such amendment shall be made in good faith and with a
reasonable basis therefor and may be made at any time prior to the
resolution of such claims.
b. If the amount of an asserted Liability set forth in an initial
Statement is the final amount of the asserted Liability covered thereby,
and no Challenge is made by Royster with respect to such asserted Liability
within 30 days after the delivery of the initial Statement, then the amount
of such asserted Liability immediately after the end of such 30-day period
shall constitute the "Liability Amount" with respect to such asserted
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Liability. If the amount of an asserted Liability set forth in a Statement
is the Corporation's estimate thereof, the Corporation subsequently amends
the Statement to set forth the actual final amount of such asserted
Liability, and no Challenge is made by Royster with respect to such
asserted Liability, as amended, within 30 days after the delivery of such
amendment to the Statement, then the amount of such asserted Liability
immediately after the end of such 30-day period shall constitute the
"Liability Amount" with respect to such asserted Liability. Until a
Statement which contains the Corporation's estimate of an asserted
Liability is subsequently amended to state the actual final amount thereof,
no determination of the "Liability Amount" with respect thereto shall be
made unless otherwise agreed by the Corporation and Royster.
c. If Royster desires to challenge whether the Corporation is entitled
to apply pursuant hereto the amount of any asserted Liability or the amount
thereof, Royster shall, in good faith and with a reasonable basis therefor,
deliver to the Corporation, within 30 days after the delivery of the
Statement (if it contains the final actual amount of the asserted
Liability) or any amendment thereto which states the final actual amount of
the Asserted Liability, a written challenge containing a specification of
the reasons for the challenge ("Challenge") and also shall deliver to the
Corporation such other information with respect to the Challenge as it may
reasonably request. A Challenge may be made with respect to all or a
portion of the amount specified in the Statement, as amended ("Challenged
Amount"). If a Challenge is made with respect to a portion of the amount
specified in the Statement (as amended), the remainder of the amount
specified in the Statement (as amended), minus the Challenged Amount shall
constitute a "Liability Amount." If the Corporation and Royster voluntarily
resolve the Challenge, the amount of the Liability as determined pursuant
to such resolution shall constitute a "Liability Amount." If no such
voluntary resolution occurs, the matter shall be resolved by a final,
non-appealable order of a court of competent jurisdiction stating the
amount of the Challenged Amount which constitutes a "Liability Amount" for
purposes thereof.
d. After the delivery of a Statement by the Corporation, the
Corporation's obligation, if any, to accrue and pay cumulative dividends
on, or redeem Series A Preferred Stock, to the extent of the amount of the
asserted Liability stated or estimated in the Statement or any amendment
thereto, shall be deferred until such Liability Amount is finally
established pursuant hereto. If the Liability Amount resulting from a
Statement, as finally determined, is less than the amount of the dividends
deferred pursuant to the preceding sentence (such deferred dividends less
such finally determined Liability Amount being referred to as the "Net
Dividends'), the Net Dividends, to the extent not covered by the
application of any other Liability Amount or any other pending Statement,
shall be deemed to have accrued as of the date of the original deferral and
shall be payable on the next Dividend Payment Date occurring after such
Liability Amount is finally established. Once a Liability Amount is finally
established pursuant hereto, the Corporation may, by written notice to the
holders of Series A Preferred Stock, from time to time and at any time,
apply such Liability Amount or any portion thereof first, against accrued
and unpaid dividends on the Series A Preferred Stock, and second, against
the Optional Redemption Price.
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e. If, upon resolution of a Challenge or rendering of a final,
non-appealable order with respect thereto, it is determined that 80% or
more of the Challenge Amount is a Liability Amount, there shall be added to
such Liability Amount the Corporation's costs and expenses reasonably
incurred and attributable to the resolution of the Challenge or the
rendition of such final order as it relates thereto. If, upon resolution of
a Challenge or rendering of a final, non-appealed order with respect
thereto, it is determined that 20% or less of the Challenged Amount is a
Liability Amount, the Corporation shall pay Royster's costs and expenses
reasonably incurred and attributable to the resolution of the Challenge or
the rendition of such final order as it relates thereto. In all other
cases, the Corporation shall pay its own costs and expenses attributable
thereto but shall not be responsible for any other costs or expenses in
connection therewith.
9. Reorganization Mergers. If at any time or from time to time there shall
be a capital reorganization of the Corporation or in case of the consolidation
or merger of the Corporation with any other person or entity (but not in case of
any sale, conveyance of disposition of all or substantially all of the assets of
the Corporation to an unaffiliated party in an arm's length transaction), the
Corporation and the person or entity formed by such consolidation or resulting
from such capital reorganization, or merger, as the case may be, shall make
appropriate provision in the articles or certificate of incorporation or other
governing instruments of such person such that the rights of the holders of the
Series A Preferred Stock after such capital reorganization, consolidation, or
merger after that event shall be as nearly equivalent as may be practicable to
such rights immediately prior to that event. The Corporation shall give to the
holders of record of the shares of Series A Preferred Stock at least ten (10)
days prior written notice of any capital reorganization, consolidation or merger
or of any sale, conveyance, or disposition of all or substantially all of the
assets of the Corporation.
IN WITNESS WHEREOF, I have signed this certificate and caused the corporate
seal of the Corporation to be hereunder affixed this 15th day of September,
1994.
/s/ S. Clark Jenkins
--------------------------
S. Clark Jenkins
President
ATTEST:
/s/ Randolph G. Abood
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Randolph G. Abood
Assistant Secretary
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APPENDIX B
AMENDED AND RESTATED
CERTIFICATE OF THE DESIGNATION,
PREFERENCES AND RIGHTS OF
THE SERIES B CUMULATIVE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $0.01 PER SHARE
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
The following recitals and resolution were duly adopted by the Board of
Directors of Royster-Clark, Inc., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General Corporation law of the
State of Delaware, on September 15, 1994:
WHEREAS, the Certificate of Incorporation of the Corporation authorizes the
issue of a class of Preferred Stock, par value $0.01 per share ("Preferred
Stock"), by the Corporation; and
WHEREAS, on May 27, 1992, the Board of Directors adopted resolutions
authorizing the issuance of 6,000 shares of Series B Cumulative Redeemable
Preferred Stock and thereafter issued a number of such shares; and
WHEREAS, the Board of Directors has examined the capital structure and
financial condition of the Corporation, and finds it to be in the best interests
of the Corporation to amend the designation, preferences and rights of the
Series B Cumulative Redeemable Preferred Stock; and
WHEREAS, the holders of all the currently issued and outstanding shares of
the Series B Cumulative Redeemable Preferred Stock have consented to this
amendment of the designation, preferences and rights of the Series B Cumulative
Redeemable Preferred Stock, now therefore, be it
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation by the provisions of the Certificate
of Incorporation, this Board of Directors hereby amends and restates the
designation, preferences and relative, participating, option or other special
rights, and the qualifications, limitations or restrictions thereof, of the
shares of the series known as the Series B Cumulative Redeemable Preferred Stock
<PAGE>
(in addition to the designation, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, set forth in the Certificate of Incorporation of the
Corporation which are applicable to the Preferred Stock), effective September
15, 1994, as follows:
1. Designation, Number of Shares and Rank.
a. The designation of said series of the Preferred Stock as amended by
this resolution shall be "Series B Cumulative Convertible Preferred Stock"
(the "Series B Preferred Stock").
b. The number of shares of Series B Preferred Stock shall be 12,000,
which number may from time to time be increased (but not to increase the
number beyond the total number of shares of Preferred Stock authorized) or
decreased (but not below the number of shares of Series B Preferred Stock
then outstanding) by resolution of the Board of Directors.
c. In the payment of dividends and in the distribution of assets upon
the liquidation (complete or partial), dissolution or winding up of the
affairs of the Corporation, the shares of Series B Preferred Stock (i)
shall rank senior to the Series A Cumulative Redeemable Preferred Stock,
par value $.01 per share, of the Corporation, (ii) shall rank junior to any
shares of Preferred Stock that may be issued as a series of Preferred Stock
designated as "Senior Preferred Stock" pursuant to Section 11.7.1 of that
certain Asset Purchase Agreement dated January 15, 1992 by and among
Royster (FMG) Acquisition Corporation (the former name of the Corporation)
and Hydro/Kirby Agri Services, Inc., a Florida corporation; and (iii) shall
rank senior to any other series of Preferred Stock that may be issued by
the Corporation, except for any such series of Preferred Stock that is
issued by the Corporation with the prior written consent of the holders of
a majority of the then outstanding Series B Preferred Stock.
2. Accrual and Payment of Dividends.
a. Holders of record of outstanding shares of Series B Preferred Stock
(individually a "Holder" and collectively the "Holders") shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available for the payment of dividends, cumulative dividends cumulating from
September 15, 1994, at the annual rate of $100.00 per share, payable in cash in
equal quarterly payments on the Dividend Payment Dates (as defined below);
provided, however, that if the Corporation is precluded from paying all or any
portion of a dividend otherwise payable on any Dividend Payment Date (as defined
below) under the terms of its senior credit agreement or related documents
between the Corporation and The CIT Group/Business Credit, Inc., or any
successor lender, or any amendment or agreement and related documents hereafter
entered into evidencing the refinancing of the Corporation's senior indebtedness
(and the Corporation has used its best efforts to obtain the consent of such
lender to the payment of dividends in cash), the accrued and unpaid amount of
such dividend shall compound quarterly from the applicable Dividend Payment Date
until paid at a rate of 10% per
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annum computed on the basis of a 365 or 366 day year and actual number of days
elapsed; and provided further, that at such time as, and to the extent that, the
Corporation is no longer precluded under the terms of its senior credit
agreement or related documents from paying all or any portion of a dividend
otherwise payable hereunder, the Corporation shall promptly pay all or that
portion of any unpaid dividends which it is permitted to pay, and to the extent
less than all unpaid dividends are so paid, the Corporation may designate the
order in which such unpaid dividends or portions thereof shall be considered
paid.
b. All dividends shall be payable on the last Business Day (as defined
below) of each March, June, September and December (herein referred to as
"Dividend Payment Date") commencing September 30, 1994 to persons who are
Holders on the date fifteen days prior to the Dividend Payment Date for
which a dividend is to be paid (a "Record Date"). Such dividends with
respect to any share of Series B Preferred Stock shall be cumulative and
accrue (whether or not declared) from the date of issue thereof. "Business
Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which national banking associations in the State of North
Carolina are authorized or obligated by law or executive order to be
closed.
c. So long as any of the Series B Preferred Stock is outstanding, the
Corporation will not declare or pay or set apart for payment any dividends
in cash or property (other than a dividend payable only in the common
stock, $.01 par value, of the Corporation ("Common Stock") or payable only
in any other class of stock ranking junior to the Series B Preferred Stock
both as to dividends and upon liquidation) or make any other distribution
on the Common Stock or any other class of stock of the Corporation ranking
junior to the Series B Preferred Stock either as to dividends or upon
liquidation (together with the Common Stock, the "Junior Securities') and
will not, directly or indirectly, redeem, purchase or otherwise acquire for
value, or set apart funds for payment with respect to the redemption,
purchase or acquisition of, any shares of any such Junior Securities or any
warrants, rights, calls or options exercisable for or convertible into such
Junior Securities, unless, in each such case, all dividends on the Series B
Preferred Stock for all Dividend Payment Dates (as compounded) prior to and
concurrent with the payment with respect to any such dividend,
distribution, redemption, purchase or acquisition as to such Junior
Securities shall have been paid in full.
3. Liquidation.
a. The shares of Series B Preferred Stock shall be preferred over the
shares of Common Stock or other securities of the Corporation except as
provided in Paragraph 1.c above. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the Holders shall be entitled to receive out of the assets of
the Corporation available for distribution to its stockholders, whether
from capital, surplus or earnings, before any distribution is made to
holders of shares of Common Stock or other Junior Securities, and after
payment in full to all holders of Senior Preferred Stock, an amount equal
to $1,000 per share plus all dividends (whether or not earned or declared)
accrued and unpaid on the shares of Series B Preferred Stock as compounded
to the date payment is made. If upon liquidation, dissolution or winding up
of the Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the
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Holders are insufficient to pay in full the preferential amount aforesaid,
then such assets, or the proceeds thereof, shall be distributable among
such Holders ratably in accordance with the respective amount which would
be payable on such shares of Series B Preferred Stock if all amounts
payable thereon were payable in full.
b. For the purposes of this Paragraph 3, neither the voluntary sale,
lease, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the property
or assets of the Corporation, nor the consolidation or merger of the
Corporation with one or more other corporations or other entities, shall be
deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, unless such voluntary sale, lease, conveyance, exchange or
transfer shall be in connection with a plan of liquidation, dissolution or
winding up of the Corporation.
4. Redemption. The Series B Preferred Stock shall not be redeemable except
as set forth below:
a. At any time and from time to time, after February 15, 2000 with
respect to any outstanding Series B Preferred Stock, the Corporation may,
at its sole option and at any time in whole or from time to time in part,
redeem shares of Series B Preferred Stock then outstanding in accordance
with Paragraph 5 (the "Optional Redemption") at the redemption price of
100% of liquidation value together with accrued and unpaid dividends as
compounded through the redemption date ("Optional Redemption Price"). In
the event of any such redemption, Board of Directors shall, by resolution,
fix the redemption date ("Optional Redemption Date"), which date shall be
no more than sixty (60) and not less than thirty (30) days from the date
the Corporation notifies the Holders of the Optional Redemption pursuant to
Paragraph 5.a hereof.
b. At any time and from time to time after February 15, 2000, any
Holder may, upon written notice to the Corporation ("Mandatory Redemption
Notice") require the Corporation to redeem (a "Mandatory Redemption") all
or any portion of the Series B Preferred Stock as may be identified in such
Mandatory Redemption Notice at the redemption price of 100% of liquidation
value together with accrued and unpaid dividends as compounded through the
redemption date ("Mandatory Redemption Price"). Upon receipt of a Mandatory
Redemption Notice by the Corporation, the Board of Directors shall, within
ten (10) days thereafter, by resolution, fix the redemption date for the
shares to be redeemed ("Mandatory Redemption Date"), which date shall be no
more than sixty (60) and not less than thirty (30) days from the date the
Corporation receives the Mandatory Redemption Notice.
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5. Terms of Redemption.
a. Not more than sixty (60) and less than thirty (30) days prior to
the Optional Redemption Date or the Mandatory Redemption Date, a notice of
the time, date and place thereof shall be sent by first class mail to the
Holders in such manner as may be prescribed by the Board of Directors. If
less than all the shares of Series B Preferred Stock are to be redeemed
pursuant to an Optional Redemption, the Corporation shall select the shares
of Series B Preferred Stock to be redeemed pro rata.
b. Upon such redemption date, Holders whose shares are to be redeemed
on such date shall cease to be stockholders with respect to such shares and
thereafter such shares shall no longer be transferable on the books of the
Corporation and such Holders shall have no interest in or claim against the
Corporation with respect to such shares except the right to receive payment
of the redemption price upon surrender of their certificate. Any funds
deposited and unclaimed at the end of two years from the date fixed for
redemption shall be repaid to the Corporation upon its request. After such
repayment, Holders whose shares were to have been redeemed shall look only
to the Corporation for payment of the redemption price. The Board of
Directors shall cause the transfer books of the Corporation to be closed as
to shares to be redeemed pursuant to Paragraph 6 and may cause the transfer
books of the Corporation to be closed after sending out the notice required
by Paragraph 5.a hereof.
c. Any redemption of the Series B Preferred Stock under any Optional
Redemption or Mandatory Redemption shall be accomplished out of funds
legally available for such purpose at the redemption price and in the
manner and with the effect provided in this Paragraph 5.
d. Upon any redemption of shares of Series B Preferred Stock the
shares of Series B Preferred Stock so redeemed shall have the status of
authorized and unissued shares of Preferred Stock, unclassified as to
series, and the number of shares of Preferred Stock which the Corporation
shall have authority to issue shall not be decreased by the redemption of
shares of Series B Preferred Stock.
6. Conversion.
a. Subject as hereinafter provided, until February 15, 2000, at the
option of any Holder of the Series B Preferred Stock, the Series B
Preferred Stock shall be convertible at any time such Preferred Stock is
outstanding, in whole or in part, at the office of the Corporation into
fully paid and nonassessable shares of Common Stock a per share rate (the
"Conversion Rate") equal to that number of shares of Common Stock as shall
equal the quotient of One Thousand Dollars ($1,000) divided by a base price
of One Hundred Eighty Dollars ($180.00).
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b. For the purposes of the provisions hereof, a "Conversion Date"
shall be the date of receipt of the Conversion Notice.
c. The right to convert shall be exercisable at any time and from time
to time by completing the notice of conversion in the form annexed hereto
as Exhibit A relating to the Series B Preferred Stock to be converted
("Conversion Notice") and delivering the same to the Corporation together
with such other evidence (if any) as the Board of Directors may reasonably
require to prove title of the person exercising such right to convert. A
Conversion Notice once given may not be withdrawn without the consent in
writing of the Corporation.
d. Within two (2) days of its receipt of a Conversion Notice, the
Corporation shall give notice to all other Holders of (i) its receipt of a
Conversion Notice (the first such notice received being referred to as the
"Trigger Notice"), (ii) the Conversion Date thereunder, and (iii) the
number of shares of Preferred Stock to be converted thereby. If, within
five (5) days of the Corporation's notice, the Corporation receives a
Conversion Notice from any other Holder, the Conversion Date of such
subsequent Conversion Notice shall be deemed to be the Conversion Date of
the Trigger Notice.
e. On conversion the dividend on the Series B Preferred Stock so
converted shall cease to accrue with effect from the close of business on
the date preceding the Conversion Date. The Common Stock issued on such
conversion shall entitle the former Holder to all dividends and other
distributions payable on the Common Stock by reference to a record date
after the applicable Conversion Date.
f. Any dividend arrears on the Series B Preferred Stock surrendered
for conversion shall be payable in full to the respective last Holders of
record of the shares of Series B Preferred Stock surrendered for conversion
(notwithstanding any subsequent transfer of the shares of Common Stock into
which such shares have been converted), pro rata with payment of
corresponding dividend arrears on the Series B Preferred Stock remaining
outstanding.
g. Conversion shall be deemed to have been effected on the Conversion
Date, and the former Holder shall as of the close of business on such date
have the full rights of the Common Stock resulting from such conversion.
h. On the Conversion Date all shares of Series B Preferred Stock in
respect of which a Conversion Notice has been delivered ("relevant shares')
shall be deemed converted into shares of Common Stock at the Conversion
Rate. Upon issuance of the Common Stock the relevant shares shall be
retired and cancelled. Until issuance of the Common Stock, the certificates
for the relevant shares shall be deemed to represent the shares of Common
Stock in to which they have been converted. Within 28 days after the
Conversion Date, the Corporation shall, or shall cause, the forwarding to
each holder of the relevant shares, at his own risk, free of charge, a
definitive certificate for the appropriate number of fully paid shares of
Common Stock
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and a new certificate for any unconverted Series B Preferred Stock
comprised in the certificate(s) surrendered by him.
i. The Corporation shall not be required to issue fractional shares
upon conversion and no payment or adjustment shall be made upon any
conversion on account of any cash dividends on the Common Stock issued upon
conversion. In the event any fractional interest in a share of Common Stock
would be issuable upon conversion, the Corporation may, at its option, in
lieu of delivering such fractional interest pay a cash adjustment in
respect of such fractional interest in an amount equal to the base price of
$180 multiplied by such fractional interest. If the Corporation shall not
elect to pay such cash adjustment, the Holder may elect to purchase the
additional fractional interest required to make up a full share of Common
Stock.
j. In case of the voluntary dissolution, liquidation or winding up of
the Corporation, all conversion rights shall terminate 45 days after the
mailing of a notice of such action to all Holders; provided that such date
of termination of conversion rights shall be not more than sixty (60) days
nor less than twenty (20) days prior to the date on which such dissolution
is to become effective or such liquidation or winding up is to commence.
Any such notice shall call attention to the date of such termination of the
conversion rights, the per share amount payable on the Common Stock, the
per share amount payable on the Series B Preferred Stock held by such
Holder in connection with such action, (in each case, if then known, or a
reasonable estimate if such amount is not known with any reasonable degree
of certainty), and the then current Conversion Rate of the Series B
Preferred Stock held by such Holder.
7. Voting. The Series B Preferred Stock shall have no voting rights
whatsoever, except such voting rights to which they are entitled under mandatory
provisions of the laws of the State of Delaware.
8. Certain Consent Required. The Corporation shall not hereafter issue any
Senior Securities (other than the Senior Preferred Stock referenced in Paragraph
1.c above), any Parity Securities or issue any additional shares of Series B
Preferred Stock while the Series B Preferred Stock is outstanding in the absence
of the prior written consent of the holders of a majority of the then
outstanding Series B Preferred Stock.
9. Reorganization, Mergers. If at any time or from time to time there shall
be a capital reorganization of the Corporation or in case of the consolidation
or merger of the Corporation with any other person or entity (but not in case of
any sale, conveyance or disposition of all or substantially all of the assets of
the Corporation to an unaffiliated party in an arm's length transaction), the
Corporation and the person or entity formed by such consolidation or resulting
from such capital reorganization or merger, as the case may be, shall make
appropriate provision in the articles or certificate of incorporation or other
governing instruments of such person such that the rights of Holders after such
capital reorganization, consolidation, or merger after that event shall be as
nearly equivalent as may be practicable to such rights
7
<PAGE>
immediately prior to that event. The Corporation shall give to Holders at least
thirty (30) days prior written notice of any capital reorganization,
consolidation or merger or of any sale, conveyance, or disposition of all or
substantially all of the assets of the Corporation.
10. Notices. All notices and other communications provided to the
Corporation and to Holders in connection with the Preferred Stock shall be in
writing (including telecopied communications) and shall be given to the intended
recipient at the address specified below, unless such address is changed by
written notice hereunder. All such notices and other communications shall be
effective (i) if delivered by telefacsimile, when transmitted (with the original
notice simultaneously sent by certified mail, postage prepaid, return receipt
requested), (ii) if delivered in person or by air courier service, when
delivered at the address of the recipient as specified below, (iii) or, if
mailed, on the third calendar day after being deposited in the mails, by
certified mail, postage prepaid, return receipt requested.
(a) If to the Corporation Royster-Clark, Inc.
409 Main Street
Tarboro, North Carolina 27886
Telefacsimile: (919) 641-9234
(b) If to any Holder, to the address or telefacsimile number specified on
the Holder's receipt for his Preferred Stock.
IN WITNESS WHEREOF, the undersigned have signed this certificate on behalf
of the Corporation on September 15, 1994.
ROYSTER-CLARK, INC.
By: /s/ S. Clark Jenkins
------------------------
President
ATTEST:
/s/ Randolph G. Abood
- ---------------------
Assistant Secretary
8
<PAGE>
EXHIBIT A
CONVERSION NOTICE
PLEASE TAKE NOTICE that the undersigned holder ("Holder") of Series B
Convertible Preferred Stock ("the Preferred Stock") of Royster-Clark, Inc. (the
"Corporation"), hereby exercises his right pursuant to the Certificate of
Designation of the Preferred Stock to convert:____________________________
(_____) shares of Preferred Stock standing in his name on the books of the
Corporation into that number of shares of fully paid and non-assessable Common
Stock of the Corporation as is determined by the application of the Conversion
Rate as defined in the Certificate of Designation.
The undersigned agrees to surrender to the Corporation his stock
certificate(s) representing the Preferred Stock to be converted promptly upon
receiving acknowledgment of this notice from the Corporation. Upon receipt of
such certificate(s), the Corporation shall return to the undersigned a stock
certificate representing the shares of Preferred Stock remaining in the
undersigned's name, if any, and a stock certificate representing the shares of
Common Stock into which the number of shares of Preferred Stock written in above
have been converted.
Dated:
By:_______________________________
Name:_____________________________
Address:__________________________
__________________________________
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
ROYSTER-CLARK, INC.
(Pursuant to Sections 242 of the General Corporation Law)
The undersigned, Francis P. Jenkins, Jr. and Randolph G. Abood, being the
duly elected Chief Executive Officer and Secretary, respectively, of
Royster-Clark, Inc., a Delaware corporation (the "Corporation"), for the
purposes of amending the Certificate of Incorporation pursuant to Section 242 of
the General Corporation Law, do hereby certify that:
1. The name of the Corporation is Royster-Clark, Inc. The Corporation was
originally incorporated in the State of Delaware on January 22, 1991 under the
name of Royster (FMG) Acquisition Corporation.
2. The Board of Directors of the Corporation adopted a resolution by
written consent, dated March 31, 1999, setting forth a proposed amendment to the
Corporation's Certificate of Incorporation conferring voting and other rights
upon the holders of the Series A 4 1/2% Subordinated Convertible Debenture due
March 30, 2004 and declared the advisability of adopting such amendment.
3. The proposed amendment was presented in a written consent of the holders
of at least a majority of shares of the Corporation's common stock as follows:
RESOLVED, that Article FOURTH of the Restated Certificate of Incorporation
of the Corporation dated September 15, 1994 be amended by adding a sixth
paragraph as follows:
Pursuant to Section 221 of the Delaware General Corporation Law, the holder
of the Series A 4 1/2% Subordinated Convertible Debenture due March 30,
2004 (the "Series A Debenture") issued by the Corporation in the original
principal amount of $14,250,000 shall have the voting rights and other
rights of the stockholders of the Company set forth in Section 19 of such
Debenture. In the event that the Series A Debenture is reissued or
exchanged for an equal principal amount of Series A 4 1/2% Subordinated
Convertible Debenture (each, a "Reissued Debenture") in other authorized
denominations, the holder of each Reissued Debenture (and any subsequently
reissued Series A Debenture) shall retain such voting rights in the same
proportion as the principal amount
<PAGE>
of such Reissued Debenture bears to $14,250,000 and shall retain all other
rights of the stockholders of the Company set forth in such Section 19.
4. Pursuant to Section 228 of the General Corporation Law, written consents
representing the holders of at least a majority of all the outstanding shares
entitled to vote thereon were executed on March 31, 1999.
5. The foregoing amendment shall become effective on the date of the filing
of this Certificate with the office of the Secretary of State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed this 31st day of March, 1999 by its authorized officers
who affirm that the statements made herein are true and correct under the
penalties of perjury.
/s/ Francis P. Jenkins
-------------------------------
Francis P. Jenkins, Jr.
Chief Executive Officer
/s/ Randolph G. Abood
-------------------------------
Randolph G. Abood
Secretary
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AMENDED AND RESTATED BYLAWS
OF
ROYSTER-CLARK, INC.
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. An annual meeting of stockholders shall be held
for the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting at
such place within or without the State of Delaware, on such date, and at such
time as the Board of Directors shall fix each year, which date shall be within
13 months after the later of the date of organization of the Corporation or the
last annual meeting of stockholders.
Section 2. Special Meetings. Special meetings of stockholders may be called
by the Board of Directors or the Chairman of the Executive Committee for any
purpose or purposes prescribed in the notice of the meeting and shall be held at
such place, on such date, and at such time as shall be fixed in the notice.
Section 3. Notice of Meetings. Written notice of the place, date and time
of all meetings of stockholders shall be given, not less than 10 nor more than
60 days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (i.e., as required from time to time by the Certificate of
Incorporation of the Corporation or the Delaware General Corporation Law).
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken; provided, however, that if the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, written notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting. At
the adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum. Except as otherwise required by law, at any meeting of
stockholders, a majority of the outstanding shares of stock entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
<PAGE>
quorum. Where a separate vote by a class or classes is required, a majority of
the outstanding shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to the vote on that matter.
If a quorum fails to attend any meeting, the chairman of the meeting or the
holders of a majority of the shares of stock entitled to vote who are present in
person or represented by proxy may adjourn the meeting to another place, date
and time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, then except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such meeting; provided,
however, that in no event shall a quorum consist of less than one-third of the
shares entitled to vote at the meeting.
Section 5. Organization. The Chairman of the Board or, in his or her
absence, the President of the Corporation or, in his or her absence, such person
as may be chosen by the holders of a majority of the shares entitled to vote who
are present in person or represented by proxy, shall call to order any meeting
of the stockholders and act as chairman of the meeting. In the absence of the
Secretary of the Corporation, the secretary of the meeting shall be such person
as the chairman appoints.
Section 6. Conduct of Business. The chairman of any meeting of stockholders
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seem to him or her in order.
Section 7. Proxies and Voting. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting.
Each stockholder shall have one vote for every share of stock entitled to
vote which is registered in his or her name on the record date for the meeting,
except as otherwise provided herein or required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
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<PAGE>
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the vote cast.
Section 8. Stock List. A complete list of stockholders entitled to vote at
any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, or if not so specified, at
the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 9. Consent of Stockholders in Lieu of Meeting. Any action required
to be taken at any annual or special meeting of stockholders of the Corporation,
or any action which may be taken at any annual or special meeting of the
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its registered office
in Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be made by hand or by certified or registered mail, return receipt
requested.
Every written consent shall bear the date of signature of each stockholder
who signs the consent. No written consent shall be effective to take the
corporate action referred to therein unless, within 60 days of the date the
earliest dated consent is delivered to the Corporation, a written consent or
consents signed by a sufficient number of holders to take action are delivered
to the Corporation in the manner prescribed in the first paragraph of this
Section.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Term of Office. The number of directors who shall
constitute the whole Board of Directors shall be seven. Each director shall be
elected for a term of one year and shall hold office until his or her successor
is elected and qualified or until his or her earlier resignation or removal,
except as otherwise provided herein or required by law.
Whenever the authorized number of directors is increased between annual
meetings of the stockholders, a majority of the directors then in office shall
have the power to elect such new directors for the balance of a term and until
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<PAGE>
their successors are elected and qualified. Any decrease in the authorized
number of directors shall not become effective until the expiration of the term
of the directors then in office unless, at the time of such decrease, there
shall be vacancies on the Board of Directors which are being eliminated by the
decrease.
Section 2. Vacancies. If the office of any director becomes vacant by
reason of death, resignation, disqualification, removal or other cause, the
shareholders shall elect a successor for the unexpired term.
Section 3. Regular Meetings. Regular meetings of the Board of Directors
shall be held at Tarboro, North Carolina or at such other place or places, and
on such date or dates, and at such time or times as shall have been established
by the Board of Directors and publicized among all directors. A notice of each
regular meeting shall not be required.
Section 4. Special Meetings. Special meetings of the Board of Directors may
be called by one-half of the directors then in office (rounded up to the nearest
whole number) or by the Chairman of the Executive Committee and shall be held at
Tarboro, North Carolina or such other place as may be approved by the Board of
Directors, and on such date, and at such time as they or he or she shall fix.
Notice of the place, date and time of each special meeting shall given to each
director by whom it is not waived by mailing written notice not less than five
days before the meeting or by telegraphing or telexing or by facsimile
transmission of the same not less than 72 hours before the meeting. Unless
otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Section 5. Quorum. At any meeting of the Board of Directors, a majority of
the total number of the whole Board of Directors shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date or time, without further
notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone. Members of
the Board of Directors, or of any committee thereof, may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business. At any meeting of the Board of Directors,
business shall be transacted in such order and manner as the Board of Directors
may determine from time to time, and all matters shall be determined by the vote
of all of the directors present, except as otherwise provided herein or required
by law. Action may be taken by the Board of Directors without a meeting if all
members thereof consent thereto in writing, and the writings are filed with the
minutes of proceedings of the Board of Directors.
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<PAGE>
Section 8. Powers. The Board of Directors may, except as otherwise required
by law, exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation.
Section 9. Compensation of Directors. Directors, as such, may receive,
pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the Board of Directors.
Section 10. Supermajority Voting Requirements. A minimum vote of
seventy-five percent (75%) of the total number of directors (rounded up to the
nearest whole number), constituting the whole board of directors, including any
unfilled vacancies ("Supermajority Vote"), shall be required for approval of the
following matters:
(a) any amendment or modification to the Certificate of Incorporation or
By-laws of the Corporation;
(b) any split, combination or reclassification of capital stock;
(c) any declaration, payment or setting aside for payment of any dividend
or other distribution or any direct or indirect redemption, retirement, purchase
or other acquisition of any stock or other securities (other than stated
dividends on the Preferred Stock);
(d) the approval of the issuance of capital stock of the Corporation,
including common or preferred stock and any securities or instruments
convertible into or exercisable for common or preferred stock or other
securities, except those options previously authorized by the Board of Directors
for the issuance of 5,278 shares of Common Stock;
(e) any acquisition or disposition of any land or any leasehold or other
interest therein, the value of which exceeds Two Million Dollars ($2,000,000.00)
in the aggregate in any one fiscal year of the Corporation;
(f) any sale or series of related sales of assets of the Corporation or
purchases or series of related purchases, the aggregate value of which exceeds
Five Hundred Thousand Dollars ($500,000.00), other than any purchases or sales
or inventory in the ordinary course of business;
(g) any incurrence of any obligation, forgiveness of any obligation or
guarantee of any obligation of any other person, including the purchase of goods
and the borrowing or lending of money by the Corporation involving an amount or
obligation in excess of Five Hundred Thousand Dollars ($500,000.00), other than
the purchase of inventory and incurrence of farmer's credit balances in the
ordinary course of business consistent with past practice;
-5-
<PAGE>
(h) any complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or reorganization of the
Corporation, other than any transaction reasonably as part of that certain
Reciprocal Option set forth in that certain Stock Purchase Agreement dated
September 15, 1994 by and among the Corporation and certain stockholders of the
Corporation;
(i) any employment agreement or compensation arrangement involving any
officer, director or stockholder of the Corporation or its affiliates;
(j) any increase in the compensation payable to any officer of the
Corporation as well as the amount of any bonus;
(k) any material change in the business purposes of the Corporation;
(l) approval of the following elements of annual business plans and related
financial forecasts and budgets:
- changes in aggregate employment levels exceeding 5% in any fiscal
year;
- base compensation adjustments for all employees as a group
exceeding 5% in any fiscal year;
- capital spending exceeding $1.5 million in any fiscal year; and
- changes in supplier relationships at any time with suppliers from
whom the Corporation purchased more than One Million Dollars
($1,000,000.00) in the preceding twelve months or from whom the
Corporation expects to purchase One Million Dollars
($1,000,000.00) in the succeeding twelve months.
(m) the election, replacement or removal of the Chairman, Chief Executive
Officer, President, Chief Operating Officer, Chief Investment Officer and Chief
Financial Officer;
(n) the appointment, replacement or removal of independent auditors;
(o) removal of any director, and
(p) any registration of any securities of the Corporation under the
Securities Act of 1933, as amended (the "Act") or any grant of any right to
register any securities of the Corporation under the Act.
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<PAGE>
ARTICLE III
COMMITTEES
Section 1. Executive Committee. There shall be a standing Executive
Committee consisting of four members who shall be nominated by the Chairman from
the members of the Board of Directors and who shall be confirmed by the Board of
Directors. The Executive Committee shall be responsible for the management and
direction of the business of the corporation and shall have all of the powers of
the board, subject only to the provisions and limitations imposed by Section 10
of Article II and by the Delaware General Corporation Law. The powers of the
Executive Committee shall include, but are not limited to, the power to
recommend the engagement and discharge of independent auditors of the
Corporation; to direct and supervise special investigations; to review with the
independent auditors the plan and results of the Corporation's procedures for
internal auditing; to review and determine salaries for officers and certain key
employees; and to review and determine bonuses and other special awards of
employee compensation and benefits.
Section 2. Conduct of Business. The Executive Committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for the giving of notice to members of all
meetings. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee.
ARTICLE IV
OFFICERS
Section 1. Generally. The officers of the Corporation shall consist of a
Chairman of the Board, a Chief Executive Officer, a President, a Chief Operating
Officer, one or more Vice Presidents, a Secretary, a Chief Investment Officer, a
Chief Financial Officer, and such other officers as may be appointed by the
Board of Directors from time to time. Offices shall be elected by the Board of
Directors, which shall consider that subject at its first meeting after every
annual meeting of stockholders. Each officer shall hold office until his or her
successor is elected and qualified or until his or her earlier resignation or
removal. Any number of offices may be held by the same person.
Section 2. Chairman of the Board. Subject to the provisions of these Bylaws
and to the direction of the Board of Directors, the Chairman shall have the
responsibility for the setting of policy concerning and the supervision of the
management and control of the business and affairs of the Corporation and shall
perform all duties and have all powers which are commonly incident to the office
of chairman or which are delegated to him or her by the Board of Directors. The
Chairman of the Board shall preside at all meetings of the Board of Directors
and stockholders.
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<PAGE>
Section 3. Chief Executive Officer. Subject to the provisions of these
Bylaws and to the direction of the Board of Directors, the Chief Executive
Officer shall have the overall executive responsibility for the management and
control of the business and affairs of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive officer (which office is the highest ranking office of the
Corporation) or which are delegated to him or her by the Board of Directors. He
or she shall have the power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized and shall have general
supervision and direction of all other officers, employees and agents of the
Corporation.
Section 4. President. Subject to the provisions of these Bylaws and to the
direction of the Board of Directors, the President shall have responsibility for
the general management and control of the business and affairs of the
Corporation and shall perform all duties and have all powers which are delegated
to him or her by the Chief Executive Officer or otherwise by the Board of
Directors.
Section 5. Chief Investment Officer. The Chief Investment Officer shall
have the responsibility for the design and maintenance of the management
information system of the Corporation and for the supervision of the accounting
and financial functions of the Corporation. He or she shall direct the
investment and disbursement of funds of the Corporation as are authorized and
shall render from time to time an account of all such transactions and of the
financial condition of the Corporation. The Chief Investment Officer shall also
perform such other duties as the Board of Directors may prescribe from time to
time.
Section 6. Chief Financial Officer. The Chief Financial Officer shall have
the responsibility for day to day maintenance of the financial and accounting
functions of the Corporation. He or she shall disburse the funds of the
Corporation as authorized and shall render from time to time an account of all
such transactions and of the financial condition of the Corporation. The Chief
Financial Officer shall also perform such other duties as the Board of Directors
may prescribe from time to time.
Section 7. Chief Operating Officer. Subject to the provisions of these
Bylaws and to the direction of the Board of Directors, the Chief Operating
Officer shall have responsibility for the everyday management, and control of
the business, operations and affairs of the Corporation and shall perform such
duties and powers which are delegated to him or her by the Chief Executive
Officer or otherwise by the Board of Directors.
Section 8. Vice President. Each Vice president shall have such powers and
duties as may be delegated to him or her by the Board of Directors. One Vice
President shall be designated by the Board of Directors to perform the duties
and exercise the powers of the President in the event of the President's absence
or disability.
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<PAGE>
Section 9. Secretary. The Secretary shall issue all authorized notices for,
and shall keep minutes of, all meetings of the stockholders and the Board of
Directors. He or she shall have charge of the corporate books and shall perform
such other duties as the Board of Directors may prescribe from time to time.
Section 3. Delegation of Authority. Except for the powers and duties of the
Chairman and the President, the Board of Directors from time to time may
delegate the powers or duties of any officer to any other officers or agents,
notwithstanding any provision hereof.
Section 4. Removal. Any officer of the Corporation may be removed at any
time, with or without cause, by the Board of Directors.
Section 5. Action with Respect to Securities of Other Corporations. Unless
otherwise directed by the Board of Directors, the Chairman or any officer of the
Corporation authorized by the Chairman shall have power to vote and otherwise
act on behalf of the Corporation, in person or by proxy, at any meeting of
stockholders or with respect to any action of stockholders of any other
corporation in which the Corporation may hold securities and otherwise to
exercise any and all rights and powers which the Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V
STOCK
Section 1. Certificates of Stock. Each stockholder shall be entitled to a
certificate signed by, or in the name of the Corporation by, the President or a
Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer
or an Assistant Treasurer, certifying the number of shares owned by him or her.
Any or all of the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock. Transfers of stock shall be made only upon
the transfer books of the Corporation kept at an office of the Corporation or by
transfer agents designated to transfer shares of the stock of the Corporation.
Except where a certificate is issued in accordance with Section 4 of Article V
of the Bylaws, an outstanding certificate for the number of shares involved
shall be surrendered for cancellation before a new certificate is issued
therefor.
Section 3. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder, or
to receive payment of any dividend or other distribution or allotment of any
rights or to exercise any rights in respect to any change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date on
which the resolution fixing the record date is adopted and which record date
shall not be more than 60 nor less than 10 days before the date of any meeting
of stockholders, nor more than 60 days prior to the time for such other
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<PAGE>
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board or Directors may fix a new record date for the
adjourned meeting.
In order that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of Directors
may fix a record date, which shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall be not more than 10 days after the date upon which the
resolution fixing the record date is adopted. If no record date has been fixed
by the Board of Directors and no prior action by the Board of Directors is
required by the Delaware General Corporation Law, the record date shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation in the manner prescribed by
Article I, Section 9 of the Bylaws. If no record date has been fixed by the
Board of Directors and prior action by the Board of Directors is required by the
Delaware General Corporation Law with respect to the proposed action by written
consent of the stockholders, the record date for determining stockholders
entitled to consent to corporate action in writing shall be at the close of
business on the date for determining stockholders entitled to consent to
corporate action in writing shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
Section 4. Lost, Stolen or Destroyed Certificates. In the event of the
loss, theft or destruction of any certificate of stock, another certificate may
be issued in its place pursuant to such regulations as the Board of Directors
may establish concerning proof of such loss, theft or destruction and concerning
the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations. The issue, transfer, conversion and registration of
certificates of stock shall be governed by such other regulations as the Board
of Directors may establish.
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<PAGE>
ARTICLE VI
NOTICES
Section 1. Notices. Except as otherwise specifically provided herein or
required by law, all notices required to by given to any stockholder, director,
officer, employee or agent shall be in writing and may be given effectively by
hand delivery to the recipient thereof, by depositing such notice in the mail
postage paid, or by sending such notice by telecopy or prepaid telegram or
mailgram. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent as his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails or by telecopy,
telegram or mailgram, shall be the time of the giving of the notice.
Section 2. Waivers. A written wavier of any notice, signed by stockholder,
director, officer, employee or agent, whether before or after the time of the
event for which notice is to be given, shall be deemed equivalent to the notice
required to be given to such stockholder, director, officer, employee or agent.
Neither the business nor the purpose of any meeting need be specified in such a
waiver.
ARTICLE VII
MISCELLANEOUS
Section 1. Facsimile Signatures. In addition to the provisions for use of
facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signature of any officer or officers of the Corporation may be sued
whenever and as authorized by the Board of Directors or a committee thereof.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
seal, containing the name of the Corporation, which seal shall be in the charge
of the Secretary. If and when so directed by the Board of Directors or a
committee thereof, duplicates of the seal may be kept and used by the Treasurer,
an Assistant Secretary, or an Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records. Each director, each
member of any committee designated by the Board of Directors, and each officer
of the Corporation shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its officers or employees, or committees
of the Board of Directors so designated, or by any other person as to matters
which such director or committee member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
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Section 4. Fiscal Year. The fiscal year of the Corporation shall be fixed
by the Board of Directors.
Section 5. Time Periods. In applying any provision of these Bylaws which
requires that an act be done or not be done a specified number of days prior to
an event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, and the day of the event shall
be included.
ARTICLE VIII
indemnification
The Corporation shall be authorized to indemnify any person entitled to
indemnity under law, to the fullest extent permitted by law.
ARTICLE IX
AMENDMENTS
Subject to the supermajority provisions of Article II, Section 10 of these
Bylaws, these Bylaws may be amended or repealed by the Board of Directors at any
meeting or by the stockholders at any meeting.
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AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ROYSTER-CLARK GROUP, INC.
(Before Receipt of Payment for Stock)
Royster-Clark Group, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
FIRST: (a) The Corporation's present name is Royster-Clark Group, Inc.
(b) The date of the filing of its original Certificate of
Incorporation with the Secretary of State of the State of Delaware was
January 7, 1999 under the name of R-C Delaware Acquisition Inc.
SECOND: This Amended and Restated Certificate of Incorporation has
been duly adopted pursuant to and in accordance with Sections 241 and Section
245 of the General Corporation Law of the State of Delaware and restates and
amends the provisions of the existing Amended Certificate of Incorporation of
the Corporation.
THIRD: The Certificate of Incorporation of the Corporation is hereby
amended and restated so as to read in its entirety as follows:
1. Name. The name of the Corporation is Royster-Clark Group, Inc.
2. Registered Office and Agent. The address of the Corporation's registered
office in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle, DE 19801. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
3. Purpose. The purposes for which the Corporation is formed are to engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware and to possess and exercise all of the
powers and privileges granted by such law and any other law of Delaware.
4. Authorized Capital. The aggregate number of shares of stock which the
Corporation shall have authority to issue is 4,975,000 shares, divided into
three (3) classes consisting of 775,000 shares of Preferred Stock, par value
$.01 per share ("Preferred Stock"); 2,200,000 shares of Class A Common Stock,
par value $.01 per share ("Class A Common Stock"); and 2,000,000 shares of Class
B Common Stock, par value $.01 per share ("Class B Common Stock"). Class A
Common Stock and Class B Common Stock are hereinafter sometimes collectively
referred to as "Common Stock."
<PAGE>
The following is a statement of the designations, preferences,
qualifications, limitations, restrictions and the special or relative rights
granted to or imposed upon the shares of each such class and upon the shares of
the first and second series of Preferred Stock.
A. PREFERRED STOCK
1. Issue in Series. Preferred Stock may be issued from time to time in
one or more series, each such series to have the terms stated herein and in
the resolution of the Board of Directors of the Corporation providing for
its issue. All shares of any one series of Preferred Stock will be
identical, but shares of different series of Preferred Stock need not be
identical or rank equally except insofar as provided by law or herein.
2. Creation of Series. In addition to the Senior Preferred Stock and
Junior Preferred Stock provided for herein, the Board of Directors will
have the authority to adopt amendments to this Certificate to cause to be
created one or more series of Preferred Stock, and to determine and fix
with respect to each series prior to the issuance of the series to which
such resolution relates:
a. The distinctive designation of the series and the number of
shares which will constitute the series, which number may be increased
or decreased (but not below the number of shares then outstanding)
from time to time by action of the Board of Directors;
b. The dividend rate, if any, and the times of payment of
dividends on the shares of the series, whether dividends will be
cumulative, and if so, from what date or dates;
c. The price or prices at which, and the terms and conditions on
which, the shares of the series may be redeemed at the option of the
Corporation;
d. Whether or not the shares of the series will be entitled to
the benefit of a retirement or sinking fund to be applied to the
purchase or redemption of such shares and, if so entitled, the amount
of such fund and the terms and provisions relative to the operation
thereof;
e. Whether or not the shares of the series will be convertible
into, or exchangeable for, any other shares of stock of the
Corporation or other securities, and if so convertible or
exchangeable, the conversion price or prices, or the rates of
exchange, and any adjustments thereof, at which such conversion or
exchange may be made, and any other terms and conditions of such
conversion or exchange;
f. The rights of the shares of the series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
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<PAGE>
g. Whether or not the shares of the series will have priority
over or be on a parity with or be junior to the shares of any other
series or class in any respect or will be entitled to the benefit of
limitations restricting the issuance of shares of any other series or
class having priority over or being on a parity with the shares of
such series in any respect, or restricting the payment of dividends on
or the making of other distributions in respect of shares of any other
series or class ranking junior to the shares of the series as to
dividends or assets, or restricting the purchase or redemption of the
shares of any such junior series or class, and the terms of any such
restriction;
h. Whether the series will have voting rights, in addition to any
voting rights provided by law, and, if so, the terms of such voting
rights; and
i. Any other preferences, qualifications, privileges, options and
other relative or special rights and limitations of that series.
3. Dividends. Holders of Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of funds legally
available for the payment thereof, dividends, if any, at the rates set
forth herein with respect to the Senior Preferred Stock and Junior
Preferred Stock and at the rates fixed by the Board of Directors for the
respective series with respect to each additional series of Preferred
Stock, and no more, before any dividends shall be declared and paid, or set
apart for payment, on Common Stock with respect to the same dividend
period.
4. Preference on Liquidation. In the event of the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
holders of each series of Preferred Stock will be entitled to receive the
amount fixed for such series plus, in the case of any series on which
dividends, if any, will have been determined by the Board of Directors to
be cumulative, an amount equal to all dividends accumulated and unpaid
thereon to the date of final distribution whether or not earned or declared
before any distribution shall be paid, or set aside for payment, to holders
of Common Stock. If the assets of the Corporation are not sufficient to pay
such amounts in full, holders of all shares of Preferred Stock will
participate in the distribution of assets ratably in proportion to the full
amounts to which they are entitled or in such order or priority, if any, as
will have been fixed in the resolution or resolutions providing for the
issue of the series of Preferred Stock. Neither the merger nor
consolidation of the Corporation into or with any other corporation, nor a
sale, transfer or lease of all or part of its assets, will be deemed a
liquidation, dissolution or winding up of the Corporation within the
meaning of this paragraph except to the extent specifically provided for
herein.
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<PAGE>
5. Redemption. The Corporation, at the option of the Board of
Directors, may redeem all or part of the shares of any series of Preferred
Stock on the terms and conditions fixed for such series.
6. Voting Rights. Except as otherwise required by law, as otherwise
provided herein or as otherwise determined by the Board of Directors as to
the shares of any series of Preferred Stock prior to the issuance of any
such shares, the holders of Preferred Stock shall have no voting rights and
shall not be entitled to any notice of meeting of stockholders.
B. 12% Series A SENIOR Cumulative Compounding Preferred Stock
1. Designation; Number of Shares. The first series of Preferred Stock
shall be designated as 12% Series A Senior Cumulative Compounding Preferred
Stock ("Senior Preferred Stock"), and the number of shares which shall
constitute such series shall be 675,000. The par value of the Senior
Preferred Stock shall be $.01 per share.
2. Accrual and Payment of Dividends.
a. The holders of Senior Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of
funds of the Corporation legally available therefor, cumulative cash
dividends at the rate of $12 per share per annum.
Dividends on the Senior Preferred Stock shall be payable in
annual installments in arrears commencing October 1, 1999 and
thereafter on each April 1 and October 1 (unless such day is not a
business day in which event on the last preceding business day) in
each such year (hereinafter referred to as a "Dividend Accrual Date"),
except that the dividend payment payable on October 1, 1999 shall be
calculated from the date of original issuance through October 1, 1999.
Each such dividend on Senior Preferred Stock when paid shall be
payable to holders of record as they appear on the stock books of the
Corporation on September 15 and March 15, as the case may be,
preceding such Dividend Accrual Date. Dividends with respect to any
shares of Senior Preferred Stock shall accrue (whether or not earned
or declared) from the date of issuance of such shares.
b. Dividends on the Senior Preferred Stock shall be cumulative,
whether or not earned or declared, so that if at any time full
cumulative dividends at the rate aforesaid on all Senior Preferred
Stock then outstanding to the end of the annual dividend period next
preceding such time shall not have been paid, the amount of the
deficiency shall be paid before any sum shall be set aside for or
applied by the Corporation to
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<PAGE>
the purchase, redemption or other acquisition for value of any Junior
Shares (as such term is defined in Section 8 of this Article 4(B)
(either pursuant 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 Junior Shares (other than a
dividend payable in Junior Shares); provided, however, that the
foregoing shall not prohibit the Corporation from repurchasing Junior
Shares from a former employee of the Corporation (or a subsidiary of
the Corporation) where such repurchase arises from the Corporation's
option to repurchase such shares upon the termination of such
employee's employment with the Corporation (or a subsidiary) pursuant
to a written plan or written agreement between the Corporation and
such employee. Accrued dividends on the Senior Preferred Stock if not
paid on the first or any subsequent Dividend Accrual Date following
accrual shall thereafter accrue additional dividends in respect
thereof (the "Additional Dividends"), compounded annually, at the rate
of 12% per annum.
c. When dividends are not paid in full upon the Senior Preferred
Stock, the Junior Preferred Stock (as defined in Section 1 of this
Article 4(C)) (on and after April 1, 2004) and any other stock ranking
on a parity as to dividends with the Senior Preferred Stock, all
dividends paid upon Senior Preferred Stock, Junior Preferred Stock (on
and after April 1, 2004) and any other shares ranking on a parity as
to dividends with the Senior Preferred Stock shall be paid pro rata so
that in all cases the amount of dividends paid per share of Senior
Preferred Stock, Junior Preferred Stock (on and after April 1, 2004)
and such other shares shall bear the same ratio that accrued dividends
per share (including Additional Dividends) on the Senior Preferred
Stock, Junior Preferred Stock (on and after April 1, 2004) and such
other shares bear to each other. Except as provided in the preceding
sentence, unless full cumulative dividends on the Senior Preferred
Stock have been paid, no dividends shall be declared or paid or set
aside for payment upon any other shares of the Corporation ranking on
a parity with the Senior Preferred Stock as to dividends.
d. An annual dividend period shall commence on the day following
a Dividend Accrual Date and shall end on the next succeeding Dividend
Accrual Date.
3. 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, the holders
of the Senior Preferred Stock 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
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<PAGE>
holders of any Junior Shares (including, prior to April 1, 2004, any
Junior Preferred Stock), an amount equal to $100 in cash per share
plus an amount equal to full cumulative dividends (whether or not
earned or declared) accrued and unpaid thereon (including Additional
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 Senior Preferred Stock and of any shares ranking on a
parity with the Senior Preferred Stock (which on and after April 1,
2004 shall include the Junior Preferred Stock) 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 Senior Preferred Stock and of any shares of stock ranking on a
parity with the Senior Preferred Stock (which on and after April 1,
2004 shall include the Junior Preferred Stock). Holders of Senior
Preferred Stock shall not be entitled, upon the liquidation,
dissolution or winding up of the Corporation, to receive any amounts
with respect to such shares other than the amounts referred to in this
Section 3a.
b. Neither the purchase nor redemption by the Corporation of any
shares of any class in any manner permitted by this Certificate or any
amendment hereof, nor the merger or consolidation of the Corporation
with or into any other corporation or corporations, nor a sale,
transfer or lease of all or substantially all of the Corporation's
assets shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for the purposes of this Section 3; provided,
however, that any consolidation or merger of the Corporation in which
the Corporation is not the surviving entity shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this Section 3 if, (A) in connection
therewith, the holders of shares of Common Stock of the Corporation
receive as consideration, whether in whole or in part, for such shares
of Common Stock (1) cash, (2) notes, debentures or other evidences of
indebtedness or obligations to pay cash or (3) preferred stock of the
surviving entity (whether or not the surviving entity is the
Corporation) which ranks on a parity with or senior to the preferred
shares received by holders of the Senior Preferred Stock with respect
to liquidation or dividends or (B) the holders of the Senior Preferred
Stock do not receive preferred shares of the surviving entity with
rights, powers and preferences equal to (or more favorable to the
holders than) the rights, powers and preferences of the Senior
Preferred Stock.
4. Redemption. The Corporation shall not have the right to redeem the
Senior Preferred Stock.
5. Voting. Except as required by law and except for any voting by the
holders of the Senior Preferred Stock as part of a separate class or series
pursuant to Section 6 of this Article 4(B) or any other provision of these
Articles, no holder
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<PAGE>
of Senior Preferred Stock, as such holder, shall be entitled to vote on any
matter submitted to a vote of shareholders. On any matters on which the
holders of the Senior Preferred Stock shall be entitled to vote, they shall
be entitled to one vote for each share held. Except as otherwise required
by law or as otherwise provided herein, the holders of Senior Preferred
Stock shall not be entitled to notice of any meeting of shareholders.
6. Other Rights. Without the written consent of the holders of a
majority of the outstanding shares of Senior Preferred Stock or the vote of
the holders of a majority of the outstanding shares of Senior Preferred
Stock at a meeting of the holders of Senior Preferred Stock called for such
purpose, the Corporation shall not (i) create, authorize or issue any other
class or series of stock entitled to a preference prior to Senior Preferred
Stock upon any dividend or distribution or any liquidation, distribution of
assets, dissolution or winding up of the Corporation, or increase the
authorized amount of any such other class or series, or (ii) amend, alter
or repeal any provision of the Corporation's Certificate of Incorporation
so as to adversely affect the relative rights and preferences of the Senior
Preferred Stock; provided however, that any such amendment that changes the
dividend payable on the Senior Preferred Stock shall require the
affirmative vote of the holder of each share of Senior Preferred Stock at a
meeting of such holders called for such purpose or the written consent of
the holder of each such share of Senior Preferred Stock.
7. Acknowledgment. Each holder of Senior Preferred Stock, by
acceptance thereof, acknowledges and agrees that payments of dividends,
interest, premium and principal on, and redemption and repurchase of, such
securities by the Corporation are subject to restrictions contained in
certain credit and financing agreements of the Corporation.
8. Definitions. The following terms, when used in this Article 4(B),
shall have the meanings set forth below:
a. As used herein, the amount of dividends "accrued" on any share
of Senior Preferred Stock as at any date shall be calculated as the
amount of any unpaid dividends accumulated thereon from and including
the last preceding Dividend Accrual Date with respect to which
dividends have not been paid, whether or not earned or declared.
b. "corporation" shall mean a corporation, partnership, business
trust, unincorporated organization, association, limited liability
company or joint stock company.
c. "Junior Shares" shall mean any series or class of the capital
stock of the Corporation now or hereafter authorized or issued by the
Corporation, including any series or class of preferred shares,
ranking junior to the Senior Preferred Stock with respect to dividends
or
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<PAGE>
distributions or upon the liquidation, distribution of assets,
dissolution or winding-up of the Corporation, including without
limitation the Common Stock. On and after April 1, 2004, "Junior
Shares" shall not include the Junior Preferred Stock.
d. "person" shall mean an individual, a corporation, partnership,
trust, limited liability company, organization, association,
government or any department or agency thereof, or any other
individual or entity.
C. Series B JUNIOR Preferred Stock
1. Designation; Number of Shares. The second series of Preferred Stock
shall be designated as Series B Junior Preferred Stock ("Junior Preferred
Stock"), and the number of shares which shall constitute such series shall
be 100,000. The par value of the Junior Preferred Stock shall be $.01 per
share.
2. Dividends.
a. The holders of Junior Preferred Stock shall not be entitled to
receive any dividends with respect to the Junior Preferred Stock until
April 1, 2004. Thereafter, the holders of Junior Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of
Directors out of funds of the Corporation legally available therefor,
cumulative cash dividends at the rate of $12 per share per annum.
Dividends on the Junior Preferred Stock shall be payable in
annual installments in arrears commencing October 1, 2004 and
thereafter on each April 1 and October 1 (unless such day is not a
business day in which event on the last preceding business day) in
each such year (hereinafter referred to as a "Dividend Accrual Date"),
except that the dividend payment payable on October 1, 2004 shall be
calculated from April 1, 2004 through October 1, 2004. Each such
dividend on Junior Preferred Stock when paid shall be payable to
holders of record as they appear on the stock books of the Corporation
on September 15 and March 15, as the case may be, preceding such
Dividend Accrual Date. Dividends with respect to any shares of Junior
Preferred Stock shall accrue (whether or not earned or declared) from
the date of issuance of such shares.
b. Dividends on the Junior Preferred Stock shall be cumulative,
whether or not earned or declared, so that if at any time full
cumulative dividends at the rate aforesaid on all Junior Preferred
Stock then outstanding to the end of the annual dividend period next
preceding such time shall not have been paid, the amount of the
deficiency shall be paid before any sum shall be set aside for or
applied by the Corporation to
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<PAGE>
the purchase, redemption or other acquisition for value of any Junior
Shares (as such term is defined in Section 8 of this Article 4(C))
(either pursuant 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 Junior Shares (other than a
dividend payable in Junior Shares); provided, however, that the
foregoing shall not prohibit the Corporation from repurchasing Junior
Shares from a former employee of the Corporation (or a subsidiary of
the Corporation) where such repurchase arises from the Corporation's
option to repurchase such shares upon the termination of such
employee's employment with the Corporation (or a subsidiary) pursuant
to a written plan or written agreement between the Corporation and
such employee. Accrued dividends on the Junior Preferred Stock if not
paid on the first or any subsequent Dividend Accrual Date following
accrual shall thereafter accrue additional dividends in respect
thereof (the "Additional Dividends"), compounded annually, at the rate
of 12% per annum.
c. When dividends are not paid in full upon the Junior Preferred
Stock (after April 1, 2004), Senior Preferred Stock and any other
stock ranking on a parity as to dividends with the Junior Preferred
Stock, all dividends paid upon Junior Preferred Stock (after April 1,
2004), Senior Preferred Stock and any other shares ranking on a parity
as to dividends with the Junior Preferred Stock shall be paid pro rata
so that in all cases the amount of dividends paid per share of Junior
Preferred Stock (after April 1, 2004), Senior Preferred Stock and such
other shares shall bear the same ratio that accrued dividends per
share (including Additional Dividends) on the Junior Preferred Stock
(on and after April 1, 2004), Senior Preferred Stock and such other
shares bear to each other. Except as provided in the preceding
sentence, unless full cumulative dividends on the Junior Preferred
Stock have been paid, no dividends shall be declared or paid or set
aside for payment upon any other shares of the Corporation ranking on
a parity with the Junior Preferred Stock as to dividends.
d. An annual dividend period shall commence on the day following
a Dividend Accrual Date and shall end on the next succeeding Dividend
Accrual Date.
3. 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, the holders
of the Junior Preferred Stock 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 Junior Shares (but, with
respect to any such liquidation,
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<PAGE>
dissolution or winding up which shall commence prior to April 1, 2004,
after all amounts payable to the holders of any Senior Preferred Stock
shall have been paid), an amount equal to $100 in cash per share plus
an amount equal to full cumulative dividends (whether or not earned or
declared) accrued and unpaid thereon (including Additional 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 Junior Preferred Stock and of any shares ranking on a
parity with the Junior Preferred Stock (which on and after April 1,
2004 shall include the Senior Preferred Stock) 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 Junior Preferred Stock and of any shares of stock ranking on a
parity with the Junior Preferred Stock (which on and after April 1,
2004 shall include the Senior Preferred Stock). Holders of Junior
Preferred Stock shall not be entitled, upon the liquidation,
dissolution or winding up of the Corporation, to receive any amounts
with respect to such shares other than the amounts referred to in this
Section 3a.
b. Neither the purchase nor redemption by the Corporation of any
shares of any class in any manner permitted by this Certificate or any
amendment hereof, nor the merger or consolidation of the Corporation
with or into any other corporation or corporations, nor a sale,
transfer or lease of all or substantially all of the Corporation's
assets shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for the purposes of this Section 3; provided,
however, that any consolidation or merger of the Corporation in which
the Corporation is not the surviving entity shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this Section 3 if, (A) in connection
therewith, the holders of shares of Common Stock of the Corporation
receive as consideration, whether in whole or in part, for such shares
of Common Stock (1) cash, (2) notes, debentures or other evidences of
indebtedness or obligations to pay cash or (3) preferred stock of the
surviving entity (whether or not the surviving entity is the
Corporation) which ranks on a parity with or senior to the preferred
shares received by holders of the Junior Preferred Stock with respect
to liquidation or dividends or (B) the holders of the Junior Preferred
Stock do not receive preferred shares of the surviving entity with
rights, powers and preferences equal to (or more favorable to the
holders than) the rights, powers and preferences of the Junior
Preferred Stock.
4. Redemption. The Corporation shall not have the right to redeem
the Junior Preferred Stock.
5. Voting. Except as required by law and except for any voting by
the holders of the Junior Preferred Stock as part of a separate class
or series pursuant
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to Section 6 of this Article 4(C) hereunder or any other provision of
these Articles, no holder of Junior Preferred Stock, as such holder,
shall be entitled to vote on any matter submitted to a vote of
shareholders. On any matters on which the holders of the Junior
Preferred Stock shall be entitled to vote, they shall be entitled to
one vote for each share held. Except as otherwise required by law or
as otherwise provided herein, the holders of Junior Preferred Stock
shall not be entitled to notice of any meeting of shareholders.
6. Other Rights. Without the written consent of the holders of a
majority of the outstanding shares of Junior Preferred Stock or the
vote of the holders of a majority of the outstanding shares of Junior
Preferred Stock at a meeting of the holders of Junior Preferred Stock
called for such purpose, the Corporation shall not amend, alter or
repeal any provision of the Corporation's Certificate of Incorporation
so as to adversely affect the rights and preferences of the Junior
Preferred Stock, provided, however, that (i) any such amendment that
changes the dividend payable on the Junior Preferred Stock shall
require the affirmative vote of the holder of each share of Junior
Preferred Stock at a meeting of such holders called for such purpose
or the written consent of the holder of each such share of Junior
Preferred Stock and (ii) from and after April 1, 2004, the Corporation
shall not (A) create, authorize or issue any other class or series of
stock entitled to a preference prior to the Junior Preferred Stock
upon any dividend or distribution or any liquidation, distribution of
assets, dissolution or winding up of the corporation, or increase the
authorized amount of any such other class or series, or (B) amend,
alter or repeal any provision of the Corporation's Certificate of
Incorporation so as to adversely affect the relative rights and
preferences of the Junior Preferred Stock, in either case without the
written consent of the holders of a majority of the outstanding shares
of Junior Preferred Stock or the vote of the holders of a majority of
the outstanding shares of Junior Preferred Stock at a meeting of the
holders of Junior Preferred Stock called for such purpose.
7. Acknowledgment. Each holder of Junior Preferred Stock, by
acceptance thereof, acknowledges and agrees that payments of
dividends, interest, premium and principal on, and redemption and
repurchase of, such securities by the Corporation are subject to
restrictions contained in certain credit and financing agreements of
the Corporation.
8. Definitions. The following terms, when used in this Article
4(C), shall have the meanings set forth below:
a. As used herein, the amount of dividends "accrued" on any
share of Junior Preferred Stock as at any date shall be
calculated as the amount of any unpaid dividends accumulated
thereon from and including the last preceding Dividend Accrual
Date with respect to which dividends have not been paid, whether
or not earned or declared.
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<PAGE>
b. "corporation" shall mean a corporation, partnership,
business trust, unincorporated organization, association, limited
liability company or joint stock company.
c. "Junior Shares" shall mean any series or class of the
capital stock of the Corporation now or hereafter authorized or
issued by the Corporation, including any series or class of
preferred shares, ranking junior to the Junior Preferred Stock
with respect to dividends or distributions or upon the
liquidation, distribution of assets, dissolution or winding-up of
the Corporation, including without limitation the Common Stock.
d. "person" shall mean an individual, a corporation,
partnership, trust, limited liability company, organization,
association, government or any department or agency thereof, or
any other individual or entity.
D. CLASS A AND CLASS B COMMON STOCK
Except as otherwise provided herein, all shares of Class A Common
Stock and Class B Common Stock will be identical and will entitle the
holders thereof to the same rights and privileges.
1. Dividends. Holders of Common Stock will be entitled to receive such
dividends as may be declared by the Board of Directors, provided that if
dividends are declared which are payable in shares of Class A Common Stock
or Class B Common Stock, dividends will be declared which are payable at
the same rate on each class of Common Stock and the dividends payable in
shares of Class A Common Stock will be payable to holders of Class A Common
Stock and the dividends payable in shares of Class B Common Stock will be
payable to holders of Class B Common Stock.
2. Conversion. Each record holder of Class A Common Stock will be
entitled to convert any or all of such holder's Class A Common Stock into
the same number of shares of Class B Common Stock and each record holder of
Class B Common Stock will be entitled to convert any or all of the shares
of such holder's Class B Common Stock into the same number of shares of
Class A Common Stock; provided, however, that at the time of conversion of
shares of Class B Common Stock into shares of Class A Common Stock such
holder would be permitted, pursuant to applicable law, to hold the total
number of shares of Class A Common Stock which such holder would hold after
giving effect to such conversion; and provided, further, that the
determination of a holder of Class B Common Stock that such holder is
permitted pursuant to applicable law to convert Class B Common Stock into
Class A Common Stock pursuant to this Section 2 shall be final and binding
upon the Company.
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<PAGE>
Each conversion of shares of one class of Common Stock into shares of
another class of Common Stock will be effected by the surrender of the
certificate or certificates representing the shares to be converted at the
principal office of the Corporation at any time during normal business
hours, together with a written notice by the holder of such shares stating
the number of shares that any such holder desires to convert into the other
class of Common Stock. Such conversion will be deemed to have been effected
as of the close of business on the date on which such certificate or
certificates have been surrendered and such notice has been received by the
Corporation, and at such time the rights of any such holder with respect to
the converted class of Common Stock will cease and the person or persons in
whose name or names the certificate or certificates for shares of the other
class of Common Stock are to be issued upon such conversion will be deemed
to have become the holder or holders of record of the shares of such other
class of Common Stock represented thereby.
Promptly after such surrender and the receipt by the Corporation of
the written notice from the holder hereinbefore referred to, the
Corporation will issue and deliver in accordance with the surrendering
holder's instructions the certificate or certificates for the other class
of Common Stock issuable upon such conversion and a certificate
representing any shares of Common Stock which were represented by the
certificate or certificates delivered to the Corporation in connection with
such conversion but which were not converted. The issuance of certificates
for the other class of Common Stock upon conversion will be made without
charge to the holder or holders of such shares for any issuance tax (except
stock transfer taxes) in respect thereof or other cost incurred by the
Corporation in connection with such conversion.
3. Transfers. The Corporation will not close its books against the
transfer of any share of Common Stock, or of any share of Common Stock
issued or issuable upon conversion of shares of the other class of Common
Stock, in any manner that would interfere with the timely conversion of
such shares of Common Stock.
4. Subdivision and Combinations of Shares. If the Corporation in any
manner subdivides or combines the outstanding shares of any class of Common
Stock, the outstanding shares of the other class of Common Stock will be
proportionately subdivided or combined.
5. Reservation of Shares for Conversion. So long as any shares of any
class of Common Stock are outstanding, the Corporation will at all times
reserve and keep available out of its authorized but unissued shares of
Class A Common Stock and Class B Common Stock (or any shares of Class A
Common Stock or Class B Common Stock which are held as treasury shares),
the number of shares sufficient for issuance upon conversion.
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<PAGE>
6. Distribution of Assets. In the event of the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
holders of Common Stock will be entitled to receive all of the remaining
assets of the Corporation available for distribution to its stockholders
after all amounts to which the holders of Preferred Stock are entitled have
been paid or set aside in cash for payment.
7. Voting Rights. The holders of Class A Common Stock shall have the
general right to vote for all purposes as provided by law. Each holder of
Class A Common Stock shall be entitled at all elections of directors to as
many votes as shall equal the number of votes which such holder would be
entitled to cast for the election of directors with respect to his shares
of stock multiplied by the number of directors to be elected, and such
holder may cast all of such votes for a single director or may distribute
them among the number to be voted for, or for any two or more of them as
such holder may see fit, and to one vote for each share upon all other
matters. Except as otherwise required by law, the holders of Class B Common
Stock shall have no voting rights.
8. Merger, etc. In connection with any merger, consolidation, or
recapitalization in which holders of Class A Common Stock generally
receive, or are given the opportunity to receive, consideration for their
shares (a) all holders of Class B Common Stock shall be given the
opportunity to receive the same form of consideration for their shares as
is received by holders of Class A Common Stock and (b) holders of Class B
Common Stock shall be entitled to receive the same amount of consideration
per share as received by holders of Class A Common Stock.
5. Action without a Meeting. Subject to the rights of the holders of any
class or series of Preferred Stock with respect to such class or series pursuant
to the provisions of Section 4 hereof, any action required or permitted to be
taken by the stockholders of the Corporation may be taken without a meeting by
the unanimous written consent of all holders of capital stock of the Corporation
entitled to vote thereon. Provided however, that no such action may be taken
unless ten days prior written notice of such proposed action is given to the
Board of Directors. The record date for the determination of the stockholders
entitled to vote by such written consent shall be the date ten days after the
date such notice is given to the Board of Directors, and in such case only
stockholders of record on such record date shall be entitled to vote by such
written consent, notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid.
6. Bylaws. The board of directors of the Corporation is authorized to
adopt, amend or repeal the bylaws of the Corporation, except as otherwise
specifically provided therein.
7. Elections of Directors. Elections of directors need not be by written
ballot unless the bylaws of the Corporation shall so provide.
8. Right to Amend. The Corporation reserves the right to amend any
provision contained in this Certificate as the same may from time to time be in
effect in the
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<PAGE>
manner now or hereafter prescribed by law, and all rights conferred on
stockholders or others hereunder are subject to such reservation.
9. Limitation on Liability. The directors of the Corporation shall be
entitled to the benefits of all limitations on the liability of directors
generally that are now or hereafter become available under the Delaware General
Corporation Law. Without limiting the generality of the foregoing, no director
of the Corporation shall be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. Any repeal or
modification of this Section 8 shall be prospective only, and shall not affect,
to the detriment of any director, any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, Royster-Clark Group, Inc. has caused this Amended and
Restated Certificate of Incorporation to be executed by Francis P. Jenkins, Jr.,
the President of the Corporation, this 22nd day of April, 1999.
ROYSTER-CLARK GROUP, INC.
By: /s/ Francis P. Jenkins
---------------------------------
Francis P. Jenkins, Jr.
President
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BYLAWS
OF
ROYSTER-CLARK GROUP, INC.
(the "Company")
ARTICLE I
STOCKHOLDERS
Meetings.
1.1.1 Place. Meetings of the stockholders shall be held at such place as
may be designated by the board of directors.
1.1.2 Annual Meeting. An annual meeting of the stockholders for the
election of directors and for other business shall be held on such date and at
such time as may be fixed by the board of directors.
1.1.3 Special Meetings. Special meetings of the stockholders may be called
at any time by the president, or the board of directors, or the holders of a
majority of the outstanding shares of stock of the Company entitled to vote at
the meeting.
1.1.4 Quorum. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of stock of the Company entitled to vote on a
particular matter shall constitute a quorum for the purpose of considering such
matter.
1.1.5 Voting Rights. Except as otherwise provided herein, in the
certificate of incorporation or Bylaws, every stockholder shall have the right
at every meeting of stockholders to one vote for every share standing in the
name of such stockholder on the books of the Company which is entitled to vote
at such meeting. Every stockholder may vote either in person or by proxy.
ARTICLE II
DIRECTORS
2.1 Number and Term. The board of directors shall have authority to (i)
determine the number of directors to constitute the board and (ii) fix the terms
of office of the directors.
2.2 Meetings.
2.2.1 Place. Meetings of the board of directors shall be held at such place
as may be designated by the board or in the notice of the meeting.
<PAGE>
2.2.2 Regular Meetings. Regular meetings of the board of directors shall be
held at such times as the board may designate. Notice of regular meetings need
not be given, provided, that if the board changes the date or times of the
regular meeting, each director shall receive written notice of the new times or
places of the regular meetings.
2.2.3 Special Meetings. Special meetings of the board may be called by
direction of the president or any two members of the board on three days' notice
to each director, either personally or by mail, telegram or facsimile
transmission.
2.2.4 Quorum. The presence at any meeting of an equal number of directors
designated by Francis P. Jenkins, Jr. (a "Jenkins Designee") and directors
designated by 399 Venture Partners, Inc. (a "399 Venture Designee") shall
constitute a quorum for the transaction of business at any meeting, provided,
that if a quorum has not been established during three consecutive regular or
special meeting of the board of directors due to the absence of the Jenkins
Designees or the 399 Venture Designees, then a quorum shall be constituted by a
majority of the directors on the board of directors.
2.2.5 Voting. Except as otherwise provided herein, in the certificate of
incorporation or by law, the vote of a majority of the directors present at any
meeting at which a quorum is present shall constitute the act of the board of
directors.
2.2.6 Committees. The board of directors may, by resolution adopted by a
majority of the whole board, (subject to any contrary agreement among the
stockholders of the Company to which the Company is a party) designate one or
more committees, each committee to consist of one or more directors and such
alternate members (also directors) as may be designated by the board. Unless
otherwise provided herein, in the absence or disqualification of any member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another director to act at the meeting in the
place of any such absent or disqualified member. Except as otherwise provided
herein, in the certificate of incorporation or by law, (subject to any contrary
agreement among the stockholders of the Company to which the Company is a party)
any such committee shall have and may exercise the powers of the full board of
directors to the extent provided in the resolution of the board directing the
committee.
2.2.7 Conflict. In the event of a conflict between the provisions in this
Article II conflict with the provisions of the Security Holders Agreement, dated
as of April 22, 1999, (the "Stockholders Agreement"), among the Company, 399
Venture Partners, Inc., Francis P. Jenkins and the additional persons signatory
thereto, the provisions of the Stockholders Agreement shall govern.
ARTICLE III
OFFICERS
3.1 Election. At its first meeting after each annual meeting of the
stockholders, the board of directors shall elect a president, treasurer,
secretary and such other officers as it deems advisable.
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<PAGE>
3.2 Authority, Duties and Compensation. The officers shall have such authority,
perform such duties and serve for such compensation as may be determined by
resolution of the board of directors. Except as otherwise provided by board
resolution, (i) the president shall be the chief executive officer of the
Company, shall have general supervision over the business and operations of the
Company, may perform any act and execute any instrument for the conduct of such
business and operations and shall preside at all meetings of the board and
stockholders, (ii) the other officers shall have the duties customarily related
to their respective offices, and (iii) any vice president, or vice presidents in
the order determined by the board, shall in the absence of the president have
the authority and perform the duties of the president.
ARTICLE IV
INDEMNIFICATION
4.1 Right to Indemnification. The Company shall indemnify any person who
was or is party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "proceeding"), by reason of the fact that such person is or
was a director or officer of the Company or a constituent corporation absorbed
in a consolidation or merger, or is or was serving at the request of the Company
or a constituent corporation absorbed in a consolidation or merger, as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or is or was a director or officer of the Company serving at
its request as an administrator, trustee or other fiduciary of one or more of
the employee benefit plans of the Company or other enterprise, against expenses
(including attorneys' fees), liability and loss actually and reasonably incurred
or suffered by such person in connection with such proceeding, whether or not
the indemnified liability arises or arose from any threatened, pending or
completed proceeding by or in the right of the Company, except to the extent
that such indemnification is prohibited by applicable law.
4.2 Advance of Expenses. Expenses incurred by a director or officer of the
Company in defending a proceeding shall be paid by the Company in advance of the
final disposition of such proceeding subject to the provisions of any applicable
statute.
4.3 Procedure for Determining Permissibility. To determine whether any
indemnification or advance of expenses under this Article IV is permissible, the
board of directors by a majority vote of a quorum consisting of directors not
parties to such proceeding may, and on request of any person seeking
indemnification or advance of expenses shall be required to, determine in each
case whether the applicable standards in any applicable statute have been met,
or such determination shall be made by independent legal counsel if such quorum
is not obtainable, or, even if obtainable, a majority vote of a quorum of
disinterested directors so directs, provided that, if there has been a change in
control of the Company between the time of the action or failure to act giving
rise to the claim for indemnification or advance of expenses and the time such
claim is made, at the option of the person seeking indemnification or advance of
expenses, the permissibility of indemnification or advance of expenses shall be
determined by independent legal counsel. The reasonable expenses of any director
or officer in prosecuting a successful claim for indemnification, and the fees
and expenses of any special legal counsel engaged to determine permissibility of
indemnification or advance of expenses, shall be borne by the Company.
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<PAGE>
4.4 Contractual Obligation. The obligations of the Company to indemnify a
director or officer under this Article IV, including the duty to advance
expenses, shall be considered a contract between the Company and such director
or officer, and no modification or repeal of any provision of this Article IV
shall affect, to the detriment of the director or officer, such obligations of
the Company in connection with a claim based on any act or failure to act
occurring before such modification or repeal.
4.5 Indemnification Not Exclusive; Inuring of Benefit. The indemnification and
advance of expenses provided by this Article IV shall not be deemed exclusive of
any other right to which one indemnified may be entitled under any statute,
provision of the Certificate of Incorporation, these bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, and shall inure to the benefit of the heirs, executors and
administrators of any such person.
4.6 Insurance and Other Indemnification. The board of directors shall have the
power to (i) authorize the Company to purchase and maintain, at the Company's
expense, insurance on behalf of the Company and on behalf of others to the
extent that power to do so has not been prohibited by statute, (ii) create any
fund of any nature, whether or not under the control of a trustee, or otherwise
secure any of its indemnification obligations, and (iii) give other
indemnification to the extent permitted by statute.
ARTICLE V
STOCK AND TRANSFER OF STOCK CERTIFICATES
5.1 Certificates of Stock. Certificates for shares of the capital stock of the
Company shall be in such form, not inconsistent with law, as shall be approved
by the board of directors. They shall be numbered in order of their issue, and
shall be signed by the president or a vice president and by the treasurer or an
assistant treasurer or the secretary or an assistant secretary of the Company.
The signatures of any of such officers upon such certificate may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may nevertheless be issued and delivered by the Company with the same effect as
if he were such officer, transfer agent or registrar.
5.2 Transfers of Stock Lost, Destroyed and Mutilated Certificates. Transfers of
shares of the capital stock of the Company by the holder thereof, or by his
attorney thereunto authorized by a power of attorney duly executed and filed
with the secretary of the Company or with a transfer agent of the Company, if
any, and on surrender of the certificate or certificates for such shares
properly endorsed. The holder of any stock issued by the Company shall
immediately notify the Company of any loss, destruction or mutilation of the
certificate therefor, or failure to receive a certificate of stock issued by the
Company, and the board of directors of the Company may, in its discretion, cause
to be issued to such holder of stock a new certificate or certificates of stock
upon compliance with such rules, regulations and/or procedures as may have been
prescribed by the board of directors with respect to the issuance of new
certificates in lieu of such other certificate or certificates of stock.
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<PAGE>
ARTICLE VI
AMENDMENTS
These bylaws may be amended or repealed at any regular or special meeting
of the board of directors by vote of a majority of all directors in office or at
any annual or special meeting of stockholders by vote of holders of a majority
of the outstanding stock entitled to vote. Notice of any such annual or special
meeting of stockholders shall set forth the proposed change or a summary
thereof.
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CERTIFICATE OF INCORPORATION
OF
S&P INVESTMENTS CORP.
FIRST: The name of the corporation is S & P Investments Corp.
SECOND: The address of its registered office in the State of Delaware is
306 South State Street, in the City of Dover 19901, County of Kent. The name of
its registered agent at such address is United States Corporation Company.
THIRD: The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is 1,000 shares of Common Stock, par
value of $1.00 per share.
FIFTH: The name and mailing address of the incorporator is John E. Lowe,
333 West Wacker Drive, Suite 2600, Chicago, Illinois 60606.
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the by-laws of the corporation.
SEVENTH: The election of directors need not be by written ballot.
EIGHTH: 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 or any class of them, 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 stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code 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 Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors and/or of
the stockholders or class of stockholders of this 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 in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
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 or class of stockholders of this corporation, as the case may be,
and also on this corporation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does hereunto set his hand and seal this 9th day of November, 1984.
/s/ John E. Lowe
--------------------------
John E. Lowe, Incorporator
<PAGE>
AMENDMENT TO
CERTIFICATE OF INCORPORATION
OF S & P INVESTMENTS CORP.
1. The name of the Corporation is S & P INVESTMENTS CORP.
2. The Certificate of Incorporation of the Corporation is amended as follows:
A. Article FOURTH is amended to read as follows:
"FOURTH: The aggregate number of shares of capital stock which the
Corporation is authorized to issue is 93,250 shares, of which 750 shares of
no par value per share shall be designated "Common Stock" and 92,500 shares
of the par value of $100 per share shall be designated "Preferred Stock".
The voting powers and the designations, preferences, and the relative,
participating, optional or other special rights of, and the qualifications,
limitations or restrictions on, the Common Stock and Preferred Stock are as
follows:
(1) As used in this Certificate of Incorporation, the following terms
shall have the following meanings:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Corporation" shall mean S&P Investments Corp.
(c) "Liquidation Value" of a share of Preferred Stock shall mean
at any given date of determination with respect to any given holder of
Preferred Stock the sum of (i) the par value of such share, and (ii)
the amount of all unpaid cumulative dividends on such share.
(d) "Non-Compliance Event" shall mean the failure, as long as
Joseph P. Sullivan and Jay D. Proops are collectively the owner of not
less than 75 shares of Common Stock (as that number of shares may be
adjusted by reason of stock splits, stock dividends, and other similar
dilutive events), of the stockholders entitled to vote for the
election of directors to elect as members of the Board, and maintain
in office, four nominees selected by said named individuals (or if
only one of said named
<PAGE>
individuals is a holder of such shares, four nominees selected by said
individual).
(e) "Original Issue Date" shall mean the date on which the first
share of Preferred Stock was originally issued.
(f) "Redemption Date" shall mean each date fixed for redemption
of Preferred Stock as determined pursuant to Section 5(a) of this
Article.
(g) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting stock shall at the time be owned directly or
indirectly by the Corporation or by one or more Subsidiaries.
(2) (a) The holders of the Preferred Stock shall be entitled to
receive, when and as declared by the Board, out of assets of the
Corporation legally available therefor, preferential cumulative
dividends at a compound rate per annum equal to 2 percentage points
plus the "prime rate" in effect from time to time at The First
National Bank of Chicago, multiplied by the par value of the Preferred
Stock. Notwithstanding the foregoing, if the Non-Compliance Event
shall occur, dividends shall cease to accumulate with respect to the
Preferred Stock. Such dividends shall accumulate on a compound basis
on each share from the Original Issue Date, and shall accumulate from
day to day whether or not earned or declared, to and including the
date on which such share is redeemed and (if redeemed) the full
Redemption Price therefor is paid pursuant to Section 5 of this
Article, and with the compounding being done on the accumulated but
unpaid dividends on a daily basis. Dividends shall be cumulative so
that, to the extent dividends are not declared, the holders of
Preferred Stock shall continue to have the right to receive the
undeclared balance of the dividends as compounded, when declared by
the Board.
(b) If, at any time, the Corporation shall pay a dividend on the
Preferred Stock which is less than the full amount of the cumulative
dividend payable, then such dividend shall be distributed such that an
equal amount thereof will be paid with respect to each outstanding
share of Preferred Stock.
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<PAGE>
(c) At any time that all cumulative dividends on the Preferred
Stock have been paid in full and the Preferred Stock fully redeemed,
then dividends may be declared and paid on or set apart for the
outstanding Common Stock out of any assets at the time legally
available therefor.
(3) (a) In the event of any liquidation, dissolution or winding-up of
the business of the Corporation, whether voluntary or involuntary, the
holders of Preferred Stock shall be entitled to receive from the
assets of the Corporation a preferential amount in cash equal to the
Liquidation Value. All of said preferential amounts to be paid to the
holders of Preferred Stock shall be paid before the payment or setting
apart for payment of any amount for, or the distribution of any assets
of the Corporation to, the holders of Common Stock in connection with
such liquidation, dissolution or winding-up.
(b) If the assets of the Corporation to be distributed to holders
of Preferred Stock are insufficient to pay the Liquidation Value in
full, then all assets to be distributed to such holders shall be
distributed among them ratably, according to the number of shares of
Preferred Stock held by each such holder.
(c) After the payment in cash to the holders of Preferred Stock
of the full Liquidation Value, the holders of Common Stock shall be
entitled to receive, ratably, according to the number of shares held
by each such holder, all remaining assets of the Corporation.
(d) A liquidation, dissolution or winding-up of the business of
the Corporation, as such terms are used in this Section 3, shall not
be deemed to include any consolidation or merger of the Corporation
with or into any other corporation or corporations.
(4) (a) Except as provided in Subsection (c), each holder of a share
of Common Stock shall be entitled to vote on all matters and shall be
entitled to one vote for each share of Common Stock held.
(b) Except as otherwise expressly provided herein or as required
by law, the holder of each share of Preferred Stock shall not be
entitled to vote on any matters.
(c) At all stockholders' meetings at which directors of the
Corporation are to be elected, each holder of Common Stock entitled to
vote shall have as many votes as shall equal the number of shares of
Common Stock owned by him, multiplied by the number of directors to be
elected, and he may cast all of such votes for a single director or
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<PAGE>
may distribute them among the number to be voted for, or any two or
more of them as he may see fit.
(d) The affirmative vote of the holders of not less than 86% of
the outstanding Common Stock shall be required in order to authorize:
(i) any amendment of this Article FOURTH or of Article
SIXTH; or
(ii) any amendment to the by-laws of the Corporation.
(5) (a) The Corporation may, at the option of the Board, redeem
the Preferred Stock in whole or in part, as follows:
(i) The redemption price for each share of Preferred Stock
shall be an amount in cash equal to the Liquidation Value (such
amount being hereinafter referred to as the "Redemption Price").
(ii) In the event of such a redemption of only a part of the
then outstanding Preferred Stock, the Corporation shall effect
such redemption, in multiples of 1,000 shares, ratably according
to the number of shares of Preferred Stock held by each holder of
the Preferred Stock.
(iii) At least 30 days and not more than 60 days prior to
the date fixed for any redemption of the Preferred Stock (the
"Redemption Date"), written notice (the "Redemption Notice")
shall be mailed, postage prepaid, registered or certified mail,
return receipt requested, to each holder of record of the
Preferred Stock at his post office address last shown on the
records of the Corporation. The Redemption Notice shall state:
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<PAGE>
(A) The Redemption Date:
(B) Whether all or less than all of the outstanding
shares of Preferred Stock are to be redeemed;
(C) The number of shares of Preferred Stock held by the
holder that the Company intends to redeem;
(D) The Redemption Price; and
(E) That the holder is to surrender to the Corporation,
by delivery to the Corporation, his certificate or
certificates representing the shares of Preferred Stock to
be redeemed.
(iv) On the Redemption Date the Corporation shall deliver to
each holder of Preferred Stock whose shares are to be redeemed a
certified or bank cashier's check in an amount equal to the
Redemption Price multiplied by the number of shares of Preferred
Stock to be redeemed from that holder; and on or after each
Redemption Date, each holder of Preferred Stock whose Preferred
Stock has been redeemed shall surrender such holder's
certificate(s) for the shares of Preferred Stock so redeemed
(endorsed for transfer, or accompanied by a separate stock
transfer power endorsed for transfer, to the Corporation) to the
Corporation. In the event less than all shares represented by
said certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(v) If the Redemption Notice shall have been duly given, and
if on the Redemption Date the full Redemption Price has been paid
to the stockholder, then notwithstanding that the certificates
evidencing any of the shares of Preferred Stock so called for
redemption shall not have been surrendered, dividends with
respect to such shares shall cease to accumulate after the
Redemption Date and all rights with respect to such shares shall
forthwith after the Redemption Date terminate, with the sole
exception of the right of
-5-
<PAGE>
the holders to receive the Redemption Price without interest upon
surrender of their certificate or certificates therefor.
(b) The Corporation's right to redeem Preferred Stock pursuant to
this Section 5 is subject to the Corporation having available funds
which, under Delaware law, may legally be used for such purpose.
(6) No share or shares of Preferred Stock acquired by the Corporation by
reason of redemption, purchase, or otherwise shall be reissued, and all such
shares shall be cancelled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
(7) Without limiting the generality of Section 4(d) of this Article FOURTH,
the provisions of this Article FOURTH may not be amended with respect to the
Preferred Stock without the prior written consent of the holders of all
Preferred Stock which is outstanding at the time of the Amendment."
B. Article SIXTH is amended to read as follows:
"SIXTH: 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:
(1) The number of directors of the Corporation shall be nine. Election of
directors need not be by ballot unless the by-laws so provide.
(2) The Board shall have power without the assent or vote of the
stockholders to fix and vary the amount to be reserved for any proper purposes;
to authorize and cause to be executed mortgages and liens upon all or any part
of the property of the Corporation; to determine the use and disposition of any
surplus or net profits; and to fix the times for the declaration and payment of
dividends.
(3) The Board in its discretion may submit any contract or act theretofore
approved by the Board for approval or ratification at any annual meeting of the
stockholders or at any meeting of the stockholders called for the purpose of
considering any such act or contract, and any contract or act that shall be
approved or be ratified by the vote of the holders of a majority of the stock of
the Corporation which is represented in person or by proxy at such meetings and
entitled to vote thereat (provided that a lawful quorum of stockholders be there
represented in person or by proxy) shall be as valid and as binding upon the
Corporation and upon all the stockholders as though it had been approved or
ratified by every stockholder of the Corporation, whether or not the contract or
-6-
<PAGE>
act would otherwise be open to legal attack because of directors' interest, or
for any other reason.
(4) In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the Board is 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
Delaware, of this Certificate, and to any by-laws from time to time made by the
stockholders; provided, that no by-laws so made shall invalidate any prior act
of the directors which would have been valid if such by-law had not been made.
(5) The stockholders shall have the sole power to adopt, alter, amend or
rescind the by-laws of the Corporation.
(6) The affirmative vote of not less than seven of the directors shall be
required in order to authorize the taking of any of the following actions by the
Corporation:
(a) the termination of the employment of John E. Gutknecht or Charles
E. Seaton prior to the fourth anniversary of closing of the purchase by the
Corporation of the assets of the Kaiser Agricultural Chemicals Division of
Kaiser Aluminum & Chemical Corporation (the "Business") unless the
Corporation elects to value the shares of Common Stock owned by the
individual whose employment is to be terminated on a fully vested basis;
(b) the acquisition by the Corporation of any business which is
substantially unrelated to the Business, or the disposition by the
Corporation of a material portion of the Business;
(c) the redemption of any Common Stock other than pursuant to the
provisions of any written Shareholders Agreement among the Corporation and
its holders of shares of Common Stock;
(d) the payment of any dividend (whether in cash or in kind) on the
Common Stock, or the making of other distribution to the stockholders of
the Corporation, other than:
(i) payment of dividends on and redemption of Preferred Stock as
expressly permitted pursuant to Article FOURTH;
-7-
<PAGE>
(ii) payments under a Tax Allocation Agreement with the parent of
the consolidated group of which the Corporation is a member, and
(iii) payments of expenses incurred by stockholders on behalf of
or for the benefit of the Corporation for which said stockholders are
entitled to reimbursement;
(e) without limiting the generality of subparagraph (d), the payment
of any dividend or redemption of any stock which is prohibited under or is
an event of acceleration under the terms of any loan or other agreement to
which the Corporation is a party;
(f) a merger of the Corporation or any Subsidiary where it is not the
survivor (other than a merger of a Subsidiary into the Corporation or
another Subsidiary), a merger of the Corporation where it is the survivor,
but which results in a change to the capitalization of the Corporation, or
a consolidation of the Corporation;
(g) a sale of substantially all of the assets of the Corporation or of
any Subsidiary;
(h) the liquidation of the Corporation; or
(i) any amendment to any Tax Allocation Agreement which shall be
entered into between the Corporation and any corporation which is its
parent for the purposes of filing consolidated Federal income tax returns.
3. The aforesaid amendments were duly adopted by the Board of Directors of
the Corporation by unanimous written consent in accordance with the provisions
of Section 141(f) of The General Corporation Law of the State of Delaware, and
by the stockholders of the Corporation in accordance with the applicable
provisions of Sections 228 and 242 of said law.
-8-
<PAGE>
IN WITNESS WHEREOF, said S&P INVESTMENTS CORP. has caused this Certificate
to be signed by Jay D. Proops, its Vice President, and attested by Joseph P.
Sullivan, its Assistant Secretary, this 28th day of February, 1985.
S & P INVESTMENTS CORP.
By: /s/ Jay D. Proops
-----------------
Jay D. Proops,
Vice President
ATTEST:
/s/ Joseph P. Sullivan
- ----------------------
Joseph P. Sullivan,
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO CERTIFICATE OF INCORPORATION
OF S & P INVESTMENTS CORP.
S & P INVESTMENTS CORP., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: That the directors and the stockholders of said corporation, by
joint written consent dated February 28, 1985, duly adopted resolutions setting
forth an amendment to said Certificate of Incorporation as follows:
RESOLVED: That Article First of the Certificate of Incorporation of the
corporation is hereby amended to read as follows:
"FIRST: The name of the corporation is KAISER AGRICULTURAL
CHEMICALS INC."
SECOND: That the aforesaid Amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, said S & P INVESTMENTS CORP. has caused this
certificate to be signed by its President and attested by its Secretary this
28th day of February, 1985.
S & P INVESTMENTS CORP.
By: /s/ John E. Gutknecht
----------------------------
John E. Gutknecht, President
ATTEST:
By: /s/ Jay D. Proops
- -------------------------------
Jay D. Proops, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
KAISER AGRICULTURAL CHEMICALS INC.
1. The name of the Corporation is Kaiser Agricultural Chemicals Inc.
2. The Certificate of Incorporation is amended as follows:
A. The first sentence of Article FOURTH is amended to read as follows:
"FOURTH: The aggregate number of shares of capital stock which
the Corporation is authorized to issue is 95,750 shares of which
750 shares of no par value per share shall be designated "Common
Stock" and 95,000 shares of the par value of $100 per share shall
be designated "Preferred Stock"."
B. Section (1)(d) of Article FOURTH is amended to read as follows:
(d) "Non-Compliance Event" shall mean the failure, as long as
Joseph P. Sullivan ("Sullivan"), Jay D. Proops, ("Proops")
and their permitted transferees (as defined in a
Shareholders Agreement between KAC Holdings, Inc., a
Delaware corporation ("Holdings"), Sullivan, Proops and
Great American Management and Investment, Inc.) are
collectively the owner of not less than 75 shares of Common
Stock of Holdings (as that number of shares may be adjusted
by reason of stock splits, stock dividends, and other
similar dilutive events), of the stockholders of Holdings,
to elect as members of the board of directors of Holdings,
and maintain in office, two nominees selected by Sullivan
and Proops (or if one of said named individuals is a holder
of such shares, two nominees selected by said individual);
C. Section (4)(d) of Article FOURTH is hereby deleted in its entirety.
D. Section 1 of Article SIXTH is amended to read as follows:
(1) The number of directors of the Corporation shall be five.
Election of directors need not be by ballot unless the
by-laws so provide.
<PAGE>
E. The first sentence of Section 6 of Article SIXTH is amended to read
as follows:
(6) The affirmative vote of not less than four of the directors
shall be required in order to authorize the taking of any of
the following actions by the Corporation:
F. Section 6(f) of Article SIXTH is amended to read as follows:
"(f) a merger of the Corporation or any Subsidiary where it is
not the survivor (other than a merger of a Subsidiary into the
Corporation or another Subsidiary, or a merger between the
Corporation and S&P No. 2, Inc., a Delaware corporation or with
S&P Branded Fertilizers, Inc., a Delaware corporation
("Estech")), a merger of the Corporation where it is the survivor
but which results in a change to the capitalization of the
Corporation, or a consolidation of the Corporation (other than a
consolidation with Estech);".
3. The aforesaid amendments were duly adopted by the Board of Directors
of the Corporation by unanimous written consent in accordance with the
provisions of Section 141(f) of The General Corporation Law of the
State of Delaware, by the holders of Common Stock of the Corporation
in accordance with the applicable provisions of Sections 228 and 242
of said law, and by the unanimous consent of all holders of Preferred
Stock in accordance with Section (7) of Article FOURTH of the
Certificate of Incorporation of the Corporation, as amended.
IN WITNESS WHEREOF, said KAISER AGRICULTURAL CHEMICALS INC. has caused this
Certificate to be signed by Joseph P. Sullivan, its Chairman of the Board, and
attested by David W. Schoenberg, its Asst. Secretary, this 6th day of January,
1986.
KAISER AGRICULTURAL CHEMICALS INC.
By: /s/ Joseph P. Sullivan
------------------------------------
Joseph P. Sullivan
Chairman of the Board
ATTEST:
/s/ David W. Schoenberg
- ---------------------------------------
David W. Schoenberg Assistant Secretary
<PAGE>
CERTIFICATE OF MERGER
OF
ESTECH BRANDED FERTILIZERS, INC.
INTO
KAISER AGRICULTURAL CHEMICALS INC.
********
The undersigned corporations
DO HEREBY CERTIFY:
FIRST: That the names and states of incorporation of each of the
constituent corporations of the merger are as follows:
NAME STATE OF INCORPORATION
Estech Branded Fertilizers, Inc. Delaware
Kaiser Agricultural Chemicals Inc. Delaware
SECOND: That an agreement of merger between the parties to the merger has
been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of subsection (c)
of Section 251 of the General Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation of the merger is Kaiser
Agricultural Chemicals Inc., a Delaware corporation. When the merger is
effective, the name of the surviving corporation shall be changed to Vigoro
Industries, Inc.
FOURTH: That the Certificate of Incorporation of Kaiser Agricultural
Chemicals Inc., a Delaware corporation, which is the surviving corporation,
shall be amended so that, Article "FIRST", in its entirety, and the first
sentence of Article "FOURTH" shall read as follows:
"FIRST: The name of the corporation is VIGORO INDUSTRIES, INC."
<PAGE>
"FOURTH: The number of shares of capital stock which the corporation is
authorized to issue is 151,000 of which 1000 shares of no par value per share
shall be designated 'Common Stock' and 150,000 shares of the par value of $100
per share shall be designated `Preferred Stock'."
Except as so amended the Certificate of Incorporation of Kaiser
Agricultural Chemicals Inc. (including the provisions of Article FOURTH other
than the first sentence thereof) shall be the Certificate of Incorporation of
the surviving corporation.
FIFTH: That the executed agreement of merger is on file at the principal
place of business of the surviving corporation. The address of said principal
place of business is 2007 West Highway 50, Fairview Heights, Illinois, 62208.
SIXTH: That a copy of the agreement of merger will be furnished on request
and without cost to any stockholder of any constituent corporation.
Dated: July 31, 1986
KAISER AGRICULTURAL CHEMICALS INC.
By: /s/ Charles E. Seaton
---------------------------------
Charles E. Seaton, President
ATTEST:
By: /s/ David W. Schoenberg
----------------------------------
Assistant, Secretary
ESTECH BRANDED FERTILIZERS, INC.
By: /s/ Mark G. Bamburger
----------------------------------
Mark G. Bamburger, President
BY: /s/ Robert M. Van Patten
----------------------------------
Robert M. Van Patten, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
VIGORO INDUSTRIES, INC.
VIGORO INDUSTRIES, INC., a corporation duly organized and existing by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, by unanimous
written consent of its members, filed with the minutes of the board, adopted
resolutions proposing and declaring advisable the following amendment to the
Certificate of Incorporation.
RESOLVED: That the Certificate of Incorporation of Vigoro Industries, Inc.
be amended by changing the first sentence of the Article thereof numbered
FOURTH so that, as amended, such sentence shall be and read as follows:
"FOURTH: The number of shares of capital stock which the Corporation
is authorized to issue is 351,000 of which 1,000 shares of no par per
share shall be designated "Common Stock" and 350,000 shares of the par
value of $100 per share shall be designated "Preferred Stock"."
FURTHER RESOLVED: That the Certificate of Incorporation of Vigoro
Industries, Inc. be amended by changing the first sentence of Subsection
(a) of Section 2 of the Article thereof numbered FOURTH so that, as
amended, such sentence shall be and read as follows:
"(2) (a) The holders of the Preferred Stock issued prior to November
27, 1987 shall be entitled to receive, when and as declared by the
Board, out of assets of the Corporation legally available therefore,
preferential cumulative dividends at a compound rate per annum equal
to 2 percentage points plus the "prime rate" in effect from time to
time at The First National Bank of Chicago, multiplied by the par
value of the Preferred Stock."
FURTHER RESOLVED: That the Certificate of Incorporation of Vigoro
Industries, Inc. be amended by substituting the word "monthly" for the word
<PAGE>
"daily" as the penultimate word of the third sentence of Subsection (a) of
Section 2 of the Article thereof numbered FOURTH.
FURTHER RESOLVED: That the Certificate of Incorporation of Vigoro
Industries, Inc. be amended by changing the designation of Subsection (b)
of Section 2 of the Article thereof numbered FOURTH to be Subsection "(c)"
and by changing the designation of Subsection (c) of Section 2 of the
Article thereof numbered FOURTH to be Subsection "(d)".
FURTHER RESOLVED: That the Certificate of Incorporation of Vigoro
Industries, Inc. be amended by adding Subsection (b) to Section 2 of the
Article thereof numbered FOURTH immediately after Subsection (a) of such
Section 2 and immediately prior to Subsection "(c)" as redesignated in
accordance with the immediately preceeding resolution to read as follows:
"(b) On or after November 27, 1987, the Preferred Stock may be issued
from time to time in one or more series with such distinctive serial
designations and may be entitled to receive such dividends at such
rate or rates and at such times as shall hereafter be stated and
expressed in the resolution or resolutions providing for the issue of
such Preferred Stock from time to time adopted by the Board of
Directors of the Corporation pursuant to authority so to do which is
hereby vested in the Board of Directors of the Corporation."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware.
-2-
<PAGE>
IN WITNESS WHEREOF, said VIGORO INDUSTRIES, INC. has caused this
Certificate to be signed by Robert M. Van Patten, its Vice President and Gerard
W. Winterbottom, its Assistant Secretary, this 27th day of November, 1987.
VIGORO INDUSTRIES, INC.
By: /s/ Robert M. Van Patten
------------------------
Robert M. Van Patten,
Vice President
Attested by:
/s/ Gerald W. Winterbottom
- --------------------------
Gerard W. Winterbottom,
Assistant Secretary
-3-
<PAGE>
CERTIFICATE OF STOCK DESIGNATION
OF
VIGORO INDUSTRIES, INC.
Certificate of the Designation, Preferences and Relative, Participating,
Optional and Other Special Rights of the Series A Preferred Stock, Par Value
$100 per share, and the Qualifications, Limitations and Restrictions Thereof
Which Have Not Been Set Forth in the Certificate of Incorporation, as amended.
------------------------------------
Pursuant to Sections 141 and 151 of the General
Corporation Law of the State of Delaware
------------------------------------
We, the undersigned, Robert M. Van Patten and Gerard W. Winterbottom, Vice
President and Assistant Secretary, respectively, of Vigoro Industries, Inc. (the
"Corporation"), a corporation duly organized and existing under the General
Corporation Law of the State of Delaware, DO HEREBY CERTIFY that the Board of
Directors of the Corporation, by unanimous written consent of its members, filed
with the minutes of the Board, duly adopted the following resolution:
RESOLVED: That the Board of Directors hereby provides for the issue of a
series of shares pursuant to the provisions of Subsection (b) of Article
FOURTH of the Certificate of Incorporation, as amended, of $100 par value
Preferred Stock of the Corporation, and hereby fixes the designation,
preferences and relative, participating, optional and other special rights
of the shares of such series and the qualifications, limitations and
restrictions thereof as those set forth in said Article FOURTH and as
follows:
(A) Designation. This series is designated as the Series A Preferred Stock
of the Corporation (the "Series A Preferred Stock"). Each share of
Series A Preferred Stock shall be identical in all respects with the
other shares of Series A Preferred Stock. Subject to the provisions of
any resolutions adopted by the Board of Directors providing for the
issue of any other series of Preferred Stock, all shares of the Series
A Preferred Stock shall share on a parity with all other series of
Preferred Stock in respect of the right to receive dividends and
payments out of the assets of the Corporation upon voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
(B) Amount. The Series A Preferred Stock shall consist of 32,000 shares,
as decreased from time to time (but not below the number of shares of
the Series A Preferred Stock then outstanding) by further resolution
duly adopted by the Board of Directors.
<PAGE>
(C) Dividends. The holders of the Series A Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors,
out of assets of the Corporation legally available therefor,
preferential cumulative dividends at a compound rate of thirteen
percent (13%) per annum multiplied by the par value of the Series A
Preferred Stock. Notwithstanding the foregoing, if the Non-Compliance
Event shall occur, dividends shall cease to accumulate with respect to
the Series A Preferred Stock. Such dividends shall accumulate on a
compound basis on each share from November 30, 1987, and shall
accumulate from day to day whether or not earned or declared, to and
including the date on which such share is redeemed and (if redeemed)
the full Redemption Price therefor is paid pursuant to Section 5 of
such Article FOURTH, and with the compounding being done on the
accumulated but unpaid dividends on a monthly basis. Dividends shall
be cumulative so that, to the extent dividends are not declared, the
holders of Series A Preferred Stock shall continue to have the right
to receive the undeclared balance of the dividends as compounded, when
declared by the Board of Directors of the Corporation.
(D) No Other Rights or Powers. The shares of the Series A Preferred Stock
shall not have any relative, participating, optional or other special
rights and powers other than as set forth above in this Resolution and
in the Certificate of Incorporation, as amended, of the Corporation.
IN WITNESS WHEREOF, said Vigoro Industries, Inc. has caused this
Certificate to be signed by Robert M. Van Patten, its Vice President, and
attested by Gerard W. Winterbottom, its Assistant Secretary, this 30th day of
November, 1987.
VIGORO INDUSTRIES, INC.
By: /s/ Robert M. Van Patten
------------------------
Robert M. Van Patten,
Vice President
ATTESTED BY:
/s/ Gerard W. Winterbottom
- --------------------------
Gerard W. Winterbottom,
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
VIGORO INDUSTRIES, INC.
VIGORO INDUSTRIES, INC., a corporation duly organized and existing by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, by unanimous
written consent of its members, filed with the minutes of the board, adopted
resolutions proposing and declaring advisable the following amendments to the
Certificate of Incorporation.
RESOLVED: That the Certificate of Incorporation of Vigoro Industries,
Inc. be amended by changing subsection (d) of Section 2 of the Article
numbered FOURTH so that, as amended, such subsection shall be and read as
follows:
"(d) At any time that all cumulative dividends on the Preferred Stock
have been paid in full, then dividends may be declared and paid on and
set apart for the outstanding Common Stock out of any assets at the
time legally available therefor."
FURTHER RESOLVED: That the Certificate of Incorporation of Vigoro
Industries, Inc. be amended by changing subsections (a) (iv), and (v) of
Section 5 of the Article numbered FOURTH so that, as amended, such
subsections shall be and read as follows:
"(iv) On the Redemption Date and upon surrender by the holder or
holders thereof of the certificate or certificates for shares of
Preferred Stock to be redeemed, the Corporation shall deliver to each
such holder of Preferred Stock whose shares are to be redeemed a
certified or bank cashier's check in an amount equal to the Redemption
<PAGE>
Price multiplied by the number of shares of Preferred Stock to be
redeemed from that holder; and on and after each Redemption Date, each
holder of Preferred Stock whose Preferred Stock has been redeemed
shall surrender such holder's certificate(s) for the shares of
Preferred Stock so redeemed (endorsed for transfer, or accompanied by
a separate stock power endorsed for transfer, to the Corporation) to
the Corporation. In the event less than all shares represented by said
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(v) If the Redemption Notice shall have been duly given, then
notwithstanding that the certificates evidencing any of the shares of
Preferred Stock so called for redemption shall not have been
surrendered, dividends with respect to such shares shall cease to
accumulate after the Redemption Date and all rights with respect to
such shares shall forthwith after the Redemption Date terminate, with
the sole exception of the right of the holders to receive the
Redemption Price without interest upon surrender of their certificate
or certificates therefor."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law of the State
of Delaware.
<PAGE>
IN WITNESS WHEREOF, said VIGORO INDUSTRIES, INC. has caused this
Certificate to be signed by Robert M. Van Patten, its Executive Vice President
and Gerard W. Winterbottom, its Assistant Secretary, this 12th day of July,
1989.
VIGORO INDUSTRIES, INC.
By: /s/ Robert M. Van Patten
------------------------------
Robert M. Van Patten,
Executive Vice President
Attested by:
/s/ Gerard W. Winterbottom
- ----------------------------------
Gerard W. Winterbottom,
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION OF
VIGORO INDUSTRIES, INC.
VIGORO INDUSTRIES, INC., a Delaware corporation (the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That the Board of Directors of the Corporation, by unanimous written
consent of its members, filed with the minutes of the board, adopted resolutions
proposing and declaring advisable the following amendments to the Certificate of
Incorporation.
(i) That Section (1) of Article Sixth of the Certificate of Incorporation
of the Corporation, as amended, be and is hereby amended in its entirety so that
as amended, said Article shall be and read as follows:
"(1) The number of directors shall be determined in accordance with
the by-laws."
(ii) That the Certificate of Incorporation of the Corporation is hereby
amended by the addition of the following as the NINTH Article of the Certificate
of Incorporation of the Corporation:
"NINTH: (a) The corporation shall indemnify (i) any person who was a
party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, and (ii) any
person who was or is party or is threatened to be made
<PAGE>
a party to any threatened, pending or completed action, suit, or
proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee or agent
of the corporation, or who is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), in judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with any such action, suit or proceeding, in each case to
the fullest extent permissible under Section 145 of the Delaware
General Corporation Law, as amended from time to time, or the
indemnification provisions of any successor statute.
(b) The foregoing provisions of this Article Ninth shall be
deemed to be a contract between the corporation and each director and
officer who serves in such capacity at any time while this Article
Ninth is in effect, and any repeal or modification thereof shall not
affect any rights or obligations then existing with respect to any
state of facts then or therefore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts. The foregoing rights of indemnification
shall not be deemed exclusive of any other rights to which any
director or officer may be entitled apart from the provisions of this
Article Sixth. The board of directors in its discretion shall have
power on behalf of the corporation to enter into agreements with
respect to the indemnification of any person, other than a director or
officer, made a party to any action, suit or proceeding by reason of
the fact that he, his testator or intestate, is or was an employee,
agent or otherwise acting on behalf of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise."
-2-
<PAGE>
(iii) That the Certificate of Incorporation of the Corporation is hereby
amended by the addition of the following as the TENTH Article of the Certificate
of Incorporation of the Corporation:
"TENTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty for loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction form which the director derived
any improper personal benefit. If the General Corporation Law of the
state of Delaware is amended after this Amended Certificate of
Incorporation becomes effective to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law
of the State of Delaware, as so amended.
Any repeal or modification of the provisions of this Article
TENTH by the stockholders of the Corporation shall be prospective
only, and shall not adversely affect any limitation on the personal
liability of a director of the Corporation with respect to any act or
omission occurring prior to the effective date of such appeal or
modification. In the event that any of the provisions of this Article
TENTH (including any provision within a single sentence) is held by a
court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions are severable and shall remain
enforceable to the fullest extent permitted by law."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to the aforesaid amendments in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendments were duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
-3-
<PAGE>
IN WITNESS WHEREOF, said Corporation VIGORO INDUSTRIES, INC. has caused
this certificate to be signed and attested to this 21st day of March, 1991.
VIGORO INDUSTRIES, INC.
By: /s/ Robert M. Van Patten
------------------------
Its: Executive Vice President
Attested by:
By: /s/ Gerard W. Winterbottom
-------------------------
Its: VP Finance
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
VIGORO INDUSTRIES, INC.
The undersigned officers, Robert M. Van Patten and Rose Marie Williams,
President and Secretary, respectively, of Vigoro Industries, Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"), do hereby certify that:
1. Article One of the Certificate of Incorporation of the Corporation is
hereby amended in its entirety as follows:
"ARTICLE ONE
The name of the corporation is IMC AgriBusiness Inc."
2. This Certificate of Amendment was duly adopted by the sole director and
sole voting stockholder of the Corporation according to the provisions of
Sections 141(f), 228 and 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned have hereunto subscribed their names
this 19th day of September, 1996.
VIGORO INDUSTRIES, INC.
By: /s/Robert M. Van Patten
-----------------------
Robert M. Van Patten
President
Attest:
/s/ Rose Marie Williams
- -----------------------
Rose Marie Williams
Secretary
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
OF
FRANKFORT SUPPLY CENTER, INC.
WITH AND INTO
IMC AGRIBUSINESS INC.
PURSUANT TO SECTION 253 OF THE
DELAWARE GENERAL CORPORATION LAW
Pursuant to Section 253 of the Delaware General Corporation Law (the
"DGCL"), IMC Agribusiness Inc., a Delaware corporation (the "Company"), hereby
certifies the following information relating to the merger (the "Merger") of
Frankfort Supply Center, Inc., an Ohio corporation ("Frankfort") with and into
the Company:
FIRST: The names and states of incorporation of each of the constituent
corporations to the Merger are as follows: Frankfort Supply Center, Inc., an
Ohio corporation, and IMC Agribusiness Inc., a Delaware corporation.
SECOND: The Company owns 100% of the outstanding shares of the Common
Stock, without par value, of Frankfort, and Frankfort has no other class of
capital stock outstanding.
THIRD: The Board of Directors of the Company has determined to merge
Frankfort with and into the Company under Section 253 of the DGCL pursuant to
the following resolutions duly adopted by the Board of Directors of the Company
on July 1, 1997, on the terms set forth in such resolutions:
WHEREAS, the Company owns 100% of the outstanding shares of the Common
Stock, without par value (the "Frankfort Common Stock"), which is the only
outstanding class of capital stock, of Frankfort Supply Center, Inc., an Ohio
corporation ("Frankfort"), and desires to merge Frankfort with and into itself;
NOW, THEREFORE, BE IT RESOLVED, that Frankfort be merged with and into the
Company, pursuant to and in accordance with Section 253 of the Delaware Law (the
"Merger") and that the
<PAGE>
proper officers of the Company be, and each of them hereby is, authorized in the
name and on behalf of the Company to take any and all actions they deem
necessary or advisable in connection therewith; RESOLVED, that the Company shall
be the surviving corporation in the Merger;
RESOLVED, that upon the Merger becoming effective, each share of Frankfort
Common Stock outstanding shall be automatically cancelled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor;
RESOLVED, that the proper officers of the Company be, and each of them
hereby is, authorized, in the name and on behalf of the Company, to execute and
file a Certificate of Ownership and Merger with the Secretary of State of the
State of Delaware in such form as the officer or officers executing the same
shall approve, the signature of such officer or officers thereon to be
conclusive evidence of the approval of such form; and
RESOLVED, that any and all actions heretofore or hereafter taken by the
proper officers of the Company relating to and within the terms of this
resolution are hereby ratified and confirmed as the acts and deeds of the
Company.
IN WITNESS WHEREOF, the Company has caused this Certificate of Ownership
and Merger to be executed by its duly authorized officer on the 1st day of July,
1997, and affirms the statements contained therein as true under the penalties
of perjury.
IMC AGRIBUSINESS INC.
BY: /s/ Rose Marie Williams
----------------------------
Rose Marie Williams
Secretary
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
Merging
HUTSON COMPANY INC.
(a Kentucky corporation)
with and into
IMC AGRIBUSINESS INC.
(a Delaware Corporation)
----------------------------------
Pursuant to Section 253
of the General Corporation Law
of the State of Delaware
----------------------------------
IMC AgriBusiness Inc. does hereby certify that:
1. IMC AgriBusiness Inc. (referred to as "IMC" and sometimes referred to as
the "Surviving Corporation") is a corporation organized and existing under the
laws of the State of Delaware.
2. IMC is the owner of one hundred percent (100%) of the issued and
outstanding shares of common stock, no par value per share, and one hundred
percent (100%) of the issued and outstanding shares of preferred stock, $100 par
value per share, of Hutson Company, Inc., a corporation organized and existing
under the laws of the State of Kentucky ("Hutson"), and that such shares
constitute the only issued and outstanding equity securities of Hutson.
3. IMC hereby merges Hutson with and into IMC, which shall be the Surviving
Corporation.
<PAGE>
4. Such merger of Hutson with and into IMC under Delaware State Law is
intended to qualify as a liquidation of Hutson for federal income tax purposes
pursuant to Sections 332 and 337(a) of the Internal Revenue Code of 1986, as
amended.
5. The following is a copy of resolutions adopted by the Board of Directors
of IMC by written consent on October 10, 1997, whereby the sole director
approved the merger of Hutson with and into IMC:
"NOW, THEREFORE, BE IT RESOLVED: That the Corporation merge Hutson with and
into the Corporation, and that the Corporation shall be the Surviving
Corporation and Hutson shall cease to exist, and that all of the estates,
properties, rights, privileges, powers, and franchises of Hutson shall be
vested in and held and enjoyed by the Corporation as fully and entirely and
without change or diminution as the same were previously held and enjoyed
by Hutson in its name, and that the Corporation shall assume all of the
obligations of Hutson (the "Merger").
FURTHER RESOLVED: That the effective date and time of the Merger shall be
October 31, 1997.
FUTHER RESOLVED: That the Certificate of Incorporation of the Corporation
shall be the Certificate of Incorporation of the Surviving Corporation and
the By-laws of the Corporation shall be the By-laws of the Surviving
Corporation.
FURTHER RESOLVED: That each issued and outstanding share of common stock,
no par value per share, and each issued and outstanding share of preferred
stock, $100 par value per share, of Hutson held by the Corporation shall be
canceled and retired and no payment shall be made with respect thereto.
FURTHER RESOLVED: That each issued and outstanding share of common and
preferred stock of the Corporation issued and outstanding immediately prior
to the effective time of the Merger shall remain the issued and outstanding
shares of capital stock of the Surviving Corporation.
FURTHER RESOLVED: That the Plan of Merger in the form attached hereto as
Exhibit A is hereby approved and adopted.
FURTHER RESOLVED: That the Merger under Delaware State Law is intended to
qualify as a liquidation of Hutson for federal income tax purposes pursuant
to Sections 332 and 337(a) of the Internal Revenue Code, as amended, and
the Plan of Complete Liquidation of Hutson Company, Inc. in the form
attached hereto as Exhibit B is hereby approved and adopted.
2
<PAGE>
FURTHER RESOLVED: That the Corporation shall cause to be executed and filed
and/or recorded such documents evidencing the Merger as are prescribed by
the laws of the State of Delaware, the laws of the State of Kentucky and
the laws of any other appropriate jurisdiction, and will cause to be
performed all necessary acts within the State of Delaware, the State of
Kentucky and in any other appropriate jurisdiction.
FURTHER RESOLVED: That the proper officers of the Corporation be, and they
hereby are, authorized, directed and empowered to take all steps and do all
acts and things, including the execution and delivery of documents, and to
take such further actions as they shall deem necessary or convenient to
effect the purposes and intent of the foregoing recitals and resolutions."
IN WITNESS WHEREOF, IMC AgriBusiness Inc. has caused this Certificate to be
executed by its duly authorized officer this 10th day of October, 1997.
IMC AGRIBUSINESS INC.
By: /s/ Donald Roberts
------------------------------------
Donald D. Roberts, Vice President
3
<PAGE>
EXHIBIT A
PLAN OF MERGER
OF
HUTSON COMPANY, INC.
WITH AND INTO
IMC AGRIBUSINESS INC.
This Plan of Merger of Hutson Company, Inc. and IMC AgriBusiness Inc. dated
this 10th day of October, 1997:
W I T N E S S E T H :
Hutson Company, Inc. shall be merged with an into IMC AgriBusiness Inc. in
accordance with the Plan, as follows:
1. IMC AgriBusiness Inc. ("IMC"), which is a business corporation of the
State of Delaware and is the parent corporation and owner of all of the
outstanding shares of Hutson Company, Inc. ("Hutson"), which is a business
corporation of the Commonwealth of Kentucky, hereby mergers Hutson into IMC
pursuant to the provisions of the Kentucky Business Corporation Act and pursuant
to the provisions of the laws of the jurisdiction of organization of IMC.
2. The separate existence of Hutson shall cease at the effective time and
date of the merger pursuant to the provisions of the Kentucky Business
Corporation Act; and IMC shall continue its existence as the surviving
corporation pursuant to the provisions of the laws of the jurisdiction of its
organization.
3. The issued shares of Hutson shall not be converted in any manner, but
each said share which is issued as of the effective time and date of the merger
shall be surrendered and extinguished.
4. The Board of Directors and the proper officers of IMC are hereby
authorized, empowered and directed to do any and all acts and things, and to
make, execute, deliver, file and/or record any and all instruments, papers and
documents which shall be or become necessary, proper or convenient to carry out
or put into effect any of the provisions of this Plan of Merger or of the merger
herein provided for.
<PAGE>
EXHIBIT B
PLAN OF LIQUIDATION
OF
HUTSON COMPANY, INC.
This Plan of Liquidation of Hutson Company, Inc. dated October 10, 1997
(the "Plan"):
W I T N E S S E T H :
Hutson Company, Inc., a Kentucky corporation (the "Corporation"), shall be
completely liquidated and dissolved in accordance with the Plan, as follows:
Section 1. The liquidation of the Corporation shall be conducted in such
manner as would entitle the Corporation to such nonrecognition of gain or loss
as is provided by the Internal Revenue Code of 1986, as amended (the "Code"),
Section 337(a). In addition, the liquidation of the Corporation shall be
conducted in such manner as would entitle IMC AgriBusiness Inc., a Delaware
corporation ("IMC"), to such nonrecognition of gain or loss as is provided by
Section 332 of the Code. This Plan shall be construed accordingly.
Section 2. The appropriate officers of the Corporation are hereby
authorized in their discretion to sell, exchange or otherwise dispose of any or
all of the property and assets of the Corporation for such consideration and on
such terms and conditions as they deem appropriate, and to pay or perform any or
all liabilities and obligations of the Corporation.
Section 3. All property and assets of the Corporation of whatever kind and
nature and not otherwise disposed of shall be distributed to or at the direction
of its stockholder in complete cancellation or redemption of all the stock of
the Corporation. The transfer of the property and assets to the stockholder
shall occur on or prior to October 31, 1997. On October 31, 1997 the Corporation
shall have disposed of all of its property and assets of whatever kind and
nature. All property and assets of the Corporation, if any, for which separate
instruments of transfer have not been executed and delivered or for which acts
of transfer have not otherwise been done at the close of business on October 31,
1997 shall be deemed to be distributed on that date to the stockholder of the
Corporation and the Corporation shall have no further interest in such property
and assets, and any interest in property or assets of whatever kind or nature
which in contemplation of law the Corporation may be deemed to have retained
shall be held by the Corporation not for its own use and benefit but solely as
nominee for the exclusive use and benefit of its stockholder and subject to its
direction.
<PAGE>
Section 4. The payment and discharge of the liabilities and obligations of
the Corporation not paid or discharged pursuant to Section 2 hereof is hereby
provided for as follows: The property and assets distributed under the
liquidation shall, notwithstanding such distribution, be and remain subject to
the liabilities and obligations of the Corporation to the same extent, and in
the same manner, but not otherwise, as such property and assets were so subject
in the hands of the Corporation provided, however, notwithstanding anything to
the contrary herein contained, the stockholder of the corporation and the assets
so distributed shall be subject to the liabilities and obligations of the
Corporation but only to the extent, if any, and in the manner and for such a
time as required by law, and not otherwise; and the stockholder shall not be
required to assume personally, and shall not be deemed to have assumed
personally, any liability or obligation of the Corporation, except as required
by law.
Section 5. In connection with the requirements of Sections 2, 3 and 4, the
Corporation shall be merged with and into IMC in accordance with the laws of the
State of Delaware and the State of Kentucky.
Section 6. The appropriate officers of the Corporation are hereby
authorized, empowered, and directed to take all steps and do all acts and
things, including, without limitation, the preparation, execution and filing of
a Certificate of Ownership and Merger in accordance with the General Corporation
Law of the State of Delaware, the preparation, execution and filing of Articles
of Merger and Plan of Merger in accordance with the Kentucky Business
Corporation Act and the execution and delivery of all other documents
appropriate to effectuate the purposes and intents of this Plan, especially
Section 1 hereof.
Section 7. Anything herein to the contrary notwithstanding, the officers of
the Corporation shall be and remain subject to the direction of the Board of
Directors.
2
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IMC AGRIBUSINESS INC.
-------------------------------------
IMC AgriBusiness Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That by written consent of the board of directors dated as of April
22, 1999, a resolution was duly adopted setting forth a proposed amendment
to the Certificate of Incorporation of the Company, declaring said
amendment to be advisable and calling for consideration of said proposed
amendment by the stockholders of the Company. The resolution setting forth
the amendment is as follows:
RESOLVED, that it is hereby proposed that Article One of the
Certificate of Incorporation of the Company be amended so that the same as
amended would read as follows:
1. Name. The name of the Corporation shall be Royster-Clark AgriBusiness,
Inc.
SECOND: That thereafter, pursuant to the resolution of the board of
directors, the proposed amendment was approved by the stockholder of the
Company by written consent dated as of April 22, 1999.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 and 228 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to be executed
as of the 28th day of April, 1999.
By: /s/ Walter R. Vance
--------------------------
Walter Vance
Secretary and Treasurer
BY-LAWS OF
IMC AgriBusiness Inc.
ARTICLE I
Offices
Section 1. The registered office shall be in the City of Dover, County of
Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. All meetings of the stockholders shall be held at such place as
may be fixed from time to time by the board of directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. An annual meeting of the stockholders for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting shall be held on a day to coincide with the annual meeting of
stockholders of IMC Global Inc., unless the board of directors, not less than
ten (10) days prior to such fixed meeting date, designates another date for such
annual meeting, in which event the annual meeting of the stockholders shall be
held on the date so designated.
-1-
<PAGE>
Section 3. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the date of
the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chairman of the board or president, and
shall be called by the chairman of the board or president or secretary at the
request in writing of a majority of the board of directors, or at the request in
writing of stockholders owning a majority in amount of the entire capital stock
of the corporation issued and outstanding and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting.
-2-
<PAGE>
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or represented
by proxy shall
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<PAGE>
decide any question brought before such meeting, unless the question is one upon
which by express provision of statute or of the certificate of incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Any action required to be taken at any annual or special
meeting of stockholders of the corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
Directors
Section 1. The number of directors of the corporation shall be one or more
directors, as set by resolution of the board of directors. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each
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<PAGE>
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by the sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall have
qualified, or their earlier resignation or removal. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
Section 3. The business of the corporation shall be managed by or under the
direction of the board of directors which may exercise all such powers of the
corporation and do all such lawful acts as are not by statute or by the
certificate of incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.
Meetings of the Board of Directors
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors shall
be held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting, and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected board of directors,
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<PAGE>
or in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver of notice
signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the chairman of
the board or the president on two (2) days' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
chairman of the board or the president in like manner and on like notice on the
written request of two or more directors.
Section 8. At all meetings of the board a majority of the total number of
directors shall constitute a quorum for the transaction of business, and the act
of majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
or these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board
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<PAGE>
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
Compensation of Directors
Section 10. The directors may be paid their expenses, if any, of attendance
at each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
Notices
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the provisions
of the statutes or of the certificate of incorporation or of these by-laws, a
waiver thereof in writing,
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<PAGE>
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
Officers
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a chairman of the board, a president, one or more
executive vice presidents, one or more vice presidents, a secretary and a
treasurer. The board of directors may also choose one or more assistant
secretaries and assistant treasurers. Any number of offices may be held by the
same person, unless the certificate of incorporation or these by-laws otherwise
provide.
Section 6. The Chairman of the Board. The chairman of the board shall be
the chief executive officer of the corporation and shall have the general
direction of the affairs of the corporation, except as otherwise prescribed by
the board of directors. He shall preside at all meetings of the stockholders, of
the board of directors and of the executive committee, if any, and shall
designate the acting secretary for such meetings to take the minutes thereof for
delivery to the secretary. He may execute contracts in the name of the
corporation and appoint and discharge agents and employees of the corporation.
The chairman of the board shall be ex-officio a member of all committees.
Section 7. The President. The president shall be the chief operating
officer of the corporation, and as such shall direct the operations of the
corporation. He shall assume such other duties as the board of directors may
assign to him from time to time. In the absence or
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<PAGE>
incapacity of the chairman of the board, he shall perform all duties and
functions of the chairman of the board. He may sign, with the secretary,
assistant secretary, treasurer or assistant treasurer, certificates for shares
of the corporation, and may sign any policies, deeds, mortgages, bonds,
contracts, or other instruments which the board of directors have authorized to
be executed except in cases where the signing and execution thereof shall be
expressly delegated by the board of directors or by these by-laws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed; appoint and discharge agents and employees of the
corporation, and in general, shall perform all duties incident to the office of
president. The president shall be ex-officio a member of all committees.
The Executive Vice-Presidents
Section 8. In the absence of the president or in the event of his inability
or refusal to act, the executive vice president (or in the event there be more
than one executive vice-president, the executive vice-presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The executive vice-presidents shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
The Vice-Presidents
Section 9. In the absence of the executive vice presidents or in the event
of their inability or refusal to act, the vice-president (or in the event there
be more than one vice-president, the vice-presidents in the order designated, or
in the absence of any designation, then in
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<PAGE>
the order of their election) shall perform the duties of the executive
vice-presidents, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the executive vice-presidents. The vice-presidents
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
The Secretary and Assistant Secretary
Section 10. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or the
chairman or executive vice presidents, under whose supervision he shall be. He
shall have custody of the corporate seal of the corporation and he, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 11. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall
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<PAGE>
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
The Treasurer and Assistant Treasurers
Section 12. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all monies
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 13. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 14. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed as required from time to time) in
such sum and with such surety or sureties as shall be satisfactory to the board
of directors for the faithful performance of the duties of his office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation.
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<PAGE>
Section 15. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election), shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
ARTICLE VI
Certificate of Stock
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
chairman of the board or the president or a vice-president and the treasurer or
an assistant treasurer, or the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of
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<PAGE>
stock, a statement that the corporation will furnish without charge to each
stockholder who so requests the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. Where a certificate is countersigned (i) by a transfer agent
other than the corporation or its employee, or (ii) by a registrar other than
the corporation or its employee, any of or all the signatures of the officers of
the corporation may be a facsimile. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
an officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of
issue.
Lost Certificates
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of the fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
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<PAGE>
Transfers of Stock
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Fixing Record Date
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
Registered Stockholders
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner
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<PAGE>
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE VII
Indemnification
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other Than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VII, the Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigate
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
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<PAGE>
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation. Subject to Section 3 of this Article VII, the
corporation shall indemnify any person who was or is party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under this
Article VII (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Section 1 or Section 2,
of this Article VII, as the case may be. Such determination shall be made
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<PAGE>
(i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders. To the extent, however, that a director,
officer, employee or agent of the corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VII, a person shall be deemed to have been acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the corporation or
another enterprise, or on information supplied to him by the officers of the
corporation or another enterprise, in the course of their duties, or on the
advice of legal counsel for the corporation or another enterprise or on
information or records given or reports made to the corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation of any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the
corporation as a director, officer, employee or agent. The provisions of this
Section 4 shall not be
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<PAGE>
deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth in
Sections 1 or 2 of this Article VII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VII. The basis of such indemnification by
a court shall be a determination by such court that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standards of conduct set forth in Sections 1 and 2 of
this Article VII, as the case may be. Notice of any application for
indemnification pursuant to this Section 5 shall be given to the corporation
promptly upon the filing of such application.
Section 6. Expenses Payable in Advance. Expenses incurred in defending or
investigating a threatened or pending action, suit or proceeding may be paid by
the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation as
authorized in this Article VII.
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<PAGE>
Section 7. Non-exclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article VII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any by-law, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VII shall be made to the fullest extent permitted by law. The
provisions of this Article VII shall not be deemed to preclude the
indemnification of any person who is not specified in Section 1 or 2 of this
Article VII but whom the corporation has the power of obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware, or
otherwise.
Section 8. Insurance. The corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VII.
Section 9. Meaning of "Corporation" for Purposes of Article VII. For
purposes of this Article VII, references to "the corporation" shall include, in
addition to the
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resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had the power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article VII with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
Section 10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
ARTICLE VIII
The stockholders shall have the sole power to adopt, alter, amend or
rescind these by-laws. The affirmative vote of the holders of not less than 86%
of the outstanding common stock of the corporation shall be required in order to
authorize any such adoption, alteration, amendment or rescission of these
by-laws.
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CERTIFICATE OF INCORPORATION
OF
PHOENIX CHEMICAL COMPANY
FIRST: The name of the corporation is PHOENIX CHEMICAL COMPANY.
SECOND: The address of its registered office in the State of Delaware is
229 South State Street, in the City of Dover 19901, County of Kent. The name of
its registered agent at such address is The Prentice-Hall Corporation, System,
Inc.
THIRD: The nature of the business or purpose to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
FOURTH: Without limiting the generality of Article THIRD above, the
corporation is authorized to issue from time to time debentures in the aggregate
principal amount of ten million dollars ($10,000,000) bearing interest at such
interest rate or rates as shall be approved by the Board of Directors.
FIFTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is 16,000 shares, consisting of:
15,000 shares of Preferred Stock, par value of $100.00 per share and 1,000
shares of Common Stock, having no par value.
SIXTH: The name and mailing address of the incorporator is Thomas N.
Harding, 333 West Wacker Drive, Suite 2600, Chicago, Illinois 60606.
<PAGE>
SEVENTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the by-laws of the Corporation.
EIGHTH: The election of officers need not be by written ballot.
NINTH: 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 or any class of them, 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 stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code 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 Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directors. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders of this 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
<PAGE>
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 or class of
stockholders of this corporation, as the case may be, and also on the
corporation.
TENTH: The corporation shall indemnify each director, officer, trustee,
employee or agent of the corporation and each person who is or was serving at
the request of the corporation as a director, officer, trustee, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise in the manner and to the fullest extent provided in Section 145 of
the General Corporation Law of the State of Delaware ("GCL").
ELEVENTH: To the fullest extent permitted by the GCL, no director of this
corporation shall be liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director; provided, however, that if
the scope of elimination or limitation of personal liability of directors
permitted by the GCL as now in effect is altered by amendment of the GCL,
nothing in this article Tenth shall eliminate or limit the liability of a
director (not otherwise eliminated prior to such amendment of the GCL) for any
act or omission occurring prior to the date when such amendment of the GCL
becomes effective.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does hereunto set his hand and seal this 12th day of August, 1987.
/s/ Thomas N. Harding
---------------------
Thomas N. Harding
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
PHOENIX CHEMICAL COMPANY
PHOENIX CHEMICAL COMPANY, a corporation duly organized and existing by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, by unanimous
written consent of its members, filed with the minutes of the board, adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation.
RESOLVED: That the Certificate of Incorporation of Phoenix Chemical Company
be amended by changing the Article thereof numbered FIFTH so that, as
amended such Article shall be and read as follows:
"FIFTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 151,000 shares, consisting of:
150,000 shares of Preferred Stock, par value of $100.00 per share and 1,000
shares of Common Stock, having no par value.
The Preferred Stock may be issued from time to time in one or more series
with such distinctive serial designations and
(a) may have such voting powers, full or limited, greater than, less
than or equal to those of the Common Stock, or may be without voting powers
and may have such sinking fund provisions;
(b) may be subject to redemption at such time or times and at such
prices;
(c) may be entitled to receive such dividends (which may be cumulative
or non-cumulative, compounding or non-compounding) at such rate or rates,
on such conditions, and at such times, and payable in preference to, or in
such relation to, the dividends payable on any other class or classes or
series of stock;
<PAGE>
(d) may have such rights and preferences upon dissolution of, or upon
any distribution of the assets of, the Corporation;
(e) may be made convertible into, or exchangeable for, shares of any
other class or classes or of any other series of the same or any other
class or classes or series of stock of the Corporation, at such price or
prices or at such rates of exchange, and with such adjustments; and
(f) shall have such other designations, preferences and relative,
participating, optional or other special rights, qualifications,
limitations or restrictions thereof;
as shall hereafter be stated and expressed in the resolution or resolutions
providing for the issue of such Preferred Stock from time to time adopted
by the Board of Directors of the Corporation pursuant to authority so to do
which is hereby vested in the Board of Directors of the Corporation.
Each share of Common Stock shall entitle the holder thereof to one
vote, in person or by proxy, at any and all meetings of the stockholders of
the Corporation, on all propositions before such meetings. At all
stockholders' meetings at which directors of the Corporation are to be
elected, each holder of Common Stock entitled to vote shall have as many
votes as shall equal the number of shares of Common Stock owned by him,
multiplied by the number of directors to be elected, and he may cast all of
such votes for a single director or may distribute them among the number to
be voted for, or any two or more of them as he may see fit."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, said PHOENIX CHEMICAL COMPANY has caused this
certificate to be signed by Joseph P. Sullivan, its Chairman, and Mary Beth
Vieha, its Assistant Secretary, this 15th day of October, 1987.
PHOENIX CHEMICAL COMPANY
By: /s/ Joseph P. Sullivan
-------------------------------
Joseph P. Sullivan,
Chairman
Attested by:
/s/ Mary Beth Vieha
- ---------------------------
Mary Beth Vieha,
Assistant Secretary
<PAGE>
CERTIFICATE OF STOCK DESIGNATION
OF
PHOENIX CHEMICAL COMPANY
Certificate of the Designation, Preferences and Relative, Participating,
Optional and Other Special Rights of the Series A Preferred Stock, Par Value
$100 per share, and the Qualifications, Limitations and Restrictions Thereof
Which Have Not Been Set Forth in the Certificate of Incorporation, as amended.
------------------------
Pursuant to Sections 141 and 151 of the General
Corporation Law of the State of Delaware
------------------------
We, the undersigned, Robert M. Prince and Wilfred R. Bahl, Jr., President
and Assistant Secretary, respectively, of Phoenix Chemical Company (the
"Corporation"), a corporation duly organized and existing under the General
Corporation Law of the State of Delaware, DO HEREBY CERTIFY that (i) the Board
of Directors of the Corporation authorized the creation of and designated a
series of Preferred Stock of the Corporation, consisting of 30,000 shares of
Series A Preferred Stock, as decreased from time to time (but not below the
number of shares of the Series A Preferred Stock then outstanding) by further
resolution duly adopted by the Board of Directors; and (ii) the Board of
Directors of the Corporation, by unanimous written consent of its members, filed
with the minutes of the board, duly adopted the following resolution:
RESOLVED: That the Corporation, in accordance with Article FIFTH of the
Certificate of Incorporation, does hereby authorize the creation of shares
of Series A Preferred Stock of the Corporation (the "Preferred Stock"), and
said Preferred Stock shall have the following rights, powers, preferences
and characteristics:
(1) As used in this Resolution, the following terms shall have the
following meanings:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Corporation" shall mean Phoenix Chemical Company.
(c) "Liquidation Value" of a share of Preferred Stock shall mean
at any given date of determination with respect to any given holder of
Preferred Stock the sum of (i) the par value of such share, and (ii)
the amount of all unpaid cumulative dividends on such share.
<PAGE>
(d) "Non-Compliance Event" shall mean the failure, as long as
Joseph P. Sullivan ("Sullivan"), Jay D. Proops ("Proops"), and their
permitted transferees (as defined in a Shareholders Agreement between
KAC Holdings, Inc., a Delaware corporation ("Holdings"), Sullivan,
Proops and Great American Management and Investment, Inc. dated
January 7, 1986, as amended) are collectively the owner of not less
than 75 shares of Common Stock (as that number of shares may be
adjusted by reason of stock splits, stock dividends, and other similar
dilutive events), of the stockholders of Holdings, to elect as members
of the Board of Directors of Holdings, and maintain in office, two
nominees selected by Sullivan and Proops (or if one of said named
individuals is a holder of such shares, two nominees selected by said
individual).
(e) "Original Issue Date" shall mean the date on which the first
share of Preferred Stock was originally issued.
(f) "Redemption Date" shall mean each date fixed for redemption
of Preferred Stock as determined pursuant to Section 5(a) of this
Article.
(g) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting stock shall at the time be owned directly or
indirectly by the Corporation or by one or more Subsidiaries.
(2) (a) The holders of the Preferred Stock shall be entitled to
receive, when and as declared by the Board, out of assets of the
Corporation legally available therefor, preferential cumulative dividends
at a compound rate of thirteen percent (13%) per annum multiplied by the
par value of the Preferred Stock. Notwithstanding the foregoing, if the
Non-Compliance Event shall occur, dividends shall cease to accumulate with
respect to the Preferred Stock. Such dividends shall accumulate on a
compound basis on each share from the Original Issue Date, and shall
accumulate from day to day whether or not earned or declared, to and
including the date on which such share is redeemed, and (if redeemed) the
full Redemption Price therefor is paid pursuant to Section 5 of this
Article. Dividends shall be cumulative so that, to the extent dividends are
not declared, the holders of Preferred Stock shall continue to have the
right to receive the undeclared balance of the dividends, when declared by
the Board.
(b) If, at any time, the Corporation shall pay a dividend on the
Preferred Stock which is less than the full amount of the cumulative
dividend payable, then such dividend shall be distributed such that an
equal amount thereof will be paid with respect to each outstanding
share of Preferred Stock.
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<PAGE>
(c) At any time that all cumulative dividends on the Preferred
Stock have been paid in full and the Preferred Stock fully redeemed,
then dividends may be declared and paid on or set apart for the
outstanding Common Stock out of any assets at the time legally
available therefor.
(3) (a) In the event of any liquidation, dissolution or winding-up of
the business of the Corporation, whether voluntary or involuntary, the
holders of Preferred Stock shall be entitled to receive from the assets of
the Corporation a preferential amount in cash equal to the Liquidation
Value. All of said preferential amounts to be paid to the holders of
Preferred Stock shall be paid before the payment or setting apart for
payment of any amount, for or the distribution of any assets of the
Corporation to, the holders of Common Stock in connection with such
liquidation, dissolution or winding-up.
(b) If the assets of the Corporation to be distributed to holders
of Preferred Stock are insufficient to pay the Liquidation Value in
full, then all assets to be distributed to such holders shall be
distributed among them ratably, according to the number of shares of
Preferred Stock held by each such holder.
(c) After the payment in cash to the holders of Preferred Stock
of the full Liquidation Value, the holders of Common Stock shall be
entitled to receive, ratably, according to the number of shares held
by each such holder, all remaining assets of the Corporation.
(d) A liquidation, dissolution or winding-up of the business of
the Corporation, as such terms are used in this Section 3, shall not
be deemed to include any consolidation or merger of the Corporation
with or into any other corporation or corporations.
(4) Except as otherwise expressly provided herein or as required by law,
the holder of each share of Preferred Stock shall not be entitled to vote on any
matters.
(5) (a) The Corporation may, at the option of the Board, redeem the
Preferred Stock in whole or in part, as follows:
(i) The redemption price for each share of Preferred Stock shall
be in an amount in cash equal to the Liquidation Value (such amount
being hereinafter referred to as the "Redemption Price").
(ii) In the event of such a redemption of only a part of the then
outstanding Preferred Stock, the Corporation shall effect such
redemption,
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<PAGE>
in multiples of 1,000 shares, ratably according to the number of
shares of Preferred Stock held by each holder of the Preferred Stock.
(iii) At least 30 days and not more than 50 days prior to the
date fixed for any redemption of the Preferred Stock (the "Redemption
Date"), written notice (the "Redemption Notice") shall be mailed,
postage prepaid, registered or certified mail, return receipt
requested, to each holder of record of the Preferred Stock at his post
office address last shown on the records of the Corporation. The
redemption notice shall state:
(A) The Redemption Date;
(B) Whether all or less than all of the outstanding shares
of Preferred Stock are to be redeemed;
(C) The number of shares of Preferred Stock held by the
holder that the Corporation intends to redeem;
(D) The Redemption Price; and
(E) That the holder is to surrender to the Corporation, by
delivery to the Corporation, his certificate or certificates
representing the shares of Preferred Stock to be redeemed.
(iv) On the Redemption Date the Corporation shall deliver to each
holder of Preferred Stock whose shares are to be redeemed a certified
or bank cashier's check in an amount equal to the Redemption Price
multiplied by the number of shares of Preferred Stock to be redeemed
from that holder; and on or after each Redemption Date, each holder of
Preferred Stock whose Preferred Stock has been redeemed shall
surrender such holder's certificate(s) for the shares of Preferred
Stock so redeemed (endorsed for transfer, or accompanied by a separate
stock transfer power endorsed for transfer, to the Corporation), to
the Corporation. In the event less than all shares represented by said
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(v) If the Redemption Notice shall have been duly given, and if
on the Redemption Date the full Redemption Price has been paid to the
stockholder, then notwithstanding that the certificates evidencing any
of the shares of Preferred Stock so called for redemption shall not
have been surrendered, dividends with respect to such shares shall
cease to
-4-
<PAGE>
accumulate after the redemption Date and all rights with respect to
such shares shall forthwith after the Redemption Date terminate, with
the sole exception of the right of the holders to receive the
Redemption Price without interest upon surrender of their certificate
or certificates therefor.
(b) The Corporation's right to redeem Preferred Stock pursuant to this
Section 5 is subject to the Corporation having available funds which, under
Delaware law, may legally be used for such purpose.
(6) No share or shares of Preferred Stock acquired by the Corporation by
reason of redemption, purchase, or otherwise shall be reissued, and all such
shares shall be cancelled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
IN WITNESS WHEREOF, said Phoenix Chemical Company has caused this
Certificate to be signed by Robert M. Prince, President, and attested by Wilfred
R. Bahl, Jr., its Assistant Secretary, this 15th day of October, 1987.
PHOENIX CHEMICAL COMPANY
By: /s/ Robert M. Prince
--------------------------------
Robert M. Prince, President
Attested by:
/s/ Wilfred R. Bahl, Jr.
- -------------------------------------
Wilfred R. Bahl, Jr.
Assistant Secretary
-5-
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
PHOENIX CHEMICAL COMPANY
PHOENIX CHEMICAL COMPANY, organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY AS FOLLOWS:
FIRST: That the Board of Directors of the Corporation, by unanimous written
consent of its members, filed with the minutes of the board, adopted resolutions
proposing and declaring advisable the following amendments to the Certificate of
Incorporation:
(i) That Article TENTH of the Restated Certificate of Incorporation is
hereby amended in its entirety to read as follows:
"TENTH: (a) The Corporation shall indemnify (i) any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or
settlement of such action or suit, and (ii) any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding, in each case to
the fullest extent permissible under Section 145 of the Delaware General
Corporation Law, as amended from time to time, or the indemnification
provisions of any successor statute.
(b) The foregoing provisions of this Article TENTH shall be deemed to be a
<PAGE>
contract between the Corporation and each director and officer who serves
in such capacity at any time while this Article TENTH is in effect, and any
repeal or modification thereof shall not affect any rights or obligations
then existing with respect to any state of facts then or theretofore
existing or any action, suit or proceeding theretofore or thereafter
brought based in whole or in part upon any such state of facts. The
foregoing rights of indemnification shall not be deemed exclusive of any
other rights to which any director or officer may be entitled apart from
the provisions of this Article TENTH. The Board of Directors in its
discretion shall have power on behalf of the Corporation to enter into
agreements with respect to the indemnification of any person, other than a
director or officer, made a party to any action, suit or proceeding by
reason of the fact that he, his testator or intestate, is or was an
employee, agent or otherwise acting on behalf of the Corporation or serving
at the request of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise."
(ii) That Article ELEVENTH of the Restated Certificate of Incorporation is
hereby amended in its entirety to read as follows:
"ELEVENTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation law is amended after this Amendment to the Certificate of
Incorporation becomes effective to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the Delaware General Corporation Law, as
so amended.
Any repeal or modification of the provisions of this Article ELEVENTH
by the stockholders of the Corporation shall be prospective only, and shall
not adversely affect any limitation on the personal liability of a director
of the Corporation with respect to any act or omission occurring prior to
the effective date of such appeal or modification. In the event that any
provisions of this Article ELEVENTH (including any provision within a
single sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the fullest extent permitted by
law."
SECOND: That in lieu of a meeting and vote of stockholders, the majority
stockholder of the Corporation has given its written consent to said amendment
and all other stockholders of the Corporation have been notified of such
amendment, all in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 242 and 228 of the Delaware General Corporation
Law.
<PAGE>
IN WITNESS WHEREOF, Phoenix Chemical Company has caused this Certificate to
be signed by William J. Rigby, its President and by Mary Beth Vieha, its
Assistant Secretary, this 28th day of June, 1991.
PHOENIX CHEMICAL COMPANY
By: /s/ William J. Rigby
---------------------------
William J. Rigby, President
ATTEST:
/s/ Mary Beth Vieha
- -------------------
Mary Beth Vieha
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PHOENIX CHEMICAL COMPANY
The undersigned officers, John U. Huber and Rose Marie Williams, President
and Assistant Secretary, respectively, of Phoenix Chemical Company, a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), do hereby certify that:
1. Article One of the Certificate of Incorporation of the Corporation is hereby
amended in its entirety as follows:
"ARTICLE ONE
The name of the corporation is IMC Nitrogen Company."
2. This Certificate of Amendment was duly adopted by the directors and sole
stockholder of the Corporation according to the provisions of Sections 141(f),
228 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have hereunto subscribed their names
this 19th day of September, 1996.
PHOENIX CHEMICAL COMPANY
[SEAL] By: /s/ John U. Huber
-----------------
John U. Huber
President
Attest:
/s/ Rose Marie Williams
- -----------------------
Rose Marie Williams
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO CERTIFICATE OF INCORPORATION
OF S & P INVESTMENTS CORP.
S & P INVESTMENTS CORP., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: That the directors and the stockholders of said corporation, by
joint written consent dated February 28, 1985, duly adopted resolutions setting
forth an amendment to said Certificate of Incorporation as follows:
RESOLVED: That Article First of the Certificate of Incorporation of the
corporation is hereby amended to read as follows:
"FIRST: The name of the corporation is KAISER AGRICULTURAL
CHEMICALS INC."
SECOND: That the aforesaid Amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, said S & P INVESTMENTS CORP. has caused this
certificate to be signed by its President and attested by its Secretary this
28th day of February, 1985.
S & P INVESTMENTS CORP.
By: /s/ John E. Gutknecht
----------------------------
John E. Gutknecht, President
ATTEST:
By: /s/ Jay D. Proops
- -------------------------------
Jay D. Proops, Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IMC NITROGEN COMPANY
-----------------------------------
IMC Nitrogen Company, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That by written consent of the Board of Directors dated as of April
22, 1999, a resolution was duly adopted setting forth a proposed amendment
to the Certificate of Incorporation of the Company, declaring said
amendment to be advisable and calling for consideration of said proposed
amendment by the stockholders of the Company. The resolution setting forth
the amendment is as follows:
RESOLVED, that it is hereby proposed that Article One of the
Certificate of Incorporation of the Company be amended so that the same as
amended would read as follows:
1. Name. The name of the Corporation shall be, "Royster-Clark
Nitrogen, Inc.
SECOND: That thereafter, pursuant to the resolution of the board of
directors, the proposed amendment was approved by the stockholder of the
Company by written consent dated as of April 22, 1999.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 and 228 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to be executed
as of the 28th day of April, 1999.
By: /s/ Walter R. Vance
----------------------------
Walter Vance
Secretary and Treasurer
BY LAWS OF IMC NITROGEN COMPANY
-------------------------------
(FORMERLY PHOENIX CHEMICAL COMP.)
---------------------------------
ARTICLE I
---------
Offices
-------
Section 1. Registered Office. The registered office shall be in the City of
-----------------
Dover, County of Kent, State of Delaware.
Section 2. Other Office. The corporation may also have offices at such
------------
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
----------
Meetings of Stockholders
------------------------
Section 1. Place of Meetings. All meetings of the stockholders shall be
-----------------
held at such place as may be fixed from time to time by the board of directors
and stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. An annual meeting of the stockholders for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting shall be held on the second Thursday of each November, unless
the board of directors, not less than ten (10) days prior to such fixed meeting
date, designates another date for such annual meeting, in which event the annual
meeting of the stockholders shall be held on the date so designated. If the day
fixed for the annual meeting shall be a Saturday, Sunday or legal holiday, such
meeting shall be held on the next succeeding business day.
Section 3. Notice of Annual Meeting. Written notice of the annual meeting
------------------------
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 4. List of Stockholders. The officer who has charge of the stock
--------------------
ledger of the corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting, either at a place within the
city where the meeting is
<PAGE>
to be held which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
Section 5. Special Meetings of Stockholders. Special meetings of the
--------------------------------
stockholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the certificate of incorporation, may be called by the president,
and shall be called by the president or secretary at the request in writing of a
majority of the board of directors or at the request in writing of stockholders
owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
Section 6. Notice of Special Meetings of Stockholders. Written notice of a
------------------------------------------
special meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called, shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting.
Section 7. Business At Special Meetings. Business transacted at any special
----------------------------
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 8. Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. Majority Vote. When a quorum is present at any meeting, the vote
-------------
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of statute or of the
certificate of incorporation, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 10. Proxies and Voting of Shares. Each stockholder shall, at every
----------------------------
meeting of the stockholders, be entitled to one vote in person or by proxy for
each share of the
-2-
<PAGE>
capital stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date, unless the proxy provides for a
longer period.
Section 11. Informal Action By Stockholders. Any action required to be
-------------------------------
taken at any annual or special meeting of stockholders of the corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE III
-----------
Directors
---------
Section 1. The number directors which shall constitute the whole board
shall be not less than two (2) nor more than nine (9). Within the limits above
specified, the directors shall be elected at the annual meeting of the
stockholders, and each directors elected shall hold office until his successor
is elected or qualified or until his earlier resignation or removal. Directors
need not be stockholders.
Section 2. Deleted.
Section 3. Filling of Vacancies. Vacancies and newly created directorships
--------------------
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
the sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
have qualified, or their earlier resignation or removal. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute.
Section 4. General Powers. The business of the corporation shall be managed
--------------
by or under the direction of the board of directors which may exercise all such
powers of the corporation and do all such lawful acts as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
Meetings of the Board of Directors
----------------------------------
Section 5. Place of Meetings. The board of directors of the corporation may
-----------------
hold meetings, both regular and special, either within or without the State of
Delaware.
Section 6. First Meeting of New Board. The first meeting of each newly
--------------------------
elected board of directors shall be held at such time and place as shall be
fixed by the vote of the stockholders at the annual meeting and no notice of
such meeting shall be necessary to the newly elected directors in order legally
to constitute the meeting, provided a quorum shall be present. In the event of
the failure of the stockholders to fix the time or place of such first meeting
of the
-3-
<PAGE>
newly elected board of directors, or in the event such meeting is not held at
the time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the board of directors, or as shall be specified in a
written waiver of notice signed by all of the directors.
Section 7. Regular Meetings. Regular meetings of the board of directors may
----------------
be held without notice at such time and at such place as shall from time to time
be determined by the board.
Section 8. Special Meetings. Special meetings of the board may be called by
----------------
the president on two (2) days' notice to each director, either personally or by
mail or by telegram; special meetings shall be called by the president in like
manner and on like notice on the written request of two or more directors.
Section 9. At all meetings of the board a majority of the total number of
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than the announcement at the meeting, until a quorum shall be
present.
Section 10. Informal Action. Unless otherwise restricted by the certificate
---------------
of incorporation or these by-laws, any action required or permitted to be taken
at any meeting of the board of directors or of any committee thereof may be
taken without a meeting, if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
Compensation of Directors
-------------------------
Section 11. In General. The directors may be paid their expenses, if any,
----------
of attendance at each meeting of the board of directors and may be paid a fixed
sum for attendance at each meeting of the board of directors or a stated salary
as director. No such payment shall preclude any director form serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Committees of Directors
-----------------------
Section 12. Designation of Committees. The board of directors may, by
-------------------------
resolution passed by a majority of the whole board of directors, designate one
or more committees, each committee to consist of two or more of the directors of
the corporation. The
-4-
<PAGE>
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee.
Section 13. Absence of a Committee Member. In the absence or
-----------------------------
disqualification of any member of a committee or committees or in the event that
any such member is unable or refuses to act, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such member.
Section 14. Powers of Committees. Any such committee, to the extent
--------------------
provided in the resolution of the board of directors, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the by-laws of the corporation; and, unless the resolution, the
certificate of incorporation or any provision of these by-laws expressly so
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock or to adopt a certificate of
ownership and merger. Such committee or committees shall have such name or names
as may be determined from time to time by committees shall have such name or
names as may be determined from time to time by resolution adopted by the board
of directors.
Section 15. Record of Proceedings. Each committee shall keep regular
---------------------
minutes of its proceedings and report the same to the board of directors when
required.
ARTICLE IV
----------
Notices
-------
Section 1. In General. Whenever under the provisions of the statutes or of
----------
the certificate of incorporation or of these by-laws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Waiver of Notice. Whenever any notice is required to be given
----------------
under the provisions of the statutes or of the certificate of incorporation or
of these by-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
-5-
<PAGE>
ARTICLE V
---------
Officers
--------
Section 1. Number and Title. The officers of the corporation shall be
----------------
chosen by the board of directors and shall be a chairman of the board,
president, a vice-president, a secretary and a treasurer. The board of directors
may also choose additional vice-presidents and one or more assistant secretaries
and assistant treasurers. Any number of offices may be held by the same person,
unless the certificate of incorporation or these by-laws otherwise provide.
Section 2. Election and Qualification. The board of directors at its first
--------------------------
meeting after each annual meeting of stockholders shall choose a chairman of the
board, a president, one or more vice-presidents, a secretary and a treasurer.
Section 3. Appointment of Additional Officers. The board of directors may
----------------------------------
appoint such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the board.
Section 4. Compensation. The salaries of all officers and agents of the
------------
corporation shall be fixed by the board of directors.
Section 5. Term of Office, Removal and Vacancies. The officers of the
-------------------------------------
corporation shall hold office until their successors are chosen and qualify. Any
officer elected or appointed by the board of directors may be removed at any
time by the affirmative vote of a majority of the board of directors. Any
vacancy occurring in any office of the corporation may be filled by the board of
directors.
Section 6. The Chairman of the Board. The chairman of the board shall be
-------------------------
the chief executive officer of the corporation and shall have the general
direction of the affairs of the corporation, except as otherwise prescribed by
the board of directors. He shall preside at all meetings of the stockholders, of
the board of directors and of the executive committee, if any, and shall
designate the acting secretary for such meetings to take the minutes thereof for
delivery to the secretary. He may execute contracts in the name of the
corporation and appoint and discharge agents and employees of the corporation.
The chairman of the board shall be ex-officio a member of all committees.
Section 7. The President. The president shall be the chief operating
-------------
officer of the corporation, and as such shall direct the operations of the
corporation. He shall assume such other duties as the board of directors may
assign to him from time to time. In the absence or incapacity of the chairman of
the board and vice chairman of the board, he shall perform all duties and
functions of the chairman of the board. He may sign, with the secretary,
assistant secretary, treasurer or assistant treasurer, certificates for shares
of the corporation, and may sign any policies, deeds, mortgages, bonds,
contracts, or other instruments which the board of directors have authorized to
be executed except in cases where the signing and execution thereof shall be
-6-
<PAGE>
expressly delegated by the board of directors or by these by-laws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed; appoint and discharge agents and employees of the
corporation, and in general, shall perform all duties incident to the office of
president. The president shall be ex-officio a member of all committees.
Section 8. The Vice-President. In the absence of the president or in the
------------------
event of his inability or refusal to act, and in the absence of the chairman of
the board or in the event of his inability or refusal to perform the duties of
the president, the vice-president (or in the event there be more than one
vice-president, the vice-presidents in the order designated, or in the absence
of any designation, then in the order of their election) shall perform the
duties of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. The vice-presidents shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
Section 9. The Secretary. The secretary shall attend all meetings of the
-------------
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 10. Assistant Secretaries. The assistant secretary, or if there be
---------------------
more than one, the assistant secretaries in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
Section 11. The Treasurer. The treasurer shall have the custody of the
-------------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and shall
render to the president and the board of directors, as its regular meetings, or
when the board of directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation.
-7-
<PAGE>
Section 12. Bond. If required by the board of directors, he shall give the
----
corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 13. Assistant Treasurers. The assistant treasurer, or if there
--------------------
shall be more than one, the assistant treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE VI
----------
Stock and Stockholders
----------------------
Section 1. Certificate of Stock. Every holder of stock in the corporation
--------------------
shall be entitled to have a certificate, signed by, or in the name of the
corporation by the president or a vice president and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation.
Section 2. Classes and Series. If the corporation shall be authorized to
------------------
issue more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation Law
of Delaware; in lieu of the foregoing requirements, there may be set forth on
the face or back of he certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 3. Signatures. Where a certificate is countersigned (i) by a transfer
----------
agent other than the corporation or its employee, or (ii) by a registrar other
than the corporation or its employee, any of or all the signatures of the
officers of the corporation may be a facsimile. In case any officer who has
signed or whose facsimile, signature has been placed upon a certificate shall
have ceased to be an officer before such certificate is issued, it may be issued
by the corporation with the same effect as if he were such officer at the date
of issue.
-8-
<PAGE>
Section 4. Lost Certificates. The board of directors may direct a new
-----------------
certificate of certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of the fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. Transfers of Stock. Upon surrender to the corporation or the
------------------
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6. Fixing Record Date. In order that the corporation may determine
------------------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote as a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
Section 7. Registered Stockholders. The corporation shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII
-----------
Indemnification
---------------
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other Than
--------------------------------------------------------------
Those by or in the Right of the Corporation. Subject to Section 3 of this
- -------------------------------------------
Article VII, the Corporation shall indemnify any person who was or is a party or
is threatened to be made a party
-9-
<PAGE>
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action, or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---------------
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the
----------------------------------------------------------------
Right of the Corporation. Subject to Section 3 of this Article VII, the
- ------------------------
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procedure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such court shall deem
proper.
Section 3. Authorization of Indemnification. Any indemnification under this
--------------------------------
Article VII (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Section 1 or Section 2,
of this Article VII, as the case may be. Such determination shall be made (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the stockholders. To the extent, however, that a director, officer,
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action,
-10-
<PAGE>
suit or proceeding described above, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith, without the
necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination under
------------------
Section 3 of this Article VII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the corporation or
another enterprise, or on information supplied to him by the officers of the
corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the corporation or another enterprise or on
information or records given or reports made to the corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the
corporation as a director, officer, employee or agent. The provisions of this
Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VII, as the
case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
--------------------------
determination in the specific case under Section 3 of this Article VII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VII. The basis of such indemnification by
a court shall be a determination by such court that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standards of conduct set forth in Sections 1 and 2 of
this Article VII, as the case may be. Notice of any application for
indemnification pursuant to this Section 5 shall be given to the corporation
promptly upon the filing of such application.
Section 6. Expenses Payable in Advance. Expenses incurred in defending or
---------------------------
investigating or threatened or pending action, suit or proceeding may be paid by
the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation as
authorized in this Article VII. No security shall be required for such
undertaking.
Section 7. Non-exclusivity of Indemnification and Advancement of Expenses.
--------------------------------------------------------------
The indemnification and advancement of expenses provided by or granted pursuant
to this Article VII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any by-law, agreement, contract, vote of
-11-
<PAGE>
stockholders or disinterested directors or pursuant to the direction (howsoever
embodied) of any court competent jurisdiction or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, it being the policy of the corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VII shall be made to the
fullest extent permitted by law. The provisions of this Article VII shall not be
deemed to preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article VII but whom the corporation has the power of
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
Section 8. Insurance. The corporation may purchase and maintain insurance
---------
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VII.
Section 9. Meaning of "Corporation" for Purposes of Article VII. For
----------------------------------------------------
purposes of this Article VII, references to "the corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had the power and authority
to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
Section 10. Survival of Indemnification and Advancement of Expenses. The
-------------------------------------------------------
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
ARTICLE VIII
------------
Amendments
----------
These by-laws may be altered, amended or repealed or new by-laws may be
adopted by the board of directors at any regular meeting of the board of
directors or at any special meeting of the board of directors.
-12-
ARTICLES OF INCORPORATION
OF
HUTSON'S AG SERVICE, INC.
The undersigned, a mature person, having the capacity to conduct and act as
an incorporator of a corporation under the Kentucky Business Corporation Act,
does hereby adopt the following Articles of Incorporation for such corporation.
ARTICLE I
The name of this corporation is HUTSON'S AG SERVICE, INC.
ARTICLE II
The period of duration is perpetual.
ARTICLE III
The purposes for which this corporation is organized are selling,
transportation and distribution of fertilizer, bulk or bag, within the
continental United States. The sale or distribution of such products shall
include the authorization to acquire both personal and real property for the
purpose of promoting the corporation's products.
To further engage in the business of buying, selling, distributing,
leasing, servicing, repairing, and otherwise dealing in agricultural implements,
vehicles, materials, machinery, and equipment. Additionally, the corporation may
hold, mortgage, lease and convey any or all real estate and chattels necessary
or useful to the promotion of the corporate affairs.
To do all and everything necessary, suitable, or proper for the
accomplishment of any of the purposes, the attainment of any of the objects, or
the furtherance of any of the powers
<PAGE>
hereinbefore set forth, either alone or in connection with other corporations,
firms, or individuals, and either as principals or agents, and to do every other
act or acts, thing or things, incidental or appurtenant to or growing out of or
connected with the aforesaid objects, purposes, or powers, or any of them.
ARTICLE IV
The corporation is authorized an aggregate of twenty thousand (20,000)
shares, divided into one (1) class. Designation of the class is designated as a
class without par value. The stock authorized to be issued by the corporation is
as follows:
CLASS NUMBER OF SHARES VALUE PER SHARE
------ ---------------- ------------------
Common 20,000 Without par value.
- --------------------------------------------------------------------------------
ARTICLE V
Each stock as issued and outstanding, which is fully paid, is entitled to
one (1) vote per share. At any such time as any share is pledged or hypothecated
to secure a note, then such share shall lose its voting rights until such time
as the please or hypothecation is released.
ARTICLE VI
The pre-emptive rights of a shareholder to acquire unissued shares of
capital stock of any class now or hereafter authorized is as follows: Any stock
not originally subscribed to nor issued by the corporation shall be first
offered to the shareholders of record on the basis of one (1) share of unissued
stock for each share of stock held by the individual shareholder. These rights
shall apply to both common stock and such other classes of stock which may
hereafter be authorized by the Articles of Incorporation.
-2-
<PAGE>
ARTICLE VII
The address of the initial registered agent of the corporation is West
Railroad Avenue, Murray, Kentucky 42071, and the name of the initial registered
agent at such address if Dan C. Hutson, II.
ARTICLE VIII
The number of directors constituting the initial Board of the corporation
shall be one (1), and the name and address of the person who shall serve as
director until the first annual meeting of the stockholder(s) until his
successor(s) are elected and shall qualify, is as follows:
DAN C. HUTSON, II 1008 Main Street
Murray, Ky. 42071
ARTICLE IX
The name and address of the incorporator and the number of shares
subscribed is as follows:
DAN C. HUTSON, II 1008 Main Street 11,000
Murray, Ky. 42071 Shares
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, I have made, signed and acknowledged these Articles of
Incorporation, in triplicate originals, on this the 12th day of February, 1976.
/s/ Dan C. Hutson, II
-----------------
DAN C. HUTSON, II
STATE OF KENTUCKY
COUNTY OF CALLOWAY
I, Wm. Donald Overbey, do hereby certify that DAN C. HUTSON, II, personally
appeared before me and acknowledged and delivered the foregoing Articles of
Incorporation of HUTSON'S AG SERVICE, INC., to be his free act and deed, as
incorporator of said corporation.
Witness my hand and seal of office on this 12th day of February, 1976.
/s/ Wm. Donald Overbey
------------------------------------
Wm. Donald Overbey, Notary Public,
State-at-Large, Kentucky
My commission expires: 3-9-78
-3-
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
HUTSON'S AG SERVICE, INC.
Dan C. Hutson, II, President, and Cindy Hutson, Secretary-Treasurer, of
Hutson's Ag Service, Inc., a Kentucky corporation with its principal place of
business located at P.O. Box 1055, 406 N. 4th Street, Murray, Calloway County,
Kentucky, do hereby certify that a meeting of shareholders and directors was
held on January 5, 1992, at 10:00 a.m. at the office of Hutson's Ag Service,
Inc., 406 N. 4th Street, Murray, Calloway County, Kentucky, for the purpose of
consideration a proposal to Amend the Articles of Incorporation; that all
stockholders and directors were present in person and signed a Waiver of Notice;
and all voted in favor of the proposed amendments and the following Resolution
was adopted:
RESOLVED, Article III of the Articles of Incorporation is deleted in
its entirety and the following is substituted in its place.
ARTICLE III
The purpose and nature of the business which is to be transacted, promoted
and carried on by this corporation shall be selling, transporting an
distributing fertilizer, bag or bulk, the sale or distribution of which shall
include the authorization to acquire both personal and real property for the
purpose of promoting the corporation's products.
To further engage in the business of buying, selling, distributing,
leasing, servicing, repairing and otherwise dealing in agricultural implements,
vehicles, materials, machinery and equipment. The corporation is further
authorized to do or take any other action(s) necessary to support the sales and
servicing of all equipment and the promotion of the corporate affairs.
<PAGE>
The corporation may also purchase, acquire, deal in, hold, own, improve,
exchange, lease, sell, convey, option, mortgage, pledge, encumber and otherwise
deal in real estate, lands, buildings, equipment, vehicles, fixtures, stocks,
bonds and securities and any and all other kinds and types of property, real,
personal and mixed, tangible and intangible, in any and all interest therein; to
transact any and all lawful business for which corporations may be organized
under KRS Chapter 271B; to borrow money, with or without security, and to do any
and all acts, and to execute and perform any and all other powers, necessary,
proper, incident or convenient, in carrying out the purposes above set forth, as
fully as any natural person might do.
IN WITNESS WHEREOF, the President and Secretary of the Corporation have
hereunto set their hands on this the 17th day of February, 1992.
/s/ Dan C. Hutson, II /s/ Cindy Hutson
- --------------------- -------------------------
DAN C. HUTSON, II CINDY HUTSON
President Secretary-Treasurer
STATE OF KENTUCKY
COUNTY OF CALLOWAY
The foregoing Articles of Amendment to Articles of Incorporation of
Hutson's Ag Service, Inc., were subscribed, sworn and acknowledged to before me
this 17th day of February, 1992, by Dan C. Hutson, II, and Cindy Hutson,
President and Secretary-Treasurer respectively, of Hutson's Ag Service, Inc.
/s/ Melanie G. Thompson
--------------------------------
NOTARY PUBLIC, State at Large
SEAL My Commission Expires: _________
<PAGE>
STATE OF KENTUCKY
COUNTY OF CALLOWAY
I, Teresa Rushing, Clerk of Calloway County, do hereby certify that the
foregoing Articles of Amendment of Articles of Incorporation of Hutson's Ag
Service, Inc., was on the _____ day of ______, 1992, lodged in my office for
record, whereupon the same, the foregoing and this certificate have been duly
recorded in my office in Book _____, at Card ____, at ________m.
Given under my hand this _____ day of ____________, 1992.
TERESA RUSHING, Clerk
By: /s/ Teresa Rushing, D.C.
------------------------
/s/ Gerald Bell
- ---------------
GERALD L. BELL
<PAGE>
ARTICLES OF MERGER OF HUTSON'S AG SERVICE, INC.
AND HUTSON'S GRAIN, INC.
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, the Directors and Shareholder of Hutson's Ag Service, Inc.,
organized under the laws of the Commonwealth of Kentucky, with its principal
office at 406 N. 4th Street, P.O. Box 1055, Murray, Calloway County, Kentucky,
and Hutson's Grain, Inc., a Kentucky corporation with its principal office at
406 N. 4th Street, P.O. Box 1055, Murray, Calloway County, Kentucky, on the 20th
day of November, 1992, authorized a merger of the two corporations;
NOW, THEREFORE, Hutson's Ag Service, Inc., through its duly authorized
officers makes and declares the Articles of Merger pursuant to KRS 271B.11-050
and other applicable law and represents as follows:
1. Hutson's Ag Service, Inc., is the parent corporation and its principal
office is 406 N. 4th Street, Murray, Calloway County, Kentucky.
2. Hutson's Grain, Inc., is the subsidiary corporation and its principal
office is also 406 N. 4th Street, Murray, Calloway County, Kentucky.
3. Hutson's Ag Service, Inc., prior to this merger, owned 100% of the
issued and outstanding stock of Hutson's Grain, Inc.
4. Stockholder approval was not required for this merger, but the merger
was unanimously approved by the Directors and Shareholder of both Hutson's Ag
Service, Inc., and Hutson's Grain, Inc.
5. A Waiver of the Plan of Merger mailing requirement was executed by the
duly authorized officers of Hutson's Ag Service, Inc., the sold shareholder of
Hutson's Grain, Inc.
6. Hutson's Grain, Inc., is being merged into Hutson's Ag Service, Inc.,
and Hutson's Ag Service, Inc., will be the surviving corporation.
7. The shares of Hutson's Grain, Inc., shall be cancelled and its separate
existence shall cease.
8. Title to all real estate and other property owned by Hutson's Grain,
Inc., shall be vested in Hutson's Ag Service, Inc.
9. Hutson's Ag Service, Inc., shall assume all liabilities of Hutson's
Grain, Inc.
<PAGE>
10. Articles of Incorporation of Hutson's Ag Service, Inc., shall not be
amended as a result of this merger.
IN WITNESS WHEREOF, the President and Secretary/Treasurer have signed and
acknowledged the foregoing Articles of Merger on behalf of Hutson's Ag Service,
Inc., this 20th day of November, 1992.
/s/ Dan C. Hutson, II
----------------------------
DAN C. HUTSON, II, President
and Sole Stockholder
/s/ Cindy Hutson
----------------------------
CINDY HUTSON, Secretary
STATE OF KENTUCKY
COUNTY OF CALLOWAY
The foregoing Articles of Merger were subscribed, sworn and acknowledged to
before me this 20th day of November, 1992, by Dan C. Hutson, II and Cindy Hutson
as President and Secretary, respectively, of Hutson's Ag Service, Inc.
/s/ Gerald Bell
---------------------------------
NOTARY PUBLIC
SEAL My Commission Expires: __________
/s/ Gerald Bell
- ---------------
GERALD BELL
ARTICLES OF AMENDMENT
BY
SHAREHOLDERS
OF THE ARTICLES OF INCORPORATION
OF
HUTSON'S AG SERVICE, INC.
TO THE SECRETARY OF STATE OF KENTUCKY:
Pursuant to the provisions of Chapter 271B of the Kentucky Revised
Statutes, the undersigned corporation hereby amends its Articles of
Incorporation, and for that purpose, submits the following statement:
1. The name of the corporation is Hutson's AG Service, Inc.
2. On April 22, 1999, the corporation adopted the following amendment of
its Articles of Incorporation:
The name of the Corporation shall be Royster-Clark Hutson, Inc.
3. If not contained in the amendment itself, the manner in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be implemented as follows:
Not Applicable
4. The foregoing amendment was adopted by unanimous written consent of the
sole Shareholder of the corporation dated as of April 22, 1999.
5. If the amendment is not to be effective when these articles are filed by
the Secretary of State, the date it will be effective is:
Effective upon filing.
HUTSON'S AG SERVICE, INC.
By: /s/ Walter R. Vance
-------------------------------
Walter Vance
Secretary and Treasurer
BY-LAWS
OF
HUTSON'S AG SERVICE, INC.
ARTICLE I
OFFICES
The registered office of the corporation in the Commonwealth of Kentucky
shall be at the address stated in its Articles of Incorporation but such address
may be changed from time to time by the Board of Directors.
The corporation shall have a principal office, and such other offices,
either within or without the Commonwealth of Kentucky, as the Board of Directors
may designate or the business of the corporation may require from time to time,
the principal office of the corporation may be, but need not be, the same as its
registered office and, until otherwise determined, shall be located at West
Railroad Avenue in Calloway County, Murray, Kentucky.
ARTICLE II
SECTION 1. ANNUAL MEETING. The annual meeting of shareholders shall be held
on the first (1st) Monday of January in each year, beginning with the year 1977,
at the hour of 10 A.M., local time, for the election of directors and such other
business as may properly come before the meeting. If the day fixed for the
annual meeting shall be a legal holiday, such meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated for any annual meeting, or at any adjournment there, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as may be practicable.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the Board of Directors, by the president or by holders of not less
than one-fifth of the outstanding shares entitled to vote at such meeting.
SECTION 3. PLACE OF MEETING. The Board of Directors or the president may
designate any place, either within or without the Commonwealth of Kentucky, as
the place of meeting for any annual meeting, or for any special meeting called
by the Board of Directors or by the president, respectively. A waiver of notice
signed by all shareholders entitled to vote at a meeting may designate any
place, either within or without the Commonwealth of Kentucky, as the place for
the holding of such meeting. If no designation is made, or if a special meeting
<PAGE>
be otherwise called, the place of meeting shall be the principal office of the
corporation, except as otherwise provided in Section 5. of this Article.
SECTION 5. NOTICE OF MEETING. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten nor more
than fifty days before the date of the meeting, either personally or by mail, by
or at the direction of the president, secretary, or the persons calling the
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid.
SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall
meet at any time and place, either within or without the Commonwealth of
Kentucky, and consent to the holding of a meeting, such meeting shall be valid
without call or notice and at such meeting any corporate action may be taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than fifty days and, in case of a meeting of shareholders, not less
than ten days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders or shareholders
entitled to receive payment of a dividend, the first date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
SECTION 7. VOTING RECORD. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make a complete record of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. Such record shall be produced and kept open at the time
<PAGE>
and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such list or stock transfer books or to vote at
any meeting of shareholders.
SECTION 8. QUORUM. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally noted.
The shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
SECTION 9. PROXIES. At all meetings of shareholders a shareholder may vote
in person or by proxy executed in writing by the shareholder by his duly
authorized attorney-in-fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy. The revocation of a proxy shall not be effective until the secretary of
the corporation has received written notice of the revocation.
SECTION 10. VOTING OF SHARES. Subject to the provisions of Section 12.,
each outstanding share entitled to vote shall be entitled to one vote upon each
matter submitted to a vote at a meeting of shareholders.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by either the president of such
corporation or by proxy appointed by him unless the Board of Directors of such
corporation should determine otherwise, in which event any other person
authorized to vote such shares shall produce a certified copy of a resolution of
the Board of Directors of such corporation so indicating.
Shares held by an administrator, executor, guardian, conservator, or
committee may be voted by him, either in person or by proxy, without a transfer
of such shares into his name. Shares standing in the name of a trustee may be
voted by him, either in person or by proxy, but no trustee shall be entitled to
vote shares held by him without a transfer of such shares into his name.
Shares standing in the joint names of three or more fiduciaries shall be
voted in the manner determined by the majority of such fiduciaries, unless the
instrument or order appointing such fiduciaries otherwise directs.
<PAGE>
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
SECTION 12. CUMULATIVE VOTING. At each election for directors each
shareholder entitled to vote at such election shall have the right to cast, in
person or by proxy, as many votes in the aggregate as he shall be entitled to
vote under the corporation's Articles of Incorporation, multiplied by the number
of directors to be elected at such election; and each Shareholder may cast the
whole number of votes for one candidate, or distribute such votes among two or
more candidates.
SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of
the corporation shall be One (1), but may be increased or decreased from time to
time by amendment to this By-Law, but no decrease shall have the effect of
shortening the term of any incumbent director. Each director shall hold office
until the next annual meeting of shareholders and until his successor shall have
been elected and qualified. Directors need not be residents of Kentucky nor
shareholders of the corporation.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this By-Law, immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
Commonwealth of Kentucky, for the holding of additional regular meetings without
notice other than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the president or any two directors. The person
authorized to call special meetings of the Board of Directors may fix any place,
either within or without the Commonwealth of Kentucky, as the place for holding
any special meeting of the Board of Directors called by them.
-13-
<PAGE>
SECTION 5. NOTICE. Notice of any special meeting shall be given at least
two days previously thereto by written notice delivered personally or mailed to
each director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail in a
sealed envelope, so addressed, with postage prepaid. If notice be given by
telegram, such notice shall be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at any meeting shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need to be
specified in the notice or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the Board of Directors fixed by Section 2.
of this Article III shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 8. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken by the Board of Directors, or by a committee thereof, at a meeting may be
taken without a meeting if a consent in writing, setting forth the action taker,
shall be signed by all of the directors, or by all of the members of the
committee, as the case may be. Such consent shall have the same effect as a
unanimous vote.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to file
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the Board of Directors for a term of
office continuing on1y until the next election of the directors by the
shareholders.
SECTION 10. COMPENSATION. Directors, as such, shall receive $50.00 each
meeting as salary for their services. By resolution of the Board of Directors,
each director may be paid his expenses, if any, of attendance at each meeting of
the Board of Directors or any committee thereof. No such payment shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 11. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the entire Board of Directors, may designate
from among its members an executive committee and one or more other committees
each of which, to the extent provided in such resolution, shall have and may
<PAGE>
exercise all the authority of the Board of Directors, but no such committee
shall have the authority of the Board of Directors in reference to amending the
Articles of Incorporation, adopting a plan of merger or consolidation,
recommending to the shareholders the sale, lease, exchange or other disposition
of all or substantially all the property and assets of the corporation otherwise
than in the usual and regular course of business, recommending to the
shareholders a voluntary dissolution of the corporation or a revocation thereof,
or amending the By-Laws.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be a president,
secretary and treasurer, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be deemed necessary
may be elected or appointed by the Board of Directors. Any two or more offices
may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation to
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of shareholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as practicable. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
of agent shall not of itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. PRESIDENT. The president shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the secretary
or any other proper officer of the corporation thereunto authorized by the Board
of Directors, certificates for shares of the corporation, and deeds, mortgages,
bonds, contracts, or other
<PAGE>
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these By-Laws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of president and such
other duties as may be prescribed by the Board of Directors from time to time.
SECTION 6. SECRETARY. The secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all certificates for shares prior
to the issue thereof and to all documents the execution of which on behalf of
the corporation under its seal is duly authorized; (d) keep a register of the
post office address of each shareholder which shall be furnished to the
secretary by such shareholder; (e) sign with the president, certificates for
shares of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of secretary and such other duties as from time to time
may be assigned to him by the president or by the Board of Directors.
SECTION 7. TREASURER. The treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) receive
and give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article V of the By-Laws; (c) in general perform all
duties incident to the office of treasurer and such other duties as from time to
time may be assigned to him by the president or by the Board of Directors. If
required by the Board of Directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the Board of Directors shall determine.
SECTION 8. SALARIES. The salaries of the officers shall be fixed from time
to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation
and no evidence of indebtedness shall be issued in its name unless authorized by
a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
<PAGE>
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents, of
the corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as the Board of Directors may
select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the president and by the
secretary and sealed with the corporate seal or a facsimile thereof. The
signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar,
other than the corporation itself or one of its employees. Each certificate for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the corporation. All certificates surrendered to the corporation for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancelled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the Board of Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of December
and end on the 30th day of November in each year.
<PAGE>
ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles of Incorporation.
ARTICLE IX
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "Corporate Seal."
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or director
of the corporation under the provisions of these By-Laws, or under the
provisions of the Articles of Incorporation, or under the provisions of the
Kentucky Business Corporation Act, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall indemnify each of its directors and officers who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Except as provided herein below, any such indemnification shall be made by
the corporation only as authorized in the specific case upon a determination
that indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth above. Such
-15-
<PAGE>
determination shall be made: (a) by the Board of Directors by a majority vote of
a quorum of directors who were or are not parties to such actions, suit, or
proceeding, or (b) by the shareholders.
Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action., or proceeding if authorized by the Board
of Directors and upon receipt of an undertaking by or on behalf of the director
or officer to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified by the corporation.
To the extent that a director or officer has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to above, or
in defense of any claim issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without any further determination that he has met the
applicable standard of conduct set forth above.
ARTICLE XII
AMENDMENTS
The shareholders may alter, amend or repeal the By-Laws at any annual or
special meeting of shareholders at which a majority of the outstanding shares of
the corporation is present by the vote of such majority, provided that the
notice of such meeting shall have included notice of such proposed amendment.
The Board of Directors shall have the power and authority to alter, amend or
repeal By-Laws of the corporation at any regular or special meeting at which a
quorum is present by the vote of a majority of the entire Board of Directors,
subject always to the power of the shareholders under Kentucky law to repeal or
change such By-Laws.
CERTIFICATE OF FORMATION
OF
ROYSTER-CLARK RESOURCES LLC
The undersigned, an authorized person, for the purpose of forming a limited
liability company, under the provisions and subject to the requirements of the
State of Delaware (particularly Chapter 18, Title 6 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "Delaware Limited Liability Company Act") hereby certifies
that:
FIRST: The name of the limited liability company (hereinafter called the
"limited liability company") is "Royster-Clark Resources LLC".
SECOND: The address of the limited liability company's registered office in
the State of Delaware is 1209 Orange Street, Wilmington, New Castle County,
Delaware 19805. The name of the limited liability company's registered agent for
service of process in the State of Delaware at such address is Corporation Trust
Company.
IN WITNESS WHEREOF, the undersigned authorized person has executed this
Certificate of Formation this 21st day of April, 1999.
/s/ Mark D. Perry
----------------------------
Mark D. Perry
Authorized Person
LIMITED LIABILITY COMPANY AGREEMENT
OF
ROYSTER-CLARK RESOURCES LLC
LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement"), dated as of April
21, 1999 by IMC AgriBusiness, Inc., a Delaware corporation ("AgriBusiness"), the
foregoing being the sole member ("Member") of Royster-Clark Resources LLC, a
Delaware limited liability company (the "LLC").
NOW, THEREFORE, the Member, intending to be legally bound, agrees as
follows:
Section 1.1 Formation. The term of the LLC commenced on April 21, 1999 with
the filing of a Certificate of Formation with the Secretary of State of the
State of Delaware pursuant to the Delaware Limited Liability Company Act,
Delaware Code, Title 6, Sections 18-101, et seq, as in effect from time to time
(the "Act").
Section 1.2 Name. The name of the LLC shall be "Royster-Clark Resources
LLC" or such other name or names as the Member may from time to time designate;
provided, that the name shall always contain the words "Limited Liability
Company," "L.L.C." or "LLC."
Section 1.3 Purpose. The LLC is organized for any lawful business purpose
or activity which may be conducted by a limited liability company under the Act,
provided, however, that prior to the closing under the Stock Purchase Agreement
dated as of January 21, 1999 among IMC Global Inc., a Delaware corporation, The
Vigoro Corporation, a Delaware corporation, and R-C Delaware Acquisition Inc., a
Delaware corporation, the LLC shall take no actions other than the receipt of
inventory and receivables and those relating to its qualification as a foreign
limited liability company in those states where real estate owned by the Member
is located.
Section 1.4 Management. The LLC shall be managed and the conduct of its
business will be controlled by the Member. The LLC shall have such officers as
the Member shall determine from time to time. The original officers of the LLC
shall be
Francis P. Jenkins Chairman and Chief Executive Officer
Ken Moshenek President and Assistant Secretary
Paul Murphy Vice-President and Assistant Secretary
Walter Vance Vice-President and Secretary
Section 1.5 Distributions. All distributions of cash or other property, in
liquidation or otherwise, shall be made by the LLC to the Member.
Section 1.6 Tax Matters. AgriBusiness shall act as the tax matters partner
(the "Tax Matters Partner") (as defined in Section 6231(a)(7) of the United
States Internal Revenue Code of 1986, as amended from time to time (the "Code"))
in accordance with Sections 6221 through 6233 of the Code.
<PAGE>
Section 1.7 Governing Law; Severability. This Agreement shall be construed
in accordance with the laws of the State of Delaware. If it is determined by a
court of competent jurisdiction that any provision of this Agreement is invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
IN WITNESS WHEREOF, the Member has caused this Agreement to be signed as of
the date first above written.
IMC AGRIBUSINESS, INC.
By: /s/ Lynn F. White
----------------------------
Name: Lynn F. White
Title: Sr. VP
CERTIFICATE OF FORMATION
OF
ROYSTER-CLARK REALTY LLC
The undersigned, an authorized person, for the purpose of forming a limited
liability company, under the provisions and subject to the requirements of the
State of Delaware (particularly Chapter 18, Title 6 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "Delaware Limited Liability Company Act") hereby certifies
that:
FIRST: The name of the limited liability company (hereinafter called the
"limited liability company") is "Royster-Clark Realty LLC".
SECOND: The address of the limited liability company's registered office in
the State of Delaware is 1209 Orange Street, Wilmington, New Castle County,
Delaware 19805. The name of the limited liability company's registered agent for
service of process in the State of Delaware at such address is Corporation Trust
Company.
IN WITNESS WHEREOF, the undersigned authorized person has executed this
Certificate of Formation this 15th day of April, 1999.
/s/ Mark D. Perry
---------------------
Mark D. Perry
Authorized Person
LIMITED LIABILITY COMPANY AGREEMENT
OF
ROYSTER-CLARK REALTY LLC
LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement"), dated as of April
16, 1999 by Royster-Clark, Inc., a Delaware corporation ("RCI"), the foregoing
being the sole member ("Member") of Royster-Clark Realty LLC, a Delaware limited
liability company (the "LLC").
NOW, THEREFORE, the Member, intending to be legally bound, agrees as
follows:
Section 1.1 Formation. The term of the LLC commenced on April 15, 1998 with
the filing of a Certificate of Formation with the Secretary of State of the
State of Delaware pursuant to the Delaware Limited Liability Company Act,
Delaware Code, Title 6, Sections 18-101, et seq, as in effect from time to time
(the "Act").
Section 1.2 Name. The name of the LLC shall be "Royster-Clark Realty LLC"
or such other name or names as the Member may from time to time designate;
provided, that the name shall always contain the words "Limited Liability
Company," "L.L.C." or "LLC."
Section 1.3 Purpose. The LLC is organized for any lawful business purpose
or activity which may be conducted by a limited liability company under the Act.
Section 1.4 Management. The LLC shall be managed and the conduct of its
business will be controlled by the Member. The LLC shall have such officers as
the Member shall determine from time to time. The original officers of the LLC
shall be
Francis P. Jenkins Chairman and Chief Executive Officer
Ken Moshenek President and Assistant Secretary
Paul Murphy Vice-President and Assistant Secretary
Walter Vance Vice-President and Secretary
Section 1.5 Distributions. All distributions of cash or other property, in
liquidation or otherwise, shall be made by the LLC to the Member.
Section 1.6 Tax Matters. RCI shall act as the tax matters partner (the "Tax
Matters Partner") (as defined in Section 6231(a)(7) of the United States
Internal Revenue Code of 1986, as amended from time to time (the "Code")) in
accordance with Sections 6221 through 6233 of the Code.
<PAGE>
Section 1.7 Governing Law; Severability. This Agreement shall be construed
----------------------------
in accordance with the laws of the State of Delaware. If it is determined by a
court of competent jurisdiction that any provision of this Agreement is invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
IN WITNESS WHEREOF, the Member has caused this Agreement to be signed as of
the date first above written.
ROYSTER-CLARK, INC.
By: /s/ Francis P. Jenkins
----------------------------
Francis P. Jenkins, Chairman and
Chief Executive Officer
CERTIFICATE OF FORMATION
OF
ROYSTER-CLARK AGRIBUSINESS REALTY, LLC
The undersigned, an authorized person, for the purpose of forming a limited
liability company, under the provisions and subject to the requirements of the
State of Delaware (particularly Chapter 18, Title 6 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "Delaware Limited Liability Company Act") hereby certifies
that:
FIRST: The name of the limited liability company (hereinafter called the
"limited liability company") is "Royster-Clark AgriBusiness Realty LLC".
SECOND: The address of the limited liability company's registered office in
the State of Delaware is 1209 Orange Street, Wilmington, New Castle County,
Delaware 19805. The name of the limited liability company's registered agent for
service of process in the State of Delaware at such address is Corporation Trust
Company.
IN WITNESS WHEREOF, the undersigned authorized person has executed this
Certificate of Formation this 15th day of April, 1999.
/s/ Mark D. Perry
---------------------
Mark D. Perry
Authorized Person
LIMITED LIABILITY COMPANY AGREEMENT
OF
ROYSTER-CLARK AGRIBUSINESS REALTY LLC
LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement"), dated as of April
---------
16, 1999 by IMC AgriBusiness Inc., a Delaware corporation ("Agribusiness"), the
foregoing being the sole member ("Member") of Royster-Clark AgriBusiness Realty
------
LLC, a Delaware limited liability company (the "LLC").
---
NOW, THEREFORE, the Member, intending to be legally bound, agrees as
follows:
Section 1.1 Formation. The term of the LLC commenced on April 15, 1998 with
---------
the filing of a Certificate of Formation with the Secretary of State of the
State of Delaware pursuant to the Delaware Limited Liability Company Act,
Delaware Code, Title 6, Sections 18-101, et seq, as in effect from time to time
(the "Act").
---
Section 1.2 Name. The name of the LLC shall be "Royster-Clark Agribusiness
----
Realty LLC" or such other name or names as the Member may from time to time
designate; provided, that the name shall always contain the words "Limited
--------
Liability Company," "L.L.C." or "LLC."
Section 1.3 Purpose. The LLC is organized for any lawful business purpose
-------
or activity which may be conducted by a limited liability company under the Act,
provided, however, that prior to the closing under the Stock Purchase Agreement
dated as of January 21, 1999 among IMC Global Inc., a Delaware corporation, The
Vigoro Corporation, a Delaware corporation, and R-C Delaware Acquisition Inc., a
Delaware corporation, the LLC shall take no actions other than those relating to
its qualification as foreign limited liability company in those states where
real estate owned by the Member is located.
Section 1.4 Management. The LLC shall be managed and the conduct of its
----------
business will be controlled by the Member. The LLC shall have such officers as
the Member shall determine from time to time. The original officers of the LLC
shall be
Francis P. Jenkins Chairman and Chief Executive Officer
Ken Moshenek President and Assistant Secretary
Paul Murphy Vice-President and Assistant Secretary
Walter Vance Vice-President and Secretary
Section 1.5 Distributions. All distributions of cash or other property, in
-------------
liquidation or otherwise, shall be made by the LLC to the Member.
Section 1.6 Tax Matters. AgriBusiness shall act as the tax matters partner
-----------
(the "Tax Matters Partner") (as defined in Section 6231(a)(7) of the United
-------------------
States Internal Revenue Code of 1986, as amended from time to time (the "Code"))
----
in accordance with Sections 6221 through 6233 of the Code.
<PAGE>
Section 1.7 Governing Law; Severability. This Agreement shall be construed
---------------------------
in accordance with the laws of the State of Delaware. If it is determined by a
court of competent jurisdiction that any provision of this Agreement is invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
IN WITNESS WHEREOF, the Member has caused this Agreement to be signed as of
the date first above written.
IMC AGRIBUSINESS INC.
By: /s/ Lynn F. White
---------------------------------
Name: Lynn F. White
Title: Senior Vice President
CERTIFICATE OF FORMATION
OF
ROYSTER-CLARK HUTSON'S REALTY LLC
The undersigned, an authorized person, for the purpose of forming a limited
liability company, under the provisions and subject to the requirements of the
State of Delaware (particularly Chapter 18, Title 6 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "Delaware Limited Liability Company Act") hereby certifies
that:
FIRST: The name of the limited liability company (hereinafter called the
"limited liability company") is "Royster-Clark Hutson's Realty LLC".
SECOND: The address of the limited liability company's registered office in
the State of Delaware is 1209 Orange Street, Wilmington, New Castle County,
Delaware 19805. The name of the limited liability company's registered agent for
service of process in the State of Delaware at such address is Corporation Trust
Company.
IN WITNESS WHEREOF, the undersigned authorized person has executed this
Certificate of Formation this 15th day of April, 1999.
/s/ Mark D. Perry
-----------------------------------
Mark D. Perry
Authorized Person
LIMITED LIABILITY COMPANY AGREEMENT
OF
ROYSTER-CLARK HUTSON'S REALTY LLC
LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement"), dated as of April
16, 1999 by Hutson's Ag Service, Inc., a Kentucky corporation ("Hutson"), the
foregoing being the sole member ("Member") of Royster-Clark Hutson's Realty LLC,
a Delaware limited liability company (the "LLC").
NOW, THEREFORE, the Member, intending to be legally bound, agrees as
follows:
Section 1.1 Formation. The term of the LLC commenced on April 15, 1998 with
---------
the filing of a Certificate of Formation with the Secretary of State of the
State of Delaware pursuant to the Delaware Limited Liability Company Act,
Delaware Code, Title 6, Sections 18-101, et seq, as in effect from time to time
(the "Act").
Section 1.2 Name. The name of the LLC shall be "Royster-Clark Hutson's
----
Realty LLC" or such other name or names as the Member may from time to time
designate; provided, that the name shall always contain the words "Limited
Liability Company," "L.L.C." or "LLC."
Section 1.3 Purpose. The LLC is organized for any lawful business purpose
-------
or activity which may be conducted by a limited liability company under the Act,
provided, however, that prior to the closing under the Stock Purchase Agreement
dated as of January 21, 1999 among IMC Global Inc., a Delaware corporation, The
Vigoro Corporation, a Delaware corporation, and R-C Delaware Acquisition Inc., a
Delaware corporation, the LLC shall take no actions other than those relating to
its qualification as foreign limited liability company in those states where
real estate owned by the Member is located.
Section 1.4 Management. The LLC shall be managed and the conduct of its
----------
business will be controlled by the Member. The LLC shall have such officers as
the Member shall determine from time to time. The original officers of the LLC
shall be
Francis P. Jenkins Chairman and Chief Executive Officer
Ken Moshenek President and Assistant Secretary
Paul Murphy Vice-President and Assistant Secretary
Walter Vance Vice-President and Secretary
Section 1.5 Distributions. All distributions of cash or other property, in
-------------
liquidation or otherwise, shall be made by the LLC to the Member.
Section 1.6 Tax Matters. Hutson shall act as the tax matters partner (the
-----------
"Tax Matters Partner") (as defined in Section 6231(a)(7) of the United States
-------------------
Internal Revenue Code of 1986, as amended from time to time (the "Code")) in
----
accordance with Sections 6221 through 6233 of the Code.
<PAGE>
Section 1.7 Governing Law; Severability. This Agreement shall be construed
---------------------------
in accordance with the laws of the State of Delaware. If it is determined by a
court of competent jurisdiction that any provision of this Agreement is invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
IN WITNESS WHEREOF, the Member has caused this Agreement to be signed as of
the date first above written.
HUTSON'S AG SERVICE, INC.
By: /s/ Lynn F. White
----------------------------
Name: Lynn F. White
Title: Senior Vice President
CERTIFICATE OF FORMATION
OF
ROYSTER-CLARK NITROGEN REALTY LLC
The undersigned, an authorized person, for the purpose of forming a limited
liability company, under the provisions and subject to the requirements of the
State of Delaware (particularly Chapter 18, Title 6 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "Delaware Limited Liability Company Act") hereby certifies
that:
FIRST: The name of the limited liability company (hereinafter called the
"limited liability company") is "Royster-Clark Nitrogen Realty LLC".
SECOND: The address of the limited liability company's registered office in
the State of Delaware is 1209 Orange Street, Wilmington, New Castle County,
Delaware 19805. The name of the limited liability company's registered agent for
service of process in the State of Delaware at such address is Corporation Trust
Company.
IN WITNESS WHEREOF, the undersigned authorized person has executed this
Certificate of Formation this 15th day of April, 1999.
/s/ Mark D. Perry
------------------------
Mark D. Perry
Authorized Person
LIMITED LIABILITY COMPANY AGREEMENT
OF
ROYSTER-CLARK NITROGEN REALTY LLC
LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement"), dated as of
April 16,1999 by IMC Nitrogen Inc., a Delaware corporation ("Nitrogen"), the
foregoing being the sole member ("Member") of Royster-Clark Nitrogen Realty LLC,
a Delaware limited liability company (the "LLC").
NOW, THEREFORE, the Member, intending to be legally bound, agrees as
follows:
Section 1.1 Formation. The term of the LLC commenced on April 15, 1998 with
the filing of a Certificate of Formation with the Secretary of State of the
State of Delaware pursuant to the Delaware Limited Liability Company Act,
Delaware Code, Title 6, Sections 18-101, et seq, as in effect from time to time
(the "Act").
Section 1.2 Name. The name of the LLC shall be "Royster-Clark Nitrogen
Realty LLC" or such other name or names as the Member may from time to time
designate; provided, that the name shall always contain the words "Limited
Liability Company," "L.L.C." or "LLC."
Section 1.3 Purpose. The LLC is organized for any lawful business purpose
or activity which may be conducted by a limited liability company under the Act,
provided, however, that prior to the closing under the Stock Purchase Agreement
dated as of January 21, 1999 among IMC Global Inc., a Delaware corporation, The
Vigoro Corporation, a Delaware corporation, and R-C Delaware Acquisition Inc., a
Delaware corporation, the LLC shall take no actions other than those relating to
its qualification as foreign limited liability company in those states where
real estate owned by the Member is located.
Section 1.4 Management. The LLC shall be managed and the conduct of its
business will be controlled by the Member. The LLC shall have such officers as
the Member shall determine from time to time. The original officers of the LLC
shall be
Francis P. Jenkins Chairman and Chief Executive Officer
Ken Moshenek President and Assistant Secretary
Paul Murphy Vice-President and Assistant Secretary
Walter Vance Vice-President and Secretary
Section 1.5 Distributions. All distributions of cash or other property, in
liquidation or otherwise, shall be made by the LLC to the Member.
Section 1.6 Tax Matters. Nitrogen shall act as the tax matters partner (the
"Tax Matters Partner") (as defined in Section 6231(a)(7) of the United States
Internal Revenue Code of 1986, as amended from time to time (the "Code")) in
accordance with Sections 6221 through 6233 of the Code.
<PAGE>
Section 1.7 Governing Law; Severability. This Agreement shall be construed
in accordance with the laws of the State of Delaware. If it is determined by a
court of competent jurisdiction that any provision of this Agreement is invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
IN WITNESS WHEREOF, the Member has caused this Agreement to be signed as of
the date first above written.
IMC NITROGEN INC.
By: /s/ Lynn F. White
----------------------------
Name: Lynn F. White
Title: Senior Vice President
-2-
ROYSTER-CLARK, INC.
ROYSTER-CLARK GROUP, INC.
ROYSTER-CLARK REALTY LLC
ROYSTER-CLARK AGRIBUSINESS REALTY LLC
ROYSTER-CLARK HUTSON'S REALTY LLC
ROYSTER-CLARK NITROGEN REALTY LLC
ROYSTER-CLARK RESOURCES LLC
IMC AGRIBUSINESS, INC.
HUTSON'S AG SERVICES, INC.
IMC NITROGEN COMPANY
10 1/4% FIRST MORTGAGE NOTES DUE 2009
INDENTURE
Dated as of April 22, 1999
United States Trust Company of New York
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310(a)(1)........................................ 7.10
(a)(2)........................................ 7.10
(a)(3)........................................ N.A.
(a)(4)........................................ N.A.
(a)(5)........................................ 7.10
(b)........................................... 7.10
(c)........................................... N.A.
311(a)........................................... 7.11
(b)........................................... 7.11
(c)........................................... N.A.
312(a)........................................... 2.05
(b)........................................... 12.03
(c)........................................... 12.03
313(a)........................................... 7.06
(b)(1)........................................ 10.03
(b)(2)........................................ 7.07
(c)........................................... 7.06;12.02
(d)........................................... 7.06
314(a)........................................... 4.03;12.02
(b)........................................... 10.02
(c)(1)........................................ 12.04
(c)(2)........................................ 12.04
(c)(3)........................................ N.A.
(d)........................................... 10.03,10.04,
10.05
(e)........................................... 12.05
(f)........................................... N.A.
315(a)........................................... 7.01
(b)........................................... 7.05,12.02
(c)........................................... 7.01
(d)........................................... 7.01
(e)........................................... 6.11
316(a) (last sentence)........................... 2.09
(a)(1)(A)..................................... 6.05
(a)(1)(B)..................................... 6.04
(a)(2)........................................ N.A.
(b)........................................... 6.07
(c)........................................... 2.12
317(a)(1)........................................ 6.08
(a)(2)........................................ 6.09
(b)........................................... 2.04
318(a)........................................... 12.01
(b)........................................... N.A.
(c)........................................... 12.01
N.A. means not applicable.
* This Cross Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions ..................................... 1
Section 1.02. Other Definitions ............................... 19
Section 1.03. Incorporation by Reference of Trust Indenture Act 20
Section 1.04. Rules of Construction ........................... 20
ARTICLE 2. THE FIRST MORTGAGE NOTES
Section 2.01. Form and Dating ................................. 20
Section 2.02. Execution and Authentication .................... 21
Section 2.03. Registrar and Paying Agent ...................... 22
Section 2.04. Paying Agent to Hold Money in Trust ............. 22
Section 2.05. Holder Lists .................................... 23
Section 2.06. Transfer and Exchange ........................... 23
Section 2.07. Replacement First Mortgage Notes ................ 34
Section 2.08. Outstanding First Mortgage Notes ................ 34
Section 2.09. Treasury First Mortgage Notes ................... 34
Section 2.10. Temporary First Mortgage Notes .................. 35
Section 2.11. Cancellation .................................... 35
Section 2.12. Defaulted Interest .............................. 35
ARTICLE 3. REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee .............................. 36
Section 3.02. Selection of First Mortgage Notes to Be
Redeemed ....................................... 36
Section 3.03. Notice of Redemption ............................ 36
Section 3.04. Effect of Notice of Redemption .................. 37
Section 3.05. Deposit of Redemption Price ..................... 37
Section 3.06. First Mortgage Notes Redeemed in Part ........... 38
Section 3.07. Optional Redemption ............................. 38
Section 3.08. Mandatory Redemption ............................ 38
Section 3.09. Offer to Purchase by Application of Excess
Proceeds ....................................... 39
ARTICLE 4. COVENANTS
Section 4.01. Payment of First Mortgage Notes ................. 40
Section 4.02. Maintenance of Office or Agency ................. 40
Section 4.03. Reports ......................................... 41
Section 4.04. Compliance Certificate .......................... 41
Section 4.05. Taxes ........................................... 42
Section 4.06. Stay, Extension and Usury Laws .................. 42
Section 4.07. Restricted Payments ............................. 42
Section 4.08. Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries .............. 45
Section 4.09. Incurrence of Indebtedness and Issuance of
Preferred Stock ................................ 46
Section 4.10. Asset Sales ..................................... 49
Section 4.11. Transactions with Affiliates .................... 50
Section 4.12. Liens ........................................... 51
i
<PAGE>
Section 4.13. Line of Business ................................ 51
Section 4.14. Corporate Existence ............................. 51
Section 4.15. Offer to Repurchase Upon Change of Control ...... 51
Section 4.16. Sale of Nitrogen Facility ....................... 52
Section 4.17. Limitation on Sale and Leaseback Transactions ... 53
Section 4.18. Limitation on Issuances and Sales of Capital
Stock of Wholly Owned Restricted Subsidiaries .. 53
Section 4.19. Advances to Subsidiaries ........................ 53
Section 4.20. Payments for Consent ............................ 54
Section 4.21. Additional Guarantees ........................... 54
Section 4.22. Master Conveyance Agreement ..................... 54
ARTICLE 5. SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets ........ 55
Section 5.02. Successor Corporation Substituted ............... 55
ARTICLE 6. DEFAULTS AND REMEDIES
Section 6.01. Events of Default ............................... 56
Section 6.02. Acceleration .................................... 57
Section 6.03. Other Remedies .................................. 58
Section 6.04. Waiver of Past Defaults ......................... 58
Section 6.05. Control by Majority ............................. 59
Section 6.06. Limitation on Suits ............................. 59
Section 6.07. Rights of Holders of First Mortgage Notes to
Receive Payment ................................ 59
Section 6.08. Collection Suit by Trustee ...................... 59
Section 6.09. Trustee May File Proofs of Claim ................ 60
Section 6.10. Priorities ...................................... 60
Section 6.11. Undertaking for Costs ........................... 60
ARTICLE 7. TRUSTEE
Section 7.01. Duties of Trustee................................ 61
Section 7.02. Rights of Trustee ............................... 62
Section 7.03. Individual Rights of Trustee .................... 62
Section 7.04. Trustee's Disclaimer ............................ 62
Section 7.05. Notice of Defaults .............................. 62
Section 7.06. Reports by Trustee to Holders of the First
Mortgage Notes ................................. 63
Section 7.07. Compensation and Indemnity ...................... 63
Section 7.08. Replacement of Trustee .......................... 64
Section 7.09. Successor Trustee by Merger, etc ................ 65
Section 7.10. Eligibility; Disqualification ................... 65
Section 7.11. Preferential Collection of Claims Against
Company ........................................ 65
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance ..................................... 65
Section 8.02. Legal Defeasance and Discharge .................. 65
Section 8.03. Covenant Defeasance ............................. 66
Section 8.04. Conditions to Legal or Covenant Defeasance ...... 66
ii
<PAGE>
Section 8.05. Deposited Money and Government Securities to
be Held in Trust; Other Miscellaneous
Provisions ..................................... 67
Section 8.06. Repayment to Company ............................ 68
Section 8.07. Reinstatement ................................... 68
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of First Mortgage
Notes .......................................... 68
Section 9.02. With Consent of Holders of First Mortgage
Notes .......................................... 69
Section 9.03. Compliance with Trust Indenture Act ............. 71
Section 9.04. Revocation and Effect of Consents ............... 71
Section 9.05. Notation on or Exchange of First Mortgage
Notes .......................................... 71
Section 9.06. Trustee to Sign Amendments, etc ................. 71
ARTICLE 10. COLLATERAL AND SECURITY
Section 10.01. Security Agreements ............................ 72
Section 10.02. Recording and Opinions ......................... 72
Section 10.03. Release of Collateral .......................... 73
Section 10.04. Certificates of the Company .................... 73
Section 10.05. Certificates of the Trustee .................... 74
Section 10.06. Authorization of Actions to Be Taken by the
Trustee Under the Security Agreements ......... 74
Section 10.07. Authorization of Receipt of Funds by the
Trustee Under the Security Agreements ......... 74
Section 10.08. Impact of Event of Default ..................... 74
Section 10.09. Termination of Security Interest ............... 75
ARTICLE 11. GUARANTEES
Section 11.01. Guarantee ...................................... 75
Section 11.02. Limitation on Guarantor Liability .............. 76
Section 11.03. Execution and Delivery of Guarantee ............ 76
Section 11.04. Guarantors May Consolidate, etc., on Certain
Terms ......................................... 77
Section 11.05. Releases Following Sale of Assets .............. 77
ARTICLE 12. MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls ................... 78
Section 12.02. Notices ........................................ 78
Section 12.03. Communication by Holders of First Mortgage
Notes with Other Holders of First Mortgage
Notes.......................................... 79
Section 12.04. Certificate and Opinion as to Conditions
Precedent ..................................... 79
Section 12.05. Statements Required in Certificate or
Opinion ....................................... 79
Section 12.06. Rules by Trustee and Agents .................... 80
Section 12.07. No Personal Liability of Directors,
Officers, Employees and Stockholders .......... 80
Section 12.08. Governing Law .................................. 80
Section 12.09. No Adverse Interpretation of Other
Agreements..................................... 80
Section 12.10. Successors ..................................... 80
Section 12.11. Severability ................................... 80
Section 12.12. Counterpart Originals .......................... 81
iii
<PAGE>
Section 12.13. Table of Contents, Headings, etc ............... 81
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF GUARANTEE
Exhibit E FORM OF SUPPLEMENTAL INDENTURE
Exhibit F FORM OF SECURITY AGREEMENTS
Exhibit G FORM OF SUBSIDIARY INTERCOMPANY NOTE
Exhibit H SCHEDULE OF GUARANTORS
iv
<PAGE>
INDENTURE dated as of April 22, 1999 among Royster-Clark, Inc., a Delaware
corporation (the "Company"), the corporations listed on Exhibit H hereto (each a
"Guarantor" and collectively, the "Guarantors") and United States Trust Company
of New York, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 10 1/4% First
Mortgage Notes due 2009 (the "Series A First Mortgage Notes") and the 10 1/4%
First Mortgage Notes due 2009 (the "Series B First Mortgage Notes" and, together
with the Series A First Mortgage Notes, the "First Mortgage Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01 Definitions.
"399 Ventures" means 399 Venture Partners, Inc., an affiliate of Citicorp
Venture Capital Ltd.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Restricted Subsidiary of, such specified Person; provided, that Indebtedness of
such other Person that is redeemed, defeased, retired or otherwise repaid at the
time, or immediately upon consummation, of the transaction by which such other
person is merged with or into or became a Restricted Subsidiary of such Person
shall not be Acquired Debt and (ii) Indebtedness secured by a Lien encumbering
any asset acquired by such specified Person.
"Additional First Mortgage Notes" means up to $10.0 million aggregate
principal amount of First Mortgage Notes (other than the Initial First Mortgage
Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09
hereof, as part of the same series as the Initial First Mortgage Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control",
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights, other than sales of inventory and equipment in the
ordinary course of business consistent with past practices and other than a
Receivables Transaction; provided that the sale, conveyance or other disposition
of all or substantially all of the assets of the Company and its Restricted
<PAGE>
Subsidiaries taken as a whole will be governed by Section 4.15 hereof and/or the
provisions described in Section 5.01 hereof and not by the provisions of Section
4.10 hereof; provided further, that (a) the sale, conveyance or other
disposition of all or substantially all of the assets constituting the Company's
East Dubuque, Illinois nitrogen facility or of the Equity Interests of any
Subsidiary which directly or indirectly owns such facility or (b) the sale,
conveyance or other disposition of all or substantially all of the assets
constituting such East Dubuque facility together with all or substantially all
of the assets constituting the Company's Cincinnati, Ohio nitrogen facility or
any Subsidiary or Subsidiaries which own directly or indirectly such facilities,
in each case in accordance with the Security Agreements, shall be governed by
Section 4.16 hereof and not by the provisions of Section 4.10 hereof and (ii)
the issuance of Equity Interests by any of the Company's Restricted Subsidiaries
or the sale of Equity Interests in any of its Restricted Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales: (i) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million; (ii) a
transfer of assets between or among the Company and its Wholly Owned
Subsidiaries, (iii) an issuance of Equity Interests by a Wholly Owned Subsidiary
to the Company or to another Wholly Owned Subsidiary; (iv) the sale or lease of
equipment, inventory, accounts receivable or other assets in the ordinary course
of business including dispositions of assets that are obsolete or no longer
useful in the business consistent with past practices; (v) the sale or other
disposition of cash or Cash Equivalents; and (vi) a Restricted Payment or
Permitted Investment that is permitted by the covenant described in Section 4.07
hereof.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"Board of Directors" means (i) with respect to a corporation, the board of
directors of the corporation, (ii) with respect to a partnership, the Board of
Directors of the general partner of the partnership and (iii) with respect to
any other Person, the board or committee of such Person serving a similar
function.
"Borrowing Base" means, as of any date, an amount equal to (i) 80% (or 85%
during the months of September, October and November) of the face amount of net
regular accounts receivable owned by the Company and its Restricted Subsidiaries
determined in accordance with GAAP, plus (ii) 70% (or 75% during the months of
September, October and November) of the face amount of net crop/extended term
receivables owned by the Company and its Subsidiaries determined by the Company
in good faith and in accordance with past practice, plus (iii) 65% (or 70%
2
<PAGE>
during the months of September, October and November) of the net book value of
all inventory owned by the Company and its Restricted Subsidiaries determined in
accordance with GAAP.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any lender party to the Credit
Agreement or with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) obligations issued or fully guaranteed by any state of the
United States or any political subdivision of any such state or any public
instrumentality thereof maturing within six months from the date of acquisition
thereof and at the time of acquisition, having one of the two highest ratings
obtainable from either Moody's Investors Service, Inc. or Standard & Poor's
Rating Services; (vi) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each
case maturing within six months after the date of acquisition; and (vii) money
market funds at least 95% of the assets of which constitute Cash Equivalents of
the kinds described in clauses (i) through (vi) of this definition.
"Cedel" means Cedel Bank, SA.
"Certificated Note" means a certificated First Mortgage Note registered in
the name of the Holder thereof and issued in accordance with Section 2.06
hereof, substantially in the form of Exhibit A-1 hereto except that such First
Mortgage Note shall not bear the Global Note Legend and shall not have the
"Schedule of Exchanges of Interests in the Global Note" attached thereto.
"Change of Control" means the occurrence of any of the following: (i) the
direct or indirect sale, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related transactions,
of all or substantially all of the properties or assets of the Company and its
Subsidiaries taken as a whole to any "person" (as that term is used in Section
13(d)(3) of the Exchange Act) other than the Company, any Wholly-Owned
Restricted Subsidiary of the Company, a Principal or a Related Party of a
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Principal; (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company; (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals and their
Related Parties, becomes the Beneficial Owner, directly or indirectly, of more
than 50% of the Voting Stock and the stock convertible into Voting Stock of the
Company, measured by voting power rather than number of shares; (iv) during any
period in which neither the Company nor Royster-Clark Group is a public
reporting company under the Securities and Exchange Act of 1934, as amended, the
consummation of the first transaction (including, without limitation, any merger
or consolidation) the result of which is that any "person" (as defined above)
becomes the Beneficial Owner, directly or indirectly, of more of the Voting
Stock and stock convertible into Voting Stock of the Company (measured by voting
power rather than number of shares) than is at the time Beneficially Owned by
CVC, 399 Ventures and their Related Parties in the aggregate; or (v) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors.
"Collateral" means the PPE and the pledge of all of the equity interests of
the Special Purpose Restricted Subsidiaries.
"Collateral Agent" means United States Trust Company of New York.
"Company" means Royster-Clark, Inc., and any and all successors thereto.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
April 1, 2009 that would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining life of the First Mortgage
Notes.
"Comparable Treasury Price" means, with respect to any date of redemption,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such date of redemption, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities," or (ii) if such release (or any successor release) is
not published or does not contain such prices on such business day, the average
of the Reference Treasury Dealer Quotations.
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized by such
Person or any of its Restricted Subsidiaries in connection with an Asset Sale,
to the extent such losses were deducted in computing such Consolidated Net
Income, plus (ii) provision for taxes based on income or profits of such Person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income, plus
(iii) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net of the
effect of all payments made or received pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus (iv) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses that
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were paid in a prior period) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Restricted Subsidiaries
for such period to the extent that such depreciation, amortization and other
non-cash expenses were deducted in computing such Consolidated Net Income, minus
(iv) non-cash items increasing such Consolidated Net Income for such period,
other than the accrual of revenue in the ordinary course of business, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash expenses
of, a Restricted Subsidiary of the Company shall be added to Consolidated Net
Income to compute Consolidated Cash Flow of the Company only to the extent that
a corresponding amount would be permitted at the date of determination to be
dividend to the Company by such Restricted Subsidiary without prior governmental
approval (that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any specified Person as of
any date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Restricted Subsidiaries (not including
Royster-Clark Group with respect to the Company) as of such date, plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agreement" means that certain Credit Agreement, dated as of April
22, 1999, by and among the Company, DLJ Capital Funding as manager and
syndication agent and the parties thereto, providing for up to $275.0 million of
revolving credit borrowings, including any related notes, guarantees, collateral
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documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Custodian" means the Trustee, as custodian with respect to the First
Mortgage Notes in global form, or any successor entity thereto.
"CVC" means Citicorp Venture Capital Ltd., a New York corporation, or any
successor thereto by merger or consolidation.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Depositary" means, with respect to the First Mortgage Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the First Mortgage Notes, and any and
all successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the First Mortgage Notes mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the Company to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described in Section 4.07 hereof.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
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"Excluded Assets" means all of the accounts receivable, inventory, certain
general intangibles and certain other tangible and intangible property and
assets of the Company and its subsidiaries and the common stock of the Company
and its subsidiaries (other than the pledge of all of the equity interests of
Royster-Clark Realty LLC, Royster-Clark AgriBusiness LLC, Royster-Clark Nitrogen
Realty LLC and Royster-Clark Hutson's Realty LLC), which will secure the
Company's and the Guarantors' obligations under the Credit Agreement.
"Existing Indebtedness" means up to $7.1 million in aggregate principal
amount of Indebtedness of the Company and its Restricted Subsidiaries (other
than Indebtedness under the Credit Agreement) in existence on the date of this
Indenture, until such amounts are repaid.
"First Mortgage Notes" has the meaning assigned to it in the preamble to
this Indenture. The Initial First Mortgage Notes and the Additional First
Mortgage Notes shall be treated as a single class for all purposes under this
Indenture.
"Fixed Charges" means, with respect to any specified Person for any period,
the sum, without duplication, of (i) the consolidated interest expense (other
than accretion of interest on the non-cash pay subordinated notes issued to IMC
Global, 399 Ventures and Management Investors for purposes of calculating the
Fixed Charges of Royster-Clark Group) of such Person and its Restricted
Subsidiaries (other than Royster-Clark Group for purposes of computing
consolidated interest expense for any Person other than Royster-Clark Group) for
such period, whether paid or accrued, including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net of the effect of all payments made or
received pursuant to Hedging Obligations, plus (ii) the consolidated interest of
such Person and its Restricted Subsidiaries (other than Royster-Clark Group for
purposes of computing consolidated interest capitalized for any Person other
than Royster-Clark Group) that was capitalized during such period, plus (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Restricted Subsidiaries (other than Royster-Clark
Group for purposes of computing such amount for any Person other than
Royster-Clark Group) or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (other than Royster-Clark Group for purposes of
computing such amount for any Person other than Royster-Clark Group), whether or
not such Guarantee or Lien is called upon, plus (iv) the product of (a) all
dividends, whether paid or accrued, whether or not in cash, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries (other than
Royster-Clark Group for purposes of computing such amount for any Person other
than Royster-Clark Group), other than dividends on Equity Interests payable
solely in Equity Interests of the Company (other than Disqualified Stock) or to
the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the specified Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary
working capital borrowings) or issues, repurchases or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated and on or prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
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giving pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio
(i) acquisitions that have been made by the specified Person or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be given pro forma effect as if they had occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated on a pro forma basis in accordance with Regulation
S-X under the Securities Act, but without giving effect to clause (iii) of the
proviso set forth in the definition of Consolidated Net Income, (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the specified Person or any of its Restricted Subsidiaries
following the Calculation Date.
"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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes, substantially in the form of
Exhibit A-1 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of (i) Royster-Clark Group and (ii) any other
subsidiary that executes a Guarantee in accordance with the provisions of this
Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a First Mortgage Note is registered.
"IMC Global" means IMC Global, Inc.
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"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of (i)
borrowed money, (ii) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof), (iii) banker's acceptances, (iv) representing Capital Lease
Obligations, (v) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or trade
payable or (vi) representing any Hedging Obligations, if and to the extent any
of the preceding items (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of the specified Person
prepared in accordance with GAAP. In addition, the term "Indebtedness" includes
all Indebtedness of others secured by a Lien on any asset of the specified
Person (whether or not such Indebtedness is assumed by the specified Person)
and, to the extent not otherwise included, the Guarantee by the specified Person
of any indebtedness of any other Person. The amount of any Indebtedness
outstanding as of any date shall be (i) the accreted value thereof, in the case
of any Indebtedness issued with original issue discount and (ii) the principal
amount thereof, together with any interest thereon that is more than 30 days
past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with the Issuer.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Initial First Mortgage Notes" means the first $200.00 million aggregate
principal amount of First Mortgage Notes issued under this Indenture on the date
hereof.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; provided that
an acquisition of assets, Equity Interests or other securities by the Company or
any of its Restricted Subsidiaries for consideration consisting solely of Equity
Interests (other than Disqualified Stock) of the Company or Royster-Clark Group
shall not be deemed to be an Investment. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Restricted 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 Equity Interests of such Restricted Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of the
covenant described in Section 4.07 hereof. The acquisition by the Company or any
Restricted Subsidiary of the Company of a Person that holds an Investment in a
third Person shall be deemed to be an Investment by the Company or such
Restricted Subsidiary in such third Person in an amount equal to the fair market
value of the Investment held by the acquired Person in such third Person in an
amount determined as provided in the final paragraph of the covenant described
in Section 4.07 hereof.
"Jenkins" means Francis P. Jenkins, Jr.
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"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the First Mortgage Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Management Investors" means the officers and employees of Royster-Clark
Group, the Company or any Subsidiary of the Company who hold Voting Stock of
Royster-Clark Group or the Company.
"Master Conveyance Agreement" means that certain agreement dated as of
April 22, 1999, between and among IMC Global, The Vigoro Corporation, the
Company and the Trustee, as Collateral Agent.
"Mortgages" means the mortgage agreements and deeds of trust entered into
by the Company and its Restricted Subsidiaries which provide for the grant by
the Company and its Restricted Subsidiaries to the Collateral Agent for the
ratable benefit of the holders of the First Mortgage Notes of mortgages and
deeds of trust in the portion of the PPE that constitute real property and the
improvements thereon.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary gain (but not loss), together with any related provision
for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale, sale of a
Nitrogen Facility (including, without limitation, any cash received upon the
sale or other disposition of any non-cash consideration received in any Asset
Sale or sale of a Nitrogen Facility) or from the Master Conveyance Agreement,
net of the direct costs relating to such Asset Sale, sale of a Nitrogen Facility
or Master Conveyance Agreement, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in each
case, after taking into account any available tax credits or deductions and any
tax sharing arrangements, and amounts required to be applied to the repayment of
Indebtedness and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP.
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"Nitrogen Facility" means either (i) the Company's nitrogen manufacturing
plant in East Dubuque, IL (the "East Dubuque Plant") or (ii) the East Dubuque
Plant and the Company's nitrogen production facility in Cincinnati, OH.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness (other than the First
Mortgage Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company of any of its Restricted
Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the First Mortgage Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice President of such Person or any Guarantor, as applicable.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 12.05
hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or any Guarantor, if applicable, or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Business" means the fertilizer, seed, crop protection and
agronomic services businesses, any of the businesses engaged in by the Company
and its Restricted Subsidiaries on the date of this Indenture and such other
business activities which are incidental or related thereto.
"Permitted Investments" means (i) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company that is a Guarantor, (ii) any Investment
in Cash Equivalents, (iii) any Investment by the Company or any Subsidiary of
the Company in a Person, if as a result of such Investment, (a) such Person
becomes a Wholly Owned Subsidiary of the Company and a Guarantor or (b) such
Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Wholly Owned Subsidiary of the Company that is a Guarantor, (iv) any
Investment made as a result of the receipt of non-cash consideration from an
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Asset Sale that was made pursuant to and in compliance with the covenant
described in Section 4.10 hereof, (v) any acquisition of stock or assets solely
in exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company or Royster-Clark Group, (vi) Hedging Obligations, (vii)
Investments in securities of trade creditors or customers received in settlement
of obligations or pursuant to a plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers, (viii)
investments existing on the date of this Indenture, (ix) loans and advances to
officers, directors, members and employees for business-related travel expenses,
moving expenses and other similar expenses, in each case, incurred in the
ordinary course of business and consistent with past practices and (x)
Investments consisting of intercompany loans or capital contributions from the
Company and its Wholly-Owned Restricted Subsidiaries to Wholly-Owned Restricted
Subsidiaries so long as the intercompany loans are subordinated to the First
Mortgage Notes.
"Permitted Liens" means (i) Liens of the Company and any Restricted
Subsidiary securing Indebtedness and other Obligations under Credit Facilities
that were securing Senior Debt that was permitted by the terms of this Indenture
to be incurred, (ii) Liens in favor of the Company or the Restricted
Subsidiaries, (iii) Liens on property of a Person existing at the time such
Person is merged with or into or consolidated with or acquired by the Company or
any Subsidiary of the Company; provided that such Liens were in existence prior
to the contemplation of such merger or consolidation or acquisition and do not
extend to any assets other than those of the Person merged into or consolidated
with or acquired by the Company or the Subsidiary, (iv) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary of
the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition, (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, bid bonds, payment bonds,
performance bonds or other obligations of a like nature incurred in the ordinary
course of business, (vi) Liens existing on the date of this Indenture, (vii)
Liens to secure Senior Debt that was permitted by this Indenture to be incurred
provided such Liens are permitted by the Security Agreements, (viii) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor, (ix) Liens incurred in the ordinary course of business of
the Company or any Subsidiary of the Company with respect to obligations that do
not exceed $10.0 million at any one time outstanding, (x) Liens on assets of
Unrestricted Subsidiaries that (a) secure Non-Recourse Debt of Unrestricted
Subsidiaries or (b) are incurred in connection with a Receivables Transaction,
(xi) Liens on any property or asset acquired by the Company or any of its
Restricted Subsidiaries in favor of the seller of such property or asset and
construction mortgages on property, in each case, created within six months
after the date of acquisition, construction or improvement of such property or
asset by the Company or such Restricted Subsidiary to secure the purchase price
or other obligation of the Company or such Restricted Subsidiary to the seller
of such property or asset or the construction or improvement cost of such
property in an amount up to the total cost of the acquisition, construction or
improvement of such property or asset; provided that in each case, such Lien
does not extend to any other property or asset of the Company and its Restricted
Subsidiaries, (xii) Liens incurred or pledges and deposits made in connection
with worker's compensation, unemployment insurance and other social security
benefits, (xiii) Liens imposed by law, such as mechanics', carriers',
warehouseman's, materialmen's, and vendors' Liens, incurred in good faith in the
ordinary course of business with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings if a reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made therefor, (xiv) zoning restrictions, easements, licenses, covenants,
reservations, restrictions on the use of real property or minor irregularities
of title incident thereto that do not, in the aggregate, materially detract from
the value of the property or the assets of the Company or impair the use of such
property in the operation of the business of the Company or any of its
Restricted Subsidiaries, (xv) Liens of landlords or mortgages of landlords,
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arising solely by operation of law, on fixtures and movable property located on
premises leased by the Company or any of its Restricted Subsidiaries in the
ordinary course of business, (xvi) financing statements granted with respect to
personal property leased by the Company and its Restricted Subsidiaries pursuant
to leases considered operating leases in accordance with GAAP, provided that
such financing statements are granted solely in connection with such leases;
(xvii) judgment Liens to the extent that such judgments do not cause or
constitute a Default or an Event of Default; (xviii) Liens securing Permitted
Refinancing Indebtedness incurred to refinance Indebtedness that has been
secured by a Lien permitted under this Indenture; provided that any such Lien
shall not extend to or cover any assets or property not securing the
Indebtedness so refinanced, (xix) Liens in favor of the First Mortgage Notes
created pursuant to the terms of the Pledge Agreements, (xx) Liens to secure
Capital Lease Obligations, mortgage financings or purchase money obligations, in
each case incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or equipment
used in the business of the Company or any Restricted Subsidiary to the extent
such Indebtedness is permitted to be incurred by Section 4.09 hereof covering
only such assets and (xxi) any extension or renewal, or successive extensions or
renewals, in whole or in part, of Liens permitted pursuant to the foregoing
clauses (i) through (xx), provided that no such extension or renewal Lien shall
(a) secure more than the amount of Indebtedness or other obligations secured by
the Lien being so extended or renewed or (b) extend to any property or assets
not subject to the Lien being so extended or renewed.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that (i) except for
Indebtedness used to extend, refinance, renew, replace, defease or refund the
Credit Facilities, the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable), of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest thereon and
the amount of all customary expenses and premiums incurred in connection
therewith), (ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded, (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the First
Mortgage Notes, such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and is subordinated in right of
payment to, the First Mortgage Notes on terms at least as favorable to the
Holders of First Mortgage Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"PPE" means the property, plant and equipment and certain related assets
owned by the Company and its subsidiaries, constituting 17 of the principal
granulation, seed production, processing and nitrogen plants of the Company and
its subsidiaries as set forth in the Security Agreements.
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"Principals" means (i) 399 Ventures, Jenkins and the Management Investors
and (ii) any Related Party of a Person referred to in clause (i).
"Private Placement Legend" means the legend set forth in Section 2.06(g)(i)
to be placed on all First Mortgage Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means an underwritten public offering of common
stock (other than Disqualified Stock) of the Company, pursuant to an effective
registration statement filed with the Security and Exchange Commission in
accordance with the Securities Act of 1933, as amended.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Receivables" means, with respect to any Person or entity, all of the
following property and interests in property of such Person or entity, whether
now existing or existing in the future or hereafter acquired or arising: (i)
accounts, (ii) accounts receivable incurred in the ordinary course of business,
including without limitation, all rights to payment created by or arising from
sales of goods, leases of goods or the rendition of services no matter how
evidenced, whether or not earned by performance, (iii) all rights to any goods
or merchandise represented by any of the foregoing after creation of the
foregoing, including, without limitation, returned or repossessed goods, (iv)
all reserves and credit balances with respect to any such accounts receivable or
account debtors, (v) all letters of credit, security, or guarantees for any of
the foregoing, (vi) all insurance policies or reports relating to any of the
foregoing, (viii) all proceeds of the foregoing and (ix) all books and records
relating to any of the foregoing.
"Receivables Subsidiary" means an Unrestricted Subsidiary exclusively
engaged in Receivables Transactions and activities related thereto; provided,
however, that (i) at no time shall the Company and its Subsidiaries have more
than one Receivables Subsidiary and (ii) all Indebtedness or other borrowings of
such Unrestricted Subsidiary shall be Non-Recourse Debt.
"Receivables Transaction" means (i) the sale or other disposition to a
third party of Receivables or an interest therein, or (ii) the sale or other
disposition of Receivables or an interest therein to a Receivables Subsidiary
followed by a financing transaction in connection with such sale or disposition
of such Receivables (whether such financing transaction is effected by such
Receivables Subsidiary or by a third party to whom such Receivables Subsidiary
sells such Receivables or interest therein); provided that in each of the
foregoing, the Company or its Subsidiaries receive cash of at least 60% of the
aggregate principal amount of any Receivables financed in such transaction.
"Reference Treasury Dealer" means, for the First Mortgage Notes, each of
(i) Donaldson, Lufkin & Jenrette Securities Corporation, or its successors;
provided, however, that if the foregoing shall not be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), the Company
shall substitute therefor another Primary Treasury Dealer and (ii) a Primary
Treasury Dealer selected by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any date of redemption, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such date of redemption.
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"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of April 22, 1999, by and among the Company and the other parties named
on the signature pages thereof, as such agreement may be amended, modified or
supplemented from time to time and, with respect to any Additional First
Mortgage Notes, one or more registration rights agreements between the Company
and the other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional First Mortgage Notes to register such Additional First
Mortgage Notes under the Securities Act.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global First
Mortgage Note in the form of Exhibit A-1 hereto bearing the Global Note Legend
and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Note upon expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global First
Mortgage Note in the form of Exhibit A-2 hereto bearing the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee, issued in a denomination equal to the outstanding
principal amount of the First Mortgage Notes initially sold in reliance on Rule
903 of Regulation S.
"Related Party" (i) with respect to each of CVC and 399 Ventures (a) any of
its direct or indirect wholly owned subsidiaries and any officer, director or
employee of CVC, 399 Ventures or any of their wholly owned subsidiaries, (b) any
spouse, parent or lineal descendant of a parent (including by adoption and
stepchildren) of the officers, directors and employees referred to in clause
(i)(a) above, (c) any trust, corporation or partnership 80% of the
beneficiaries, stockholders or partners of which consists of one or more of the
persons described in clause (i)(a) or (b) above or any combination thereof and
(d) any charitable trust the grantor of which consists of one or more of the
persons described in clause (i)(a), (b) or (c) above or any combination thereof,
and (ii) with respect to each of Jenkins and the Management Investors, (a) any
spouse or lineal descendant (including by adoption and stepchildren) of such
person, (b) any trust, corporation or partnership 80% of the beneficiaries,
stockholders or partners of which consists of Jenkins, or the Management
Investors or any of the persons described in clause (ii)(a) above or any
combination thereof and (c) any charitable trust the grantor of which consists
of Jenkins, or the Management Investors or one or more of the persons described
in clause (ii)(a) or (b) above or any combination thereof.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Certificated Note" means a Certificated Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
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"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" means any Subsidiary of the referent Person that is
not an Unrestricted Subsidiary.
"Royster-Clark Group" means Royster-Clark Group, Inc.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Note" means a global note substantially in the form of
Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the First Mortgage Notes sold in reliance on
Rule 144A.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreements" means (i) the three security agreements granting a
first priority interest on the equipment and certain other assets of the 17
principal granulation, seed production, processing and nitrogen plants from each
of Royster-Clark, Inc., IMC AgriBusiness, Inc. and IMC Nitrogen Company to the
Collateral Agent for the benefit of the holders of the First Mortgage Notes,
(ii) the four collateral assignments of limited liability company interests
granting a pledge of all of the equity interests in the Special Purpose
Restricted Subsidiaries from each of Royster-Clark, Inc., IMC AgriBusiness,
Inc., Hutson's Ag Services and IMC Nitrogen Company to the Trustee, as
Collateral Agent and (iii) the 17 deeds of trusts/mortgages granting a first
priority security interest in the real property and improvements on the the 17
principal granulation, seed production, processing and nitrogen plants from each
of Royster-Clark, Inc., IMC AgriBusiness, Inc. and IMC Nitrogen Company to the
Collateral Agent for the benefit of the holders of the First Mortgage Notes.
"Senior Debt" means (i) all Indebtedness of the Company or any Restricted
Subsidiary outstanding under Credit Facilities and all Hedging Obligations with
respect thereto, (ii) any other Indebtedness of the Company or any Restricted
Subsidiary permitted to be incurred under the terms of this Indenture, unless
the instrument under which such Indebtedness is incurred expressly provides that
it is on a parity with or subordinated in right of payment to the First Mortgage
Notes or any Guarantee and (iii) all Obligations with respect to the items
listed in the preceding clauses (i) and (ii). Notwithstanding anything to the
contrary in the preceding, Senior Debt will not include (i) any liability for
federal, state, local or other taxes owed or owing by the Company, (ii) any
Indebtedness of the Company to any of its Restricted Subsidiaries or other
Affiliates, (iii) any trade payables, or (iv) the portion of any Indebtedness
that is incurred in violation of this Indenture.
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"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date of this
Indenture.
"Special Adjusted Treasury Rate" means, with respect to any date of
redemption, the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such date of redemption, plus 0.75%.
"Special Purpose Restricted Subsidiary Permitted Liens" means (i) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor, (ii) Liens imposed by law, such as mechanics', carriers',
warehouseman's, materialmen's, and vendors' Liens, incurred in good faith in the
ordinary course of business with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings if a reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made therefor, (iii) zoning restrictions, easements, licenses, covenants,
reservations, restrictions on the use of real property or minor irregularities
of title incident thereto that do not, in the aggregate, materially detract from
the value of the property or the assets of the Special Purpose Restricted
Subsidiaries or impair the use of such property in the operation of the business
of the Special Purpose Restricted Subsidiaries, (iv) Liens to secure the
performance of statutory obligations, surety or appeal bonds, bid bonds, payment
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business, (v) financing statements granted with respect to
personal property leased by the Restricted Subsidiaries pursuant to leases
considered operating leases in accordance with GAAP, provided that such
financing statements are granted solely in connection with such leases, (vi)
judgment Liens to the extent that such judgments do not cause or constitute a
Default or an Event of Default, (vii) Liens in favor of the First Mortgage Notes
created pursuant to the terms of the Pledge Agreements and (viii) Liens to
secure Capital Lease Obligations, mortgage financings or purchase money
obligations, in each case incurred for the purpose of financing all or any part
of the purchase price or cost of construction or improvement of property, plant
or equipment used in the business of such Special Purpose Restricted Subsidiary
to the extent such Indebtedness is permitted to be incurred by Section 4.09
hereof covering only such assets.
"Special Purpose Restricted Subsidiaries" means each of Royster-Clark
Realty LLC, Royster-Clark AgriBusiness Realty LLC, Royster-Clark Nitrogen
Realty, LLC and Royster-Clark Hutson's Realty LLC.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
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trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global First Mortgage Note
substantially in the form of Exhibit A-1 attached hereto that bears the Global
Note Legend and that has the "Schedule of Exchanges of Interests in the Global
Note" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of First
Mortgage Notes that do not bear the Private Placement Legend.
"Unrestricted Certificated Note" means one or more Certificated Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company (other than
the Special Purpose Restricted Subsidiaries) that is designated by the Board of
Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only
to the extent that such Subsidiary (i) has no Indebtedness other than
Non-Recourse Debt, (ii) is not a party to any agreement, contract, arrangement
or understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company, (iii) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results, (iv) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries and (v) has at least one director on its board of
directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries. Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described in Section 4.07
hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under
Section 4.09 hereof, the Company shall be in default of such covenant. The Board
of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under Section 4.09 hereof, calculated on a pro forma
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basis as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation. George Smith Ag. Services, Inc. shall be an
Unrestricted Subsidiary as of the date hereof.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any specified Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person but shall
not in any event include Royster-Clark Group.
Section 1.02Other Definitions.
Defined in
Term Section
---- -------
"Affiliate Transaction".................................. 4.11
"Asset Sale Offer"....................................... 3.09
"Authentication Order"................................... 2.02
"Change of Control Offer"................................ 4.15
"Change of Control Payment".............................. 4.15
"Change of Control Payment Date"......................... 4.15
"Covenant Defeasance".................................... 8.03
"Event of Default"....................................... 6.01
"Excess Proceeds"........................................ 4.10
"incur".................................................. 4.09
"Legal Defeasance"....................................... 8.02
"Offer Amount"........................................... 3.09
"Offer Period"........................................... 3.09
"Paying Agent"........................................... 2.03
"Permitted Debt"......................................... 4.09
"Purchase Date".......................................... 3.09
"Registrar".............................................. 2.03
"Restricted Payments".................................... 4.07
Section 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the First Mortgage Notes and the Guarantees;
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"indenture security Holder" means a Holder of a First Mortgage Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the First Mortgage Notes and the Guarantees means the Company
and the Guarantors, respectively, and any successor obligor upon the First
Mortgage Notes and the Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.04 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include the
singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or rules adopted
by the SEC from time to time.
ARTICLE 2.
THE FIRST MORTGAGE NOTES
Section 2.01 Form and Dating.
(a) General. The First Mortgage Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The
Guarantee shall be substantially in the form of Exhibit D, the terms of which
are incorporated in and made part of this Indenture. The First Mortgage Notes
may have notations, legends or endorsements required by law, stock exchange rule
or usage. Each First Mortgage Note shall be dated the date of its
authentication. The First Mortgage Notes shall be in denominations of $1,000 and
integral multiples thereof.
The terms and provisions contained in the First Mortgage Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any First Mortgage Note conflicts with
the express provisions of this Indenture, the provisions of this Indenture shall
govern and be controlling.
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(b) Global Notes. First Mortgage Notes issued in global form shall be
substantially in the form of Exhibits A-1 or A-2 attached hereto (including the
Global Note Legend thereon and the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). In the limited circumstances when Global Notes
may be exchanged for Certificated Notes, the Certificated Notes shall be
substantially in the form of Exhibit A-1 attached hereto (but without the Global
Note Legend thereon and without the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). Each Global Note shall represent such of the
outstanding First Mortgage Notes as shall be specified therein and each shall
provide that it shall represent the aggregate principal amount of outstanding
First Mortgage Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding First Mortgage Notes represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges
and redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding First
Mortgage Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. First Mortgage Notes offered and sold in
reliance on Regulation S shall be issued initially in the form of the Regulation
S Temporary Global Note, which shall be deposited on behalf of the purchasers of
the First Mortgage Notes represented thereby with the Trustee, at its New York
office, as custodian for the Depositary, and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated
agents holding on behalf of Euroclear or Cedel, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The Restricted Period
shall be terminated upon the receipt by the Trustee of (i) a written certificate
from the Depositary, together with copies of certificates from Euroclear and
Cedel certifying that they have received certification of non-United States
beneficial ownership of 100% of the aggregate principal amount of the Regulation
S Temporary Global Note (except to the extent of any beneficial owners thereof
who acquired an interest therein during the Restricted Period pursuant to
another exemption from registration under the Securities Act and who will take
delivery of a beneficial ownership interest in a Rule 144A Global Note bearing a
Private Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof),
and (ii) an Officers' Certificate from the Company. Following the termination of
the Restricted Period, beneficial interests in the Regulation S Temporary Global
Note shall be exchanged for beneficial interests in Regulation S Permanent
Global Notes pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Notes, the Trustee shall cancel
the Regulation S Temporary Global Note. The aggregate principal amount of the
Regulation S Temporary Global Note and the Regulation S Permanent Global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee, as the case may be, in
connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel shall be applicable to transfers of beneficial
interests in the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes that are held by Participants through Euroclear or Cedel.
Section 2.02 Execution and Authentication.
Two Officers shall sign the First Mortgage Notes for the Company by manual
or facsimile signature.
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If an Officer whose signature is on a First Mortgage Note no longer holds
that office at the time a First Mortgage Note is authenticated, the First
Mortgage Note shall nevertheless be valid.
A First Mortgage Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
First Mortgage Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate First Mortgage Notes for
original issue up to the aggregate principal amount stated in paragraph 4 of the
First Mortgage Notes. The aggregate principal amount of First Mortgage Notes
outstanding at any time may not exceed such amount except as provided in Section
2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate First Mortgage Notes. An authenticating agent may authenticate
First Mortgage Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with
Holders or an Affiliate of the Company.
Section 2.03 Registrar and Paying Agent.
The Company shall maintain an office or agency where First Mortgage Notes
may be presented for registration of transfer or for exchange ("Registrar") and
an office or agency where First Mortgage Notes may be presented for payment
("Paying Agent"). The Registrar shall keep a register of the First Mortgage
Notes and of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company shall notify the Trustee in writing of the
name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the First Mortgage Notes,
and will notify the Trustee of any default by the Company or any Guarantor in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Subsidiary) shall have no further liability for the money. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company or a Guarantor, the Trustee shall serve as Paying Agent for the First
Mortgage Notes.
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Section 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss.312(a). If the Trustee is not
the Registrar, the Company and/or the Guarantors shall furnish to the Trustee at
least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of First Mortgage Notes and the Company and the Guarantors shall
otherwise comply with TIA ss.312(a).
Section 2.06 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. A Global Note will be exchanged by
the Company for Certificated Notes only if (i) the Company delivers to the
Trustee notice from the Depositary that it is unwilling or unable to continue to
act as Depositary for the Global Notes or that it is no longer a clearing agency
registered under the Exchange Act and, in either case, a successor Depositary is
not appointed by the Company within 120 days after the date of such notice from
the Depositary, (ii) the Company in its sole discretion determines that the
Global Notes (in whole but not in part) should be exchanged for Certificated
Notes and delivers a written notice to such effect to the Trustee; provided that
in no event shall the Regulation S Temporary Global Note be exchanged by the
Company for Certificated Notes prior to (x) the expiration of the Restricted
Period and (y) the receipt by the Registrar of any certificates required
pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act or (iii) there shall
have occurred and be continuing a Default or Event of Default with respect to
the First Mortgage Notes. Upon the occurrence of any of the preceding events in
(i), (ii) or (iii) above, Certificated Notes shall be issued in such names as
the Depositary shall instruct the Trustee. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every First Mortgage Note authenticated and delivered in exchange for, or in
lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
First Mortgage Note other than as provided in this Section 2.06(a), however,
beneficial interests in a Global Note may be transferred and exchanged as
provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
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that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). Beneficial interests in any Unrestricted Global
Note may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Certificated Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Certificated Note shall be registered to effect the
transfer or exchange referred to in (1) above; provided that in no event
shall Certificated Notes be issued upon the transfer or exchange of
beneficial interests in the Regulation S Temporary Global Note prior to (x)
the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company in
accordance with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted
Global Notes. Upon satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Notes contained in this
Indenture and the First Mortgage Notes or otherwise applicable under the
Securities Act, the Trustee shall adjust the principal amount of the
relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the Rule 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including
the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
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beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Series B First Mortgage Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to subparagraph (B) or (D)
above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
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(c) Transfer or Exchange of Beneficial Interests for Certificated Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Certificated Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Certificated Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Certificated Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Certificated Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(F) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Certificated Note in the appropriate
principal amount. Any Certificated Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Certificated Notes to the
Persons in whose names such Notes are so registered. Any Certificated Note
issued in exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and
shall be subject to all restrictions on transfer contained therein.
(ii) Beneficial Interests in Regulation S Temporary Global Note to
Certificated Notes. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof,
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a beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Certificated Note or transferred to a Person who takes
delivery thereof in the form of a Certificated Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Certificated Notes. A holder of a beneficial interest in a Restricted
Global Note may exchange such beneficial interest for an Unrestricted
Certificated Note or may transfer such beneficial interest to a Person who
takes delivery thereof in the form of an Unrestricted Certificated Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Series B First Mortgage Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Certificated Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Certificated Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Certificated Notes. If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest for
a Certificated Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Certificated Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the
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Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Certificated Note in the
appropriate principal amount. Any Certificated Note issued in exchange for
a beneficial interest pursuant to this Section 2.06(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Certificated Notes to
the Persons in whose names such Notes are so registered. Any Certificated
Note issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Certificated Notes for Beneficial Interests.
(i) Restricted Certificated Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Certificated Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Certificated Notes to a Person
who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Certificated Note proposes
to exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Certificated Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Certificated Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(2) thereof;
(D) if such Restricted Certificated Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Certificated Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(F) if such Restricted Certificated Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Certificated Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case of
clause (B) above, the Rule 144A Global Note, in the case of clause (C)
above, the Regulation S Global Note.
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(ii) Restricted Certificated Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Certificated Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Certificated Note to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Series B First Mortgage Notes or (3) a Person who
is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Certificated Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Certificated Notes proposes to
transfer such Notes to a Person who shall take delivery thereof
in the form of a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Certificated Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Certificated Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Certificated Note
may exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Certificated Notes to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
at any time. Upon receipt of a request for such an exchange or transfer,
the Trustee shall cancel the applicable Unrestricted Certificated Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
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If any such exchange or transfer from a Certificated Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of Certificated Notes so
transferred.
(e) Transfer and Exchange of Certificated Notes for Certificated Notes.
Upon request by a Holder of Certificated Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Certificated Notes. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to the
Registrar the Certificated Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by its attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Certificated Notes to Restricted Certificated Notes.
Any Restricted Certificated Note may be transferred to and registered in
the name of Persons who take delivery thereof in the form of a Restricted
Certificated Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Certificated Notes to Unrestricted Certificated Notes.
Any Restricted Certificated Note may be exchanged by the Holder thereof for
an Unrestricted Certificated Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Certificated Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Series B First Mortgage Notes or (3) a Person who
is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
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(C) any such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Certificated Notes
proposes to exchange such Notes for an Unrestricted Certificated
Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Certificated Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Certificated
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Unrestricted Certificated Notes to Unrestricted Certificated
Notes. A Holder of Unrestricted Certificated Notes may transfer such Notes
to a Person who takes delivery thereof in the form of an Unrestricted
Certificated Note. Upon receipt of a request to register such a transfer,
the Registrar shall register the Unrestricted Certificated Notes pursuant
to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance
with the Registration Rights Agreement, the Company shall issue and, upon
receipt of an Authentication Order in accordance with Section 2.02, the Trustee
shall authenticate (i) one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Notes tendered for acceptance by Persons that certify in
the applicable Letters of Transmittal that (x) they are not broker-dealers, (y)
they are not participating in a distribution of the Series B First Mortgage
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Certificated Notes in
an aggregate principal amount equal to the principal amount of the Restricted
Certificated Notes accepted for exchange in the Exchange Offer. Concurrently
with the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Certificated Notes so accepted Certificated
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Certificated Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
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(A) Except as permitted by subparagraph (B) below, each Global
Note and each Certificated Note (and all Series A First Mortgage Notes
issued in exchange therefor or substitution thereof) shall bear the
legend in substantially the following form:
"This First Mortgage Note (or its predecessor) has not been
registered under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, may not be offered, sold, pledged
or otherwise transferred within the United States or to, or for the
account or benefit of, U.S. persons, except as set forth in the next
sentence. By its acquisition hereof or of a beneficial interest
herein, the holder:
(1) Represents that (a) it is a "Qualified Institutional
Buyer" (as defined in Rule 144A under the Securities Act) (a
"QIB") or (b) it has acquired this First Mortgage Note in an
offshore transaction in compliance with Regulation S under the
Securities Act,
(2) Agrees that it will not resell or otherwise transfer
this First Mortgage Note except (a) to the Company or any of its
subsidiaries, (b) to a person whom the seller reasonably believes
is a QIB purchasing for its own account or for the account of a
QIB in a transaction meeting the requirements of Rule 144A, (c)
in an offshore transaction meeting the requirements of Rule 904
of the Securities Act, (d) in a transaction meeting the
requirements of Rule 144 under the Securities Act, (e) in
accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of
counsel acceptable to the Company) or (f) pursuant to an
effective registration statement and, in each case, in accordance
with the applicable securities laws of any state of the United
States or any other applicable jurisdiction and
(3) Agrees that it will deliver to each person to whom this
First Mortgage Note or an interest herein is transferred a notice
substantially to the effect of this legend.
As used herein, the terms "offshore transaction" and "United
States" have the meanings given to them by Rule 902 of Regulation S
under the Securities Act. The Indenture contains a provision requiring
the trustee to refuse to register any transfer of this First Mortgage
Note in violation of the foregoing."
(B) Notwithstanding the foregoing, any Global Note or
Certificated Note issued pursuant to subparagraphs (b)(iv), (c)(iii),
(c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section
2.06 (and all Series B First Mortgage Notes issued in exchange
therefor or substitution thereof) shall not bear the Private Placement
Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES
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EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE
REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE
MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF
THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL
BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Certificated Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Certificated
Notes, the principal amount of First Mortgage Notes represented by such Global
Note shall be reduced accordingly and an endorsement shall be made on such
Global Note by the Trustee or by the Depositary at the direction of the Trustee
to reflect such reduction; and if the beneficial interest is being exchanged for
or transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note by
the Trustee or by the Depositary at the direction of the Trustee to reflect such
increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Certificated Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Certificated Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer
of or exchange any First Mortgage Note selected for redemption in whole or
in part, except the unredeemed portion of any First Mortgage Note being
redeemed in part.
(iv) All Global Notes and Certificated Notes issued upon any
registration of transfer or exchange of Global Notes or Certificated Notes
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shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Certificated Notes surrendered upon such registration of transfer
or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any First Mortgage Notes during a period
beginning at the opening of business 15 days before the day of any
selection of First Mortgage Notes for redemption under Section 3.02 hereof
and ending at the close of business on the day of selection, (B) to
register the transfer of or to exchange any First Mortgage Note so
selected for redemption in whole or in part, except the unredeemed portion
of any First Mortgage Note being redeemed in part or (C) to register the
transfer of or to exchange a First Mortgage Note between a record date and
the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any First Mortgage Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any First Mortgage Note is registered
as the absolute owner of such First Mortgage Note for the purpose of
receiving payment of principal of and interest on such First Mortgage
Notes and for all other purposes, and none of the Trustee, any Agent or
the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Certificated
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
Section 2.07 Replacement First Mortgage Notes.
If any mutilated First Mortgage Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any First Mortgage Note, the Company shall issue
and the Trustee, upon receipt of an Authentication Order, shall authenticate a
replacement First Mortgage Note if the Trustee's requirements are met. If
required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a First Mortgage Note is replaced. The
Company may charge for its expenses in replacing a First Mortgage Note.
Every replacement First Mortgage Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other First Mortgage Notes duly issued hereunder.
Section 2.08 Outstanding First Mortgage Notes.
The First Mortgage Notes outstanding at any time are all the First Mortgage
Notes authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation, those reductions in the interest in a Global
Note effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a First Mortgage Note does not cease to be outstanding because the
Company or an Affiliate of the Company holds the First Mortgage Note; however,
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First Mortgage Notes held by the Company or a Subsidiary of the Company shall
not be deemed to be outstanding for purposes of Section 3.07(b) hereof.
If a First Mortgage Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced First Mortgage Note is held by a bona fide purchaser.
If the principal amount of any First Mortgage Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay First Mortgage Notes payable on that date, then on and after that date
such First Mortgage Notes shall be deemed to be no longer outstanding and shall
cease to accrue interest.
Section 2.09 Treasury First Mortgage Notes.
In determining whether the Holders of the required principal amount of
First Mortgage Notes have concurred in any direction, waiver or consent, First
Mortgage Notes owned by the Company, any Guarantor or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, shall be considered as though not outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only First Mortgage Notes that
the Trustee knows are so owned shall be so disregarded.
Section 2.10 Temporary First Mortgage Notes.
Until certificates representing First Mortgage Notes are ready for
delivery, the Company may prepare and the Trustee, upon receipt of an
Authentication Order, shall authenticate temporary First Mortgage Notes.
Temporary First Mortgage Notes shall be substantially in the form of
Certificated Notes but may have variations that the Company considers
appropriate for temporary First Mortgage Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate Certificated Notes in exchange for temporary
First Mortgage Notes.
Holders of temporary First Mortgage Notes shall be entitled to all of the
benefits of this Indenture.
Section 2.11 Cancellation.
The Company at any time may deliver First Mortgage Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
First Mortgage Notes surrendered to them for registration of transfer, exchange
or payment. The Trustee and no one else shall cancel all First Mortgage Notes
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall destroy canceled First Mortgage Notes (subject to the
record retention requirement of the Exchange Act). Certification of the
destruction of all canceled First Mortgage Notes shall be delivered to the
Company. The Company may not issue new First Mortgage Notes to replace First
Mortgage Notes that it has paid or that have been delivered to the Trustee for
cancellation.
Section 2.12 Defaulted Interest.
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If the Company defaults in a payment of interest on the First Mortgage
Notes, it shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the First Mortgage Notes and in Section 4.01 hereof. The Company
shall notify the Trustee in writing of the amount of defaulted interest proposed
to be paid on each First Mortgage Note and the date of the proposed payment. The
Company shall fix or cause to be fixed each such special record date and payment
date, provided that no such special record date shall be less than 10 days prior
to the related payment date for such defaulted interest. At least 15 days before
the special record date, the Company (or, upon the written request of the
Company, the Trustee in the name and at the expense of the Company) shall mail
or cause to be mailed to Holders a notice that states the special record date,
the related payment date and the amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem First Mortgage Notes pursuant to the
optional redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee, at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of First Mortgage Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of First Mortgage Notes to Be Redeemed.
If less than all of the First Mortgage Notes are to be redeemed or
purchased in an offer to purchase at any time, the Trustee shall select the
First Mortgage Notes to be redeemed or purchased among the Holders of the First
Mortgage Notes in compliance with the requirements of the principal national
securities exchange, if any, on which the First Mortgage Notes are listed or, if
the First Mortgage Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular First Mortgage Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding First Mortgage Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the First
Mortgage Notes selected for redemption and, in the case of any First Mortgage
Note selected for partial redemption, the principal amount thereof to be
redeemed. First Mortgage Notes and portions of First Mortgage Notes selected
shall be in amounts of $1,000 or whole multiples of $1,000; except that if all
of the First Mortgage Notes of a Holder are to be redeemed, the entire
outstanding amount of First Mortgage Notes held by such Holder, even if not a
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to First Mortgage Notes called
for redemption also apply to portions of First Mortgage Notes called for
redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
First Mortgage Notes are to be redeemed at its registered address.
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The notice shall identify the First Mortgage Notes to be redeemed and shall
state:
(a) the redemption date;
(b) redemption price;
(c) if any First Mortgage Note is being redeemed in part, the portion
of the principal amount of such First Mortgage Note to be redeemed and
that, after the redemption date upon surrender of such First Mortgage Note,
a new First Mortgage Note or First Mortgage Notes in principal amount equal
to the unredeemed portion shall be issued upon cancellation of the original
First Mortgage Note;
(d) the name and address of the Paying Agent;
(e) that First Mortgage Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest (including Liquidated Damages) on First Mortgage Notes
called for redemption ceases to accrue on and after the redemption date;
(g) the paragraph of the First Mortgage Notes and/or Section of this
Indenture pursuant to which the First Mortgage Notes called for redemption
are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the First
Mortgage Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
First Mortgage Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued and unpaid interest on all First Mortgage Notes to be
redeemed on that date. The Trustee or the Paying Agent shall promptly return to
the Company any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price of, and
accrued and unpaid interest on, all First Mortgage Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the First
Mortgage Notes or the portions of First Mortgage Notes called for redemption. If
a First Mortgage Note is redeemed on or after an interest record date but on or
prior to the related interest payment date, then any accrued and unpaid interest
(including Liquidated Damages) shall be paid to the Person in whose name such
First Mortgage Note was registered at the close of business on such record date.
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If any First Mortgage Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest shall be paid on the unpaid principal, from
the redemption date until such principal is paid, and to the extent lawful on
any interest not paid on such unpaid principal, in each case at the rate
provided in the First Mortgage Notes and in Section 4.01 hereof.
Section 3.06. First Mortgage Notes Redeemed in Part.
Upon surrender of a First Mortgage Note that is redeemed in part, the
Company shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new First Mortgage
Note equal in principal amount to the unredeemed portion of the First Mortgage
Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the First Mortgage Notes pursuant to this
Section 3.07 prior to April 1, 2004. Thereafter, the Company shall have the
option to redeem the First Mortgage Notes, in whole or in part, upon not less
than 30 nor more than 60 day's notice at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 1 of the
years indicated below:
Year Percentage
---- ----------
2004.................................................. 105.125%
2005.................................................. 103.417%
2006.................................................. 101.708%
2007 and thereafter................................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at
any time prior to April 1, 2002, the Company may redeem First Mortgage Notes
with the net proceeds of one or more Public Equity Offerings at a redemption
price equal to 110.250% of the aggregate principal amount thereof plus accrued
and unpaid interest (including Liquidated Damages) thereon, if any; provided
that at least 65% in aggregate principal amount of the First Mortgage Notes
originally issued remain outstanding immediately after the occurrence of such
redemption and that such redemption occurs within 45 days of the date of the
closing of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or sinking
fund payments with respect to the First Mortgage Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 or Section 4.22 hereof, as
applicable, the Company shall be required to commence an offer to all Holders to
purchase First Mortgage Notes (an "Asset Sale Offer"), it shall follow the
procedures specified below.
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The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of First Mortgage Notes required
to be purchased pursuant to Section 4.10 or Section 4.22 hereof, as applicable,
(the "Offer Amount") or, if less than the Offer Amount has been tendered, all
First Mortgage Notes tendered in response to the Asset Sale Offer. Payment for
any First Mortgage Notes so purchased shall be made in the same manner as
interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a First Mortgage Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender First Mortgage Notes pursuant to the Asset Sale
Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender First Mortgage Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 or Section 4.22 hereof, as applicable, and the length of time
the Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any First Mortgage Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
*(d) that, unless the Company defaults in making such payment, any First
Mortgage Note accepted for payment pursuant to the Asset Sale Offer shall cease
to accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a First Mortgage Note purchased pursuant
to an Asset Sale Offer may elect to have First Mortgage Notes purchased in
integral multiples of $1,000 only;
(f) that Holders electing to have a First Mortgage Note purchased pursuant
to any Asset Sale Offer shall be required to surrender the First Mortgage Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the First Mortgage Note completed, or transfer by book-entry transfer, to the
Company, a depositary, if appointed by the Company, or a Paying Agent at the
address specified in the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the First Mortgage Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such First
Mortgage Note purchased;
(h) that, if the aggregate principal amount of First Mortgage Notes
surrendered by Holders exceeds the Offer Amount, the Company shall select the
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First Mortgage Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only First Mortgage Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased); and
(i) that Holders whose First Mortgage Notes were purchased only in part
shall be issued new First Mortgage Notes equal in principal amount to the
unpurchased portion of the First Mortgage Notes surrendered (or transferred by
book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of First Mortgage Notes or portions thereof tendered pursuant to the
Asset Sale Offer, or if less than the Offer Amount has been tendered, all First
Mortgage Notes tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such First Mortgage Notes or portions thereof were
accepted for payment by the Company in accordance with the terms of this Section
3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall
promptly (but in any case not later than five days after the Purchase Date) mail
or deliver to each tendering Holder an amount equal to the purchase price of the
First Mortgage Notes tendered by such Holder and accepted by the Company for
purchase, and the Company shall promptly issue a new First Mortgage Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new First Mortgage Note to such Holder, in a principal amount
equal to any unpurchased portion of the First Mortgage Note surrendered. Any
First Mortgage Note not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce the results
of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of First Mortgage Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the First Mortgage Notes on the dates and in the manner
provided in the First Mortgage Notes. Principal, premium, if any, and interest
shall be considered paid on the date due if the Paying Agent, if other than the
Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due
date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. The Company shall pay all Liquidated Damages, if any, in the
same manner on the dates and in the amounts set forth in the Registration Rights
Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the First
Mortgage Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where First Mortgage Notes may be
surrendered for registration of transfer or for exchange and where notices and
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demands to or upon the Company in respect of the First Mortgage Notes and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the First Mortgage Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any First Mortgage Notes are outstanding, the Company shall furnish to
the Holders of First Mortgage Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on the
annual financial statements by the Company's certified independent accountants
and (ii) all current reports that would be required to be filed with the SEC on
Form 8-K if the Company were required to file such reports, in each case, within
the time periods specified in the SEC's rules and regulations. In addition,
following the consummation of the Exchange Offer, whether or not required by the
rules and regulations of the SEC, the Company shall file a copy of all
information and reports referred to in clauses (i) and (ii) above with the SEC
for public availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company and the Guarantors shall at all times comply with TIA
ss.314(a).
(b) For so long as any First Mortgage Notes remain outstanding, the Company
and the Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor is so
required under the TIA) shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and the Security Agreements, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and the Security Agreements
and is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture or the Security Agreements (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge and what action the
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Company is taking or proposes to take with respect thereto) and that to the best
of his or her knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of or interest (including
Liquidated Damages), if any, on the First Mortgage Notes is prohibited or if
such event has occurred, a description of the event and what action the Company
is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the First Mortgage Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the First Mortgage Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or Royster-Clark Group
or to the Company or a Restricted Subsidiary of the Company); (ii) purchase,
redeem or otherwise acquire or retire for value (including, without limitation,
in connection with any merger or consolidation involving the Company) any Equity
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Interests of the Company or any direct or indirect parent of the Company (other
than Equity Interests owned by Royster-Clark Group, the Company or any Wholly
Owned Restricted Subsidiary of the Company); (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the First Mortgage Notes or the
Subsidiary Guarantees, except a payment of interest or principal at the Stated
Maturity thereof; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted
Payments permitted by clauses (ii), (iii), (iv), (v), (vi), (vii), (viii)
and (xii) of the next succeeding paragraph) is less than the sum, without
duplication, of (i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the date
of this Indenture to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Company since the date of this
Indenture as a contribution to its common equity capital or from the issue
or sale of Equity Interests of the Company (other than Disqualified Stock)
or from the issue or sale of convertible or exchangeable Disqualified Stock
or convertible or exchangeable debt securities of the Company that have
been converted into or exchanged for such Equity Interests (other than
Equity Interests (or Disqualified Stock or debt securities) sold to a
Subsidiary of the Company), plus (iii) to the extent that any Restricted
Investment that was made after the date of this Indenture is sold for cash
or otherwise liquidated or repaid for cash (or the non-cash proceeds have
been converted to cash), the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment, plus (iv) if
any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary, the
lesser of (A) the fair market value of the Company's ownership interest in
such redesignated Subsidiary (as determined in good faith by the Board of
Directors) as of the date of its redesignation or (B) the fair market value
when made of all Investments subsequent to the date of this Indenture
previously made by the Company and its Restricted Subsidiaries in such
redesignated Subsidiary but only to the extent that such Investments were
treated as a Restricted Payment (other than any Restricted Payment made
pursuant to clauses (i) through (xii) below).
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any Restricted
Subsidiary or of any Equity Interests of the Company or any Restricted
Subsidiary in exchange for, or out of the net cash proceeds of the substantially
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concurrent sale or issuance (other than to a Restricted Subsidiary of the
Company) of, Equity Interests of the Company (other than Disqualified Stock) or
from the net cash proceeds of an equity capital contribution to the Company;
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness of the Company or any Restricted Subsidiary with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the
payment of any dividend by a Subsidiary of the Company to the holders of its
common Equity Interests on a pro rata basis; (v) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Company
or any Restricted Subsidiary of the Company held by any member of the Company's
(or any of its Restricted Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $250,000 in any twelve-month period plus the
amount received by the Company or any Restricted Subsidiary of the Company from
any member of management for the purchase of any Equity Interests of the Company
or any Restricted Subsidiary of the Company during such twelve-month period;
provided that any amounts so received for such purchases shall be excluded from
clause (c)(ii) of the preceding paragraph to the extent of any such repurchase,
redemption or other acquisition or retirement for value; (vi) Permitted
Investments; (vii) repurchase of Equity Interests deemed to occur upon exercise
of stock options to the extent that such Equity Interests represent a portion of
the exercise price of such options; (viii) any loans, advances, distributions or
payments from the Company to any Restricted Subsidiary, or any loans, advances,
distributions or payments by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary; provided, however, that any such loans, advances,
distributions or payments must be expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the First Mortgage Notes; (ix)
the defeasance, redemption, repurchase or other acquisition of any Indebtedness
subordinated or pari passu in right of payment to the First Mortgage Notes at a
purchase price not greater than 101% of the principal amount of such
Indebtedness, plus any accrued and unpaid interest thereon, in the event of a
Change of Control; provided that prior to or contemporaneously with such
repurchase, the Company has made the Change of Control Offer with respect to the
First Mortgage Notes and has repurchased all First Mortgage Notes validly
tendered for payment and not withdrawn in connection with such Change of Control
Offer; (x) other Restricted Payments in an aggregate amount not to exceed $5.0
million; (xi) any Investments in a joint venture or in a Permitted Business in
an aggregate amount not to exceed $10.0 million; or (xii) the declaration or
payment of dividends or advances to Royster-Clark Group for expenses incurred by
Royster-Clark Group in its capacity as a holding company that are attributable
to the operations of the Company and its Restricted Subsidiaries, including,
without limitation, (A) fees and expenses paid to members of the Board of
Directors of Royster-Clark Group, (B) general corporate overhead expenses of
Royster-Clark Group directly and exclusively attributable to the ownership
and/or business and operations of the Company and its Restricted Subsidiaries,
not to exceed $100,000 in any fiscal year or $500,000 in any fiscal year if
Royster-Clark Group is a public reporting company under the Securities Exchange
Act of 1934, (C) foreign, federal, state or local tax liabilities paid by
Royster-Clark Group directly and exclusively attributable to the ownership
and/or business and operations of the Company and its Restricted Subsidiaries
(other than Royster-Clark Group), (D) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of Royster-Clark
Group held by any member or former member of Royster-Clark Group's or the
Company's (or any of their Restricted Subsidiaries') Board of Directors or any
present or former officer, employee or director of Royster-Clark Group, the
Company or any Restricted Subsidiary pursuant to any management equity
subscription agreement or stock option agreement, directly and exclusively
attributable to the ownership and/or business and operations of the Company and
its Restricted Subsidiaries (other than Royster-Clark Group), provided that the
aggregate amount paid pursuant to this clause (D) does not exceed in any fiscal
year $250,000, plus the aggregate cash proceeds received by the Company or
Royster-Clark Group from any reissuance of Equity Interests by Royster-Clark
Group or the Company to employees, officers or directors of Royster-Clark Group,
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the Company or any Restricted Subsidiary during such fiscal year provided that
any cash proceeds received from any such reissuance shall be excluded from
clause (c)(ii) of the preceding paragraph, to the extent of any such repurchase,
redemption, or other acquisition or retirement for value, (E) customary and
reasonable accounting, legal or other professional or administrative expenses
directly and exclusively attributable to the ownership and/or business and
operations of the Company and its Restricted Subsidiaries (other than
Royster-Clark Group), and (F) reasonable fees, offering costs and related
expenses associated with any registration statements filed with the Commission;
provided, however, the aggregate amount paid pursuant to the foregoing clauses
(A) and (E) does not exceed $500,000 in any fiscal year.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
Section 4.07 shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $5.0 million. 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 is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
The Board of Directors may designate any Restricted Subsidiary (other than
any of the Special Purpose Restricted Subsidiaries) to be an Unrestricted
Subsidiary if such designation would not cause a Default. For purposes of making
such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated shall be deemed to be Restricted Payments at the time of such
designation and shall reduce the amount available for Restricted Payments under
the first paragraph of this Section 4.07. All such outstanding Investments shall
be deemed to constitute Investments in an amount equal to the fair market value
of such Investments at the time of such designation (as determined in good faith
by the Board of Directors). Such designation shall only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
For purposes of determining compliance with this Section 4.07, in the event
that a Restricted Payment meets the criteria of more than one of the exceptions
described in (i) through (xii) above or is entitled to be made pursuant to the
first paragraph of this Section 4.07, the Company shall, in its sole discretion,
classify such Restricted Payment in any manner that complies with this Section
4.07.
Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock to the Company or any of its Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured by, its profits,
or pay any indebtedness owed to the Company or any of its Restricted
Subsidiaries, (ii) make loans or advances to the Company or any of its
Restricted Subsidiaries or (iii) transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries.
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However, the preceding restrictions shall not apply to Royster-Clark Group
and to encumbrances or restrictions existing under or by reason of (i) Existing
Indebtedness and the Credit Facilities as in effect on the date of this
Indenture and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in such Existing Indebtedness, as in effect on the date of this
Indenture, (ii) this Indenture, the Guarantees and the First Mortgage Notes,
(iii) applicable law, (iv) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred, (v) customary non-assignment provisions in leases or other
agreements entered into in the ordinary course of business and consistent with
past practices, (vi) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on the property so acquired
of the nature described in clause (iii) of the preceding paragraph, (vii) any
agreement for the sale or other disposition of a Restricted Subsidiary or all or
substantially all of the assets of such Restricted Subsidiary that restricts
distributions by that Restricted Subsidiary pending such sale or other
disposition, (viii) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced, (ix) Liens securing
Indebtedness that limit the right of the debtor to dispose of the assets subject
to such Lien, (x) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements, stock
sale agreements and other similar agreements entered into in the ordinary course
of business, (xi) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business, (xii)
permitted mortgage or construction financing that imposes restrictions on the
property acquired or improved, (xiii) encumbrances or restrictions imposed by
amendments to the contracts, agreements or obligations referred to in the
foregoing clauses (i) through (xii) if not materially more restrictive in the
aggregate than the contract, agreement or obligation in question prior to its
amendment, (xiv) protective liens filed in connection with sale-leaseback
transactions permitted under Section 4.17 hereof and (xv) Indebtedness permitted
to be incurred pursuant to clauses (xi), (xiii) and (xv) of the third paragraph
of Section 4.09 hereof.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of Preferred
Stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or issue Disqualified Stock, and the Restricted Subsidiaries
(other than the Special Purpose Restricted Subsidiaries) may incur Indebtedness
or issue Preferred Stock, if the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1.0 determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred or the Preferred Stock or Disqualified Stock had been issued,
as the case may be, at the beginning of such four-quarter period.
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If such four quarter period includes any period prior to the date of this
Indenture, the financial statements for such prior period shall be prepared on a
pro forma basis giving effect to the Transactions in accordance with Article 11
of Regulation S-X under the Securities Act.
The first paragraph of this Section 4.09 shall not prohibit the incurrence
of any of the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company and any Restricted Subsidiary (other
than the Special Purpose Restricted Subsidiaries) of Indebtedness under
Credit Facilities in an aggregate principal amount at any one time
outstanding under this clause (i) not to exceed the Borrowing Base, less
the aggregate amount of all mandatory reductions required by Sections 4.10
and 4.16 hereof that have actually been made since the date of this
Indenture; provided, that the Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (i) need not
constitute Permitted Refinancing Indebtedness;
(ii) the incurrence by the Company and its Restricted Subsidiaries
(other than the Special Purpose Restricted Subsidiaries) of the Existing
Indebtedness;
(iii) the incurrence by the Company and the Restricted Subsidiaries of
Indebtedness represented by the First Mortgage Notes to be issued on the
date of this Indenture and the Exchange Notes to be issued pursuant to the
Registration Rights Agreements (including, in each case, the Subsidiary
Guarantees);
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries (other than the Special Purpose Restricted Subsidiaries) of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by this Indenture to be
incurred under the first paragraph of this Section 4.09 or clauses (ii),
(iii), (iv), (ix) or (xvi) of this paragraph;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly Owned Restricted Subsidiaries; provided, however, that
(i) if the Company or any Guarantor is the obligor on such Indebtedness,
such Indebtedness must be expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the First Mortgage Notes,
in the case of the Company, or the Guarantee, in the case of a Guarantor
and (ii) (A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Wholly Owned Restricted Subsidiary thereof shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company
or such Subsidiary, as the case may be, that was not permitted by this
clause (v);
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries (other than the Special Purpose Restricted Subsidiaries) of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(vii) the guarantee by the Company or any of its Restricted
Subsidiaries (other than the Special Purpose Restricted Subsidiaries) of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this Section 4.09;
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(viii) the accrual of interest, the accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the
form of additional Indebtedness with the same terms, and the payment of
dividends on Disqualified Stock in the form of additional shares of the
same class of Disqualified Stock shall not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this
Section 4.09; provided, in each such case, that the amount thereof is
included in Fixed Charges of the Company as accrued;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries (other than the Special Purpose Restricted Subsidiaries) of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (ix), not to exceed $20.0
million;
(x) the incurrence by the Company or any of its Restricted
Subsidiaries (other than the Special Purpose Restricted Subsidiaries) of
obligations that are incurred for the purpose of fixing or hedging currency
risk or the value of commodities or foreign currencies purchased or
received by the Company or any Restricted Subsidiary in the ordinary course
of business in amounts reasonably related to the Company's business and not
for speculative purposes;
(xi) Indebtedness of the Company or a Restricted Subsidiary (other
than the Special Purpose Restricted Subsidiaries) owed to (including
obligations in respect of letters of credit for the benefit of) any Person
in connection with worker's compensation, health, disability or other
employee benefits or property, casualty or liability insurance provided by
such Person to the Company or such Restricted Subsidiary, pursuant to
reimbursement or indemnification obligations to such Person, in each case
incurred in the ordinary course of business and consistent with past
practices;
(xii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary (other than the Special Purpose Restricted
Subsidiaries) providing for indemnification, adjustment of purchase price
or similar obligations, in each case, incurred or assumed in connection
with the disposition of any business, asset or Equity Interests; provided
that the maximum aggregate liability of all such Indebtedness shall at no
time exceed the gross proceeds actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
(xiii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
(other than the Special Purpose Restricted Subsidiaries) in the ordinary
course of business;
(xiv) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt or such Subsidiary ceases to be an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company;
(xv) the incurrence of Indebtedness (other than by the Special Purpose
Restricted Subsidiaries) in connection with Receivables Transactions; and
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(xvi) the incurrence by Royster-Clark Group of Indebtedness
represented by (A) the non-cash pay subordinated notes issued to IMC
Global, 399 Ventures and Management Investors to consummate the
Transactions and (B) the 4 1/2% convertible subordinated note issued to 399
Ventures on March 31, 1999 to effect the acquisitions of AgriBusiness and
Royster-Clark.
The Company shall not incur any Indebtedness (including Permitted Debt)
that is contractually subordinated in right of payment to any other Indebtedness
of the Company unless such Indebtedness is also contractually subordinated in
right of payment to the First Mortgage Notes on substantially identical terms;
provided, however, that no Indebtedness of the Company shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of the
Company solely by virtue of being unsecured.
For purposes of determining compliance with this Section 4.09, in the event
that an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xvi) above, or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall be permitted to classify such item of Indebtedness on the date
of its incurrence, or reclassify all or a portion of such item of Indebtedness,
in any manner that complies with this Section 4.09. Indebtedness under Credit
Facilities outstanding on the date on which First Mortgage Notes are first
issued and authenticated under this Indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (i) of the
definition of Permitted Debt.
Notwithstanding any of the foregoing, the Special Purpose Restricted
Subsidiaries shall not incur any Indebtedness except for Permitted Debt
specifically provided for in clauses (iii) and (v) of this Section 4.09.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries, to consummate an Asset Sale other than transfers of Receivables to
a Receivables Subsidiary in connection with a Receivables Transaction and
regulatory divestitures required in connection with acquisitions unless (i) the
Company (or the 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 or Equity Interests issued or sold or otherwise disposed of,
(ii) such fair market value is determined by the Company's Board of Directors
and evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee and (iii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash. For purposes of this provision, each of the following shall
be deemed to be cash: (A) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the First Mortgage Notes or any Subsidiary
Guarantee) that are assumed by the transferee of any such assets pursuant to a
customary assumption agreement and (B) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are within 45 days converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received in that conversion);
provided, however, that the 75% limitation referred to above shall not apply to
any Asset Sale in which the cash or Cash Equivalents portion of the
consideration received therefore is equal to or greater than what the net
after-tax proceeds would have been had such Asset Sale complied with the
aforementioned 75% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds at its option (a) to repay Senior Debt
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and, if the Senior Debt repaid is revolving credit Indebtedness, to
correspondingly reduce commitments with respect thereto, (b) to acquire all or
substantially all of the assets of, or a majority of the Voting Stock of,
another Permitted Business, (c) to make a capital expenditure or (d) to acquire
other long-term assets that are used or useful in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph shall constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall make
an Asset Sale Offer to all Holders of First Mortgage Notes and all holders of
other Indebtedness that is pari passu with the First Mortgage Notes containing
provisions similar to those set forth in this Indenture with respect to offers
to purchase or redeem with the proceeds of sales of assets to purchase the
maximum principal amount of First Mortgage Notes and such other pari passu
Indebtedness that may be purchased out of the Excess Proceeds. The offer price
in any Asset Sale Offer shall be equal to 100% of principal amount plus accrued
and unpaid interest (including Liquidated Damages), if any, to the date of
purchase, and shall be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by this Indenture. If the aggregate
principal amount of First Mortgage Notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee shall select the First Mortgage Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis based on the principal amount
of First Mortgage Notes and such other pari passu Indebtedness tendered. Upon
completion of each Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
The Company shall 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 each
repurchase of First Mortgage Notes pursuant to an Asset Sale Offer. To the
extent that the provisions of any securities laws or regulations conflict with
this Section 4.10, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations
hereunder by virtue of such conflict.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless (a) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (b) the Company delivers to the Trustee (i) with respect to
any Affiliate Transaction or series of interrelated or contractually related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with this
Section 4.11 and that such Affiliate Transaction has been approved by a majority
of the disinterested members of the Board of Directors and (ii) with respect to
any Affiliate Transaction or series of interrelated or contractually related
Affiliate Transactions involving aggregate consideration in excess of $10.0
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million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, shall not be subject to the provisions of the prior paragraph: (i)
any employment agreement, compensation or employee benefit arrangements,
incentive arrangements and customary director fees (including grants of stock,
stock options or other Equity Interests) entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary; (ii)
transactions between or among the Company and/or its Restricted Subsidiaries;
(iii) transactions with a Person that is an Affiliate of Royster-Clark Group or
the Company solely because Royster-Clark Group or the Company owns an Equity
Interest in such Person; (iv) payment of reasonable directors fees to Persons
who are not otherwise Affiliates of Royster-Clark Group or the Company; (v)
Restricted Payments that are permitted by Section 4.07 hereof; and (vi)
customary loans, advances, fees and compensation paid to, and indemnity provided
on behalf of, officers, directors, employees or consultants of the Company or
any of its Restricted Subsidiaries.
Section 4.12. Liens.
The Special Purpose Restricted Subsidiaries shall not, and the Company
shall not permit any of its Special Purpose Restricted Subsidiaries to, directly
or indirectly, create, incur, assume or suffer to exist any Lien of any kind,
except for Special Purpose Restricted Subsidiary Permitted Liens. The Company
shall not, and shall not permit any of its Restricted Subsidiaries to, directly
or indirectly, create, incur, assume or suffer to exist any Lien of any kind
securing the Collateral or Indebtedness, Attributable Debt or trade payables on
any asset now owned or hereafter acquired, except Permitted Liens; provided,
however that in addition to creating Permitted Liens on its properties or
assets, the Company and any of its Restricted Subsidiaries (other than the
Special Purpose Restricted Subsidiaries) may create any Lien upon any of their
properties or assets (including but not limited to any capital stock of its
Subsidiaries) if the First Mortgage Notes are equally and ratably secured.
Section 4.13. Line of Business.
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses
and franchises of the Company and its Restricted Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any of
its Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries, taken as a whole, and that the loss thereof is
not adverse in any material respect to the Holders of the First Mortgage Notes.
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Section 4.15. Offer to Repurchase Upon Change of Control.
(a) If a Change of Control occurs, each Holder of First Mortgage Notes
shall have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of that Holder's First Mortgage Notes
pursuant to an offer (the "Change of Control Offer") on the terms set forth in
this Indenture. In the Change of Control Offer, the Company shall offer a
payment in cash (the "Change of Control Payment") equal to 101% of the aggregate
principal amount of First Mortgage Notes repurchased plus accrued and unpaid
interest (including Liquidated Damages) thereon, to the date of purchase. Within
ten days following any Change of Control, the Company shall mail a notice to
each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase First Mortgage Notes on the Change
of Control Payment Date specified in such notice which date shall be no earlier
than 30 days and no later than 60 days from the date such notice is mailed,
pursuant to the procedures required by this Indenture and described in such
notice. The Company shall 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 the First Mortgage Notes as a result of a Change of Control. To
the extent that the provisions of any securities laws or regulations conflict
with the Change of Control provisions of this 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 this Indenture by virtue of such conflict.
(b) On the date the Change of Control Payment is made (the "Change of
Control Payment Date"), the Company shall, to the extent lawful (1) accept for
payment all First Mortgage Notes or portions thereof properly tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all First Mortgage Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the First Mortgage Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of First Mortgage Notes or
portions thereof being purchased by the Company.
(c) The Paying Agent shall promptly mail to each Holder of First Mortgage
Notes so tendered the Change of Control Payment for such First Mortgage Notes,
and the Trustee shall promptly authenticate and mail (or cause to be transferred
by book entry) to each Holder a new First Mortgage Note equal in principal
amount to any unpurchased portion of the First Mortgage Notes surrendered, if
any; provided that each such new First Mortgage Note shall be in a principal
amount of $1,000 or an integral multiple thereof.
(d) The provisions described above that require the Company to make a
Change of Control Offer following a Change of Control shall be applicable
regardless of whether or not any other provisions of this Indenture are
applicable. Except as described above with respect to a Change of Control, this
Indenture does not contain provisions that permit the Holders of the First
Mortgage Notes to require that the Company repurchase or redeem the First
Mortgage Notes in the event of a takeover, recapitalization or similar
transaction.
(e) The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Section 4.15 and purchases all First Mortgage Notes validly
tendered and not withdrawn under such Change of Control Offer.
Section 4.16. Sale of Nitrogen Facility
Upon the sale of a Nitrogen Facility (or the capital stock of the Guarantor
owning such facility), each Holder of First Mortgage Notes shall have the right
to require the Company to repurchase ratably with the Net Proceeds of such sale
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all outstanding First Mortgage Notes, in whole or in part, at a repurchase price
equal to the Permitted Sale Repurchase Price, according to the procedures set
forth in Section 4.15 hereof. "Permitted Sale Repurchase Price" means an amount
equal to, as determined by an Independent Investment Banker, the sum of the
present values of the remaining scheduled payments of interest and the scheduled
payment of principal thereon, discounted to the repurchase date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Special Adjusted Treasury Rate, plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the repurchase date.
All of the consideration received by the Company or a Restricted Subsidiary
from the sale of a Nitrogen Facility shall be in the form of cash. Any proceeds
from the sale of a Nitrogen Facility remaining after the repurchase of First
Mortgage Notes set forth in Section 4.15 shall be applied to permanently repay
Senior Debt and, if the Senior Debt repaid is revolving credit Indebtedness,
shall permanently reduce commitments with respect thereto.
Section 4.17. Limitation on Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company or any Restricted Subsidiary may enter into a sale and leaseback
transaction if (i) the Company or that Restricted Subsidiary, as applicable,
could have incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under Section 4.09 hereof, (ii)
the gross cash proceeds of that sale and leaseback transaction are at least
equal to the fair market value, as determined in good faith by the Board of
Directors and set forth in an Officers' Certificate delivered to the Trustee, of
the property that is the subject of that sale and leaseback transaction and
(iii) the transfer of assets in that sale and leaseback transaction is permitted
by, and the Company applies the proceeds of such transaction in compliance with
Section 4.10 hereof.
Section 4.18. Limitation on Issuances and Sales of Capital Stock of Wholly
Owned Restricted Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries (other than Royster-Clark Group) to, transfer, convey, sell, lease
or otherwise dispose of any Equity Interests in any Wholly Owned Restricted
Subsidiary of the Company to any Person (other than the Company or a Wholly
Owned Restricted Subsidiary of the Company), unless (i) such transfer,
conveyance, sale, lease or other disposition is of all the Equity Interests in
such Wholly Owned Restricted Subsidiary and the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with Section 4.10 hereof or (ii) such transfer, conveyance, sale, lease or other
disposition is of less than all the Capital Stock of such Wholly Owned
Restricted Subsidiary, such formerly Wholly Owned Restricted Subsidiary has been
duly designated as an Unrestricted Subsidiary and no longer constitutes a
Restricted Subsidiary after such sale, the Company could have made an Investment
in the retained shares of such formerly Wholly Owned Restricted Subsidiary at
the time of such sale in accordance with Section 4.07 hereof and the cash Net
Proceeds from such transfer, conveyance, sale, lease or other disposition are
applied in accordance with Section 4.10 hereof.
In addition, the Company shall not permit any Wholly Owned Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
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Section 4.19. Advances to Subsidiaries.
All advances to Royster-Clark Group and Subsidiaries of the Company made by
the Company after the date of this Indenture shall be evidenced by intercompany
notes in favor of the Company. These intercompany notes shall be subordinated to
the Guarantees and the First Mortgage Notes.
Section 4.20. Payments for Consent.
Royster-Clark Group and the Company shall not, and shall not permit any of
their Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of First Mortgage Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the First Mortgage Notes unless such
consideration is offered to be paid and is paid to all Holders of the First
Mortgage Notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
Section 4.21. Additional Guarantees.
If the Company or any of its Subsidiaries acquires or creates another
Restricted Subsidiary after the date of this Indenture, then that newly acquired
or created Restricted Subsidiary must become a Guarantor and execute a
supplemental indenture, a form of which is attached as Exhibit E hereto, and
deliver an Opinion of Counsel to the Trustee within 10 Business Days of the date
on which it was acquired or created. Notwithstanding the foregoing, in the event
the Company or any of its Subsidiaries acquires or creates a Restricted
Subsidiary which is organized under the laws of a jurisdiction other than the
United States or a political subdivision thereof, and if the issuance of a
Guarantee by such Restricted Subsidiary would result in the imposition of a tax
or similar governmental charge, such foreign Restricted Subsidiary shall not be
required to be a Guarantor. The form of such Guarantee is attached as Exhibit D
hereto.
Section 4.22. Master Conveyance Agreement
The Trustee, as Collateral Agent for and on behalf of the Holders of the
First Mortgage Notes, the Company and IMC Global have entered into the Master
Conveyance Agreement. In connection therewith, on or before September 15, 1999,
the Company shall deliver to the Trustee an Officer's Certificate which shall
certify (i) which parcels of real property listed on Schedule 1 to the Master
Conveyance Agreement have been conveyed to one of the IMC Operating Companies
(as defined in the Master Conveyance Agreement) or a Subsidiary thereof and the
entity to which each parcel was so conveyed, (ii) which parcels listed on
Schedule 1 to the Master Conveyance Agreement have not been properly conveyed,
(iii) which parcels of real property listed on Schedule 2 to the Master
Conveyance Agreement have been conveyed to one of the Special Purpose Restricted
Subsidiaries, (iv) which parcels listed on Schedule 2 to the Master Conveyance
Agreement have not been properly conveyed, (v) that no Default or Event of
Default exists with respect to the Indenture, and (vi) all of the parcels listed
in clauses (i) and (iii) above have been transferred to one of the Special
Purpose Restricted Subsidiaries and (vii) that indemnity proceeds from the
Master Conveyance Agreement shall be applied as set forth below. Purchaser shall
also attach to the Officer's Certificate a valuation report prepared in
accordance with paragraph 5 of the Master Conveyance Agreement entitled
"Seller's Indemnification" for those parcels listed in clauses (ii) and (iv)
above. Any indemnity proceeds received by the Company or the Trustee as
collateral agent under the Master Conveyance Agreement from IMC Global or the
Company shall be applied or invested as provided for in the second and third
paragraphs of Section 4.10; however, if the aggregate amount of indemnity
proceeds exceeds $5.0 million, the Company will make an Asset Sale Offer
pursuant to the provisions of Section 4.10.
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ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
Royster-Clark Group and the Company may not, directly or indirectly (a)
consolidate or merge with or into another Person (whether or not Royster-Clark
Group or the Company is the surviving corporation) or (b) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company and its Restricted Subsidiaries taken as a
whole, in one or more related transactions, to another Person, unless in the
case of each of Royster-Clark Group and the Company, (i) either (A)
Royster-Clark Group or the Company is the surviving corporation or (B) the
Person formed by or surviving any such consolidation or merger (if other than
Royster-Clark Group or the Company) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia, (ii) the Person formed by or surviving any such
consolidation or merger (if other than Royster-Clark Group or the Company) or
the Person to which such sale, assignment, transfer, conveyance or other
disposition shall have been made assumes all the obligations of Royster-Clark
Group or the Company under the First Mortgage Notes, this Indenture and the
Registration Rights Agreement pursuant to agreements reasonably satisfactory to
the Trustee, (iii) immediately after such transaction no Default or Event of
Default exists and (iv) Royster-Clark Group or the Company or the Person formed
by or surviving any such consolidation or merger (if other than Royster-Clark
Group or the Company), or to which such sale, assignment, transfer, conveyance
or other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of Royster-Clark Group or the Company immediately preceding the
transaction and (B) will, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof.
In addition, Royster-Clark Group and the Company may not, directly or
indirectly, lease all or substantially all of its properties or assets, in one
or more related transactions, to any other Person. This Section 5.01 shall not
apply to a sale, assignment, transfer, conveyance or other disposition of assets
between or among Royster-Clark Group, the Company and any of its Wholly Owned
Subsidiaries and any of the Guarantors.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the First Mortgage Notes except in the case of a
sale of all of the Company's assets that meets the requirements of Section 5.01
hereof.
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ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the First Mortgage Notes and such default
continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the First Mortgage Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise;
(c) the Company or any of its Restricted Subsidiaries fails to comply with
any of the provisions of Section 4.07, 4.09, 4.10, 4.15, 4.16, 4.22 or 5.01
hereof;
(d) the Company or any of its Restricted Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement in this
Indenture, the First Mortgage Notes or the Security Agreements for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in aggregate
principal amount of the First Mortgage Notes (including Additional First
Mortgage Notes, if any) then outstanding voting as a single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, which default is caused by a
failure to pay principal of, or interest or premium, if any, on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of such Indebtedness, together with the 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 $10.0
million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any Restricted Subsidiary that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $10.0 million;
(g) the Company or any Restricted Subsidiary that is a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary pursuant to or within the meaning of
Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
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(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any Restricted Subsidiary
that is a Significant Subsidiary or any group of Restricted Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a custodian of the Company or any Restricted Subsidiary
that is a Significant Subsidiary or any group of Restricted Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary or for
all or substantially all of the property of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary; or
(iii) orders the liquidation of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
or
(i) the Company or any Restricted Subsidiary shall breach any material
representation, warranty or agreement set forth in the Security Agreements or
repudiate any obligations under the Security Agreements or the Security
Agreements shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect.
(j) except as permitted by this Indenture, any Guarantee is held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor, or any Person acting on behalf
of any Guarantor, shall deny or disaffirm its obligations under such Guarantor's
Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in clause
(g) or (h) of Section 6.01 hereof with respect to the Company, any Restricted
Subsidiary that is a Significant Subsidiary or any group of Restricted
Significant Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding First Mortgage Notes may declare all
the First Mortgage Notes to be due and payable immediately. Upon any such
declaration, the First Mortgage Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, any Restricted
Subsidiary that is a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary,
all outstanding First Mortgage Notes shall be due and payable immediately
without further action or notice. The Holders of a majority in aggregate
principal amount of the then outstanding First Mortgage Notes by written notice
to the Trustee may on behalf of all of the Holders rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal,
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interest (or Liquidated Damages) or premium that has become due solely because
of the acceleration) have been cured or waived.
If an Event of Default occurs on or after April 1, 2004 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the First Mortgage
Notes pursuant to Section 3.07 hereof, then, upon acceleration of the First
Mortgage Notes, an equivalent premium shall also become and be immediately due
and payable, to the extent permitted by law, anything in this Indenture or in
the First Mortgage Notes to the contrary notwithstanding. If an Event of Default
occurs prior to April 1, 2004 by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding the prohibition on redemption of the First Mortgage Notes prior to such
date, then, upon acceleration of the First Mortgage Notes, an additional premium
shall also become and be immediately due and payable in an amount, for each of
the years beginning on April 1 of the years set forth below, as set forth below
(expressed as a percentage of the principal amount of the First Mortgage Notes
on the date of payment that would otherwise be due but for the provisions of
this sentence):
Year Percentage
---- ----------
1999.................................................. 110.250%
2000.................................................. 109.225%
2001.................................................. 108.200%
2002.................................................. 107.175%
2003.................................................. 106.150%
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the First Mortgage Notes or to enforce the performance of any
provision of the First Mortgage Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the First Mortgage Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a First Mortgage Note in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding First Mortgage Notes by notice to the Trustee may on behalf of
the Holders of all of the First Mortgage Notes waive an existing Default or
Event of Default and its consequences hereunder, except a continuing Default or
Event of Default in the payment of the principal of, premium and Liquidated
Damages, if any, or interest on, the First Mortgage Notes (including in
connection with an offer to purchase) (provided, however, that the Holders of a
majority in aggregate principal amount of the then outstanding First Mortgage
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration). Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
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Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding First
Mortgage Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of First Mortgage Notes
or that may involve the Trustee in personal liability. The Trustee may also
withhold from Holders of the First Mortgage Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest (or Liquidated Damages)) if it determines
that withholding notice is in their interest.
Section 6.06. Limitation on Suits.
A Holder of a First Mortgage Note may pursue a remedy with respect to this
Indenture or the First Mortgage Notes only if:
(a) the Holder of a First Mortgage Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then outstanding
First Mortgage Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a First Mortgage Note or Holders of First Mortgage Notes
offer and, if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal amount
of the then outstanding First Mortgage Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a First Mortgage Note may not use this Indenture to prejudice
the rights of another Holder of a First Mortgage Note or to obtain a preference
or priority over another Holder of a First Mortgage Note.
Section 6.07. Rights of Holders of First Mortgage Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a First Mortgage Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the First Mortgage Note, on or after
the respective due dates expressed in the First Mortgage Note (including in
connection with an offer to purchase), or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company or any Guarantor for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the First Mortgage Notes and interest on overdue principal
and, to the extent lawful, interest and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
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reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the First Mortgage Notes allowed in any judicial proceedings relative
to the Company (or any other obligor upon the First Mortgage Notes), its
creditors or its property and shall be entitled and empowered to collect,
receive and distribute any money or other property payable or deliverable on any
such claims and any custodian in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee, and in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the First Mortgage Notes or the rights of any Holder, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of First Mortgage Notes for amounts due and unpaid
on the First Mortgage Notes for principal, premium and Liquidated Damages,
if any, and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the First Mortgage Notes for
principal, premium and Liquidated Damages, if any and interest,
respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of First Mortgage Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
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faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a First Mortgage Note
pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding First Mortgage Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
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(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of First Mortgage Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the First Mortgage Notes, it shall
not be accountable for the Company's use of the proceeds from the First Mortgage
Notes or any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the First Mortgage Notes or any other document in connection with
the sale of the First Mortgage Notes or pursuant to this Indenture other than
its certificate of authentication.
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Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of First Mortgage Notes
a notice of the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any First Mortgage Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of the
Holders of the First Mortgage Notes.
Section 7.06. Reports by Trustee to Holders of the First Mortgage Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as First Mortgage Notes remain
outstanding, the Trustee shall mail to the Holders of the First Mortgage Notes a
brief report dated as of such reporting date that complies with TIA ss. 313(a)
(but if no event described in TIA ss. 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The Trustee
also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of First
Mortgage Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the First Mortgage Notes are listed in accordance with
TIA ss. 313(d). The Company shall promptly notify the Trustee when the First
Mortgage Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
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To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the First Mortgage Notes on all money or property
held or collected by the Trustee, except that held in trust to pay principal and
interest on particular First Mortgage Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss.313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding First Mortgage Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding First Mortgage Notes
may appoint a successor Trustee to replace the successor Trustee appointed by
the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding First
Mortgage Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder who has been a Holder
for at least six months, fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it as
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Trustee to the successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA ss.310(a)(1), (2) and (5). The Trustee is subject to TIA ss.310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss.311(a), excluding any creditor
relationship listed in TIA ss.311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss.311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding First Mortgage
Notes upon compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding First Mortgage
Notes and the Guarantors shall be deemed to have been discharged from their
obligations with respect to their Guarantees on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose,
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding First Mortgage
Notes, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such First Mortgage Notes and this Indenture (and the Trustee,
on demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), and the Guarantors shall be deemed to have been
discharged from their obligation with respect to their Guarantees, except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding First Mortgage
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Notes to receive solely from the trust fund described in Section 8.04 hereof,
and as more fully set forth in such Section, payments in respect of the
principal of, premium, if any, and interest (including Liquidated Damages) on
such First Mortgage Notes when such payments are due, (b) the Company's
obligations with respect to such First Mortgage Notes under Article 2 and
Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and the Company's obligations in connection therewith and
(d) this Article Eight. Subject to compliance with this Article Eight, the
Company may exercise its option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from its obligations under the covenants contained in Sections 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21 and
4.22 hereof and clause (iv) of Section 5.01 hereof with respect to the
outstanding First Mortgage Notes on and after the date the conditions set forth
in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the
First Mortgage Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such First Mortgage Notes shall not be deemed outstanding for
accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding First Mortgage Notes, the Company may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such First Mortgage Notes shall be unaffected thereby. In
addition, upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03 hereof, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(f)
hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding First Mortgage Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, 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 and Liquidated Damages, if any,
and interest on the outstanding First Mortgage Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be, and
the Company must specify whether the First Mortgage Notes are being defeased to
maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, 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
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received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding First Mortgage 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;
(c) in the case of an election under Section 8.03 hereof, 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 of the
outstanding First Mortgage Notes 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;
(d) 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 resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the First Mortgage Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
(which may be subject to customary exceptions) to the effect that, assuming no
intervening bankruptcy of the Company or any Guarantor between the date of
deposit and the 91st day following the deposit and assuming that no Holder is an
"insider" of the Company under applicable bankruptcy law, 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;
(g) 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 with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; and
(h) 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.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding First
Mortgage Notes shall be held in trust and applied by the Trustee, in accordance
with the provisions of such First Mortgage Notes and this Indenture, to the
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payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
First Mortgage Notes of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, but such money need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding First
Mortgage Notes
Anything in this Article Eight to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any First Mortgage Note and remaining unclaimed for one year after
such principal, and premium, if any, or interest has become due and payable
shall be paid to the Company on its request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such First Mortgage Note
shall thereafter look only to the Company for payment thereof, and all liability
of the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in the New York Times and The Wall Street Journal (national edition),
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the First
Mortgage Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying
Agent is permitted to apply all such money in accordance with Section 8.02 or
8.03 hereof, as the case may be; provided, however, that, if the Company makes
any payment of principal of, premium, if any, or interest on any First Mortgage
Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such First Mortgage Notes to receive
such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of First Mortgage Notes.
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Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture, the Guarantees or the
First Mortgage Notes without the consent of any Holder of a First Mortgage Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated First Mortgage Notes in addition to or in
place of certificated First Mortgage Notes or to alter the provisions of Article
2 hereof (including the related definitions) in a manner that does not
materially adversely affect any Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the First Mortgage Notes by a successor to the
Company pursuant to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional rights or benefits
to the Holders of the First Mortgage Notes or that does not adversely affect the
legal rights hereunder of any Holder of the First Mortgage Note;
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional First Mortgage Notes in
accordance with the limitations set forth in this Indenture as of the date
hereof; or
(g) to allow any Guarantor to execute a supplemental indenture and/or a
Guarantee with respect to the First Mortgage Notes.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of First Mortgage Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15
hereof), the Guarantees and the First Mortgage Notes with the consent of the
Holders of at least a majority in principal amount of the First Mortgage Notes
(including Additional First Mortgage Notes, if any) then outstanding voting as a
single class (including, without limitation consents obtained in connection with
a tender offer or exchange offer for, or purchase of, the First Mortgage Notes),
and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of
Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest (including Liquidated Damages) on the
First Mortgage Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of this Indenture, the
Guarantees or the First Mortgage Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding First Mortgage
Notes (including Additional First Mortgage Notes, if any) voting as a single
class (including, without limitation, consents obtained in connection with a
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tender offer or exchange offer for, or purchase of, the First Mortgage Notes).
Section 2.08 hereof shall determine which First Mortgage Notes are considered to
be "outstanding" for purposes of this Section 9.02.
The Collateral Agent and the Company can (i) amend the Security Agreements
or (ii) release any of the Collateral from a Lien of the Security Agreements
(except in accordance with the provisions thereof or as set forth in Section
10.3 hereof) only with the consent of holders of at least 75% in aggregate
principal amount of the outstanding First Mortgage Notes.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of First Mortgage Notes as aforesaid, and
upon receipt by the Trustee of the documents described in Section 7.02 hereof,
the Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of First Mortgage
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of First Mortgage Notes
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such amended
or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the First Mortgage
Notes (including Additional First Mortgage Notes, if any) then outstanding
voting as a single class may waive compliance in a particular instance by the
Company with any provision of this Indenture or the First Mortgage Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any First Mortgage Notes held
by a non-consenting Holder):
(a) reduce the principal amount of First Mortgage Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any First
Mortgage Note or alter or waive any of the provisions with respect to the
redemption of the First Mortgage Notes except as provided above with respect to
Sections 3.09, 4.10 and 4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any First Mortgage Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest (or Liquidated Damages) on the First Mortgage Notes
(except a rescission of acceleration of the First Mortgage Notes by the Holders
of at least a majority in aggregate principal amount of the then outstanding
First Mortgage Notes (including Additional First Mortgage Notes, if any) and a
waiver of the payment default that resulted from such acceleration);
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(e) make any First Mortgage Note payable in money other than that stated in
the First Mortgage Notes;
(f) make any change in the provisions of this Indenture relating to waivers
of past Defaults or the rights of Holders of First Mortgage Notes to receive
payments of principal of or interest (or Liquidated Damages) or premium, if any,
on the First Mortgage Notes;
(g) waive a redemption payment with respect to any First Mortgage Note
(other than a payment required by Sections 4.10, 4.15 and 4.16 hereof);
(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions; or
(i) release any Guarantor from any of its obligations under its Guarantee
or this Indenture, except in accordance with the terms of this Indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the First Mortgage Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a First Mortgage Note is a continuing consent by the Holder of a
First Mortgage Note and every subsequent Holder of a First Mortgage Note or
portion of a First Mortgage Note that evidences the same debt as the consenting
Holder's First Mortgage Note, even if notation of the consent is not made on any
First Mortgage Note. However, any such Holder of a First Mortgage Note or
subsequent Holder of a First Mortgage Note may revoke the consent as to its
First Mortgage Note if the Trustee receives written notice of revocation before
the date the waiver, supplement or amendment becomes effective. An amendment,
supplement or waiver becomes effective in accordance with its terms and
thereafter binds every Holder.
Section 9.05. Notation on or Exchange of First Mortgage Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any First Mortgage Note thereafter authenticated. The
Company in exchange for all First Mortgage Notes may issue and the Trustee
shall, upon receipt of an Authentication Order, authenticate new First Mortgage
Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new First Mortgage Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
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the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10.
COLLATERAL AND SECURITY
Section 10.01. Security Agreements.
The due and punctual payment of the principal of and interest and
Liquidated Damages, if any, on the First Mortgage Notes when and as the same
shall be due and payable, whether on an interest payment date, at maturity, by
acceleration, repurchase, redemption or otherwise, and interest on the overdue
principal of and interest and Liquidated Damages (to the extent permitted by
law), if any, on the First Mortgage Notes and performance of all other
obligations of the Company and the Guarantors to the Holders of First Mortgage
Notes or the Trustee under this Indenture and the First Mortgage Notes,
according to the terms hereunder or thereunder, shall be secured as provided in
the Security Agreements and the Guarantees which the Company and the Guarantors
have entered into simultaneously with the execution of this Indenture and which
is attached as Exhibit G hereto. Each Holder of First Mortgage Notes, by its
acceptance thereof, consents and agrees to the terms of the Security Agreements
(including, without limitation, the provisions providing for foreclosure and
release of Collateral) as the same may be in effect or may be amended from time
to time in accordance with its terms and authorizes and directs the Collateral
Agent to enter into the Security Agreements and to perform its obligations and
exercise its rights thereunder in accordance therewith. The Company and the
Guarantors shall deliver to the Trustee, in its capacity as both Trustee and
Collateral Agent, all documents required pursuant to the Security Agreements,
and shall do or cause to be done all such acts and things as may be necessary or
proper, or as may be required by the provisions of the Security Agreements, to
assure and confirm to the Trustee, in its capacity as both Trustee and
Collateral Agent, the security interest in the Collateral contemplated hereby,
by the Security Agreements or any part thereof, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the First Mortgage Notes secured hereby, according to the
intent and purposes herein expressed. The Company and the Guarantors shall take,
or shall cause its Subsidiaries to take, upon request of the Trustee, any and
all actions reasonably required to cause the Security Agreements to create and
maintain, as security for the Obligations of the Company and the Guarantors
hereunder, a valid and enforceable perfected first priority Lien in and on all
the Collateral, in favor of the Collateral Agent for the benefit of the Holders
of First Mortgage Notes, superior to and prior to the rights of all third
Persons and subject to no other Liens than Permitted Liens.
Section 10.02. Recording and Opinions.
(a) The Company shall furnish to the Trustee simultaneously with the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, the
Mortgages, financing statements or other instruments necessary to make effective
the Lien intended to be created by the Security Agreements, and reciting with
respect to the security interests in the Collateral, the details of such action,
or (ii) stating that, in the opinion of such counsel, no such action is
necessary to make such Lien effective.
(b) The Company shall furnish to the Trustee, in its capacity as both
Trustee and Collateral Agent, on April 1 in each year beginning with April 1,
2000, an Opinion of Counsel, dated as of such date, either (i) (A) stating that,
in the opinion of such counsel, action has been taken with respect to the
recording, registering, filing, re-recording, re-registering and refiling of all
supplemental indentures, financing statements, continuation statements or other
instruments of further assurance as is necessary to maintain the Lien of the
Security Agreements and reciting with respect to the security interests in the
Collateral the details of such action or referring to prior Opinions of Counsel
in which such details are given, (B) stating that, based on relevant laws as in
effect on the date of such Opinion of Counsel, all financing statements and
continuation statements have been executed and filed that are necessary as of
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such date and during the succeeding 12 months fully to preserve and protect, to
the extent such protection and preservation are possible by filing, the rights
of the Holders of First Mortgage Notes and the Collateral Agent and the Trustee
hereunder and under the Security Agreements with respect to the security
interests in the Collateral, or (ii) stating that, in the opinion of such
counsel, no such action is necessary to maintain such Lien and assignment.
(c) The Company shall otherwise comply with the provisions of TIA
ss.314(b).
Section 10.03. Release of Collateral.
(a) Subject to subsections (b), (c) and (d) of this Section 10.03, the
Nitrogen Facility referred to in Section 4.16 hereof may be released without
substitution of collateral from the Lien and security interest created by the
Security Agreements if an offer is made to repurchase the First Mortgage Notes
from the cash proceeds of the sale of the Nitrogen Facility in accordance with
the provisions of the Security Agreements or as provided hereby. In addition,
upon the request of the Company pursuant to an Officers' Certificate certifying
that all conditions precedent hereunder have been met (at the sole cost and
expense of the Company) the Collateral Agent shall release (i) the Nitrogen
Facility that is sold, conveyed or disposed of in compliance with the provisions
of this Indenture; provided, that the Company shall apply the Net Proceeds in
accordance with Section 4.16 hereof. Upon receipt of such Officers' Certificate
the Collateral Agent shall execute, deliver or acknowledge any necessary or
proper instruments of termination, satisfaction or release to evidence the
release of the Nitrogen Facility permitted to be released pursuant to this
Indenture or the Security Agreements.
(b) No Collateral shall be released from the Lien and security interest
created by the Security Agreements pursuant to the provisions of the Security
Agreements unless there shall have been delivered to the Collateral Agent the
Officer's Certificate required by this Section 10.03.
(c) At any time when a Default or Event of Default shall have occurred and
be continuing and the maturity of the First Mortgage Notes shall have been
accelerated (whether by declaration or otherwise) and the Trustee shall have
delivered a notice of acceleration to the Collateral Agent, no release of the
Nitrogen Facility pursuant to the provisions of the Security Agreements shall be
effective as against the Holders of First Mortgage Notes.
(d) The release of the Nitrogen Facility from the terms of this Indenture
and the Security Agreements shall not be deemed to impair the security under
this Indenture in contravention of the provisions hereof if and to the extent
the Nitrogen Facility is released pursuant to the terms of the Security
Agreements. To the extent applicable, the Company shall cause TIA ss.313(b),
relating to reports, and TIA ss.314(d), relating to the release of property or
securities from the Lien and security interest of the Security Agreements, to be
complied with. Any certificate or opinion required by TIA ss.314(d) may be made
by an Officer of the Company except in cases where TIA ss.314(d) requires that
such certificate or opinion be made by an independent Person, which Person shall
be an independent engineer, appraiser or other expert selected or approved by
the Trustee, in his capacity as both Trustee and Collateral Agent, in the
exercise of reasonable care.
Section 10.04. Certificates of the Company.
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The Company shall furnish to the Trustee and the Collateral Agent, prior
to each proposed release of the Nitrogen Facility pursuant to the Security
Agreements, (i) all documents required by TIA ss.314(d) and (ii) an Opinion of
Counsel, which may be rendered by internal counsel to the Company, to the effect
that such accompanying documents constitute all documents required by TIA
ss.314(d). The Trustee may, to the extent permitted by Sections 7.01 and 7.02
hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such documents and such
Opinion of Counsel.
Section 10.05. Certificates of the Trustee.
In the event that the Company wishes to release the Nitrogen Facility in
accordance with the Security Agreements and has delivered the certificates and
documents required by the Security Agreements and Sections 10.03 and 10.04
hereof, the Trustee shall determine whether it has received all documentation
required by TIA ss.314(d) in connection with such release and, based on such
determination and the Opinion of Counsel delivered pursuant to Section 10.04(b),
shall deliver a certificate to the Collateral Agent setting forth such
determination.
Section 10.06. Authorization of Actions to Be Taken by the Trustee Under the
Security Agreements.
Subject to the provisions of Section 7.01 and 7.02 hereof, the Trustee may,
in its sole discretion and without the consent of the Holders of First Mortgage
Notes, direct, on behalf of the Holders of First Mortgage Notes, the Collateral
Agent to, take all actions it deems necessary or appropriate in order to (a)
enforce any of the terms of the Security Agreements and (b) collect and receive
any and all amounts payable in respect of the Obligations of the Company
hereunder. The Trustee shall have power to institute and maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts that may be unlawful or in violation of the Security Agreements or
this Indenture, and such suits and proceedings as the Trustee may deem expedient
to preserve or protect its interests and the interests of the Holders of First
Mortgage Notes in the Collateral (including power to institute and maintain
suits or proceedings to restrain the enforcement of or compliance with any
legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Holders of First Mortgage Notes or of the
Trustee). The Collateral Agent shall determine the circumstances and manner in
which the Collateral shall be disposed of, including, but not limited to, the
determination of whether to release all or any portion of the Nitrogen Facility
from the liens created by the Security Agreements and whether to foreclose on
the Collateral following an Event of Default and a declaration of acceleration
of the First Mortgage Notes.
Section 10.07. Authorization of Receipt of Funds by the Trustee Under the
Security Agreements.
The Trustee is authorized to receive any funds for the benefit of the
Holders of First Mortgage Notes distributed under the Security Agreements, and
to make further distributions of such funds to the Holders of First Mortgage
Notes according to the provisions of this Indenture.
Section 10.08. Impact of Event of Default
So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions, the Company and its Subsidiaries shall
be entitled to exercise any voting and other consensual rights pertaining to the
Collateral pledged by them.
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Upon the occurrence and during the continuance of an Event of Default and a
declaration of an acceleration of the First Mortgage Notes (1) and following
written notice from the Collateral Agent all rights of the Company to exercise
such voting and other consensual rights shall cease, and all such rights shall
become vested in the Collateral Agent, which, to the extent permitted by law,
shall have the sole right to exercise such voting and other consensual rights,
(2) all rights of the Company to receive any cash dividends, interest and other
payments made upon or with respect to the Collateral will cease and such cash
dividends, interest and other payments will be paid to the Collateral Agent and
(3) the Collateral Agent may sell the Collateral or any part thereof in
accordance with the terms of the Security Agreements. All funds distributed
under the Security Agreements and received by the Collateral Agent for the
benefit of the Holders of the First Mortgage Notes will be distributed by the
Collateral Agent in accordance with the provisions of this Indenture.
Section 10.09. Termination of Security Interest.
Upon the full and final payment and performance of all Obligations of the
Company under this Indenture and the First Mortgage Notes, and of the Guarantors
under this Indenture and the Guarantees, or upon Legal Defeasance, the Trustee
shall, at the request of the Company, deliver a certificate to the Collateral
Agent stating that such Obligations have been paid in full, and instruct the
Collateral Agent to release the Liens pursuant to this Indenture and the
Security Agreements. The Security Agreements shall thereafter be terminated.
ARTICLE 11.
GUARANTEES
Section 11.01. Guarantee.
Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a First Mortgage Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the First Mortgage Notes or the obligations of the Company hereunder or
thereunder, that: (a) the principal of and interest on the First Mortgage Notes
will be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest (including Liquidated Damages) on the
overdue principal of and interest on the First Mortgage Notes, if any, if
lawful, and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (b) in case of any extension
of time of payment or renewal of any First Mortgage Notes or any of such other
obligations, that same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same immediately.
Each Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
First Mortgage Notes or this Indenture, the absence of any action to enforce the
same, any waiver or consent by any Holder of the First Mortgage Notes with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
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of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenant that this Guarantee
shall not be discharged except by complete performance of the obligations
contained in the First Mortgage Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Guarantee. The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as the exercise of such right
does not impair the rights of the Holders under the Guarantee.
Section 11.02. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of First Mortgage Notes, each Holder,
hereby confirms that it is the intention of all such parties that the Guarantee
of such Guarantor not constitute a fraudulent transfer or conveyance for
purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal or state law to the extent
applicable to any Guarantee. To effectuate the foregoing intention, the Trustee,
the Holders and the Guarantors hereby irrevocably agree that the obligations of
such Guarantor will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Article 10, result
in the obligations of such Guarantor under its Guarantee not constituting a
fraudulent transfer or conveyance.
Section 11.03. Execution and Delivery of Guarantee.
To evidence its Guarantee set forth in Section 11.01, each Guarantor hereby
agrees that a notation of such Guarantee substantially in the form included in
Exhibit D shall be endorsed by an Officer of such Guarantor on each First
Mortgage Note authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of such Guarantor by its President or one of its
Vice Presidents.
Each Guarantor hereby agrees that its Guarantee set forth in Section 11.01
shall remain in full force and effect notwithstanding any failure to endorse on
each First Mortgage Note a notation of such Guarantee.
If an Officer whose signature is on this Indenture or on the Guarantee no
longer holds that office at the time the Trustee authenticates the First
Mortgage Note on which a Guarantee is endorsed, the Guarantee shall be valid
nevertheless.
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The delivery of any First Mortgage Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guarantee
set forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.21 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture and Guarantees in accordance with Section 4.21 hereof and this
Article 11, to the extent applicable.
Section 11.04. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 11.05, no Guarantor may sell or
otherwise dispose of all or substantially all of its assets to, or consolidate
with or merge with or into (whether or not such Guarantor is the surviving
Person) another Person, other than the Company or another Guarantor, unless (a)
subject to Section 11.05 hereof, either the Person acquiring the property in any
such sale or disposition or the Person formed by or surviving any such
consolidation or merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the First Mortgage Notes, this Indenture, the Guarantee and the
Registration Rights Agreement on the terms set forth herein or therein or the
Net Proceeds of such sale or other disposition are applied in accordance with
Section 4.10 hereof; and (b) immediately after giving effect to such
transaction, no Default or Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Guarantee endorsed upon the First Mortgage Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Guarantees to be endorsed upon all of the First Mortgage Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Guarantees so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Guarantees
theretofore and thereafter issued in accordance with the terms of this Indenture
as though all of such Guarantees had been issued at the date of the execution
hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses
(a) and (b) above, nothing contained in this Indenture or in any of the First
Mortgage Notes shall prevent any consolidation or merger of a Guarantor with or
into the Company or another Guarantor, or shall prevent any sale or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety to
the Company or another Guarantor.
Section 11.05. Releases Following Sale of Assets.
In the event (i) the Company designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary, or (ii) of a sale or other disposition
of all or substantially all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all to the capital
stock of any Guarantor, in each case to a Person that is not (either before or
after giving effect to such transactions) a Restricted Subsidiary of the
Company; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of this Indenture,
including without limitation Section 4.10 hereof, then such Guarantor (in the
event of a sale or other disposition, by way of merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the corporation
77
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acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be released and relieved
of any obligations under its Guarantee. Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that
such sale or other disposition was made by the Company in accordance with the
provisions of this Indenture, including without limitation Section 4.10 hereof,
the Trustee shall execute any documents reasonably required in order to evidence
the release of any Guarantor from its obligations under its Guarantee.
Any Guarantor not released from its obligations under its Guarantee shall
remain liable for the full amount of principal of and interest on the First
Mortgage Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
ARTICLE 12.
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA ss.318(c), the imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Company, any Guarantor or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company and/or any Guarantor:
Royster-Clark, Inc.
10 Rockefeller Plaza - Suite 1120
New York, New York 10020
Telecopier No.: (212) 332-2994
Attention: Francis P. Jenkins, Jr.
With a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
Telecopier No.: (215) 994-2222
Attention: Craig L. Godshall
If to the Trustee:
United States Trust Company of New York
Corporate Trust Division
114 West 47th Street, 25th Floor
New York, New York 10036-1532
Telecopier No.: (212) 852-1627/6
Attention: Louis P. Young
78
<PAGE>
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery (except that
notice to the Trustee shall not be deemed to have been given until actually
received by the Trustee).
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss.313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of First Mortgage Notes with Other
Holders of First Mortgage Notes.
Holders may communicate pursuant to TIA ss.312(b) with other Holders with
respect to their rights under this Indenture or the First Mortgage Notes. The
Company, the Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss.312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company and/or any Guarantor to the
Trustee to take any action under this Indenture, the Company and/or such
Guarantor shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss.314(a)(4)) shall comply with the provisions of TIA
ss.314(e) and shall include:
79
<PAGE>
(a) a statement that the Person making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or such Guarantor under the First Mortgage
Notes, the Guarantees, this Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder by accepting a
First Mortgage Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the First Mortgage Notes.
Section 12.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.10. Successors.
All agreements of the Company in this Indenture and the First Mortgage
Notes shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors. All agreements of each Guarantor in this Indenture
shall bind its successors, except as otherwise provided in Section 11.05.
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<PAGE>
Section 12.11. Severability.
In case any provision in this Indenture or in the First Mortgage Notes
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 12.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
81
<PAGE>
SIGNATURES
Dated as of April 22, 1999
ROYSTER-CLARK, INC.
By: /s/ G. Kenneth Moshenek
------------------------------------
Name: G. Kenneth Moshenek
Title:
ROYSTER-CLARK GROUP, INC.
By: /s/ G. Kenneth Moshenek
------------------------------------
Name: G. Kenneth Moshenek
Title:
ROYSTER-CLARK REALTY LLC
ROYSTER-CLARK AGRIBUSINESS REALTY LLC
ROYSTER-CLARK HUTSON'S REALTY LLC
ROYSTER-CLARK NITROGEN REALTY LLC
ROYSTER-CLARK RESOURCES LLC
By: /s/ G. Kenneth Moshenek
------------------------------------
Name: G. Kenneth Moshenek
Title:
IMC AGRIBUSINESS INC.
HUTSON'S AG SERVICES, INC.
IMC NITROGEN COMPANY
By: /s/ G. Kenneth Moshenek
------------------------------------
Name: G. Kenneth Moshenek
Title:
Attest:
- -----------------------------
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW YORK
By: /s/ Louis P. Young
------------------------------------
Name: Louis P. Young
Title: Vice-President
Attest:
- -----------------------------
Authorized Signatory
Date:
82
<PAGE>
EXHIBIT A-1
[Face of Note]
CUSIP/CINS
----------
10 1/4% First Mortgage Notes due 2009
No. 1 $
----------
ROYSTER-CLARK, INC.
promises to pay to
-------------------------------------------------------------
or registered assigns,
the principal sum of
-----------------------------------------------------------
Dollars on
Interest Payment Dates:
Record Dates:
Dated:
ROYSTER-CLARK, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
(SEAL)
This is one of the Global Notes referred to
in the within-mentioned Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:
--------------------------
Authorized Signatory
A-1-1
<PAGE>
EXHIBIT A-1
[Back of Note]
10 1/4% First Mortgage Notes due 2009
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THIS FIRST MORTGAGE NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER: (1) REPRESENT THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
"QIB") OR (B) IT HAS ACQUIRED THIS FIRST MORTGAGE NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS FIRST MORTGAGE NOTE EXCEPT
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT,
(D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS FIRST MORTGAGE NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Royster-Clark, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 10 1/4% per
annum from October 1, 1999 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company will pay interest and Liquidated Damages semi-annually in
arrears on April 1 and October 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that
A-1-2
<PAGE>
if there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be October 1, 1999. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the March 15 or September 15 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to principal, premium and Liquidated Damages, if any, and interest
at the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, and provided
that payment by wire transfer of immediately available funds will be required
with respect to principal of and interest, premium and Liquidated Damages on,
all Global Notes and all other Notes the Holders of which shall have provided
wire transfer instructions to the Company or the Paying Agent. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, United States Trust Company of
New York, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE AND SECURITY AGREEMENTS. The Company issued the Notes under an
Indenture dated as of April 22, 1999 ("Indenture") among the Company, the
Guarantors and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are secured obligations of
the Company limited to $210.0 million in aggregate principal amount. The Notes
are secured by a first priority security interest in the property, plant and
equipment and certain related assets of the Company and its subsidiaries,
constituting 17 of the principal granulation, seed production, processing and
nitrogen plants of the Company and its subsidiaries, and a pledge of all of the
equity interests of Royster-Clark Realty LLC, Royster-Clark AgriBusiness LLC,
Royster-Clark Nitrogen Realty LLC and Royster-Clark Hutson's Realty LLC, the
Company's Special Purpose Restricted Subsidiaries that own or will own
approximately 270 properties used in the Company's business, including
substantially all of the Farmarkets and other owned facilities, pursuant to the
Security Agreements referred to in the Indenture.
A-1-3
<PAGE>
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to April 1, 2004.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on April 1
of the years indicated below:
Year Percentage
---- ----------
2004................................................... 105.125%
2005................................................... 103.417%
2006................................................... 101.708%
2007 and thereafter.................................... 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
at any time prior to April 1, 2002, the Company may redeem Notes with the net
proceeds of one or more Public Equity Offerings at a redemption price equal to
110.250% of the aggregate principal amount, plus accrued and unpaid interest
(including Liquidated Damages) thereon, if any; provided that at least 65% in
aggregate principal amount of the Notes originally issued remain outstanding
immediately after the occurrence of such redemption and that such redemption
occurs within 45 days of the date of the closing of such Public Equity Offering.
6. MANDATORY REDEMPTION.
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price paid in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company shall commence an offer to all Holders of
Notes and all holders of other Indebtedness that is pari passu with the First
Mortgage Notes containing provisions similar to those set forth in the Indenture
with respect to offers to purchase or redeem with the proceeds of sales of
assets to purchase the maximum principal amount of First Mortgage Notes and such
other pari passu Indebtedness that may be purchased out of the Excess Proceeds,
(an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase
the maximum principal amount of Notes (including any Additional Notes) that may
be purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the
A-1-4
<PAGE>
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes (including any Additional Notes) tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes surrendered by Holders thereof and such other pari
passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis based on the principal amount
of First Mortgage Notes and such other pari passu Indebtedness tendered. Holders
of Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding Notes
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer for, Notes) and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
for, Notes) and Additional Notes, if any, voting as a single class. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation or sale of all or substantially all of the
Company's assets, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder or to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest (including Liquidated Damages) on the
Notes; (ii) default in payment when due of the
A-1-5
<PAGE>
principal of, or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise, (iii) failure by the Company or any of its Restricted
Subsidiaries to comply with Section 4.07, 4.09, 4.10, 4.15, 4.16, 4.22 or 5.01
of the Indenture; (iv) failure by the Company or any of its Restricted
Subsidiaries for 60 days after notice to the Company by the Trustee or the
Holders of at least 25% in principal amount of the Notes (including Additional
Notes, if any) then outstanding voting as a single class to comply with any of
the other agreements in the Indenture; (v) default under certain other
agreements relating to Indebtedness of the Company or any of its Restricted
Subsidiaries, which default results in the acceleration of such Indebtedness
prior to its express maturity or is caused by a failure to pay principal of, or
interest or premium, if any, on such Indebtedness prior to the expiration of the
grace period, and in each case, the principal amount of total Indebtedness
aggregates $10.0 million or more; (vi) certain final judgments against the
Company or any of its Restricted Subsidiaries for the payment of money
aggregating in excess of $10.0 million that remain undischarged for a period of
60 days; (vii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries; (viii) the breach by the Company
or any Restricted Subsidiary of certain covenants in the Security Agreements,
repudiation by the Company or any Restricted Subsidiary of any obligations under
the Security Agreements or the Security Agreements shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect; and (ix) except as permitted by the Indenture, any
Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Guarantor or any Person acting on its behalf shall deny or disaffirm its
obligations under such Guarantor's Guarantee. If any Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to the
Company, any Restricted Subsidiary that is a Significant Subsidiary or any group
of Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest (or Liquidated
Damages)) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest (or Liquidated Damages) on, or the principal of, the Notes. The Company
is required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. If the Trustee becomes a creditor of the
Company or any Guarantor, the Indenture limits its right to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue, or resign.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator
or stockholder, of the Company or any Guarantor, as such, shall not have any
liability for any obligations of the Company or the Guarantors under the Notes
or the Indenture, the Guarantees, or for any claim based on, in respect of,
A-1-6
<PAGE>
or by reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
CERTIFICATED NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Certificated
Notes shall have all the rights set forth in the Registration Rights Agreement
dated as of April 22, 1999, between the Company and the parties named on the
signature pages thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Royster-Clark, Inc.
10 Rockefeller Plaza - Suite 1120
New York, New York 10020
Attention: Walter Vance
A-1-7
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
---------------------------------
(Insert assignee's legal name)
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
------------------------
Your Signature:
------------------------------------------------------------
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:
----------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-1-8
<PAGE>
EXHIBIT A-1
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:
$
------------------
Date:
-------------------
Your Signature:
------------------------------------------------------------
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
----------------------------------------------------
Signature Guarantee*:
------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-1-9
<PAGE>
EXHIBIT A-1
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Certificated Note, or exchanges of a part of
another Global Note or Certificated Note for an interest in this Global Note,
have been made:
Amount of Amount of
decrease in increase in Principal Amount Signature of
Principal Principal [at maturity] of authorized
Amount Amount this Global Note officer of
[at maturity] [at maturity] following such Trustee or
Date of of this of this decrease Note
Exchange Global Note Global Note (or increase) Custodian
- -------- ------------- ------------- ---------------- ------------
* This schedule should be included only if the Note is issued in global form.
A-1-10
<PAGE>
EXHIBIT A-2
[Face of Regulation S Temporary Global Note]
CUSIP/CINS
----------
10 1/4% First Mortgage Notes due 2009
No. 2 $
----------
ROYSTER-CLARK, INC.
promises to pay to
-------------------------------------------------------------
or registered assigns,
the principal sum of
-----------------------------------------------------------
Dollars on
Interest Payment Dates:
Record Dates:
Dated: April 22, 1999
ROYSTER-CLARK, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
(SEAL)
This is one of the Global Notes referred to
in the within-mentioned Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:
--------------------------
Authorized Signatory
A-2-1
<PAGE>
[Back of Regulation S Temporary Global Note]
10 1/4% First Mortgage Notes due 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS FIRST MORTGAGE NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
"QIB") OR (B) IT HAS ACQUIRED THIS FIRST MORTGAGE NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS FIRST MORTGAGE NOTE EXCEPT
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT,
(D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS FIRST MORTGAGE NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
A-2-2
<PAGE>
EXHIBIT A-2
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Royster-Clark, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 10 1/4% per
annum from October 1, 1999 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company will pay interest and Liquidated Damages semi-annually in
arrears on April 1 and October 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be October 1, 1999. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or more
Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to
receive payments of interest hereon; until so exchanged in full, this Regulation
S Temporary Global Note shall in all other respects be entitled to the same
benefits as other First Mortgage Notes under the Indenture.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the March 15 or September 15 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to principal, premium, interest and Liquidated Damages, if any, at
the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, and provided
that payment by wire transfer of immediately available funds will be required
with respect to principal of and interest, premium and Liquidated Damages on,
all Global Notes and all other Notes the Holders of which shall have provided
wire transfer instructions to the Company or the Paying Agent. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, UNITED STATES TRUST COMPANY OF
NEW YORK, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE AND SECURITY AGREEMENTS. The Company issued the Notes under an
Indenture dated as of April 22, 1999 ("Indenture") among the Company, the
Guarantors and the Trustee. The terms
A-2-3
<PAGE>
EXHIBIT A-2
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code ss.ss.77aaa-77bbbb). The Notes are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Notes are secured obligations of the Company limited to $210.0 million in
aggregate principal amount. The Notes are secured by a first priority security
interest in the property, plant and equipment and certain related assets of the
Company and its subsidiaries, constituting 17 of the principal granulation, seed
production, processing and nitrogen plants of the Company and its subsidiaries,
and a pledge of all of the equity interests of Royster-Clark Realty LLC,
Royster-Clark AgriBusiness LLC, Royster-Clark Nitrogen Realty LLC and
Royster-Clark Hutson's Realty LLC, the Company's Special Purpose Restricted
Subsidiaries that own or will own approximately 270 properties used in the
Company's business, including substantially all of the Farmarkets and other
owned facilities, pursuant to the Security Agreements referred to in the
Indenture.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to April 1, 2004.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on April 1
of the years indicated below:
Year Percentage
---- ----------
2004.................................................. 105.125%
2005.................................................. 103.417%
2006.................................................. 101.708%
2007 and thereafter................................... 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
at any time prior to April 1, 2002, the Company may redeem Notes with the net
proceeds of one or more Public Equity Offerings at a redemption price equal to
110.250% of the aggregate principal amount, plus accrued and unpaid interest
(including Liquidated Damages) thereon, if any; provided that at least 65% in
aggregate principal amount of the Notes originally issued remain outstanding
immediately after the occurrence of such redemption and that such redemption
occurs within 45 days of the date of the closing of such Public Equity Offering.
6. MANDATORY REDEMPTION.
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price paid in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
A-2-4
<PAGE>
EXHIBIT A-2
(b) If the Company or a Restricted Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company shall commence an offer to all Holders of
Notes and all holders of other Indebtedness that is pari passu with the First
Mortgage Notes containing provisions similar to those set forth in the Indenture
with respect to offers to purchase or redeem with the proceeds of sales of
assets to purchase the maximum principal amount of First Mortgage Notes and such
other pari passu Indebtedness that may be purchased out of the Excess Proceeds,
(an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase
the maximum principal amount of Notes (including any Additional Notes) that may
be purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes (including any Additional Notes) tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use such Excess
Proceeds for any purpose not otherwise prohibited by the Indenture. If the
aggregate principal amount of Notes surrendered by Holders thereof and such
other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes and such other
pari passu Indebtedness to be purchased on a pro rata basis based on the
principal amount of First Mortgage Notes and such other pari passu Indebtedness
tendered. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in whole or in part
for one or more Global Notes only (i) on or after the termination of the 40-day
restricted period (as defined in Regulation S) and (ii) upon presentation of
certificates (accompanied by an Opinion of Counsel, if applicable) required by
Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global
Note for one or more Global Notes, the Trustee shall cancel this Regulation S
Temporary Global Note.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
A-2-5
<PAGE>
EXHIBIT A-2
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding Notes
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer for, Notes) and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
for, Notes) and Additional Notes, if any, voting as a single class. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation or sale of all or substantially all of the
Company's assets, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder or to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest (including Liquidated Damages) on the
Notes; (ii) default in payment when due of the principal of, or premium, if any,
on the Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise, (iii) failure
by the Company or any of its Restricted Subsidiaries to comply with Section
4.07, 4.09, 4.10, 4.15, 4.16, 4.22 or 5.01 of the Indenture which failure
remains uncured for 30 days; (iv) failure by the Company or any of its
Restricted Subsidiaries for 60 days after notice to the Company by the Trustee
or the Holders of at least 25% in principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class to comply
with any of the other agreements in the Indenture; (v) default under certain
other agreements relating to Indebtedness of the Company or any of its
Restricted Subsidiaries, which default results in the acceleration of such
Indebtedness prior to its express maturity or is caused by a failure to pay
principal of, or interest or premium, if any, on such Indebtedness prior to the
expiration of the grace period, and in each case, the principal amount of total
Indebtedness aggregates $10.0 million or more; (vi) certain final judgments
against the Company or any of its Restricted Subsidiaries for the payment of
money aggregating in excess of $10.0 million that remain undischarged for a
period of 60 days; (vii) certain events of bankruptcy or insolvency with respect
to the Company or any of its Restricted Subsidiaries; (viii) the breach by the
Company or any Restricted Subsidiary of certain covenants in the Security
Agreements, repudiation by the Company or any Restricted Subsidiary of any
obligations under the Security Agreements or the Security Agreements shall be
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect; and (ix) except as permitted by
the Indenture, any Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor or any Person acting on its behalf shall deny or
disaffirm its obligations under such Guarantor's Guarantee. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, with
respect to the Company, any Restricted Subsidiary that is a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders may not enforce the Indenture
or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default
A-2-6
<PAGE>
EXHIBIT A-2
or Event of Default relating to the payment of principal or interest (or
Liquidated Damages)) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest (or Liquidated Damages) on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. If the Trustee becomes a creditor of the
Company or any Guarantor, the Indenture limits its right to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue, or resign.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator
or stockholder, of the Company or any of the Guarantors, as such, shall not have
any liability for any obligations of the Company or such Guarantor under the
Notes or the Indenture, the Guarantees, or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
CERTIFICATED NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Certificated
Notes shall have all the rights set forth in the Registration Rights Agreement
dated as of April 22, 1999, between the Company and the parties named on the
signature pages thereof or, in the case of Additional Notes, Holders of
Restricted Global Notes and Restricted Certificated Notes shall have the rights
set forth in one or more registration rights agreements, if any, between the
Company and the other parties thereto, relating to rights given by the Company
to the purchasers of any Additional Notes (collectively, the "Registration
Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
A-2-7
<PAGE>
EXHIBIT A-2
Royster-Clark, Inc.
10 Rockefeller Plaza - Suite 1120
New York, New York 10020
Attention: Walter Vance
A-2-8
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
---------------------------------
(Insert assignee's legal name)
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
------------------------
Your Signature:
------------------------------------------------------------
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:
----------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-2-9
<PAGE>
EXHIBIT A-2
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:
$
------------------
Date:
-------------------
Your Signature:
------------------------------------------------------------
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
----------------------------------------------------
Signature Guarantee*:
------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-2-10
<PAGE>
EXHIBIT A-2
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary Global
Note for an interest in another Global Note, or of other Restricted Global Notes
for an interest in this Regulation S Temporary Global Note, have been made:
Amount of Amount of
decrease in increase in Principal Amount Signature of
Principal Principal [at maturity] of authorized
Amount Amount this Global Note officer of
[at maturity] [at maturity] following such Trustee or
Date of of this of this decrease Note
Exchange Global Note Global Note (or increase) Custodian
- -------- ------------- ------------- ---------------- ------------
A-2-11
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Royster-Clark, Inc.
10 Rockefeller Plaza - Suite 1120
New York, New York 10020
United States Trust Company of New York
Corporate Trust Division
114 West 47th Street, 25th Floor
New York, New York l0036-1532
Re: 10 1/4% First Mortgage Notes due 2009
Reference is hereby made to the Indenture, dated as of April 22, 1999 (the
"Indenture"), between Royster-Clark, Inc. as issuer (the "Company"), and United
States Trust Company of New York, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
___________________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial interest in
the Rule 144A Global Note or a Certificated Note Pursuant to Rule 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Certificated Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Certificated Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Certificated Note will be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Rule 144A Global Note and/or the
Certificated Note and in the Indenture and the Securities Act.
2. |_| Check if Transferee will take delivery of a beneficial interest in
the Temporary Regulation S Global Note, the Regulation S Global Note or a
Certificated Note pursuant to Regulation S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act
and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b)
B-1
<PAGE>
of Regulation S under the Securities Act, (iii) the transaction is not part of a
plan or scheme to evade the registration requirements of the Securities Act and
(iv) if the proposed transfer is being made prior to the expiration of the
Restricted Period, the transfer is not being made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser). Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Certificated Note will be
subject to the restrictions on Transfer enumerated in the Private Placement
Legend printed on the Regulation S Global Note, the Temporary Regulation S
Global Note and/or the Certificated Note and in the Indenture and the Securities
Act.
3. |_| Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Certificated Note pursuant to any provision
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Certificated
Notes and pursuant to and in accordance with the Securities Act and any
applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act.
4. |_| Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Note or of an Unrestricted Certificated Note.
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Certificated
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Certificated Notes and in the Indenture.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Certificated Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Certificated Notes and in the Indenture.
B-2
<PAGE>
(c) |_| Check if Transfer is Pursuant to Other Exemption. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Certificated Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Certificated Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
----------------------------------------
[Insert Name of Transferor]
By:
-------------------------------------
Name:
Title:
Dated:
-----------------------
B-3
<PAGE>
EXHIBIT B
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| Rule 144A Global Note (CUSIP ________________), or
(ii) |_| Regulation S Global Note (CUSIP ________________); or
(b) |_| a Restricted Certificated Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| Rule 144A Global Note (CUSIP ________________), or
(ii) |_| Regulation S Global Note (CUSIP ________________), or
(iii) |_| Unrestricted Global Note (CUSIP ________________); or
(b) |_| a Restricted Certificated Note; or
(c) |_| an Unrestricted Certificated Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Royster-Clark, Inc.
10 Rockefeller Plaza - Suite 1120
New York, New York 10020
United States Trust Company of New York
Corporate Trust Division
114 West 47th Street, 25th Floor
New York, New York l0036-1532
Re: 10 1/4% First Mortgage Notes due 2009.
(CUSIP [780879AA0][USU7793AA89])
Reference is hereby made to the Indenture, dated as of April 22, 1999 (the
"Indenture"), between Royster-Clark, Inc., as issuer (the "Company"), and United
States Trust Company of New York, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
__________________________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Certificated Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Certificated Notes or Beneficial
Interests in an Unrestricted Global Note
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) |_| Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Certificated Note. In connection with the Exchange
of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Certificated Note, the Owner hereby certifies (i) the Certificated
Note is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Certificated Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
C-1
<PAGE>
EXHIBIT C
(c) |_| Check if Exchange is from Restricted Certificated Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Certificated Note for a beneficial interest in
an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Certificated Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) |_| Check if Exchange is from Restricted Certificated Note to
Unrestricted Certificated Note. In connection with the Owner's Exchange of a
Restricted Certificated Note for an Unrestricted Certificated Note, the Owner
hereby certifies (i) the Unrestricted Certificated Note is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been effected
in compliance with the transfer restrictions applicable to Restricted
Certificated Notes and pursuant to and in accordance with the Securities Act,
(iii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Unrestricted Certificated Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
2. Exchange of Restricted Certificated Notes or Beneficial Interests in
Restricted Global Notes for Restricted Certificated Notes or Beneficial
Interests in Restricted Global Notes
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Certificated Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Certificated Note with an equal principal amount, the Owner hereby certifies
that the Restricted Certificated Note is being acquired for the Owner's own
account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Certificated Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Certificated Note and in
the Indenture and the Securities Act.
(b) Check if Exchange is from Restricted Certificated Note to beneficial
interest in a Restricted Global Note. In connection with the Exchange of the
Owner's Restricted Certificated Note for a beneficial interest in the [CHECK
ONE] |_| Rule 144A Global Note or |_| Regulation S Global Note, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's own
account without transfer and (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Global Notes and
pursuant to and in accordance with the Securities Act, and in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Note and in the Indenture and the Securities Act.
C-2
<PAGE>
EXHIBIT C
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
----------------------------------------
[Insert Name of Transferor]
By:
------------------------------------
Name:
Title:
Dated:
C-3
<PAGE>
EXHIBIT D
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of April 22, 1999 (the "Indenture") among
Royster-Clark, Inc., the Guarantors listed on Schedule I thereto and United
States Trust Company of New York, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium, if any, and interest (including
Liquidated Damages) on the Notes (as defined in the Indenture), whether at
maturity, by acceleration, redemption or otherwise, the due and punctual payment
of interest on overdue principal and premium, and, to the extent permitted by
law, interest (including Liquidated Damages), and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture
are expressly set forth in Article 11 of the Indenture and reference is hereby
made to the Indenture for the precise terms of the Guarantee. Each Holder of a
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Guarantee shall cease to be so subordinated and
subject in right of payment upon any defeasance of this Note in accordance with
the provisions of the Indenture.
ROYSTER-CLARK GROUP, INC.
By:
------------------------------------
Name:
Title:
D-1
<PAGE>
EXHIBIT D
ROYSTER-CLARK REALTY LLC
ROYSTER-CLARK AGRIBUSINESS REALTY LLC
ROYSTER-CLARK HUTSON'S REALTY LLC
ROYSTER-CLARK NITROGEN REALTY LLC
By:
------------------------------------
Name:
Title:
D-2
<PAGE>
EXHIBIT D
IMC AGRIBUSINESS, INC.
HUTSON'S AG SERVICES, INC.
IMC NITROGEN COMPANY
By:
------------------------------------
Name:
Title:
D-3
<PAGE>
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of ____________________ (or its permitted successor), a Delaware
corporation (the "Company"), the Company, the other Guarantors (as defined in
the Indenture referred to herein) and ____________________, as trustee under the
indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of April __, 1999 providing for the
issuance of an aggregate principal amount of up to $210,000,000 of ___% First
Mortgage Notes due 2009 (the "First Mortgage Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Guarantee"); and
WHEREAS, pursuant to Section [_____] of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as
follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and delivered by
the Trustee and to the Trustee and its successors and assigns, the Notes or
the obligations of the Company hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest (including Liquidated Damages)
on the overdue principal of and interest (including Liquidated
Damages) on the Notes, if any, if lawful, and all other obligations of
the Company to the Holders or the Trustee hereunder or thereunder will
be promptly paid in full or performed, all in accordance with the
terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors shall be
jointly and severally obligated to pay the same immediately.
E-1
<PAGE>
EXHIBIT E
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder of the Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the
same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever.
(d) This Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the Indenture,
and the Guaranteeing Subsidiary accepts all obligations of a Guarantor
under the Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guarantors, or any Custodian, Trustee,
liquidator or other similar official acting in relation to either the
Company or the Guarantors, any amount paid by either to the Trustee or such
Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed
hereby.
(g) As between the Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article 6 of the
Indenture for the purposes of this Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any declaration
of acceleration of such obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Guarantee.
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair
the rights of the Holders under the Guarantee.
(i) Pursuant to Section 11.02 of the Indenture, after giving effect to
any maximum amount and any other contingent and fixed liabilities that are
relevant under any applicable Bankruptcy or fraudulent conveyance laws, and
after giving effect to any collections from, rights to receive contribution
from or payments made by or on behalf of any other Guarantor in respect of
the obligations of such other Guarantor under Article 11 of the Indenture,
this new Guarantee shall be limited to the maximum amount permissible such
that the obligations of such Guarantor under this Guarantee will not
constitute a fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the
Guarantees shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Guarantee.
E-2
<PAGE>
EXHIBIT E
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with or merge with or
into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Guarantor
unless:
(i) subject to Sections 11.04 and 11.05 of the Indenture, the Person
formed by or surviving any such consolidation or merger (if other than a
Guarantor or the Company) unconditionally assumes all the obligations of
such Guarantor, pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes, the Indenture and
the Guarantee on the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor corporation, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of the
Guarantee endorsed upon the Notes and the due and punctual performance of all of
the covenants and conditions of the Indenture to be performed by the Guarantor,
such successor corporation shall succeed to and be substituted for the Guarantor
with the same effect as if it had been named herein as a Guarantor. Such
successor corporation thereupon may cause to be signed any or all of the
Guarantees to be endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee. All the Guarantees so issued shall in all respects have the same legal
rank and benefit under the Indenture as the Guarantees theretofore and
thereafter issued in accordance with the terms of the Indenture as though all of
such Guarantees had been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 and Section 11.05 of Article 11
of the Indenture, and notwithstanding clauses (a) and (b) above, nothing
contained in the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or another
Guarantor, or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, in each case to a
Person that is not (either before or after giving effect to such transaction) a
Restricted Subsidiary of the Company, then such Guarantor (in the event of a
sale or other disposition, by way of merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) will be released and relieved of any
obligations under its Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture, including without limitation Section 4.10 of the Indenture. Upon
delivery by the Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other disposition was made by
the Company in accordance with the provisions of the Indenture, including
without limitation Section 4.10 of the Indenture, the Trustee shall execute any
documents reasonably required in order to evidence the release of any Guarantor
from its obligations under its Guarantee.
E-3
<PAGE>
EXHIBIT E
(b) Any Guarantor not released from its obligations under its Guarantee
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor under the Indenture as
provided in Article 11 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Guarantees, the Indenture or
this Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the SEC that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience only
and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
E-4
<PAGE>
EXHIBIT E
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated:
---------------, ----
[GUARANTEEING SUBSIDIARY]
By:
------------------------------------
Name:
Title:
ROYSTER-CLARK, INC.
By:
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Name:
Title:
[EXISTING GUARANTORS]
By:
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Name:
Title:
[TRUSTEE],
as Trustee
By:
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Authorized Signatory
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EXHIBIT F
FORM OF SECURITY AGREEMENTS
F-1
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EXHIBIT G
FORM OF SUBSIDIARY INTERCOMPANY NOTE
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EXHIBIT H
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under the Indenture as of the
Issue Date:
Royster-Clark Group, Inc.
Royster-Clark Realty LLC
Royster-Clark AgriBusiness Realty LLC
Royster-Clark, Hutson's Realty LLC
Royster-Clark Nitrogen Realty LLC
Royster-Clark Resources LLC
IMC AgriBusiness, Inc.
Hutson's Ag Services, Inc.
IMC Nitrogen Company
H-1
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REGISTRATION RIGHTS AGREEMENT
Dated as of April 22, 1999
by and among
Royster-Clark, Inc.
Royster-Clark Group, Inc.
Royster-Clark Realty LLC
Royster-Clark AgriBusiness Realty LLC
Royster-Clark Hutson's Realty LLC
Royster-Clark Nitrogen Realty LLC
Royster-Clark Resources LLC
IMC AgriBusiness, Inc.
Hutson's Ag Services, Inc.
IMC Nitrogen Company
and
Donaldson, Lufkin & Jenrette Securities Corporation
J.P. Morgan Securities Inc.
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This Registration Rights Agreement (this "Agreement") is made and
entered into as of April 22, 1999, by and among Royster-Clark, Inc., a
Delaware corporation (the "Company"), Royster-Clark Group, Inc., a Delaware
corporation, Royster-Clark Realty LLC, a Delaware limited liability company,
Royster-Clark AgriBusiness Realty LLC, a Delaware limited liability company,
Royster-Clark Hutson's Realty LLC, a Delaware limited liability company,
Royster-Clark Nitrogen Realty LLC, a Delaware limited liability company,
Royster-Clark Resources LLC, IMC AgriBusiness, Inc., a Delaware corporation,
Hutson's Ag Services, Inc., a Kentucky corporation, IMC Nitrogen Company, a
Delaware corporation, (each a "Guarantor" and, collectively, the
"Guarantors"), and Donaldson, Lufkin & Jenrette Securities Corporation and
J.P. Morgan Securities Inc. (each an "Initial Purchaser" and, collectively,
the "Initial Purchasers"), each of whom has agreed to purchase the Company's
10 1/4% First Mortgage Notes due 2009 (the "First Mortgage Notes") pursuant
to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated April
15, 1999, (the "Purchase Agreement"), by and among the Company, the
Guarantors and the Initial Purchasers. In order to induce the Initial
Purchasers to purchase the First Mortgage Notes, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the obligations of the
Initial Purchasers set forth in Section 3 of the Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meaning assigned to them the Indenture, dated April 22 1999, between the
Company and United States Trust Company of New York, as Trustee, relating to
the First Mortgage Notes and the Exchange Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness
under the Act of the Exchange Offer Registration Statement relating to the
Exchange Notes to be issued in the Exchange Offer, (b) the maintenance of
such Exchange Offer Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company
to the Registrar under the Indenture of
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Exchange Notes in the same aggregate principal amount as the aggregate
principal amount of First Mortgage Notes tendered by Holders thereof pursuant
to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: The Company's 10 1/4% First Mortgage Exchange Notes due
2009 to be issued pursuant to the Indenture: (i) in the Exchange Offer or
(ii) as contemplated by Section 4 hereof.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Exchange Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
First Mortgage Notes that are tendered by such Holders in connection with
such exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the First Mortgage Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act and pursuant to Regulation
S under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated
by reference into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and
the Guarantors relating to (a) an offering of Exchange Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i)
that is filed pursuant to the provisions of this Agreement and (ii) including
the Prospectus included therein, all amendments and supplements thereto
(including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
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Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each First Mortgage Note until (i) the
date on which such First Mortgage Note has been exchanged by a Person other
than a broker-dealer for an Exchange Note in the Exchange Offer; (ii)
following the exchange by a broker-dealer in the Exchange Offer of a First
Mortgage Note for an Exchange Note, the date on which such Exchange Note is
sold to a purchaser who receives from such broker-dealer on or prior to the
date of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement; (iii) the date on which such First Mortgage Note has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement; or (iv) the date on which
such First Mortgage Note is distributed to the public pursuant to Rule 144
under the Securities Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have
been complied with), the Company and the Guarantors shall (i) cause the
Exchange Offer Registration Statement to be filed with the Commission as soon
as practicable after the Closing Date, but in no event later than 60 days
after the Closing Date (such 60th day being the "Filing Deadline"), (ii) use
its best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than
150 days after the Closing Date (such 150th day being the "Effectiveness
Deadline"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may
be necessary in order to cause it to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
Exchange Notes to be made under the Blue Sky laws of such jurisdictions as
are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting (i) registration of the Exchange Notes to be offered in
exchange for the First Mortgage Notes that are Transfer Restricted Securities
and (ii) resales of Exchange Notes by Broker-Dealers that tendered into the
Exchange Offer First Mortgage Notes that such Broker-Dealer acquired for its
own account as a result of market making activities or other trading
activities (other than First Mortgage Notes acquired directly from the
Company or any of its Affiliates) as contemplated by Section 3(c) below.
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(b) The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in
no event shall such period be less than 20 Business Days. The Company and the
Guarantors shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Exchange
Notes shall be included in the Exchange Offer Registration Statement. The
Company and the Guarantors shall use their respective best efforts to cause
the Exchange Offer to be Consummated on the earliest practicable date after
the Exchange Offer Registration Statement has become effective, but in no
event later than 30 business days thereafter (such 30th day being the
"Consummation Deadline").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds Transfer Restricted
Securities that were acquired for the account of such Broker-Dealer as a
result of market-making activities or other trading activities (other than
First Mortgage Notes acquired directly from the Company or any Affiliate of
the Company), may exchange such Transfer Restricted Securities pursuant to
the Exchange Offer. Such "Plan of Distribution" section shall also contain
all other information with respect to such sales by such Broker-Dealers that
the Commission may require in order to permit such sales pursuant thereto,
but such "Plan of Distribution" shall not name any such Broker-Dealer or
disclose the amount of Transfer Restricted Securities held by any such
Broker-Dealer, except to the extent required by the Commission as a result of
a change in policy, rules or regulations after the date of this Agreement.
See the Shearman & Sterling no-action letter (available July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Exchange
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
Guarantors shall permit the use of the Prospectus contained in the Exchange
Offer Registration Statement by such Broker-Dealer to satisfy such prospectus
delivery requirement. To the extent necessary to ensure that the prospectus
contained in the Exchange Offer Registration Statement is available for sales
of Exchange Notes by Broker-Dealers, the Company and the Guarantors agree to
use their respective reasonable best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented, amended and
current as required by and subject to the provisions of Sections 6(a) and (c)
hereof and in conformity with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time
to time, for a period of 180 days from the Consummation Deadline or such
shorter period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold pursuant thereto. The
Company and the Guarantors shall provide sufficient copies of the latest
version of such Prospectus to such Broker-Dealers, promptly upon request, and
in no event later than two business days after such request, at any time
during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section
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6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Company within 20 Business Days following the Consummation
Deadline that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by
such Holder or (C) such Holder is a Broker-Dealer and holds First Mortgage
Notes acquired directly from the Company or any of its Affiliates, then the
Company and the Guarantors shall:
(x) cause to be filed, on or prior to 60 days after the earlier of (i)
the date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the
date on which the Company receives the notice specified in clause (a)(ii)
above, (such earlier date, the "Filing Deadline"), a shelf registration
statement pursuant to Rule 415 under the Act (which may be an amendment to
the Exchange Offer Registration Statement (the "Shelf Registration
Statement")), relating to all Transfer Restricted Securities, and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 120 days after the
Filing Deadline for the Shelf Registration Statement (such 60th day the
"Effectiveness Deadline").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law
(i.e., clause (a)(i) above), then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause
(x) above; provided that, in such event, the Company shall remain obligated
to meet the Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a) and the other
securities required to be registered therein pursuant to Section 6(b)(ii)
hereof, the Company and the Guarantors shall use their respective best
efforts to keep any Shelf Registration Statement required by this Section
4(a) continuously effective, supplemented, amended and current as required by
and subject to the provisions of Sections 6(b) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i))
following the Closing Date, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Shelf Registration Statement
have been sold pursuant thereto.
Notwithstanding the foregoing, following the date on which such Shelf
Registration Statement first becomes effective under the Act, the Company may
suspend the effectiveness of the Shelf Registration Statement by prior
written notice to the Holders for a period not to exceed 30 days in any
twelve month period if (i) an event occurs and is continuing as a result of
which the Shelf Registration Statement would, in the reasonable good faith
judgment of the Company's Board of Directors, contain an untrue statement of
a material fact or omit to state a material fact necessary in order to make
the statements therein not misleading and (ii)(A) the Company's
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Board of Directors reasonably determines in good faith that the
disclosure of such event at such time would have a material adverse effect on
the business, operations or prospects of the Company and its subsidiaries,
taken as a whole, or (B) the disclosure otherwise relates to a previously
undisclosed pending material business transaction, the disclosure of which
would, in the reasonable good faith judgment of the Company's Board of
Directors, impede the Company's ability to consummate such transaction.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes
to the Company in writing, within 20 days after receipt of a request
therefor, the information specified in Item 507 or 508 of Regulation S-K, as
applicable, of the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No Holder
of Transfer Restricted Securities shall be entitled to liquidated damages
pursuant to Section 5 hereof unless and until such Holder shall have provided
all such information. Each selling Holder agrees to promptly furnish
additional information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation
Deadline or (iv) any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or
fail to be usable for its intended purpose without being succeeded within 5
days by a post-effective amendment to such Registration Statement that cures
such failure and that is itself declared effective within 5 days of filing
such post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "Registration Default"), then the
Company and the Guarantors hereby jointly and severally agree to pay to each
Holder of Transfer Restricted Securities affected thereby liquidated damages
in an amount equal to $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues for the first 90-day period
immediately following the occurrence of such Registration Default. The amount
of the liquidated damages shall increase by an additional $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been
cured, up to a maximum amount of liquidated damages of $.50 per week per
$1,000 in principal amount of Transfer Restricted Securities; provided that
the Company and the Guarantors shall in no event be required to pay
liquidated damages for more than one Registration Default at any given time.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness
of the Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement), in the case of (ii) above, (3) upon
Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange
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Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement) to again be declared effective or made usable in the case of
(iv) above, the liquidated damages payable with respect to the Transfer
Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as
applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture,
on each Interest Payment Date, as more fully set forth in the Indenture and
the Notes. Notwithstanding the fact that any securities for which liquidated
damages are due cease to be Transfer Restricted Securities, all obligations
of the Company and the Guarantors to pay liquidated damages with respect to
securities shall survive until such time as such obligations with respect to
such securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall (x) comply with all
applicable provisions of Section 6(c) below, (y) use their respective best
efforts to effect such exchange and to permit the resale of Exchange Notes by
Broker-Dealers that tendered in the Exchange Offer First Mortgage Notes that
such Broker-Dealer acquired for its own account as a result of its market
making activities or other trading activities (other than First Mortgage
Notes acquired directly from the Company or any of its Affiliates) being sold
in accordance with the intended method or methods of distribution thereof,
and (z) comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the Company
raises a substantial question as to whether the Exchange Offer is
permitted by applicable federal law, the Company and the Guarantors
hereby agree to seek a no-action letter or other favorable decision from
the Commission allowing the Company and the Guarantors to Consummate an
Exchange Offer for such Transfer Restricted Securities. The Company and
the Guarantors hereby agree to pursue the issuance of such a decision to
the Commission staff level but shall not be required to take
commercially unreasonable actions to effect a change in Commission
policy. In connection with the foregoing, the Company and the Guarantors
hereby agree to take all such other reasonable actions as may be
requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A)
participating in telephonic conferences with the Commission, (B)
delivering to the Commission staff an analysis prepared by counsel to
the Company setting forth the legal bases, if any, upon which such
counsel has concluded that such an Exchange Offer should be permitted
and (C) diligently pursuing a resolution (which need not be favorable)
by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker Dealer) shall furnish, upon the
request of the Company, prior to the Consummation of the Exchange Offer,
a written representation to the Company and the Guarantors (which may be
contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
Affiliate of the Company, (B) it is not engaged
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in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Exchange Notes to be issued in the Exchange Offer and (C) it is
acquiring the Exchange Notes in its ordinary course of business. As a
condition to its participation in the Exchange Offer each Holder using
the Exchange Offer to participate in a distribution of the Exchange
Notes shall acknowledge and agree that, if the resales are of Exchange
Notes obtained by such Holder in exchange for First Mortgage Notes
acquired directly from the Company or an Affiliate thereof, it (1) could
not, under Commission policy as in effect on the date of this Agreement,
rely on the position of the Commission enunciated in Morgan Stanley and
Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the Commission's
letter to Shearman & Sterling dated July 2, 1993, and similar no-action
letters (including, if applicable, any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the registration
and prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507
or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available
May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
interpreted in the Commission's letter to Shearman & Sterling dated July
2, 1993, and, if applicable, any no-action letter obtained pursuant to
clause (i) above, (B) including a representation that neither the
Company nor any Guarantor has entered into any arrangement or
understanding with any Person to distribute the Exchange Notes to be
received in the Exchange Offer and that, to the best of the Company's
and each Guarantor's information and belief, each Holder participating
in the Exchange Offer is acquiring the Exchange Notes in its ordinary
course of business and has no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes received
in the Exchange Offer and (C) any other undertaking or representation
required by the Commission as set forth in any no-action letter obtained
pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall (i) comply with
all the provisions of Section 6(c) below and use their respective best
efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the
Company and the Guarantors will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of First
Mortgage Notes covered by any Shelf Registration Statement contemplated
by this Agreement, Exchange Notes
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having an aggregate principal amount equal to the aggregate principal
amount of First Mortgage Notes sold pursuant to the Shelf Registration
Statement and surrendered to the Company for cancellation; the Company
shall register Exchange Notes on the Shelf Registration Statement for
this purpose and issue the Exchange Notes to the purchaser(s) of
securities subject to the Shelf Registration Statement in the names as
such purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement,
as applicable. Upon the occurrence of any event that would cause any
such Registration Statement or the Prospectus contained therein (A) to
contain an untrue statement of material fact or omit to state any
material fact necessary to make the statements therein not misleading or
(B) not to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Company and
the Guarantors shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use their respective best efforts to cause such amendment to
be declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise each Holder promptly and, if requested by such Holder,
confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to
make the statements therein not misleading, or that requires the making
of any additions
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to or changes in the Prospectus in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company and the Guarantors shall use their respective best efforts
to obtain the withdrawal or lifting of such order at the earliest
possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(v) furnish to each selling or exchanging Holder in connection with
such exchange or sale, if any, before filing with the Commission, copies
of any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such selling or exchanging Holders
in connection with such sale, if any, for a period of at least five
Business Days, and the Company will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which such selling or exchanging Holders
shall reasonably object within five Business Days after the receipt
thereof. A selling or exchanging Holder shall be deemed to have
reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the
Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each selling or exchanging Holder in
connection with such exchange or sale, if any, make the Company's and
the Guarantors' representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such selling
or exchanging Holders may reasonably request;
(vii) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all
financial and other records, pertinent corporate documents of the
Company and the Guarantors and cause the Company's and the Guarantors'
officers, directors and employees to supply all information reasonably
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<PAGE>
requested by any such Holder, attorney or accountant in connection with
such Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness;
(viii) if requested by any Holders in connection with such exchange
or sale, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Holders may reasonably request to have included
therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be included in such Prospectus supplement or post-effective
amendment;
(ix) furnish to each Holder in connection with such exchange or
sale, without charge, at least one copy of the Registration Statement,
as first filed with the Commission, and of each amendment thereto,
including all documents incorporated by reference therein and all
exhibits (including exhibits incorporated therein by reference);
(x) deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
and the Guarantors hereby consent to the use (in accordance with law) of
the Prospectus and any amendment or supplement thereto by each selling
Holder in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of the Transfer
Restricted Securities pursuant to any applicable Registration Statement
contemplated by this Agreement as may be reasonably requested by any
Holder in connection with any sale or resale pursuant to any applicable
Registration Statement. In such connection, the Company and the
Guarantors shall:
(A) upon request of any Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be
furnished) to each Holder, upon Consummation of the Exchange Offer
or upon the effectiveness of the Shelf Registration Statement, as
the case may be:
(1) a certificate, dated such date, signed on behalf of
the Company and each Guarantor by (x) the President or any
Vice President and (y) a principal financial or accounting
officer of the Company and such Guarantor, confirming, as of
the date thereof, the matters set forth in Sections 6(kk),
9(a) and 9(b) of the Purchase Agreement and such other similar
matters as such Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors covering matters
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similar to those set forth in paragraph (e) of Section 9 of
the Purchase Agreement and such other matter as such Holder
may reasonably request, and in any event including a statement
(which may be provided in a letter separate from the opinion)
to the effect that such counsel has participated in
conferences with officers and other representatives of the
Company and the Guarantors, representatives of the independent
public accountants for the Company and the Guarantors and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness
of such statements; and that such counsel advises that, on the
basis of the foregoing (relying as to materiality to the
extent such counsel deems appropriate upon the statements of
officers and other representatives of the Company and the
Guarantors and without independent check or verification), no
facts came to such counsel's attention that caused such
counsel to believe that the applicable Registration Statement,
at the time such Registration Statement or any post-effective
amendment thereto became effective and, in the case of the
Exchange Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date and,
in the case of the opinion dated the date of Consummation of
the Exchange Offer, as of the date of Consummation, contained
an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data
included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 9(n) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with the matters covered in clause (A) above and with any customary
conditions contained in any agreement entered into by the Company
and the Guarantors pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification
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of the Transfer Restricted Securities under the securities or Blue Sky
laws of such jurisdictions as the selling Holders may request and do any
and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; provided, however,
that neither the Company nor any Guarantor shall be required to register
or qualify as a foreign corporation where it is not now so qualified or
to take any action that would subject it to the service of process in
suits or to taxation, other than as to matters and transactions relating
to the Registration Statement, in any jurisdiction where it is not now
so subject;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling or exchanging Holders
to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing
any restrictive legends; and to register such Transfer Restricted
Securities in such denominations and such names as the selling Holders
may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xiv) use their respective best efforts to cause the disposition of
the Transfer Restricted Securities covered by the Registration Statement
to be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof
to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering
such Transfer Restricted Securities and provide the Trustee under the
Indenture with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with the Depository
Trust Company;
(xvi) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the
terms of the TIA; and execute and use its best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely
manner; and
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(xviii)provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any
fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"Suspension Notice"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder has received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such
Holder is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (in each case,
the "Recommencement Date"). Each Holder receiving a Suspension Notice hereby
agrees that it will either (i) destroy any Prospectuses, other than permanent
file copies, then in such Holder's possession which have been replaced by the
Company with more recently dated Prospectuses or (ii) deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then
in such Holder's possession of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of the
Suspension Notice. The time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by a number of days equal to the number of days in the
period from and including the date of delivery of the Suspension Notice to
the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement will be borne by the
Company, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and
expenses; (ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing
(including printing certificates for the Exchange Notes to be issued in the
Exchange Offer and printing of Prospectuses, messenger and delivery services
and telephone; (iv) all fees and disbursements of counsel for the Company,
the Guarantors and, subject to Section 7(b) below, the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection with
listing the Exchange Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company and
the Guarantors (including the expenses of any special audit and comfort
letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including
special experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the
Guarantors will reimburse the Initial Purchasers
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<PAGE>
and the Holders of Transfer Restricted Securities who are tendering
First Mortgage Notes into in the Exchange Offer and/or selling or reselling
First Mortgage Notes or Exchange Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf
Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins,
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such
Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all
losses, claims, damages, liabilities, judgments, (including without
limitation, any reasonable legal or other reasonable expenses incurred in
connection with investigating or defending any matter, including any action
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary prospectus
or Prospectus (or any amendment or supplement thereto) provided by the
Company to any Holder or any prospective purchaser of Exchange Notes or
registered First Mortgage Notes, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by an
untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to any of the Holders furnished in writing to
the Company by any of the Holders; provided, however, that the foregoing
indemnity agreement with respect to any Registration Statement, preliminary
prospectus or Prospectus shall not inure to the benefit of any Holder who
failed to deliver a final Prospectus (as then amended or supplemented,
provided by the Company to the several Holders in the requisite quantity and
on a timely basis to permit proper delivery on or prior to written
confirmation of such sale) to the person asserting any losses, claims,
damages and liabilities and judgments caused by any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement therein not misleading, if such material misstatement or omission
or alleged material misstatement of omission was cured in the final
Prospectus and it shall have been determined that such person would not have
incurred such losses, claims, damages and liabilities and judgments had the
final Prospectus been delivered.
(b) Each Holder of Transfer Restricted agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, or the Guarantors to the same extent as the
foregoing indemnity from the Company and the Guarantors set forth in section
(a) above, but only with reference to information relating to such Holder
furnished in writing to the Company by such Holder expressly for use in any
Registration Statement. In no event shall any Holder, its directors, officers
or any Person who controls such Holder be liable or responsible for any
amount in excess of the amount by which the total amount received by such
Holder with respect to its sale of Transfer Restricted Securities pursuant to
a Registration Statement exceeds (i) the amount paid
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<PAGE>
by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages that such Holder, its directors, officers or any Person
who controls such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying person")
in writing and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel,
as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder
shall not be required to assume the defense of such action pursuant to this
Section 8(c), but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of the Holder). Any indemnified party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel
shall have been specifically authorized in writing by the indemnifying party,
(ii) the indemnifying party shall have failed to assume the defense of such
action or employ counsel reasonably satisfactory to the indemnified party or
(iii) the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised by such counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) for all indemnified parties and all such fees and expenses
shall be reimbursed as they are incurred. Such firm shall be designated in
writing by a majority of the Holders, in the case of the parties indemnified
pursuant to Section 8(a), and by the Company and Guarantors, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its prior written consent or (ii)
effected without its prior written consent if the settlement is entered into
more than thirty business days after the indemnifying party shall have
received a request from the indemnified party for reimbursement for the fees
and expenses of counsel (in any case where such fees and expenses are at the
expense of the indemnifying party) and, prior to the date of such settlement,
the indemnifying party shall have failed to comply with such reimbursement
request for the fee and expenses of counsel (unless the reasonableness of
such fees and expenses of counsel is being contested in good faith). No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in
respect of which the indemnified party is or could have been a party and
indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
on claims that are or could have been the subject matter of such
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action and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act, by or on behalf of the indemnified
party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company and
the Guarantors, on the one hand, and the Holders, on the other hand, from
their sale of Transfer Restricted Securities or (ii) if the allocation
provided by clause 8(d)(i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the
Company and the Guarantors, on the one hand, and of the Holder, on the other
hand, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the Company and the
Guarantors, on the one hand, and of the Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or such
Guarantor, on the one hand, or by the Holder, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and judgments
referred to above shall be deemed to include, subject to the limitations set
forth in Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any
action or claim.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to
in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any matter, including any action that could have given rise to such
losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, no Holder, its directors, its officers or any
Person, if any, who controls such Holder shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the total received
by such Holder with respect to the sale of Transfer Restricted Securities
pursuant to a Registration Statement exceeds (i) the amount paid by such
Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Holders' obligations to
contribute pursuant to this Section 8(c) are several in proportion to the
respective principal amount of Transfer Restricted Securities held by each
Holder hereunder and not joint.
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SECTION 9. RULE 144A and RULE 144
The Company and each Guarantor agrees with each Holder, for so long as
any Transfer Restricted Securities remain outstanding and during any period
in which the Company or such Guarantor (i) is not subject to Section 13 or
15(d) of the Exchange Act, to make available, upon request of any Holder, to
such Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such
Transfer Restricted Securities designated by such Holder or beneficial owner,
the information required by Rule 144A(d)(4) under the Act in order to permit
resales of such Transfer Restricted Securities pursuant to Rule 144A, and
(ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all
filings required thereby in a timely manner in order to permit resales of
such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their
respective obligations under Sections 3 and 4 hereof may result in material
irreparable injury to the Initial Purchasers or the Holders for which there
is no adequate remedy at law, that it will not be possible to measure damages
for such injuries precisely and that, in the event of any such failure, the
Initial Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Guarantors' obligations under
Sections 3 and 4 hereof. The Company and the Guarantors further agree to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as disclosed in the Offering Memorandum of the Company dated April 15,
1999 with respect to the First Mortgage Notes, neither the Company nor any
Guarantor has previously entered into any agreement granting any registration
rights with respect to its securities to any Person. The rights granted to
the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's and the
Guarantors' securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section
5 hereof and this Section 10(c)(i), the Company has obtained the written
consent of Holders of all outstanding Transfer Restricted Securities and (ii)
in the case of all other provisions hereof, the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount
of Transfer Restricted Securities (excluding Transfer Restricted Securities
held by the Company or its Affiliates). Notwithstanding the foregoing, a
waiver or consent to departure from the provisions hereof that relates
exclusively to the rights of Holders whose Transfer Restricted Securities are
being tendered pursuant to the Exchange Offer, and that does not affect
directly or indirectly the rights of other Holders whose Transfer Restricted
Securities are not being tendered pursuant to such Exchange Offer, may be
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given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand,
and shall have the right to enforce such agreements directly to the extent
they may deem such enforcement necessary or advisable to protect its rights
or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier,
or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
Royster-Clark, Inc.
10 Rockeller Plaza
11th Floor
New York, New York 10020
Telecopier No.: (212) 332-2999
Attention: Francis P. Jenkins, Jr.
With a copy to: Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Telecopier No.: (215) 994-2222
Attention: Craig L. Godshall
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; provided, that nothing herein shall be deemed to permit
any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Transfer
Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all
of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such Person shall
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be conclusively deemed to have agreed to be bound by and to perform all
of the terms and provisions of this Agreement, including the restrictions on
resale set forth in this Agreement and, if applicable, the Purchase
Agreement, and such Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability
of any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred
to herein with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such
subject matter.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ROYSTER-CLARK, INC.
By: /s/ Paul M. Murphy
------------------------------------
Name:
Title:
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ROYSTER-CLARK GROUP, INC.
By: /s/ Walter R. Vance
------------------------------------
Name:
Title:
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IMC AGRIBUSINESS, INC.
HUTSON'S AG SERVICES, INC.
IMC NITROGEN COMPANY
By: /s/ Paul M. Murphy
------------------------------------
Name:
Title:
23
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ROYSTER-CLARK REALTY LLC
ROYSTER-CLARK AGRIBUSINESS
REALTY LLC
ROYSTER-CLARK HUTSON'S
REALTY LLC
ROYSTER-CLARK NITROGEN REALTY
LLC
By: /s/ Walter R. Vance
------------------------------------
Name:
Title:
24
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DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ David P. Faris
---------------------------------
Name: David P. Faris
Title: Vice President
J. P. MORGAN SECURITIES INC.
By: /s/ Douglas A. Cruiskank
--------------------------------
Name: Douglas A. Cruiskank
Title: VP
25
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EXHIBIT A
NOTICE OF FILING OF
EXCHANGE OFFER REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: Royster-Clark, Inc.
10 1/4% of First Mortgage Notes due 2009
Date: ___, 1999
For your information only (NO ACTION REQUIRED):
Today, ______, 1999 we filed [an Exchange Registration Statement/a
Shelf Registration Statement] with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within
[150] [120] business days of the date hereof.
26
EXCHANGE AGREEMENT
DATED AS OF APRIL 22, 1999
AMONG
399 VENTURE PARTNERS, INC.
FRANCIS P. JENKINS, JR.
ROYSTER-CLARK, INC.
AND
ROYSTER-CLARK GROUP, INC.
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TABLE OF CONTENTS
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Page
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ARTICLE 1 CLOSING, REDEMPTION AND MANNER OF EXCHANGE.............................................. 3
1.1. Redemptions and Exchange of the Jenkins Exchange Shares........................... 3
1.2. RCG3 Securities Exchanged for Jenkins Exchange Shares............................. 3
1.3. Deliveries at Closing............................................................. 4
1.5. Time and Place of Closing......................................................... 4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES......................................................... 4
2.1. General Statement.................................................................. 5
2.2. Representations and Warranties of RCGI............................................. 5
2.2.1. Organization............................................................... 5
2.2.2. Power and Authority........................................................ 5
2.2.3. Execution and Delivery by RCGI............................................. 5
2.2.4. Authorization.............................................................. 5
2.2.5. Conflict................................................................... 6
2.2.6. Finder's Fees.............................................................. 6
2.2.7. Solvency................................................................... 6
2.2.8. Securities Law Matters..................................................... 7
2.2.9. Necessary Funds............................................................ 7
2.3. Representations and Warranties of Principal Stockholder............................ 7
2.3.1. Organization............................................................... 7
2.3.2. Good Standing.............................................................. 7
2.3.3. Power and Authority........................................................ 7
2.3.4. Execution and Delivery..................................................... 8
2.3.5. Ownership.................................................................. 8
2.3.6. Authorization.............................................................. 8
2.3.7. Conflict................................................................... 9
2.3.8. Subsidiaries............................................................... 9
2.3.9. Capitalization............................................................. 9
2.3.10. Financial Statements...................................................... 10
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2.3.11. Absence of Liens.......................................................... 10
2.3.12. Tax Matters............................................................... 11
2.3.13. Absence of Changes........................................................ 12
2.3.14. Contracts................................................................. 13
2.3.15. Enforceability of Contracts............................................... 15
2.3.16. Permits................................................................... 15
2.3.17. Employee Benefit Plans.................................................... 15
2.3.18. List of Employees......................................................... 16
2.3.19. Union Representation and Labor Relations.................................. 17
2.3.20. Insurance................................................................. 17
2.3.21. Litigation and Claims..................................................... 17
2.3.22. Compliance with Law....................................................... 18
2.3.23. Environmental Matters..................................................... 18
2.3.24. Real Estate............................................................... 21
2.3.25. Intellectual Property..................................................... 22
2.3.26. Finder's Fees............................................................. 23
2.3.27. Assets.................................................................... 24
2.3.28. Product Warranty.......................................................... 24
2.3.29. Top Customers and Suppliers............................................... 24
2.3.30. No Undisclosed Liabilities................................................ 24
2.3.31. Limitation on Warranties.................................................. 25
2.3.32. Definition of Knowledge................................................... 25
2.4. Representations and Warranties of 399 Venture...................................... 25
2.4.1. Organization............................................................... 25
2.4.2. Power and Authority........................................................ 25
2.4.3. Execution and Delivery by 399 Venture...................................... 26
2.4.4. Authorization.............................................................. 26
2.4.5. Conflict................................................................... 26
2.4.6. Finder's Fees.............................................................. 26
ARTICLE 3 CONDUCT PRIOR TO THE CLOSING........................................................... 27
3.1. General........................................................................... 27
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3.2. Obligations of the Principal Stockholder.......................................... 27
3.3. Reserved.......................................................................... 29
3.4. Joint Obligations................................................................. 29
ARTICLE 4 CONDITIONS TO CLOSING.................................................................. 30
4.1. Conditions to Obligations of Principal Stockholder................................ 30
4.2. Conditions to RCGI's and 399 Venture's Obligations................................ 32
ARTICLE 5 CLOSING................................................................................ 33
5.1. Form of Documents................................................................. 34
5.2. The Company's Deliveries.......................................................... 34
5.3. RCGI's Deliveries................................................................. 34
5.4. The Principal Stockholder Deliveries.............................................. 34
5.5. 399 Venture Deliveries............................................................ 35
5.6. Other Transactions Occurring at the Closing....................................... 36
ARTICLE 6 POST CLOSING AGRE34ENTS
6.1. Post-Closing Agreements........................................................... 36
6.2. Confidentiality; Non Competition; Non-Solicitation................................ 36
6.2.1. Confidentiality............................................................. 36
6.2.2. Non-Competition............................................................. 36
6.2.3. Non Solicitation............................................................ 37
6.3. Further Assurances................................................................ 38
6.4. Transfer Taxes.................................................................... 38
6.5. Agreement to Defend and Indemnify................................................. 38
6.6. Registration and Legend........................................................... 39
6.7. Section 351 Transaction........................................................... 39
ARTICLE 7 INDEMNIFICATION........................................................................ 39
7.1. General........................................................................... 39
7.2. Certain Definitions............................................................... 39
7.2.1. Damages..................................................................... 39
7.2.2. Environmental Claim......................................................... 40
7.2.3. Indemnified Party........................................................... 40
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7.2.4. Indemnifying Party.......................................................... 40
7.2.5. Third Party Claim........................................................... 40
7.3. The Principal Stockholder's Indemnification Obligations........................... 41
7.4. Survival of Indemnification Obligations........................................... 43
7.5. Limitation on Indemnification Obligations......................................... 44
7.6. RCGI's Indemnification Covenants.................................................. 44
7.7. Indemnification Procedures........................................................ 45
7.8. Cooperation on Environmental Claims............................................... 47
7.8.1. RCGI's Rights to Remedial Action............................................ 47
7.8.2. The Principal Stockholder's Rights to Remedial Action....................... 47
7.8.3. Minimization of Remedial Action Costs and Disruption of Operation........... 48
7.9. Mitigation........................................................................ 48
7.10. Indemnification Exclusive Remedy.................................................. 48
ARTICLE 8 EFFECT OF TERMINATION/PROCEEDING....................................................... 49
8.1. General........................................................................... 49
8.2. Right to Terminate................................................................ 49
8.3. Certain Effects of Termination.................................................... 49
8.4. Remedies.......................................................................... 50
8.5. Right to Damages.................................................................. 50
8.6. Non-Solicitation.................................................................. 50
8.7. Confidentiality................................................................... 51
ARTICLE 9 MISCELLANEOUS.......................................................................... 51
9.1. Fees.............................................................................. 51
9.2. Publicity......................................................................... 51
9.3. Notices........................................................................... 52
9.4. Entire Agreement; Interpretation.................................................. 53
9.5. Non-Waiver........................................................................ 54
9.6. Counterparts...................................................................... 54
9.7. Severability...................................................................... 54
9.8. Binding Effect; Benefit........................................................... 54
9.9. Assignability..................................................................... 54
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9.10. Governmental Reporting........................................................... 54
9.11. Applicable Law................................................................... 55
9.12. Waiver of Trial by Jury.......................................................... 55
9.13. Consent to Jurisdiction.......................................................... 55
9.14. Amendments....................................................................... 55
9.15. Construction..................................................................... 55
Annex A Redemptions-Shares and Amounts
Annex B Exchange-Shares and Amounts
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v
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TABLE OF EXHIBITS
(not part of this Agreement)
Exhibit A - List of Stockholders
Exhibit B - Material Consents
Exhibit C - Company Release
Exhibit D - Principal Stockholder Release
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TABLE OF SCHEDULES
(not part of this Agreement)
2.3.2 Good Standing
2.3.5 Ownership
(a) Jenkins Shares
(b) Encumbrances on Jenkins Shares
2.3.6 Authorization
2.3.7 Conflict
2.3.9 Capitalization
2.3.10 Financial Statements
2.3.11 Absence of Liens
2.3.12 Tax Matters
2.3.13 Absence of Changes
2.3.14 Contracts
2.3.17 Employee Benefit Plans
2.3.18 List of Employees
2.3.19 Union Representations and Relations
2.3.20 Insurance
2.3.21 Litigation and Claims
2.3.22 Compliance with Law
2.3.23 Environmental Matters
2.3.24 Real Estate
2.3.25 Intellectual Property
2.3.27 Sufficiency of Assets; Assets of Affiliates; Inventory
2.3.28 Product Warranty
2.3.29 Customers and Suppliers
2.3.30 Undisclosed Liabilities
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TABLE OF DEFINED TERMS
(not part of this Agreement)
Defined Term Page
399 Venture ........................................................ 1
399 Venture Shares ................................................. 3
Affiliate .......................................................... 5
Agreement .......................................................... 1
Ancillary Documents ................................................ 4
Assets ............................................................. 9
Business ........................................................... 1
CERCLA ............................................................. 17
Claim Notice ....................................................... 43
Class A Common Stock ............................................... 3
Closing............................................................. 4
Closing Date ....................................................... 4
Code ............................................................... 10
Common Stock ....................................................... 1
Company...... ...................................................... 1
Company Release .................................................... 29
Company Software ................................................... 22
Compensation Plans ................................................. 14
Competing Business ................................................. 35
Contaminant ........................................................ 17
Contracts .......................................................... 14
control............................................................. 6
Court Order......................................................... 5
Debentures.......................................................... 1
Defending Party .................................................... 42
Employee Benefit Plans ............................................. 15
Encumbrance......................................................... 8
Environmental Claims ............................................... 38
Environmental Laws ................................................. 17
Environmental Permits .............................................. 18
Environmental Representations and Warranties ....................... 20
ERISA .............................................................. 14
ESOP ............................................................... 2
ESOP Trust ......................................................... 2
Financial Statements ............................................... 9
including .......................................................... 53
Indemnified Persons ................................................ 37
Intellectual Property .............................................. 21
IRS ................................................................ 15
Jenkins Common Shares .............................................. 1
Jenkins Exchange ................................................... 1
Jenkins Exchange Shares ............................................ 1
Jenkins Preferred Shares ........................................... 1
Jenkins Redemption ................................................. 1
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Jenkins Redemption Payment ......................................... 1
Jenkins Redemption Shares .......................................... 1
Jenkins Shares ..................................................... 1
Leased Premises .................................................... 20
Litigation Conditions .............................................. 44
Management Exchange ................................................ 2
Management Redemption .............................................. 2
Material Adverse Effect ............................................ 6
Material Consents .................................................. 26
Owned Premises ..................................................... 20
Pension Plans ...................................................... 14
Permits ............................................................ 14
Permitted Liens .................................................... 10
Preferred Stock .................................................... 1
Preferred Stockholders Agreement ................................... 30
Principal Stockholder .............................................. 1
Principal Stockholder Release ...................................... 31
Principal Stockholder's knowledge .................................. 18
Process Safety Management Claims ................................... 38
RCGI ............................................................... 1
RCGI Indemnitee .................................................... 39
RCGI Indemnitees ................................................... 39
RCGI Shares ....................................................... 3
Real Estate ........................................................ 20
Registration Rights Agreement ...................................... 30
Release ............................................................ 18
Remedial Action .................................................... 18
Requirements of Law ................................................ 5
Return ............................................................. 10
Returns ............................................................ 10
Reverse Stock Split ................................................ 2
Rollover Investors ................................................. 2
Securities Act ..................................................... 6
Securities Holders Agreement ....................................... 30
Series A Debenture ................................................. 1
Series A Preferred Stock ........................................... 3
Series B Debenture ................................................. 1
Series B Preferred Stock ........................................... 3
Stockholder Indemnity .............................................. 42
Subsidiary ......................................................... 8
Tax ................................................................ 10
Taxes .............................................................. 10
Trademarks ......................................................... 21
Transportation Claims .............................................. 38
Welfare Plans ...................................................... 14
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EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT ("Agreement") is made and entered into as of April
22, 1999 among 399 VENTURE PARTNERS, INC., a Delaware corporation ("399
Venture"), ROYSTER-CLARK, INC. (the "Company"), ROYSTER-CLARK GROUP, INC., a
Delaware corporation ("RCGI"), and FRANCIS P. JENKINS, JR. (the "Principal
Stockholder"), an individual.
R E C I T A L S
A. The Company is engaged in the manufacture or purchase and sale (through
wholesale and retail channels) of crop production inputs and services (the
"Business").
B. RCGI desires to acquire the Company by acquiring all the outstanding
shares of common stock, $.01 par value (the "Common Stock"), and all the
outstanding Series B Cumulative Convertible Preferred Stock, $.01 par value (the
"Preferred Stock"), of the Company.
C. As of the date hereof, 399 Venture owns (i) a Series A Subordinated
Convertible Debenture of the Company in the initial principal amount of
$14,250,000 (the "Series A Debenture") and (ii) a Series B Subordinated
Convertible Debenture of the Company in the initial principal amount of
$7,956,630, (the "Series B Debenture", the Series A and Series B Debentures
together, the "Debentures"). 399 Venture desires to exchange the Debentures
(together with accrued interest thereon) for certain shares of the equity
securities of RCGI.
D. As of the date hereof, the Principal Stockholder and his Affiliates own
(i) 43,579 shares (the "Jenkins Common Shares") of the outstanding Common Stock
and 6,000 shares of the outstanding Preferred Stock (the "Jenkins Preferred
Shares," and together with the Jenkins Common Shares and the Jenkins Preferred
Shares, the "Jenkins Shares"). Each Jenkins Preferred Share is convertible into
5.5555 shares of Common Stock. The Company and Jenkins desire that at the
Closing the Company shall redeem 8,677.151 Jenkins Common Shares and 2,700
Jenkins Preferred Shares (collectively, the "Jenkins Redemption Shares") at a
price per common equivalent of $285 in cash for an aggregate redemption payment
of $6,747,988 (the "Jenkins Redemption Payment"). Such redemption is referred to
in this Agreement as the "Jenkins Redemption." Immediately following the Jenkins
Redemption, the Principal Stockholder and his Affiliates will own the aggregate
number of shares of Common Stock and Preferred Stock set forth opposite such
stockholder's name on Exhibit A-2 (collectively, the "Jenkins Exchange Shares").
At the Closing of the transactions contemplated by this Agreement, the Principal
Stockholder and his Affiliates shall transfer to RCGI the Jenkins Exchange
Shares in exchange for the respective numbers of shares of Series A Preferred
Stock, Series B Preferred Stock and Class A Common Stock (as defined herein) of
RCGI set forth on Exhibit A-2. The foregoing exchange is referred to in this
Agreement as the "Jenkins Exchange."
<PAGE>
E. As of the date hereof, each stockholder of the Company designated as a
rollover investor on Exhibit A-3 (collectively, the "Rollover Investors") owns
of record the aggregate number of shares of Common Stock set forth opposite each
such Rollover Investor's name on Exhibit A-3 and Exhibit A-4. Concurrently with
the Jenkins Redemption, the Company shall redeem from each Rollover Investor for
$285 per share in cash the number of shares of Common Stock set forth opposite
each such Rollover Investor's name on Exhibit A-3. The foregoing redemption is
referred to in this Agreement as the "Management Redemption." In addition,
pursuant to a Securities Purchase and Holders Agreement of even date herewith
concurrently with the Jenkins Exchange, each Rollover Investor shall transfer to
RCGI the number of shares of Common Stock set forth opposite each such Rollover
Investor's name on Exhibit A-4 in exchange for the respective numbers of shares
of Series A Preferred Stock, Series B Preferred Stock and Class A Common Stock
(as defined herein) of RCGI set forth opposite each such Rollover Investor's
name on Exhibit A-4. The foregoing exchange is referred to in this Agreement as
the "Management Exchange."
F. As of the date hereof, certain other stockholders of the Company hold in
the aggregate 2,498 shares of Common Stock (other than the ESOP Shares, as
defined below), all of which the Company shall redeem at a price per share of
$285 in cash. As of the date hereof, certain option holders of the Company hold
the numbers of options to purchase Common Stock set forth beside each such
option holder's name on Exhibit B-1, and pursuant to a Securities Purchase and
Holders Agreement, concurrently with the Management Exchange, each such option
be exchanged for the options to acquire shares of capital stock of RCGI set
forth opposite such option holder's name on Exhibit B-1. The foregoing exchange
is referred to in this Agreement as the "Option Exchange."
G. The Rollover Investors, RCGI and the Company have agreed pursuant to a
Securities Purchase and Holders Agreement, dated as of the date hereof, to
effect the Management Redemption, the Management Exchange and the Option
Exchange.
H. On the date hereof, the trust (the "ESOP Trust") established by the
Company's Employee Stock Ownership Plan (the "ESOP") holds of record 10,097.732
shares of Common Stock. In connection with the transactions contemplated by this
Agreement, immediately after the consummation of the transactions described in
Recitals B through G above, the Company will effect a reverse stock split with
respect to its Common Stock of 11,000 to 1 (the "Reverse Stock Split"),
resulting in a payment of $2,877,853.62 by the Company to the ESOP Trust as a
payment of cash in lieu of fractional shares.
I. In connection with the Reverse Stock Split, the Company shall also pay
in cash an aggregate amount equal to $648,795 to the holders of options
exercisable for shares of Common Stock set forth on Exhibit B-2 (representing
payment of cash in lieu of fractional interests, less the exercise price
applicable thereto, and before withholding of amounts pursuant to the Company's
usual payroll practices).
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A G R E E M E N T S
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowle ged, the parties agree as follows:
ARTICLE 1
Closing, Redemption and Manner of Exchange
1.1. Redemptions and Exchange of the Jenkins Exchange Shares. On the terms
and subject to the condition contained in this Agreement, at the Closing:
(a) the Jenkins Redemption shall occur and the Principal Stockholder
shall surrender to the Company for redemption, free and clear of all
Encumbrances, the Jenkins Redemption Shares and the Company shall pay the
Principal Stockholder the Jenkins Redemption Payment;
(b) the Jenkins Exchange shall occur and the Principal Stockholder
shall deliver to RCGI the Jenkins Exchange Shares, free and clear of all
Encumbrances, in exchange for the number and kind of securities of RCGI set
forth opposite on Exhibit A-2 (the "RCGI Shares");
(c) 399 Venture shall transfer the Debentures to RCGI, free and clear
of all Encumbrances, in exchange for 222,704.75 shares (the "399 Venture
Shares") of Series A Preferred Stock (as defined).
1.2. RCGI Securities Exchanged for Jenkins Exchange Shares. The Jenkins
Exchange Shares shall be exchanged for the number and kind of securities set
forth on Exhibit A-2, which shall consist of shares of (i) 12% Series A Senior
Cumulative Compounding Preferred Stock, $.01 par value, of RCGI (the "Series A
Preferred Stock"); (ii) Series B Junior Preferred Stock, $.01 par value, of RCGI
(the "Series B Preferred Stock"); and (iii) Class A Common Stock, par value $.01
per share (the "Class A Common Stock"), of RGCI. For purposes of valuation
pursuant to this Agreement, the Series A Preferred Stock shall be valued at its
liquidation value; the Series B Preferred Stock shall be valued at its
liquidation value; and Class A Common Stock shall be valued at $1.00 per share.
1.3. Deliveries at Closing. The following deliveries shall be made at
Closing:
(a) the Principal Stockholder shall (i) deliver to the Company
certificates evidencing the Jenkins Redemption Shares, in proper form for
redemption, and (ii) deliver to RCGI certificates evidencing the Jenkins
Exchange Shares duly endorsed in blank, or accompanied by valid stock powers
duly executed in blank, in proper form for transfer;
(b) 399 Venture shall deliver to RCGI the Debentures with an
assignment form duly endorsed in blank, in proper form for transfer;
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(c) RCGI shall deliver (i) to the Principal Stockholder, certificates
representing the RCGI Shares and (ii) to 399 Venture, certificates representing
the 399 Venture Shares; and
(d) the Company shall pay the Principal Stockholder the Jenkins
Redemption Payment by wire transfer to such account as the Principal Stockholder
shall designate by written notice delivered to the Company and RCGI not later
than three days prior to the Closing Date.
1.4. Time and Place of Closing. The transactions contemplated by this
Agreement and the Ancillary Documents shall be consummated (the "Closing") at
the offices of Dechert Price & Rhoads, New York, New York on a date and at a
time agreed upon by the Principal Stockholder, 399 Venture, the Company and
RCGI, but in no event later than the third business day after the conditions set
forth in Article IV have been satisfied or, if permitted by applicable law,
waived. The date on which the Closing occurs in accordance with the preceding
sentence is referred to in this Agreement as the "Closing Date."
ARTICLE 2
Representations and Warranties
2.1. General Statement. The parties make the representations and warranties
to each other which are set forth in this Article II. All such representations
and warranties shall survive the Closing to the extent contemplated by Article
VII (and none shall merge into any instrument of conveyance).
2.2. Representations and Warranties of RCGI. RCGI represents and warrants
to the Principal Stockholder and 399 Venture as follows:
2.2.1 Organization. RCGI is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation.
2.2.2 Power and Authority. RCGI has full corporate power and authority to
execute, deliver and perform its obligations under this Agreement and each other
agreement, instrument, document and certificate to be executed and/or delivered
pursuant to this Agreement (collectively, the "Ancillary Documents") by RCGI.
2.2.3 Execution and Delivery by RCGI . The execution and delivery of this
Agreement by RCGI, the execution and delivery of the Ancillary Documents
executed and/or delivered by it and the performance by RCGI of its obligations
under this Agreement and the Ancillary Documents to which it is a party have
been duly authorized and approved by all requisite corporate action. This
Agreement has been duly executed and delivered by RCGI and, assuming the valid
authorization, execution and delivery of this Agreement by the other parties
hereto, constitutes the legal, valid and binding obligation of RCGI, enforceable
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of
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general application relating to or affecting creditors' rights and to general
equity principles. Each of the Ancillary Documents executed and delivered by
RCGI, assuming the valid authorization, execution and delivery thereof by the
other party or parties thereto, if any, will be a legal, valid and binding
obligation of RCGI, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general equity
principles.
2.2.4 Authorization. Except for (a) filings under Environmental Permits as
may be necessary to reflect the change of control of the Company contemplated
hereby and (b) such consents, authorizations, orders, approvals, filings or
registrations the failure of which to be obtained or made would not prevent the
consummation of any of the transactions contemplated hereby, no consent,
authorization, order or approval of, or filing or registration with, any person,
including any governmental authority or other regulatory agency, is required for
or in connection with the execution and delivery of this Agreement by RCGI, the
execution and delivery of any Ancillary Document to be executed or delivered by
RCGI or the consummation by RCGI of the transactions contemplated hereby or
thereby.
2.2.5 Conflict.
2.2.5.1. Assuming the receipt of all necessary consents and approvals and
the filing of all necessary documents as described in Section 2.2.4, neither the
execution and delivery of this Agreement or any of the Ancillary Documents to
which it is a party nor the consummation of any of the transactions contemplated
hereby or thereby nor compliance with or fulfillment of the terms, conditions
and provisions hereof or thereof will result in a breach of the terms,
conditions or provisions of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a default),
an event of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under (1) the charter or by-laws of RCGI, (2)
any note, instrument, mortgage, lease, franchise or financial obligation or any
other agreement or instrument to which RCGI is a party or any of its properties
is subject or by which RCGI or any of its assets may be bound or affected, (3)
any judgment, order, award or decree of any foreign, federal, state, local or
other court or tribunal and any award in any arbitration proceeding ("Court
Order") to which RCGI is a party or by which it is bound or (4) any foreign,
federal, state or local laws, statutes, regulations, rules, codes or ordinances
enacted, adopted, issued or promulgated by any governmental body ("Requirements
of Law") affecting RCGI, other than, in the case of clauses (2), (3) and (4)
above, any such breaches, defaults or rights that, individually or in the
aggregate, would not prevent the consummation of any of the transactions
contemplated hereby.
2.2.6. Finder's Fees. Neither RCGI nor any of its Affiliates has dealt with
any person, firm or entity entitled to a broker's commission, finder's fee,
investment banker's fee or similar payment for arranging the transactions
contemplated hereby or by the Ancillary Documents or introducing the parties to
each other, for which the Company or the Principal Stockholder could become
liable or obligated. As used in this Agreement, an "Affiliate" is any
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person or entity which controls is controlled by or is under common control with
another person or entity, the term "control" meaning the power, direct or
indirect, to direct or cause the direction of management and policies of a
person or entity through voting securities, contract or otherwise.
2.2.7. Solvency. Assuming the accuracy of the Principal Stockholder's
representations and warranties, immediately after giving effect to the
consummation of the transactions contemplated hereby and by the Ancillary
Documents and the incurrence of any indebtedness herewith or therewith, the
assets of the Company will exceed its liabilities. In connection with the
consummation of the transactions contemplated hereby and by the Ancillary
Documents and the incurrence of any indebtedness herewith or therewith, RCGI
does not intend that the Company would incur, and does not believe that the
Company will incur, debts that would be beyond the Company's ability to pay as
such debts mature.
2.2.8. Securities Law Matters.
(a) RCGI is acquiring the Jenkins Shares and the Debentures for its
own account for investment and with no present intention of distributing or
reselling the Jenkins Shares or any part thereof in any transaction which would
constitute "distribution" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) Neither the Company nor any person acting on its behalf has
offered to sell or sold any shares of the securities of the Company by any form
of general solicitation such as would violate Rule 502(c) promulgated under the
Securities Act.
2.2.9. Necessary Funds. RCGI has received the necessary financing
commitments required to finance its obligations in connection with the Closing
and, based upon information provided by RCGI to the Principal Stockholder, to
provide for currently anticipated working capital needs of the Company as of
Closing.
2.3. Representations and Warranties of the Principal Stockholder. The
Principal Stockholder represents and warrants to RCGI and to 399 Venture that:
2.3.1. Organization. Each of the Company and its Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation.
2.3.2. Good Standing. Each of the Company and its Subsidiary is duly
qualified to transact business and is in good standing as a foreign corporation
in the jurisdictions set forth on Schedule 2.3.2 of the Disclosure Schedules,
which jurisdictions are the only jurisdictions wherein the character of the
properties owned or leased or the nature of the activities conducted by each of
them makes such qualification necessary, except where the failure to so qualify,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. For purposes of this Agreement, "Material Adverse
Effect" means a material adverse effect on the business, properties, assets or
liabilities, results of operations or financial condition of the Company taken
as a whole, other than changes relating to or resulting from (a) the public
disclosure of the transactions contemplated by this Agreement or (b) any
condition or matter
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described in the Disclosure Schedules that is specifically identified as
potentially involving a Material Adverse Effect.
2.3.3. Power and Authority. The Company has full corporate power and
authority to execute, deliver and perform its obligations under this Agreement,
and the Company has full corporate power and authority to execute, deliver and
perform its obligations under the Ancillary Documents to be executed and
delivered by the Company.
2.3.4. Execution and Delivery.
(a) This Agreement has been duly executed and delivered by the
Principal Stockholder and, assuming the valid authorization, execution and
delivery of this Agreement by the other parties hereto, constitutes the legal,
valid and binding obligation of the Principal Stockholder, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application relating to or affecting
creditors' rights and to general equity principles.
(b) The execution and delivery of this Agreement by the Company and
the performance by the Company of its obligations under this Agreement have been
duly authorized and approved by all requisite corporate action. This Agreement
has been duly executed and delivered by the Company and, assuming the valid
authorization, execution and delivery of this Agreement by the other parties
hereto, constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general equity principles.
(c) Each Ancillary Document executed and delivered by the Company or
the Principal Stockholder, as the case may be, assuming the valid authorization,
execution and delivery by the other party or parties thereto, if any, will be
duly authorized, executed and delivered and will be a legal, valid and binding
obligation of the Company or the Principal Stockholder, as the case may be,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general equity principles.
2.3.5. Ownership. Schedule 2.3.5(a) of the Disclosure Schedules contains a
complete, discrete list of all Jenkins Shares, including the name of the record
holder, the certificate number, and the number and type of securities issued
thereunder. Except as disclosed in Schedule 2.3.5(b) of the Disclosure
Schedules, the Jenkins Shares are free and clear of any Lien, and the Principal
Stockholder has full legal right, power and authority to enter into this
Agreement, surrender the Jenkins Shares in exchange for the Purchase Price and
to perform the Principal Stockholder's obligations hereunder, in each case
without the need for the consent of any other person or entity.
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2.3.6. Authorization. Except as set forth in Schedule 2.3.6 of the
Disclosure Schedules and except for (a) filings under Environmental Permits as
may be necessary to reflect the change of control of the Company contemplated
hereby, and (b) such consents, authorizations, orders, approvals, filings or
registrations the failure of which to be obtained or made would not reasonably
be expected to have a Material Adverse Effect or would not prevent the
consummation of any of the transactions contemplated hereby, no consent,
authorization, order or approval of, or filing or registration with, any person,
including any governmental authority or other regulatory agency, is required for
or in connection with the execution and delivery of this Agreement by the
Company or the Principal Stockholder, the execution and delivery of any
Ancillary Documents to which the Company or the Principal Stockholder is a
party, as the case may be, and the consummation by the Company or the Principal
Stockholder and their Affiliates of the transactions contemplated hereby or
thereby.
2.3.7. Conflict. Assuming the receipt of all necessary consents and
approvals and the filing of all necessary documents as described in Section
2.3.6, except as set forth in Schedule 2.3.7 of the Disclosure Schedules,
neither the execution and delivery of this Agreement or any of the Ancillary
Documents or the consummation of any of the transactions contemplated hereby or
thereby nor compliance with or fulfillment of the terms, conditions and
provisions hereof or thereof will result in a breach of the terms, conditions or
provisions of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default), an event
of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation or imposition
of any lien, claim, charge, security interest, mortgage, pledge, easement,
conditional sale or other title retention agreement, defect in title or other
restrictions of a similar kind ("Encumbrance") upon any of the Jenkins Shares or
any of the assets of the Company, under (1) the charter or by-laws of the
Company, (2) any note, instrument, mortgage, lease, franchise or financial
obligation or any other agreement or instrument to which the Principal
Stockholder, the Company is a party or by which the Company or any of its assets
may be bound or affected, (3) any Court Order to which Principal Stockholder or
the Company is a party or by which the Principal Stockholder or Company is
bound, (4) any Requirements of Law affecting Principal Stockholder or the
Company or (5) any Permits, other than, in the case of clauses (2), (3), (4) and
(5) above, any such breaches, defaults, rights or Encumbrances that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect or would not prevent the consummation of any of the
transactions contemplated hereby.
2.3.8. Subsidiaries. The Company directly or indirectly, does not own any
of the stock of, or any other interest in, any other corporation, partnership or
business entity other than Conetoe Chemical, a North Carolina corporation (the
"Subsidiary").
2.3.9. Capitalization. The authorized capital of the Company consists of
350,000 shares of Common Stock, of which 72,409.732 shares are issued and
outstanding, and
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50,000 shares of Preferred Stock, of which 6,000 shares are issued and
outstanding. There are 11,831 options to acquire Common Stock issued and
outstanding.
Except as described above in this Section 2.3.9 or as set forth in Schedule
2.3.9 of the Disclosure Schedules, there are no shares of capital stock of any
other class authorized, issued or outstanding. All of the issued and outstanding
shares of capital stock of the Subsidiary owned by the Company have been validly
issued, are fully paid and nonassessable, are owned beneficially and of record
by the Company, and were not issued in violation of the terms of any agreement
or other understanding binding upon the Company. All of the issued and
outstanding shares of capital stock of the Company have been validly issued, are
fully paid and non-assessable and were not issued in violation of the terms of
any agreement or other understanding binding upon the Company. The Jenkins
Shares are owned beneficially and of record by the Principal Stockholder or his
Affiliates. Except as set forth in Schedule 2.3.9 of the Disclosure Schedules,
the Principal Stockholder owns all the Jenkins Shares free and clear of all
encumbrances or restrictions on transfer. Except as set forth on Schedule 2.3.9
of the Disclosure Schedules, neither the Company nor the Principal Stockholder
is a party to any voting trust, proxy or other voting agreement or understanding
with respect to the voting capital stock of the Company. Except as set forth on
Schedule 2.3.9(a) of the Disclosure Schedules or as provided in the Ancillary
Documents, there are no outstanding subscriptions, options, warrants, purchase
rights (including preemptive rights), calls, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock of the Company obligating the Company to issue, sell, transfer or
otherwise dispose of any securities of any kind. The capital stock of the
Company was issued in compliance with the applicable federal and state
securities laws.
2.3.10. Financial Statements. Schedule 2.3.10 of the Disclosure Schedules
contains copies of the audited consolidated balance sheets, statements of
earnings and statements of cash flows (together with any supplementary
information thereto) of the Company as of and for the fiscal years ended
December 31, 1996, 1997 and 1998. The financial statements described in the
preceding sentence are referred to herein as the "Financial Statements." The
Financial Statements are derived from the books and records of the Company and
have been prepared in conformity with GAAP and present fairly in accordance with
GAAP, in all material respects, the financial position of the Business, as of
the dates thereof and the results of operations and cash flows of the Business,
for the periods covered by said statements, except as disclosed in Schedule
2.3.10 of the Disclosure Schedules. The Financial Statements as of and for the
fiscal year ended December 31, 1998 comply with the requirements of Regulation
S-X promulgated under the Securities Act.
2.3.11. Absence of Liens. Except as set forth on Schedule 2.3.11 of the
Disclosure Schedules and except for assets disposed of in the ordinary course of
business, the Company has valid title to or a valid leasehold in, or a
contractual or common law right to use, each item of equipment, machinery,
inventory, tools and other tangible personal property reflected on the Financial
Statements and used in the conduct of the Business ("Assets") free and clear of
any Encumbrances, except for the following: (a) liens for Taxes and other
governmental charges
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and assessments which are not yet due and payable, (b) liens of landlords and
liens of carriers, warehousemen, mechanics and materialmen and other like liens
arising in the ordinary course of business for sums not yet due and payable, (c)
liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, and (d) other liens or imperfections on
Assets which are not material in amount or do not materially detract from the
value of or materially impair the existing use of the Assets affected by such
lien or imperfection (collectively, "Permitted Liens").
2.3.12. Tax Matters.
(a) As used in this Agreement the term (i) "Taxes" means all federal,
state, provincial, local, foreign and other income, sales, use, ad valorem,
value added, transfer, withholding, payroll, real property or other taxes, fees,
assessments or similar charges of any kind, together with any interest and any
penalties, with respect thereto; (ii) the term "Tax" means any one of the
foregoing Taxes; (iii) the term "Code" means the Internal Revenue Code of 1986,
as amended; and (iv) the term "Returns" means all returns, declarations,
reports, statements, and other documents required to be filed in respect of
Taxes (the term "Return" meaning any one of the foregoing Returns).
(b) The Company has no Tax liability for any taxable period or portion
thereof ending on or before December 31, 1998, other than accrued but unpaid
Taxes due for the year ending December 31, 1998 reflected on the Financial
Statements for the year ending December 31, 1998 for which adequate reserves
have been established in accordance with generally accepted accounting
principles. Except as described in Schedule 2.3.12 of the Disclosure Schedules,
(i) there have been filed on a timely basis, all material Returns required to be
filed by or on behalf of the Company; (ii) no extension of time within which to
file any such Return has been requested or granted; (iii) there are no unpaid
Tax assessments, notifications of intention to examine or waivers of the
applicable statutes of limitation with respect to material Tax liabilities of
the Company; and (iv) the Company has not been notified in writing of any Return
filing obligation or proposed Tax liability by any taxing authority with which
it does not file Returns.
(c) Except as described in Schedule 2.3.12 of the Disclosure
Schedules, (i) with respect to all amounts in respect of Taxes imposed upon the
Company, or for which the Company is liable to taxing authorities, with respect
to all taxable periods or portions of periods ending on or before the Closing
Date, all applicable Tax laws have been complied with in all material respects,
all amounts required to be paid to taxing authorities as shown on Returns filed
with such authorities on or before the date hereof have been paid, all amounts
required to be paid to taxing authorities after the date hereof and on or before
the Closing Date to be shown on Returns to be filed with such authorities will
timely be paid; (ii) there are no ongoing examinations by any taxing authority
of the Company; (iii) there is currently in effect no consent agreement
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under section 341(f) of the Code, private ruling concerning Taxes from any
taxing authority, or closing agreement concerning Taxes with any taxing
authority that could affect the Tax liability of the Company for any period
after the Closing Date; (iv) neither the Company is required to make any
adjustments under section 481 of the Code (or any comparable provision of state,
local or foreign law) by reason of a change of accounting method; and (v) the
Company is not a partner in any entity considered to be a partnership for U.S.
federal income tax purposes.
(d) Except as provided under Treas. Reg. section 1.1502-6 (or any
similar provision of state, local or foreign law) and except as described in
Schedule 2.3.12 of the Disclosure Schedules, the Company has no liability for or
any obligation to pay Taxes of any other person as a transferee or successor, by
contract, or otherwise.
(e) This Section 2.3.12 contains the exclusive representations and
warranties of the Principal Stockholder with regard to the subject matter
addressed herein.
2.3.13. Absence of Changes. Since December 31, 1998, there has been no
change, event or circumstance which, individually or in the aggregate, has had a
Material Adverse Effect. Except as set forth on Schedule 2.3.13 of the
Disclosure Schedules, since December 31, 1998, the Company has conducted the
Business only in the ordinary course. Without limiting the generality of the
foregoing, since December 31, 1998 (except with regard to Section 2.3.13(h)),
except as set forth in Schedule 2.3.13 of the Disclosure Schedule:
(a) the Company has not made or authorized any additions to or sold,
leased, transferred or assigned any assets or properties, tangible or
intangible, with a fair market value of more than $250,000, except in the
ordinary course of its business;
(b) the Company has not mortgaged, pledged or subjected to any
Encumbrance (except Permitted Liens) any of its assets or properties (whether
tangible or intangible) other than in the ordinary course of its business;
(c) no party (including the Company) has accelerated, terminated, made
material modifications to or canceled any agreement referred to in Section
2.3.14 or any other material agreement, contract, lease, license or Permit to
which the Company is a party or by which any of them is bound;
(d) the Company has not made or authorized any material capital
expenditures in excess of the budgeted amount for capital expenditures
previously provided by the Company;
(e) the Company has not discharged or satisfied any Encumbrance or
paid any material obligation or material liability (fixed or contingent) other
than in the ordinary course of business;
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(f) there has been no change made or authorized in the charter or
bylaws (or similar governing documents) of the Company and the Company has not
merged with or into or consolidated with any other entity, or voluntarily or
involuntarily dissolved or liquidated or changed or agreed to change in any
manner the rights of its outstanding capital stock;
(g) the Company has not purchased, redeemed, issued, sold or otherwise
acquired or disposed of any of its capital stock or any evidence of indebtedness
or other of its securities, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange or exercise) any of its
capital stock or any evidence of indebtedness or other of its securities;
(h) since September 30, 1998 the Company has neither declared or paid
any dividend nor made any distribution to any stockholder of the Company,
including any extraordinary distribution, on account of such stockholder's
ownership of any shares of capital stock of the Company, other than the payment
of dividends payable on the Preferred Stock in the ordinary course of business,
and such payments have not, on an annualized basis, exceeded an aggregate amount
of $1.2 million;
(i) the Company has not granted any increase in the compensation
payable or to become payable to any of its directors or officers, except for
normal annual increases in the ordinary course of business consistent with past
practice, or entered into any other transaction with any of its directors or
officers other than reimbursement of reasonable business expenses incurred in
the ordinary course of business;
(j) the Company has not adopted, amended, modified or terminated any
bonus, profit-sharing, incentive, severance or other plan, contract or
commitment for the benefit of any of its directors and officers or any other
employee or group of employees (or taken any such action with respect to any
other Employee Benefit Plan), except in the ordinary course of its business;
(k) the Company has not made any change in its method of accounting;
(l) the Company has not entered into any transactions with any
Affiliate, except in the ordinary course of business as described in Schedule
2.3.13 of the Disclosure Schedule;
(m) the Company has not changed or modified in any material respect
its existing credit, collection and payment policies, procedures and practices
with respect to accounts receivable and accounts payable;
(n) the Company has not suffered any damage, destruction, loss or
claim, whether or not covered by insurance, in excess of $500,000; and
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(o) the Company has not entered into any agreement or arrangement with
respect to, or otherwise committed to, any of the foregoing.
2.3.14. Contracts. Schedule 2.3.14 of the Disclosure Schedules contains a
listing of the following undischarged written (or, to the knowledge of the
Principal Stockholder, oral) contracts, agreements, leases and other instruments
to which the Company is a party:
(a) agreements for the employment for any period of time whatsoever,
or in regard to the employment, or restricting the employment, including any
termination, severance or change in control agreements of any employee of the
Company who earns more than $75,000 per year;
(b) consulting agreements where the payment thereunder is in excess of
$100,000 per year and which have an unexpired term in excess of one year;
(c) collective bargaining agreements;
(d) contracts or arrangements providing for bonuses, options, deferred
compensation or stock appreciation rights;
(e) leases or subleases, either as lessee or sublessee, lessor or
sublessor, of personal property, where the lease or sublease provides for an
annual rent in excess of $100,000 and has an unexpired term in excess of one
year;
(f) service agreements affecting any of the assets of any of the
Company where the charges are reasonably expected to be in excess of $100,000
and which has an unexpired term as of the date hereof in excess of one year;
(g) loan agreements, promissory notes, indentures, bonds, security
agreements, guarantees or obligations for borrowed money or other instruments
involving Indebtedness in an amount in excess of $100,000;
(h) any partnership, joint venture or other similar agreement or
arrangement;
(i) any agreement containing any covenant or provision prohibiting the
Company from engaging in any line or type of business (except for such
agreements which shall not apply to the Company upon Closing) or competing with
any person;
(j) any agreement under which it has advanced or loaned any amount to
any of its directors, officers and employees outside the ordinary course of its
business;
(k) any agreement under which a sale of any of the Real Estate that is
material to the operation of the Business is pending;
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(l) any indemnification agreement by the Company running to any person
that involves, individually or in the aggregate, a contingent liability of the
Company of $100,000 or more, other than in connection with customer contracts,
agreements entered into in the ordinary course of business or with respect to
directors or executive officers of the Company;
(m) any long-term or continuing agreements or arrangements with
respect to discounts or allowances or extended payment terms that provide for
the receipt or expenditure following the date hereof of more than $500,000,
other than purchase orders and sales orders in the ordinary course of business;
or
(n) any other agreements that provide for the receipt or expenditure
following the date hereof of more than $500,000, other than purchase orders and
sales orders in the ordinary course of business.
2.3.15. Enforceability of Contracts. All agreements, leases, subleases,
licenses and other instruments described in Section 2.3.14 and Schedules 2.3.24
and 2.3.25 (collectively, "Contracts") are valid and in full force and effect,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors' rights and to general
equity principles. No default (or an event which would, with the passage of time
or the giving of notice or both, constitute a default) by the Company has
occurred thereunder and, to the Principal Stockholder's knowledge, no default
(or an event which would, with the passage of time or the giving of notice or
both, constitute a default) by the other contracting parties has occurred
thereunder, which default, individually or in the aggregate with other defaults,
would reasonably be expected to have a Material Adverse Effect.
2.3.16. Permits. The Company holds, owns or possesses all licenses,
permits, registrations and government approvals (other than Environmental
Permits, which are exclusively provided for in Section 2.3.23) which are
required in order for them to conduct their respective businesses as conducted
immediately prior to the date of this Agreement (collectively, the "Permits"),
except where the failure to possess such Permits, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
All Permits have been duly obtained and are in full force and effect. The
Company is in compliance with the terms and conditions of the Permits in all
material respects. There are no proceedings pending or, to the knowledge of the
Principal Stockholder, threatened seeking to revoke, cancel, suspend or
adversely modify any of the Permits.
2.3.17. Employee Benefit Plans.
(a) Schedule 2.3.17 of the Disclosure Schedules contain a true and
complete list of each (i) employee pension benefit plan (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (collectively, the "Pension Plans"), (ii) employee welfare benefit
plan (as defined in Section 3(1) of ERISA) (collectively, the "Welfare Plans")
and (iii) bonus, deferred compensation, and severance plan which does not
constitute a Welfare Plan (collectively, the "Compensation Plans") maintained,
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contributed to or required to be contributed to by the Company for the benefit
of employees of the Company. The Pension Plans, the Welfare Plans and the
Compensation Plans sometimes are referred to herein collectively as the
"Employee Benefit Plans".
(b) All Employee Benefit Plans comply in all material respects with
ERISA, the Code (including the requirements of Code section 401(a) to the extent
any Pension Plan is intended to conform to that section) and other Requirements
of Law. A favorable determination as to the qualification under Code section
401(a) of each of the Pension Plans intended to be qualified under such section
has been made by the Internal Revenue Service ("IRS") or a request for a
favorable determination has been or will be filed within the remedial amendment
period applicable thereto.
(c) Neither the Company nor any Affiliate of the Company (as
determined under Code Section 414(b), (c), (m) or (o) of the Code) has taken any
action, nor has any event occurred, that has resulted or will likely result in
any liability under Section 302(c) or Title IV of ERISA, including any
withdrawal liability with respect to any "multiemployer plan" as defined in
Section 4001(a) of ERISA, which liability could reasonably be expected to become
a liability of RCGI or any Affiliate of RCGI (including, but not limited to, the
Company) following the Closing.
(d) RCGI and 399 Venture have received the most recent actuarial
report with respect to each Employee Benefit Plan that is a defined benefit
pension plan, as defined by Section 3(35) of ERISA. The information was supplied
to the actuary by the Company for use in preparing those reports and was
complete and accurate in all material respects and the Principal Stockholder has
no knowledge that the conclusions expressed in those reports are incorrect.
(e) This Section 2.3.17 contains exclusive representations and
warranties of the Principal Stockholder with respect to employee benefit
matters. The preceding sentence shall, however, not be construed to limit RCGI's
and 399 Venture's ability to rely on the relevant provisions of Sections 2.3.10,
2.3.11, 2.3.13(c), 2.3.13(i), 2.3.14(c) or 2.3.21 with respect to employee
benefit matters. The Principal Stockholder has furnished to RCGI and 399 Venture
(1) the amount of any contingent withdrawal liability to which the Company or
RCGI could become subject by reason of a transaction described in ERISA Section
4204 and (2) the amount of any withdrawal liability that would be incurred under
ERISA Section 4201 et seq. in the event of a complete withdrawal on the Closing
Date from any multiemployer plan, as defined in ERISA Section 4001(a), to which
the Company could reasonably expect to be required to contribute after Closing,
whether by reason of this Agreement or operation of law.
2.3.18. List of Employees. Schedule 2.3.18 of the Disclosure Schedules
contains a list of all employees of the Company as of the date hereof, whose
annual salaries exceed $75,000 and said list correctly reflects their employer,
base salaries, dates of employment and positions.
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2.3.19. Union Representation and Labor Relations. There is no labor strike,
dispute, slow-down or work stoppage actually pending or, to the knowledge of the
Principal Stockholder, threatened, against or involving the Company, other than
disputes with individual employees in which the liability of the Company is not
reasonably expected to exceed $100,000. Except as set forth on Schedule 2.3.19
of the Disclosure Schedules, none of the employees of the Company is covered by
any collective bargaining agreement, and no collective bargaining agreement is
currently being negotiated by any of the Company. There is no request for union
representation pending or, to the Principal Stockholder's knowledge, overtly
threatened against the business of the Company which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 2.3.19 of the Disclosure Schedules, the Company
has no labor negotiations in process with any labor union or other labor
organization. The Company is not, and has not been in the last three years,
engaged in any grievance or unfair labor practice that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect. There
is not, and in the last three years there has been no, charge pending or, to the
knowledge of the Principal Stockholder, threatened against the Company alleging
unlawful discrimination in employment practices before any court or agency that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, and there is no charge of or proceeding with regard to
any unfair labor practice against the Company pending before the National Labor
Relations Board.
2.3.20. Insurance. Schedule 2.3.20 of the Disclosure Schedules contains a
description of all policies of fire, liability, workers' compensation and other
forms of insurance providing insurance coverage to or for any of the Company,
and the name of the owner of each such policy. All such policies are outstanding
and in full force and effect. All premiums with respect thereto have been paid
when due and no notice of cancellation or termination has been received with
respect to any such policy. There is no default with respect to any provision
contained in any such policy, nor has there not been any failure to give any
notice or present any claim under any such policy in a timely fashion or in the
manner or detail required by the policy. Except as set forth in Schedule 2.3.20
of the Disclosure Schedules, there are no outstanding claims under such
policies. Except as set forth in Schedule 2.3.20 of the Disclosure Schedules,
the Company has not been refused any insurance coverage, nor has its coverage
been limited by any insurance carrier to which it has applied for insurance or
with which it has carried insurance during the last five years, except where
such coverage has been obtained from an alternative source under commercially
reasonable terms. Except as disclosed in Schedule 2.3.20 of the Disclosure
Schedules, on and after May 31, 1998, all products liability and general
liability policies maintained by or for the benefit of the Company have been
"occurrence" policies and not "claims made" policies. All such policies and the
coverage provided thereunder will continue to be in full force and effect
through the Closing Date.
2.3.21. Litigation and Claims. Except as set forth on Schedule 2.3.21 to
the Disclosure Schedules, there is no litigation, action, suit, claim or
proceeding (including arbitration proceedings) or investigation pending, in law
or in equity, and there are no proceedings, reviews or governmental
investigations before any commission or other administrative authority, pending
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or, to the Principal Stockholder's knowledge, threatened and no notice,
citation, summons or order (including arbitration orders or awards) has been
served upon and no penalty has been assessed against the Company, or any of its
officers, directors or Affiliates, with respect to or affecting the present or
former operations, business, products, sales practices or financial condition of
the Company or with respect to or affecting the Jenkins Shares or the Principal
Stockholder's rights thereto which, if decided adversely to such entity or
person, would reasonably be expected to have a Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby.
2.3.22. Compliance with Law. Except as set forth on Schedule 2.3.22 to the
Disclosure Schedules, the Company is not in violation of, or delinquent with
respect to, any Requirements of Law (except for Environmental Laws, as to which
Section 2.3.23 applies) to which the property, assets, personnel or business
activities of the Company are subject. Except as set forth on Schedule 2.3.22 to
the Disclosure Schedules, no investigation, review, inquiry or proceeding by any
governmental body with respect to the Company is pending or, to the knowledge of
the Principal Stockholder, threatened.
2.3.23. Environmental Matters.
(a) For the purpose of this Agreement:
(i) "Contaminant" means any waste, pollutant, hazardous substance,
contaminant, extremely hazardous substance, hazardous material, toxic
substance, or hazardous waste, as such terms are defined under any
Environmental Laws, including, without limitation: (i) asbestos or
asbestos-containing material; (ii) polychlorinated biphenyls; (iii) any
radioactive waste or material; or (iv) any petroleum or petroleum-derived
substance or waste;
(ii) "Environmental Laws" means any federal, provincial, state, local,
or foreign law, rule or regulation, ordinance, code, permit, order, decree,
common law or civil code principle or other binding determination of any
governmental authority directed to, addressing or imposing liability or
standards of conduct with respect to: protection of the environment;
Releases or threatened Releases of Contaminants into the environment;
occupational and public safety and health; transportation of goods; or the
manufacture, processing, distribution, use, treatment, storage, disposal,
or handling of Contaminants, in each case as in effect as of the date
hereof (including the reauthorization, reissuance, redesignation or
renaming thereof). Environmental Laws include, without limitation, the
Clean Air Act, as amended (42 U.S.C. 7401 et seq.); the Clean Water Act, as
amended (33 U.S.C. 1251 et seq.); the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended (42 U.S.C.
9601 et seq.); the Resource Conservation and Recovery Act of 1976, as
amended (42 U.S.C. 6901 et seq.); the Toxic Substances Control Act, as
amended (15 U.S.C. 2601 et seq.); the
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Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et seq.);
the Occupational Health and Safety Act, as amended (29 U.S.C. 651 et seq.);
the Hazardous Materials Transportation Act, as amended (49 U.S.C. 1801 et
seq.); and any corresponding state statutes and any regulations adopted by
the United States Environmental Protection Agency, the United States
Occupational, Health and Safety Administration or the United States
Department of Transportation or the states pursuant to any of the above;
(iii) "Environmental Permits" means all material licenses, permits,
registrations, governmental approvals, agreements and consents and other
authorizations which are required under Environmental Laws to operate the
Business as currently conducted;
(iv) "Release" means release, spill, emission, leaking, pumping,
injection, deposit (including the placement of contaminated media on or
offsite for any purpose), disposal, discharge, dispersal, escape, leaching,
or migration into or presence in the environment; and
(v) "Remedial Action" means actions required under CERCLA or any other
Environmental Laws to (i) clean up, remove, treat, remediate, or in any
other way address Contaminants in the environment; (ii) prevent the Release
or threatened Release or minimize the further Release of Contaminants;
(iii) investigate and determine if a remedial response is needed and to
design such a response; or (iv) perform post-remedial investigation,
monitoring, operation, maintenance, and care relating thereto.
(vi) "Principal Stockholder's knowledge" means, for purposes of this
Section 2.3.23, the actual knowledge as of the date hereof or as of the
Closing Date (as the case may be), after due inquiry, of the Principal
Stockholder, Randolph G. Abood, George Zolovick, Kenneth Moshenek, Walter
Vance, and Paul Murphy.
(b) To the Principal Stockholder's knowledge and except as set forth
in Schedule 2.3.23 of the Disclosure Schedules, (i) the Company holds and is in
compliance with all Environmental Permits required under all applicable
Environmental Laws as of the date hereof in connection with the Business, and
all of such Environmental Permits are in full force and effect, except for such
permits which the Company's failure to hold would not reasonably be expected to
have a Material Adverse Effect, and (ii) the Company are not and, for the past
five years, have not been in violation of any Environmental Law, except for such
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect and except for such past violations
which have been fully settled, corrected or otherwise resolved.
(c) To the Principal Stockholder's knowledge and except as set forth
in Schedule 2.3.23 of the Disclosure Schedules, no Real Estate or any other
property for which
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the Company has or may have legal obligations is currently subject to any
pending or threatened investigation by, order from or written agreement with any
governmental entity or third party respecting: (i) any violation of any
Environmental Law; (ii) any Remedial Action; or (iii) any claim of Damage
arising from the Release or threatened Release of a Contaminant into the
environment.
(d) To the Principal Stockholder's knowledge and except as set forth
in Schedule 2.3.23 of the Disclosure Schedules, the Company is not a party to or
subject to any pending or threatened judicial or administrative proceeding,
order, judgment, decree, or settlement alleging a violation of or liability or
obligation under any Environmental Law, the enforcement of which, the compliance
with, or the ongoing obligations of which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect, except such
orders, judgments, decrees, or settlements as have been fully resolved according
to the terms thereof.
(e) To the Principal Stockholder's knowledge and except as set forth
in Schedule 2.3.23 of the Disclosure Schedules, there have been no Releases or
threatened Releases at any of the Real Property during the periods of time that
such Real Property was owned or operated by the Company, except for such
Releases or threatened Releases which, individually or in the aggregate, have
not and would not reasonably be expected to have a Material Adverse Effect.
(f) To the Principal Stockholder's knowledge and except as set forth
in Schedule 2.3.23 of the Disclosure Schedules, the Real Estate is free from any
underground storage tanks for which Remedial Action or Actions are required by
any Environmental Law, except for such Remedial Actions which, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
(g) To the Principal Stockholder's knowledge, the Company has provided
RCGI and 399 Venture access to all environmental reports and data prepared by or
on behalf of the Company that disclose material environmental conditions or
material violations of Environmental Law at the Real Estate.
(h) Other than post-Closing filings under Environmental Permits that
may be necessary to reflect the change of control of the Company contemplated
hereby, neither the execution and delivery of this Agreement or any of the
Ancillary Documents nor the consummation of any of the transactions contemplated
hereby or thereby nor compliance with or fulfillment of the terms, conditions
and provisions hereof or thereof will result in a breach of the terms,
conditions or provisions of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a default),
an event of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation or imposition
of any Encumbrance upon any of the Jenkins Shares or any of the assets of the
Company, under any Environmental Permit, other than any such breaches, defaults,
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rights or Encumbrances that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect or would not prevent
the consummation of any of the transactions contemplated hereby.
(i) This Section 2.3.23 (collectively, the "Environmental
Representations and Warranties") contains the exclusive representations and
warranties of the Principal Stockholder with regard to Environmental Laws,
Environmental Permits and any other environmental matters in this Agreement.
2.3.24. Real Estate. (a) The Company owns interests in real estate
identified in Schedule 2.3.24 of the Disclosure Schedules (the "Owned
Premises"). With respect to each such parcel of owned real property:
(i) the Company has good and marketable title to the parcel of real
property, free and clear of any Encumbrance, easement, covenant or other
restriction, except for Permitted Liens, Encumbrances, easements, covenants
and other restrictions of record which do not affect materially and
adversely the current use, occupancy or marketability of title, of the
property subject thereto;
(ii) there are no pending or, to the knowledge of the Principal
Stockholder, threatened condemnation, expropriation, eminent domain or
other similar proceedings, lawsuits or administrative actions relating to
the property which materially and adversely affect the current use or
occupancy thereof;
(iii) except as set forth in Schedule 2.3.24 of the Disclosure
Schedules, there are no outstanding written or, to the knowledge of the
Principal Stockholder, oral rights, agreements, options or rights of first
refusal to purchase the parcel of real property, or any portion thereof or
interest therein, which have been granted to any other person; and
(iv) to the knowledge of the Principal Stockholder, there are no
parties (other than the Company) in possession of or holding any rights to
take possession of any parcel of real property set forth on Schedule 2.3.24
of the Disclosure Schedules, other than tenants under any leases disclosed
in Schedule 2.3.24 of the Disclosure Schedules who are in possession of
space to which they are entitled and other than any parties holding rights,
the exercise of which would not materially and adversely affect the current
use or occupancy of the real property subject thereto.
(b) The Company leases or subleases interests in real estate
identified in Schedule 2.3.24 of the Disclosure Schedules (the "Leased
Premises"; and, together with the Owned Premises, the "Real Estate"). With
respect to each such parcel of leased or subleased real property, except as set
forth in Schedule 2.3.24 of the Disclosure Schedules, the Company is the lessee
of each of the Leased Premises, and no party other than the Company has any
right to
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possession, occupancy or use of any of the Leased Premises. A copy of each lease
relating to the Leased Premises has been made available to RCGI and 399 Venture,
together with all amendments and modifications thereto and subordination,
attornment or non-disturbance agreements in respect thereof.
2.3.25. Intellectual Property.
(a) Each material (i) trademark, service mark, slogan, trade name,
trade dress and the like (collectively, and together with the associated
goodwill of each, "Trademarks") held by the Company exclusively in connection
with the Business, including information regarding each registration and pending
application to register any such Trademarks; (ii) patent on and pending
application to patent any technology or design used exclusively in connection
with the Business; (iii) registration of and application to register any
copyright held by the Company exclusively in connection with the Business; and
(iv) license of rights in Trademarks, patents, copyrights, unpatented
formulations and know-how, whether to or by the Company, is listed in Schedule
2.3.25 of the Disclosure Schedules. The scheduled rights are referred to herein
collectively as the "Intellectual Property."
(b) To the Principal Stockholder's knowledge, the patents, Trademark
registrations and copyright registrations for all Intellectual Property are
valid and in full force, are held of record in the Company's name free and clear
of all Encumbrances (other than liens or imperfections which are not material in
amount and do not materially detract from the value of or materially impair the
existing use of the patents, Trademark registrations and copyright registrations
affected by such lien or imperfection), and are not the subject of any
outstanding injunction, judgment, order, decree, ruling or charge, or any
pending or, to the Principal Stockholder's knowledge, threatened action, suit,
investigation, charge, complaint, claim, demand or cancellation or reexamination
proceedings or any other proceeding challenging their extent, validity,
legality, enforceability, use or ownership of the item. All fees or other costs
necessary for maintaining the same in full force and effect, including but not
limited to maintenance fees, annuities and renewal fees, which are due and
payable on or prior to the Closing Date have been paid. The Company is the
applicant of record in all patent applications, and applications for Trademark
and copyright registration for all Intellectual Property, and except as set
forth in Schedule 2.3.25 of the Disclosure Schedules, to the Principal
Stockholder's knowledge, no opposition, extension of time to oppose,
interference, rejection, or refusal to register has been received in connection
with any such application.
(c) Schedule 2.3.25 of the Disclosure Schedules identifies each item
of Intellectual Property that any third party owns or licenses as licensee and
that the Company uses pursuant to license, sublicense, agreement or permission.
With respect to each item of Intellectual Property required to be so identified
in the Disclosure Schedules, the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement or permission.
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(d) None of the trade secrets, know-how, or other confidential or
proprietary information of the Company has been disclosed to any person unless
such disclosure was, in respect of the Business, made pursuant to a
confidentiality agreement, except for any such disclosures which would not
reasonably be expected to have a Material Adverse Effect.
(e) The Company owns, licenses or has a right to use all material
computer hardware, software and data processing systems used in connection with
the operation of the Business (collectively, the "Company Software") which are
listed in Schedule 2.3.25 of the Disclosure Schedules. There are no material
malfunctions with respect to the Company Software as currently used by the
Company. Except as set forth in Schedule 2.3.25 of the Disclosure Schedules, to
the knowledge of the Principal Stockholder, Company Software owned by the
Company is capable of accurately processing, calculating, manipulating, storing,
and exchanging date/time data from, into, and between the twentieth and
twenty-first centuries, including, without limitation, the years 1999 and 2000
and any leap year calculations, provided that all other information technology
used in combination with such Company Software properly exchanges date/time data
with such Company Software.
(f) (i) To the Principal Stockholder's knowledge, no other firm,
corporation, association or person claims the right to use on or in connection
with similar or closely related goods and in the United States, any mark which
is identical or confusingly similar to any of the Trademarks; (ii) there are no
pending or, to the knowledge of the Principal Stockholder, threatened claims of
any third party (other than a licensor of Intellectual Property to the Company)
asserting ownership rights in any of the Intellectual Property; (iii) there are
no pending or, to the knowledge of the Principal Stockholder, threatened claims
that the use by the Company of any Intellectual Property infringes any right of
any third party; and (iv) to Seller's knowledge, no third party is infringing
any of the rights of the Company in any of the Intellectual Property, in each
case, except for matters not reasonably expected to have a Material Adverse
Effect.
(g) This Section 2.3.25 contains the exclusive representations and
warranties of the Principal Stockholder with regard to the subject matter
addressed herein. The preceding sentence shall, however, not be construed to
limit RCGI's or 399 Venture's ability to rely on the relevant provisions of
Sections 2.3.13(a), 2.3.13(c), 2.3.13(k), 2.3.14(i) or 2.3.14(l).
2.3.26. Finder's Fees. With the exception of Donaldson, Lufkin & Jenrette,
neither the Principal Stockholder nor the Company nor any of their Affiliates
has dealt with any person, firm or entity entitled to a broker's commission,
finder's fee, investment banker's fee or similar payment for arranging the
transactions contemplated hereby or by the Ancillary Documents or introducing
the parties to each other for which RCGI, the Company or 399 Venture could
become liable or obliged.
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2.3.27. Assets
(a) Sufficiency of Assets. Except as set forth in Schedule 2.3.27 of
the Disclosure Schedules, the assets owned or leased by the Company or which the
Company have a contractual right to use, together with the Company's
Intellectual Property, include all of the assets used in or otherwise necessary
for the conduct of the Business as currently conducted. Except as set forth in
Schedule 2.3.27 of the Disclosure Schedules, the Assets are in good condition
and repair in all material respects, subject to normal wear and tear. To the
knowledge of the Principal Stockholder, no additional assets, including
following the Closing, additional Intellectual Property, accounts receivable or
fixed assets, will be necessary in order to operate the Business on a
stand-alone basis as currently operated.
(b) Inventory. The inventory of the Company is of a quality and
quantity which is usable or saleable in the ordinary course of its business
consistent with the Company's past experience and practice, except to the extent
of the reserve for inventory writedown reflected in the Financial Statements.
Since the Financial Statement date, the inventory of the Company has been
replenished in a normal and customary manner consistent with past practices.
Except as set forth in Schedule 2.3.27 of the Disclosure Schedule, no inventory
is held on consignment by or for the Company.
2.3.28. Product Warranty. Except as set forth in Schedule 2.3.28 of the
Disclosure Schedules, the Company has not made written (or, to the knowledge of
the Principal Stockholder, oral) warranties with respect to the quality or
absence of defects of its products which it has sold and which are in force as
of the date hereof.
2.3.29. Top Customers and Suppliers. Schedule 2.3.29 of the Disclosure
Schedules sets forth a complete and correct list of the top 10 customers and top
10 suppliers by dollar volume of the Company, taken as a whole, during the
fiscal year ended December 31, 1998. Except as set forth in Schedule 2.3.29 of
the Disclosure Schedules and except in the ordinary course, to the knowledge of
the Principal Stockholder, none of such customers or suppliers intends to cease
doing business with the Company or to significantly reduce the general level of
business it is currently doing with the Company.
2.3.30. No Undisclosed Liabilities. Except for liabilities and obligations
(a) set forth in the consolidated balance sheet (including notes thereto)
included in the Financial Statements at and for the Company's fiscal year ended
December 31, 1998, (b) described or identified in Schedule 2.3.30 of the
Disclosure Schedules, or (c) incurred in the ordinary course of business since
December 31, 1998 and reflected as a liability on the books of account of the
Company, the Company is not subject to any indebtedness, obligation or liability
(contingent or otherwise). Notwithstanding the foregoing, no representation and
warranty is made pursuant to this Section 2.3.30 with respect to any matter that
is specifically addressed by another representation or warranty contained in
this Section 2.3 or any certificate delivered pursuant hereto.
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2.3.31. Limitation on Warranties. Neither the Principal Stockholder nor the
Company makes any representations or warranties except as set forth herein or in
any Ancillary Document. RCGI and 399 Venture acknowledge that they have
conducted an independent investigation of the financial condition, assets,
liabilities, properties and projected operations of the Company (including with
respect to environmental matters) in making their determination as to the
propriety of the transaction contemplated by this Agreement, and in entering
into this Agreement, have relied solely on the results of said investigation and
on the representations and warranties of the Principal Stockholder expressly
contained in this Agreement. The Principal Stockholder shall be deemed to have
made a misrepresentation with respect to or breach of the representations and
warranties in this Agreement with respect to any tax matter, employee benefit
matter, environmental matter or intellectual property matter only if such matter
breaches Section 2.3.12 (in the case of tax matters), 2.3.17 (in the case of
employee benefit matters), 2.3.23 (in the case of environmental matters) or
2.3.25 (in the case of intellectual property matters) of this Agreement,
respectively (it being understood that the other representations and warranties
in this Agreement shall not apply to such matters).
2.3.32. Definition of Knowledge. Except as otherwise provided herein, for
the purposes of this Agreement, the knowledge of the Principal Stockholder shall
be deemed to be limited to (and the phrases "the Principal Stockholder's
knowledge", "knowledge of the Principal Stockholder" or words of similar import
mean) the actual knowledge as of the date hereof or as of the Closing Date (as
the case may be) of, the Principal Stockholder, Randolph G. Abood, Kenneth
Moshenek, Walter Vance, George Zolonick, Paul Murphy and Max Baer, each after
due inquiry.
2.4. Representations and Warranties of 399 Venture. 399 Venture represents
and warrants to the Principal Stockholder that
2.4.1. Organization. 399 Venture is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation.
2.4.2. Power and Authority. 399 Venture has full corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Ancillary Documents to be executed and/or delivered pursuant to
this Agreement by 399 Venture.
2.4.3. Execution and Delivery by 399 Venture. The execution and delivery of
this Agreement by 399 Venture, the execution and delivery of the Ancillary
Documents to which it is a party and the performance by 399 Venture of its
obligations under this Agreement and the Ancillary Documents to which it is a
party have been duly authorized and approved by all requisite corporate action.
This Agreement has been duly executed and delivered by 399 Venture and, assuming
the valid authorization, execution and delivery of this Agreement by the other
parties hereto, constitutes the legal, valid and binding obligation of 399
Venture, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general equity principles.
Each of the Ancillary Documents executed and delivered by 399 Venture, assuming
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the valid authorization, execution and delivery thereof by the other party or
parties thereto, if any, will be a legal, valid and binding obligation of 399
Venture, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general equity principles.
2.4.4. Authorization. No consent, authorization, order or approval of, or
filing or registration with, any person, including any governmental authority or
other regulatory agency, is required for or in connection with the execution and
delivery of this Agreement by 399 Venture, the execution and delivery of the
Ancillary Documents to which 399 Venture is a party and the consummation by 399
Venture of the transactions contemplated hereby or thereby.
2.4.5. Conflict. Neither the execution and delivery of this Agreement or
any of the Ancillary Documents executed and delivered by 399 Venture nor the
consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will result in a breach of the terms, conditions or provisions of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default), an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of rights
under (1) the charter or by-laws of 399 Venture (2) any note, instrument,
mortgage, lease, franchise or financial obligation or any other agreement or
instrument to which 399 Venture is a party or any of its properties is subject
or by which 399 Venture or any of its assets may be bound or affected, (3) any
Court Order to which 399 Venture is a party or by which it is bound or (4) any
Requirements of Law affecting 399 Venture, other than, in the case of clauses
(2), (3) and (4) above, any such breaches, defaults or rights that, individually
or in the aggregate, would not prevent the consummation of any of the
transactions contemplated hereby.
2.4.6. Finder's Fees. With the exception of Donaldson, Lufkin & Jenrette,
neither 399 Venture nor any of its Affiliates has dealt with any person, firm or
entity entitled to a broker's commission, finder's fee, investment banker's fee
or similar payment for arranging the transactions contemplated hereby or by the
Ancillary Documents or introducing the parties to each other, for which RCGI,
the Company or the Principal Stockholder could become liable or obligated.
ARTICLE 3
Conduct Prior to the Closing
3.1. General. 399 Venture, the Principal Stockholder and RCGI shall have
the rights and obligations with respect to the period between the date hereof
and the Closing Date which are set forth in the remainder of this Article III.
3.2. Obligations of the Company and the Principal Stockholder . The
following are the obligations of the Company and the Principal Stockholder:
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3.2.1. The Company shall, and the Principal Stockholder shall cause the
Company to, give to RCGI's and 399 Venture's officers, employees, and other
authorized representatives and financing sources reasonable access during normal
business hours to all of the properties, books, Returns, contracts, documents,
insurance policies, records and personnel of or with respect to the Company that
relate to the Business and shall furnish to RCGI and 399 Venture and such
persons as RCGI and 399 Venture shall designate to the Company such documents
and copies of documents and all information as RCGI and 399 Venture or such
persons may at any time and from time to time reasonably request. In furtherance
of the foregoing, the Company shall, and the Principal Stockholder shall cause
the Company to, provide RCGI and 399 Venture and their financing sources and
their respective agents and representatives with full access to any and all of
its management personnel, accountants, representatives, premises, properties,
contracts, commitments, books, records and other information during regular
Business hours, and shall furnish such financial and operating data,
projections, forecasts, business plans, strategic plans and other data relating
to the Business as RCGI and 399 Venture and their financing sources and its
agents and representatives shall reasonably request; provided, however, that
neither the Company nor the Principal Stockholder be required to violate any
obligation of confidentiality to which the Principal Stockholder or the Company
is subject or to waive any privilege which any of them may possess in
discharging their obligations pursuant to this Section 3.2.1. The Company shall,
and the Principal Stockholder shall cause the Company to, use its reasonable
best efforts to cause its officers, employees, consultants, agents, accountants
and attorneys to cooperate fully with RCGI and 399 Venture, their financing
sources, agents and representatives in connection with the financing of the
transactions contemplated hereby, including the preparation of any offering
documents related thereto. RCGI and 399 Venture agree that such investigation
shall be conducted in such a manner as not to interfere unreasonably with the
operations of the Company.
3.2.2. The Company shall and the Principal Stockholder shall use reasonable
efforts (and RCGI and 399 Venture shall cooperate with the Company) to cause the
Company to, obtain the approvals, authorizations, exemptions, waivers and
consents to the consummation of the transactions contemplated hereby under or
with respect to (a) each contract, lease, agreement, Permit, Environmental
Permit, and other instrument and (b) each foreign, federal, state or local
governmental approval, in each case, which is enumerated in Exhibit B attached
hereto (collectively, the "Material Consents"); provided, however, that such
action shall not include any requirement of the Principal Stockholder or the
Company to expend money, commence or participate in any litigation or offer or
grant any accommodation (financial or otherwise) to any third party.
3.2.3. The Company shall, and the Principal Stockholder shall cause the
Company to, carry on the Business in the ordinary course of business, except as
expressly permitted by this Agreement.
3.2.4. The Company and the Principal Stockholder, as the case may be, shall
give prompt written notice to RCGI and 399 Venture in the event any of their
respective
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representations and warranties are discovered to be untrue as of the
time made or in the event the Company or the Principal Stockholder determines
that such representations and warranties shall be untrue as if made at and as of
the Closing Date. Except as set forth in Section 9.4, no disclosure by the
Principal Stockholder pursuant to this Section 3.2.4 shall be deemed to amend or
supplement the Disclosure Schedules or to cure any misrepresentation or breach
of warranty.
3.2.5. Without the prior written consent of RCGI and 399 Venture, the
Company shall not, and the Principal Stockholder shall cause the Company not to,
other than in the ordinary course of business, as explicitly contemplated by
this Agreement or the Ancillary Documents or as set forth in Schedule 3.2.5 of
the Disclosure Schedules:
(a) amend its certificate of incorporation or by-laws, partnership
agreements or other organizational documents;
(b) make any change in the authorized capital stock of the Company or
issue any shares of stock of any class or issue or become a party to any
subscriptions, warrants, rights, options, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock of the Company, or to other equity securities of the Company, or
grant any stock appreciation or similar rights;
(c) institute any material increase or otherwise materially change the
compensation payable to or to become payable to any employee, officer or agent
of the Company;
(d) incur or commit to incur any capital expenditures not set forth in
Schedule 3.2.5(d) of the Disclosure Schedules or not included with the Company's
capital spending plan for its current fiscal year in excess of $2,500,000 in the
aggregate;
(e) sell, transfer or otherwise dispose of any asset or property
(including sales or transfers to Affiliates), except for sales of inventory and
for transfers of cash in payment of the liabilities of the Company;
(f) enter into any lease, contract or commitment which, if taken prior
to the date hereof, would be required to be disclosed in Schedule 2.3.14 of the
Disclosure Schedules;
(g) take any action or omit to take any action which will result in a
violation of any applicable law which, if taken prior to the date hereof, would
be required to be disclosed in Schedule 2.3.22 of the Disclosure Schedules;
(h) prepay any material obligation which, if taken prior to the date
hereof, would be required to be disclosed in Schedule 2.3.13 of the Disclosure
Schedules; or
(i) borrow any money;
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(j) take any action to change accounting policies or procedures
(including procedures with respect to revenue recognition, payments of accounts
payable and collection of accounts receivable) except as required by GAAP; or
(k) enter into any agreement to do any of the foregoing.
3.2.6. The Company shall, and the Principal Stockholder shall use his best
efforts as a stockholder to cause the Company to, use its best efforts, subject
to the requirements of applicable law, to take all action necessary to effect
the Reverse Stock Split and shall ensure that all agreements, certificates and
other documents delivered or received by the Company in connection with the
Reverse Stock Split are in form and substance satisfactory to RCGI and to 399
Venture, prior to such delivery or receipt.
3.2.7. The Company shall, and the Principal Stockholder shall use his best
efforts as a stockholder to cause the Company to, use its best efforts to ensure
that the Company effects the Jenkins Redemption and the Management Redemption on
the terms contemplated by this Agreement and shall ensure that all agreements
certificates and other documents delivered or received by the Company in
connection with such redemptions are in form and substance satisfactory to RCGI
and 399 Venture, prior to such delivery or receipt.
3.3. Reserved.
3.4. Joint Obligations. The following shall apply with equal force to 399
Venture, the Principal Stockholder, and RCGI:
3.4.1. Subject to the terms and conditions of this Agreement, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate the transactions contemplated hereby and by the
Ancillary Documents as soon as practicable.
3.4.2. RCGI and IMC Global filed on February 3, 1999 with the Federal Trade
Commission and the Antitrust Division of the Department of Justice the
notifications and other information required to be filed under the HSR Act with
respect to the transactions contemplated hereby and by the IMC Agreement. Each
of RCGI, 399 Venture, and Principal Stockholder warrants that all information
supplied by such party in connection with such filings was, as of the date
filed, true and accurate in all material respects and in material compliance
with the requirements of the HSR Act and any such rules and regulations. RCGI,
399 Venture and the Principal Stockholder shall each make available to the other
such information as each of them may reasonably request relative to the
Company's business, assets and property as may be required of each of them in
connection with the filing of any additional information requested by such
agencies under the HSR Act.
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ARTICLE 4
Conditions to Closing
4.1. Conditions to Obligations of the Company and the Principal
Stockholder. The obligations of the Company and the Principal Stockholder to
close the transactions contemplated hereby and by the Ancillary Documents is
subject to the fulfillment or, if permitted by applicable law, waiver by the
Company and the Principal Stockholder of all of the following conditions on or
prior to the Closing Date:
4.1.1. The representations and warranties made by each of RCGI and 399
Venture (i) that are qualified as to materiality shall be true and correct on
and as of the Closing Date as though made or given on and as of the Closing Date
(except to the extent such representations specifically relate to an earlier
date) and (ii) that are not qualified with respect to materiality shall be true
in all material respects on and as of the Closing Date as though made or given
on and as of the Closing Date (except to the extent such representations
specifically relate to an earlier date), except in each case for changes therein
(x) specifically permitted or contemplated by this Agreement or the Ancillary
Documents, (y) consented to in writing by RCGI or 399 Venture, or (z) breaches
of representations and warranties (other than any representation or warranty in
Sections 2.2.1, 2.2.2, 2.2.3, 2.2.4, 2.2.5(1), 2.4.1, 2.4.2, 2.4.3 and 2.4.4)
that are not, individually or in the aggregate, reasonably expected to have a
Material Adverse Effect.
4.1.2. There shall not have been any breach by RCGI or by 399 Venture in
the performance of any of their respective covenants and agreements herein which
shall not have been remedied or cured (it being understood that RCGI or 399
Venture, as the case may be, shall be given a reasonable opportunity to remedy
or cure any such breach), other than breaches which are not reasonably expected
to have a material adverse effect on their abilities to perform their respective
obligations under this Agreement and the Ancillary Documents to which either of
them is a party.
4.1.3. No action, suit or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation.
4.1.4. The Company shall have executed and delivered a release in a form
attached hereto as Exhibit C (the "Company Release").
4.1.5. The Principal Stockholder shall have received evidence satisfactory
to him of 399 Venture's investment in RCGI (in addition to the exchange of the
Debentures for the 399 Venture Shares) of (i) $10,000,000 through the purchase
from RCGI of a subordinated note, and (ii) $26,771,525 in exchange for (A)
251,799.25 shares of Series A Preferred, (B) 400,000 shares
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of Class A Common, and (C) 1,191600 shares of Class B Common Stock, par value
$.01 per share, of RCGI.
4.1.6. RCGI shall have received the financing contemplated by Section
2.2.9.
4.1.7. 399 Venture shall have delivered the Debentures to RCGI.
4.1.8. All conditions to the closing contemplated under the Stock Purchase
Agreement (the "IMC Agreement") dated as of January 21, 1999 among IMC Global
Inc., a Delaware corporation, the Vigoro Corporation, a Delaware corporation, as
amended pursuant to an amendment dated as of April 13, 1999, shall have been
satisfied or waived.
4.1.9. The Preferred Stockholder Agreement, in the form agreed to by the
parties hereto (the "Preferred Stockholders Agreement"), dated as of the date of
the Closing, among 399 Venture and certain individuals shall have been executed
and delivered by 399 Venture.
4.1.10. The Registration Rights Agreement, in the form agreed to by the
parties thereto (the "Registration Rights Agreement"), dated as of the date of
the Closing, among 399 Venture, RCGI, the Principal Stockholder and the other
parties thereto shall have been executed and delivered by RCGI and 399 Venture.
4.1.11. The Securities Purchase and Holders Agreement, in the form agreed
by the parties thereto (the "Securities Holders Agreement"), dated as of the
date of the Closing, among RCGI, 399 Venture, the Principal Stockholder and the
additional signatories thereto, shall have been executed and delivered by RCGI
and 399 Venture.
4.1.12. An employment agreement between the Principal Stockholder and RCGI,
in form and substance satisfactory to the parties thereto (the "Jenkins
Employment Agreement"), shall have been executed and delivered by RCGI.
4.1.13. The termination agreement in the form attached hereto as Exhibit E
(the "Termination Agreement" shall have been executed by 399 Venture and
delivered to the Principal Stockholder.
4.2. Conditions to RCGI's and 399 Venture's Obligations. The obligation of
RCGI and 399 Venture to close the transactions contemplated hereby and by the
Ancillary Documents is subject to the fulfillment or, if permitted by applicable
law, waiver by RCGI and 399 Venture of all of the following conditions on or
prior to the Closing Date:
4.2.1. The representations and warranties made by each of the Company and
the Principal Stockholder (i) that are qualified as to materiality shall be true
and correct on and as of the Closing Date as though made or given on and as of
the Closing Date (except to the extent such representations specifically relate
to an earlier date) and (ii) that are not qualified with
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respect to materiality shall be true in all material respects on and as of the
Closing Date as though made or given on and as of the Closing Date (except to
the extent such representations specifically relate to an earlier date), except
in each case for changes therein (x) specifically permitted or contemplated by
this Agreement or the Ancillary Documents, (y) consented to in writing by RCGI
or 399 Venture, or (z) breaches of representations and warranties (other than
any representation or warranty in Sections 2.3.1, 2.3.3, 2.3.4, 2.3.5 and 2.3.9)
that are not, individually or in the aggregate, reasonably expected to have a
Material Adverse Effect.
4.2.2. There shall not have been any breach by the Principal Stockholder or
the Company in the performance of any of their respective covenants and
agreements herein which shall not have been remedied or cured (it being
understood that the Company and the Principal Stockholder, as the case may be,
shall be given a reasonable opportunity to remedy or cure any such breach),
other than breaches which are not reasonably expected to have a Material Adverse
Effect.
4.2.3. The Principal Stockholder or the Company shall have procured all
Material Consents.
4.2.4. No action, suit or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect materially and adversely the right of RCGI to own the
Jenkins Shares and to control the Company, (D) affect materially and adversely
the right of the Company to own its assets and to operate its business (and no
such injunction, judgment, order, decree, ruling or charge shall be in effect)
or (E) otherwise would reasonably be expected to have a Material Adverse Effect.
4.2.5. The Principal Stockholder shall have executed and delivered a
release in a form attached hereto as Exhibit D (the "Principal Stockholder
Release").
4.2.6. RCGI shall have received the financing contemplated by Section
2.2.9.
4.2.7. The Principal Stockholder shall have delivered the Jenkins
Redemption Shares to the Company for the Jenkins Redemption.
4.2.8. The Principal Stockholder shall have delivered the Jenkins Exchange
Shares to RCGI for exchange.
4.2.9. All conditions to the closing contemplated under the IMC Agreement
shall have been satisfied or waived.
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4.2.10. Since September 30, 1998, the Company shall have made no
distributions to any stockholder of the Company, including any extraordinary
distribution, on account of such stockholder's ownership of any shares of
capital stock of the Company, other than the payments of dividends payable on
the Preferred Stock in the ordinary course of business, such payments not to
exceed an aggregate annual amount of $1.2 million.
4.2.11. The Securities Holders Agreement shall have been executed and
delivered by the Company and the Principal Stockholder.
4.2.12. The Preferred Stockholder Agreement shall have been executed and
delivered by the Principal Stockholder.
4.2.13. The Registration Rights Agreement shall have been executed and
delivered by the Principal Stockholder and the Company.
4.2.14. The Jenkins Employment Agreement shall have been executed and
delivered by the Principal Stockholder.
4.2.15. No Material Adverse Effect shall have occurred nor shall any event
or circumstance which could reasonably be expected to have a Material Adverse
Effect have occurred.
4.2.16. The Termination Agreement shall have been executed by the Principal
Stockholder and the Company and delivered to RCGI.
ARTICLE 5
Closing
5.1. Form of Documents. At the Closing, the parties shall deliver the
documents, and shall perform the acts, which are set forth in this Article V.
5.2. The Company's Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Section 4.1, the Company shall deliver to the Principal
Stockholder the Jenkins Redemption Amount by wire transfer of immediately
available funds.
5.3. RCGI's Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Section 4.2, RCGI shall execute and/or deliver to the
Principal Stockholder all of the following:
5.3.1. Certificates representing the RCGI Shares.
5.3.2. A certificate of good standing of RCGI, issued not earlier than ten
(10) days prior to the Closing Date by the Secretary of State of Delaware.
5.3.3. An incumbency certificate with respect to the officers of RCGI
executing this Agreement, and any RCGI Ancillary Document delivered hereunder,
on behalf of RCGI.
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5.3.4. A certified copy of resolutions of RCGI's board of directors,
authorizing the execution, delivery and performance of this Agreement, and any
other document delivered by RCGI hereunder.
5.3.5. A closing certificate executed by the President of RCGI (or any
other authorized officer of RCGI), on behalf of RCGI, as to the matters
described in Sections 4.1.1 and 4.1.2 and stating that all documents to be
executed and delivered by RCGI at the Closing have been executed and delivered
by duly authorized officers of RCGI.
5.3.6. Certified copies of the charter and by-laws of RCGI.
5.4. The Principal Stockholder's Deliveries. Subject to the fulfillment or
waiver of the conditions set forth in Section 4.1, the Principal Stockholder
shall execute or deliver all of the following:
5.4.1. Deliveries to RCGI:
(i) Certified copies of the charter and by-laws of the Company.
(ii) Certificate of good standing of the Company issued not earlier
than ten (10) business days prior to the Closing Date by the Secretary of
State of Delaware.
(iii) Certificates representing the Jenkins Exchange Shares, in each
case duly endorsed in blank or with duly executed stock powers attached.
(iv) A closing certificate executed by the Principal Stockholder and
the President of the Company, as to the matters described in Sections 4.2.1
and 4.2.2. and stating that all documents to be executed by the Company and
delivered at the Closing have been executed and delivered by duly
authorized officers of the Company;
(v) The written resignations, effective as of the Closing Date, of the
directors of the Company (other than the Principal Stockholder and Randolph
G. Abood).
(vi) The minute books and stock records of the Company.
(vii) A legal opinion in a form agreed to by the parties hereto.
(viii) An incumbency certificate with respect to the officers of the
Company executing this Agreement, and any Ancillary Document delivered
hereunder, on behalf of the Company.
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5.4.2. Deliveries to the Company:
(i) The Jenkins Redemption Shares.
5.5. 399 Venture Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Section 4.2, 399 Venture shall execute and/or deliver to
the Principal Stockholder all of the following:
5.5.1. A certificate of good standing of 399 Venture, issued not earlier
than five (5) days prior to the Closing Date by the Secretary of State of
Delaware.
5.5.2. An incumbency certificate with respect to the officers of 399
Venture executing this Agreement, and any Ancillary Document delivered
hereunder, on behalf of 399 Venture.
5.5.3. A closing certificate executed by the President of 399 Venture (or
any other authorized officer of 399 Venture), on behalf of 399 Venture, as to
the matters described in Sections 4.1.1 and 4.1.2 and stating that all documents
to be executed and delivered by 399 Venture at the Closing have been executed
and delivered by duly authorized officers of 399 Venture.
5.6. Other Transactions Occurring at the Closing. In addition to the
deliveries to be made at the Closing pursuant to Sections 5.2 and 5.3:
5.6.1. The Company will execute and deliver the Company Release.
5.6.2. The Principal Stockholder will execute and deliver the Principal
Stockholder Release.
5.6.3. RCGI will deliver certificates representing the 399 Venture Shares
to 399 Venture.
5.6.4. 399 Venture will deliver the Debentures to RCGI.
ARTICLE 6
Post Closing Agreements
6.1. Post Closing Agreements. From and after the Closing, the parties shall
have the respective rights and obligations which are set forth in the remainder
of this Article VI.
6.2. Confidentiality; Non Competition; Non-Solicitation.
6.2.1. Confidentiality. From and after the Closing, the Principal
Stockholder shall, and shall cause his representatives and agents to, keep
confidential and not disclose to any other person (other than his legal and
financial advisors and accountants) or use for their own
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benefit or the benefit of any other person, any information regarding the
business and affairs of the Company or its Subsidiary. The obligation of the
Principal Stockholder under this Section 6.2 shall not apply to information
which: (i) is or becomes generally available to the public without breach of the
commitment provided for in this Section 6.2; (ii) was otherwise available to the
Principal Stockholder on a non-confidential basis; or (iii) is required to be
disclosed by law, order or regulation of a court or tribunal or government or
disclosures necessary to implement the provisions of this Agreement or the
Ancillary Documents; provided, however, that, in the case of clause (iii) above,
the Principal Stockholder shall provide RCGI and 399 Venture as much advance
notice of the possibility of such disclosure as practical so RCGI may attempt to
stop such disclosure or obtain a protective order concerning such disclosure.
6.2.2. Non-Competition.
(a) In consideration of the benefits of this Agreement to the
Principal Stockholder and in order to induce RCGI to enter into this Agreement,
the Principal Stockholder hereby covenants and agrees that from and after the
Closing and until the later of (i) the third anniversary of the Closing Date and
(ii) one (1) year after the termination of the Principal Stockholder's
employment by the Company, the Principal Stockholder shall not, and shall cause
any employee or Affiliate not to, directly or indirectly, as a partner,
stockholder, director, consultant, joint venturer, investor or in any other
capacity, engage in, or own, manage, operate or control, or participate in the
ownership, management, operation or control of, any business or entity which
engages anywhere in the United States of America in (x) the sale of crop
production inputs and services at retail or (y) the sale of the crop production
inputs set forth in Schedule 6.2.2 at wholesale (a "Competing Business");
provided, however, that nothing herein shall prohibit the Principal Stockholder
from (i) owning not more than 5.0% of any class of securities of a publicly
traded entity in a Competing Business, (ii) acquiring and following such
acquisition, actively engaging in, any business enterprise partially engaged in
a Competing Business, so long as not more than 20% of the fair market value of
such business, as determined in good faith by the Principal Stockholder and
certified to RCGI by the Principal Stockholder, is attributable to such
Competing Business, or (iii) acquiring, and following such acquisition, actively
engaging in, any business enterprise partially engaged in a Competing Business,
provided that if more than 20% of the fair market value of such business, as
determined in good faith by the Principal Stockholder and certified to RCGI by
the Principal Stockholder, is attributable to such Competing Business, then such
business shall divest itself of the subsidiary, division, group, franchise or
segment which engages in such Competing Business as soon as practicable after
the date of such acquisition, and provided, further, that with respect to any
purchase intended to be accounted for as a pooling of interests under GAAP or
treated for federal income tax purposes as a tax-free reorganization, no such
divestiture shall be required until, in the reasonable opinion of the acquiror,
such divestiture would no longer endanger the accounting of such acquisition as
a pooling of interests under GAAP or the treatment for federal income tax
purposes of such acquisition as a tax-free reorganization.
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6.2.3. Non Solicitation. From the date hereof until the later of (i) the
third anniversary of the Closing Date and (ii) one (1) year after the
termination of the Principal Stockholder's employment by the Company, the
Principal Stockholder shall not, without prior written approval of RCGI,
directly or indirectly, solicit for employment any current officer, senior
manager, general manager, sales or technical employee of the Company; provided,
however, that the foregoing shall not prevent the Principal Stockholder, or any
of his Affiliates from hiring any such person (i) who contacts the Principal
Stockholder or his Affiliates on his or her own initiative without solicitation
from any of the Principal Stockholder or his Affiliates, (ii) in connection with
general employment advertisements published in magazines, journals, newspapers
and other publications that are not targeted at the Company or any of the
Company's employees or (iii) who has been discharged by the Company prior to any
such solicitation.
6.2.4. The Principal Stockholder acknowledges that given the nature of the
Business the covenants contained in this Section 6.2 contain reasonable
limitations as to time, geographic area and scope of activity to be restrained,
and do not impose a greater restraint than is necessary to protect and preserve
for the benefit of RCGI the goodwill of the Company and to protect the
legitimate business interests of the Company. If, however, this Section 6.2 is
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too long a period of time or over too large a geographic
area or by reason of its being too extensive in any other respect or for any
other reason it will be interpreted to extend only over the longest period of
time for which it may be enforceable and/or over the largest geographic area as
to which it may be enforceable and/or to the maximum extent in all other aspects
as to which it may be enforceable, all as determined by such court and in such
action.
6.2.5. The Principal Stockholder agrees that RCGI's remedies at law for any
breach or threat of breach by the Principal Stockholder of the provisions of
this Section 6.2 will be inadequate, and that RCGI shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this Section
6.2 and to enforce specifically the terms and provisions hereof, in addition to
any other remedy to which RCGI may be entitled at law or equity. In the event of
litigation regarding this Section 6.2, the prevailing party in such litigation
shall, in addition to any other remedies that prevailing party may obtain in
such litigation, be entitled to recover from the other party all reasonable
legal fees and out-of-pocket expenses incurred by such party in enforcing or
defending its rights hereunder.
6.3. Further Assurances. The parties shall execute such further documents,
and perform such further acts, as may be reasonably necessary to transfer and
convey the Jenkins Shares to Purchaser, on the terms herein contained, and to
otherwise comply with the terms of this Agreement and consummate the
transactions contemplated hereby and by the Ancillary Documents.
6.4. Transfer Taxes RCGI and the Principal Stockholder shall each pay, and
shall indemnify the other party against, 50 percent of any sales Tax, use Tax,
stamp Tax, stock transfer Tax or other similar Tax imposed on the transactions
contemplated by this Agreement.
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6.5. Agreement to Defend and Indemnify. Without prejudicing its right to
indemnification under Article VII hereof, RCGI acknowledges and accepts as
contract rights (and agrees to cause the Company to honor in accordance with
their terms) the provisions of the Company's charter and/or by-laws or other
organizational documents as in effect on the date hereof with respect to
indemnification of officers, directors, employees and agents of each of them
(collectively, "Indemnified Persons") (including provisions relating to
contribution, advancement of expenses and the like), and agrees that, for a
period of six years after the Closing Date, indemnity provisions of the charter
and by-laws or other organizational documents of the Company, to the extent the
Company is still in existence, shall not be modified or amended except as
required by law, unless such modification or amendment expands the rights of the
Indemnified Persons to indemnification (including with respect to contribution,
advancement of expenses and the like).
6.6. Registration and Legend. RCGI agrees and understands that the Jenkins
Shares have not been, and will not be, registered under the Securities Act or
the securities laws of any state and that the Jenkins Shares may be sold or
disposed of only in one or more transactions registered under the Securities Act
and applicable state securities laws or as to which an exemption from the
registration requirements of the Securities Act and applicable state securities
laws is available. RCGI acknowledges and agrees that no person has any right to
require the Principal Stockholder to cause the registration of any of the
Jenkins Shares. The certificates representing the Jenkins Shares shall contain a
legend similar to the following and other legends necessary or appropriate under
applicable state securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
A REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS WITH RESPECT TO SUCH SHARES IS EFFECTIVE OR UNLESS THE
COMPANY IS IN RECEIPT OF AN OPINION OF COUNSEL SATISFACTORY TO IT TO
THE EFFECT THAT SUCH SHARES MAY BE SOLD WITHOUT REGISTRATION UNDER THE
ACT AND SUCH LAWS.
6.7. Section 351 Transaction. The parties hereto intend that the
transactions contemplated by this Agreement regarding the transfer of securities
or cash to RCGI in exchange for RCGI Shares shall be treated as transfers under
Section 351 of the Code. None of the parties hereto will take a position on
their respective tax returns that is inconsistent with such treatment.
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ARTICLE 7
Indemnification
7.1. General. From and after the Closing, the parties shall indemnify each
other as provided in this Article VII. All payments made by RCGI, the Company or
Principal Stockholder, as the case may be, under this Article VII shall be
treated as adjustments to the value of the property exchanged pursuant to
Section 1.2 for all tax purposes.
7.2. Certain Definitions. As used in this Agreement, the following terms
shall have the indicated meanings:
7.2.1. "Damages" shall mean all losses, damages (including, with respect to
Environmental Claims, costs of Remedial Actions), awards, fines, penalties,
deficiencies, judgments, costs, expenses and fees (including reasonable
attorneys' fees, accountants' fees, court costs and all other reasonable
expenses incurred in investigating or defending any litigation or proceeding,
commenced or threatened), resulting from, arising out of or incident to any of
the indemnifiable items in this Article VII. Damages, however, shall be net of:
(i) any federal, state, or local income tax benefits actually realized by the
Indemnified Party as a result of the matter for which indemnification is sought
offset by any additional tax burden actually suffered by the Indemnified Party
as a result of the matter giving rise to indemnification; provided that no
Indemnified Party shall be required solely for the purpose of realizing a
benefit to take any tax position that could have an adverse effect on such
Indemnified Party if taken; and provided, further, that the Indemnified Party
shall not be required to disclose its (or its Affiliates) tax returns, work
papers or other information with respect to the preparation of such returns, but
shall be required to disclose the foregoing only to a nationally recognized
accounting firm that agrees to disclose only its conclusions to the Indemnifying
Party that accrues to or is realized by the Indemnified Party in respect of the
matter for which a claim is asserted; (ii) any proceeds received by the
Indemnified Party from any separate indemnification or contribution from or
against any person or entity; and (iii) insurance proceeds or coverage pursuant
to any insurance (including title insurance) held by the Indemnified Party or
its Affiliates and covering the event for which indemnification is sought or
insurance proceeds recovered from any other person or entity by the
Indemnifiable Party (less any costs, expenses, premium increases or taxes
incurred in connection therewith).
7.2.2. "Environmental Claim" shall mean any Third Party Claim arising under
any Environmental Law; provided that Environmental Claims shall not include any
enforcement actions by any government agency following the Closing Date with
respect to, or related to compliance of the Business on or prior to the Closing
Date with "process safety management regulations" (as defined under 29 C.F.R.
1910.119) ("Process Safety Management Claims") or state or federal laws or
regulations concerning the transportation of hazardous materials
("Transportation Claims").
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7.2.3. "Indemnified Party" shall mean, with respect to a particular matter,
a party hereto seeking indemnification from another party hereto pursuant to
this Article VII.
7.2.4. "Indemnifying Party" shall mean, with respect to a particular
matter, a party against whom indemnification under this Article VII is sought by
an Indemnified Party.
7.2.5. "Third Party Claim" shall mean any claim, action, suit, proceeding,
investigation, judicial or administrative order, or like matter which is
asserted, requested or threatened by, or initiated at the request of, a person
other than the parties hereto and their Affiliates, their successors and
permitted assigns, against any Indemnified Party.
7.3. The Principal Stockholder's Indemnification Obligations. The Principal
Stockholder shall indemnify, defend and hold harmless RCGI, 399 Venture, the
officers, directors, shareholders, employees and Affiliates thereof and their
successors and permitted assigns (each referred to in this Agreement as an "RCGI
Indemnitee" and, collectively, the "RCGI Indemnitees") against and from all
Damages sustained or incurred, by any RCGI Indemnitee, as a result of or arising
out of:
7.3.1. any inaccuracy in or breach of any representation and warranty made
by the Principal Stockholder in Section 2.3 or in any Ancillary Document
delivered by the Principal Stockholder or the Company to RCGI or 399 Venture in
connection herewith;
7.3.2. any breach by the Principal Stockholder or the Company of, or
failure of the Principal Stockholder or the Company to comply with, any of the
covenants or obligations under this Agreement or in any Ancillary Document to be
performed by the Principal Stockholder or the Company;
7.3.3. any inaccuracy in or breach of any of the Environmental
Representations and Warranties, whether made pursuant to this Agreement or in
the certificate delivered to RCGI pursuant to Section 5.4.1(iv);
7.3.4. any Environmental Claim solely to the extent that such Environmental
Claim is associated with, arises from, or relates to (a) conditions existing
prior to the Closing Date on the Real Estate, (b) conditions existing prior to
the Closing Date on real estate (other than the Real Estate) formerly owned,
leased or operated by the Company or any of their predecessors, (c) the
operation of the Business or the operation of the businesses of any Company
predecessor prior to the Closing Date or (d) the offsite disposal,
transportation, recycling or Release or threatened Release of any Contaminants
as a result of the Company's operations, or those of their predecessors, before
the Closing Date, in each case, including Environmental Claims for a Release or
threatened Release of any Contaminant on, in, at, to, beneath or from the Real
Estate before the Closing Date (whether or not such Environmental Claim also
constitutes a breach of the Environmental Representations and Warranties);
provided that RCGI's activities (including communications), other than those
activities required by Environmental Law, have not directly or indirectly
triggered or caused to be ripened such Environmental Claim (it being understood
that
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RCGI Indemnitees' right to indemnification under this Section 7.3.4 shall not be
nullified or limited by RCGI Indemnitees' compliance with Environmental Laws,
including the conduct of investigations, in connection with facility operations,
expansion or closure activities or the sale of the Business or other reasonable,
good faith activities in connection with the operation of the Business in the
ordinary course);
7.3.5. any inaccuracy in or breach of any representation or warranty made
by the Principal Stockholder in Section 2.3.30 or in respect thereof under the
certificate delivered to RCGI pursuant to Section 5.3.4.
7.3.6. Notwithstanding the foregoing provisions of this Section 7.3:
(a) the Principal Stockholder shall be required to indemnify and hold
harmless RCGI Indemnitees pursuant to Sections 7.3.1 through 7.3.5 only to the
extent that the aggregate amount of Damages incurred by RCGI Indemnitees
pursuant to Sections 7.3.1 through 7.3.5 exceeds $2,000,000 (it being understood
that such $2,000,000 shall constitute a "deductible" for which the Principal
Stockholder bears no indemnification responsibility and that such "deductible"
shall be separate from and independent of any other such "deductible" set forth
in this Agreement);
(b) the Principal Stockholder shall be required to indemnify and hold
harmless RCGI Indemnitees under this Section 7.3 only to the extent that the
aggregate amount required to be paid by the Principal Stockholder pursuant to
this Section 7.3 does not exceed $5 million.
(c) Notwithstanding the foregoing the limitations contained in clauses
(a) and (b) of this Section 7.3.6 shall not apply to any Damages: (i) sustained
or incurred by any RCGI Indemnitee as a result of or arising out of any breach
of any representation or warranty in Section 2.3.1, Section 2.3.3, Section
2.3.4, or Section 2.3.9; (ii) sustained or incurred by any RCGI Indemnitee as a
result of or arising out of any breach of or failure to comply with any covenant
or obligation in Articles I, VI, VII or IX; or (iii) resulting or arising from
an intentional or willful breach by the Company or the Principal Stockholder of
any representation or warranty in Section 2.3 or any covenant under this
Agreement or any Ancillary Document to which the Principal Stockholder or the
Company is party which, in each case, would constitute common law fraud.
7.3.7. Notwithstanding any other provision of this Agreement, the Company
shall be required to indemnify and hold harmless RCGI Indemnitees pursuant to
this Section 7.3 with the same force and effect as if the Company were the
Principal Stockholder; provided, however, that (i) the Company shall not be
required to make any payments under this Section 7.3 until the aggregate amount
paid by the Principal Stockholder under such Section shall equal $5 million and
(ii) the Company shall be required to indemnify and hold harmless RCGI
Indemnitees under this Section 7.3 only to the extent that the aggregate amount
required to be paid by the Company pursuant to this Section 7.3 does not exceed
$6 million.
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7.3.8. In addition to the foregoing indemnification provisions of this
Section 7.3, the Principal Stockholder shall indemnify, defend and hold harmless
RCGI, 399 Venture, the Company, and the officers, director, shareholders,
employees and Affiliates thereof and their successors and permitted assigns from
and against (i) any claims by the ESOP, the ESOP Trust, or any ESOP participant
or beneficiary of any such participant, for any payments following the Closing
Date in connection with the Reverse Stock Split other than the payment of
$2,877,853.62 specified in Recital H hereof (it being understood that the
Principal Stockholder shall also be entitled to apply the $118,274 deposited in
escrow by the Company plus any additional amounts deposited in escrow by the
Rollover Investors towards any amounts payable under this clause (i)); (ii) any
claim for any excise tax or penalty imposed under any provision of applicable
law, including but not limited to ERISA or the Code by any governmental agency,
including but not limited to the Internal Revenue Service or the United States
Department of Labor; (iii) any payments in excess of $9,622,021.99 in the
aggregate (inclusive of amounts deposited by the Rollover Investors into escrow
for the benefit of the ESOP Trust) made or required to be made in cash to
stockholders of the Company (other than the ESOP or the ESOP Trust) on account
of (A) shares of the Company and options to purchase shares of Common Stock
redeemed by the Company pursuant to the transactions contemplated by this
Agreement, and (B) any payment made or required to be made by the Company to the
Rollover Investors (including the Principal Stockholder) on account of shares of
Common Stock and options to purchase shares of Common Stock which are being
redeemed by the Company pursuant to the Management Redemption. The Principal
Stockholder's indemnification obligations hereunder shall not be subject the
limitations set forth in Section 7.3.6.
7.4. Survival of Indemnification Obligations. The indemnification provided
for in Section 7.3 shall terminate 18 months after the Closing Date (and no
claims shall be made by any RCGI Indemnitee under Section 7.3 thereafter),
except that the indemnification by the Principal Stockholder (and, subject to
Section 7.3.7, by the Company) shall continue as to:
(i) the covenants of the Principal Stockholder set forth in Article I
or Article VI shall survive for the periods of time set forth therein or,
if no period of time is set forth, such covenants shall survive
indefinitely;
(ii) claims for indemnification for breaches of representations and
warranties set forth in Section 2.3.12 with respect to matters occurring on
or after September 15, 1994, which survive until the expiration of the
applicable statute of limitations (it being understood that indemnification
for claims related to breaches of representations and warranties set forth
in Section 2.3.12 to the extent attributable to matters occurring prior to
September 15, 1994 shall terminate 18 months after the Closing Date);
(iii) claims for indemnification under Sections 7.3.3, and 7.3.4 which
shall survive until the fifth anniversary of the Closing Date (it being
understood that indemnification for any such claims to the extent
attributable to circumstances or events occurring prior to September 15,
1994 shall terminate 18 months after the Closing Date);
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(iv) the indemnification obligation under Section 7.3.8 relating in
any way to claims for payments to the ESOP or the ESOP Trust, or any
participant or beneficiary claiming benefits under the ESOP or the ESOP
Trust, or to the proposed or asserted imposition of any taxes or penalties
asserted by any governmental agency in respect of the ESOP or the ESOP
Trust, shall survive until the 90th day following the close of any
applicable statute of limitations with respect to such claims; and
(v) any Damages of which any RCGI Indemnitee has notified the
Principal Stockholder or the Company, as the case may be, in accordance
with the requirements of Section 7.7 on or prior to the date such
indemnification would otherwise terminate in accordance with this Section
7.4, as to which the obligation of the Principal Stockholder or the
Company, as the case may be, shall continue until the liability of the
Principal Stockholder or the Company, as the case may be, shall have been
determined pursuant to this Article VII, and the Principal Stockholder or
the Company, as the case may be, shall have reimbursed all RCGI Indemnitees
for the full amount of such Damages that are payable in accordance with
this Article VII.
7.5. Limitation on Indemnification Obligations. In the event that the
Principal Stockholder or the Company, as the case may be (the "Defending Party")
is conducting any defense against a Third Party Claim for which an RCGI
Indemnitee has sought indemnification under Section 7.3, expenses incurred by
the Defending Party in connection therewith, including legal costs and expenses,
shall constitute RCGI Indemnitee Damages for purposes of determining the maximum
aggregate amount to be paid by the Defending Party pursuant to Section 7.3.
7.6. RCGI's Indemnification Covenants. RCGI shall indemnify, defend and
hold harmless the Principal Stockholder and his respective Affiliates,
successors and assigns (individually, a "Stockholder Indemnitee" and,
collectively, the "Stockholder Indemnities"), against and from all Damages
sustained or incurred by any Stockholder Indemnitee as a result of or arising
out of or by virtue of:
7.6.1. any inaccuracy in or breach of any representation and warranty made
by RCGI to the Principal Stockholder herein or in any Document delivered to the
Principal Stockholder by RCGI in connection herewith;
7.6.2. any breach by RCGI of, or failure by RCGI to comply with, any of the
covenants or obligations under this Agreement or any Document to be performed by
RCGI, unless the Principal Stockholder had waived or consented to such breach or
failure as of the Closing Date; or
7.6.3. any Environmental Claim solely to the extent that such Environmental
Claim is associated with, arises from or relates to (a) conditions arising on
the Real Estate on or after the Closing Date, (b) the operation of the Company
on or after the Closing Date or (c) the offsite disposal, transportation,
recycling, Release or Threatened Release of any Contaminants as
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a result of the Company's operations on or after the Closing Date, in each case,
including Environmental Claims for a Release or threatened Release of any
Contaminant on, in, at, to, beneath or from the Real Estate on or after the
Closing Date.
7.7. Indemnification Procedures.
7.7.1. An Indemnified Party shall give prompt written notice to the
Indemnifying Party of the assertion of any claim for indemnification (a "Claim
Notice"). Each Claim Notice shall set forth, with reasonable specificity, the
facts and circumstances of any such claim for indemnification or Third Party
Claim and the grounds for which indemnification is sought and shall include in
such Claim Notice (if then known) the amount or the method of computation of the
amount of such claim, and a reference to the provision of this Agreement or any
other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based; provided, however, that a Claim Notice
in respect of any action at law or suit in equity by or against a third Person
as to which indemnification will be sought shall be subject to the provisions of
Sections 7.7.3.
7.7.2. After the giving of any Claim Notice, the amount of indemnification
to which an Indemnified Party shall be entitled under this Article VII shall be
determined: (i) by the written agreement between the Indemnified Party and the
Indemnifying Party; (ii) by a final judgment or decree of any court of competent
jurisdiction; or (iii) by any other means to which the Indemnified Party and the
Indemnifying Party shall agree. The judgment or decree of a court shall be
deemed final when the time for appeal, if any, shall have expired and no appeal
shall have been taken or when all appeals taken shall have been finally
determined. The Indemnified Party shall have the burden of proof in establishing
the amount of Damages suffered by it.
7.7.3. (a) In order for a party to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
Third Party Claim, the Indemnified Party must notify the Indemnifying Party in
writing, and in reasonable detail, of the Third Party Claim within 20 days after
receipt by such Indemnified Party of written notice of the Third Party Claim.
Thereafter, the Indemnified Party shall deliver to the Indemnifying Party,
within 10 business days after the Indemnified Party's receipt thereof, copies of
all notices and documents (including court papers) received by the Indemnifying
Party relating to the Third Party Claim. Notwithstanding the foregoing, should a
party be physically served with a complaint with regard to a Third Party Claim,
the Indemnified Party must notify the Indemnifying Party with a copy of the
complaint within 10 business days after receipt thereof and shall deliver to the
Indemnifying Party within seven business days after the receipt of such
complaint copies of notices and documents (including court papers) received by
the Indemnified Party relating to the Third Party Claim. Failure to notify the
Indemnifying Party shall not relieve the Indemnifying Party of its indemnity
obligation, except to the extent the Indemnifying Party is actually prejudiced
in its defense of the action by such failure. Subject to attorney-client
privilege, the parties hereto agree to cooperate fully with each other in
connection with the defense, negotiation or settlement of any such legal
proceeding, claim or demand. Except as hereinafter provided in this Section 7.7,
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the Indemnified Party shall not, and the Indemnifying Party shall, have the
right using counsel reasonably acceptable to the Indemnified Party to contest,
defend, litigate or settle any such Third Party Claim which involves (and
continues to involve) solely monetary damages; provided that the Indemnifying
Party shall have notified the Indemnified Party in writing of its intention to
do so within 90 days of the Indemnified Party having given notice of the Third
Party Claim to the Indemnifying Party and provided further that (i) the
Indemnifying Party expressly agrees in such notice to the Indemnified Party
that, if the Third Party Claim is adversely determined, the Indemnifying Party
shall have an obligation to indemnify against such Third Party Claim; (ii) the
defense of such Third Party Claim by the Indemnifying Party will not, in the
reasonable opinion of the Indemnified Party, reasonably be likely to have a
Material Adverse Effect; and (iii) the Indemnifying Party shall diligently
address the Third Party Claim (the conditions set forth in clauses (i), (ii) and
(iii) being collectively referred to as the "Litigation Conditions"). The
Indemnified Party shall have the right to participate, and to be represented by
counsel at its own expense, in any such contest, defense, litigation or
settlement conducted by the Indemnifying Party, provided that the Indemnified
Party shall be entitled to reimbursement therefor if the Indemnifying Party
shall lose its right to contest, defend, litigate and settle the Third Party
Claim.
(b) The Indemnifying Party shall not be entitled, or shall lose its
right, to contest, defend, litigate and settle the Third Party Claim if the
Indemnified Party shall give written notice to the Indemnifying Party of any
objection thereto based upon the Litigation Conditions. The Indemnifying Party,
if it shall have assumed the defense of any Third Party Claim as provided in
this Agreement, shall not consent to a settlement of, or the entry of any
judgment arising from, any such Third Party Claim, enter into any compromise or
settlement which commits the Indemnified Party to take, or to forbear to take,
any action or which does not provide for a complete release by such third party
of the Indemnified Party without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld or delayed).
Notwithstanding the foregoing, the Indemnified Party shall have the right to
pay, settle or compromise any such Third Party Claim, provided that, in such
event, the Indemnified Party shall waive any right to indemnity therefor.
(c) If an Indemnified Party is entitled to indemnification against a
Third Party Claim, and the Indemnifying Party fails to accept a tender of, or
assume the defense of, a Third Party Claim pursuant to this Section 7.2, or if,
in accordance with Section 7.2.3(b), the Indemnifying Party shall not be
entitled, or shall lose its right, to contest, defend, litigate and settle such
a Third Party Claim or if such Third Party Claim involves equitable or other
non-monetary relief, the Indemnified Party shall have the right to contest,
defend and litigate such Third Party Claim; provided that the Indemnifying Party
shall have the right to participate in, and to be represented by counsel (at its
own expense) in any such contest, defense, litigation or settlement conducted by
the Indemnified Party. The Indemnified Party, if it shall have assumed the
defense of any Third Party Claim as provided in this Agreement, shall not
consent to a settlement of, or the entry of any judgment arising from, any such
Third Party Claim, enter into any compromise or settlement which commits the
Indemnifying Party to take, or to forbear to take, any action (other
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than the payment of money) without the prior written consent of the Indemnifying
Party (which consent shall not be unreasonably withheld or delayed).
7.7.4. In any case where an Indemnified Party recovers from third Persons
any amount in respect of a matter with respect to which an Indemnifying Party
has indemnified it pursuant to this Article VII, such Indemnified Party shall
promptly pay over to the Indemnifying Party the amount so recovered (after
deducting therefrom the full amount of the expenses incurred by it in procuring
such recovery), but not in excess of the sum of (i) any amount previously so
paid by the Indemnifying Party to or on behalf of the Indemnified Party in
respect of such matter and (ii) any amount expended by the Indemnifying Party in
pursuing or defending any claim arising out of such matter.
7.8. Cooperation on Environmental Claims
7.8.1. RCGI's Rights to Remedial Action. In addition to the provisions of
Section 7.7, if any claim for indemnification is sought against the Principal
Stockholder with respect to any Environmental Claim, the resolution of which
involves or includes Remedial Action at Real Estate owned, leased, or operated
by the Company at the time such Remedial Action is to be conducted, RCGI may, in
its discretion, elect to assume full control over any Remedial Action in
connection with any such claim. Upon such election, RCGI shall: (i) after the
Principal Stockholder gives reasonable notice, permit representatives of the
Principal Stockholder (including the Principal Stockholder's advisors and
consultants) to visit and inspect from time to time any properties to which the
Environmental Claim relates; (ii) after the Principal Stockholder gives
reasonable notice, allow the Principal Stockholder to enter on such properties
from time to time for the purpose of conducting such environmental tests as the
Principal Stockholder may reasonably desire with respect to the Environmental
Claim; all during normal business hours and at the Principal Stockholder's
expense; and (iii) prior to submission to any government agency, provide the
Principal Stockholder with a reasonable opportunity to review and approve, which
approval shall not be unreasonably withheld, all proposals, reports,
submissions, data, correspondence, or other documents. RCGI may, at its
discretion, elect to allow the Principal Stockholder to assume full control over
Remedial Action upon providing written notice to the Principal Stockholder of
such election and upon providing the Principal Stockholder with sufficient
opportunity to assume such control. In the event that RCGI shall refuse to
cooperate as set forth in this Section 7.8.1 and Section 7.8.2 with respect to
the taking of a Remedial Action with respect to an Environmental Claim, the
Principal Stockholder shall have no further liability to RCGI with respect to
the Environmental Claim.
7.8.2. The Principal Stockholder's Rights to Remedial Action. If RCGI
elects to allow the Principal Stockholder to assume full control over Remedial
Actions pursuant to Section 7.8.1, RCGI shall: (i) provide the Principal
Stockholder with access to the Real Estate at all reasonable times to enable the
Principal Stockholder to perform such Remedial Action; provided that unless
required by a final government order, the Principal Stockholder shall not
undertake a Remedial Action or other action in settlement of a claim that would
materially and adversely
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affect RCGI's or the Company's operations at the Real Estate unless consented to
by RCGI; (ii) furnish the Principal Stockholder with such relevant records,
information, reports, studies, data, and cost estimates in RCGI's or the
Company's possession; and (iii) attend such conferences, proceedings, hearings,
trials, or appeals regarding any Remedial Action or any Environmental Claim as
the Principal Stockholder shall reasonably request with sufficient advance
notice. For any Principal Stockholder performed Remedial Actions, the Principal
Stockholder shall: (i) provide RCGI with reasonable advance notice to allow RCGI
to attend any conferences, proceedings, hearings, trials, or appeals regarding
any Remedial Action; and (ii) prior to submission to any government agency,
provide RCGI with a reasonable opportunity to review and approve, which approval
shall not be unreasonably withheld, all proposals, reports, submissions, data,
correspondence, or other documents.
7.8.3. Minimization of Remedial Action Costs and Disruption of Operation.
(a) The Principal Stockholder and RCGI Indemnitees agree to use their
best efforts to minimize costs of Remedial Actions and minimize disruption of
operations with respect to Environmental Claims, and, in deciding among various
alternative courses of remedial action, due consideration shall be given to
minimization of costs and the minimization of interference with the ongoing
operations and to the prompt resolution of the Environmental Claim; provided,
however, that if any Remedial Action subject to indemnification hereunder is
reasonably expected to have a Material Adverse Effect, the Principal Stockholder
shall compensate RCGI and/or the Company therefor. and provided further, that
any amount paid by the Principal Stockholder pursuant to this Section 7.8.3
shall be credited toward the amount payable by the Principal Stockholder
pursuant to Section 7.3.6(b) and shall be subject to the payment limitation of
such section.
(b) RCGI will make available its employees at each site and equipment
and other fixed assets purchased hereunder and located at such site to assist in
the remediation work to the extent such employees and equipment are reasonably
capable of doing such work and permitted to do so under Environmental Law;
provided, however, that no such employee shall be required to assist in the
remediation effort if to do so will materially diminish such employee's
availability to perform and be utilized for such employee's normal job purpose
or would otherwise materially interfere with RCGI's operations.
7.9. Mitigation. Each of the parties agrees to take all reasonable steps
(taking into account the nature of the event or condition, and the other demands
on the time and attention of the officers of each respective party) to mitigate
their respective Damages upon and after becoming aware of any event or condition
which could reasonably be expected to give rise to any Damages that are
indemnifiable hereunder; provided that such mitigation shall not interfere with
or disrupt in any material respect the business or operations of a party.
7.10. Indemnification Exclusive Remedy. Except to the extent remedies
cannot be waived as a matter of law and except for injunctive relief pursuant to
Section 6.2, if the Closing occurs, indemnification pursuant to the provisions
of this Article VII shall be the exclusive remedy of the parties for any
misrepresentation or breach of any representation, warranty, agreement or
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covenant contained herein or in any Ancillary Document (other than the Preferred
Stockholders Agreement, the Securities Holders Agreement, the Registration
Rights Agreement and the Jenkins Employment Agreement) (it being understood
that, without limiting the generality of the foregoing, (a) no action in tort or
strict liability may be maintained by any Indemnified Party, (b) the only action
which may be asserted by any Indemnified Party with respect to any Environmental
Claim shall be a contract action to enforce, or to recover Damages pursuant to,
this Article VII, and (c) each of the Principal Stockholder and RCGI, for itself
and the other RCGI Indemnitees or Stockholder Indemnitees, as the case may be,
hereby waives any and all statutory rights, including rights of contribution or
indemnification that any of them might otherwise be entitled to under any
federal, state or local law (including Environmental Laws (including CERCLA)).
ARTICLE 8
Effect of Termination/Proceeding
8.1. General. The parties shall have the rights and remedies with respect
to the termination and/or enforcement of this Agreement which are set forth in
this Article VIII.
8.2. Right to Terminate. Anything to the contrary herein notwithstanding,
this Agreement and the transactions contemplated hereby may be terminated at any
time prior to the Closing:
8.2.1. by the mutual written consent of RCGI and the Principal Stockholder;
8.2.2. by prompt notice given in accordance with Section 9.3, by either of
such parties if the Closing shall not have occurred at or before 11:59 p.m. on
June 30, 1999 and provided that the right to terminate this Agreement under this
Section 8.2.2 shall not be available to any party whose failure to fulfill any
of its obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur on or prior to the aforesaid date; or
8.2.3. by RCGI or the Principal Stockholder if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued a final and non-appealable order, decree or ruling permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby.
8.3. Certain Effects of Termination. In the event of the termination of
this Agreement by either the Principal Stockholder or RCGI as provided in
Section 8.2:
8.3.1. each party, if so requested by the other party, will return promptly
every document furnished to it by the other party (or any subsidiary, division,
associate or Affiliate of such other party) in connection with the transactions
contemplated hereby, whether so obtained before or after the execution of this
Agreement, and any copies thereof (except for copies of documents publicly
available) which may have been made, and will use reasonable efforts to cause
its representatives and any representatives of financial institutions and
investors and others to
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whom such documents were furnished promptly to return such documents and any
copies thereof any of them may have made; and
This Section 8.3 and Section 8.7 shall survive any termination of this
Agreement.
8.4. Remedies. Notwithstanding any termination right granted in Section
8.2, in the event of the nonfulfillment of any condition to a party's closing
obligations, in the alternative, such party may elect to do one of the
following:
8.4.1. proceed to close despite the nonfulfillment of any closing
condition, it being understood that consummation of the Closing shall be deemed
a waiver of a breach of any representation, warranty, agreement or covenant or
of such party's rights and remedies with respect thereto to the extent that such
party shall have knowledge of such breach and the Closing shall nonetheless
occur;
8.4.2. decline to close, terminate this Agreement as provided in Section
8.2, and thereafter seek damages to the extent permitted in Section 8.5; or
8.4.3. seek specific performance of the obligations of the other party,
each party hereby agreeing that in the event of any breach by such party of this
Agreement, remedies at law for any such breach will be inadequate, and that such
non-breaching party shall be entitled to enforce specifically the terms and
provisions hereof, in addition to any other remedy to which such non-breaching
party may be entitled at law or equity.
8.5. Right to Damages. If this Agreement is terminated pursuant to Section
8.2, neither party hereto shall have any claim against the other except as set
forth in Section 8.4 or, if the circumstances giving rise to such termination
were caused by the other party's willful failure to comply with a material
covenant set forth herein, such termination shall not be deemed or construed as
limiting or denying any legal or equitable right or remedy of said party.
8.6. Non-Solicitation. If this Agreement is terminated, neither RCGI nor
399 Venture nor any of their Affiliates will, for a period of one year
thereafter, without the prior written approval of the Company, directly or
indirectly solicit, induce or attempt to persuade any person who is an employee
of the Company on the date hereof or at any time hereafter that precedes such
termination, to terminate his or her employment with the Company. Each of 399
Venture and RCGI agrees that the Company's remedies at law for any breach or
threat of breach by RCGI or 399 Venture, as the case may be, of the provisions
of this Section 8.6 will be inadequate, and that the Company shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Section 8.6 and to enforce specifically the terms and provisions hereof, in
addition to any other remedy to which the Company may be entitled at law or in
equity. It is the intent and understanding of each party hereto that if, in any
action before any court or agency legally empowered to enforce this Section 8.6,
any term, restriction, covenant or promise in this Section 8.6 is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
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covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court or agency.
8.7. Confidentiality. (a) 399 Venture shall, and shall cause its
representatives and agents to, keep confidential and not disclose to any other
person (other than its legal and financial advisors and accountants) or use for
their own benefit or the benefit of any other person, any information regarding
the business and affairs of the Company. The obligation of 399 Venture and its
representatives and agents under this Section 8.7 shall not apply to information
which: (i) is or becomes generally available to the public without breach of the
commitment provided for in this Section 8.7; (ii) was otherwise available to 399
Venture on a non-confidential basis; or (iii) is required to be disclosed by
law, order or regulation of a court or tribunal or government or disclosures
necessary to implement the provisions of this Agreement or the Ancillary
Documents; provided, however, that, in the case of clause (iii) above, 399
Venture shall provide the Principal Stockholder and the Company as much advance
notice of the possibility of such disclosure as practicable so the Principal
Stockholder and the Company may attempt to stop such disclosure or obtain a
protective order concerning such disclosure. Notwithstanding anything contained
in the foregoing, the parties hereto expressly acknowledge and agree that the
representations, covenants, and other agreements of 399 Venture and Citicorp
Venture Capital, Ltd. contained in this Section 8.7 apply only to 399 Venture
and Citicorp Venture Capital, Ltd. and not to any of its affiliates or
shareholders, including, without limitation, Citibank, N.A., Citicorp or
Citigroup.
ARTICLE 9
Miscellaneous
9.1. Fees. Each party hereto shall bear all fees and expenses incurred by
such party in connection with, relating to or arising out of the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including financial
advisors', attorneys', accountants' and other professional fees and expenses;
provided, however, that Company shall pay such fees and expenses incurred by the
Company prior to the Closing Date.
9.2. Publicity. Except as otherwise required by law or applicable stock
exchange rules, press releases and other publicity concerning this transaction
shall be made only with the prior agreement of the Principal Stockholder, the
Company and RCGI (and in any event, the Principal Stockholder and RCGI shall use
all reasonable efforts to consult and agree with each other with respect to the
content of any such required press release or other publicity); provided,
however, that the foregoing shall not preclude communications or disclosures
necessary to implement the provisions of this Agreement.
9.3. Notices. All notices required or permitted to be given hereunder shall
be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three business days after being deposited in the United
States mail, postage prepaid, registered or certified mail, return receipt
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requested. Notices delivered by hand, by facsimile, or by nationally recognized
private courier shall be deemed given on the first business day following
receipt; provided, however, that a notice delivered by facsimile shall only be
effective if such notice is also delivered by hand, or deposited in the United
States mail, postage prepaid, registered or certified mail, on or before two
business days after its delivery by facsimile. All notices shall be addressed as
follows:
If to the Company or the Principal Stockholder:
Francis P. Jenkins, Jr.
Royster-Clark, Inc.
10 Rockefeller Plaza
Suite 1120
New York, NY 10020
Fax: (212) 332-2999
with a copy to:
Randolph G. Abood
Royster-Clark, Inc.
10 Rockefeller Plaza
Suite 1120
New York, NY 10020
Fax (212) 332-2994
If to RCGI or 399 Venture:
c/o 399 Venture Partners, Ltd
399 Park Avenue, 14th Floor, Zone 4
New York, New York 10043
Attention: Thomas F. McWilliams
Fax: (212) 888-2940
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Craig Godshall, Esq.
Fax: (212) 994-2222
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and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 9.3.
9.4. Entire Agreement; Interpretation. This Agreement and the Ancillary
Documents constitute the entire agreement between the parties and shall be
binding upon and inure to the benefit of the parties hereto and their respective
legal representatives, successors and permitted assigns. Articles, titles and
headings to sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement. The Disclosure Schedules and Exhibits referred to herein shall
be construed with and as an integral part of this Agreement to the same extent
as if they were set forth verbatim herein. Any amendments, or alternative or
supplementary provisions, to this Agreement must be made in writing and duly
executed by an authorized representative or agent of each of the parties hereto.
Neither the specification of any dollar amount in any representation or warranty
contained in this Agreement nor the inclusion of any specific item in the
Disclosure Schedules is intended to imply that such amount, or higher or lower
amounts, or the item so included or other items, are or are not material, and no
party shall use the fact of the setting forth of any such amount or the
inclusion or omission of any such item in any dispute or controversy between the
parties as to whether any obligation, item or matter not described herein or
included in the Disclosure Schedules is or is not material for purposes of this
Agreement. Unless this Agreement specifically provides otherwise, neither the
specification of any item or matter in any representation or warranty contained
in this Agreement nor the inclusion of any specific item in the Disclosure
Schedules is intended to imply that such item or matter, or other items or
matters, are or are not in the ordinary course of business, and no party shall
use the fact of the setting forth or the inclusion of any such item or matter in
any dispute or controversy between the parties as to whether any obligation,
item or matter not described herein or included in the Disclosure Schedules is
or is not in the ordinary course of business for purposes of this Agreement. The
Principal Stockholder may once not later than 20 days after the date hereof (or,
in the event the Closing shall not have occurred prior to the date set forth in
Section 8.2.2, then once per 30 days thereafter) by notice in accordance with
the terms of this Agreement, supplement or amend the Disclosure Schedules, in
order to add information arising from events after the date hereof. No such
supplement or amendment shall be evidence, in and of itself, that the
representations and warranties in the Agreement are no longer true and correct
in accordance with their terms. It is specifically agreed that the Disclosure
Schedules may be so supplemented or amended to add immaterial, as well as
material, items thereto. No such supplemental or amended Disclosure Schedules
shall be deemed to cure any breach for purposes of Section 4.2. If, however, the
Closing occurs, any such supplement or amendment will be effective to cure and
correct for all other purposes any breach of any representation, warranty,
covenant or agreement which would have existed if Seller had not made such
supplement or amendment, and all references to the Disclosure Schedules which
are supplemented or amended as provided in this Section 9.4 shall for all
purposes after the Closing be deemed to be a reference to the Disclosure
Schedules as so supplemented or amended.
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9.5. Non-Waiver. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.
9.6. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed to be an original, and all such counterparts shall
constitute but one instrument.
9.7. Severability. The invalidity of any provision of this Agreement or
portion of a provision shall not affect the validity of any other provision of
this Agreement or the remaining portion of the applicable provision.
9.8. Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and their successors and permitted
assigns. Except as set forth in Section 6.5 or in respect of any RCGI Indemnitee
or Stockholder Indemnitee which is not a party hereto, nothing in this
Agreement, express or implied, shall confer on any person other than the parties
hereto, and their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
including third party beneficiary rights.
9.9. Assignability. This Agreement shall not be assignable by RCGI without
the prior written consent of the Principal Stockholder; provided, however, that
RCGI may assign its rights hereunder to the Company, any Affiliates of RCGI, to
any successor to its business, or as collateral security to any person providing
financing to RCGI to consummate the transactions contemplated hereunder; and
provided further, however, that no such assignment shall relieve RCGI of its
obligations hereunder.
9.10. Governmental Reporting. Anything to the contrary in this Agreement
notwithstanding, nothing in this Agreement shall be construed to mean that a
party hereto or other person must make or file, or cooperate in the making or
filing of, any return or report to any governmental authority in any manner that
such person or such party reasonably believes or reasonably is advised is not in
accordance with law.
9.11. Applicable Law. This Agreement shall be governed and controlled as to
validity, enforcement, interpretation, construction, effect and in all other
respects by the internal laws of the State of New York applicable to contracts
made in that State.
9.12. Waiver of Trial by Jury. Each of the parties hereto waives the right
to a jury trial in connection with any suit, action or proceeding seeking
enforcement of such party's rights under this Agreement.
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9.13. Consent to Jurisdiction. This Agreement has been executed and
delivered in and shall be deemed to have been made in New York, New York. Each
of the Principal Stockholder, 399 Venture, the Company and RCGI agrees to the
exclusive jurisdiction of any state or Federal court within the City of New
York, Borough of Manhattan with respect to any claim or cause of action arising
under or relating to this Agreement, and waives personal service of any and all
process upon it or him, and consents that all services of process be made by
hand, by registered mail or certified mail, return receipt requested, directed
to it or him at its or his address as set forth in Section 9.3, and service so
made shall be deemed to be completed when received. Each of the Principal
Stockholder, 399 Venture, the Company and RCGI waives any objection based on
forum non conveniens and waives any objection to venue of any action instituted
hereunder. Nothing in this paragraph shall affect the right of each of the
Principal Stockholder, 399 Venture, the Company or RCGI to serve legal process
in any other manner permitted by law.
9.14. Amendments. This Agreement shall not be modified or amended except
pursuant to an instrument in writing executed and delivered on behalf of each of
the parties hereto.
9.15. Construction. The titles and headings contained in this Agreement are
for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement. The term "including" means "including, without
limitation".
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IN WITNESS WHEREOF, the parties have executed this Exchange Agreement on
the date first above written.
ROYSTER-CLARK GROUP, INC.
By: /s/ Paul M. Murphy
------------------------------------
Name: Paul M. Murphy
Title: Vice President
399 VENTURE PARTNERS, INC.
By: /s/ Thomas F. McWilliams
------------------------------------
Name: Thomas F. McWilliams
Title:
ROYSTER-CLARK, INC.
By: /s/ Paul M. Murphy
------------------------------------
Name: Paul M. Murphy
Title: Vice President
/s/ Francis P. Jenkins, Jr.
-----------------------------------------
Francis P. Jenkins, Jr.
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Annex A
Redemptions - Shares and Amounts
<PAGE>
Annex B
Exchange - Shares and Amounts
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated April 22, 1999, by
and among Royster-Clark Group, Inc., a Delaware corporation (the "Company"), 399
Venture Partners, Inc., a Delaware corporation ("399 Venture"), the individuals,
including Francis P. Jenkins, Jr. ("Jenkins"), set forth on the signature page
to this Agreement and those persons, who hereafter join in the Stockholders'
Agreement and this Agreement as Management Investors (collectively, the
"Management Investors") and other Persons who may from time to time become
parties to this Agreement.
Background
The Company, 399 Venture, and the Management Investors are parties to, and
this Agreement is made pursuant to, the Stockholders' Agreement. In order to
induce the Investors to enter into the Stockholders' Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement.
Terms
In consideration of the mutual covenants contained herein and intending to
be legally bound hereby, the parties hereto agree as follows:
1. Definitions
As used in this Agreement, the following capitalized terms shall have the
following meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 of the Rules
promulgated under the Exchange Act.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A Common Stock, no par value, of the
Company, and the Class B Common Stock, no par value, of the Company and any
capital stock of the Company issued or issuable with respect to such common
stock by way of or in connection with any stock dividend or distribution payable
thereon or stock split, reverse stock split, recapitalization, reclassification,
reorganization, exchange, subdivision or combination thereof.
"Damages" has the meaning set forth in Section 6(a) of this Agreement.
"Demand Registration" and "Demand Registration Requests" have the meanings
set forth in Section 3(a) of this Agreement.
"Demand Securities" has the meaning set forth in Section 3(c) of this
Agreement.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Incidental Registration" has the meaning set forth in Section 2(a) of this
Agreement.
"Inspector" and "Inspectors" have the meanings set forth in Section 4(i) of
this Agreement.
"Investor" means each Person which is or becomes a party to this Agreement
and the Permitted Transferee of such Person.
"Jenkins Registrable Securities" means (i) any shares of Common Stock
issued or issuable to or otherwise acquired by Jenkins on or after the date
hereof and (ii) any shares of capital stock of the Company issued or issuable
with respect to the securities referred to in clause (i) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes of
this Agreement, a Person will be deemed to be a holder of Jenkins Registrable
Securities whenever such Person has the right to acquire, directly or
indirectly, such Jenkins Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected, provided, however, that each such
share of Common Stock shall cease to be a Jenkins Registrable Security when (i)
it has been effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it; (ii) it is distributed
to the public pursuant to Rule 144 (or any similar provisions then in force)
under the Securities Act; or (iii) it has otherwise been transferred and a new
certificate or other evidence of ownership for it not bearing or requiring a
legend as set forth in Section 4.2 of the Stockholders' Agreement (or other
legend of similar import) and not subject to any stop transfer order has been
delivered by or on behalf of the Company and no other restriction on transfer
exists under the Securities Act.
"Other Registrable Securities" means (i) any shares of Common Stock issued
or issuable to or otherwise acquired by the Management Investors on or after the
date hereof and (ii) any shares of capital stock of the Company issued or
issuable with respect to the securities referred to in clause (i) above by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization,
provided, however, that Incentive Shares (as defined in the Stockholders'
Agreement) of Common Stock issued to Management Investors (and any shares of
capital stock of the Company issued or issuable with respect to such Incentive
Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization) shall be deemed to be Other Registrable Securities only to the
extent that such shares are subject to the Company's Purchase Option (as defined
in the Stockholders' Agreement) at the Adjusted Book Value Price (as defined in
the Stockholders' Agreement). For purposes of this Agreement, a Person will be
deemed to be a holder of Other Registrable Securities whenever such Person has
the right to acquire, directly or indirectly, such Other Registrable Securities
(upon conversion or exercise in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon the exercise of
such right), whether or not such acquisition has actually been effected, but in
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the case of Registrable Securities subject to vesting, only to the extent that
such Person's right to acquire such Registrable Securities has vested and
provided, further, that each Other Registrable Security shall cease to be an
Other Registrable Security when (i) it has been effectively registered under the
Securities Act and disposed of in accordance with the Registration Statement
covering it; (ii) it is distributed to the public pursuant to Rule 144 (or any
similar provisions then in force) under the Securities Act; or (iii) it has
otherwise been transferred and a new certificate or other evidence of ownership
for it not bearing or requiring a legend as set forth in Section 4.2 of the
Stockholders' Agreement (or other legend of similar import) and not subject to
any stop transfer order has been delivered by or on behalf of the Company and no
other restriction on transfer exists under the Securities Act.
"Permitted Transferee" shall mean a Permitted Transferee of a Person as
determined according to the Stockholders' Agreement, provided that such
transferee executes a joinder to this Agreement.
"Person" means an individual, partnership, limited liability company,
corporation, trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Prospectus" means the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement and all other amendments and supplements to such
prospectus, including post-effective amendments, and all material incorporated
by reference in such prospectus.
"Public Offering" means a successfully completed firm-commitment
underwritten public offering (other than a Unit Offering) pursuant to an
effective registration statement under the Securities Act in respect of the
offer and sale of shares of Common Stock for the account of the Company and any
stockholder selling shares of Common Stock resulting in aggregate net proceeds
to the Company in such offering of not less than $20 million.
"Records" has the meaning set forth in Section 4(i) of this Agreement.
"Registrable Securities" means the 399 Venture Registrable Securities, the
Jenkins Registrable Securities, and the Other Registrable Securities.
"Registration Expenses" means the costs and expenses of all registrations
and qualifications under the Securities Act, and of all other actions the
Company is required to take in order to effect the registration of Registrable
Securities under the Securities Act pursuant to this Agreement (including all
federal and state registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, the fees and expenses of the Company's
independent public accountants (including the expenses of any special audit and
"cold comfort" letters required by or incident to such registration)) other than
the costs and expenses of any Investors whose Registrable Securities are to be
registered pursuant to this Agreement comprising underwriters' commissions,
brokerage fees, transfer taxes or the fees and expenses of any accountants or
other representatives retained by any Investor; provided, however, that the
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<PAGE>
Company shall pay the reasonable fees and disbursements of one attorney for all
of the Investor or Investors whose Registrable Securities are to be registered.
"Registration Statement" means any registration statement of the Company
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such registration statement.
"Rule 415" has the meaning set forth in Section 3(a) of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Shelf Registration Statement" has the meaning set forth in Section 4(o) of
this Agreement.
"Special Registration Statement" means (i) a registration statement on
Forms S-8 or S-4 or any similar or successor form or any other registration
statement relating to an exchange offer or an offering of securities solely to
the Company's employees or security holders or (ii) a registration statement
registering a Unit Offering.
"Stockholders' Agreement" means the Securities Purchase and Holders
Agreement dated as of the date hereof by and among the Company, 399 Venture,
Jenkins and the Management Investors and other Persons party thereto from time
to time.
"399 Venture Registrable Securities" means (i) any shares of Common Stock
issued or issuable to or otherwise acquired by 399 Venture on or after the date
hereof and (ii) any shares of capital stock of the Company issued or issuable
with respect to the securities referred to in clause (i) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes of
this Agreement, a Person will be deemed to be a holder of 399 Venture
Registrable Securities whenever such Person has the right to acquire, directly
or indirectly, such 399 Venture Registrable Securities (upon conversion or
exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected, provided, however,
that each such share of Common Stock shall cease to be a 399 Venture Registrable
Security when (i) it has been effectively registered under the Securities Act
and disposed of in accordance with the Registration Statement covering it; (ii)
it is distributed to the public pursuant to Rule 144 (or any similar provisions
then in force) under the Securities Act; or (iii) it has otherwise been
transferred and a new certificate or other evidence of ownership for it not
bearing or requiring a legend as set forth in Section 4.2 of the Stockholders'
Agreement (or other legend of similar import) and not subject to any stop
transfer order has been delivered by or on behalf of the Company and no other
restriction on transfer exists under the Securities Act.
"Unit Offering" means an underwritten public offering of a combination of
debt and equity securities of the Company (or warrants or exchange rights to
purchase equity securities) in which not more than 15% of the gross proceeds
received from the sale of such securities is attributed to such equity
securities.
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"underwritten registration" or "underwritten offering" means a registration
in which securities of the Company are sold to an underwriter for reoffering to
the public.
2. Incidental Registration.
(a) Right to Include Common Stock. If the Company at any time proposes
to register any of its Common Stock under the Securities Act (other than on
a Special Registration Statement), whether or not for sale for its own
account, the Company will give written notice at least 30 days prior to the
anticipated effective date of the registration statement filed or to be
filed in connection with such registration to all holders of Registrable
Securities of its intention to register Common Stock under the Securities
Act and of such holders' rights under this Section 2. Upon the written
request of any such holders of Registrable Securities made within 15 days
of the date of the foregoing notice from the Company (which request shall
specify the aggregate number of such holder's Registrable Securities to be
registered and will also specify the intended method of disposition
thereof), the Company will effect the registration under the Securities Act
of all Registrable Securities which the Company has been so requested to
register by the holders thereof (an "Incidental Registration"), to the
extent required to permit the public disposition (in accordance with such
intended methods thereof) of the Registrable Securities to be so
registered; provided, however, that (i) if, any time after giving written
notice of its intention to register shares of Common Stock and prior to the
effective date of the Registration Statement filed in connection with such
registration, the Company shall determine for any reason not to register
the Common Stock, the Company shall give written notice of such
determination to each holder of Registrable Securities and, thereupon,
shall be relieved of its obligation to register any Registrable Securities
in connection with such registration (but not from its obligation to pay
the Registration Expenses in connection therewith); (ii) if a registration
requested pursuant to this Section 2 shall involve an underwritten public
offering, any holder of Registrable Securities requesting to be included in
such registration may elect, in writing at least 25 days prior to the
effective date of the Registration Statement filed in connection with such
registration, not to register such securities in connection with such
registration; and (iii) if, at any time after the 180-day or shorter period
specified in Section 4(b), the sale of the securities has not been
completed, the Company may withdraw from the registration on a pro rata
basis (based on the number of each holder's Registrable Securities included
in such Registration Statement) the Registrable Securities included in such
Registration Statement and which have not been sold.
(b) Priority in Incidental Registrations. If a registration pursuant
to Section 2(a) involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the total
number of shares of Common Stock to be included in such registration,
including the Registrable Securities requested to be included pursuant to
this Section 2, exceeds the maximum number of shares of Common Stock
specified by the managing underwriter that may be distributed without
adversely affecting the price, timing or distribution of such shares of
Common Stock, then the Company shall include in such registration only such
maximum number of shares of Common Stock which, in the reasonable opinion
of such underwriter or underwriters, can be sold, in the following order of
priority: (i) first, all of the shares of Common Stock that the Company
proposes to sell for its own account, if any, unless such registration is
commenced pursuant to exercise of a valid demand registration then all of
the shares of Common Stock being registered by such holder shall be first
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and the Common Stock being registered by the Company for its own account
shall be second, (ii) next, all of the shares of Common Stock being
registered pursuant to a Demand Registration (as hereinafter defined) or
any other demand registration rights exercised after registration is
commenced, (iii) next, the shares of Common Stock being registered by
holders with registration rights requested to be included in such
Incidental Registration (allocated among such holders on a pro rata basis
based upon their respective percentage of ownership of the total number of
shares of Common Stock then outstanding), and (iv) next, the shares of
Common Stock being registered by holders without registration rights that
are permitted to participate in such Incidental Registration (allocated
among such holders on a pro rata basis based upon their respective
percentage of ownership of the total number of shares of Common Stock then
outstanding). Notwithstanding the foregoing, if an Incidental Registration
is an underwritten offering, the managing underwriter or underwriters may
select shares for inclusion, or exclude shares completely, in such
Incidental Registration on a basis other than a pro rata basis if, in the
reasonable opinion of such underwriter or underwriters, selection on such
other basis, or inclusion of such shares, would be material to the success
of the offering.
(c) Selection of Underwriters. If any Incidental Registration is an
underwritten offering, the investment banker(s) and manager(s) for the
offering will be selected by the Company.
(d) Expenses. The Company will pay all Registration Expenses in
connection with any registration of Registrable Securities requested
pursuant to this Section 2.
(e) Liability for Delay. The Company shall not be held responsible for
any delay in the filing or processing of a Registration Statement which
includes any Registrable Securities due to requests by holders of
Registrable Securities pursuant to this Section 2 nor for any delay in
requesting the effectiveness of such Registration Statement.
(f) Participation in Underwritten Registrations. No holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such holder (i) agrees to sell such holder's Registrable
Securities on the basis provided in any underwriting arrangements approved
by the persons who have selected the underwriter and (ii) accurately
completes in a timely manner and executes all questionnaires, escrow
agreements, powers of attorney, indemnification agreements, underwriting
agreements and other documents customarily required under the terms of such
underwriting arrangements.
3. Demand Registration
(a) Right to Demand Registration. At any time after the date 6 months
after the effective date of the first registration statement under the
Securities Act for a Public Offering and subject to Section 3(c) below, (i)
the holders of a majority of 399 Venture Registrable Securities shall be
entitled to make two written requests (each, a "Demand Registration
Request") and (ii) Jenkins, so long as he holds at least five percent of
the then outstanding Common Stock, shall be entitled to make one Demand
Registration Request to the Company for registration (a "Demand
Registration") with the Commission under and in accordance with the
provisions of the Securities Act (including, but not limited to,
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registrations under Rule 415 promulgated under the Securities Act ("Rule
415")) of all or part of the 399 Venture Registrable Securities or Jenkins
Registrable Securities, as the case may be, owned by any such Investor
(which Demand Registration Request shall specify the intended number of 399
Venture or Jenkins Registrable Securities to be disposed of by such
holders, the anticipated price range for such offering and the intended
method of disposition thereof); provided, however, that (i) the Company
may, if the Board of Directors so determines in the exercise of its
reasonable judgment, that it would be inadvisable to effect such Demand
Registration at such time, defer such Demand Registration for a single
period not to exceed 180 days. Within 10 days after receipt of the Demand
Registration Request, the Company will serve written notice of such Demand
Registration Request to all holders of Registrable Securities and, subject
to paragraph (c) below, the Company will include in such registration all
Registrable Securities of such holders with respect to which the Company
has received written requests for inclusion therein from such holders
within 15 business days after duly given to the applicable holder of the
notice from the Company. All requests made pursuant to this Section 3(a)
will specify the aggregate number of such holder's Registrable Securities
to be registered and will also specify the intended methods of disposition
thereof.
(b) In addition to the registration rights provided in Section 3(a),
upon the written request of the holders of a majority of the 399 Venture
Registrable Securities, at any time and from time to time, the Company
shall be obliged to register under the Securities Act on Form S-3 (if the
Company is then eligible to use such registration form) (each, a "Short
Form Registration"), or any similar or successor short-form registration
adopted by the Commission for which the Company may then be eligible, of
such 399 Venture Registrable Shares, each in accordance with the provisions
of this Agreement. Jenkins shall have the right, so long as he holds at
least five per cent of the then outstanding Common Stock, to request two
Short Form Registrations of the Jenkins Registrable Shares, each in
accordance with the provisions of this Agreement.
(c) Priority in Demand Registrations. The Company will not include in
any Demand Registration any securities (including securities to be sold for
the account of the Company) which are not Registrable Securities without
the prior written consent of holders of at least a majority of the 399
Venture Registrable Securities and Jenkins Registrable Securities
(collectively, the "Demand Securities") included in such registration. If
any of the Registrable Securities proposed to be registered pursuant to a
Demand Registration are to be sold in a firm commitment underwritten
offering and the managing underwriter or underwriters of a Demand
Registration advise the Company and the holders of such Registrable
Securities in writing that in its or their reasonable opinion the number of
shares of Common Stock proposed to be sold in such Demand Registration
exceeds the maximum number of shares specified by the managing underwriter
that may be distributed without adversely affecting the price, timing or
distribution of the Common Stock, the Company shall include in such
registration only such maximum number of securities which, in the
reasonable opinion of such underwriter or underwriters can be sold in the
following order of priority: (i) first, the number of Demand Securities
requested to be included in such registration, (allocated among such
holders on a pro rata basis based upon their respective percentage of
ownership of the total number of shares of Common Stock then outstanding);
(ii) next, the securities the Company has requested to be included in such
registration, if any; (iii) next, the shares of Common Stock being
registered by holders with incidental or "piggyback" registration rights
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requested to be included in such Demand Registration (allocated among such
holders on a pro rata basis based upon their respective percentage of
ownership of the total number of shares of Common Stock then outstanding),
and (iv) next, the shares of Common Stock being registered by holders
without registration rights that are permitted to participate in such
Demand Registration (allocated among such holders on a pro rata basis based
upon their respective percentage of ownership of the total number of shares
of Common Stock then outstanding).
(d) Selection of Underwriters. In the case of a Demand Registration
for an underwritten offering, the holders of a majority of the Demand
Securities to be included in such Demand Registration will have the right
to select the investment banker(s) and manager(s) to administer the
offering, which investment banker(s) and manager(s) will be nationally
recognized, subject to the Company's approval, which will not be
unreasonably withheld.
(e) Expenses. The Company will pay all Registration Expenses in
connection with any registration of Registrable Securities requested
pursuant to this Section 3.
4. Registration Procedures. If and whenever the Company is required to
effect or cause the registration of any Registrable Securities under the
Securities Act as provided in this Agreement, the Company will, as expeditiously
as possible:
(a) prepare and file with the Commission a Registration Statement with
respect to such Registrable Securities, and use its best efforts to cause
such Registration Statement to become effective, provided, however, that
before filing any Registration Statement the Company will furnish to the
counsel selected by the holders of a majority of the Registrable Securities
covered by such Registration Statement copies of all such documents
proposed to be filed;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective for a period of not less than 180 days or such shorter
period which will terminate when all Registrable Securities covered by such
Registration Statement have been sold (but not before the expiration of the
applicable period referred to in Section 4(3) of the Securities Act and
Rule 174 promulgated thereunder, if applicable, and other than as may be
required pursuant to Section 4(o) below) and comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such Registration Statement during such period in accordance
with the intended methods of disposition by the seller or sellers thereof
set forth in such Registration Statement;
(c) furnish to each seller of such Registrable Securities such number
of copies of such Registration Statement and of each such amendment and
supplement thereof (in each case including all exhibits), such number of
copies of the Prospectus included in such Registration Statement (including
each preliminary Prospectus and supplemental Prospectus), in conformity
with the requirements of the Securities Act, and such other documents as
such seller may reasonably request in order to facilitate the disposition
of the Registrable Securities by such seller;
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<PAGE>
(d) use its best efforts to register or qualify such Registrable
Securities covered by such Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as each seller shall
request, and do any and all other acts and things which may be necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller; provided,
however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take
any action which would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject itself to general
taxation in any jurisdiction where it is not then so subject;
(e) immediately notify each seller of any Registrable Securities
covered by such Registration Statement, of the Company becoming aware that
the Prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and (at any time when a Prospectus relating thereto is required to
be delivered under the Securities Act within the appropriate period
mentioned in clause (b) of this Section 4) within ten days of such notice
prepare and furnish to all sellers a reasonable number of copies of an
amended or supplemental Prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be listed on the Nasdaq National
Market of The Nasdaq Stock Market, Inc. ("Nasdaq"), and arrange for at
least two market makers to register as such with respect to the Registrable
Securities with the National Association of Securities Dealers, Inc.
(g) provide an independent transfer agent and registrar for such
Registrable Securities covered by such Registration Statement not later
than the effective date of such Registration Statement;
(h) furnish to each seller of Registrable Securities covered by such
Registration Statement an original, manually signed copy, addressed to such
seller (and the underwriters, if any) of:
(i) an opinion of counsel for the Company, dated the effective
date of such Registration Statement (or, if such registration involves
an underwritten offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance
to the sellers of not less than 50% of the Registrable Securities
included in such Registration Statement (and the managing underwriter,
if any); and
(ii) a "comfort letter," dated the effective date of such
Registration Statement (or, if such registration involves an
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<PAGE>
underwritten offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements included in such
Registration Statement, covering such matters with respect to such
Registration Statement as are customarily covered in accountants'
letters delivered to the underwriters in underwritten offerings of
securities as may reasonably be requested by the sellers of not less
than 50% of the Registrable Securities included in such Registration
Statement (and the managing underwriter, if any);
(i) make available for inspection by any seller of such Registrable
Securities covered by such Registration Statement, by any underwriter
participating in any disposition to be effected pursuant to such
Registration Statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter (any of the foregoing
persons, including such seller, individually an "Inspector" and
collectively the "Inspectors"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company as shall be
reasonably requested by an Inspector (collectively, the "Records"), and
cause all of the Company's officers, directors and employees to supply all
information reasonably requested by any Inspector in connection with such
Registration Statement; provided, however, that any Records that are
designated by the Company in writing as confidential shall be kept
confidential by the Inspectors unless (A) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such
Registration Statement or (B) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or by any regulatory authority having jurisdiction. Each
Investor agrees that non-public information obtained by it as a result of
such Inspections shall be deemed confidential and acknowledges its
obligations under the federal securities laws not to trade any securities
of the Company on the basis of material non-public information;
(j) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities (including, without
limitation, effecting a stock split or combination of shares);
(k) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earning statement covering
the period of at least 12 months beginning with the first day of the
Company's first full calendar quarter after the effective date of the
Registration Statement, which earning statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder;
(l) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of
such registration or comparable statement and to require the insertion
therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included;
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<PAGE>
(m) in the event of the issuance of any stop order suspending the
effectiveness of a Registration Statement, or of any order suspending of
preventing the use of any related Prospectus or suspending the
qualification of any Common Stock included in such Registration Statement
for sale in any jurisdiction, the Company will use its reasonable best
efforts promptly to obtain the withdrawal of such order;
(n) use its best efforts to cause such Registrable Securities covered
by such Registration Statement to be registered or approved by such other
governmental agencies or authorities as may be necessary to enable the
sellers thereof to consummate the disposition of such Registrable
Securities; and
(o) keep effective any Registration Statement effected pursuant to
Rule 415 (a "Shelf Registration Statement") until the earlier of (i) such
date as of which all the Registrable Securities under the Shelf
Registration Statement have been disposed of in the manner described in
such Registration Statement and (ii) two years after the date on which such
Shelf Registration Statement is declared effective.
The Company may require each seller of Registrable Securities as to which
any registration is being effected promptly to furnish to the Company such
information regarding the distribution of such Registrable Securities as may be
legally required. Such information shall be furnished in writing and shall state
that it is being furnished for use in the Registration Statement.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in clause (e) of this Section 4,
such holder will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by clause (e) of this Section 4, and, if so directed by
the Company, such holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such holder's possession,
of the Prospectus covering such Registrable Securities current at the time of
receipt of the Company's notice. In the event the Company shall give any such
notice, the period mentioned in clause (b) of this Section 4 shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to clause (e) of this Section 4 up to and
including the date when each seller of Registrable Securities covered by such
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by clause (e) of this Section 4.
If any Registration Statement or comparable statement contemplated by this
Agreement refers to any holder by name or otherwise as the holder of any
securities of the Company and if, in its sole and exclusive judgment, such
holder is or might be deemed to be a controlling person of the Company, such
holder shall have the right to require (i) the insertion therein of language, in
form and substance satisfactory to such holder and presented to the Company in
writing, to the effect that the holding by such holder of such securities is not
to be construed as a recommendation by such holder of the investment quality of
the Company's securities covered thereby and that such holding does not imply
that such holder will assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such holder by name or
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<PAGE>
otherwise is not required by the Securities Act or any similar federal statute
then in force, the deletion of the reference to such holder, provided, however,
that with respect to this clause (ii) such holder shall furnish to the Company
an opinion of counsel to such effect which opinion and counsel shall be
reasonably satisfactory to the Company.
5. Lapse of Registration Rights. Notwithstanding any other provision of
this Agreement, the rights set forth in Sections 2 and 3 hereof shall not be
available to any Investor owning less than five percent (5%) of the then
outstanding Common Stock.
6. Indemnification.
(a) Indemnification by the Company. The Company hereby agrees to
indemnify and hold harmless each holder of Registrable Securities which
shall have been registered under the Securities Act, and such holder's
officers, directors and agents and each other Person, if any, who controls
such holder within the meaning of the Securities Act and each other Person
(including underwriters) who or which participates in the offering of such
Registrable Securities against any losses, claims, damages, liabilities,
reasonable attorneys' fees, costs or expenses (collectively, the
"Damages"), joint or several, to which such holder or controlling Person or
participating Person may become subject under the Securities Act or
otherwise, insofar as such Damages (or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact made by the Company or its agents contained
in any Registration Statement under which such Registrable Securities are
registered under the Securities Act, in any preliminary Prospectus or final
Prospectus contained therein, or in any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse such holder of
Registrable Securities or such controlling Person or participating Person
in connection with investigating or defending any such Damages or
proceeding; provided, however, that the Company will not be liable in any
such case to the extent that any such Damages arise out of or are based
upon (i) an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, said preliminary or
final Prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such holder
or such controlling or participating Person, as the case may be,
specifically for use in the preparation thereof; or (ii) an untrue
statement or alleged untrue statement, omission or alleged omission in a
Prospectus if such untrue statement or alleged untrue statement, omission
or alleged omission is corrected in an amendment or supplement to the
Prospectus which amendment or supplement is delivered to such holder in a
timely manner and such holder thereafter fails to deliver such Prospectus
as so amended or supplemented prior to or concurrently with the sale of
such Registrable Securities to the Person asserting such Damages.
(b) Indemnification by the Holders of Registrable Securities Which Are
Registered. It shall be a condition of the Company's obligations under this
Agreement to effect any registration under the Securities Act that there
shall have been delivered to the Company an agreement or agreements duly
executed by each holder of Registrable Securities to be so registered,
whereby such holder agrees to indemnify and hold harmless the Company, its
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<PAGE>
directors, officers and agents and each other Person, if any, which
controls the Company within the meaning of the Securities Act against any
Damages, joint or several, to which the Company, or such other Person or
such Person controlling the Company may become subject under the Securities
Act or otherwise, but only to the extent that such Damages (or proceedings
in respect thereof) arise out of or are based upon any untrue statements or
alleged untrue statement of any material fact contained, on the effective
date thereof, in any Registration Statement under which such Registrable
Securities are registered under the Securities Act, in any preliminary
Prospectus or final Prospectus contained therein or in any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, which,
in each such case, has been made in or omitted from such Registration
Statement, said preliminary or final Prospectus or said amendment or
supplement in reliance upon, and in conformity with, written information
furnished to the Company by such holder of Registrable Securities
specifically for use in the preparation thereof. The Company shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to
information furnished in writing by such Persons specifically for inclusion
in any Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder shall (i) give prompt written notice to the
indemnifying party of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section
6; and (ii) unless the indemnified party has been advised by its counsel
that a conflict of interest exists between such indemnified and
indemnifying parties under applicable standards of professional
responsibility, with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably satisfactory to
the indemnified party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent
will not be unreasonably withheld). No indemnifying party will consent to
the entry of any judgment or enter into any settlement (i) that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect of such claim or litigation and (ii) except for judgments or
settlements calling for the payment of money only, without the consent of
the indemnified party (which consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the
defense of the claim, will not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying
party with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnification provided for
in the preceding Sections 6(a) or 6(b) is unavailable to an indemnified
party in respect of any Damages referred to therein, the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as
a result of such Damages in such proportion as is appropriate to reflect
not only the relative benefits received by the indemnified party and the
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<PAGE>
indemnifying party, but also the relative fault of the indemnified party
and the indemnifying party, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied
by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action; provided, however, that in no event shall
the liability of any selling holder of Registrable Securities hereunder be
greater in amount than the difference between the dollar amount of the
proceeds received by such holder upon the sale of the Registrable
Securities giving rise to such contribution obligation and all amounts
previously contributed by such holder with respect to such Damages. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of fraudulent misrepresentation.
(e) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on
behalf of any indemnified party or any officer, director or controlling
Person of such indemnified party and will survive the transfer of
securities. The Company also agrees to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such
party in the event the Company's indemnification is unavailable for any
reason.
7. Hold-Back Agreements
(a) Restrictions on Public Sale by Holder of Registrable Securities.
Each holder of Registrable Securities whose Registrable Securities are
eligible for inclusion in a Registration Statement filed pursuant to
Sections 2 or 3 agrees, if requested by the managing underwriter or
underwriters in an underwritten offering of any Registrable Securities, not
to effect any public sale or distribution of Registrable Securities,
including a sale pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act (except as part of such underwritten
registration), during the 20-day period prior to, and during the 180-day
period (or such shorter period as may be agreed to by such parties)
beginning on the effective date of such Registration Statement, to the
extent timely notified in writing by the Company or the managing
underwriter or underwriters, provided, however, that this provision shall
not apply to employees of 399 Venture.
The foregoing provisions shall not apply to any holder of Registrable
Securities if such holder is prevented by applicable statute or regulation from
entering into any such agreement; provided, however, that any such holder shall
undertake, in its request to participate in any such underwritten offering, not
to effect any public sale or distribution of Registrable Securities (except as
part of such underwritten registration) during such period unless it has
provided 45 days prior written notice of such sale or distribution to the
managing underwriter or underwriter.
(b) No Inconsistent Agreements. The Company will not enter into any
Agreement which is inconsistent with or violate the rights granted to
holders of Registrable Securities in this Agreement.
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<PAGE>
(c) Restrictions on Public Sale by the Company and Others. The Company
shall (i) not effect any public sale or distribution of any of its Common
Stock for its own account during the 20-day period prior to, and during the
180-day period beginning on, the effective date of a Registration Statement
filed pursuant to Sections 2 or 3 (except as part of a Special Registration
Statement), and (ii) use reasonable efforts to cause each holder of Common
Stock purchased from the Company at any time after the date of this
Agreement (other than purchasers in an underwritten offering) to agree not
to effect any public sale or distribution of any such securities during
such period, including a sale pursuant to Rule 144 under the Securities Act
(except as part of such underwritten registration, if permitted).
8. Miscellaneous
(a) Amendment and Modification. This Agreement may be amended or
modified, or any provision hereof may be waived, provided, however, that
such amendment or waiver is set forth in a writing executed by (i) the
Company, (ii) 399 Venture (so long as 399 Venture and its Affiliates own in
the aggregate at least 5% of the outstanding Common Stock on a fully
diluted basis), (iii) Jenkins (so long as he owns at least 5% of the
outstanding Common Stock on a fully diluted basis), (iv) the holders of a
majority of the outstanding Common Stock on a fully diluted basis
(including Shares owned by 399 Venture and its Affiliates) held by the
Investors, and (v) in the case of any amendment which materially and
adversely affects any Investor, such Investor. No course of dealing between
or among any persons having any interest in this Agreement will be deemed
effective to modify, amend or discharge any part of this Agreement or any
rights or obligations of any person under or by reason of this Agreement.
(b) Survival of Representations and Warranties. All representations,
warranties, covenants and agreements set forth in this Agreement will
survive the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, regardless of any investigation
made by an Investor or on its behalf.
(c) Successors and Assigns; Entire Agreement. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns
and executors, administrators and heirs. In addition, whether or not any
express assignment has been made, the provisions of this Agreement which
are for the benefit of purchasers or holders of Registrable Securities are
also for the benefit of, and enforceable by, any subsequent holder of
Registrable Securities. This Agreement sets forth the entire agreement and
understandings among the parties as to the subject matter hereof and merges
and supersedes all prior discussions and understandings of any and every
nature among them.
(d) Separability. In the event that any provision of this Agreement or
the application of any provision hereof is declared to be illegal, invalid
or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent
necessary to delete such illegal, invalid or unenforceable provision unless
that provision held invalid shall substantially impair the benefits of the
remaining portions of this Agreement.
(e) Notices. All notices provided for or permitted hereunder shall be
made in writing by hand delivery, registered or certified first-class mail,
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<PAGE>
telecopier or air courier guaranteeing overnight delivery to the other
party at the following addresses (or at such other address as shall be
given in writing by any party to the others):
If to the Company to:
Royster-Clark Group, Inc.
10 Rockefeller Plaza - 11th Floor
New York, New York 10020
Telecopy number: (212) 332-2999
Attention: Francis P. Jenkins, Jr.
Randolph G. Abood
If to 399 Venture to:
399 Venture Partners, Inc.
399 Park Avenue, 14th Floor
New York, NY 10043
Telecopy number: 212-888-2940
Attention: Thomas F. McWilliams
with a required copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Telecopy number: 215 994-2222
Attention: Craig L. Godshall
If to the Management Investors or any of them, to their addresses as listed
in the books of the Company.
All such notices shall be deemed to have been duly given: when delivered by
hand, if personally delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
(f) Governing Law. The validity, performance, construction and effect
of this Agreement shall be governed by and construed in accordance with the
internal law of Delaware, without giving effect to principles of conflicts
of law.
(g) Waiver of Jury Trial. Each of the parties to this Agreement
waives, to the fullest extent permitted by law, any right to trial by jury
of any claim, demand, action or cause of action (i) arising under this
Agreement or (ii) in any way connected with or related or incidental to the
dealings of the parties hereto in respect of this Agreement or any of the
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<PAGE>
transactions related hereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise. Each of the
parties to this Agreement agrees and consents that any such claim, demand,
action or cause of action shall be decided by court trial without a jury
and that the parties to this Agreement may file an original counterpart of
a copy of this Agreement with any court as written evidence of the consent
of the parties hereto to the waiver of the right to trial by jury.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall
they affect their meaning, construction or effect.
(i) Counterparts. This Agreement may be executed in two or more
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which
taken together shall constitute one and the same instrument.
(j) Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
(k) Termination. This Agreement and the rights and obligations of the
parties hereunder shall terminate upon the later of (i) the date which is
five years following a Public Offering and (ii) April 22, 2009, provided,
however, that the indemnification rights and obligations set forth in
Section 6 hereof shall survive the termination of this Agreement.
(l) Remedies. In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement, it
being agreed by the parties that the remedy at law, including monetary
damages, for breach of such provision will be inadequate compensation for
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived.
(m) Party No Longer Owning Registrable Securities. If a party hereto
ceases to own any Registrable Securities, such party will no longer be
deemed to be an Investor for purposes of this Agreement; provided, however,
that the indemnification rights and obligations set forth in Section 6
hereof shall survive any such cessation of ownership.
(n) Pronouns. Whenever the context may require, any pronouns used
herein shall be deemed also to include the corresponding neuter, masculine
or feminine forms.
(o) No Effect on Employment. Nothing herein contained shall confer on
any Investor the right to remain in the employ of the Company or any of its
subsidiaries or Affiliates.
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IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the day and year first above written.
ROYSTER-CLARK GROUP, INC.
By: /s/ Francis P. Jenkins, Jr.
---------------------------------------
Name: Francis P. Jenkins, Jr.
Title: Chief Executive Officer
399 VENTURE PARTNERS, INC.
By: /s/ Thomas F. McWilliams
---------------------------------------
Name: Thomas F. McWilliams
Title: Vice President
MANAGEMENT INVESTORS:
/s/ Francis P. Jenkins
-----------------------------------
Name: Francis P. Jenkins
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Randolph G. Abood
-----------------------------------
Name: Randolph G. Abood
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
-18-
SECURITIES PURCHASE AND HOLDERS AGREEMENT
dated as of
April 22, 1999
by and among
Royster-Clark Group, Inc.,
399 Venture Partners, Inc.,
and
The Additional Investors Signatory Hereto
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS..................................................... 2
ARTICLE II ISSUANCE OF SHARES TO 399 VENTURE AND CONTINUING MANAGEMENT
INVESTORS; REDEMPTION OF CERTAIN STOCK.............................. 7
2.1. Securities.................................................... 7
2.2. Closing....................................................... 8
2.3. Conditions to 399 Venture's and Management Investor's
Obligations................................................... 8
2.4. Conditions to the Company's Obligations....................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 10
3.1. Representations and Warranties of the Company................. 10
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH INVESTOR..... 11
4.1. Representations, Warranties and Covenants of Each Investor.... 11
4.2. Legends....................................................... 12
4.3. Management Investor Representations and Warranties............ 13
4.4. Representations and Warranties of 399 Venture................. 14
4.5. Restrictions on Transfers of Securities....................... 14
4.6. Certain Sales by Jenkins...................................... 16
4.7. Termination of Restrictions................................... 17
4.8. Notation...................................................... 17
4.9. Limitation on Repurchase of Company Stock..................... 17
4.10. Future Sales.................................................. 17
4.11. Reliance...................................................... 18
ARTICLE V OTHER COVENANTS AND REPRESENTATIONS............................. 18
5.1. Observers' Rights............................................. 18
5.2. Financial Statements and Other Information.................... 19
5.3. Regulatory Compliance Cooperation............................. 19
5.4. Small Business Administration Forms........................... 20
5.5. Economic Impact............................................... 20
5.6. SBA Access.................................................... 20
5.7. Sale of the Company........................................... 20
5.8. Tag-Along Rights.............................................. 21
5.9. Covenant Not To Compete or Solicit............................ 24
5.10. Preemptive Rights............................................. 25
5.11. Right to Join in Purchase..................................... 26
ARTICLE VI CORPORATE ACTIONS.............................................. 27
6.1. Certificate of Incorporation and Bylaws....................... 27
6.2. Directors and Voting Agreements............................... 27
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6.3. Right to Remove Designated Directors.......................... 28
6.4. Right to Fill Certain Vacancies in Company's Board............ 28
6.5. Rights upon Disability or Death of Jenkins.................... 29
6.5. Committee Members; Directors of Company Subsidiaries.......... 29
6.6. Amendment of Certificate and Bylaws........................... 29
6.7. Termination of Designation Rights............................. 29
6.8. Future Sales of Securities.................................... 30
ARTICLE VII ADDITIONAL RESTRICTIONS ON TRANSFERS OF SECURITIES HELD BY
MANAGEMENT INVESTORS................................................ 30
7.1. Restrictions on Transfer...................................... 30
7.2. Purchase Option............................................... 31
7.3. Company's Right of First Refusal.............................. 33
7.4. Involuntary Transfers......................................... 34
7.5. Lapse......................................................... 34
ARTICLE VIII REGISTRATION RIGHTS; PREFERRED STOCKHOLDERS AGREEMENT;
INDEMNIFICATION..................................................... 35
8.1. Registration Rights........................................... 35
8.2. Preferred Stockholders Agreement.............................. 35
8.3. Indemnification for Certain Liabilities....................... 35
ARTICLE IX MISCELLANEOUS.................................................. 36
9.1. Purchaser Representative...................................... 36
9.2. Section 83(b) Elections....................................... 36
9.3. Amendment and Modification.................................... 36
9.4. Waiver of Fiduciary Duties and Corporate Opportunity;
Acknowledgment................................................ 37
9.4. Survival...................................................... 37
9.5. Successors and Assigns; Entire Agreement...................... 37
9.6. Separability.................................................. 37
9.7. Notices....................................................... 38
9.8. Governing Law................................................. 39
9.9. Waiver of Jury Trial.......................................... 39
9.10. Acknowledgment Of Management Investors........................ 39
9.11. No Effect on Employment....................................... 40
9.12. Headings...................................................... 40
9.13. Counterparts.................................................. 40
9.14. Further Assurances............................................ 40
9.15. Termination................................................... 40
9.16. Remedies...................................................... 40
9.17. Party No Longer Owning Securities............................. 40
9.18. Pronouns...................................................... 40
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SECURITIES PURCHASE AND HOLDERS AGREEMENT
SECURITIES PURCHASE AND HOLDERS AGREEMENT, dated as of April 22, 1999 (the
"Agreement"), by and among Royster-Clark Group, Inc., a Delaware corporation
(the "Company"), 399 Venture Partners, Inc., a Delaware corporation ("399
Venture"), the individuals, including Francis P. Jenkins, Jr. ("Jenkins"),
signatory hereto who are designated on Schedule 1-A(A) hereto as Continuing
Management Investors (the "Continuing Management Investors"), and the
individuals, designated on Schedule 1-B hereto as Purchasing Management
Investors who are signatory to this Agreement or who following the date hereof
execute a joinder to this Agreement (the "Purchasing Management Investors"). The
Purchasing Management Investors and Continuing Management Investors are
sometimes referred to hereinafter individually as a "Management Investor" and
collectively as the "Management Investors." 399 Venture and the Management
Investors and each other person who becomes a party to this Agreement by
executing a joinder hereto are sometimes referred to hereinafter individually as
an "Investor" and collectively as the "Investors."
Background
A. The Company, 399 Venture, and Jenkins are the parties to an Exchange
Agreement dated as of April 22, 1999 (the "Exchange Agreement"). At the closing
of the several transactions contemplated by the Exchange Agreement and this
Agreement (the "Exchange Closing"), certain of the outstanding stock of
Royster-Clark, Inc. a Delaware corporation ("Royster-Clark"), owned by Jenkins
and his Affiliates will have been redeemed by Royster-Clark for cash and the
balance of such shares will have been acquired by the Company in exchange for a
combination of Shares (as hereinafter defined). In addition, the Continuing
Management Investors shall have submitted to the Company for redemption the
number and kinds of securities set forth on Schedule 1-A(B) in return for the
respective amounts set forth opposite such Continuing Management Investor's name
on Schedule 1-A(B).
B. As of the Exchange Closing, the authorized capital stock of the Company
will consist of shares of (i) Class A Common Stock, par value $.01 per share
("Class A Common Stock"), (ii) Class B Common Stock, par value $.01 per share
("Class B Common Stock" and, collectively with the Class A Common Stock, the
"Common Stock"), (iii) 12% Series A Senior Cumulative Compounding Preferred
Stock, par value $.01 per share ("Series A Preferred Stock"), and (iv) Series B
Junior Preferred Stock, par value $.01 per share ("Series B Preferred Stock",
collectively with the Series A Preferred Stock, the "Preferred Stock"). The
Common Stock and Preferred Stock are sometimes referred to hereinafter
individually and collectively as the "Shares."
C. Pursuant to this Agreement each Continuing Management Investor will
exchange the securities of Royster-Clark held by such Continuing Management
Investor set forth opposite such Continuing Management Investor's name on
Schedule 1-A(A) and described as Rollover Securities in exchange for the number
and kind of Shares set forth opposite such Continuing Management Investor's name
on Schedule 1-A(A) and described as Exchanged Shares.
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D. On the date hereof, the Company has adopted the 1999 Restricted Stock
Purchase Plan, the form of which is attached hereto as Exhibit A (the
"Restricted Stock Plan"). On the date hereof, certain Continuing Management
Investors are exchanging the options set forth opposite their respective names
on Schedule 1-C hereto (collectively, the "Rollover Options") for the number of
options to purchase the number and kinds of securities of RCGI as are set forth
on Schedule 1-C hereto and designated as "Exchanged Options" (the "Exchanged
Options"). In addition, following the date hereof and from time to time, each of
the Purchasing Management Investors will purchase from the Company Class A
Common Stock pursuant to the Restricted Stock Plan (such Shares being the
"Incentive Shares") in the amounts set forth opposite such Purchasing Management
Investor's name on Schedule 1-B, to be appended hereto at the time of such
purchase and thereafter amended from time to time to reflect additional
Purchasing Management Investors. No Purchasing Management Investor shall
purchase Incentive Shares unless such Purchasing Management Investor is or
becomes a party to this Agreement.
E. As used herein, the term "Securities" shall mean (i) the shares of
Common Stock (including any Incentive Shares) held by any party hereto, (ii) all
other securities of the Company (or a successor to the Company) received on
account of ownership of Common Stock, including all securities issued in
connection with any merger, consolidation, stock dividend, stock distribution,
stock split, reverse stock split, stock combination, recapitalization,
reclassification, subdivision, conversion or similar transaction in respect
thereof and (iii) all other equity securities (other than Preferred Stock) of
the Company or a successor to the Company owned at any time hereafter by such
party, whether acquired from the Company, an Investor or otherwise.
F. The Investors and the Company wish to set forth certain agreements
regarding their future relationships and their rights and obligations with
respect to the Securities.
Terms
In consideration of the mutual covenants contained herein and intending to
be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Adjusted Book Value Price" has the meaning set forth in Section
7.2(a)(ii)(C)(2) of this Agreement.
"Adjusted Book Value Price Percentage" has the meaning set forth in Section
7.3(a)(iii) of this Agreement.
"Adjusted Cost Price" has the meaning set forth in Section 7.2(a)(ii)(B)(1)
of this Agreement.
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"Affiliate" has the meaning set forth in Rule 12b-2 of the Rules
promulgated under the Exchange Act.
"Agreement" has the meaning set forth in the Preamble of this Agreement.
"Approved Sale" has the meaning set forth in Section 5.7(b) of this
Agreement.
"Assurance of Compliance" has the meaning set forth in Section 5.4 of this
Agreement.
"Called Shares" has the meaning set forth in Section 7.2(a)(iii) of this
Agreement.
"Cash Redemption Amount" has the meaning set forth in Section 2.1 of this
Agreement.
"Cause," when used in connection with the termination of a Management
Investor's employment with the Company or any of its Subsidiaries, means such
Management Investor's (A) willful and continued failure to perform such
Management Investor's duties, after written notice of such failure, which
failure has not been corrected within the 30-day period after written notice has
been given; (B) the willful commission by such Management Investor of acts that
are dishonest and demonstrably and materially injurious to the Company or any of
its Subsidiaries, monetarily or otherwise; (C) conviction of a felony; (D)
failure to perform such Management Investor's duties at a satisfactory level as
determined by a majority of the members of the Board of Directors in good faith,
which failure has not been corrected within the 90-day period after written
notice has been given; or (E) material breach of any of the covenants of this
Agreement.
"Class A Common Stock" has the meaning set forth in Background Section B of
this Agreement.
"Class B Common Stock" has the meaning set forth in Background Section B of
this Agreement.
"Closing" has the meaning set forth in Section 2.2 of this Agreement.
"Combination Offering" has the meaning set forth in Section 5.10(d) of this
Agreement.
"Common Stock" has the meaning set forth in Background Section B of this
Agreement.
"Company" means Royster-Clark Group, Inc., a Delaware corporation, except
that when used in Article VII, "Company" means the Company and all other
entities of which the Company from time to time owns, directly or indirectly,
50% or more of the stock or assets.
"Continuing Management Investors" has the meaning set forth in the Preamble
of this Agreement.
"399 Venture" has the meaning set forth in the Preamble of this Agreement.
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"399 Venture Co-Investor" has the meaning set forth in Section 4.5(d)(iv)
of this Agreement.
"399 Venture Designees" has the meaning set forth in Section 6.2(a)(ii).
"399 Venture Securities" has the meaning set forth in Section 2.1(c) of
this Agreement.
"ESOP" has the meaning assigned to such term in Section 8.3 of this
Agreement.
"Escrow Amount" has the meaning set forth in Section 5.6(d)(i) of this
Agreement.
"Escrow Notice" has the meaning set forth in Section 5.6(d)(ii) of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agreement" has the meaning set forth in Background Section A of
this Agreement.
"Exchanged Shares" has the meaning set forth in Section 2.1 of this
Agreement.
"Good Reason" means the failure of the Company or Royster-Clark to pay a
Management Investor the compensation provided by the Company on the date hereof
or, in the case of Jenkins, pursuant to his employment agreement with the
Company and Royster-Clark, as it may be amended from time to time.
"Incentive Shares" means the shares of Common Stock owned by each
Purchasing Management Investor designated as Incentive Shares on Schedule 1-B to
be appended hereto, as it may be amended from time to time, and all other
securities of the Company (or a successor to the Company) (i) received on
account of ownership of such shares, including any and all incentive securities
issued in connection with any merger, consolidation, stock dividend, stock
distribution, stock split, reverse stock split, stock combination,
recapitalization, reclassification, subdivision, conversion or similar
transaction in respect thereof or (ii) acquired pursuant to the Restricted Stock
Plan; provided that in no event shall Incentive Shares include any Securities
issuable upon the exercise of an Exchanged Option.
"Investor" and "Investors" have the meanings set forth in the Preamble of
this Agreement.
"Jenkins" has the meaning set forth in the Preamble of this Agreement.
"Jenkins Designees" has the meaning set forth in Section 6.2(a)(i).
"Management Investor" and "Management Investors" have the meanings set
forth in the Preamble of this Agreement.
"Observers" has the meaning set forth in Section 5.1 of this Agreement.
"Offer Notice" has the meaning set forth in Section 4.6 of this Agreement.
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"Offered Securities" has the meaning set forth in Section 4.6 of this
Agreement.
"Option Purchase Price" has the meaning set forth in Section 7.2(a)(ii)(A)
of this Agreement.
"Permitted Transferee" has the meaning set forth in Section 4.5(d) of this
Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, firm, association, joint venture, joint stock company, trust or
other entity, or any government or regulatory administrative or political
subdivision or agency, department or instrumentality thereof.
"Preferred Stock" has the meaning set forth in Background Section B of this
Agreement.
"Preferred Stockholders Agreement" has the meaning set forth in Section 8.2
of this Agreement.
"Public Offering" means a successfully completed firm-commitment
underwritten public offering (other than a Unit Offering, as hereinafter
defined) pursuant to an effective registration statement under the Securities
Act in respect of the offer and sale of shares of Common Stock for the account
of the Company and any stockholder selling shares of Common Stock resulting in
aggregate net proceeds to the Company in such offering of not less than $20
million.
"Purchase Number" has the meaning set forth in Section 7.2(a)(ii) of this
Agreement.
"Purchase Option" has the meaning set forth in Section 7.2(a) of this
Agreement.
"Purchasing Management Investors" has the meaning set forth in the Preamble
of this Agreement.
"Redemption Shares" has the meaning set forth in Section 2.1 of this
Agreement.
"Registration Rights Agreement" has the meaning set forth in Article VIII
of this Agreement.
"Regulatory Problem" has the meaning set forth in Section 5.3 of this
Agreement.
"Regulatory Sale" has the meaning set forth in Section 5.8(f) of this
Agreement.
"Restricted Investor" has the meaning set forth in Section 4.5 of this
Agreement.
"Restricted Stock Plan" has the meaning set forth in Background Section D
of this Agreement.
"Reverse Stock Split" has the meaning assigned to such term in Section 8.3
of this Agreement.
"Rights Holder" has the meaning set forth in Section 5.10 of this
Agreement.
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"Rollover Securities" has the meaning set forth in Background Section C of
this Agreement.
"Royster-Clark" has the meaning set forth in set forth in Background
Section A of this Agreement.
"Royster-Clark Shares" means the shares of common stock, par value $.01 per
share, of Royster-Clark outstanding as of the Closing and all such shares
issuable upon the exercise of options outstanding on the Closing Date.
"Sale Notice" has the meaning set forth in Section 7.3 of this Agreement.
"SBA" has the meaning set forth in Section 3.1(g) of this Agreement.
"SEC" has the meaning set forth in Section 3.1(h) of this Agreement.
"Securities" has the meaning set forth in Background Section E of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" has the meaning set forth in Background Section
B of this Agreement.
"Series B Preferred Stock" has the meaning set forth in Background Section
B of this Agreement.
"Shares" has the meaning set forth in Background Section B of this
Agreement.
"Size Status Declaration" has the meaning set forth in Section 5.4 of this
Agreement.
"Subordinated Note" has the meaning set forth in Section 4.10(b) of this
Agreement.
"Subsequent Offering" has the meaning set forth in Section 7.2(a)(iii)(A)
of this Agreement.
"Subsidiary" means, as to any Person, any corporation or other entity more
than 50% of whose stock of any class or classes or other rights having by the
terms thereof ordinary voting power to elect a majority of the directors (or
persons exercising similar functions) of such corporation or other entity
(irrespective of whether or not at the time stock of any class or classes of
such corporation or other entity shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person and/or
one or more Subsidiaries of such Person.
"Tag-Along Acceptance Notice" has the meaning set forth in Section 5.8(b)
of this Agreement.
"Tag-Along Right" has the meaning set forth in Section 5.8 (a) of this
Agreement.
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"Tag-Along Rights Holders" has the meaning set forth in Section 5.8(a) of
this Agreement.
"Tag-Along Sale Notice" has the meaning set forth in Section 5.8(b) of this
Agreement.
"Tag-Along Seller" has the meaning set forth in Section 5.8(b) of this
Agreement.
"Termination Date" has the meaning set forth in Section 7.2(a) of this
Agreement.
"Transfer" has the meaning set forth in Section 4.5(b) of this Agreement.
"Transfer Date" has the meaning set forth in Section 7.4 of this Agreement.
"Transfer Notice" has the meaning set forth in Section 4.6 of this
Agreement.
"Unit Offering" means an underwritten public offering of a combination of
debt securities and equity securities of the Company (or warrants or exchange
rights to purchase equity securities) in which not more than 15% of the gross
proceeds received for the sale of such securities is attributed to such equity
securities.
"83(b) Election" has the meaning set forth in Section 9.2 of this
Agreement.
ARTICLE II
ISSUANCE OF SHARES TO 399 VENTURE AND CONTINUING MANAGEMENT INVESTORS;
REDEMPTION OF CERTAIN STOCK
2.1. Exchange and Redemption of Royster-Clark Securities. (a) At the
Closing, each Continuing Management Investor (other than Jenkins and his Family
Members) shall exchange the Royster-Clark Shares set forth opposite such
Person's name on Schedule 1-A(A) and described as Rollover Securities (the
"Rollover Securities") for the number of shares of Class A Common Stock and of
Series A and Series B Preferred Stock set forth opposite such Continuing
Management Investor's name on Schedule 1-A(A) (collectively, the "Exchanged
Shares").
(b) At the Closing, each Continuing Management Investor (other than
Jenkins) shall submit for redemption to Royster-Clark the number and kind
of securities set forth opposite such Person's name on Schedule 1-A(B) (the
"Redemption Shares") and shall receive an amount in cash as specified on
Schedule 1-A(B) (the "Cash Redemption Amounts").
(c) At the Closing, 399 Venture shall purchase from the Company,
400,000 shares of Class A Common Stock, 1,191,600 shares of Class B Common
Stock, and 474,504 shares of Series A Preferred Stock (collectively, the
"399 Venture Securities"). The purchase price for the Securities purchased
pursuant to this Section 2.1(b) shall be $1.00 per share of Common Stock
and $100 per share of Preferred Stock.
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2.2. Closing. The closing of the transfer of the Shares purchased by 399
Venture and exchanged by the Continuing Investors hereunder (the "Closing") will
take place at the same location and on the same date as the Exchange Closing. At
the Closing, (a) the Company shall deliver to 399 Venture certificates
evidencing the number of shares of Securities to be purchased by 399 Venture
against payment of the purchase price of $26,771,525 by wire transfer of
immediately available funds or by certified check, (b) Royster-Clark shall
deliver to the Continuing Management Investors the Cash Redemption Amounts and
the Continuing Management Investors shall deliver to Royster-Clark certificates
evidencing such redeemed shares, in appropriate form for cancellation by
Royster-Clark, and (c) the Company shall deliver to the Continuing Management
Investors the certificates evidencing the Exchanged Shares, and the Continuing
Management Investors shall deliver to the Company certificates evidencing such
Investor's Rollover Securities, duly executed for transfer in blank or
accompanied by Stock Powers duly executed in blank. The Cash Redemption Amounts
shall be delivered by wire transfer of immediately available funds or by
certified or cashier's check.
2.3. Conditions to 399 Venture's and Management Investor's Obligations. The
obligation of 399 Venture to purchase and pay for the 399 Venture Securities and
of each Management Investor to exchange his Rollover Securities for the
Exchanged Shares at the Closing is subject to the satisfaction on or prior to
the Closing of the following conditions:
(a) The representations and warranties of the Company set forth in
Article III shall be true and correct in all material respects on and as of
the Closing as though then made, and all covenants of the Company required
to be performed on or prior to the Closing shall have been performed in all
material respects.
(b) The Company's Certificate of Incorporation and Bylaws shall be
substantially in the forms of Exhibits B and C, respectively.
(c) The Company shall have delivered to each of 399 Venture and the
Continuing Management Investors certificates for the Exchanged Shares
issued pursuant to Section 2.2 and Royster-Clark shall have delivered the
Cash Redemption Amounts to the Continuing Management Investors.
(d) No preliminary or permanent injunction or order, decree or ruling
of any nature issued by any court or governmental agency of competent
jurisdiction, nor any statute, rule, regulation or executive order
promulgated or enacted by any federal, state or local governmental
authority, shall be in effect, that would prevent the consummation of the
transactions contemplated by this Agreement or the Exchange Agreement.
(e) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not violate the Company's
Certificate of Incorporation or Bylaws, any applicable laws or orders,
regulations, rules or requirements of a court, public body or authority by
which the Company is bound.
(f) All corporate and other proceedings, if any, taken or to be taken
by the Company in connection with the transactions contemplated hereby to
be consummated at the Closing and all documents incident thereto shall be
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reasonably satisfactory in form and substance to 399 Venture and the
Continuing Management Investors and 399 Venture and the Continuing
Management Investors shall have received from the Company all such
counterpart originals or certified or other copies of such documents as
they may reasonably request.
(g) All conditions to the closing under the Stock Purchase Agreement
dated as of January 21, 1999 among IMC Global Inc., a Delaware corporation,
The Vigoro Corporation, a Delaware corporation, and the Company, as amended
on April 13, 1999, shall have been satisfied or waived.
2.4. Conditions to the Company's Obligations. The obligations of the
Company to issue the 399 Venture Securities to 399 Venture and the Exchanged
Shares to each Continuing Management Investor as set forth herein at the Closing
are subject to the satisfaction on or prior to the Closing of the following
conditions:
(a) The representations and warranties of 399 Venture and each
Continuing Management Investor set forth in Article IV shall be true and
correct in all material respects at and as of the Closing as though then
made, and all covenants of each Investor required to be performed at or
prior to the Closing shall have been performed in all material respects.
(b) No preliminary or permanent injunction or order, decree or ruling
of any nature issued by any court or governmental agency of competent
jurisdiction, nor any statute, rule, regulation or executive order
promulgated or enacted by any federal, state or local governmental
authority, shall be in effect, that would prevent the consummation of the
transactions contemplated by this Agreement or the Exchange Agreement.
(c) All corporate and other proceedings, if any, taken or to be taken
by 399 Venture and the Continuing Management Investors in connection with
the transactions contemplated hereby to be consummated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Company, and the Company shall have received from 399
Venture and each Continuing Management Investor all such counterpart
originals or certified or other copies of such documents as it may
reasonably request.
(d) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not violate any applicable
laws or orders, regulations, rules or requirements of a court, public body
or authority by which 399 Venture or any Continuing Management Investor is
bound.
(e) 399 Venture shall have paid or shall pay concurrently the purchase
price required of it pursuant to this Article II, and 399 Venture shall
have purchased or shall simultaneously purchase the 399 Venture Securities
pursuant to this Article II and each Continuing Management Investor shall
have delivered or shall deliver simultaneously the certificates
representing such Management Investor's Rollover Securities in the form
required by Section 2.2.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. Representations and Warranties of the Company. The Company represents
and warrants to each of the Investors as follows:
(a) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware.
(b) The Company has full corporate power and corporate authority to
make, execute, deliver and perform this Agreement and to carry out all of
the transactions provided for herein.
(c) The Company has taken such corporate action as is necessary or
appropriate to enable it to perform its obligations hereunder, and this
Agreement constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with the terms
hereof.
(d) The Shares, when issued in accordance with the terms of this
Agreement and the Exchange Agreement, will be validly issued, fully paid
and non-assessable.
(e) Upon consummation of the Closing, the authorized capital stock of
the Company will consist of (i) 2,200,000 shares of Class A Common Stock,
of which 768,426 will be issued and outstanding, (ii) 2,000,000 shares of
Class B Common Stock, of which 1,191,600 will be issued and outstanding,
(iii) 675,000 shares of Series A Preferred Stock, of which 607,140 will be
issued and outstanding, and (iv) 100,000 shares of Series B Preferred
Stock, of which 74,874 will be issued and outstanding. Except as set forth
in Section 3.1(f) and as otherwise set forth herein, as of the Closing
there will be no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase from the Company,
or otherwise require the Company to issue, any shares of capital stock of
the Company or securities or obligations of any kind convertible into or
exchangeable for any shares of capital stock of the Company; the Company
will not be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock;
and the Shares will constitute all of the outstanding shares of the
Company's capital stock.
(f) The Company has reserved for issuance pursuant to the Restricted
Stock Plan 239,980 shares of Class A Common Stock, 14,795 shares of Series
A Preferred Stock and 8,320 shares of Series B Preferred Stock. Any current
or future employee purchasing Class A Common Stock pursuant to the
Restricted Stock Plan who is not a party to this Agreement shall be
required, as a condition of such purchase, to execute an agreement pursuant
to which such employee agrees to be bound by the terms and provisions of
this Agreement applicable to such employee, and any shares purchased
pursuant to the Restricted Stock Plan shall be deemed to be Incentive
Shares hereunder.
(g) The Company is a "small business concern," as that term is defined
in the Small Business Investment Act of 1958, as amended, and in the
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regulations of the Small Business Administration ("SBA") promulgated
thereunder. The information set forth in the SBA Forms 480, 652 and Part A
of Form 1031 regarding the Company and its Affiliates, when delivered to
the Investors, will be accurate and complete.
(h) Neither the Company nor any person acting on its behalf has
offered to sell or sold any of the shares by any form of general
solicitation such as would violate Rule 502(c) promulgated by the
Securities and Exchange Commission (the "SEC") under the Securities Act.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF EACH INVESTOR
4.1. Representations, Warranties and Covenants of Each Investor. Each of
the Investors severally represents and warrants to, and covenants and agrees
with, the Company that:
(a) Such Investor has full legal right, power and authority (including
the due authorization by all necessary corporate action in the case of
corporate Investors) to enter into this Agreement and to perform such
Investor's obligations hereunder without the need for the consent of any
other Person; and this Agreement has been duly authorized, executed and
delivered and constitutes the legal, valid and binding obligation of such
Investor enforceable against such Investor in accordance with the terms
hereof.
(b) The Securities are being received by such Investor for investment
for his or its own account and not with a view to any distribution thereof
that would violate the Securities Act, or the applicable securities laws of
any state; and such Investor will not distribute the Securities in
violation of the Securities Act or the applicable securities laws of any
state.
(c) Such Investor understands that the Securities have not been
registered under the Securities Act or the securities laws of any state and
may not be reoffered or sold unless subsequently registered under the
Securities Act and any applicable state securities laws or unless an
exemption from such registration becomes or is available.
(d) Such Investor is financially able to hold the Securities for
long-term investment, believes that the nature and amount of the Securities
being purchased are consistent with such Investor's overall investment
program and financial position, and recognizes that there are substantial
risks involved in the purchase of the Securities.
(e) Such Investor confirms that (i) such Investor is familiar with the
business of the Company, (ii) such Investor has had the opportunity to ask
questions of officers and directors of the Company and to obtain (and that
such Investor has received to such Investor's satisfaction) such
information about the business and financial condition of the Company as
such Investor has reasonably requested, and (iii) such Investor, is an
"accredited investor" within the meaning of Rule 501(a) promulgated under
the Securities Act.
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4.2. Legends. (a) All certificates representing Securities shall bear the
following legends in addition to any other legend required under applicable law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS A REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH SHARES IS
EFFECTIVE OR UNLESS THE COMPANY IS IN RECEIPT OF AN OPINION OF
COUNSEL SATISFACTORY TO IT TO THE EFFECT THAT SUCH SHARES MAY BE
SOLD WITHOUT REGISTRATION UNDER THE ACT AND SUCH LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
THE TERMS AND CONDITIONS OF A SECURITIES PURCHASE AND HOLDERS
AGREEMENT BY AND AMONG THE COMPANY AND THE HOLDERS SPECIFIED
THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY. THE SALE, TRANSFER OR OTHER DISPOSITION OF
THE SECURITIES IS SUBJECT TO THE TERMS OF SUCH AGREEMENT AND THE
SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH.
(b) In addition to the legends required by Section 4.2(a) above, the
following legend shall appear on certificates representing Incentive
Shares, provided, that the Company's failure to cause certificates
representing Incentive Shares to bear such legend shall not affect the
Company's Purchase Option described in Section 7.2 herein:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT FOR A
PERIOD OF TIME TO A PURCHASE OPTION OF THE COMPANY APPLICABLE TO
"INCENTIVE SHARES" AS DESCRIBED IN THE SECURITIES PURCHASE AND HOLDERS
AGREEMENT BY AND AMONG THE COMPANY AND THE HOLDERS SPECIFIED THEREIN, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
4.3. Management Investor Representations and Warranties. Each Management
Investor severally represents and warrants to the Company that:
(a) such Management Investor's residence, business address, business
and residence telephone numbers and social security number are as set forth
below such Management Investor's signature to this Agreement; and
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(b) in formulating the decision to (i) exchange such Management
Investor's Rollover Securities for the Exchanged Shares, (ii) submit the
Redemption Shares set forth opposite such Management Investor's name on
Schedule 1-A(B) for the Cash Redemption Amounts specified thereon, and
(iii) enter into this Agreement, such Management Investor has relied solely
upon the independent investigation of the Company's business and upon
consultations with such Management Investor's legal and financial advisers
with respect to this Agreement and the nature of such Management Investor's
investment; and that in entering into this Agreement no reliance was placed
upon any representations or warranties other than those contained in this
Agreement. Each Management Investor acknowledges having received and read
the Confidential Offering Memorandum of RCGI dated April 16, 1999 relating
to its $200,000,000 10.25% First Mortgage Notes due 2009.
(c) The Management Investor has good and valid title to the Rollover
Securities being exchanged by such Management Investor and Redemption
Shares being submitted for redemption by such Management Investor, free and
clear of all liens, claims, mortgages, securities interests, options,
charges, restrictions (including, without limitation, rights of first
refusal and similar rights) and other encumbrances (collectively,
"Encumbrances") of any kind. The certificates representing the Rollover
Securities are duly endorsed in blank or accompanied by stock powers duly
endorsed in blank in proper form for transfer, passing good and valid title
to the Rollover Securities to RCGI, free and clear of all Encumbrances,
other than those arising from acts of RCGI. The Rollover Securities and the
Redemption Shares are not subject to any voting trust agreement or other
contract, agreement, arrangement, commitment or understanding restricting
or otherwise relating to voting or disposition of the Rollover Securities
and the Redemption Shares.
(d) Each Continuing Management Investor acknowledges and agrees that
such Management Investor's Rollover Options shall be irrevocably
surrendered and exchanged for such Investor's Exchanged Options and that
the Exchanged Options shall have the terms and conditions contained in the
stock option agreement between the Company and such Continuing Management
Investor entered into as of the Closing Date, the form of which is appended
to this Agreement as Exhibit F. Each Continuing Management Investor forever
releases and discharges the Company and Royster-Clark forever from any
claims in respect of Common Stock of Royster-Clark or any other claims or
liabilities arising with respect to such Investor's Rollover Options.
4.4. Representations and Warranties of 399 Venture. 399 Venture represents
and warrants to, and covenants and agrees with the Company that, 399 Venture
qualifies as an "accredited investor" within the meaning of Rule 501(a) of
Regulation D under the Securities Act, and has such knowledge and experience in
financial and business matters that 399 Venture is capable of evaluating the
merits and risks of its purchase of the Securities.
4.5. Restrictions on Transfers of Securities. The following restrictions on
Transfer shall apply to all Securities owned by any Restricted Investor until
the completion of a Public Offering. As used herein, "Restricted Investor" shall
mean any Investor or Permitted Transferee except a Permitted Transferee by
virtue of Section 4.5(d)(iii) hereof:
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(a) No Restricted Investor shall Transfer (other than in connection
with a redemption or purchase by the Company) any Securities unless (i)
such Transfer is to a Permitted Transferee and (ii) such Transfer complies
with the provisions, if applicable, of Sections 5.7 and 5.8, this Section
4.5 and, in addition, in the case of Securities held by Management
Investors, the applicable provisions of Article VII of this Agreement.
(b) No Restricted Investor may effect any Transfer of Securities
unless the transferee (other than a Permitted Transferee under Section
4.5(d)(iii)) executes an agreement pursuant to which such transferee agrees
to be bound by the terms and provisions of this Agreement applicable to the
transferor (except as otherwise specifically provided herein). Any
purported Transfer in violation of this Agreement shall be null and void
and of no force and effect and the purported transferee shall have no
rights or privileges in or with respect to the Company. As used herein,
"Transfer" means the making of any sale, exchange, assignment,
hypothecation, gift, security interest, pledge or other encumbrance, or any
contract therefor, any voting trust or other agreement or arrangement with
respect to the transfer of voting rights or any other beneficial interest
in any of the Securities, the creation of any other claim thereto or any
other transfer or disposition whatsoever, whether voluntary or involuntary,
affecting the right, title, interest or possession in or to such
Securities.
(c) Prior to any proposed Transfer of any Securities, the holder
thereof shall give written notice to the Company describing the manner and
circumstances of the proposed Transfer accompanied by a written opinion of
legal counsel, addressed to the Company and the transfer agent, if other
than the Company, and reasonably satisfactory in form and substance to each
addressee, to the effect that the proposed Transfer of the Securities may
be effected without registration under the Securities Act and applicable
state securities laws. Each certificate evidencing the Securities
transferred shall bear the legends set forth in Section 4.2(a) and, if
applicable, the legend set forth in Section 4.2(b), except that such
certificate shall not bear the legends set forth in Section 4.2(a) if the
opinion of counsel referred to above is to the further effect that such
legend is not required in order to establish compliance with any provision
of the Securities Act or applicable state securities laws.
(d) As used herein, "Permitted Transferee" shall mean:
(i) in the case of any Investor or Permitted Transferee who is a
natural person, (x) such person's spouse or children or grandchildren
(in each case, natural or adopted), any trust for the sole benefit of
such person and such person's spouse or children or grandchildren (in
each case, natural or adopted), any charitable trust the grantor of
which is an Investor or Permitted Transferee, or any corporation or
partnership in which the direct and beneficial owner of all of the
equity interests is such individual person or such person's spouse or
children or grandchildren (in each case, natural or adopted) (or any
trust solely for the benefit of such persons), collectively "Family
Members" or (y) any organization exempt from federal income taxation
under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended;
(ii) in the case of any Investor or Permitted Transferee who is,
in each case, a natural person, the heirs, executors, administrators
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or personal representatives upon the death of such person or upon the
incompetency or disability of such person for purposes of the
protection and management of such person's assets;
(iii) any Person if such Person takes such Securities pursuant to
a sale in connection with a Public Offering or following a Public
Offering in open market transactions or under Rule 144 under the
Securities Act;
(iv) in the case of 399 Venture or any Permitted Transferee of
399 Venture, (A) Citibank N.A., Citicorp or CitiGroup or any Affiliate
of any of the foregoing entities; (B) any employee or director of any
of the foregoing entities, or any trust, partnership or other entity
established for the benefit of such officers, employees or directors
(each, a "399 Venture Co-Investor"); or (C) any qualified
institutional buyer (as such term is defined in Rule 144A under the
Securities Act) organized under the laws of the United States or any
State thereof, provided that the Transfer to such qualified
institutional buyer shall be subject to the provisions of Section 5.8
hereof;
(v) in the case of 399 Venture or any Permitted Transferee of 399
Venture, any Person if such Person takes such Securities pursuant to a
Transfer required in connection with any Regulatory Problem, as
provided in Section 5.3 below, provided, however, that the transfer to
such Person shall be subject to the provisions of Section 5.8 hereof;
or
(vi) in the case of any Investor or Permitted Transferee, any
Person approved by the Company as evidenced by a resolution duly
adopted by at least a majority of the Board of Directors or the
holders of a majority of the outstanding Common Stock then held by the
Investors (including shares held by the transferor), provided,
however, that the transfer to such Person shall be subject to the
provisions of Section 5.8 hereof.
(e) As long as this Agreement is in effect and except in the case of
an Approved Sale or a Public Offering, (i) Jenkins and his direct or
indirect transferees shall not transfer any shares of Common Stock unless
such transferee agrees in writing to vote all of the Securities transferred
to comply with all of the provisions of Sections 6.1 through 6.7 below, and
(ii) 399 Venture and its direct or indirect transferees shall not transfer
any shares of Common Stock unless such transferee agrees in writing to
comply with all of the provisions of Sections 6.2 through 6.8 below;
provided, however, that if 399 Venture and its Co-Investors transfer, in
one or more related transactions, 50% or more of the Common Stock held by
399 Venture and its Co-Investors as of the Closing Date, the transferee or
transferees thereof shall be required to agree in writing to vote all of
the Securities transferred to such Persons for the Jenkins Designees
pursuant to Sections 6.2(a)(i), 6.3, 6.4(a) and the proviso to Section 6.7
(and any designee pursuant to Section 6.5) and with the covenants set forth
in Section 5.7(a), but shall not be subject to any additional restrictions
or requirements with respect to voting.
4.6. Certain Sales by Jenkins. (a) Notwithstanding any other provision of
this Agreement, at such time as Jenkins is no longer the chief executive officer
of the Company, Jenkins, and his Family Members shall be free, at any time and
from time to time, to sell up to 50%, in the aggregate, of the Common Stock
collectively owned by them as of the time he is no longer the chief executive
officer of the Company, subject to the provisions of this Section 4.6. If
Jenkins, no longer being the chief executive officer of the Company, decides to
make such a sale, he shall give written
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notice (the "Transfer Notice") to the Company of the number of shares of Common
Stock he wishes to sell (the "Offered Securities"). The Company may offer to
purchase all (but not less than all) of the Offered Securities by delivering a
written notice (the "Offer Notice") of such offer (the "Offer") to Jenkins
within 60 days after receipt of the Transfer Notice. The Offer Notice will set
forth the terms and conditions on which the Company will purchase the Offered
Securities. Jenkins shall give the Company written notice of his acceptance or
rejection of the Offer within 30 days of receipt of the Offer Notice.
(b) If the Company offers to purchase the Offered Securities and
Jenkins accepts the Offer, the closing of the purchase and sale of the
Offered Securities shall be held at the place and the date to be
established by the Company, which in no event shall be less than ten or
more than 15 days from the date on which Jenkins delivers his acceptance of
the Offer. At such closing, Jenkins shall deliver the certificates
evidencing the number of shares of Offered Securities to be purchased by
the Company, accompanied by stock powers duly endorsed in blank or duly
executed instruments of transfer, and any other documents that are
necessary to transfer to the Company good title to such of the securities
to be transferred, free and clear of all pledges, security interests,
liens, charges, encumbrances, equities, claims and options of whatever
nature other than those imposed under this Agreement, and concurrently with
such delivery, the Company shall deliver to Jenkins the full amount of the
purchase price for the Offered Securities in cash or certified or bank
cashier's check.
(c) If the Company makes no offer (for any reason including without
limitation those set forth in Section 4.9), or does not make a timely offer
to purchase all of the Offered Securities or Jenkins elects not to accept
the Offer, Jenkins may sell the Offered Securities to a third party;
provided, however, that (i) if the Company shall have made timely delivery
of the Offer Notice pursuant to Section 4.6(a) above, such sale shall be at
a price no less than the price specified in the Offer Notice and on other
terms no more favorable to such third party than those specified in the
Offer Notice and (ii) such sale shall take place during the 120-day period
immediately following the last date on which Jenkins could have accepted
the Offer. Any shares of the Offered Securities not transferred within such
120-day period will be subject to the provisions of this Section 4.6 upon
subsequent transfer.
(d) The provisions of Section 5.8 shall apply to any sale pursuant to
this Section 4.6, provided, however, that for the purposes of this Section
4.6 only, the Tag-Along Rights of those Investors who elect to exercise
such rights shall, if necessary, be reduced pro rata in proportion to such
Investors' relative investments in the then outstanding Common Stock to
ensure that the Common Stock sold by the Tag-Along Rights Holders
constitute not more than 50% of the Common Stock being sold.
4.7. Termination of Restrictions. The restrictions on transfers of Common
Stock contained in Sections 4.5 and 4.6 above shall terminate on the
consummation of a Public Offering.
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4.8. Notation. A notation will be made in the appropriate transfer records
of the Company with respect to the restrictions on transfer of the Securities
referred to in this Agreement.
4.9. Limitation on Repurchase of Company Stock. Each Investor understands
that concurrently with the issuance of the Shares, the Company is entering into
certain financing agreements which will contain prohibitions, restrictions and
limitations on the ability of the Company to purchase any of the Securities and
to pay dividends on the Securities.
4.10. Future Sales. (a) Each Management Investor understands and agrees
that 399 Venture may in the future transfer, subject to the terms and conditions
of this Agreement, shares of Common Stock to a third party. In addition, future
investors in the Company may receive debt securities or preferred stock senior
in liquidation preference and dividend payment rights, with a higher dividend
rate or other terms more favorable than those of the Securities.
(b) Each Management Investor understands and agrees that 399 Venture
may elect to transfer, in whole or in part, the $10,000,000 subordinated
note issued to 399 Venture on the Closing Date (the "Subordinated Note"),
and 399 Venture shall have the right to transfer the Subordinated Note, in
whole or in part, to any Person. In connection with such transfer, 399
Venture may elect to have the Company repurchase part or all of the
Subordinated Note and reissue the aggregate amount so repurchased to such
Person designated by 399 Venture, either as shares of Series A Preferred
Stock or as an additional Subordinated Note, as 399 Venture may designate
in writing. No Tag-Along Rights of any Investors shall apply to the
transactions described in this Section 4.10(b) with respect to transaction
with Affiliates of 399 Venture.
(c) Each Management Investor understands and agrees that in the
future, in addition to the provisions of Section 4.10(b), 399 Venture may
elect to transfer, in whole or in part, the equity or debt securities held
by 399 Venture, and 399 Venture may elect to so transfer such securities by
requiring the Company (i) to repurchase or redeem the securities designated
by 399 Venture to be repurchased or redeemed and (ii) to reissue to such
Person or Persons designated by 399 Venture in writing the aggregate amount
so repurchased or redeemed by the Company from 399 Venture. No Tag-Along
Rights of any Investors pursuant to Section 5.8 shall apply to the
foregoing transfers; however, to the extent that the Persons designated by
399 Venture in the foregoing clause (ii) are not an Affiliate of 399
Venture or any fund organized by an Affiliate of 399 Venture, each Investor
who would have been a Tag-Along Rights Holder had Section 5.8 applied to
the foregoing transactions shall have the right to require 399 Venture to
purchase that number of shares of Common Stock from such Investor as 399
Venture would have been required to include in the transfer had the
transfer been subject to Section 5.8.
4.11. Reliance. Each Investor acknowledges that the Company and each of the
other Investors is entering into this Agreement in reliance upon such Investor's
representations and warranties and other covenants and agreements contained
herein.
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ARTICLE V
OTHER COVENANTS AND REPRESENTATIONS
5.1. Observers' Rights. So long as 399 Venture or its Affiliates own at
least 5% of the Common Stock outstanding, if no employee of 399 Venture or its
Affiliates is a member of the Company's Board of Directors, 399 Venture shall
have the right to designate two observers (the "Observers") to attend meetings
of the Company's Board of Directors and committees thereof. If at least one
employee of 399 Venture or its Affiliates is a member of the Company's Board of
Directors, 399 Venture shall have the right to designate one Observer to attend
meetings of the Company's Board of Directors and committees thereof. The
Observers shall not have the right to vote on any matter presented to the Board
of Directors or any committee thereof. The Company shall give each Observer
written notice of each meeting of the Board of Directors and committees thereof
at the same time and in the same manner as the members of the Board of Directors
or such committee receive notice of such meetings, and the Company shall permit
each Observer to attend as an observer all meetings of its Board of Directors
and committees thereof. Each Observer shall be entitled to receive all written
materials and other information given to the directors in connection with such
meetings at the same time such materials and information are given to the
directors, and each Observer shall keep confidential such materials and
information and any other confidential information discussed at any meeting of
the Board of Directors. If the Company proposes to take any action by written
consent in lieu of a meeting of its Board of Directors or a committee thereof,
the Company shall give written notice thereof to each Observer prior to the
effective date of such consent. The Company shall provide to each Observer all
written materials and other information given to the directors in connection
with such action by written consent at the same time such materials and
information are given to the directors, and each Observer shall keep such
materials and information confidential. The Company shall pay the reasonable
out-of-pocket expenses of each Observer incurred in connection with attending
such meetings.
5.2. Financial Statements and Other Information. So long as 399 Venture
owns any of the Securities, the Company shall deliver to 399 Venture:
(a) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Company,
consolidated balance sheets of the Company and its subsidiaries as of the
end of such period, and consolidated statements of income and cash flows of
the Company and its subsidiaries for the period then ended prepared in
conformity with generally accepted accounting principles applied on a
consistent basis, except as otherwise noted therein, and subject to the
absence of footnotes and to year-end adjustments;
(b) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, a consolidated and consolidating
balance sheet of the Company and its subsidiaries as of the end of such
year, and consolidated and consolidating statements of income and cash
flows of the Company and its subsidiaries for the year then ended prepared
in conformity with generally accepted accounting principles applied on a
consistent basis, except as otherwise noted therein, together with an
auditor's report thereon of a firm of established national reputation; and
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(c) copies of any other reports, financial statements, certificates or
other documents required to be delivered to the agent for the Company's
bank group pursuant to the terms of any credit agreement then in effect.
5.3. Regulatory Compliance Cooperation. So long as 399 Venture or its
Affiliates beneficially own any of the Securities, before the Company redeems,
purchases or otherwise acquires, directly or indirectly, or converts or takes
any action with respect to the voting rights of, any shares of any class of its
capital stock or any securities convertible into or exchangeable for any shares
of any class of its capital stock, the Company shall give 399 Venture at least
30 days prior written notice of such pending action. Upon the written request of
399 Venture made within 20 days after its receipt of any such notice, stating
that after giving effect to such action 399 Venture would have a Regulatory
Problem (as described below), the Company will defer taking such action for such
period (not to extend beyond 90 days after 399 Venture's receipt of the
Company's original notice) as 399 Venture requests to permit it and its
Affiliates to reduce the quantity of Securities held by it and its Affiliates in
order to avoid the Regulatory Problem. In addition, the Company will not be a
party to any merger, consolidation, recapitalization or other transaction
pursuant to which 399 Venture would be required to take any voting securities,
or any securities convertible into voting securities, which would reasonably be
expected to cause 399 Venture to have a Regulatory Problem. For purposes of this
paragraph, a Person will be deemed to have a "Regulatory Problem" when such
Person and such person's Affiliates own, control or have power over (or such
Person believes that there is a substantial risk of an assertion that such
Person and such Person's Affiliates own, control or have power over) a greater
quantity of securities of any kind issued by the Company than are permitted to
be owned by such Person under any requirement of any governmental authority
applicable to such Person.
5.4. Small Business Administration Forms.
Prior to and after the Closing, the Company shall, if requested by 399
Venture or any Permitted Transferee of 399 Venture, execute Forms 480 ("Size
Status Declaration") and 652-D ("Assurance of Compliance") of the Small Business
Administration and any other documents that may be required by the Small
Business Administration or any other governmental agency having jurisdiction
over the activities of 399 Venture, or which 399 Venture or such Permitted
Transferee may reasonably require in connection therewith.
5.5. Economic Impact. Promptly after the end of each fiscal year (but in
any event prior to February 28 of each year), the Company shall provide to 399
Venture a written assessment, in form and substance satisfactory to 399 Venture,
of the economic impact of 399 Venture's financing hereunder, specifying the
full-time equivalent jobs created and retained, and the impact of the financing
on the revenues and profits of the Company's business and on taxes paid by the
Company and its employees.
5.6. SBA Access. The Company agrees that 399 Venture and any SBA examiner
shall have the rights of access and information specified in 13 C.F.R. 107.620
(1996) (and any successor provision).
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5.7. Sale of the Company.
(a) For a period of three years following the Closing, so long as the
Company has not consummated a Public Offering, 399 Venture and its
Permitted Transferees (other than any Permitted Transferees pursuant to
Section 4.5(d)(iii)) will not vote in favor of (at a duly called and duly
held meeting of stockholders or the Board of Directors, as the case may be,
of the Company) or consent in writing to the merger, consolidation or sale
(by any means) of all or substantially all of the assets of the Company or
any similar transaction, in any one transaction or series of related
transactions, without the prior written consent of Jenkins.
(b) Subject to Section 5.7(a), so long as the Company has not
consummated a Public Offering, if holders of at least a majority of the
Common Stock (including voting and non-voting shares voting as a single
class) then outstanding and the Board of Directors vote in favor of (at a
duly called and duly held meeting of stockholders or the Board of
Directors, as the case may be, of the Company) or consent in writing to the
merger or consolidation of the Company or the sale of all or substantially
all of its assets or sale of all of the outstanding capital stock or any
other similar transaction (provided such holders include Jenkins if Jenkins
and his Family Members collectively own at least 50% of the outstanding
Common Stock held by them as of the Closing) (any of the foregoing, an
"Approved Sale"), (i) each Restricted Investor will consent to, vote for,
and raise no objections against, and waive dissenters and appraisal rights
(if any) with respect to, the Approved Sale, and (ii) if the Approved Sale
includes a sale of Securities, each Restricted Investor will agree to sell
and will be permitted to sell all of such Restricted Investor's Securities
on the same terms and conditions as are offered to and approved by the
holders of a majority of the Common Stock then outstanding. Each Restricted
Investor will take all necessary and desirable actions in connection with
the consummation of an Approved Sale, including, without limitation, the
execution of any stock purchase, escrow or other similar agreement which
may be required.
(c) The obligations of each of the Investors with respect to an
Approved Sale are subject to the satisfaction of the conditions that upon
the consummation of the Approved Sale all of the Investors and Permitted
Transferees will receive the same form and amount of consideration per
share of Common Stock, or if any holder of Common Stock is given an option
as to the form and amount of consideration to be received, all Investors
and Permitted Transferees will be given the same option.
5.8. Tag-Along Rights.
(a) Except in the case of a Public Offering or a Transfer to a
Permitted Transferee (excluding a Transfer pursuant to Section
4.5(d)(iv)(C), Section 4.5(d)(v) or Section 4.5(d)(vi)), no Restricted
Investor will effect a Transfer of shares of Common Stock unless all other
Investors and their Permitted Transferees and assigns (collectively, the
"Tag-Along Rights Holders") are offered an equal opportunity (the
"Tag-Along Right") to participate in such transaction or transactions on a
pro rata basis as set forth in Section 5.8(b) (subject to the provisions of
Section 5.8(f)) and on identical terms.
(b) Prior to any sale of Common Stock subject to these provisions, the
seller (the "Tag-Along Seller") shall notify the Company in writing of the
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proposed sale. Such notice (the "Tag-Along Sale Notice") shall set forth
(i) the number of shares of Common Stock (the "Tag-Along Shares") subject
to the proposed sale; (ii) the name and address of the proposed purchaser;
and (iii) the proposed amount of consideration and terms and conditions of
payment offered by such proposed purchaser. Each Tag-Along Rights Holder
shall have the right to sell a percentage of the Tag-Along Shares equal to
the percentage of the outstanding shares of Common Stock then held by such
Tag-Along Rights Holder. The Company shall promptly, and in any event
within ten days, deliver or caused to be delivered (by guaranteed overnight
courier service, if available) the Tag-Along Sale Notice to the Tag-Along
Rights Holders. Each Tag-Along Rights Holder may exercise the Tag-Along
Right by delivery of a written notice (the "Tag-Along Acceptance Notice")
to the Tag-Along Seller within ten days of the date the Tag-Along Sale
Notice was delivered to such courier service or the United States Postal
Service, as the case may be. The Tag-Along Acceptance Notice shall state
the number of shares of Common Stock that the Tag-Along Rights Holder
proposes to include in the proposed sale, and the number of Tag-Along
Shares to be sold by the Tag-Along Seller shall be reduced by such amount.
If no Tag-Along Acceptance Notice is received during the ten-day period
referred to above, Tag-Along Seller shall have the right for a 120-day
period to effect the proposed sale of the Tag-Along Shares on terms and
conditions no more favorable to the transferee than those stated in the
Tag-Along Sale Notice.
(c) Each Tag-Along Rights Holder acknowledges and agrees that 399
Venture or a Permitted Transferee of 399 Venture may grant similar
"tag-along" rights to other Persons and, in such event, such other Persons
shall be offered an equal opportunity to participate in such transaction or
transactions to the same extent as such Tag-Along Rights Holders hereunder
and shall be included in the calculation of the pro rata basis upon which
such Tag-Along Rights Holders may participate in such transaction or
transactions.
(d) (i) Notwithstanding the requirements of this Section 5.8, a
Tag-Along Seller may sell Common Stock at any time without complying with
the requirements of Section 5.8(b) so long as the Tag-Along Seller deposits
into escrow with an independent third party at the time of sale that amount
of consideration received in the sale equal to the "Escrow Amount." As used
herein, the "Escrow Amount" shall equal that amount of consideration as all
Tag-Along Rights Holders would have been entitled to receive if they had
the opportunity to participate in the sale on a pro rata basis, determined
as if each Tag-Along Rights Holder (A) delivered a Tag-Along Notice to the
Tag-Along Seller in the time period set forth in Section 5.8(b) and (B)
proposed to include all of such Tag-Along Rights Holder's shares of Common
Stock in such sale.
(ii) The Tag-Along Seller shall notify the Company in writing of
the proposed sale pursuant to this Section 5.8(d) no later than the
date of such sale. Such notice (the "Escrow Notice") shall set forth
the information required in the Tag-Along Sale Notice, and in
addition, such notice shall state the name of the escrow agent and, if
the consideration (in whole or in part) for the sale was cash, then
the account number of the escrow account. The Company shall promptly,
and in any event within ten days, deliver or caused to be delivered
(by guaranteed overnight courier service, if available) the Escrow
Notice to each Tag-Along Rights Holder. Such Tag-Along Rights Holder
may exercise the tag-along right by delivery to the Tag-Along Seller,
within ten days of the date (the "Escrow Notice Delivery Date") the
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Escrow Notice was delivered to such courier service or the United
States Postal Service, as the case may be, of (A) a written notice
specifying the number of shares of Common Stock it proposes to sell;
and (B) the certificates for such Common Stock, with stock powers duly
endorsed in blank and with signatures guaranteed.
(iii) Promptly after the expiration of the tenth day after the
Escrow Notice Delivery Date, (A) the Tag-Along Seller shall purchase
that number of shares of Common Stock as the Tag-Along Seller would
have been required to include in the sale had the Tag-Along Seller
complied with the provisions of Section 5.8(b), (B) all shares of
Common Stock not required to be purchased by the Tag-Along Seller
shall be returned to the Tag-Along Rights Holders thereof and (C) all
funds and other consideration held in escrow shall be released to the
Tag-Along Seller. If the Tag-Along Seller received consideration other
than cash in such Tag-Along Seller's sale, the Tag-Along Seller shall
purchase the shares of Common Stock tendered by paying to the
Tag-Along Rights Holders non-cash consideration and cash in the same
proportion as received by the Tag-Along Seller in the sale.
(e) Notwithstanding anything herein to the contrary, a Tag-Along
Seller may make any of the following sales without offering the Tag-Along
Rights Holders the opportunity to participate: (i) sales to a Permitted
Transferee (except pursuant to Section 4.5(d)(iv)(C), 4.5(d)(v) or
4.5(d)(vi)); (ii) sales to officers and directors of the Company which in
the aggregate do not exceed 5% of the outstanding shares of Common Stock;
(iii) sales pursuant to an effective registration statement under the
Securities Act; (iv) sales pursuant to an Approved Sale; (v) sales pursuant
to Section 5.8(h) below; and (f) sales other than those specified in the
foregoing (i) through (v) which in the aggregate do not exceed 5% of the
Common Stock outstanding held by the Tag-Along Seller as of the date
hereof. In addition, any repurchase of Common Stock by the Company pursuant
to Section 4.10(b) and (c) shall not be subject to this Section 5.8.
(f) Notwithstanding any other provision of this Agreement if any
Transfer is a Transfer (a "Regulatory Sale") made to cure a Regulatory
Problem, as set forth in Section 5.3, each Tag-Along Rights Holder shall
have the right to sell to the proposed transferee the same percentage of
the total number of shares of Common Stock outstanding then owned by such
Tag-Along Rights Holder as the percentage of the total number of shares of
Common Stock outstanding then owned by the Tag-Along Seller. If the total
number of shares of Common Stock proposed to be Transferred in a Regulatory
Sale by the Tag-Along Seller and those Tag-Along Rights Holders exercising
their Tag-Along Rights exceeds the maximum number of shares of Common Stock
that the proposed transferee is willing to purchase or otherwise acquire,
then the number of shares of Common Stock to be Transferred shall be
allocated among the Tag-Along Seller and such Tag-Along Rights Holders
(with rounding to avoid fractional shares) in proportion to the number of
outstanding shares of Common Stock that each of them then owns; provided,
however, that in no event shall the number of shares of Common Stock to be
Transferred by 399 Venture or its Affiliates be reduced below that number
necessary to cure the Regulatory Problem in question.
(g) The Tag-Along Rights provided pursuant to this Section 5.8 shall
terminate upon the earlier of (i) a Public Offering or sale of the Company;
and (ii) the day after the date on which 399 Venture and its Permitted
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Transferees that are not natural persons own less than 5% of the Common
Stock owned by 399 Venture on the Closing Date.
(h) Notwithstanding anything to the contrary herein, if any Restricted
Investor receives a Tag-Along Sale Notice and does not elect to exercise
his Tag-Along Right with respect to the Transfer contemplated by such
notice, such Restricted Investor may sell those shares of Common Stock
which such Restricted Investor could have sold pursuant to such Tag-Along
Right to a third party without compliance with Sections 4.5(a), 5.8 or 7.1.
5.9. Covenant Not To Compete or Solicit.
(a) In consideration of the opportunity to participate in the equity
of the Company, each Management Investor (other than Jenkins, Randolph
Abood and James Shirley) covenants and agrees that:
(i) for one (1) year after termination of such Management
Investor's employment with the Company or any of its Subsidiaries,
neither such Management Investor nor any of such Management Investor's
Affiliates shall engage, directly or indirectly, in lines of business
similar to the business of the Company or any of its Subsidiaries
anywhere in the United States. Each Management Investor and the
Company agree that the foregoing covenant is intended to prohibit each
Management Investor from engaging in such activities, as the case may
be, as owner, creditor (except as a trade creditor in the ordinary
course of business), partner, stockholder, lender, officer, director,
manager, employee, contractor or agent for any person, firm or
corporation (except (x) with respect to the Company or (y) as a holder
of equity or debt securities in a corporation which has a class of
securities that is publicly traded on a stock exchange or the
recognized over-the-counter market, and then only to the extent of
owning not more than two percent (2%) of the issued and outstanding
debt or equity securities of such corporation); and
(ii) no Management Investor or any of such Management Investor's
Affiliates shall (x) solicit, employ, retain as a consultant,
interfere with or attempt to entice away from the Company or any of
its Subsidiaries or any successor to any of them any individual who is
employed or retained by the Company or any Subsidiary or any successor
to any of them or (y) engage in or participate in any effort or act to
induce any customers, suppliers, associates or independent contractors
of the Company or any Subsidiary or any successor to any of them to
cease doing business or their association with the Company or any
Subsidiary or any successor to any of them.
(b) Each Management Investor acknowledges and agrees that the remedy
at law for any breach, or threatened breach, of any of the provisions of
this Section 5.9 will be inadequate and, accordingly, each Management
Investor covenants and agrees that the Company shall, in addition to any
other rights and remedies which the Company may have, be entitled to
equitable relief, including injunctive relief, and to the remedy of
specific performance with respect to any breach or threatened breach of
such covenant, as may be available from any court of competent
jurisdiction. Such right to obtain equitable relief may be exercised, at
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the option of the Company, concurrently with, prior to, after, or in lieu
of, the exercise of any other rights or remedies which the Company may have
as a result of any such breach or threatened breach.
(c) In the event that the provisions of this Section 5.9 shall be
determined by a court of competent jurisdiction to be unenforceable under
applicable law as to that jurisdiction (the parties agreeing that such
decision shall not be binding, res judicata or collateral estoppel in any
other jurisdiction) for any reason whatsoever, then any such provision or
provisions shall not be deemed void, but the parties hereto agree that such
limits may be modified by the court and that such covenant contained in
this Section 5.9 shall be amended in accordance with such modifications, it
being specifically agreed by each Management Investor and the Company that
it is their continuing desire that this covenant be enforced to the full
extent of its terms and conditions or if a court finds the scope of the
covenant unenforceable, the court should redefine the covenant so as to
comply with applicable law.
5.10. Preemptive Rights. (a) Subject to the terms of this Section 5.10, if
the Company proposes to issue any equity securities, other than in a Public
Offering or transaction described in Section 5.10(d) or (e) below, the Company
shall first offer in writing to sell to each Investor who (i) is then a
stockholder of the Company and (ii) holds one percent or more of the outstanding
shares of Common Stock, calculated on a fully diluted basis (collectively, the
"Rights Holders"), such Rights Holder's pro rata share of the proposed issue of
such equity securities, at the same price and on the same terms at which the
Company proposes to sell such issue to others. For purposes hereof, a Rights
Holder's "pro rata share" of an issue of equity securities shall be that number
which is equal to the product of (i) the number of equity securities proposed to
be issued, times (ii) a fraction, the numerator of which is the number of
outstanding shares of Common Stock held by the Rights Holder, calculated on a
fully-diluted basis, and the denominator of which is the aggregate number of
outstanding shares of Common Stock, calculated on a fully-diluted basis. As used
in this Section 5.10, "equity security" means any capital stock of the Company,
any security convertible or exchangeable (with or without consideration) into or
for any capital stock of the Company, any security carrying any warrant, option
or right to subscribe to or to purchase any capital stock of the Company, or any
warrant, option or right to purchase any capital stock of the Company. As used
in this Section 5.10, "calculated on a fully-diluted basis" means calculated on
a pro forma basis assuming the exercise of all options, warrants or other rights
for Common Stock (or securities convertible into or exchangeable for Common
Stock) and the conversion or exchange of all securities convertible into or
exchangeable for Common Stock.
(b) The Company's offer shall describe the equity security proposed to
be issued by the Company, specifying the quantity, the price and payment
terms. Each Rights Holder shall have 15 days from receipt of such offer to
accept the offer in writing, which acceptance may be as to all or any part
of the Rights Holder's pro rata share of such issue. The closing of the
sale of the portion of the equity securities subscribed for under this
Section 5.10(b) shall be held on a date acceptable to the Company and the
applicable Rights Holder, but in no case more than 45 days after the date
of the Company's offer to the Rights Holder.
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(c) In the event any Rights Holder does not subscribe for all of the
issue of equity securities offered to such Rights Holder pursuant to this
Section 5.10, the Company may sell the portion of the securities not
subscribed for at a price no less favorable to the Company than that
specified in such offer and on payment terms no less favorable to the
Company than those specified in such offer. However, if such sale is not
consummated within 120 days after the date the offer pursuant to Section
5.10(a) was made, the Company shall not sell such securities without again
complying with this Section 5.10.
(d) Notwithstanding the foregoing, the provisions of this Section 5.10
shall not be applicable to the issuance of shares of Common Stock (i) upon
the conversion of shares of one class of Common Stock into shares of
another class; (ii) as a dividend on all the outstanding shares of Common
Stock; (iii) in any transaction in respect of a Security that is available
to all holders of such Security on a pro rata basis, provided that for
purposes of this clause (iii), all classes of Common Stock shall be treated
as a single security; (iv) in connection with grants of stock or options to
employees, consultants or directors of the Company; (v) to an Affiliate of
399 Venture in connection with the repurchase by the Company of equity or
debt securities of the Company held by 399 Venture in accordance with
Section 4.10; (vi) in an offering or sale of securities pursuant to a
registration statement filed with, and declared effective by, the
Securities and Exchange Commission pursuant to the Securities Act; (vii) in
an offering or sale of securities pursuant to Rule 144A promulgated under
the Securities Act; or (viii) to the sellers of an acquired business; or
(ix) in an offering or sale of securities pursuant to a Unit Offering or
other offering of a combination of Common Stock and other equity or debt
securities of the Company (each such Unit or other offering, a "Combination
Offering"), provided, however, that a Rights Holder may participate in a
Combination Offering pursuant to this Section 5.10 if such Rights Holder
purchases his or its "proportionate share" of each security offered in such
offering. For purposes hereof, "proportionate share" shall mean that the
purchase price paid by such Rights Holder is allocated to each class of
such offered securities in the same proportion as the aggregate purchase
price for such class bears to the aggregate price of all securities
constituting such Combination Offering.
(e) The preemptive rights granted by this Section 5.10 shall expire
upon the consummation of a Public Offering.
5.11. Right to Join in Purchase.
(a) Subject to the terms of this Section 5.11, if any of Jenkins or
his Affiliates or 399 Venture or any Person controlled by 399 Venture (each
of the foregoing a "Purchase Rights Holder"), is offered the opportunity to
purchase equity securities of the Company held by any other stockholder of
the Company (the "Offeror"), the Purchase Rights Holder receiving such
offer (the "Offeree") shall give the other Purchase Rights Holder (the
"Participant") the opportunity to participate in such sale by promptly
submitting a written notice to the Participant setting forth the number of
equity securities offered by the Offeror and the terms and conditions for
the purchase and sale thereof (the "Offer Notice"). The Participant shall
have the right, exercisable within the shorter of 15 days after receipt of
the Offer Notice or the date (if any) on which the offer described in the
Offer Notice expires by its terms, to purchase all or a portion of the
Participant's pro rata share of the proposed issue of such equity
25
<PAGE>
securities, at the same price and on the same terms specified in the Offer
Notice and on the date specified for purchase therein.
(b) For purposes hereof, a Participant's "pro rata share" of equity
securities being sold by an Offeror shall be that number which is equal to
the product of (i) the number of equity securities being sold by an
Offeror, times (ii) a fraction, the numerator of which is the number of
outstanding shares of Common Stock held by the Purchase Rights Holder,
calculated on a fully-diluted, as converted basis, and the denominator of
which is the aggregate number of outstanding shares of Common Stock,
calculated on a fully-diluted, as converted basis. As used in this Section
5.11, "equity security" means any capital stock of the Company, any
security convertible or exchangeable (with or without consideration) into
or for any capital stock of the Company, any security carrying any warrant,
option or right to subscribe to or to purchase any capital stock of the
Company, or any warrant, option or right to purchase any capital stock of
the Company. As used in this Section 5.11, "calculated on a fully-diluted
basis" means calculated on a pro forma basis assuming the exercise of all
options, warrants or other rights for Common Stock (or securities
convertible into or exchangeable for Common Stock) and the conversion or
exchange of all securities convertible into or exchangeable for Common
Stock.
(c) To the extent that a Participant does not exercise its right to
purchase the equity securities being sold by the Offeror, the other
Purchase Rights Holder may purchase the portion of the equity securities
not so purchased at the same price and on the same terms specified in the
Offer Notice and on the date specified for purchase therein.
(d) To the extent that the sale of equity securities by the Offeror is
not consummated for any reason within 120 days after the date of the Offer
Notice, the provisions of this Section 5.11 shall again apply with respect
to any further sales by the Offeror of the equity securities not so
purchased.
(e) Notwithstanding any contrary provision of this Agreement, the
provisions of this Section 5.11 shall not be applicable to the purchase of
any equity securities (i) by a Purchase Rights Holder pursuant to the terms
of any equity security of the Company or any other security, put or call
option, pledge, right, warrant, convertible or exchangeable security or
other similar instrument, agreement or arrangement in effect on the date of
this Agreement which is set forth on the Disclosure Schedules, or (ii) by
399 Venture from any of its Affiliates.
(f) The rights and obligations set forth in this Section 5.11 shall
terminate upon the consummation of a Public Offering.
ARTICLE VI
CORPORATE ACTIONS
6.1. Certificate of Incorporation and Bylaws. Each Investor has reviewed
the Certificate of Incorporation of the Company and the Bylaws of the Company in
the forms attached hereto as Exhibits A and B, respectively, and hereby approves
and ratifies the same.
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6.2. Directors and Voting Agreements. (a) Each Investor shall take, at any
time and from time to time, all action necessary (including, without limitation,
voting the Class A Common Stock owned by such Investor, calling special meetings
of stockholders and executing and delivering written consents) to ensure that
the Board of Directors of the Company is composed at all times of up to five
persons, determined as follows: (i) two individuals designated by Jenkins (the
"Jenkins Designees"); (ii) two individuals designated by 399 Venture (the "399
Venture Designees"); and (iii) one individual (the "Independent Director")
designated by the vote of a majority of the other four directors. The initial
directors named pursuant to this Section 6.2 shall be:
Designator Director
Jenkins Jenkins
Randolph G. Abood
399 Venture Thomas F. McWilliams
(b) The Board of Directors shall consist of five members, provided,
however, that if the Board of Directors determines in good faith that it is in
the best interests of the Company to increase the number of directors, and
Jenkins and 399 Venture agree to such increase in writing, then the number of
directors shall be increased to such number as the Board of Directors shall
determine.
6.3. Right to Remove Designated Directors. If (i) 399 Venture shall request
the removal of any 399 Venture Designee, (ii) Jenkins shall request the removal
of any Jenkins Designee, or (iii) either of 399 Venture or Jenkins request the
removal of the Independent Director, in each case (either with or without cause)
by written notice to the other, the other party shall promptly consent in
writing or vote or cause to be voted all Securities entitled to vote thereon now
or hereafter owned or controlled by him or it, as the case may be, for the
removal of such person as a director. In the event any person ceases to be a
director, such person shall also cease to be a member of any committee of the
Board of Directors of the Company.
6.4. Right to Fill Certain Vacancies in Company's Board.
(a) In the event that a vacancy is created on the Company's Board of
Directors at any time by the death, disability, retirement, resignation or
removal (with or without cause) of a 399 Venture Designee or a Jenkins
Designee, or if otherwise there shall exist or occur any vacancy on the
Company's Board of Directors in a directorship subject to designation by
399 Venture or Jenkins, such vacancy shall not be filled by the remaining
members of the Company's Board of Directors but each Investor hereby agrees
promptly to consent in writing or vote or cause to be voted all shares of
Common Stock entitled to vote thereon now or hereafter owned or controlled
by it to elect that individual designated to fill such vacancy and serve as
a 399 Venture Designee or a Jenkins Designee, as the case may be.
(b) In the event that such vacancy is created by the death,
disability, retirement, resignation or removal (with inherent cause) of an
Independent Director, such vacancy shall be filled by a majority vote of
the remaining four directors.
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6.5. Rights upon Disability or Death of Jenkins. In the event of the
disability or death of Jenkins, (a) Jenkins rights under Section 6.2(a)(i) shall
terminate, (b) the Board of Directors shall thereafter be composed of four
persons (plus any increases in the number of directors pursuant to Section
6.2(b)), (c) the executor of Jenkins' estate or his attorney-in-fact, as the
case may be, shall have the right to appoint one director to the Board of
Directors following the execution and delivery by such executor or
attorney-in-fact of a joinder to this Agreement which binds such person to the
obligations imposed upon Jenkins under this Agreement, and (d) upon execution
and delivery of such joinder, the executor or attorney-in-fact shall be entitled
to exercise Jenkins' rights under this Article VI excluding those set forth in
Section 6.2(a)(i). Each Investor hereby agrees to consent in writing or vote or
cause to be voted all shares of Common Stock entitled to vote thereon now or
hereafter owned or controlled by it to elect that individual appointed by such
executor or attorney-in-fact in accordance with the foregoing provisions.
6.6. Committee Members; Directors of Company Subsidiaries. The Company
shall take, and each of the Investors agrees that such Investor shall cause the
Company to take, at any time and from time to time, all action necessary
(including voting all shares of common stock of any Subsidiary of the Company,
calling special meetings of stockholders and executing and delivering written
consents) to ensure that all committees of the Board of Directors of the
Company, the Boards of Directors of all Subsidiaries of the Company and any
committees of such Boards are identical to the Board of Directors of the
Company.
6.7. Amendment of Certificate and Bylaws. Each Investor agrees that it
shall not consent in writing or vote or cause to be voted any shares of Common
Stock now or hereafter owned or controlled by it in favor of any amendment,
repeal, modification, alteration or rescission of, or the adoption of any
provision in, the Company's Certificate of Incorporation or Bylaws inconsistent
with this Agreement unless 399 Venture consents in writing to such action or
votes or causes to be voted all of the shares of Common Stock held by 399
Venture in favor of such action; provided that, 399 Venture shall not consent to
any amendment which would adversely affect Jenkins' right to designate a
director to the Company's Board of Directors or remove or fill any vacancy
created with respect to, any director designated by Jenkins' as set forth in
Article VI of this Agreement.
6.8. Termination of Designation Rights.
(a) The rights and obligations of 399 Venture, as set forth in Section
6.2 through 6.7 above, shall terminate upon the earlier of (i) the date the
Company consummates a Public Offering or (ii) the date when 399 Venture and
its Permitted Transferees (other than Permitted Transferees pursuant to
Section 4.5(d)(iii)), and their respective Affiliates no longer own at
least 50% of (x) the Common Stock owned by 399 Venture as of the Closing,
minus (y) the Common Stock transferred by 399 Venture to 399 Venture
Co-Investors (which sales shall be made consistent with 399 Venture's
customary policies with respect to sales to 399 Venture Co-Investors).
(b) The rights and obligations of Jenkins, as set forth in Section 6.2
through 6.7 above, shall terminate upon the earlier of (i) the date the
Company consummates a Public Offering or (ii) the date when Jenkins and his
Permitted Transferees (other than Permitted Transferees pursuant to Section
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4.5 (d)(iii) no longer own at least 50% of the Common Stock owned by
Jenkins as of the Closing.
(c) The rights and obligations set forth in Section 6.2 through 6.7
above of any executor or attorney-in-fact under Section 6.5 above shall
terminate upon the earlier of (i) the date the Company consummates a Public
Offering or (ii) the date when Jenkins (or his estate) and his or its
Permitted Transferees (other than Permitted Transferees pursuant to Section
4.5(d)(iii)) no longer own in the aggregate at least 50% of the Securities
owned by Jenkins as of the Closing.
(d) It is hereby acknowledged and agreed that the rights to designate
directors as set forth in Section 6.2 through 6.7 above have been granted
to 399 Venture and Jenkins, respectively, pursuant to this Agreement, and
such rights may not be transferred by either of them to any transferee
(other than pursuant to Section 6.5, or in the case of 399 Venture, to a
corporate Affiliate), including any Permitted Transferee, but shall be
exercised only by 399 Venture and Jenkins, respectively, until terminated
pursuant to this Section 6.8.
6.9. Future Sales of Securities. If 399 Venture shall propose the sale of
additional debt or equity securities by the Company to any Person and the Board
of Directors should fail to approve such sale, such sale, the terms and issuance
of such securities, and the use of proceeds may be approved by the vote of the
holders of a majority of the outstanding Class A Common Stock, such vote to be
taken upon ten days' written notice to the holders of the Class A Common Stock.
To the extent that the Company uses the proceeds of such sale to repurchase any
of its equity securities, each holder of such securities may, with respect to
such repurchase, exercise the Tag-Along Right set forth in Section 5.8, pursuant
to the procedures set forth in Section 5.8(b), and any additional tag-along
rights which such holder may have. If any such holder does not exercise his or
its Tag-Along Right in full, 399 Venture shall have right to assume such right
with respect to the number of unpurchased shares.
ARTICLE VII
ADDITIONAL RESTRICTIONS ON TRANSFERS OF
SECURITIES HELD BY MANAGEMENT INVESTORS
7.1. Restrictions on Transfer. In addition to any restrictions on Transfer
-------------------------
imposed by Section 4.5, no Management Investor shall effect a Transfer of any
-----------
Securities (other than a Transfer to a Permitted Transferee pursuant to Sections
--------
4.5(d)(i) or 4.5(d)(ii), 4.5(d)(iii) or 4.5(d)(vi) and other than pursuant to
- --------- ---------- ----------- ----------
Section 5.7 or 5.8). In the event of such a Transfer to a Permitted Transferee,
for purposes of determining the applicability of the Purchase Option of the
Company described in Section 7.2 herein and, if applicable, the amount of the
-----------
Option Purchase Price for Incentive Shares purchased under such Purchase Option,
reference shall be made to the Termination Date of the Management Investor who
first owned the Incentive Shares transferred in such Transfer. In exercising the
consent and approval described in the first sentence of this Section 7.1, the
-----------
Company may employ its sole discretion in evaluating the nature of the proposed
transferee and the Company may impose such conditions on Transfer as it deems
appropriate in its sole discretion, including, but not limited to, requirements
that the transferee be an employee of the Company and that the transferee
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purchase the Management Investor's Securities as a "Management Investor" subject
to the restrictions of this Article VII. Any purported Transfer in violation of
this Agreement shall be null and void and of no force and effect and the
purported transferees shall have no rights or privileges in or with respect to
the Company.
7.2. Purchase Option.
----------------
(a) General Terms. In the event that on or prior to the fifth
-------------
anniversary of the Closing, any Management Investor shall cease to be
employed by the Company (whether as a consultant, director or employee) for
any reason (including, but not limited to, death, temporary or permanent
disability, retirement at age 65 or more under the Company's normal
retirement policies, resignation or termination by the Company with or
without Cause), such Management Investor (or such Management Investor's
heirs, executors, administrators, transferees, successors or assigns) shall
give prompt notice to the Company of such termination (except in the case
of termination by the Company with or without Cause), and the Company, or
one or more designee(s) selected by a two-thirds majority of the members of
the Board of Directors, shall have the right and option at any time within
90 days after the later of the effective date of such termination of
employment (the "Termination Date") or the date of the Company's receipt of
------------------
the aforesaid notice, to purchase from such Management Investor, or such
Management Investor's heirs, executors, administrators, transferees,
successors or assigns, as the case may be, any or all of the Incentive
Shares then owned by such Management Investor and such Management
Investor's Permitted Transferees (pursuant to Section 4.5(d)(i) or
---------
4.5(d)(ii)) at a purchase price equal to the Option Purchase Price. The
-----------
Company or its designee(s) shall give notice to the terminated Management
Investor (or such Management Investor's heirs, executors, administrators,
transferees, successors or assigns) of its intention to purchase Incentive
Shares at any time not later than 90 days after the Termination Date. (The
right of the Company and its designee(s) set forth in this Section 7.2 to
purchase a terminated Management Investor's Incentive Shares is hereinafter
referred to as the "Purchase Option").
(i) Exercise of Purchase Option. The Purchase Option shall be
exercised by written notice to the terminated Management Investor (or
such Management Investor's heirs, executors, administrators,
transferees, successors or assigns) signed by an officer of the
Company (whether as a consultant, director or employee) on behalf of
the Company or by its designee(s), as the case may be. Such notice
shall set forth the number of Incentive Shares desired to be purchased
and shall set forth a time and place of closing which shall be no
earlier than ten days and no later than 60 days after the date such
notice is sent. At such closing, the seller shall deliver the
certificates evidencing the number of Incentive Shares to be purchased
by the Company and/or its designee(s), accompanied by stock powers
duly endorsed in blank or duly executed instruments of transfer, and
any other documents that are necessary to transfer to the Company
and/or its designee(s) good title to such of the Incentive Shares to
be transferred, free and clear of all pledges, security interests,
liens, charges, encumbrances, equities, claims and options of whatever
nature other than those imposed under this Agreement, and concurrently
with such delivery, the Company and/or its designee(s) shall deliver
to the seller the full amount of the Option Purchase Price for such
Incentive Shares in cash or by certified or bank cashier's check.
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(ii) Option Purchase Price. (A) If the Management Investor shall
be terminated by the Company without Cause, resign with Good Reason or
shall cease to be employed by the Company by reason of death, normal
retirement at age 65 or more under the Company's normal retirement
policies, or temporary or permanent disability, the "Option Purchase
Price" for the Incentive Shares to be purchased from such Management
Investor or such Management Investor's Permitted Transferees pursuant
to the Purchase Option (such number of Incentive Shares being the
"Purchase Number") shall equal the price calculated as set forth in
the table below opposite the applicable Termination Date of such
Management Investor:
If the Termination Date Occurs: Option Purchase Price
On or prior to the first anniversary of Adjusted Cost Price multiplied by
the Closing the Purchase Number
After the first anniversary of the Adjusted Cost Price multiplied by
Closing, and on or prior to the second 80% of the Purchase Number, plus
anniversary of the Closing Adjusted Book Value Price
multiplied by 20% of the Purchase
Number
After the second anniversary of the Adjusted Cost Price multiplied by
Closing, and on or prior to the third 60% of the Purchase Number, plus
anniversary of the Closing Adjusted Book Value Price
multiplied by 40% of the Purchase
Number
After the third anniversary of the Adjusted Cost Price multiplied by
Closing, and on or prior to the fourth 40% of the Purchase Number, plus
anniversary of the Closing Adjusted Book Value Price
multiplied by 60% of the Purchase
Number
After the fourth anniversary of the Adjusted Cost Price multiplied by
Closing, and on or prior to the fifth 20% of the Purchase Number, plus
anniversary of the Closing Adjusted Book Value Price
multiplied by 80% of the Purchase
Number
(B) If the Management Investor shall cease to be employed by the
Company (whether as a consultant, director or employee) for any reason
other than those set forth in clause (A) of this Section 7.2(a)(ii)
(including, but not limited to, as the result of voluntary resignation
(other than for Good Reason) or termination for Cause), the Option
Purchase Price for all Incentive Shares to be purchased from the
Management Investor (and such Management Investor's Permitted
Transferees) pursuant to the Purchase Option shall equal the Adjusted
Cost Price multiplied by the Purchase Number.
(C) As used herein:
(1) "Adjusted Cost Price" for each Incentive Share means the
price paid by such Management Investor per share (adjusted for
any stock dividend payable upon, or subdivision or combination
of, the Common Stock); and
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(2) "Adjusted Book Value Price" for each Incentive Share
means the greater of (i) the Adjusted Cost Price or (ii) the fair
market value of such Incentive Share, as determined in good
faith, without regard to any discount applicable to a minority
holding or due to lack of liquidity, by the Board of Directors of
the Company and provided, however, that if any of the Common
Stock is traded on a national securities exchange or reported on
the National Association of Securities Dealers, Inc. Automated
Quotation System, then the "Adjusted Book Value Price" shall
equal for each Incentive Share the closing price per share of
Common Stock on such exchange or as so reported on the Management
Investor's Termination Date.
7.3. Company's Right of First Refusal. If a Management Investor or such
Management Investor's Permitted Transferees proposes to sell any or all of such
Management Investor's or Permitted Transferee's Incentive Shares to a third
party in a bona fide transaction (except for sales pursuant to Sections 5.7 or
5.8), and provided such transaction is permitted under any applicable
restrictions set forth in Sections 4.5 and 7.1 herein, the Management Investor,
or such Management Investor's Permitted Transferees, may not Transfer such
Incentive Shares without first offering to sell such Incentive Shares to the
Company pursuant to this Section 7.3.
The Management Investor, or such Management Investor's Permitted
Transferees, shall deliver a written notice (a "Sale Notice") to the Company
describing in reasonable detail the Incentive Shares being offered, the name of
the offeree, the purchase price requested and all other material terms of the
proposed Transfer. Upon receipt of the Sale Notice, the Company, or a designee
selected by a two-thirds majority of the members of the Board of Directors of
the Company, shall have the right and option to purchase all (but not less than
all) of the Incentive Shares being offered at the price and on the terms of the
proposed Transfer set forth in the Sale Notice. Within 10 days after receipt of
the Sale Notice, the Company shall notify such Management Investor, or such
Management Investor's Permitted Transferees, whether or not it or its designee
wishes to purchase any or all of the offered Incentive Shares.
If the Company or its designee elects to purchase the offered Incentive
Shares, the closing of the purchase and sale of such Incentive Shares shall be
held at the place and on the date established by the Company in its notice to
the Management Investor, or such Management Investor's Permitted Transferees, in
response to the Sale Notice, which in no event shall be less than ten or more
than 30 days from the date of such notice. In the event that the Company or its
designee does not elect to purchase all the offered Incentive Shares, the
Management Investor, or such Management Investor's Permitted Transferees, may,
subject to the other provisions of this Agreement, Transfer the offered
Incentive Shares to the offeree specified in the Sale Notice at a price no less
than the price specified in the Sale Notice and on other terms no more favorable
to the transferee(s) thereof than specified in the Sale Notice during the
180-day period immediately following the last date on which the Company could
have elected to purchase the offered Incentive Shares. Any such Incentive Shares
not transferred within such 180-day period will be subject to the provisions of
this Section 7.3 upon subsequent Transfer.
7.4. Involuntary Transfers. In the event that Incentive Shares owned by any
Management Investor, or such Management Investor's Permitted Transferees, shall
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<PAGE>
be subject to sale or other Transfer (the date of such sale or Transfer shall
hereinafter be referred to as the "Transfer Date") by reason of (i) bankruptcy
or insolvency proceedings, whether voluntary or involuntary, or (ii) distraint,
levy, execution or other involuntary Transfer, then such Management Investor, or
such Management Investor's Permitted Transferees, shall give the Company written
notice thereof promptly upon the occurrence of such event stating the terms of
such proposed Transfer, the identity of the proposed transferee, the price or
other consideration, if readily determinable, for which the Incentive Shares are
proposed to be transferred, and the number of shares of Common Stock to be
transferred. After its receipt of such notice or, failing such receipt, after
the Company otherwise obtains actual knowledge of such a proposed Transfer, the
Company, or a designee selected by a majority of the members of the Board of
Directors of the Company excluding the affected Management Investor or Permitted
Transferee and any director designated by such Investor, shall have the right
and option to purchase all, but, not less than all of such Incentive Shares
which right shall be exercised by written notice given by the Company to such
proposed transferor within 60 days following the Company's receipt of such
notice or, failing such receipt, the Company's obtaining actual knowledge of
such proposed Transfer. Any purchase pursuant to this Section 7.4 shall be at
the price and on the terms applicable to such proposed transfer. If the nature
of the event giving rise to such involuntary Transfer is such that no readily
determinable consideration is to be paid for the Transfer of the Incentive
Shares, the price to be paid by the Company shall be the Option Purchase Price
that would have been applicable hereunder pursuant to Section 7.2(a)(ii)(A) had
the date of such proposed Transfer of the Incentive Shares been the Management
Investor's Termination Date. The closing of the purchase and sale of such
Incentive Shares shall be held at the place and the date to be established by
the Company, which in no event shall be less than ten or more than 60 days from
the date on which the Company gives notice of its election to purchase the
Incentive Shares. At such closing, the Management Investor, or such Management
Investor's Permitted Transferees, shall deliver the certificates evidencing the
number of shares of Common Stock to be purchased by the Company, accompanied by
stock powers duly endorsed in blank or duly executed instruments of transfer,
and any other documents that are necessary to transfer to the Company good title
to such of the securities to be transferred, free and clear of all pledges,
security interests, liens, charges, encumbrances, equities, claims and options
of whatever nature other than those imposed under this Agreement, and
concurrently with such delivery, the Company shall deliver to the Management
Investor, or such Management Investor's Permitted Transferees, the full amount
of the purchase price for such Incentive Shares in cash by certified or bank
cashier's check.
7.5. Lapse. The provisions of Sections 7.1, 7.3 and Section 7.4 shall
terminate immediately after consummation of an Approved Sale.
ARTICLE VIII
REGISTRATION RIGHTS; PREFERRED STOCKHOLDERS AGREEMENT;
INDEMNIFICATION
8.1. Registration Rights. The Investors shall have registration rights with
respect to the Shares as set forth in the Registration Rights Agreement among
the parties hereto and dated as of the date hereof, the form of which is
attached hereto as Exhibit D (the "Registration Rights Agreement"). Each of the
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<PAGE>
Investors and their Permitted Transferees agrees not to effect any public sale
or distribution of any securities of the Company during the periods specified in
the Registration Rights Agreement, except as permitted by the Registration
Rights Agreement, and each such Investor agrees to be bound by the rights of
priority to participate in offerings as set forth therein.
8.2. Preferred Stockholders Agreement. The Investors shall have the rights
with respect to the Preferred Stock set forth in the Preferred Stockholders
Agreement, dated of even date herewith, by and among the Investors who hold
Preferred Stock and attached hereto as Exhibit E (the "Preferred Stockholders
Agreement"). Each Investor party to the Preferred Stockholders Agreement
acknowledges and agrees that a breach by such Investor of the covenants and
obligations applicable to such Investor under the Preferred Stockholders
Agreement shall constitute a breach of such Investor's covenants and obligations
under this Agreement.
8.3. Indemnification for Certain Liabilities. Each Continuing Management
Investor acknowledges that, on the Closing Date and in connection with the
Closing of the transactions contemplated by this Agreement, Royster-Clark
effected a reverse stock split (the "Reverse Stock Split") pursuant to which the
10,097.732 outstanding shares of Common Stock held of record by the
Royster-Clark Employee Savings and Investment Plan (the "ESOP") were converted
into the right to receive $2,877,853.62 as cash in lieu of fractional shares.
Each Continuing Management Investor other than Jenkins and his Family Members,
severally and not jointly and in proportion to such Management Investor's
relative Common Stock ownership percentage, shall indemnify and hold harmless
the Company, 399 Venture and Royster-Clark, and their respective officers,
directors, shareholders, employees and Affiliates from and against any claims by
the ESOP, the trust of the ESOP or any ESOP participant or beneficiary of any
such participant, for any payments following the Closing Date in connection with
the Reverse Stock Split, provided, that the Continuing Management Investors
(other than Jenkins and his Family Members) aggregate liability pursuant to this
Section 8.3 shall not exceed the $184,658.00 contributed by the Continuing
Management Investors to an escrow account established for such purpose as of the
Closing Date (together with any interest accrued thereon). A Continuing
Management Investor's relative Common Stock ownership percentage shall be a
fraction, the numerator of which is the number of shares of Common Stock issued
by the Company to such Continuing Management Investor at the Closing and the
denominator of which is the number of shares of Common Stock issued by the
Company to all of the Continuing Management Investors at the Closing.
ARTICLE IX
MISCELLANEOUS
9.1. Purchaser Representative. If the Company or any Investor enters into
any negotiation or transaction, including an Approved Sale, for which Rule 506
(or any similar rule then in effect) promulgated by the SEC under the Securities
Act may be available with respect to such negotiation or transaction (including
a merger, consolidation or other reorganization), each Management Investor will,
at the request of the Company, appoint a purchaser representative (as such term
is defined in Rule 501(h) promulgated by the SEC under the Securities Act)
reasonably acceptable to the Company. If any Management Investor appoints the
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<PAGE>
purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any Management Investor declines
to appoint the purchaser representative designated by the Company such
Management Investor will appoint another purchaser representative (reasonably
acceptable to the Company), and such Management Investor will be responsible for
the fees of the purchaser representative so appointed.
9.2. Section 83(b) Elections. Each Management Investor shall make the
election (the "83(b) Election") to include in such Management Investor's income,
in the year such Management Investor receives the Incentive Shares, the excess,
if any, of the fair market value of the Incentive Shares on the date such shares
are acquired (determined without regard to restrictions which lapse) over the
price paid per Incentive Share, pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended, in the manner and within the time period
specified by the regulations promulgated thereunder. EACH MANAGEMENT INVESTOR
ACKNOWLEDGES THAT (1) SUCH MANAGEMENT INVESTOR ALONE IS RESPONSIBLE FOR FILING
WITH THE INTERNAL REVENUE SERVICE, BY THE APPLICABLE DEADLINE, ALL APPLICABLE
FORMS REQUIRED TO EFFECT THE 83(B) ELECTION, (2) NO EXTENSION OF THE 83(B)
ELECTION DEADLINE WILL BE AVAILABLE UNDER LAW AND (3) ADVERSE TAX CONSEQUENCES
MAY RESULT TO SUCH MANAGEMENT INVESTOR IF THE 83(B) ELECTION IS NOT TIMELY MADE.
9.3. Amendment and Modification. This Agreement may be amended or modified,
or any provision hereof may be waived, provided that such amendment,
modification or waiver is set forth in a writing executed by (i) the Company,
(ii) 399 Venture (so long as 399 Venture and its Permitted Transferees (other
than Permitted Transferees pursuant to Section 4.5 (d)(iii)) own in the
aggregate at least 5% of the outstanding Common Stock on a fully diluted basis),
(iii) Jenkins (so long as Jenkins and his Permitted Transferees (other than
Permitted Transferees pursuant to Section 4.5 (d)(iii)) own in the aggregate at
least 5% of the outstanding Common Stock on a fully diluted basis) and (iv) the
holders of a majority of the outstanding Common Stock on a fully diluted basis
(including Shares owned by 399 Venture and its Affiliates) held by the
Investors; provided, however, that without the approval of the holders of a
majority of the outstanding Common Stock then held by Management Investors, (A)
the provisions of this Agreement cannot be amended to treat Management Investors
differently than the other Investors and (B) the provisions of Sections 5.6, 9.3
and Article VII of this Agreement may not be amended or modified to the
detriment of Management Investors. No course of dealing between or among any
Persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any Person under or by reason of this Agreement.
9.4. Waiver of Fiduciary Duties and Corporate Opportunity; Acknowledgment.
(a) Nothing in this Agreement shall be construed so as to limit the
ability of 399 Venture, Citicorp Venture Capital Ltd. or any of their
respective Affiliates to make investments in any other business entity
(including without limitation a business entity that competes with the
Company) in the ordinary course of their respective businesses.
(b) Without limiting the generality of the above, to the fullest
extent permitted by any applicable law, the doctrine of corporate
opportunity, or any other analogous doctrine, shall not apply with respect
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<PAGE>
to 399 Venture or any of its respective affiliates. In particular, (i) 399
Venture and its Affiliates shall have the right to engage in business
activities, whether or not in competition with the Company or the Company's
business activities, without consulting any Investor or any other
stockholder and (ii) 399 Venture shall have no obligation to any Investor
or any other stockholder with respect to any opportunity to acquire
property or make investments at any time.
(c) Each party to this Agreement expressly acknowledges and agrees
that 399 Venture's representations, covenants and other agreements
contained herein apply only to 399 Venture and Citicorp Venture Capital
Ltd., and not to any of their respective affiliates or shareholders,
including, without limitation, Citibank N.A., Citicorp or CitiGroup.
9.5. Survival. All representations, warranties, covenants and agreements
set forth in this Agreement will survive the execution and delivery of this
Agreement, the Closing, and the consummation of the transactions contemplated
hereby and by the Exchange Agreement, regardless of any investigation made by an
Investor or on its behalf.
9.6. Successors and Assigns; Entire Agreement. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns and
executors, administrators and heirs. This Agreement, together with the
Registration Rights Agreement and the Preferred Stockholders Agreement, and each
other agreement referenced herein which contains terms incorporated by reference
into this Agreement, sets forth the entire agreement and understanding among the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
9.7. Separability. In the event that any provision of this Agreement or the
application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
9.8. Notices. All notices provided for or permitted hereunder shall be made
(except as otherwise provided herein) in writing by hand delivery, registered or
certified first-class mail, facsimile (with confirmation of receipt) or air
courier guaranteeing overnight delivery to the other party at the following
addresses (or at such other address as shall be given in writing by any party to
the others):
If to the Company, to:
Royster-Clark Group, Inc.
Royster-Clark, Inc.
10 Rockefeller Plaza Suite 1120
New York, NY 10020
Attention: Francis P. Jenkins, Jr.
Fax (212) 332-2999
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<PAGE>
with required copies to:
399 Venture Partners, Inc.
399 Park Avenue
14th Floor
New York, New York 10043
Telecopy number: (212) 888-2940
Attention: Thomas F. McWilliams
Royster-Clark Group, Inc.
Royster-Clark, Inc.
10 Rockefeller Plaza Suite 1120
New York, NY 10020
Attention: Randolph G. Abood, Esq.
Fax (212) 332-2999
If to 399 Venture, to:
399 Venture Partners, Inc.
399 Park Avenue
14th Floor
New York, New York 10043
Telecopy number: (212) 888-2940
Attention: Thomas F. McWilliams
with a required copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Telecopy number: (215) 994-2222
Attention: Craig L. Godshall
If to the Management Investors or any of them, to the business addresses
(or residence address if no business address is indicated) listed on the
signature page of this Agreement or joinder to this Agreement.
All such notices shall be deemed to have been duly given: when delivered by
hand, if personally delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if sent by
facsimile; and on the next business day, if timely delivered to an air courier
guaranteeing overnight delivery.
9.9. Governing Law. The validity, performance, construction and effect of
this Agreement shall be governed by and construed in accordance with the
internal law of Delaware, without giving effect to principles of conflicts of
law.
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<PAGE>
9.10. Waiver of Jury Trial. Each of the parties to this Agreement waives,
to the fullest extent permitted by law, any right to trial by jury of any claim,
demand, action or cause of action (i) arising under this Agreement or (ii) in
any way connected with or related or incidental to the dealings of the parties
hereto in respect of this Agreement or any of the transactions related hereto,
in each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise. Each of the parties to this Agreement agrees and
consents that any such claim, demand, action or cause of action shall be decided
by court trial without a jury and that the parties to this Agreement may file an
original counterpart of a copy of this Agreement with any court as written
evidence of the consent of the parties hereto to the waiver of the right to
trial by jury.
9.11. ACKNOWLEDGMENT OF MANAGEMENT INVESTORS. EACH MANAGEMENT INVESTOR
ACKNOWLEDGES THAT SUCH MANAGEMENT INVESTOR IS A SOPHISTICATED BUSINESSPERSON WHO
WAS ADEQUATELY REPRESENTED BY COUNSEL DURING NEGOTIATIONS REGARDING THE
PROVISIONS OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE PROVISIONS
RESTRICTING THE TRANSFER OF SECURITIES BY MANAGEMENT INVESTORS SET FORTH IN
SECTION 4.5 AND ARTICLE VII, AND SPECIFICALLY SECTION 7.2, WHICH SETS FORTH THE
COMPANY'S PURCHASE OPTION WITH RESPECT TO INCENTIVE SHARES. EACH MANAGEMENT
INVESTOR ACKNOWLEDGES THAT ANY PROPERTY RIGHT THAT SUCH MANAGEMENT INVESTOR HAS
IN INCENTIVE SHARES IS SUBJECT IN ALL RESPECTS TO THE COMPANY'S PRIOR RIGHT TO
REPURCHASE SUCH INCENTIVE SHARES AS PROVIDED IN ARTICLE VII. EACH MANAGEMENT
INVESTOR FURTHER ACKNOWLEDGES THAT IF THE COMPANY EXERCISES ITS PURCHASE OPTION
SUCH MANAGEMENT INVESTOR'S INCENTIVE SHARES COULD BE PURCHASED BY THE COMPANY AT
A PRICE THAT IS LESS THAN THE FAIR MARKET VALUE OF SUCH SECURITIES AT THE TIME
OF SUCH EXERCISE.
9.12. No Effect on Employment. Nothing herein contained shall confer on any
Management Investor the right to remain in the employ of the Company or any of
its subsidiaries or Affiliates.
9.13. Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.
9.14. Counterparts. This Agreement may be executed in two or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same instrument. Jenkins is signing this
Agreement in his own capacity and for his Family Members who hold shares of
Royster-Clark Inc.
9.15. Further Assurances. Each party shall cooperate and take such action
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
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<PAGE>
9.16. Termination. Unless sooner terminated in accordance with its terms,
this Agreement shall terminate on April 22, 2009.
9.17. Remedies. In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The parties
agree that the provisions of this Agreement shall be specifically enforceable,
it being agreed by the parties that the remedy at law, including monetary
damages, for breach of such provision will be inadequate compensation for any
loss and that any defense in any action for specific performance that a remedy
at law would be adequate is waived.
9.18. Party No Longer Owning Securities. If a party hereto ceases to own
any Securities, such party will no longer be deemed to be an Investor or
Management Investor for purposes of this Agreement.
9.19. Pronouns. Whenever the context may require, any pronouns used herein
shall be deemed also to include the corresponding neuter, masculine or feminine
forms.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase and Holders Agreement as of the day and year first above written.
ROYSTER-CLARK GROUP, INC.
By: /s/ Francis P. Jenkins, Jr.
---------------------------------------
Name: Francis P. Jenkins, Jr.
Title: Chief Executive Officer
399 VENTURE PARTNERS, INC.
By: /s/ Thomas F. McWilliams
---------------------------------------
Name: Thomas F. McWilliams
Title: Vice President
MANAGEMENT INVESTORS:
/s/ Francis P. Jenkins, Jr.
------------------------------------
Name: Francis P. Jenkins, Jr.
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Randolph G. Abood
------------------------------------
Name: Randolph G. Abood
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
40
<PAGE>
/s/ G. Kenneth Moshenek
------------------------------------
Name: G. Kenneth Moshenek
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Walter Vance
------------------------------------
Name: Walter Vance
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Max Baer
------------------------------------
Name: Max Baer
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Alan S. Fitter
------------------------------------
Name: Alan S. Fitter
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
41
<PAGE>
/s/ Martha B. Shirley
------------------------------------
Name: Martha B. Shirley
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Martha B. Shirley
------------------------------------
Name: Martha B. Shirley as Trustee of the
Shirley Irrevocable Trust for Martha
/s/ Mary Shirley Swiney
------------------------------------
/s/ James A. Shirley
------------------------------------
Name: Mary Shirley Swiney and James A. Shirley
as Co-Trustees of the Shirley
Irrevocable Sprinkle Trust
42
<PAGE>
/s/ Steven A. Sheline
------------------------------------
Name: Steven Sheline
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Jane Sheline
------------------------------------
Name: Jane Sheline
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
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<PAGE>
Schedule 1-A(A)
Continuing Management Investors
Amount and Kind of
Royster-Clark Securities
Name of Management Being Exchanged Amount and Kind of
Investor ("Rollover Securities") Exchange Shares
- ------------------ ------------------------ ------------------
<PAGE>
Section 1-A(B)
Redemption by Royster-Clark
Amount and Kind of
Securities of
Royster-Clark Submitted
Name of Investor for Redemption Cash Redemption Amounts
- ---------------- ----------------------- -----------------------
<PAGE>
Schedule 1-B
Purchasing Management Investors
<PAGE>
Schedule 1-C
Options
Each Exchanged Option shall be exercisable for that kind and number of
securities and that amount of cash (each in the respective proportional amounts)
that would have been received by such Management Investor had he exercised the
Rollover Options immediately prior to the Closing and the Management Redemption
(as defined in the Exchange Agreement).
Each Exchanged Option shall be exercisable until April 22, 2009, and shall
not be terminable by the Company for any reason, terminable upon the death,
disability or termination of employment of such Management Investor, or subject
to any repurchase option by the Company for any reason.
The following table sets forth the name of each Continuing Management
Investor and the number of Exchanged Options to which the terms of this
Agreement and this Schedule 1-C apply.
Name Rollover Options Exercise Price Exchange Options
- ---- ---------------- -------------- ----------------
<PAGE>
EXHIBIT A
RESTRICTED STOCK PURCHASE PLAN
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
ROYSTER-CLARK GROUP, INC.
<PAGE>
EXHIBIT C
BYLAWS
OF
ROYSTER-CLARK GROUP, INC.
<PAGE>
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT E
PREFERRED STOCKHOLDERS AGREEMENT
<PAGE>
EXHIBIT F
FORM OF STOCK OPTION AGREEMENT
PREFERRED STOCKHOLDERS AGREEMENT
PREFERRED STOCKHOLDERS AGREEMENT, dated as of April 22, 1999 (the
"Agreement"), by and among 399 Venture Partners, Inc., a Delaware corporation
("399 Venture"), and the individuals, including Francis P. Jenkins, Jr.
("Jenkins"), signatory hereto and who are designated on Schedule 1 hereto as, or
who later join in this Agreement as, Management Investors (the "Management
Investors"). 399 Venture and the Management Investors and each other person who
becomes a party to this Agreement by executing a joinder hereto are sometimes
referred to hereinafter individually as an "Investor" and collectively as the
"Investors."
Background
A. Royster-Clark Group, Inc., a Delaware corporation (the "Company"), is
among the parties to the Acquisition Agreements, pursuant to which, at the
respective closings of the transactions contemplated by the Acquisition
Agreements (collectively, the "Closing"), all of the outstanding capital stock
of Royster-Clark Inc., a Delaware corporation ("Royster-Clark"), will have been
acquired by the Company in exchange for a combination of securities of the
Company. The Company and the Investors are parties to a Securities Purchase and
Holders Agreement dated as of the date hereof (the "Securities Holders
Agreement") pursuant to which certain of the Investors have agreed, subject to
the terms and conditions set forth therein, to exchange the equity securities of
Royster-Clark for certain equity securities of the Company.
B. As of the Closing, the authorized capital stock of the Company will
consist of shares of (i) Class A Common Stock, no par value ("Class A Common
Stock"), (ii) Class B Common Stock, no par value ("Class B Common Stock," and
collectively with the Class A Common Stock, the "Common Stock"), (iii) 12%
Series A Senior Cumulative Compounding Preferred Stock, par value $.01 per share
("Series A Preferred Stock"), (iv) Series B Junior Preferred Stock, par value
$.01 per share ("Series B Preferred Stock" and collectively with the Series A
Preferred Stock, the "Preferred Stock").
C. After giving effect to the transactions contemplated by the Acquisition
Agreements, each Investor will hold the shares of Series A Preferred Stock and
Series B Preferred Stock set forth opposite such Investor's name on Schedule I
hereto.
D. As used herein, the terms "Series A Preferred Stock" and "Series B
Preferred Stock" shall include all of such securities held by any party hereto,
including all securities of the Company (or a successor to the Company) received
on account of ownership of such securities, including all securities issued in
connection with any merger, consolidation, stock dividend, stock distribution,
stock split, reverse stock split, stock combination, recapitalization,
reclassification, subdivision, conversion or similar transaction in respect
thereof.
E. Pursuant to the Securities Holders Agreement, the Investors and the
Company set forth certain agreements regarding their future relationships and
their rights and
<PAGE>
obligations with respect to the Common Stock. The Investors wish to set forth
herein certain additional agreements regarding their future relationships and
their rights and obligations with respect to the Preferred Stock.
Terms
In consideration of the mutual covenants contained herein and intending to
be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Acquisition Agreements" means (i) the Exchange Agreement dated as of April
22, 1999, among 399 Venture, Jenkins, Royster-Clark and the Company and (ii) the
Securities Holders Agreement.
"Affiliate" has the meaning set forth in Rule 12b-2 of the Rules
promulgated under the Exchange Act.
"Agreement" has the meaning set forth in the Preamble of this Agreement.
"Class A Common Stock" has the meaning set forth in Background Section B of
this Agreement.
"Class B Common Stock" has the meaning set forth in Background Section B of
this Agreement.
"Closing" has the meaning set forth in Background Section A of this
Agreement.
"Common Stock" has the meaning set forth in Background Section B of this
Agreement.
"Company" means Royster-Clark Group, Inc., a Delaware corporation.
"399 Venture" has the meaning set forth in the Preamble of this Agreement.
"Escrow Amount" has the meaning set forth in Section 3.2(c)(i) of this
Agreement.
"Escrow Notice" has the meaning set forth in Section 3.2(c)(ii) of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2
<PAGE>
"Investor" and "Investors" have the meanings set forth in the Preamble of
this Agreement.
"Management Investors" has the meaning set forth in the Preamble of this
Agreement.
"Permitted Transferee" has the meaning set forth in Section 4.5(d) of the
Securities Holders Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, firm, association, joint venture, joint stock company, trust or
other entity, or any government or regulatory administrative or political
subdivision or agency, department or instrumentality thereof.
"Preferred Stock" has the meaning set forth in Background Section B of this
Agreement.
"Public Offering" means a successfully completed firm-commitment
underwritten public offering (other than a Unit Offering, as hereinafter
defined) pursuant to an effective registration statement under the Securities
Act in respect of the offer and sale of shares of Common Stock for the account
of the Company and any stockholder selling shares of Common Stock in such
offering resulting in aggregate net proceeds to the Company of not less than $20
million.
"Required Series A Sale" has the meaning set forth in Section 2.1(a) of
this Agreement.
"Restricted Investor" has the meaning set forth in Section 4.5 of the
Securities Holders Agreement.
"Royster-Clark" has the meaning set forth in Background Section A of this
Agreement.
"Security" has the meaning set forth in Background Section E of the
Securities Holders Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Holders Agreement" has the meaning set forth in Background
Section A of this Agreement.
"Series A Preferred Stock" has the meaning set forth in Background Section
B of this Agreement.
"Series A Seller" has the meaning set forth in Section 2.1(a) of this
Agreement.
"Series B Preferred Stock" has the meaning set forth in Background Section
B of this Agreement.
"Tag-Along Acceptance Notice" has the meaning set forth in Section 3.2(a)
of this Agreement.
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"Tag-Along Right" has the meaning set forth in Section 3.1(a) of this
Agreement.
"Tag-Along Rights Holders" has the meaning set forth in Section 3.1(a) of
this Agreement.
"Tag-Along Sale Notice" has the meaning set forth in Section 3.2(a) of this
Agreement.
"Tag-Along Seller" has the meaning set forth in Section 3.2(a) of this
Agreement.
"Transfer" has the meaning set forth in Section 4.5(b) of the Securities
Holders Agreement.
"Unit Offering" means an underwritten public offering of a combination of
debt securities and equity securities of the Company (or warrants or exchange
rights to purchase equity securities) in which not more than 15% of the gross
proceeds received for the sale of such securities is attributed to such equity
securities.
ARTICLE II
REQUIRED SALES
2.1. Sale of Series A Preferred. (a) If any Restricted Investor (a "Series
A Seller") proposes to sell, other than to a Permitted Transferee (excluding a
Transfer pursuant to Section 4.5(d)(iv)(c), Section 4.5(d)(v) or Section
4.5(d)(vi) of the Securities Holders Agreement), at least a majority of the
outstanding Series A Preferred Stock in an all cash transaction, such Series A
Seller may, at such Series A Seller's option, require the holders of the Series
A Preferred Stock and Series B Preferred Stock to participate in the transaction
on a pro rata basis (based on liquidation value, treating the Series A Preferred
Stock and the Series B Preferred Stock as one class for this purpose) on the
same terms as the proposed transfer (a "Required Series A Sale"). Each
Restricted Investor will take all necessary and desirable actions in connection
with the consummation of a Required Series A Sale, including the execution of
any stock purchase, escrow or other agreement required in connection with such
sale.
(b) The obligations of each of the Investors with respect to a
Required Series A Sale are subject to the satisfaction of the conditions that
upon the consummation of the Required Series A Sale, all of the Restricted
Investors will receive the same form and amount of consideration (based on
liquidation value), or if any holder is given an option as to the form and
amount of consideration to be received, all Restricted Investors will be given
the same option.
2.2. Sales of Common and Preferred. If any Transfer proposed by a Tag-Along
Seller, as set forth in Article III, includes both Preferred Stock and Common
Stock, each Tag-Along Right Holder who elects to exercise his Tag-Along Right
with respect to such Transfer must include in the proposed sale a pro rata
amount of both Common and Preferred Stock and may not elect to exercise such
Tag-Along Right with respect to only one class of Securities.
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<PAGE>
ARTICLE III
TAG-ALONG RIGHTS
3.1. Tag-Along Rights. (a) Except in the case of a Transfer to a Permitted
Transferee (excluding a Transfer pursuant to Section 4.5(d)(iv)(c), Section
4.5(d)(v) or Section 4.5(d)(vi) of the Securities Holders Agreement, no
Restricted Investor will effect a Transfer of shares of Series A or Series B
Preferred Stock unless all other Investors and their Permitted Transferees and
assigns who hold Series A Preferred Stock or Series B Preferred Stock
(collectively, the "Tag-Along Rights Holders") are offered an equal opportunity
(the "Tag-Along Right") to participate in such transaction or transactions on a
pro rata basis (as demonstrated in Section 3.1(b)), as set forth in Section 3.2,
and on identical terms (based on liquidation value treating the Series A
Preferred Stock and Series B Preferred Stock as one class for this purpose).
(b) For purposes of illustration only, assume 399 Venture holds Series
A Preferred Stock valued at $70 million and the Management Investors, in the
aggregate, hold Series A Preferred Stock valued at $20 million and Series B
Preferred Stock valued at $10 million. If 399 Venture proposes to sell $30
million of its Series A Preferred Stock in a transaction subject to Section
3.1(a), and each Investor exercises his Tag-Along Right in full, 399 Venture
would sell $21 million of Series A Preferred Stock and the Management Investors,
in the aggregate, would sell $6 million of Series A Preferred Stock and $3
million of Series B Preferred Stock.
3.2. Tag-Along Procedures. (a) Prior to any sale of Series A or Series B
Preferred Stock subject to these provisions, the seller (the "Tag-Along Seller")
shall deliver (by guaranteed overnight courier service, if available) to the
respective Tag-Along Rights Holders written notice of the proposed sale. Such
notice (the "Tag-Along Sale Notice") shall set forth (i) the number of shares of
Series A or Series B Preferred Stock (the "Tag-Along Shares"), as applicable,
subject to the proposed sale; (ii) the name and address of the proposed
purchaser; and (iii) the proposed amount of consideration and terms and
conditions of payment offered by such proposed purchaser. Each Tag-Along Right
Holder shall have the right to sell a percentage of the Tag-Along Shares equal
to the percentage of the outstanding shares of Preferred Stock then held by such
Tag-Along Right Holder. Each Tag-Along Right Holder may exercise the Tag-Along
Right by delivery of a written notice (the "Tag-Along Acceptance Notice") to the
Tag-Along Seller within ten days of the date the Tag-Along Seller delivered or
caused to be delivered the Tag-Along Sale Notice. The Tag-Along Acceptance
Notice shall state the number of shares of Series A Preferred Stock and/or
Series B Preferred Stock, as applicable, that the Tag-Along Right Holder
proposes to include in the proposed sale, and the number of Tag-Along Shares to
be sold by the Tag-Along Seller shall be reduced by such amount. If no Tag-Along
Acceptance Notice is received during the ten-day period referred to above, the
Tag-Along Seller shall have the right for a 120-day period to effect the
proposed sale on terms and conditions no more favorable to the transferee than
those stated in the Tag-Along Sale Notice.
(b) Each Tag-Along Right Holder other than 399 Venture acknowledges
and agrees that 399 Venture or a Permitted Transferee of 399 Venture may grant
similar "tag-along" rights to other Persons and, in such event, such other
Persons shall be offered
5
<PAGE>
an equal opportunity to participate in such transaction or transactions to the
same extent as such Tag-Along Rights Holders hereunder and shall be included in
the calculation of the pro rata basis upon which such Tag-Along Rights Holders
may participate in such transaction or transactions.
(c) (i) Notwithstanding the requirements of this Section 3.2, a
Tag-Along Seller may sell Series A or Series B Preferred Stock at any time
without complying with the requirements of Section 3.2(a) so long as the
Tag-Along Seller deposits into escrow with an independent third party at the
time of sale that amount of consideration received in the sale equal to the
"Escrow Amount." As used herein, the "Escrow Amount" shall equal that amount of
consideration which all Tag-Along Rights Holders would have been entitled to
receive if they had the opportunity to participate in the sale on a pro rata
basis (based on liquidation value, treating the Series A Preferred Stock and the
Series B Preferred Stock as one class for this purpose), determined as if each
Tag-Along Right Holder (A) delivered a Tag-Along Notice to the Tag-Along Seller
in the time period set forth in Section 3.2(a) and (B) proposed to include all
applicable securities of such Tag-Along Right Holder in such sale.
(ii) The Tag-Along Seller shall have delivered or cause to be
delivered (by guaranteed overnight courier service, if available) to the
Tag-Along Rights Holders written notice of the proposed sale pursuant to this
Section 3.2(c) no later than the date of such sale (the date of such delivery,
the "Escrow Delivery Date"). Such notice (the "Escrow Notice") shall set forth
the information required in the Tag-Along Sale Notice, and in addition, such
notice shall state the name of the escrow agent and, if the consideration (in
whole or in part) for the sale was cash, then the account number of the escrow
account. Each Tag-Along Right Holder may exercise the tag-along right by
delivery (by guaranteed overnight courier service, if available) to the
Tag-Along Seller, within ten days of the Escrow Delivery Date, of (A) a written
notice specifying the number of shares of Series A and/or Series B Preferred
Stock, as applicable, such Tag-Along Right Holder proposes to sell; and (B) the
certificates for such Preferred Stock, with stock powers duly endorsed in blank
and with signatures guaranteed.
(iii) Promptly after the expiration of the tenth day after the
Escrow Delivery Date, (A) the Tag-Along Seller shall purchase that number of
shares of Series A and/or, Series B Preferred Stock, as applicable, as the
Tag-Along Seller would have been required to include in the sale had the
Tag-Along Seller complied with the provisions of Section 3.2(a), (B) all shares
of Preferred Stock not required to be purchased by the Tag-Along Seller shall be
returned to the Tag-Along Rights Holders thereof and (C) all funds and other
consideration held in escrow shall be released to the Tag-Along Seller. If the
Tag-Along Seller received consideration other than cash in such Tag-Along
Seller's sale, the Tag-Along Seller shall purchase the shares of Preferred Stock
tendered by paying to the Tag-Along Rights Holders non-cash consideration and
cash in the same proportion as received by the Tag-Along Seller in the sale.
(iv) Notwithstanding any other provision of this Agreement if any
Transfer is a Transfer (a "Regulatory Sale") made to cure a Regulatory Problem,
as set forth in Section 5.3 of the Securities Holders Agreement, each Tag-Along
Right Holder shall have the right to sell to the proposed transferee the same
percentage of the total number of shares of Preferred Stock outstanding then
owned by such Tag-Along Right Holder as the percentage of the total number of
shares of Preferred Stock outstanding then owned by the Tag-Along Seller. If
6
<PAGE>
the total number of shares of Preferred Stock proposed to be Transferred in a
Regulatory Sale by the Tag-Along Seller and those Tag-Along Rights Holders
exercising their Tag-Along Rights exceeds the maximum number of shares of
Preferred Stock that the proposed transferee is willing to purchase or otherwise
acquire, then the number of shares of Preferred Stock to be Transferred shall be
allocated among the Tag-Along Seller and such Tag-Along Rights Holders (with
rounding to avoid fractional shares) in proportion to the number of outstanding
shares that each of them then owns; provided, however, that in no event shall
the number of shares of Preferred Stock to be Transferred by 399 Venture or its
Affiliates be reduced below that number necessary to cure the Regulatory Problem
in question.
3.3. Exempted Transactions. Notwithstanding anything in this Article III to
the contrary, a Tag-Along Seller may make any of the following sales without
offering the Tag-Along Rights Holders the opportunity to participate: (a) sales
to a Permitted Transferee (other than pursuant to Section 4.5(d)(iv)(C), Section
4.5(d)(v) or Section 4.5(d)(vi) of the Securities Holders Agreement); (b) sales
pursuant to an effective registration statement under the Securities Act; (c)
sales pursuant to a Required Series A Sale; (d) sales, other than those
specified in the foregoing clauses (a) through (c), which in the aggregate do
not exceed 5% of the outstanding Preferred Stock held by the Tag-Along Seller as
of the date hereof. In addition, any repurchase of Preferred Stock by the
Company pursuant to Section 4.3 shall not be subject to this Article III.
3.4. Termination of Tag-Along Rights. The Tag-Along Rights provided
pursuant to this Article III shall terminate upon the earlier of (i) a Public
Offering or sale of the Company; and (ii) the day after the date on which 399
Venture and its Permitted Transferees own less than 5% of the Common Stock owned
by 399 Venture on the date of the Closing.
ARTICLE IV
Additional covenants
4.1. Joinder. No Restricted Investor shall make any Transfer of Preferred
Stock unless the transferee executes an agreement pursuant to which such
transferee agrees to be bound by the terms and provisions of this Agreement
applicable to the transferor. Any purported Transfer in violation of this
Agreement shall be null and void and of no force and effect and the purported
transferee shall have no rights or privileges in or with respect to the Company.
4.2. Legend. All certificates representing Preferred Stock shall bear the
following legends, in addition to any other legend required under applicable
law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS A
REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS WITH RESPECT TO SUCH SHARES IS EFFECTIVE OR UNLESS THE COMPANY IS IN
7
<PAGE>
RECEIPT OF AN OPINION OF COUNSEL SATISFACTORY TO IT TO THE EFFECT THAT SUCH
SHARES MAY BE SOLD WITHOUT REGISTRATION UNDER THE ACT AND SUCH LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE
TERMS AND CONDITIONS OF A PREFERRED STOCKHOLDERS AGREEMENT BY AND AMONG THE
HOLDERS SPECIFIED THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY. THE SALE, TRANSFER OR OTHER DISPOSITION OF
THE SECURITIES IS SUBJECT TO THE TERMS OF SUCH AGREEMENT AND THE SECURITIES
ARE TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH.
4.3. Future Sales. (a) Each Management Investor understands and agrees
that 399 Venture may in the future transfer, subject to the terms and conditions
of this Agreement, shares of Preferred Stock to a third party. In addition,
future investors in the Company may receive debt securities or preferred stock
senior in liquidation preference and dividend payment rights, with a higher
dividend rate or other terms more favorable than those of the Preferred Stock.
(b) Each Management Investor understands and agrees that 399 Venture
may elect to transfer, in whole or in part, the $10,000,000 subordinated note
issued to 399 Venture at the Closing (the "Subordinated Note"), and 399 Venture
shall have the right to transfer the Subordinated Note, in whole or in part, to
any Person. In connection with such transfer, 399 Venture may elect to have the
Company repurchase part or all of the Subordinated Note and reissue the
aggregate amount so repurchased to such Person designated by 399 Venture, either
as shares of Series A Preferred Stock or as an additional Subordinated Note, as
399 Venture may designate in writing. No Tag-Along Rights of any Investors shall
apply to the transactions described in this Section 4.3(b).
(c) Each Management Investor understands and agrees that in the
future, in addition to the provisions of Section 4.3(b), 399 Venture may elect
to transfer, in whole or in part, the equity or debt securities held by 399
Venture, and 399 Venture may elect to so transfer such securities by requiring
the Company (i) to repurchase or redeem the securities designated by 399 Venture
to be repurchased or redeemed and (ii) to reissue to such Person or Persons
designated by 399 Venture in writing the aggregate amount so repurchased or
redeemed by the Company from 399 Venture. No Tag-Along Rights of any Investors
pursuant to Article III shall apply to the foregoing transfers; however, to the
extent that the Persons designated by 399 Venture in the foregoing clause (ii)
are not an Affiliate of 399 Venture or any fund organized by an Affiliate of 399
Venture, each Investor who would have been a Tag-Along Rights Holder had Article
III applied to the foregoing transactions shall have the right to require 399
Venture to purchase that number of shares of Series A Preferred Stock from such
Investor as 399 Venture would have been required to include in the transfer had
the transfer been subject to Article III.
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(d) If 399 Venture shall propose the sale of additional debt or equity
securities by the Company to any Person and the Board of Directors should fail
to approve such sale, such sale, the terms and issuance of such securities, and
the use of proceeds may be approved by the vote of the holders of a majority of
the outstanding Class A Common Stock, such vote to be taken upon ten days
written notice to the holders of the Class A Common Stock. To the extent that
the Company uses the proceeds of such sale to repurchase any of its equity
securities, each holder of Preferred Stock may, with respect to such repurchase,
exercise the Tag-Along Right set forth in Article III, pursuant to the
procedures set forth in Section 3.2, and any additional tag-along rights which
such holder may have. If any holder of Preferred Stock does not exercise his or
its Tag-Along Right in full, 399 Venture shall have right to assume such right
with respect to the number of unpurchased shares.
(e) If the Board of Directors, in connection with a proposed
acquisition by the Company or its subsidiaries, shall approve the issuance of an
additional series of Preferred Stock having rights to dividends or distributions
upon liquidation or winding up which are senior to or on parity with those of
the Series B Preferred Stock, then, to the extent the consent of the holders of
the Series B Preferred Stock shall be required pursuant to the Company's
certificate of incorporation or applicable law, each holder of Series B
Preferred Stock hereby agrees to vote all of such shares held by such holder in
favor of such proposed issuance.
ARTICLE 5
MISCELLANEOUS
5.1. Amendment and Modification. This Agreement may be amended or modified,
or any provision hereof may be waived, provided that such amendment,
modification or waiver is set forth in a writing executed by (i) 399 Venture (so
long as 399 Venture and its Permitted Transferees (other than Permitted
Transferees pursuant to Section 4.5(d)(iii) of the Securities Holders Agreement)
own in the aggregate at least 5% of the outstanding Preferred Stock on a fully
diluted basis), (ii) in the case of amendments, modifications or waiver which
relate to or affect the rights, benefits or obligations of holders of Series A
Preferred Stock, the holders of a majority of the outstanding Series A Preferred
Stock, and (iii) in the case of amendments, modifications or waivers which
relate to or affect the rights, benefits or obligations of holders of Series B
Preferred Stock, the holders of a majority of the outstanding Series B Preferred
Stock. No course of dealing between or among any Persons having any interest in
this Agreement will be deemed effective to modify, amend or discharge any part
of this Agreement or any rights or obligations of any Person under or by reason
of this Agreement.
5.2. Survival of Representations and Warranties. All representations,
warranties, covenants and agreements set forth in this Agreement will survive
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and by the Acquisition Agreements, regardless
of any investigation made by an Investor or on its behalf.
5.3. Successors and Assigns; Entire Agreement. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns and
executors, administrators and heirs. This
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Agreement, together with the Acquisition Agreements, sets forth the entire
agreement and understanding among the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
5.4. Separability. In the event that any provision of this Agreement or the
application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
5.5. Notices. All notices provided for or permitted hereunder shall be made
(except as otherwise provided herein) in writing by hand delivery, registered or
certified first-class mail, telecopier or air courier guaranteeing overnight
delivery to the other party at the following addresses (or at such other address
as shall be given in writing by any party to the others):
If to 399 Venture, to:
399 Venture Partners, Inc.
399 Park Avenue
14th Floor
New York, New York 10043
Telecopy number: (212) 888-2940
Attention: Thomas F. McWilliams
with a required copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Telecopy number: (215) 994-2222
Attention: Craig L. Godshall
If to the Management Investors or any of them, to the business addresses
(or residence address if no business address is indicated) listed on the
signature page of this Agreement or joinder to this Agreement.
All such notices shall be deemed to have been duly given: when delivered by
hand, if personally delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
5.6. Governing Law. The validity, performance, construction and effect of
this Agreement shall be governed by and construed in accordance with the
internal law of Delaware, without giving effect to principles of conflicts of
law.
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5.7. Waiver of Jury Trial. Each of the parties to this Agreement waives, to
the fullest extent permitted by law, any right to trial by jury of any claim,
demand, action or cause of action (i) arising under this Agreement or (ii) in
any way connected with or related or incidental to the dealings of the parties
hereto in respect of this Agreement or any of the transactions related hereto,
in each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise. Each of the parties to this Agreement agrees and
consents that any such claim, demand, action or cause of action shall be decided
by court trial without a jury and that the parties to this Agreement may file an
original counterpart of a copy of this Agreement with any court as written
evidence of the consent of the parties hereto to the waiver of the right to
trial by jury.
5.8. ACKNOWLEDGMENT OF MANAGEMENT INVESTORS. EACH MANAGEMENT INVESTOR
ACKNOWLEDGES THAT SUCH MANAGEMENT INVESTOR IS A SOPHISTICATED BUSINESSPERSON WHO
WAS ADEQUATELY REPRESENTED BY COUNSEL DURING NEGOTIATIONS REGARDING THE
PROVISIONS OF THIS AGREEMENT.
5.9. No Effect on Employment. Nothing herein contained shall confer on any
Management Investor the right to remain in the employ of the Company or any of
its subsidiaries or Affiliates.
5.10. Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.
5.11. Counterparts. This Agreement may be executed in two or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same instrument.
5.12. Further Assurances. Each party shall cooperate and take such action
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
5.13. Remedies. In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The parties
agree that the provisions of this Agreement shall be specifically enforceable,
it being agreed by the parties that the remedy at law, including monetary
damages, for breach of such provision will be inadequate compensation for any
loss and that any defense in any action for specific performance that a remedy
at law would be adequate is waived.
5.14. Party No Longer Owning Securities. If a party hereto ceases to own
any Preferred Stock, such party will no longer be deemed to be an Investor or
Management Investor for purposes of this Agreement.
5.15. Pronouns. Whenever the context may require, any pronouns used herein
shall be deemed also to include the corresponding neuter, masculine or feminine
forms.
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IN WITNESS WHEREOF, the parties hereto have executed this Preferred
Stockholders Agreement as of the day and year first above written.
399 VENTURE PARTNERS, INC.
By: /s/ Thomas F. McWilliams
---------------------------------
Name:
Title:
MANAGEMENT INVESTORS:
/s/ Francis P. Jenkins, Jr.
------------------------------------
Name: Francis P. Jenkins
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Randolph G. Abood
------------------------------------
Name: Randolph G. Abood
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ G. Kenneth Moshenek
------------------------------------
Name:G. Kenneth Moshenek
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
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/s/ Walter R. Vance
------------------------------------
Name: Walter R. Vance
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Max Baer
------------------------------------
Name: /s/ Max Baer
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Alan S. Fitter
------------------------------------
Name: Alan S. Fitter
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Steven A. Sheline
------------------------------------
Name: Steven A. Sheline
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Jane Sheline
------------------------------------
Name: Jane A. Sheline
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
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/s/ Martha B. Shirley
------------------------------------
Name: Martha B. Shirley as Trustee of the
Shirley Irrevocable Trust for Martha
/s/ James A. Shirley
------------------------------------
/s/ Mary Shirley Swiney
------------------------------------
Name: Mary Shirley Swiney and James A. Shirley
as Co-Trustees of the Shirley
Irrevocable Sprinkle Trust
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Schedule 1
EXHIBIT 5.1
[DECHERT PRICE & RHOADS LETTERHEAD]
June 21, 1999
Royster-Clark, Inc.
10 Rockefeller Plaza - Suite 1120
New York, NY 10020
Re: Registration Statement on Form S-4
----------------------------------
Dear Gentlemen and Ladies:
We have acted as special counsel to Royster-Clark, Inc., a Delaware
corporation (the "Company"); Royster-Clark Group, Inc., a Delaware corporation;
Royster-Clark AgriBusiness, Inc., a Delaware corporation; Royster-Clark
Nitrogen, Inc., a Delaware corporation; Royster-Clark Hutson, Inc., a Kentucky
corporation; Royster-Clark Resources LLC, a Delaware limited liability company;
Royster-Clark Realty LLC, a Delaware limited liability company; Royster-Clark
AgriBusiness Realty LLC, a Delaware limited liability company; Royster-Clark
Hutson's Realty LLC, a Delaware limited liability company; and Royster-Clark
Nitrogen Realty LLC, a Delaware limited liability company (collectively, the
"Guarantors") in connection with the preparation and filing of the Registration
Statement on Form S-4 filed on June 21, 1999 with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
and the Trust Indenture Act of 1939, as amended (the "Registration Statement").
The Registration Statement relates to the proposed issuance of up to $200
million aggregate principal amount of 10 1/4% First Mortgage Notes due 2009 (the
"Exchange Notes") of the Company and the guarantee thereof (the "Exchange
Guaranties") by each of the Guarantors. The Exchange Notes are to be issued in
exchange for an equal aggregate principal amount of the Company's outstanding
10 1/4% First Mortgage Notes due 2009 (the "Existing Notes" and together with
the Exchange Notes, the "Notes") and the Guarantors' guaranties thereof pursuant
to the Registration Rights Agreement dated April 22, 1999 among the Company, the
Guarantors, Donaldson, Lufkin & Jenrette Securities Corporation and J.P. Morgan
Securities Inc. The Exchange Notes are to be issued pursuant to the terms of an
Indenture, filed as Exhibit 4.01 to the Registration Statement (the
"Indenture"), among the Company, the Guarantors and United States Trust Company
of New York, as Trustee.
We have participated in the preparation of the Registration Statement and
have made such legal and factual examination and inquiry which we have deemed
advisable for the rendering of the opinions set forth below. In making our
examination, we have assumed the
<PAGE>
Royster-Clark, Inc.
June 21, 1999
Page 2
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to all authentic original documents of all
documents submitted to us as copies.
To the extent that it may be relevant to the opinion expressed herein, we
have assumed, for purposes of the opinions expressed herein, that (i) the
Trustee has the power and authority to enter into and perform the Indenture and
(ii) the Indenture has been duly authorized, executed and delivered by the
Trustee and is a legal, valid and binding obligation of the Trustee, enforceable
against the Trustee in accordance with its term. Based on the foregoing, it is
our opinion that:
1. The Exchange Notes have been duly authorized by the Company, and when
the Registration Statement has been declared effective, when the Exchange Notes
have been duly executed, authenticated and delivered in accordance with the
terms of the Indenture, and when the Exchange Notes have been issued and
delivered against the exchange of the Existing Notes in accordance with the
terms set forth in the Prospectus included in the Registration Statement, the
Exchange Notes will constitute legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization or other similar laws affecting creditors' rights or debtors'
obligations and to general principles of equity.
2. The Exchange Guaranties have been duly authorized by the respective
Guarantors, and when the Registration Statement has been declared effective,
when the Exchange Notes have been duly executed, authenticated and delivered in
accordance with the terms of the Indenture, and when the Exchange Notes have
been issued and delivered against the exchange of the Existing Notes in
accordance with the terms set forth in the Prospectus included in the
Registration Statement, the Exchange Guaranties will constitute the legal, valid
and binding obligations of the respective Guarantors, enforceable against the
respective Guarantors in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or
other similar laws affecting creditors' rights or debtors' obligations and to
general principles of equity.
The opinions expressed herein are limited to the laws of the United States
of America, the State of New York and the Delaware General Corporation Law, and
we express no opinion concerning any other laws. We note in this regard that the
laws of jurisdictions other than the laws of the State of New York and the
Delaware General Corporation Law may govern. For purposes of this opinion we
have assumed, with your consent, that the laws of such jurisdictions are
identical to the laws of the State of New York and the Delaware General
Corporation Law.
The opinions expressed herein are rendered for your benefit in connection
with the transaction contemplated herein. The opinions expressed herein may not
be used or relied upon by any other person, nor may this letter or any copies
hereof be furnished to a third party, filed with a governmental agency, quoted,
cited or otherwise referred to without our prior written consent, except as
noted below.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the use of our name in the Prospectus contained
therein under the caption
<PAGE>
Royster-Clark, Inc.
June 21, 1999
Page 3
"Legal Matters." In giving such consent we do not thereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/s/ Dechert Price & Rhoads
U.S. $275,000,000
REVOLVING CREDIT AGREEMENT,
dated as of April 22, 1999,
among
ROYSTER-CLARK, INC.,
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent,
J.P. MORGAN SECURITIES, INC.,
as the Documentation Agent,
and
U.S. BANCORP AG CREDIT, INC.,
as the Administrative Agent.
--------------------------------------
CO-LEAD ARRANGERS AND
CO-BOOK MANAGERS:
DLJ CAPITAL FUNDING, INC.
and
J.P. MORGAN SECURITIES, INC.
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms.......................................................3
1.2. Use of Defined Terms...............................................41
1.3. Cross-References...................................................42
1.4. Accounting and Financial Determinations............................42
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES,
NOTES AND LETTERS OF CREDIT
2.1. Commitments........................................................42
2.1.1. Credit Extensions..................................................42
2.1.2. Lenders Not Permitted or Required to Make Loans....................43
2.1.3. Issuer Not Permitted or Required to Issue Letters of Credit........43
2.2. Reduction of Commitment Amounts....................................44
2.2.1. Optional...........................................................44
2.2.2. Mandatory..........................................................44
2.3. Borrowing Procedures and Funding Maintenance.......................44
2.3.1. Revolving Loans....................................................44
2.3.2. Swing Line Loans...................................................44
2.4. Continuation and Conversion Elections..............................45
2.5. Funding............................................................45
2.6. Issuance Procedures................................................46
2.6.1. Other Lenders'Participation........................................46
2.6.2. Disbursements; Conversion to Revolving Loans.......................46
2.6.3. Reimbursement......................................................47
2.6.4. Deemed Disbursements...............................................47
2.6.5. Nature of Reimbursement Obligations................................48
2.7. Register; Notes....................................................48
2.8. Equalization Transfers.............................................50
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments; Application............................52
3.1.1. Repayments and Prepayments.........................................52
3.1.2. Application........................................................54
i
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Section Page
- ------- ----
3.2. Interest Provisions................................................54
3.2.1. Rates..............................................................54
3.2.2. Post-Maturity Rates................................................54
3.2.3. Payment Dates......................................................55
3.3. Fees...............................................................55
3.3.1. Commitment Fee.....................................................55
3.3.2. The Agents'and the Co-Lead Arrangers' Fees.........................56
3.3.3. Letter of Credit Fee...............................................56
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful.........................................56
4.2. Deposits Unavailable...............................................57
4.3. Increased LIBO Rate Loan Costs, etc................................57
4.4. Funding Losses.....................................................57
4.5. Increased Capital Costs............................................58
4.6. Taxes..............................................................58
4.7. Payments, Computations, etc........................................61
4.8. Sharing of Payments................................................62
4.9. Setoff.............................................................62
4.10. Change of Lending Office...........................................62
4.11. Replacement of Lenders.............................................63
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
5.1. Initial Credit Extension...........................................63
5.1.1. Resolutions, etc...................................................63
5.1.2. Delivery of Notes..................................................64
5.1.3. Transaction Documents..............................................64
5.1.4. Consummation of Transaction, etc...................................64
5.1.5. Intercreditor Agreement............................................65
5.1.6. Closing Date Certificate...........................................65
5.1.7. Subsidiary Guaranty................................................65
5.1.8. Pledge and Security Agreements, etc................................65
5.1.9. UCC Filing Service.................................................67
5.1.10. Solvency Opinion, Solvency Certificate.............................67
5.1.11. Reliance Letters...................................................67
ii
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Section Page
- ------- ----
5.1.12. Borrowing Base Certificate; Compliance Certificate.................67
5.1.13. Financial Information, etc.........................................68
5.1.14. Closing Fees, Expenses, etc........................................68
5.1.15. Payment of Outstanding Indebtedness, etc...........................68
5.1.16. Insurance..........................................................69
5.1.17. Opinions of Counsel................................................69
5.2. All Credit Extensions..............................................69
5.2.1. Compliance with Warranties, No Default, etc........................69
5.2.2. Credit Extension Request...........................................69
5.2.3. Satisfactory Legal Form............................................70
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc..................................................70
6.2. Due Authorization, Non-Contravention, etc..........................70
6.3. Government Approval, Regulation, etc...............................71
6.4. Validity, etc......................................................71
6.5. Financial Information..............................................71
6.6. No Material Adverse Change.........................................71
6.7. Litigation, Labor Controversies, etc...............................72
6.8. Subsidiaries.......................................................72
6.9. Ownership of Properties............................................72
6.10. Taxes..............................................................72
6.11. Pension and Welfare Plans..........................................73
6.12. Environmental Warranties...........................................73
6.13. Accuracy of Information............................................74
6.14. Regulations U and X................................................74
6.15. Year 2000..........................................................75
6.16. Status of Obligations as Senior Indebtedness; First
Mortgage Note Offering; First Mortgage Notes; etc..................75
6.17. Solvency...........................................................75
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants..............................................76
7.1.1. Financial Information, Reports, Notices, etc.......................76
7.1.2. Maintenance of Existence...........................................78
iii
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Section Page
- ------- ----
7.1.3. Maintenance of Properties..........................................79
7.1.4. Insurance..........................................................79
7.1.5. Books and Records..................................................79
7.1.6. Environmental Covenant.............................................80
7.1.7. Future Subsidiaries................................................80
7.1.8. Use of Proceeds....................................................81
7.1.9. Cash Management Accounts...........................................81
7.2. Negative Covenants.................................................81
7.2.1. Business Activities................................................82
7.2.2. Indebtedness.......................................................82
7.2.3. Liens..............................................................84
7.2.4. Financial Covenants................................................85
7.2.5. Investments........................................................87
7.2.6. Restricted Payments, etc...........................................89
7.2.7. Capital Expenditures...............................................89
7.2.8. Consolidation, Merger, etc.........................................90
7.2.9. Asset Dispositions, etc............................................90
7.2.10. Modification of Certain Agreements.................................91
7.2.11. Transactions with Affiliates.......................................91
7.2.12. Negative Pledges, Restrictive Agreements, etc......................91
7.2.13. Sale and Leaseback.................................................92
7.2.14. Stock of Subsidiaries..............................................92
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default.......................................92
8.1.1. Non-Payment of Obligations.........................................92
8.1.2. Breach of Warranty.................................................92
8.1.3. Non-Performance of Certain Covenants and Obligations...............93
8.1.4. Non-Performance of Other Covenants and Obligations.................93
8.1.5. Default on Other Indebtedness......................................93
8.1.6. Judgments..........................................................93
8.1.7. Pension Plans......................................................93
8.1.8. Change in Control..................................................93
8.1.9. Bankruptcy, Insolvency, etc........................................94
8.1.10. Impairment of Security, etc........................................94
8.2. Action if Bankruptcy...............................................95
8.3. Action if Other Event of Default...................................95
iv
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Section Page
- ------- ----
ARTICLE IX
THE AGENTS
9.1. Actions............................................................95
9.2. Funding Reliance, etc..............................................96
9.3. Exculpation........................................................96
9.4. Successor..........................................................97
9.5. Credit Extensions by Each Agent and Issuer.........................97
9.6. Credit Decisions...................................................97
9.7. Copies, etc........................................................98
9.8. The Syndication Agent and the Documentation Agent..................98
9.9. Notices of Default.................................................98
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Waivers, Amendments, etc...........................................99
10.2. Notices...........................................................100
10.3. Payment of Costs and Expenses.....................................100
10.4. Indemnification...................................................101
10.5. Survival..........................................................102
10.6. Severability......................................................102
10.7. Headings..........................................................102
10.8. Execution in Counterparts, Effectiveness, etc.....................102
10.9. Governing Law; Entire Agreement...................................103
10.10. Successors and Assigns............................................103
10.11. Sale and Transfer of Loans; Participations in Loans and Notes.....103
10.11.1. Assignments.......................................................103
10.11.2. Participations....................................................105
10.12. Confidentiality...................................................106
10.13. Other Transactions................................................107
10.14. Forum Selection and Consent to Jurisdiction.......................107
10.15. Waiver of Jury Trial..............................................107
v
<PAGE>
SCHEDULES:
- ----------
Schedule I - Disclosure Schedule
Schedule II - Percentages and Administrative Information
Schedule III - Location of Secured Inventory
Schedule IV - Limits on Borrowing Base Availability
EXHIBITS:
- ---------
Exhibit A-1 - Form of Revolving Note
Exhibit A-2 - Form of Swing Line Note
Exhibit B-1 - Form of Borrowing Request
Exhibit B-2 - Form of Issuance Request
Exhibit C - Form of Continuation/Conversion Notice
Exhibit D - Form of Closing Date Certificate
Exhibit E-1 - Form of Compliance Certificate
Exhibit E-2 - Form of Borrowing Base Certificate
Exhibit F-1 - Form of Parent Guaranty and Pledge Agreement
Exhibit F-2 - Form of Borrower Pledge and Security Agreement
Exhibit F-3 - Form of Subsidiary Pledge and Security Agreement
Exhibit G - Form of Subsidiary Guaranty
Exhibit H - Form of Lender Assignment Agreement
Exhibit I - Form of Intercreditor Agreement
Exhibit J - Form of Solvency Certificate
vi
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of April 22, 1999, among
ROYSTER-CLARK, INC., a Delaware corporation (the "Borrower"), the various
financial institutions as are or may become parties hereto (collectively, the
"Lenders"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as the syndication agent (the
"Syndication Agent"), J.P. MORGAN SECURITIES, INC. ("Morgan"), as the
documentation agent (the "Documentation Agent"), U.S. BANCORP AG CREDIT, INC.
("U.S. Bancorp"), as the collateral agent and as the administrative agent (the
"Administrative Agent", together with the Syndication Agent and the
Documentation Agent, sometimes referred to herein collectively as the "Agents"
and each as an "Agent") for the Lenders, and DLJ and Morgan, as co-lead
arrangers and co-book managers (in such capacity, the "Co-Lead Arrangers").
W I T N E S S E T H:
WHEREAS, certain principals (the "Management Investors") of the Borrower
and 399 Venture Partners, Inc., a Delaware corporation and an affiliate of
Citicorp Venture Capital Ltd. ("399VP", and, together with the Management
Investors, the "Equity Investors"), own all of the issued and outstanding
Capital Stock of Royster-Clark Group, Inc., a Delaware corporation ("Parent");
WHEREAS, the Borrower intends to acquire all of the issued and outstanding
equity securities of the IMC Businesses (as hereinafter defined) pursuant to a
transaction in which, among other things, (a) the Borrower will acquire (the
"IMC Acquisition") all of the issued and outstanding equity securities of IMC
AgriBusiness, Inc., a Delaware corporation ("IMC AgriBusiness"), Hutson's Ag
Services, Inc., a Kentucky corporation ("Hutson"), and IMC Nitrogen Company, a
Delaware corporation ("IMC Nitrogen", and, together with IMC AgriBusiness and
Hutson, and each of their respective Subsidiaries, the "IMC Businesses"), from
IMC Global, Inc., a Delaware corporation (the "Seller"), and (b) the Equity
Investors shall cause Parent to acquire all of the outstanding Capital Stock of
the Borrower (the "R-C Acquisition", and, together with the IMC Acquisition, the
"Acquisition Transactions");
WHEREAS, after giving effect to the Acquisition Transactions, each of the
IMC Businesses will be wholly-owned, direct and indirect Subsidiaries of the
Borrower, and the Borrower will be a wholly-owned Subsidiary of Parent;
WHEREAS, in connection with the Acquisition Transactions, and pursuant to
the Transaction Documents, the following capital-raising transactions and other
transactions will occur prior to or contemporaneously with the consummation of
the Acquisition Transactions and the making of the initial Credit Extensions
hereunder:
<PAGE>
(a) the Borrower will issue first mortgage notes due April 22, 2009
(the "First Mortgage Note Offering") for gross cash proceeds of
$200,000,000, which proceeds will be used to partially fund the Transaction
(as hereinafter defined);
(b) Parent will receive gross cash proceeds in an aggregate amount
equal to approximately $59,000,000 from 399VP or certain of its affiliates
from the issuance (the "Cash Equity Issuance") to 399VP or certain of its
affiliates of (i) non-cash pay junior subordinated notes with an aggregate
outstanding principal amount equal to $10,000,000 (the "399VP Notes")
payable to certain affiliates of 399VP, (ii) $47,400,000 of non-cash pay
preferred stock of Parent issued to 399VP and (iii) $1,600,000 of common
stock of Parent issued to 399VP, and Parent shall contribute such aggregate
gross cash proceeds from the Cash Equity Issuance to the Borrower in the
form of cash common equity;
(c) Parent will receive Capital Stock of the Borrower with a value
equal to approximately $20,500,000 in exchange for the issuance (the
"Rollover Equity Issuance") to the Management Investors of (i) $8,300,000
of zero preferred stock of Parent, (ii) $11,800,000 of non-cash pay
preferred stock of Parent and (iii) $400,000 of common stock of Parent; and
(d) Parent will issue (the "IMC Rollover Issuance", and, together with
the Rollover Equity Issuance and the Cash Equity Issuance, the "Equity
Issuances"; the Equity Issuances and the First Mortgage Note Offering are
hereinafter collectively referred to as the "Capital Transactions")
$10,000,000 of non-cash pay junior subordinated notes to the Seller (the
"Seller Notes") as partial consideration for the purchase price of the IMC
Acquisition;
WHEREAS, in connection with the Acquisition Transactions, the Capital
Transactions, the refinancing of approximately $75,600,000 of existing debt of
the Borrower and the IMC Businesses (the "Refinancing", together with the
Acquisition Transactions, the Capital Transactions and each of the other
transactions contemplated hereby, the "Transaction") and the ongoing working
capital and general corporate needs of the Borrower, the Borrower desires to
obtain the following financing facilities from the Lenders:
(a) a Revolving Loan Commitment (to include availability for Revolving
Loans, Swing Line Loans and Letters of Credit) pursuant to which Borrowings
of Revolving Loans, in a maximum aggregate principal amount (together with
all Swing Line Loans and Letter of Credit Outstandings) not to exceed
$275,000,000, will be made on and subsequent to the Closing Date but prior
to the Revolving Loan Commitment Termination Date;
(b) a Letter of Credit Commitment pursuant to which the Issuer will
issue Letters of Credit for the account of the Borrower and its Restricted
Subsidiaries from time to time on and subsequent to the Closing Date but
prior to the Revolving Loan Commitment Termination Date in a maximum
2
<PAGE>
aggregate Stated Amount at any one time outstanding not to exceed
$10,000,000; and
(c) a Swing Line Loan Commitment pursuant to which Borrowings of Swing
Line Loans, in an aggregate outstanding principal amount not to exceed
$25,000,000, will be made subsequent to the Closing Date but prior to the
Revolving Loan Commitment Termination Date;
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth, to extend such Commitments, make such Loans to
the Borrower and issue (or participate in) such Letters of Credit;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"399VP" is defined in the first recital.
"399VP Notes" is defined in clause (b) of the fourth recital.
"Account" means any account (as that term is defined in Section 9-106 of
the UCC) of the Borrower or any Restricted Subsidiary arising from the sale or
lease of goods or rendering of services.
"Account Debtor" is defined in clause (b) of the definition of "Eligible
Account".
"Acquired Borrowing Base Assets" is defined in clause (b)(iii) of the
definition of "Permitted Acquisition".
"Acquisition Transactions" is defined in the second recital.
"Administrative Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor Administrative
Agent pursuant to Section 9.4.
3
<PAGE>
"Administrative Agent's Fee Letter" means the confidential fee letter,
dated April 12, 1999, among the Borrower and U.S. Bancorp, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power (a)
to vote 10% or more of the Capital Stock (on a fully diluted basis) of such
Person having ordinary voting power for the election of directors or managing
general partners, or (b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agent" and "Agents" are defined in the preamble.
"Agreement" means, on any date, this Revolving Credit Agreement as
originally in effect on the Closing Date and as thereafter from time to time
amended, supplemented, amended and restated, or otherwise modified and in effect
on such date.
"Alternate Base Rate" means, for any day and with respect to all Base Rate
Loans, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate
and (b) the rate of interest in effect for such day as most recently publicly
announced or established by the Administrative Agent (or any Affiliate of the
Administrative Agent) in Minneapolis, Minnesota (or such other place of business
as may be designated by any successor Administrative Agent) as its "reference
rate". The "reference rate" is a rate set by the Administrative Agent based upon
various factors including the Administrative Agent's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above or below such announced
rate. Any change in the reference rate established or announced by the
Administrative Agent shall take effect at the opening of business on the day of
such establishment or announcement by the Administrative Agent.
"Annualized" means, with respect to the determination of Interest Expense
for the first three Fiscal Quarters ending after the Closing Date, the amount
determined by multiplying the actual amount of Interest Expense from the Closing
Date to the date of such calculation multiplied by 366 and divided by the number
of days from (and including) the Closing Date to (and including) the date of
such calculation.
"Applicable Commitment Fee" means, (a) for each day from the Closing Date
through (and including) the first anniversary of the Closing Date, a fee which
shall accrue at a rate of 1/2 of 1% per annum, and (b) for each day thereafter,
a fee which shall accrue at the applicable rate per annum set forth below under
the column entitled "Applicable Commitment Fee", determined by reference to the
applicable Leverage Ratio referred to below:
4
<PAGE>
Leverage Applicable
Ratio Commitment Fee
-------- --------------
Greater than
or equal to 3.5:1 .500%
Less than 3.5:1 but greater
than
or equal to 2.5:1 .375%
Less than 2.5:1 .250%
The Leverage Ratio used to compute the Applicable Commitment Fee shall be that
set forth in the Compliance Certificate most recently delivered by the Borrower
to the Administrative Agent; changes in the Applicable Commitment Fee resulting
from a change in the Leverage Ratio shall become effective upon delivery by the
Borrower to the Administrative Agent of a new Compliance Certificate pursuant to
clause (c) of Section 7.1.1. If the Borrower shall fail to deliver a Compliance
Certificate within the number of days required pursuant to clause (c) of Section
7.1.1 (without giving effect to any grace period), the Applicable Commitment Fee
from and including the first day after the date on which such Compliance
Certificate was required to be delivered to, but not including the date the
Borrower delivers to, the Administrative Agent an appropriately completed
Compliance Certificate shall conclusively equal the highest Applicable
Commitment Fee set forth above.
"Applicable Margin" means at all times during the applicable periods set
forth below (a) with respect to the unpaid principal amount of each Loan
maintained as a Base Rate Loan, the applicable percentage set forth below under
the column entitled "Applicable Margin for Base Rate Loans" and (b) with respect
to the unpaid principal amount of each Loan maintained as a LIBO Rate Loan, the
applicable percentage set forth below under the column entitled "Applicable
Margin for LIBO Rate Loans", in each case, determined by reference to the
applicable Leverage Ratio referred to below:
Applicable
Margin For Applicable
Leverage Base Rate Margin For
Ratio Loans LIBO Rate Loans
-------- ---------- ----------------
Greater than or equal to 5.5:1 1.75% 3.00%
Less than 5.5:1 but greater
than or equal to 3.5:1 1.50% 2.75%
Less than 3.5:1 but greater
than or equal to 2.5:1 1.25% 2.50%
Less than 2.5:1 1.00% 2.25%
5
<PAGE>
Notwithstanding anything to the contrary set forth in this Agreement (including
the then effective Leverage Ratio), from the Closing Date through (and
including) the first anniversary of the Closing Date, the Applicable Margin for
all Loans maintained as (a) Base Rate Loans shall be 1.50% and (b) LIBO Rate
Loans shall be 2.75%. The Leverage Ratio used to compute the Applicable Margin
shall be that set forth in the Compliance Certificate most recently delivered by
the Borrower to the Administrative Agent; changes in the Applicable Margin
resulting from a change in the Leverage Ratio shall become effective upon
delivery by the Borrower to the Administrative Agent of a new Compliance
Certificate pursuant to clause (c) of Section 7.1.1. If the Borrower shall fail
to deliver a Compliance Certificate within the number of days required pursuant
to clause (c) of Section 7.1.1 (without giving effect to any grace period), the
Applicable Margin from and including the first day after the date on which such
Compliance Certificate was required to be delivered to, but not including the
date the Borrower delivers to, the Administrative Agent an appropriately
completed Compliance Certificate shall conclusively equal the highest Applicable
Margin set forth above.
"Assignee Lender" is defined in Section 10.11.1.
"Assignor Lender" is defined in Section 10.11.1.
"Authorized Officer" means, relative to any Obligor, those of its officers
whose signatures and incumbency shall have been certified to the Agents and the
Lenders pursuant to Section 5.1.1.
"Base Net Worth" means Net Worth as of June 30, 1999, as set forth in the
Compliance Certificate delivered by the Borrower to the Administrative Agent for
the Fiscal Quarter ending on June 30, 1999.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrower" is defined in the preamble.
"Borrower Pledge and Security Agreement" means the Pledge Agreement
executed and delivered by an Authorized Officer of the Borrower pursuant to
clause (b) of Section 5.1.8, substantially in the form of Exhibit F-2 hereto, as
amended, supplemented, amended and restated or otherwise modified from time to
time.
"Borrowing" means the Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by all Lenders on the same Business
Day and pursuant to the same Borrowing Request in accordance with Section 2.1.
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"Borrowing Base Amount" means, at any time, the sum (without duplication)
of
(a) the Net Asset Value of all Eligible Accounts at such time as
determined in accordance with clause (a) of the definition of "Net Asset
Value" and as certified by the Borrower in the most recently delivered
Borrowing Base Certificate;
plus
(b) the Net Asset Value of Eligible Inventory at such time as
determined in accordance with clause (b) of the definition of "Net Asset
Value" and as certified by the Borrower in the most recently delivered
Borrowing Base Certificate;
plus
(c) the Net Asset Value of all Eligible Rebate Receivables at such
time as determined in accordance with clause (c) of the definition of "Net
Asset Value" and as certified by the Borrower in the most recently
delivered Borrowing Base Certificate;
plus
(d) the Net Asset Value of all Eligible Prepaid Inventory at such time
as determined in accordance with clause (d) of the definition of "Net Asset
Value" and as certified by the Borrower in the most recently delivered
Borrowing Base Certificate.
"Borrowing Base Certificate" means a certificate duly completed and
executed by the treasurer, assistant treasurer, chief accounting or financial
Authorized Officer of the Borrower, substantially in the form of Exhibit E-2
hereto.
"Borrowing Request" means a loan request and certificate duly executed by
an Authorized Officer of the Borrower, substantially in the form of Exhibit B-1
hereto.
"Business Day" means any day which is neither a Saturday nor Sunday nor a
legal holiday on which banks are authorized or required to be closed in New York
City or Minneapolis, Minnesota, and, with respect to Borrowings of, Interest
Periods with respect to, payments of principal and interest in respect of, and
conversions of Base Rate Loans into, LIBO Rate Loans, any day on which dealings
in Dollars are carried on in the London interbank market.
"Capital Expenditures" means for any period, the sum, without duplication,
of the aggregate amount of all expenditures of the Borrower and its Restricted
Subsidiaries for fixed or capital assets made during such period which, in
accordance with GAAP, would be classified as capital expenditures.
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<PAGE>
"Capital Stock" means, with respect to any Person, (a) any and all shares,
interests, participations, rights or other equivalents of or interests in
(however designated) corporate or capital stock, including shares of preferred
or preference stock of such Person, (b) all partnership interests (whether
general or limited) in such Person, (c) all membership interests or limited
liability company interests in such Person, and (d) all other equity or
ownership interests in such Person of any other type.
"Capital Transactions" is defined in clause (d) of the fourth recital.
"Capitalized Lease Liabilities" means, without duplication, all monetary
obligations of the Borrower or any of its Restricted Subsidiaries under any
leasing or similar arrangement which, in accordance with GAAP, would be
classified as capitalized leases, and, for purposes of this Agreement and each
other Loan Document, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP, and the stated maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a premium or penalty.
"Cash Collateralize" means, with respect to a Letter of Credit, the payment
to the Administrative Agent of immediately available funds in an amount equal to
the Stated Amount of such Letter of Credit, deposited in a cash collateral
account with the Administrative Agent or its designee on terms satisfactory to
the Administrative Agent.
"Cash Equity Issuance" is defined in clause (b) of the fourth recital.
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation of (or unconditionally guaranteed or insured
by) the United States of America or a State thereof (or any agency or
political subdivision thereof, to the extent such obligations are supported
by the full faith and credit of the United States of America or a State
thereof) maturing not more than one year after such time,
(b) commercial paper maturing not more than 270 days from the date of
issue, which is issued by
(i) a corporation (other than an Affiliate of any Obligor)
organized under the laws of any State of the United States or of the
District of Columbia and rated A-1 or higher by S&P or P-1 or higher
by Moody's; or
(ii) any Lender (or its holding company);
8
<PAGE>
(c) any certificate of deposit, time deposit or bankers acceptance,
maturing not more than one year after its date of issuance, which is issued
by either
(i) any bank organized under the laws of the United States (or
any State thereof) and which has (A) a credit rating of A2 or higher
from Moody's or A or higher from S&P and (B) a combined capital and
surplus greater than $500,000,000; or
(ii) any Lender;
(d) any repurchase agreement having a term of 30 days or less entered
into with any Lender or any commercial banking institution satisfying the
criteria set forth in clause (c)(i) which
(i) is secured by a fully perfected security interest in any
obligation of the type described in clause (a); and
(ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of
such commercial banking institution thereunder; or
(e) any money market or similar fund the assets of which are comprised
exclusively of any of the items specified in clauses (a) through (c) above
and as to which withdrawals are permitted at least every 90 days.
"Casualty Event" means the damage, destruction or condemnation, as the case
may be, of any property of the Borrower or any of its Restricted Subsidiaries.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Change in Control" means
(a) the failure of the Borrower at any time to own (directly or
indirectly), free and clear of all Liens and encumbrances (other than Liens
permitted to exist under clauses (a), (e) and (h) of Section 7.2.3), all
right, title and interest in 100% of the Capital Stock of each of the IMC
Businesses;
(b) the failure of Parent at any time to own (directly or indirectly),
free and clear of all Liens and encumbrances (other than Liens permitted to
exist under clauses (a), (e) and (h) of Section 7.2.3), all right, title
and interest in 100% of the Capital Stock of the Borrower;
9
<PAGE>
(c) any Person, or two or more Persons acting in concert (other than
Francis P. Jenkins and his controlled Affiliates), individually or
collectively, acquiring a greater percentage of the beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act) of the voting
Capital Stock of Parent on a fully diluted basis than 399VP, CVC and each
of their controlled Affiliates, collectively;
(d) the failure of 399VP, CVC and each of their controlled Affiliates,
collectively, to hold at least 37.5% of the voting Capital Stock held by
such Persons, collectively, on the Closing Date, subject to any stock
splits, distributions, redemptions or repurchases;
(e) the first day on which a majority of the members of the Board of
Directors of the Borrower are not Continuing Directors; or
(f) any "Change of Control" as such term is defined in the First
Mortgage Note Indenture.
"Closing Date" means the date of the initial Credit Extension, not to be
later than April 30, 1999.
"Closing Date Certificate" means a certificate of an Authorized Officer of
the Borrower substantially in the form of Exhibit D hereto, delivered pursuant
to Section 5.1.6.
"Co-Lead Arrangers" is defined in the preamble.
"Code" means the Internal Revenue Code of 1986, and the regulations
thereunder, in each case as amended, reformed or otherwise modified from time to
time.
"Combine" and "Combination" are defined in Section 7.2.8.
"Commitment" means, as the context may require, a Lender's Revolving Loan
Commitment, Swing Line Loan Commitment or Letter of Credit Commitment.
"Commitment Amount" means, as the context may require, the Revolving Loan
Commitment Amount, the Swing Line Loan Commitment Amount or the Letter of Credit
Commitment Amount.
"Commitment Termination Event" means (a) the occurrence of any Event of
Default described in clauses (a) through (d) of Section 8.1.9 with respect to
any Obligor, or (b) the occurrence and continuance of any other Event of Default
and either (i) the declaration of all or any portion of the Loans to be due and
payable pursuant to Section 8.3, or (ii) the giving of notice by the
Administrative Agent, acting at the direction of the Required Lenders, to the
Borrower that the Commitments have been terminated.
10
<PAGE>
"Commodity Hedging Agreements" means with respect to any Person, all
liabilities of such Person under exchange agreements, swap agreements, cap
agreements, future agreements, forward agreements and all other agreements or
arrangements (of a non-speculative nature) designed to protect such Person
against fluctuations in commodity prices.
"Compliance Certificate" means a certificate duly completed and executed by
the president, chief executive, treasurer, controller or chief financial
Authorized Officer of the Borrower, substantially in the form of Exhibit E-1
hereto, together with such changes thereto as the Agents may from time to time
reasonably request for the purpose of monitoring the Borrower's compliance with
the financial covenants contained herein.
"Contingent Liability" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the Indebtedness of any
other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of Capital Stock of any other Person. The amount of any Person's
obligation under any Contingent Liability shall (subject to any limitation set
forth therein) be deemed to be the outstanding principal amount of the debt,
obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit C hereto.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Borrower who:
(a) was a member of such Board on the date hereof; or
(b) was nominated for election or elected to such Board with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election.
"Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"Credit Extension" means, as the context may require, (a) the making of a
Loan by a Lender or (b) the issuance of any Letter of Credit, or the extension
of any Stated Expiry Date of any previously issued Letter of Credit, by the
Issuer.
"Credit Extension Request" means, as the context may require, any Borrowing
Request or Issuance Request.
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<PAGE>
"Crop Term Accounts" means Accounts as to which the Borrower grants certain
Account Debtors extended payment due dates of not later than the end of the Crop
Year in which such Accounts arise.
"Crop Year" means October 1 through September 30 of the next succeeding
year for winter wheat, or January 1 through January 31 of the next succeeding
year for all other crops.
"Current Assets" means, on any date, without duplication, all assets which,
in accordance with GAAP, would be included as current assets on a consolidated
balance sheet of the Borrower and its Restricted Subsidiaries at such date.
"Current Liabilities" means, on any date, without duplication, all amounts
which, in accordance with GAAP, would be included as current liabilities on a
consolidated balance sheet of the Borrower and its Restricted Subsidiaries at
such date, excluding current maturities of Indebtedness.
"Current Ratio" means, at any time, the ratio of (a) Current Assets to (b)
Current Liabilities plus, without duplication, the amount of outstanding Loans
and Letter of Credit Outstandings at such time.
"Customer Deposit" means a deposit received by the Borrower or any
Restricted Subsidiary from a customer of the Borrower or such Restricted
Subsidiary in payment for the future delivery of Inventory.
"CVC" means Citicorp Venture Capital Ltd., a New York corporation.
"Debt" means, without duplication, the outstanding principal amount of all
Indebtedness of the Borrower and its Restricted Subsidiaries that is of the type
referred to in clause (a), (b), (c) and (e) of the definition of "Indebtedness"
and any Contingent Liability in respect of any of the foregoing.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Deferred Rebate Receivable" means a Rebate Receivable, which, by the terms
thereof, is to be paid to the Borrower or any Restricted Subsidiary more than
365 days after the date on which the accrual of such Rebate Receivable is
accounted for by the Borrower or such Restricted Subsidiary.
"Disbursement" is defined in Section 2.6.2.
"Disbursement Date" is defined in Section 2.6.2.
"Disbursement Due Date" is defined in Section 2.6.2.
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<PAGE>
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Required Lenders.
"Disposition" (or correlative words such as "Dispose") means any sale,
transfer, lease, contribution or other conveyance (including by way of merger)
of, or the granting of options, warrants or other rights to, any of the
Borrower's or its Restricted Subsidiaries' assets (including accounts
receivables and Capital Stock of Restricted Subsidiaries) to any other Person
(other than to another Obligor) in a single transaction or series of related
transactions.
"DLJ" is defined in the preamble.
"Documentation Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor Documentation
Agent pursuant to Section 9.4.
"Dollar" and the sign "$" mean lawful money of the United States.
"EBITDA" means, for any applicable period, the sum (without duplication)
for the Borrower and its Restricted Subsidiaries on a consolidated basis of:
(a) Net Income,
plus
(b) the amount deducted, in determining Net Income, representing
amortization,
plus
(c) the amount deducted, in determining Net Income, representing all
income Taxes (whether paid in cash or deferred),
plus
(d) the amount deducted, in determining Net Income, representing
Interest Expense,
plus
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<PAGE>
(e) the amount deducted, in determining Net Income, representing
depreciation of assets,
plus
(f) the amount deducted, in determining Net Income, representing
non-cash charges (including extraordinary losses),
minus
(g) the amount included, in determining Net Income, representing
non-cash credits (including extraordinary gains).
Notwithstanding the foregoing, (i) for the third Fiscal Quarter of the 1998
Fiscal Year, the fourth Fiscal Quarter of the 1998 Fiscal Year and the first
Fiscal Quarter of the 1999 Fiscal Year, EBITDA shall be deemed to be
- -$7,318,097, $2,280,306 and $4,362,161, respectively, and (ii) with respect to
EBITDA calculated for a four Fiscal Quarter period, EBITDA shall be adjusted to
include the Permitted Acquisition(s) made during such Fiscal Quarter (such
adjustments to be satisfactory to the Agents) as if such Permitted
Acquisition(s) had been made at the beginning of such four Fiscal Quarter
period.
"Effective Date" means the date this Agreement becomes effective pursuant
to Section 10.8.
"Eligible Account" means, with respect to the Borrower and any Restricted
Subsidiary, at the time of any determination thereof, any Account as to which
each of the following requirements has been fulfilled to the reasonable
satisfaction of the Administrative Agent:
(a) the Borrower or such Restricted Subsidiary owns such Account free
and clear of all Liens other than any Lien in favor of the Administrative
Agent granted pursuant to this Agreement or another Loan Document (and,
other than in the case of Accounts referred to in clause (d) below, the
Administrative Agent shall have a first-priority (other than inchoate
statutory Liens otherwise permitted by Section 7.2.3) perfected Lien on
such Account);
(b) such Account is a legal, valid, binding and enforceable obligation
of the Person obligated under such Account (the "Account Debtor") (except
as such enforceability may be, at any time of determination, limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by principles of equity);
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<PAGE>
(c) such Account is not subject to any bona fide dispute, setoff,
counterclaim or other claim or defense on the part of the Account Debtor or
any other Person denying liability under such Account; provided, however,
that any such Account shall constitute an Eligible Account to the extent it
is not subject to any such dispute, setoff, counterclaim or other claim or
defense;
(d) the Borrower or such Restricted Subsidiary has the full and
unqualified right to assign and grant a Lien in such Account to the
Administrative Agent as security for the Obligations (and the
Administrative Agent shall have a perfected, first-priority Lien on such
Account);
(e) such Account is evidenced by an invoice rendered to the Account
Debtor (which shall include computer records) or is reflected by computer
records maintained by the Borrower or such Restricted Subsidiary evidencing
such Account and is not evidenced by any instrument or chattel paper (as
the terms "instrument" and "chattel paper" are defined in Section 9-105 of
the UCC) unless such instrument or chattel paper has been delivered to the
Administrative Agent pursuant to any Pledge and Security Agreement;
(f) with respect to such Account, no Account Debtor is
(i) an Affiliate of the Borrower or any of its Restricted
Subsidiaries (other than Conetoe Chemical, Inc. and George Smith AG
Services, Inc., and any 399VP-related company which is deemed an
Affiliate solely by reason of 399VP's common ownership interest in
each of Parent and such 399VP-related company), or
(ii) the subject of any reorganization, bankruptcy, receivership,
custodianship, insolvency or other condition analogous with respect to
such Account Debtor to those described in clauses (a) through (d) of
Section 8.1.9;
(g) such Account is not Past Due;
(h) such Account is not an Account owing by an Account Debtor having,
at the time of any determination of Eligible Accounts, Past Due Accounts
which exceed 35% of the aggregate outstanding amount of all of such Account
Debtor's Accounts (other than any Accounts which are the subject of bona
fide disputes between such Account Debtor and the Borrower or such
Restricted Subsidiary, as the case may be);
(i) with respect to the Account Debtor under such Account, neither the
Borrower nor any such Restricted Subsidiary is indebted to such Account
Debtor (including any Person who has a Customer Deposit with the Borrower
or any Restricted Subsidiary), unless the Borrower or such Restricted
Subsidiary and such Account Debtor have entered into an agreement whereby
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<PAGE>
the Account Debtor is prohibited from exercising any right of setoff with
respect to the Accounts of the Borrower or such Restricted Subsidiary,
provided, that in any event, if such an agreement prohibiting setoff rights
with respect to any such Account is not delivered by the Account Debtor,
then only up to the amount that the Borrower or such Restricted Subsidiary
is indebted to such Account Debtor under such Account shall be excluded as
an Eligible Account pursuant to this clause;
(j) such Account arises from a sale to an Account Debtor located
within the United States, unless the Account Debtor's obligations (or that
portion of such obligations which is acceptable to the Administrative
Agent) with respect to a sale to an Account Debtor not located within the
United States are secured by a letter of credit, guaranty or eligible
bankers' acceptance having terms, and from such issuers and confirmation
banks, as are reasonably acceptable to the Administrative Agent; provided,
that Accounts arising from sales to Account Debtors located within Canada
need not be so secured up to an aggregate amount of $2,000,000 at any time
outstanding;
(k) such Account is not an Account owing by an Account Debtor having,
at the time of any determination of Eligible Accounts, in excess of 5% of
the aggregate face amount of all Eligible Accounts of all Account Debtors;
(l) such Account is not an Account which arose as a result of the sale
of consigned inventory owned by a third party;
(m) such Account is not an Account owed to Lebanon Chemical
Corporation pursuant to the purchase agreement, dated as of December 16,
1998; and
(n) such Account is not a Rebate Receivable;
provided, however, that, with respect to any Eligible Account which is subject
to a discount or a rebate to be granted to the Account Debtor, the amount of
such discount or rebate, as the case may be, shall be excluded from the value of
such Eligible Account dollar-for-dollar.
"Eligible Inventory" means, with respect to the Borrower and any Restricted
Subsidiary, at the time of any determination thereof, any Inventory located in
the United States arising in the ordinary course of business and as to which
each of the following requirements has been fulfilled to the reasonable
satisfaction of the Administrative Agent:
(a) the Borrower or such Restricted Subsidiary owning such Inventory,
as the case may be, has full and unqualified right to assign and grant, and
has assigned and granted, a perfected Lien in such Inventory to the
Administrative Agent as security for the Obligations (and the
Administrative Agent shall have a perfected, first-priority Lien on such
Inventory (subject to Liens permitted pursuant to clause (e) of Section
7.2.3));
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<PAGE>
(b) the Borrower or such Restricted Subsidiary owns such Inventory
free and clear of all Liens other than any Lien in favor of the
Administrative Agent granted pursuant to this Agreement or another Loan
Document and other than inchoate statutory Liens otherwise permitted by
Section 7.2.3;
(c) none of such Inventory is obsolete, unsalable, damaged or
otherwise unfit for sale or consumption or further processing;
(d) none of such Inventory is in the possession of a third party
(other than any Inventory Agent pursuant to clause (e) below) unless such
Inventory is
(i) at a location listed on Schedule III hereto (which Schedule
III may be modified and/or supplemented from time to time with notice
to and consent from the Administrative Agent), and for which the
Administrative Agent has received a bailee letter satisfactory to the
Administrative Agent, executed by such third party, or
(ii) covered by negotiable warehouse receipts or negotiable bills
of lading issued by either (A) a warehouseman licensed and bonded by
the United States Department of Agriculture or any state's equivalent
Governmental Authority or (B) a recognized carrier having an office in
the United States and in a financial condition reasonably acceptable
to the Administrative Agent, and which receipts or bills of lading, in
any case, designate the Administrative Agent directly or by
endorsement as the only Person to which the warehouseman or carrier is
legally obligated to deliver such Inventory;
(e) none of such Inventory is in the possession of any Inventory Agent
unless (i) such Inventory Agent has been previously approved by the
Administrative Agent in writing, (ii) such Inventory is stored at a
location listed on Schedule III hereto and (iii) the Borrower has complied,
to the satisfaction of the Agents and their counsel, with the filing
requirements of Article 9 of the UCC with respect to such Inventory;
(f) none of such Inventory shall consist of pallets, bags or other
supplies; and
(g) none of such Inventory shall include Prepaid Inventory.
"Eligible Prepaid Inventory" means, with respect to the Borrower and any
Restricted Subsidiary, at the time of any determination thereof, any Prepaid
Inventory as to which each of the following requirements has been fulfilled to
the reasonable satisfaction of the Administrative Agent:
(a) such Prepaid Inventory must constitute Inventory when received;
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<PAGE>
(b) with respect to the Person to whom any payments were made by the
Borrower or any Restricted Subsidiary in connection with such Prepaid
Inventory, neither the Borrower nor any such Restricted Subsidiary is
indebted to such Person, unless the Borrower or such Restricted Subsidiary
and such Person have entered into an agreement whereby such Person is
prohibited from exercising any right of setoff with respect to the Prepaid
Inventory of the Borrower or such Restricted Subsidiary, provided, that in
any event, if such an agreement prohibiting setoff rights with respect to
any such Prepaid Inventory is not delivered by such Person, then only up to
the amount that the Borrower or such Restricted Subsidiary is indebted to
such Person with respect to such Prepaid Inventory shall be excluded as
Prepaid Inventory pursuant to this clause;
(c) any payments made by the Borrower or any Restricted Subsidiary in
connection with such Prepaid Inventory shall only be made to a Person
located within the United States, unless such Person's obligations (or that
portion of such obligations which is acceptable to the Administrative
Agent) with respect to such Prepaid Inventory are secured by a letter of
credit, guaranty or eligible bankers' acceptance having terms, and from
such issuers and confirmation banks, as are reasonably acceptable to the
Administrative Agent;
(d) such Prepaid Inventory shall not include Prepaid Inventory for
which the Borrower or any Restricted Subsidiary made a payment to:
(i) an Affiliate of the Borrower or any of its Restricted
Subsidiaries (other than any 399VP-related company which is deemed an
Affiliate solely by reason of 399VP's common ownership interest in
each of Parent and such 399VP-related company), or
(ii) a Person that is the subject of any reorganization,
bankruptcy, receivership, custodianship, insolvency or other condition
analogous with respect to such Person to those described in clauses
(a) through (d) of Section 8.1.9;
(e) any payments made by the Borrower or any Restricted Subsidiary in
connection with such Prepaid Inventory shall not be made to any Person
which has any obligation to the Borrower or any Restricted Subsidiary which
is more than thirty days past due; and
(f) any payments made by the Borrower or any Restricted Subsidiary in
connection with such Prepaid Inventory which have been disallowed by the
Administrative Agent, at the time of delivery of the first Borrowing Base
Certificate pursuant to clause (j) of Section 7.1.1 upon which such
payments appear, shall be excluded from Eligible Prepaid Inventory pursuant
to this clause.
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<PAGE>
"Eligible Rebate Receivables" means, with respect to the Borrower and any
Restricted Subsidiary, at the time of determination thereof, any Rebate
Receivable as to which each of the following requirements has been fulfilled to
the reasonable satisfaction of the Administrative Agent:
(a) the Administrative Agent has approved the methodology used by the
Borrower or any such Restricted Subsidiary in determining what constitutes
a Rebate Receivable;
(b) such Rebate Receivable is not a Deferred Rebate Receivable; and
(c) with respect to the Person under such Rebate Receivable, neither
the Borrower nor any such Restricted Subsidiary is indebted to such Person
(and such indebtedness is past due by the terms thereof), unless the
Borrower or such Restricted Subsidiary and such Person have entered into an
agreement whereby such Person is prohibited from exercising any right of
setoff with respect to the Rebate Receivables of the Borrower or such
Restricted Subsidiary, provided, that in any event, if such an agreement
prohibiting setoff rights with respect to any such Rebate Receivable is not
delivered by such Person, then only up to the amount that the Borrower or
such Restricted Subsidiary is indebted to such Person under such Rebate
Receivable shall be excluded from the value of such Eligible Rebate
Receivable dollar-for-dollar pursuant to this clause.
"Environmental Laws" means all applicable federal, state or local statutes,
laws, ordinances, codes, rules, regulations and guidelines (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment.
"Equalization Transfer" is defined in clause (b) of Section 2.8.
"Equity Investors" is defined in the first recital.
"Equity Issuances" is defined in clause (d) of the fourth recital.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto of similar import, together with
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections thereto.
"Event of Default" is defined in Section 8.1.
"Excess Availability" means, at any time of determination, the amount which
is
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(a) the lesser of (i) the Revolving Loan Commitment Amount and (ii)
the then existing Borrowing Base Amount
less
(b) the aggregate outstanding principal amount of all Revolving Loans
and Swing Line Loans, together with the aggregate amount of all Letter of
Credit Outstandings.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended.
"Existing Letters of Credit" means (a) the letter of credit no. SPL28308,
dated November 26, 1986, issued by Harris Trust & Savings Bank to American
National Bank and Trust Company of Chicago in the stated amount of $3,672,603
(of which $2,203,562 is available as of the Closing Date) and (b) the letter of
credit issued by Harris Trust & Savings Bank to Transamerica Company in an
approximate stated amount of $1,400,000 (of which approximately $300,000 is
available as of the Closing Date).
"Extended Term Accounts" means Accounts, which are not Crop Term Accounts,
as to which the Borrower grants certain Account Debtors extended payment terms
(i.e. greater than 30-day payment terms).
"Farmarkets Subsidiaries" means, collectively, (i) each of Royster-Clark
Realty LLC, Royster-Clark AgriBusiness Realty LLC, Royster-Clark Nitrogen Realty
LLC and Royster-Clark Hutson's Realty LLC, each a Delaware limited liability
company and (ii) each other Subsidiary of the Borrower certified as a Farmarkets
Subsidiary by the Board of Directors of the Borrower, to which the Borrower and
certain of its Subsidiaries (including the IMC Businesses) will transfer Fixed
Assets to secure the First Mortgage Notes.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York; or
(b) if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it.
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"Fee Letter" means the confidential fee letter, dated January 20, 1999,
among Parent, CVC, Donaldson, Lufkin & Jenrette Securities Corporation and DLJ,
as amended, supplemented, amended and restated or otherwise modified from time
to time.
"Filing Agent" is defined in Section 5.1.9.
"Filing Statements" is defined in Section 5.1.9.
"First Mortgage Note Documents" means, collectively, the First Mortgage
Note Indenture, the Registration Rights Agreement, the Note Purchase Agreement
and each of the other loan agreements, indentures, note purchase agreements,
promissory notes, guarantees, and other instruments and agreements executed and
delivered in connection with the First Mortgage Note Offering, and evidencing
the terms of the First Mortgage Notes, as amended, supplemented, amended,
restated and otherwise modified from time to time in accordance with Section
7.2.10.
"First Mortgage Note Indenture" means the Indenture, dated as of April 22,
1999, among the Borrower, the guarantors party thereto and United States Trust
Company of New York, as Trustee, as the same may be amended, supplemented,
amended and restated or otherwise modified from time to time in accordance with
Section 7.2.10.
"First Mortgage Note Offering" is defined in clause (a) of the fourth
recital.
"First Mortgage Notes" means, the 10 1/4% First Mortgage Notes due 2009 of
the Borrower issued pursuant to the First Mortgage Note Offering and the First
Mortgage Note Indenture, and including any first mortgage notes of the Borrower
with substantially identical terms exchanged therefor pursuant to a registration
statement under the Securities Act of 1933, as amended.
"Fiscal Month" means any fiscal month of a Fiscal Year.
"Fiscal Quarter" means a quarter ending on the last day of March, June,
September or December of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number corresponding
to any calendar year (e.g., "1998 Fiscal Year") refer to the Fiscal Year ending
on December 31 of such Fiscal Year.
"Fixed Assets" includes (a) the equity interests of each of the Farmarkets
Subsidiaries, (b) the real property, buildings, structures and other
improvements to any of the foregoing, of the Borrower and its Subsidiaries and
to the extent any of the following items of property constitute fixtures and/or
equipment under applicable laws, all fixtures, fittings, appliances, apparatus,
equipment, machinery, building and construction materials and other articles of
every kind and nature whatsoever and all replacements thereof, now or hereafter
21
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affixed or attached to, placed upon or used in any way in connection with the
complete and comfortable use, enjoyment, occupation, operation, development
and/or maintenance of the real property of the Borrower or such Subsidiary or
such buildings, structures and other improvements and (c) any general
intangibles or other rights (including contract rights and intellectual
property) directly relating to the use and possession of any of the foregoing.
"Fixed Charge Coverage Ratio" means, at the close of any Fiscal Quarter,
the ratio computed for the period consisting of such Fiscal Quarter and each of
the three immediately prior Fiscal Quarters of:
(a) EBITDA for all such Fiscal Quarters,
less
(b) the sum of Capital Expenditures for all such Fiscal Quarters,
less
(c) the sum of Taxes paid in cash by the Borrower and its Restricted
Subsidiaries for all such Fiscal Quarters,
to
(d) the sum of Interest Expense paid in cash for all such Fiscal
Quarters; provided, that for the first three Fiscal Quarters ending after
the Closing Date, Interest Expense shall be determined on an Annualized
basis.
Notwithstanding the foregoing, for purposes of calculating the Fixed Charge
Coverage Ratio for the third Fiscal Quarter of the 1998 Fiscal Year, the fourth
Fiscal Quarter of the 1998 Fiscal Year and the first Fiscal Quarter of the 1999
Fiscal Year, the amount deducted pursuant to (i) clause (b) above shall be
deemed to be $7,919,000, $7,466,000 and $4,956,000, respectively and (ii) clause
(c) above shall be deemed to be -$10,755,000, -$7,038,000 and -$5,784,000,
respectively.
"Foreign Subsidiary" means a Subsidiary of the Borrower that is not a
Subsidiary incorporated or organized in or under the laws of the United States
or any State thereof.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"GAAP" is defined in Section 1.4.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
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local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Hazardous Material" means
(a) any "hazardous substance" as defined by CERCLA; or
(b) any "hazardous waste" as defined by the Resource Conservation and
Recovery Act, as amended; or
(c) any pollutant or contaminant or hazardous or toxic chemical,
material or substance (including any petroleum product) within the meaning
of any other applicable federal, state or local law, regulation, ordinance
or requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning any
hazardous or toxic waste, substance or material, all as amended.
"Hedging Obligations" means, with respect to any Person, all liabilities of
such Person under currency exchange agreements, interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, Commodity
Hedging Agreements, and all other agreements or arrangements designed to protect
such Person against fluctuations in interest rates, currency exchange rates or
commodity prices.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular Section,
paragraph or provision of this Agreement or such other Loan Document.
"Hutson" is defined in the second recital.
"IMC Acquisition" is defined in the second recital.
"IMC AgriBusiness" is defined in the second recital.
"IMC Businesses" is defined in the second recital.
"IMC Nitrogen" is defined in the second recital.
"IMC Rollover Issuance" is defined in clause (d) of the fourth recital.
"Immaterial Subsidiary" means any Subsidiary of the Borrower which (a) is
restricted, pursuant to its Organic Documents, from executing the Subsidiary
Guaranty and (b)(i) accounted for less than 5% of EBITDA of the Borrower and its
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Subsidiaries on a consolidated basis for the most recently completed Fiscal
Quarter with respect to which, pursuant to Section 7.1.1, financial statements
have been, or are required to have been, delivered by the Borrower on or before
the date as of which any such determination is made, as reflected in such
financial statements, and (ii) has assets which represent less than 5% of the
consolidated gross assets of the Borrower and its Subsidiaries as of the last
day of the most recently completed Fiscal Quarter with respect to which,
pursuant to Section 7.1.1, financial statements have been, or are required to
have been, delivered by the Borrower on or before the date as of which any such
determination is made, as reflected in such financial statements.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of any Obligor, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature, (b) which relates to the
limited scope of examination of matters relevant to such financial statement, or
(c) which relates to the treatment or classification of any item in such
financial statement and which, as a condition to its removal, would require an
adjustment to such item the effect of which would be to cause such Obligor to be
in default of any of its obligations under Section 7.2.4.
"including" and "include" mean including without limiting the generality of
any description preceding such term, and, for purposes of this Agreement and
each other Loan Document, the parties hereto agree that the rule of ejusdem
generis shall not be applicable to limit a general statement, which is followed
by or referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Incur" is defined in Section 7.2.2.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money or advances and
all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities of such Person;
(d) net liabilities of such Person under all Hedging Obligations;
(e) whether or not so included as liabilities in accordance with GAAP,
all Indebtedness of the types referred to in clauses (a) through (c) above
(excluding prepaid interest thereon) secured by a Lien on property owned or
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<PAGE>
being purchased by such Person (including Indebtedness arising under
conditional sales or other title retention agreements), whether or not such
Indebtedness shall have been assumed by such Person or is limited in
recourse; provided, however, that, to the extent such Indebtedness is
limited in recourse to the assets securing such Indebtedness, the amount of
such Indebtedness shall be limited to the fair market value of such assets;
(f) all obligations arising under Synthetic Leases; and
(g) all Contingent Liabilities of such Person in respect of any of
the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership or joint venture
in which such Person is a general partner or a joint venturer) to the extent
such Person is liable for such Indebtedness as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent the terms of such Indebtedness provide that such Person is not liable
therefor.
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Intercreditor Agreement" means the Intercreditor Agreement executed and
delivered pursuant to the terms of this Agreement by the Administrative Agent
and the United States Trust Company of New York, as trustee under the First
Mortgage Note Indenture, and acknowledged by the Borrower, substantially in the
form of Exhibit I hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"Interest Coverage Ratio" means, at the close of any Fiscal Quarter, the
ratio computed for the period consisting of such Fiscal Quarter and each of the
three immediately prior Fiscal Quarters of:
(a) EBITDA for all such Fiscal Quarters
to
(b) the sum of Interest Expense paid in cash for all such Fiscal
Quarters; provided, that for the first three Fiscal Quarters ending after
the Closing Date, Interest Expense shall be determined on an Annualized
basis.
"Interest Expense" means, for any applicable period, the aggregate interest
expense of the Borrower and its Restricted Subsidiaries for such applicable
period, as determined in accordance with GAAP, including the portion of any
payments made in respect of Capitalized Lease Liabilities allocable to interest
expense.
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<PAGE>
"Interest Period" means, as to any LIBO Rate Loan, the period commencing on
(and including) the Borrowing date of such Loan or on the date on which the Loan
is converted into or continued as a LIBO Rate Loan, and ending on (but
excluding) the date one, two, three, six or nine months thereafter, or, if
available in the Administrative Agent's reasonable determination, two weeks or
twelve months thereafter as selected by the Borrower in its Borrowing Request or
its Continuation/Conversion Notice; provided, however, that:
(a) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period;
(c) no Interest Period for any Loan shall extend beyond the Stated
Maturity Date for such Loan; and
(d) there shall be no more than 10 Interest Periods in effect at any
one time.
"Inventory" means, any "inventory" (as that term is defined in Section
9-109(4) of the UCC) of the Borrower or any Restricted Subsidiary.
"Inventory Agent" means any commission agent, third-party warehouseperson
or consigning agent which holds Inventory owned by the Borrower or any
Restricted Subsidiary for sale at such consigning agent's place of business.
"Investment" means, relative to any Person, (a) any loan or advance made by
such Person to any other Person (excluding commission, travel, relocation and
similar advances to officers, directors and employees made in the ordinary
course of business) or (b) any investment, contribution or similar transfer made
by such Person for purposes of acquiring or maintaining any ownership or similar
interest in another Person or a business of another Person (whether through the
ownership or acquisition of Capital Stock, revenues or profits or otherwise,
including by way of merger, consolidation or otherwise). The amount of any
Investment shall be the original principal or capital amount thereof less all
returns of principal or equity thereon (and without adjustment by reason of the
financial condition of such other Person) and shall, if made by the transfer or
exchange of property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such property at
the time of such transfer or exchange.
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<PAGE>
"Issuance Request" means a Letter of Credit request and certificate duly
executed by an Authorized Officer of the Borrower, in substantially the form of
Exhibit B-2 attached hereto.
"Issuer" means the Administrative Agent or an affiliate of the
Administrative Agent, in its capacity as Issuer of Letters of Credit and any
other Lender as may be designated by the Borrower (and consented to by the
Administrative Agent and such Lender, such consent by the Administrative Agent
not to be unreasonably withheld) in its capacity as Issuer of Letters of Credit.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit H hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 2.1.3.
"Letter of Credit Commitment" means, with respect to the Issuer, the
Issuer's obligation to issue Letters of Credit pursuant to clause (c) of Section
2.1.1 and, with respect to each of the other Lenders that has a Revolving Loan
Commitment, the obligation of each such Lender to participate in such Letters of
Credit pursuant to Section 2.6.1.
"Letter of Credit Commitment Amount" means, on any date, a maximum amount
of $10,000,000, as such amount may be reduced from time to time pursuant to
Section 2.2.
"Letter of Credit Outstandings" means, on any date, an amount equal to the
sum of
(a) the then aggregate amount which is undrawn and available under all
issued and outstanding Letters of Credit (whether or not the conditions to
drawing thereunder could be satisfied on such date),
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations in respect of such Letters of Credit.
"Leverage Ratio" means, at the end of any Fiscal Quarter, the ratio of:
(a) Total Debt outstanding at such time
to
(b) EBITDA for the period of four consecutive Fiscal Quarters ended on
such date.
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"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans, the
rate per annum equal to the rate at which Dollar deposits are offered for such
Interest Period as set forth on, at the option of the Administrative Agent,
either the Reuters Screen LIBO Page or the Telerate Screen LIBO Page, in both
cases at or about 9:00 a.m. (Minnesota time), two Business Days prior to the
beginning of such Interest Period for delivery on the first day of such Interest
Period, and in an amount approximately equal to the amount of the LIBO Rate Loan
and for a period approximately equal to such Interest Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, the rate of interest per annum (rounded upwards to the next 1/16th of
1%) determined by the Administrative Agent as follows:
LIBO Rate
LIBO Rate = -------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be adjusted automatically as to all LIBO Rate Loans then outstanding
as of the effective date of any change in the LIBOR Reserve Percentage.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such on Schedule II hereto or designated in the Lender Assignment
Agreement pursuant to which such Lender became a Lender hereunder or such other
office of a Lender as shall be so designated from time to time by notice from
such Lender to the Borrower and the Administrative Agent, which shall be making
or maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO
Rate Loans, the percentage (expressed as a decimal, rounded upward to the next
1/16th of 1%) in effect on such day (whether or not applicable to any Lender)
under regulations issued from time to time by the F.R.S. Board for determining
the maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the F.R.S. Board).
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or any filing or recording of any
instrument or document in respect of the foregoing, to secure payment of a debt
or performance of an obligation or any other priority or preferential treatment
of any kind or nature whatsoever that has the practical effect of creating a
security interest in property.
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<PAGE>
"Loan" means, as the context may require, a Revolving Loan of any type or a
Swing Line Loan.
"Loan Document" means this Agreement, the Notes, the Letters of Credit,
each Rate Protection Agreement, each Borrowing Request, each Issuance Request,
each Borrowing Base Certificate, the Fee Letter, the Administrative Agent's Fee
Letter, each Pledge Agreement, the Subsidiary Guaranty, and each other
agreement, document or instrument delivered in connection with this Agreement or
any other Loan Document, whether or not specifically mentioned herein or
therein.
"Management Investors" is defined in the first recital.
"Marketable Securities" means "marketable securities" as defined under
GAAP.
"Material Adverse Effect" means (a) a material adverse effect on the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower and its Subsidiaries, taken as a whole,
(b) a material impairment of the ability of the Borrower or any other Obligor to
perform its respective material obligations under the Loan Documents to which it
is or will be a party, or (c) an impairment of the validity or enforceability
of, or a material impairment of the rights, remedies or benefits available to
the Issuer, the Agents, the Co-Lead Arrangers or the Lenders under, this
Agreement or any other Loan Document.
"Monthly Payment Date" means the last day of each Fiscal Month, or, if any
such day is not a Business Day, the next succeeding Business Day.
"Moody's" means Moody's Investors Service, Inc.
"Morgan" is defined in the preamble.
"Net Asset Value" means, at any time of any determination thereof:
(a) with respect to Accounts, as reflected on the books of the
Borrower and its Restricted Subsidiaries in accordance with GAAP, an amount
equal to (i) 80% of the book value of all Eligible Accounts which are
Regular Accounts (provided that during the months of September, October and
November (the "Seasonal Period") the advance rate shall be 85%), plus (ii)
70% of all Eligible Accounts which are Crop Term Accounts or Extended Term
Accounts (provided that (A) the advance rate during the Seasonal Period
shall be 75% and (B) the aggregate amount of such Crop Term Accounts and
Extended Term Accounts shall be limited, before applying the relevant
advance rate, to those amounts specified on Schedule IV hereto), less (iii)
all credits, discounts, allowances (and net of all unissued credits in the
form of competitive allowances or otherwise) and other reserves deemed
appropriate by the Administrative Agent;
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<PAGE>
(b) with respect to Inventory, as reflected on the books of the
Borrower and its Restricted Subsidiaries in accordance with GAAP, an amount
equal to (i) 65% of the lesser of the market value and the cost of goods
(determined on a first-in, first-out basis) of all Eligible Inventory
(provided, that (A) the advance rate during the Seasonal Period shall be
70% and (B) that the aggregate amount of saleable equipment, applicators
and planter plates which, for purposes hereof, shall be deemed to be
Eligible Inventory, before applying the relevant advance rate, shall not
exceed $1,000,000); less (ii) all Customer Deposits and inventory reserves,
including reserves for inventory shrinkage, variances, capitalized
distribution costs, and other reserves as deemed appropriate by the
Administrative Agent;
(c) with respect to Rebate Receivables, as reflected on the books of
the Borrower and its Restricted Subsidiaries in accordance with GAAP, an
amount equal to 80% of all Eligible Rebate Receivables (provided, that (i)
the advance rate during the Seasonal Period shall be 85% and (ii) the
amount of such Eligible Rebate Receivables shall be limited, after applying
the relevant advance rate, to those amounts specified on Schedule IV
hereto); and
(d) with respect to Prepaid Inventory, as reflected on the books of
the Borrower and its Restricted Subsidiaries in accordance with GAAP, an
amount equal to 65% of Eligible Prepaid Inventory (provided, that (i) the
advance rate during the Seasonal Period shall be 70% and (ii) the amount of
such Eligible Prepaid Inventory shall be limited, after applying the
relevant advance rate, to those amounts specified on Schedule IV hereto).
"Net Casualty Proceeds" means, with respect to any Casualty Event, the
amount of any insurance proceeds or condemnation awards received by the Borrower
or any of its Restricted Subsidiaries in connection therewith, but excluding any
proceeds or awards required to be paid to a creditor (other than the Lenders)
which holds a first-priority Lien permitted by Section 7.2.3 on the property
which is the subject of such Casualty Event.
"Net Debt Proceeds" means, with respect to the incurrence, sale or issuance
by the Borrower or any of its Restricted Subsidiaries of any Debt (other than
Debt permitted by Section 7.2.2), the excess of:
(a) the gross cash proceeds received by the Borrower or any of its
Restricted Subsidiaries from such incurrence, sale or issuance,
less
(b) all reasonable and customary underwriting commissions and legal,
investment banking, brokerage and accounting and other professional fees,
sales commissions and disbursements and all other reasonable fees, expenses
and charges, in each case actually incurred in connection with such
incurrence, sale or issuance.
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"Net Disposition Proceeds" means, with respect to any Disposition (other
than transfers made as part of the Transaction and other sales permitted
pursuant to clause (a) of Section 7.2.9), the excess of:
(a) the gross cash proceeds received by the Borrower or any of its
Restricted Subsidiaries from any such Disposition and any cash payments
received in respect of promissory notes or other non-cash consideration
delivered to the Borrower or such Restricted Subsidiary in respect thereof,
less
(b) the sum (without duplication) of (i) all reasonable and customary
fees and expenses with respect to legal, investment banking, brokerage,
accounting and other professional fees, sales commissions and disbursements
and all other reasonable fees, expenses and charges, in each case actually
incurred in connection with such Disposition, (ii) all Taxes and other
governmental costs and expenses actually paid or estimated by the Borrower
(in good faith) to be payable in cash in connection with such Disposition,
and (iii) payments made by the Borrower or any of its Restricted
Subsidiaries to retire Indebtedness (other than the Credit Extensions) of
the Borrower or any of its Restricted Subsidiaries where payment of such
Indebtedness is required in connection with such Disposition;
provided, however, that if, after the payment of all Taxes with respect to such
Disposition, the amount of estimated Taxes, if any, pursuant to clause (b)(ii)
above exceeded the Tax amount actually paid in cash in respect of such
Disposition, the aggregate amount of such excess shall be immediately payable,
pursuant to clause (d) of Section 3.1.1, as Net Disposition Proceeds.
"Net Equity Proceeds" means with respect to the sale or issuance by the
Borrower or any of its Restricted Subsidiaries to any Person of any of its
Capital Stock or any warrants or options with respect to its Capital Stock or
the exercise of any such warrants or options after the Closing Date, the excess
of:
(a) the gross cash proceeds received by such Person from such sale,
exercise or issuance,
less
(b) all reasonable and customary underwriting commissions and legal,
investment banking, brokerage, accounting and other professional fees,
sales commissions and disbursements and all other reasonable fees, expenses
and charges, in each case actually incurred in connection with such sale or
issuance.
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"Net Income" means, for any period, the aggregate of all amounts which, in
accordance with GAAP, would be included as net income on the consolidated
financial statements of the Borrower and its Restricted Subsidiaries for such
period.
"Net Worth" means the consolidated net worth of the Borrower and its
Restricted Subsidiaries, determined in accordance with GAAP.
"Net Worth Amount" means the amount equal to
(a) for the quarterly period ending 06/30/00, the Base Net Worth less
$41,000,000 plus (only to the extent Net Income is in excess of zero) an
amount equal to 50% of the Net Income for the quarterly period from
04/01/00 to 06/30/00;
(b) for the quarterly period ending 09/30/00, the amount determined
pursuant to clause (a) above plus (only to the extent Net Income is in
excess of zero) an amount equal to 50% of the Net Income for the quarterly
period from 07/01/00 to 09/30/00;
(c) for the quarterly period ending 12/31/00, the amount determined
pursuant to clause (b) above plus (only to the extent Net Income is in
excess of zero) an amount equal to 50% of the Net Income for the quarterly
period from 10/01/00 to 12/31/00; and
(d) for the quarterly periods ending 03/31/01, 06/30/01, 09/30/01 and
12/31/01, the Net Worth Amount determined (in accordance with the method
set forth above) as of the prior quarterly period plus (only to the extent
Net Income is in excess of zero) an amount equal to 50% of the Net Income
for such quarterly period ending 03/31/01, 06/30/01, 09/30/01 or 12/31/01,
respectively.
"No Less Favorable Terms and Conditions" means, with respect to the First
Mortgage Note Refinancing or any other refinancing of the First Mortgage Notes
permitted hereunder, terms and conditions which are no less favorable to the
Agents and the Lenders and evidenced by documentation which shall not (i)
increase the principal amount of or interest rate on the outstanding
Indebtedness evidenced by the First Mortgage Notes, (ii) reduce either the tenor
or the average life of such Indebtedness, (iii) change the respective primary
obligor(s) on the refinancing Indebtedness as on the First Mortgage Notes, (iv)
change the security, if any, for the refinancing Indebtedness (except to the
extent that less security is granted to holders of such refinancing
Indebtedness) and (v) afford the holders of such refinancing Indebtedness other
covenants, defaults, rights or remedies, taken as a whole, more burdensome to
the obligor(s) than those contained in the First Mortgage Notes.
"Non-Excluded Taxes" means any Taxes other than net income and franchise
taxes imposed with respect to the Lender by a Governmental Authority under the
laws of which the Lender is organized or in which it maintains its applicable
lending office.
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"Non-U.S. Lender" means any Lender (including each Assignee Lender) that is
not a "United States person", as defined under Section 7701(a)(30) of the Code.
"Note" means, as the context may require, a Revolving Note or a Swing Line
Note.
"Note Purchase Agreement" means the note purchase agreement, dated as of
April 15, 1999, between Parent, the Borrower, Donaldson, Lufkin & Jenrette
Securities Corporation and Morgan, as amended, supplemented, amended, restated
and otherwise modified from time to time in accordance with Section 7.2.10.
"Notice of Default" is defined in Section 9.9.
"Obligations" means all obligations (monetary or otherwise, whether
absolute or contingent, matured or unmatured) of the Borrower and each other
Obligor arising under or in connection with this Agreement and each other Loan
Document.
"Obligor" means Parent, the Borrower, each Restricted Subsidiary or any
other Person (other than any Agent, the Co-Lead Arrangers or any Lender)
obligated under any Loan Document.
"Offering Memorandum" means the offering memorandum of the Borrower, dated
April 15, 1999, prepared in connection with the offer and sale of the First
Mortgage Notes.
"Organic Document" means, relative to any Obligor (or any Immaterial
Subsidiary), as applicable, its certificate of incorporation, by-laws,
certificate of partnership, partnership agreement, certificate of formation,
limited liability agreement and all shareholder agreements, voting trusts and
similar arrangements to which such Obligor (or such Immaterial Subsidiary) is a
party applicable to any of its authorized shares of Capital Stock.
"Other Taxes" means any and all stamp, documentary or similar taxes, or any
other excise or property taxes or similar levies that arise on account of any
payment made or required to be made under any Loan Document or from the
execution, delivery, registration, recording or enforcement of any Loan
Document.
"Parent" is defined in the first recital.
"Parent Guaranty and Pledge Agreement" means the Pledge Agreement executed
and delivered by an Authorized Officer of Parent pursuant to clause (a) of
Section 5.1.8, substantially in the form of Exhibit F-1 hereto, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Participant" is defined in Section 10.11.2.
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"Past Due" means, which respect to
(a) Regular Accounts, such Account is outstanding more than 90 days
past the original billing date for such Account;
(b) Crop Term Accounts, such Account is outstanding after the end of
the Crop Year in which such Account arose; and
(c) Extended Term Accounts, such Account is outstanding more than 30
days past the due date, which date shall be no later than 180 days past the
original billing date for such Account;
provided, however, that, with respect to any Account, the original billing date
for such Account shall be deemed to be the earlier of (i) the actual original
billing date and (ii) the date which is seven days from the date of the shipment
of the Inventory giving rise to such Account.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or
any corporation, trade or business that is, along with the Borrower, a member of
a Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the applicable percentage
relating to Revolving Loans as set forth opposite its name on Schedule II hereto
under the applicable column heading or set forth in Lender Assignment
Agreement(s), as such percentage may be adjusted from time to time pursuant to
Lender Assignment Agreement(s) executed by such Lender and its Assignee
Lender(s) and delivered pursuant to Section 10.11.
"Permitted Acquisition" means an acquisition (whether pursuant to an
acquisition of Capital Stock, assets or otherwise) by the Borrower or any
Restricted Subsidiary from any Person of a business ("Target") in which the
following conditions are satisfied:
(a) immediately before and after giving effect to such acquisition, no
Default or Event of Default shall have occurred and be continuing or would
result therefrom (including under Section 7.2.1);
(b) subject to the proviso below, the Borrower shall have delivered
each of the following to the Agents:
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(i) a Compliance Certificate for the period of four full Fiscal
Quarters immediately preceding such acquisition (prepared in good
faith and in a manner and using such methodology which is consistent
with the most recent financial statements delivered pursuant to
Section 7.1.1) giving pro forma effect to the consummation of such
acquisition and evidencing compliance with the covenants set forth in
Section 7.2.4 as of the end of the Fiscal Quarter most recently ended
for which a Compliance Certificate is delivered by the Borrower to the
Administrative Agent;
(ii) a certificate (prepared in good faith by the chief
accounting or financial Authorized Officer of the Borrower and in a
manner and using such methodology which is consistent with the most
recent financial projections delivered pursuant to clause (i) of
Section 7.1.1) setting forth financial projections (which shall be on
a monthly basis for the first 24 months following such Permitted
Acquisition and on a yearly basis thereafter) for the Borrower and its
Restricted Subsidiaries (and including Target), on a consolidated
basis, demonstrating that the monthly Excess Availability shall not,
at any time over the life of this Agreement, be less than $25,000,000;
and
(iii) a customary inspection of Target's receivables and
inventory (the "Acquired Borrowing Base Assets") (which shall have
been commenced within 10 Business Days of the Borrower instructing the
Administrative Agent (which instruction shall be given as promptly as
possible) to inspect such Acquired Borrowing Base Assets of Target)
and completed by the Administrative Agent as soon as reasonably
practicable using all reasonable efforts to complete such inspection
promptly in accordance with past practices, the scope and results of
which inspection shall be satisfactory in all respects to the Agents
to the extent necessary to determine compliance with clause (ii)
above;
provided, that, with respect to clauses (ii) and (iii) above, the Borrower
shall only be required to deliver such certificate and such inspection from
time to time to the extent (A) the value of any Acquired Borrowing Base
Assets acquired in connection with any one Investment or a series of
related or unrelated Investments constituting Permitted Acquisitions equals
or exceeds $5,000,000 (and, thereafter, in increments of $5,000,000 or
more) and (B) an inspection of such Acquired Borrowing Base Assets shall
not have previously been completed by the Administrative Agent (either
pursuant to clause (iii) above or in connection with a customary yearly
inspection performed by the Administrative Agent); and
(c) notwithstanding clause (a) of Section 7.2.12, the Borrower will
cause Target (if Target becomes a Restricted Subsidiary) to enter into an
agreement (on terms and conditions and pursuant to documentation reasonably
satisfactory to the Agents) prohibiting the creation or assumption of any
Lien upon Target's properties, revenues or assets, whether owned at the
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time of such acquisition or thereafter acquired (other than any Lien (i)
created in favor of the Administrative Agent pursuant to a Loan Document
and (ii) permitted under Section 7.2.3).
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means, as the context may require, any Pledge and
Security Agreement or the Parent Guaranty and Pledge Agreement.
"Pledge and Security Agreement" means, as the context may require, the
Borrower Pledge and Security Agreement or the Subsidiary Pledge and Security
Agreement.
"Prepaid Inventory" means prepaid expenses of the Borrower or any
Restricted Subsidiary for which the Borrower or such Restricted Subsidiary has
made payments to suppliers for the receipt of Inventory at a future date.
"Pro Forma Balance Sheet" is defined in clause (e) of Section 5.1.13.
"Product Supply Agreement" means the product supply agreements, each dated
as of April 22, 1999, between the IMC Kalium Ltd., IMC-Agrico Company and the
Borrower, as amended, supplemented, amended and restated and otherwise modified
from time to time in accordance with Section 7.2.10.
"Purchasing Lender" is defined in clause (e) of Section 2.8.
"Quarterly Payment Date" means the last day of each of March, June,
September and December, or, if any such day is not a Business Day, the next
succeeding Business Day.
"R-C Acquisition" is defined in the second recital.
"Rate Protection Agreement" means, collectively, any currency or interest
rate swap, cap, collar or similar agreement or arrangements designed to protect
against fluctuations in interest rates or currency exchange rates entered into
by the Borrower or any of its Restricted Subsidiaries under which the
counterparty to such agreement is (or at the time such Rate Protection Agreement
was entered into, was) a Lender or an Affiliate of a Lender.
"Rebate Receivables" means those rights to payment associated with vendor
rebate programs, which rights of payment accrue to the Borrower or any
Restricted Subsidiary.
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"Refinancing" is defined in the fifth recital.
"Register" is defined in clause (b) of Section 2.7.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of April 22, 1999, among Parent, the Borrower, the IMC Businesses, the
Farmarkets Subsidiaries, Donaldson, Lufkin & Jenrette Securities Corporation and
Morgan as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with Section 7.2.10.
"Regular Accounts" means Accounts as to which the Borrower or any
Restricted Subsidiary grants 30 day payment terms to the Account Debtor.
"Reimbursement Obligation" is defined in Section 2.6.3.
"Reinstatement Date" is defined in Section 4.1.
"Related Fund" means, with respect to any Lender which is a fund that
invests in loans, any other fund that invests in loans and is controlled by the
same investment advisor as such Lender or by an Affiliate of such investment
advisor.
"Release" means a "release", as such term is defined in CERCLA.
"Replacement Lender" is defined in Section 4.11.
"Replacement Notice" is defined in Section 4.11.
"Required Lenders" means, at any time, Lenders having at least 51% of the
Revolving Loan Commitment Amount.
"Resource Conservation and Recovery Act" means the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended.
"Restricted Payment" means the declaration or payment of any dividend
(other than dividends payable solely in common stock of the Borrower or any
Restricted Subsidiary) on, or the making of any payment or distribution on
account of, or setting apart assets for a sinking or other analogous fund for,
the purchase, redemption, defeasance, retirement or other acquisition of any
class of Capital Stock (now or hereafter outstanding) of the Borrower or any
Restricted Subsidiary or any warrants or options to purchase any such Capital
Stock, whether now or hereafter outstanding, or the making of any other
distribution in respect thereof, either directly or indirectly, whether in cash,
property or obligations of the Borrower or any Restricted Subsidiary or
otherwise.
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"Restricted Subsidiary" means any Subsidiary of the Borrower that is not a
Farmarkets Subsidiary or an Immaterial Subsidiary.
"Revolving Loan" is defined in Section 2.1.1.
"Revolving Loan Commitment" is defined in Section 2.1.1.
"Revolving Loan Commitment Amount" means, on any date, $275,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Revolving Loan Commitment Termination Date" means the earliest of (a) the
fifth anniversary of the Closing Date, (b) the date on which the Revolving Loan
Commitment Amount is terminated in full or reduced to zero pursuant to Section
2.2, and (c) the date on which any Commitment Termination Event occurs.
"Revolving Note" means a promissory note of the Borrower payable to any
Lender, substantially in the form of Exhibit A-1 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time in accordance
with the terms hereof and thereof), evidencing the aggregate Indebtedness of the
Borrower to such Lender resulting from outstanding Revolving Loans, and also
means all other promissory notes accepted from time to time in substitution
therefor or renewal thereof.
"Rollover Equity Issuance" is defined in clause (c) of the fourth recital.
"S&P" means Standard & Poor's Ratings Services.
"Seasonal Period" is defined in clause (a) of the definition of "Net Asset
Value".
"Secured Parties" means, collectively, the Lenders, the Issuer, the Agents,
each counterparty to a Rate Protection Agreement and (in each case), each of
their respective successors, transferees and assigns.
"Seller Notes" is defined in clause (d) of the fourth recital.
"Selling Lender" is defined in clause (e) of Section 2.8.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on any Indebtedness of the Borrower and its Restricted Subsidiaries, whether
outstanding on the date hereof or thereafter incurred as permitted herein,
unless, in the case of any particular Indebtedness, the agreement or instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness is junior or subordinated in right of
payment to any item of Indebtedness of the Borrower and its Restricted
Subsidiaries. Without limiting the generality of the foregoing, "Senior
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Indebtedness" includes the principal of, premium, if any, and interest and all
other obligations of every nature of the Borrower (or any other Obligor) from
time to time owed pursuant to this Agreement or any other Loan Document.
Notwithstanding the foregoing, "Senior Indebtedness" does not include (a) in the
case of the obligation of the Borrower in respect of each Lender's obligations,
the obligation of the Borrower in respect of the other Lender's obligations, (b)
any liability for Taxes owed or owing by the Borrower or any of its Restricted
Subsidiaries to the extent that such liability constitutes Indebtedness, (c)
Indebtedness of the Borrower (or any other Obligor) to Parent, (d) that portion
of any Indebtedness which at the time of issuance is issued in violation hereof,
and (e) Indebtedness and amounts incurred in connection with obtaining goods,
materials or services in the ordinary course of business (other than such
Indebtedness which is owed to banks and other financial institutions or secured
by the goods or materials which were purchased with such Indebtedness).
"Solvency Certificate" means the solvency certificate delivered pursuant to
clause (b) of Section 5.1.10, substantially in the form of Exhibit J hereto.
"Solvent" means, with respect to any Person and its Subsidiaries on a
particular date, that on such date (a) the fair value of the property of such
Person and its Subsidiaries on a consolidated basis is greater than the total
amount of liabilities, including Contingent Liabilities, of such Person and its
Subsidiaries on a consolidated basis, (b) the present fair salable value of the
assets of such Person and its Subsidiaries on a consolidated basis, is not less
than the amount that will be required to pay the probable liability of such
Person and its Subsidiaries on a consolidated basis on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not believe
that it or its Subsidiaries will, incur debts or liabilities beyond the ability
of such Person and its Subsidiaries to pay as such debts and liabilities mature,
and (d) such Person and its Subsidiaries on a consolidated basis are not engaged
in business or a transaction, and such Persons and its Subsidiaries on a
consolidated basis are not about to engage in business or a transaction, for
which the property of such Person and its Subsidiaries would constitute an
unreasonably small capital. The amount of Contingent Liabilities at any time
shall be computed as the amount that, in light of all the facts and
circumstances existing at such time, can reasonably be expected to become an
actual or matured liability.
"Stated Amount" of each Letter of Credit means the total amount available
to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Expiry Date" is defined in Section 2.6.
"Stated Maturity Date" means, in the case of any Revolving Loan, the fifth
anniversary of the Closing Date or, if such day is not a Business Day, the first
Business Day following such day.
"Stock Purchase Agreement" means the Stock Purchase Agreement, dated as of
January 21, 1999 (as amended on April 13, 1999 and April 22, 1999), between
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Parent, the Seller and The Vigoro Corporation, as amended, supplemented, amended
and restated and otherwise modified from time to time in accordance with Section
7.2.10.
"Subject Lender" is defined in Section 4.11.
"Subordinated Debt" means all unsecured Indebtedness for money borrowed
which is subordinated, upon terms and pursuant to documentation satisfactory to
the Agents and the Required Lenders, in right of payment to the payment in full
in cash of all Obligations.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which more than 50% of the outstanding
Capital Stock (or other ownership interest) having ordinary voting power to
elect a majority of the board of directors, managers or other voting members of
the governing body of such entity (irrespective of whether at the time Capital
Stock (or other ownership interests) of any other class or classes of such
entity shall or might have voting power upon the occurrence of any contingency)
is at the time directly or indirectly owned or controlled by such Person, by
such Person and one or more other Subsidiaries of such Person, or by one or more
other Subsidiaries of such Person.
"Subsidiary Guaranty" means the Guaranty executed and delivered by an
Authorized Officer of each Restricted Subsidiary pursuant to Section 5.1.7,
substantially in the form of Exhibit G hereto, as amended, supplemented, amended
and restated or otherwise modified from time to time.
"Subsidiary Pledge and Security Agreement" means the Pledge Agreement
executed and delivered by an Authorized Officer of each Restricted Subsidiary
pursuant to clause (b) of Section 5.1.8, substantially in the form of Exhibit
F-3 hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"Swing Line Lender" means the Administrative Agent (or another Lender
designated by the Administrative Agent with the consent of the Borrower, if such
Lender agrees to be the Swing Line Lender hereunder), in such Person's capacity
as the maker of Swing Line Loans.
"Swing Line Loan" is defined in Section 2.1.1.
"Swing Line Loan Commitment" means, with respect to the Swing Line Lender,
the Swing Line Lender's obligation pursuant to Section 2.1.1 to make Swing Line
Loans and, with respect to each Lender with a Commitment to make Revolving Loans
(other than the Swing Line Lender), such Lender's obligation to participate in
Swing Line Loans pursuant to Section 2.3.2.
"Swing Line Loan Commitment Amount" means, on any date, $25,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Swing Line Note" means a promissory note of the Borrower payable to the
Swing Line Lender, in substantially the form of Exhibit A-2 hereto (as such
promissory note may be amended, endorsed or otherwise modified from time to
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time), evidencing the aggregate Indebtedness of the Borrower to the Swing Line
Lender resulting from outstanding Swing Line Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"Syndication Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor Syndication
Agent by the predecessor Syndication Agent and the Borrower.
"Synthetic Lease" means, as applied to any Person, any lease (including
leases that may be terminated by the lessee at any time) of any property
(whether real, personal or mixed) (a) that is not a capital lease in accordance
with GAAP and (b) in respect of which the lessee retains or obtains ownership of
the property so leased for federal income tax purposes, other than any such
lease under which that Person is the lessor.
"Target" is defined in the definition of "Permitted Acquisition".
"Taxes" means any and all income, stamp or other taxes, duties, levies,
imposts, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, and all
interest, penalties or similar liabilities with respect thereto.
"Telerate Screen LIBO Page" means the display designated as "Page 3750" on
the Telerate Service (or such other page as may replace Page 3750 on the service
or such other service as may be nominated by the British Bankers' Association as
the information vendor for the purpose of displaying British Bankers'
Association interest settlement rates for Dollar deposits).
"Termination Date" means the date on which all Obligations have been paid
in full in cash, all Letters of Credit have been terminated, expired or Cash
Collateralized, all Rate Protection Agreements have been terminated and all
Commitments have been terminated.
"Total Debt" means, on any date, the outstanding principal amount of all
Indebtedness of the Borrower and its Restricted Subsidiaries of the type
referred to in clause (a) (which, in the case of the Loans, shall be deemed to
equal the average monthly amount of Loans outstanding on the last day of each
month during the Fiscal Quarter ending on or immediately preceding the date of
determination), clause (b) (which, in the case of Letter of Credit Outstandings
shall be deemed to equal the average monthly amount of Letter of Credit
Outstandings on the last day of each month during the Fiscal Quarter ending on
or immediately preceding the date of determination), clause (c), clause (e) and
clause (f), in each case of the definition of "Indebtedness" (exclusive of
intercompany Indebtedness between the Borrower and its Restricted Subsidiaries)
and (without duplication) any Contingent Liability in respect of any of the
foregoing.
"Transaction" is defined in the fifth recital.
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"Transaction Documents" means, collectively, the Stock Purchase Agreement,
the First Mortgage Note Documents, the Product Supply Agreement, and all other
material agreements, documents, instruments, certificates, filings, consents,
approvals, board of directors resolutions and opinions furnished to or in
connection with the Transaction.
"type" means, relative to any Revolving Loan, the portion thereof, if any,
being maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York or, with respect to Filing Statements, the Uniform
Commercial Code as in effect from time to time in each applicable jurisdiction
of the United States.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"Waiver" means any agreement in favor of the Administrative Agent for the
benefit of the Lenders and each Issuer in form and substance reasonably
satisfactory to the Administrative Agent.
"Welfare Plan" means a "welfare plan", as such term is defined in section
3(1) of ERISA.
"wholly-owned Subsidiary" means, with respect to any Person, any Subsidiary
of such Person all of the Capital Stock (including all rights and options to
purchase such Capital Stock) of which, other than directors' qualifying shares,
are owned, beneficially and of record, by such Person and/or one or more
wholly-owned Subsidiaries of such Person.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context
otherwise requires, terms for which meanings are provided in this Agreement
shall have such meanings when used in the Disclosure Schedule, each Loan
Document, notice and other communication delivered from time to time in
connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder (including under Section 7.2.4) shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared in
accordance with, those generally accepted accounting principles ("GAAP") applied
in the preparation of the financial statements referred to in Section 5.1.13.
Unless otherwise expressly provided, all financial covenants and defined
financial terms shall be computed on a consolidated basis for the Borrower and
its Restricted Subsidiaries, in each case without duplication.
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ARTICLE II
COMMITMENTS, BORROWING PROCEDURES,
NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement,
(a) each Lender severally agrees to make Revolving Loans (other than
Swing Line Loans) pursuant to the Revolving Loan Commitment, and the Swing
Line Lender agrees to make Swing Line Loans pursuant to the Swing Line Loan
Commitment, in each case as described in this Section 2.1; and
(b) the Issuer agrees that it will issue Letters of Credit pursuant to
Section 2.1.1, and each other Lender that has a Revolving Loan Commitment
severally agrees that it will purchase participation interests in such
Letters of Credit pursuant to Section 2.6.1.
SECTION 2.1.1. Credit Extensions. Subject to compliance by the Borrower
with the terms hereof, from time to time on any Business Day occurring from and
after the Closing Date but prior to the Revolving Loan Commitment Termination
Date:
(a) each Lender will make loans (relative to such Lender, its
"Revolving Loans") to the Borrower equal to such Lender's Percentage of the
aggregate amount of the Borrowing or Borrowings of Revolving Loans
requested by the Borrower to be made on such day. On the terms and subject
to the conditions set forth herein, the Borrower may from time to time
borrow, prepay and reborrow Revolving Loans. The Commitment of each Lender
described in this Section 2.1.1 is herein referred to as its "Revolving
Loan Commitment";
(b) the Swing Line Lender will make Loans (relative to the Swing
Line Lender, its "Swing Line Loans") to the Borrower equal to the
principal amount of the Swing Line Loans requested by the Borrower to be
made on such day. On the terms and subject to the conditions hereof, the
Borrower may from time to time borrow, prepay and reborrow such Swing Line
Loans;
(c) the Issuer will issue one or more standby letters of credit
(each referred to as a "Letter of Credit") for the account of the Borrower
or any Restricted Subsidiary in the Stated Amount requested by the
Borrower on such day, or extend the Stated Expiry Date of an existing
standby Letter of Credit previously issued hereunder to a date not later
than the earlier of (i) the Revolving Loan Commitment Termination Date and
(ii) one year from the date of such extension; it being acknowledged and
agreed by the parties hereto that the Existing Letters of Credit are each
deemed to be and shall constitute a "Letter of Credit" issued under and
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governed by the terms of this Agreement, and Harris Trust & Savings Bank
is deemed to be an "Issuer" under the terms of this Agreement with respect
to the Existing Letters of Credit.
SECTION 2.1.2. Lenders Not Permitted or Required to Make Loans. No Lender
shall be permitted or required to, and the Borrower shall not request any Lender
to, make any Revolving Loan or Swing Line Loan if, after giving effect thereto,
the aggregate outstanding principal amount of all the Revolving Loans and Swing
Line Loans
(a) of all the Lenders, together with the aggregate amount of all
Letter of Credit Outstandings, would exceed the lesser of (i) the Revolving
Loan Commitment Amount and (ii) the then existing Borrowing Base Amount;
(b) of such Lender (other than the Swing Line Lender), together with
such Lender's Percentage of the aggregate amount of all Letter of Credit
Outstandings, would exceed such Lender's Percentage of the lesser of (i)
the Revolving Loan Commitment Amount and (ii) the then existing Borrowing
Base Amount; or
(c) in the case of Swing Line Loans, if after giving effect to the
making of such Swing Line Loan, the outstanding principal amount of all
Swing Line Loans would exceed the then existing Swing Line Loan Commitment
Amount.
SECTION 2.1.3. Issuer Not Permitted or Required to Issue Letters of Credit.
No Issuer shall be permitted or required to issue any Letter of Credit if, after
giving effect thereto, (a) the aggregate amount of all Letter of Credit
Outstandings would exceed the Letter of Credit Commitment Amount or (b) the sum
of the aggregate amount of all Letter of Credit Outstandings plus the aggregate
principal amount of all Revolving Loans and Swing Line Loans then outstanding
would exceed the lesser of (i) the Revolving Loan Commitment Amount and (ii) the
then existing Borrowing Base Amount.
SECTION 2.2. Reduction of Commitment Amounts. The Commitment Amounts are
subject to reduction from time to time pursuant to this Section 2.2.
SECTION 2.2.1. Optional. The Borrower may, from time to time on any
Business Day occurring after the Closing Date, voluntarily reduce the Swing Line
Loan Commitment Amount, the Letter of Credit Commitment Amount or the Revolving
Loan Commitment Amount; provided, however, that all such reductions shall
require at least five Business Days' prior notice to the Administrative Agent
and be permanent, and any partial reduction of any Commitment Amount shall be in
a minimum amount of $5,000,000 and in an integral multiple of $1,000,000. Any
reduction of the Revolving Loan Commitment Amount which reduces the Revolving
Loan Commitment Amount below the sum of (a) the Letter of Credit Commitment
Amount and (b) the Swing Line Loan Commitment Amount shall result in an
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automatic and corresponding reduction of the Letter of Credit Commitment Amount
and/or the Swing Line Loan Commitment Amount (as specified by the Borrower) to
an aggregate amount not in excess of the Revolving Loan Commitment Amount, as so
reduced, without any further action on the part of the Issuer or the Swing Line
Lender.
SECTION 2.2.2. Mandatory. The Revolving Loan Commitment Amount shall,
without any further action, automatically and permanently be reduced on the
Revolving Loan Commitment Termination Date so that the Revolving Loan Commitment
Amount equals $0, provided, that any such reduction of the Revolving Loan
Commitment Amount which reduces the Revolving Loan Commitment Amount below the
sum of (a) Letter of Credit Commitment Amount and (b) the Swing Line Loan
Commitment Amount shall result in an automatic and corresponding reduction of
the Letter of Credit Commitment Amount and/or the Swing Line Loan Commitment
Amount (as specified by the Borrower) to an aggregate amount not in excess of
the Revolving Loan Commitment Amount, as so reduced, without any further action
on the part of the Issuer or the Swing Line Lender.
SECTION 2.3. Borrowing Procedures and Funding Maintenance. Revolving Loans
shall be made by the Lenders in accordance with Section 2.3.1, and Swing Line
Loans shall be made by the Swing Line Lender in accordance with Section 2.3.2.
SECTION 2.3.1. Revolving Loans. In the case of Revolving Loans, by
delivering a Borrowing Request to the Administrative Agent on or before 11:00
a.m., Denver, Colorado time, on a Business Day, the Borrower may from time to
time irrevocably request, on not less than one Business Day's notice (in the
case of Base Rate Loans) or three Business Days' notice (in the case of LIBO
Rate Loans), that a Borrowing be made in a minimum aggregate amount of
$5,000,000 or any larger integral multiple of $1,000,000 or in the unused amount
of the Revolving Loan Commitment Amount. The Administrative Agent shall make
such funds available by transfer to or for the accounts of the Borrower on the
Business Day specified in the Borrowing Request (to the extent such Borrowing
Request was delivered on time pursuant to the terms hereof).
SECTION 2.3.2. Swing Line Loans. By telephonic notice (given by those
Persons authorized in writing by the Borrower to give such telephonic notice to
the Swing Line Lender and Administrative Agent), promptly followed (within one
Business Day) by the delivery of a confirming Borrowing Request, to the Swing
Line Lender and the Administrative Agent on or before 11:00 a.m., Denver,
Colorado time, on the Business Day the proposed Swing Line Loan is to be made,
the Borrower may from time to time irrevocably request that a Swing Line Loan be
made by the Swing Line Lender in any principal amount. All Swing Line Loans
shall be made as Base Rate Loans and shall not be entitled to be converted into
LIBO Rate Loans. The making of any such Swing Line Loan shall be conclusively
presumed to have been made to or for the benefit of the Borrower when the Swing
Line Lender and the Administrative Agent each believe in good faith that the
telephonic notice has been made by an authorized Person representing the
Borrower, or when such Swing Line Loan is deposited to the credit of the account
of the Borrower regardless of the fact that Persons other than those authorized
hereunder may have authority to draw against such account. The Administrative
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Agent shall make such funds available by transfer to or for the accounts of the
Borrower on the same Business Day such telephonic notice shall have been
received.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 11:00
a.m., Denver, Colorado time, on a Business Day, the Borrower may from time to
time irrevocably elect, on not less than one Business Day's notice (in the case
of a conversion of LIBO Rate Loans to Base Rate Loans) or three Business Days'
notice (in the case of a continuation of LIBO Rate Loans or a conversion of Base
Rate Loans into LIBO Rate Loans) nor more than five Business Days' notice (in
the case of any Loans) that all, or any portion in a minimum aggregate amount of
$5,000,000 or an integral multiple of $1,000,000, of any Loans be, in the case
of Base Rate Loans, converted into LIBO Rate Loans or, in the case of LIBO Rate
Loans, converted into Base Rate Loans or continued as LIBO Rate Loans (in the
absence of delivery of a Continuation/Conversion Notice with respect to any LIBO
Rate Loan at least three Business Days (but not more than five Business Days)
before the last day of the then current Interest Period with respect thereto,
such LIBO Rate Loan shall, on such last day, automatically convert to a Base
Rate Loan); provided, however, that (a) each such conversion or continuation
shall be pro rated among the applicable outstanding Loans of all Lenders, and
(b) no portion of the outstanding principal amount of any Loans may be continued
as, or be converted into, LIBO Rate Loans when any Default has occurred and is
continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the Borrower to repay such
LIBO Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively
assumed that each Lender elected to fund all LIBO Rate Loans by purchasing
Dollar deposits in its LIBOR Office's interbank Eurodollar market.
SECTION 2.6. Issuance Procedures. By delivering to the Administrative Agent
an Issuance Request on or before 11:00 a.m., Denver, Colorado time, on a
Business Day, the Borrower may, from time to time irrevocably request, on not
less than three nor more than ten Business Days' notice (or such shorter or
longer notice as may be acceptable to the Issuer), in the case of an initial
issuance of a Letter of Credit, and not less than three nor more than ten
Business Days' notice (unless a shorter or longer notice period is acceptable to
the Issuer) prior to the then existing Stated Expiry Date of a Letter of Credit,
in the case of a request for the extension of the Stated Expiry Date of a Letter
of Credit, that the Issuer issue, or extend the Stated Expiry Date of, as the
case may be, an irrevocable Letter of Credit on behalf of the Borrower (whether
issued for the account of or on behalf of the Borrower or any of its Restricted
Subsidiaries) in such form as may be requested by the Borrower and approved by
the Issuer, for the purposes described in Section 7.1.8; provided, however, that
no extension of the Stated Expiry Date of an outstanding Letter of Credit may
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provide for a Stated Expiry Date subsequent to the earlier of (a) the Revolving
Loan Commitment Termination Date and (b) one year from the date of such
extension. Notwithstanding anything to the contrary contained herein or in any
separate application for any Letter of Credit, the Borrower hereby acknowledges
and agrees that it shall be obligated to reimburse the Issuer upon each
Disbursement paid under a Letter of Credit, and it shall be deemed to be the
obligor for purposes of each such Letter of Credit issued hereunder (whether the
account party on such Letter of Credit is the Borrower or a Restricted
Subsidiary). Upon receipt of an Issuance Request, the Administrative Agent shall
promptly notify the Issuer and each Lender thereof. Each Letter of Credit shall
by its terms be stated to expire on a date (its "Stated Expiry Date") no later
than the earlier to occur of (a) the Revolving Loan Commitment Termination Date
or (b) one year from the date of its issuance.
SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each
Letter of Credit issued by the Issuer pursuant hereto, and without further
action, each Lender (other than the Issuer) that has a Revolving Loan Commitment
shall be deemed to have irrevocably purchased from the Issuer, to the extent of
its Percentage in respect of Revolving Loans, and the Issuer shall be deemed to
have irrevocably granted and sold to such Lender a participation interest in
such Letter of Credit (including the Contingent Liability and any Reimbursement
Obligation and all rights with respect thereto), and such Lender shall, to the
extent of its Percentage in respect of Revolving Loans, be responsible for
reimbursing promptly (and in any event within one Business Day) the Issuer for
Reimbursement Obligations which have not been reimbursed by the Borrower in
accordance with Section 2.6.3. In addition, such Lender shall, to the extent of
its Percentage in respect of Revolving Loans, be entitled to promptly receive a
ratable portion of the Letter of Credit fees payable pursuant to Section 3.3.3
with respect to each Letter of Credit and of interest payable pursuant to
Section 3.2 with respect to any Reimbursement Obligation. To the extent that any
Lender has reimbursed the Issuer for a Disbursement as required by this Section,
such Lender shall be entitled to receive its ratable portion of any amounts
subsequently received (from the Borrower or otherwise) in respect of such
Disbursement.
SECTION 2.6.2. Disbursements; Conversion to Revolving Loans. The Issuer
will notify the Borrower and the Administrative Agent promptly (but in any event
on the same Business Day) of the presentment for payment of any drawing under
any Letter of Credit issued by the Issuer, together with notice of the date (the
"Disbursement Date") such payment shall be made (each such payment, a
"Disbursement"). Subject to the terms and provisions of such Letter of Credit,
the Issuer shall make such payment to the beneficiary (or its designee) of such
Letter of Credit. Prior to 11:00 a.m., Denver, Colorado time, on the Business
Day following the Disbursement Date (the "Disbursement Due Date"), the Borrower
will reimburse the Administrative Agent, for the account of the Issuer, for all
amounts which the Issuer has disbursed under such Letter of Credit, together
with interest thereon at the rate per annum otherwise applicable to Revolving
Loans (made as Base Rate Loans) from and including the Disbursement Date to but
excluding the Disbursement Due Date and, thereafter (unless such Disbursement is
converted into a Base Rate Loan on the Disbursement Due Date), at a rate per
annum equal to the rate per annum then in effect with respect to overdue
Revolving Loans (made as Base Rate Loans) pursuant to Section 3.2.2 for the
period from the Disbursement Due Date through but excluding the date of such
reimbursement; provided, however, that if no Default shall have then occurred
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and be continuing, unless the Borrower has notified the Administrative Agent no
later than one Business Day prior to the Disbursement Due Date that it will
reimburse the Issuer for the applicable Disbursement, then the amount of the
Disbursement shall be deemed to be a Borrowing of Revolving Loans constituting
Base Rate Loans and following the giving of notice thereof by the Administrative
Agent to the Lenders, each Lender with a Revolving Loan Commitment (other than
the Issuer) will deliver to the Issuer on the Disbursement Due Date immediately
available funds in an amount equal to such Lender's Percentage of such
Borrowing. Each conversion of Disbursement amounts into Revolving Loans shall
constitute a representation and warranty by the Borrower that on the date of the
making of such Revolving Loans all of the statements set forth in Section 5.2.1
are true and correct.
SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement Obligation")
of the Borrower under Section 2.6.2 to reimburse the Issuer with respect to each
Disbursement (including interest thereon) not converted into a Base Rate Loan
pursuant to Section 2.6.2, and, upon the Borrower failing or electing not to
reimburse the Issuer and the giving of notice thereof by the Administrative
Agent to the Lenders, each Lender's (to the extent it has a Revolving Loan
Commitment) obligation under Section 2.6.1 to reimburse the Issuer or fund its
Percentage of any Disbursement converted into a Base Rate Loan, shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which the Borrower or such
Lender, as the case may be, may have or have had against the Issuer or any such
Lender, including any defense based upon the failure of any Disbursement to
conform to the terms of the applicable Letter of Credit (if, in the Issuer's
good faith opinion, such Disbursement is determined to be appropriate) or any
non-application or misapplication by the beneficiary of the proceeds of such
Letter of Credit; provided, however, that after paying in full its Reimbursement
Obligation hereunder, nothing herein shall adversely affect the right of the
Borrower or such Lender, as the case may be, to commence any proceeding against
the Issuer for any wrongful Disbursement made by the Issuer under a Letter of
Credit as a result of acts or omissions constituting gross negligence or willful
misconduct on the part of the Issuer.
SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during the
continuation of any Event of Default of the type described in clauses (a)
through (d) of Section 8.1.9 or, with notice from the Administrative Agent
acting at the direction of the Required Lenders, upon the occurrence and during
the continuation of any other Event of Default,
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is undrawn and
available under all Letters of Credit issued and outstanding shall, without
demand upon or notice to the Borrower or any other Person, be deemed to
have been paid or disbursed by the Issuer under such Letters of Credit
(notwithstanding that such amount may not in fact have been so paid or
disbursed); and
(b) the Borrower shall be immediately obligated to reimburse the
Issuer for the amount deemed to have been so paid or disbursed by the
Issuer.
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Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in cash with the Administrative Agent and held as collateral security
for the Obligations in connection with the Letters of Credit issued by the
Issuer. At such time as the Events of Default giving rise to the deemed
disbursements hereunder shall have been cured or waived, or any Letters of
Credit shall have expired undrawn, the Administrative Agent shall return to the
Borrower all amounts then on deposit with the Administrative Agent pursuant to
this Section, together with accrued interest at the Federal Funds Rate, which
have not been applied to the satisfaction of such Obligations.
SECTION 2.6.5. Nature of Reimbursement Obligations. The Borrower and, to
the extent set forth in Section 2.6.1, each Lender with a Revolving Loan
Commitment, shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of
its own gross negligence or willful misconduct) shall not be responsible for (a)
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
Letter of Credit or any document submitted by any party in connection with the
application for and issuance of a Letter of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged, (b) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any instrument transferring or assigning or purporting to transfer or
assign a Letter of Credit or the rights or benefits thereunder or the proceeds
thereof in whole or in part, which may prove to be invalid or ineffective for
any reason, (c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit, (d) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, or (e) any loss or delay in the
transmission or otherwise of any document or draft required in order to make a
Disbursement under a Letter of Credit. None of the foregoing shall affect,
impair or prevent the vesting of any of the rights or powers granted to the
Issuer or any Lender with a Revolving Loan Commitment hereunder. In furtherance
and extension and not in limitation or derogation of any of the foregoing, any
action taken or omitted to be taken by the Issuer in good faith (and not
constituting gross negligence or willful misconduct) shall be binding upon the
Borrower, each Obligor and each such Lender, and shall not put the Issuer under
any resulting liability to the Borrower, any Obligor or any such Lender, as the
case may be.
SECTION 2.7. Register; Notes. (a) Each Lender may maintain in accordance
with its usual practice an account or accounts evidencing the Indebtedness of
the Borrower to such Lender resulting from each Loan made by such Lender,
including the amounts of principal and interest payable and paid to such Lender
from time to time hereunder. In the case of a Lender that does not request,
pursuant to clause (b)(ii) below, execution and delivery of a Note evidencing
the Loans made by such Lender to the Borrower, such account or accounts shall,
to the extent not inconsistent with the notations made by the Administrative
Agent in the Register, be conclusive and binding on the Borrower absent manifest
error; provided, however, that the failure of any Lender to maintain such
account or accounts shall not limit or otherwise affect any Obligations of the
Borrower or any other Obligor.
(b)(i) The Borrower hereby designates the Administrative Agent to serve as
the Borrower's agent, solely for the purpose of this clause (b), to maintain a
register (the "Register") on which the Administrative Agent will record each
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Lender's Commitment, the Loans made by each Lender and each repayment in respect
of the principal amount of the Loans of each Lender and annexed to which the
Administrative Agent shall retain a copy of each Lender Assignment Agreement
delivered to the Administrative Agent pursuant to Section 10.11.1. Failure to
make any recordation, or any error in such recordation, shall not affect the
Borrower's obligation in respect of such Loans. The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders shall treat each Person in whose name a
Loan (and as provided in clause (ii) the Note evidencing such Loan, if any) is
registered as the owner thereof for all purposes of this Agreement,
notwithstanding notice or any provision herein to the contrary. A Lender's
Commitment and the Loans made pursuant thereto may be assigned or otherwise
transferred in whole or in part only by registration of such assignment or
transfer in the Register. Any assignment or transfer of a Lender's Commitment or
the Loans made pursuant thereto shall be registered in the Register only upon
delivery to the Administrative Agent of a Lender Assignment Agreement duly
executed by the Assignor Lender thereof. No assignment or transfer of a Lender's
Commitment or the Loans made pursuant thereto shall be effective unless such
assignment or transfer shall have been recorded in the Register by the
Administrative Agent as provided in this Section 2.7.
(ii) The Borrower agrees that, upon the written request to the
Administrative Agent by any Lender, the Borrower will execute and deliver to
such Lender, as applicable, a Note evidencing the Loans made by such Lender. The
Borrower hereby irrevocably authorizes each Lender to make (or cause to be made)
appropriate notations on the grid attached to such Lender's Notes (or on any
continuation of such grid), which notations, if made, shall evidence, inter
alia, the date of, the outstanding principal amount of, and the interest rate
and Interest Period applicable to the Loans evidenced thereby. Such notations
shall, to the extent not inconsistent with the notations made by the
Administrative Agent in the Register, be conclusive and binding on the Borrower
absent manifest error; provided, however, that the failure of any Lender to make
any such notations shall not limit or otherwise affect any Obligations of the
Borrower or any other Obligor. The Loans evidenced by any such Note and interest
thereon shall at all times (including after assignment pursuant to Section
10.11.1) be payable to the order of the payee named therein and its registered
assigns. Subject to the provisions of Section 10.11.1, a Note and the obligation
evidenced thereby may be assigned or otherwise transferred in whole or in part
only by registration of such assignment or transfer of such Note and the
obligation evidenced thereby in the Register (and each Note shall expressly so
provide). Any assignment or transfer of all or part of an obligation evidenced
by a Note shall be registered in the Register only upon surrender for
registration of assignment or transfer of the Note evidencing such obligation,
accompanied by a Lender Assignment Agreement duly executed by the assignor
thereof and the compliance by the parties thereto with the other requirements of
Section 10.11.1, and thereupon, if requested by the assignee, one or more new
Notes shall be issued to the designated assignee and the old Note shall be
returned by the Administrative Agent to the Borrower marked "exchanged". No
assignment of a Note and the obligation evidenced thereby shall be effective
unless it shall have been recorded in the Register by the Administrative Agent
as provided in this Section.
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SECTION 2.8. Equalization Transfers. Until such time as U.S. Bancorp is no
longer the Administrative Agent and Swing Line Lender hereunder, the following
provisions shall apply notwithstanding any other provisions herein to the
contrary:
(a) It is anticipated that the Borrower may wish to borrow and repay
Loans on each Business Day, and that repayments will be received
automatically from the accounts referred to in Section 5.1.11. Except to
the extent otherwise required by this Agreement, the daily Borrowings by
the Borrower will be accommodated by the Swing Line Lender by the making of
Swing Line Loans. To minimize the number of transfers of funds to and from
the Lenders resulting from such Borrowings and repayments, the Swing Line
Lender may fund daily Loans for the accounts of the Lenders and apply daily
repayments of Loans to the accounts of the Lenders other than according to
each Lenders' Percentage (i.e., without receiving each such other Lender's
Percentage of a Loan on the date of disbursement thereof or without paying
each such other Lender's Percentage of a repayment of a Loan on the date of
payment thereof); provided, however, that no such Loan shall be made and no
repayment of a Loan shall be applied other than according to the Lenders'
Percentages if (i) at the time of the making or repayment of any Loan, the
Administrative Agent has actual knowledge of a Default, (ii) after giving
effect to the requested Loan, the Swing Line Lender would hold, at the end
of any Business Day, Loans exceeding its Percentage of the then existing
Revolving Loan Commitment Amount plus the Swing Line Loan Commitment
Amount, or (iii) after applying any repayment, the Swing Line Lender would
hold, at the end of any Business Day, Loans of less than zero Dollars ($0).
(b) At any time at the Administrative Agent's discretion, and, in any
event, as of the end of the last Business Day of each week if the
outstanding Loans are not held according to the Lenders' Percentages, the
Administrative Agent shall give notice to the Lenders of the amount of
funds to be transferred from the Swing Line Lender to the Administrative
Agent for the account of each Lender, or from the Lenders to the
Administrative Agent for the account of the Swing Line Lender, as the case
may be (each such transfer, an "Equalization Transfer"), required to cause
the Loans to be held by the Lenders (including the Swing Line Lender)
according to their respective Percentage. On the Business Day following
such notice, the necessary Equalization Transfers shall be made in
immediately available funds on or before 11:00 a.m., Denver, Colorado time;
provided, however, that Equalization Transfers necessary to avoid any event
described in clause (a)(ii) or (a)(iii) of Section 2.8 shall be made prior
to close of business on the same Business Day such notice is received by
each such Lender.
(c) Except as set forth in clause (d) below, any Equalization Transfer
(i) by any Lender to the Administrative Agent for the account of the Swing
Line Lender shall be deemed to constitute a Loan by such Lender to the
Borrower and a repayment by the Borrower of Loans held by the Swing Line
Lender, and (ii) by the Swing Line Lender to the Administrative Agent for
the account of each Lender shall be deemed to constitute a Loan by the
Swing Line Lender to the Borrower and a repayment of Loans held by such
Lender.
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(d) To the extent a Default of the nature set forth in Section 8.1.9
shall have occurred and be continuing on the date on which any Equalization
Transfer is required to be made pursuant to clause (b) above, any such
Equalization Transfer (i) by any Lender to the Administrative Agent for the
account of the Swing Line Lender, and (ii) by the Swing Line Lender to the
Administrative Agent for the account of any Lender shall, in each case, be
deemed to constitute a purchase by each such Lender or the Swing Line
Lender, as the case may be, of a direct interest, in the amount of such
Equalization Transfer, in outstanding Loans, such that each of the Lenders
shall have an interest in such Loans equal to their respective Percentage
as of the date of occurrence of such Default.
(e) At any time after any Lender (a "Selling Lender") shall have
received any Equalization Transfer that constitutes a purchase by any other
Lender (a "Purchasing Lender") of a direct interest in such Selling
Lender's Loans pursuant to clause (d) above, if such Selling Lender
receives any payment on account of its Loans, such Selling Lender will
distribute to such Purchasing Lender its proportionate share of such
payment (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Purchasing Lender's direct
interest was outstanding and funded); provided, however, that in the event
that such payment received by such Selling Lender is required to be
returned, such Purchasing Lender will return to such Selling Lender any
portion thereof previously distributed to it by such Selling Lender.
(f) Each Lender's obligation to make Equalization Transfers pursuant
to clause (b) above shall be absolute and unconditional and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender or any other Person
may have against the Administrative Agent, the Swing Line Lender or any
other Person for any reason whatsoever, (ii) the occurrence or continuance
of a Default, an Event of Default or a Commitment Termination Event, (iii)
any materially adverse change in the condition (financial or otherwise) of
the Borrower or any other Obligor, (iv) any breach of this Agreement by any
Obligor or any Lender (including any Lender's failure to make any
Equalization Transfer) or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.
SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay in full
the unpaid principal amount of each Loan upon the Stated Maturity Date therefor.
Prior thereto, the Borrower
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(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Revolving Loan; provided, however, that
(i) any such prepayment of Revolving Loans shall be made pro rata
among the Revolving Loans of the same type and, if applicable, having
the same Interest Period of all Lenders that have made such Revolving
Loans;
(ii) the Borrower shall comply with Section 4.4 in the event that
any LIBO Rate Loan is prepaid on any day other than the last day of
the Interest Period for such LIBO Rate Loan;
(iii) all such voluntary prepayments shall require at least one
Business Day's notice in the case of Base Rate Loans, three Business
Days' notice in the case of LIBO Rate Loans, but no more than five
Business Days' notice in the case of any Loans, in each case in
writing to the Administrative Agent; and
(iv) all such voluntary partial prepayments shall be in a minimum
aggregate amount of $5,000,000 and an integral multiple of $1,000,000,
or in the aggregate principal amount of all Loans of the type then
outstanding;
(b) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Swing Line Loans;
(c) shall, on each date when the sum of (i) the aggregate outstanding
principal amount of all Loans plus (ii) the aggregate amount of all Letter
of Credit Outstandings less all cash proceeds in the accounts referred to
in Section 7.1.9 at the time of determination of any of the foregoing
exceeds the lesser of (A) the Revolving Loan Commitment Amount (as it may
be reduced from time to time, pursuant to Section 2.2), and (B) the then
applicable Borrowing Base Amount, make a mandatory prepayment of all Loans
and, if necessary, Cash Collateralize Letter of Credit Outstandings, in an
aggregate amount equal to such excess;
(d) shall, not later than one Business Day following the receipt of
any Net Disposition Proceeds (in respect of any assets other than Fixed
Assets) by the Borrower or any of its Restricted Subsidiaries, deliver to
the Administrative Agent a calculation of the amount of such Net
Disposition Proceeds and make a mandatory prepayment of the Loans in an
amount equal to 100% of such Net Disposition Proceeds, to be applied as set
forth in Section 3.1.2; provided, however, that no such mandatory
prepayment of the Loans shall be required under this clause (d) to the
extent (i) such Net Disposition Proceeds are received in connection with
clause (c) of Section 7.2.9 or (ii) the Borrower notifies the Agents no
later than 15 days following the receipt of such Net Disposition Proceeds
(provided, that no notice shall be required with respect to amounts not in
excess of $1,000,000) that it is the Borrower's or its Restricted
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Subsidiary's good faith intention to apply such Net Disposition Proceeds
toward the acquisition of other assets or property used in the business of
such Person (and, in any event, in compliance with Section 7.2.1) and such
Person in fact so uses such Net Disposition Proceeds within 365 days
following the receipt by such Person of Net Disposition Proceeds, with the
amount of Net Disposition Proceeds unused after such 365-day period being
applied to prepay the Loans pursuant to this clause (d);
(e) shall, not later than one Business Day following the receipt of
any Net Debt Proceeds by the Borrower or any of its Restricted
Subsidiaries, deliver to the Administrative Agent a calculation of the
amount of such Net Debt Proceeds, and make a mandatory prepayment of the
Loans in an amount equal to 100% of such Net Debt Proceeds, to be applied
as set forth in Section 3.1.2;
(f) shall, concurrently with the receipt of any Net Equity Proceeds by
the Borrower or any of its Restricted Subsidiaries, deliver to the
Administrative Agent a calculation of the amount of such Net Equity
Proceeds, and no later than five Business Days following the delivery of
such calculation, make a mandatory prepayment of the Loans in an amount
equal to 50% of such Net Equity Proceeds, to be applied as set forth in
Section 3.1.2;
(g) shall, not later than one Business Day following the receipt of
any Net Casualty Proceeds (in respect of any assets other than Fixed
Assets) by the Borrower or any of its Restricted Subsidiaries, deliver to
the Administrative Agent a calculation of the amount of such Net Casualty
Proceeds and make a mandatory prepayment of the Loans in an amount equal to
100% of such Proceeds, to be applied as set forth in Section 3.1.2;
provided, that no such mandatory prepayment of Net Casualty Proceeds shall
be required under this clause (g) (i) if the Borrower notifies the Agents
no later than 60 days following the receipt of such Net Casualty Proceeds
of the Borrower's or its Restricted Subsidiary's good faith intention to
apply such Net Casualty Proceeds to the rebuilding or replacement of such
damaged, destroyed or condemned assets or property and (ii) to the extent
such Person in fact uses such Net Casualty Proceeds to begin rebuilding or
replacing the damaged, destroyed or condemned assets or property within 180
days following the receipt of such Net Casualty Proceeds and continues
diligently to complete such rebuilding or replacement of such damaged,
destroyed or condemned assets or property within the time reasonably
required therefore (the "Rebuilding and Replacement Work"), with the amount
of Net Casualty Proceeds unused after the completion of such Rebuilding and
Replacement Work being applied to the Loans pursuant to Section 3.1.2;
(h) shall, on each date when any reduction in the Revolving Loan
Commitment Amount shall become effective, make a mandatory prepayment of
the Loans and (if necessary) Cash Collateralize Letter of Credit
Outstandings in an aggregate amount equal to the excess, if any, of the sum
of (i) the aggregate outstanding principal amount of all Revolving Loans
and Swing Line Loans and (ii) the aggregate amount of all Letter of Credit
Outstandings over the Revolving Loan Commitment Amount as so reduced; and
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(i) shall, immediately upon the occurrence of the Stated Maturity Date
of any Loans or Obligations, whether by way of acceleration pursuant to
Section 8.2 or Section 8.3 or otherwise, repay all outstanding Loans and
other Obligations, unless, pursuant to Section 8.3, only a portion of all
Loans and other Obligations are so accelerated (in which case the portion
so accelerated shall be so prepaid).
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 4.4. No prepayment of
principal of any Revolving Loans pursuant to clause (a), (b) (c), (d), (e), (f)
or (g) of Section 3.1.1 shall cause a reduction in the Revolving Loan Commitment
Amount, the Swing Line Loan Commitment Amount or the Letter of Credit Commitment
Amount, as the case may be.
SECTION 3.1.2. Application. Each prepayment or repayment of principal of
the Loans shall be applied, to the extent of such prepayment or repayment,
first, to the principal amount thereof being maintained as Base Rate Loans, and
second, to the principal amount thereof being maintained as LIBO Rate Loans;
provided that prepayments or repayments of LIBO Rate Loans not made on the last
day of the Interest Period with respect thereto, shall be prepaid or repaid
subject to the provisions of Section 4.4 (together with a payment of all accrued
interest).
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of the Loans shall accrue and be payable in accordance with this Section
3.2.
SECTION 3.2.1. Rates. (a) Each Base Rate Loan shall accrue interest on the
unpaid principal amount thereof for each day from and including the day upon
which such Loan was made or converted to a Base Rate Loan to but excluding the
date such Loan is repaid or converted to a LIBO Rate Loan at a rate per annum
equal to the sum of the Alternate Base Rate for such day plus the Applicable
Margin for such Loan on such day.
(b) Each LIBO Rate Loan shall accrue interest on the unpaid principal
amount thereof for each day during each Interest Period applicable thereto at a
rate per annum equal to the sum of the LIBO Rate (Reserve Adjusted) for such
Interest Period plus the Applicable Margin for such Loan on such day.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount of
any Loan is due and payable (whether on the applicable Stated Maturity Date,
upon acceleration or otherwise), or any other monetary Obligation (other than
overdue Reimbursement Obligations which shall bear interest as provided in
Section 2.6.2) of the Borrower is due and payable, the Borrower shall pay, but
only to the extent permitted by law, interest (after as well as before judgment)
on such amounts at a rate per annum equal to the rate that would otherwise be
applicable to Base Rate Loans pursuant to Section 3.2.1 plus 2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
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(a) on the Stated Maturity Date therefor;
(b) in the case of a LIBO Rate Loan, on the date of any payment or
prepayment, in whole or in part, of principal outstanding on such Loan, to
the extent of the unpaid interest accrued through such date on the
principal so paid or prepaid;
(c) with respect to Base Rate Loans, on each Monthly Payment Date
occurring after the Closing Date hereunder;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed three
months, at intervals of three months after the first day of such Interest
Period);
(e) with respect to the principal amount of any Base Rate Loans
converted into LIBO Rate Loans on a day when interest would not otherwise
have been payable pursuant to clause (c), above, on the date of such
conversion; and
(f) on that portion of any Loans the Stated Maturity Date of which is
accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such
acceleration.
Interest accrued on Loans, Reimbursement Obligations or other monetary
Obligations arising under this Agreement or any other Loan Document after the
date such amount is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand; provided, that so long
as the Borrower shall be in compliance with Section 5.2, any such amounts which
are due and payable shall be funded with the proceeds of a Swing Line Loan.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this
Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender, for each day during the
period (including any portion thereof when any of the Lenders' Revolving Loan
Commitments are suspended by reason of the Borrower's inability to satisfy any
condition of Article V) commencing on the Closing Date and continuing through
the Revolving Loan Commitment Termination Date, a commitment fee on such
Lender's Percentage of the daily average unused portion of the Revolving Loan
Commitment Amount, whether or not then available, for such day at a rate per
annum equal to the Applicable Commitment Fee for such day. Such commitment fees
shall be payable by the Borrower in arrears on each Quarterly Payment Date,
commencing with the first such day following the Closing Date, and ending on the
Revolving Loan Commitment Termination Date. The making of Swing Line Loans by
the Swing Line Lender shall not constitute usage under the Revolving Loan
Commitment for the purpose of calculating the commitment fees to be paid by the
Borrower to the Lenders (other than the Swing Line Lender) pursuant to this
Section 3.3.1.
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SECTION 3.3.2. The Agents' and the Co-Lead Arrangers' Fees. The Borrower
agrees to pay to each of the Syndication Agent, the Administrative Agent, the
Documentation Agent and the Co-Lead Arrangers for each such Person's own
account, the fees set forth in the Fee Letter and the Administrative Agent's Fee
Letter, in each case in accordance with their respective terms.
SECTION 3.3.3. Letter of Credit Fee. The Borrower agrees to pay to
(a) the Administrative Agent, for the pro rata account of the Issuer
and each other Lender, a Letter of Credit fee for each day on which there
shall be any Letter of Credit Outstandings in an amount equal to the
product of (i) a rate per annum equal to the then Applicable Margin for
Loans maintained as LIBO Rate Loans multiplied by (ii) the Stated Amount of
each such Letter of Credit; and
(b) the Issuer (i) a Letter of Credit fronting fee for each day on
which there shall be any Letter of Credit Outstandings in an amount equal
to .125% per annum on the Stated Amount of each such Letter of Credit, and
(ii) from time to time promptly after demand, the normal issuance,
presentation, amendment and other processing fees, and other standard
administrative costs and charges of the Issuer relating to Letters of
Credit as from time to time in effect.
Fees payable pursuant to this Section shall be payable quarterly in arrears on
each Quarterly Payment Date and on the Revolving Loan Commitment Termination
Date.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, upon notice thereof to the Borrower and the
Administrative Agent, be conclusive and binding on the Borrower) that the
introduction of or any change in or in the interpretation of any law, in each
case after the date upon which such Lender shall have become a Lender hereunder,
makes it unlawful, or any central bank or other Governmental Authority asserts,
after such date, that it is unlawful, for such Lender to make, continue or
maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the
obligations of such Lender to make, continue, maintain or convert any such LIBO
Rate Loan shall, upon such determination, forthwith be suspended until such
Lender shall notify the Administrative Agent that the circumstances causing such
suspension no longer exist (with the date of such notice being the
"Reinstatement Date"), and (a) all LIBO Rate Loans previously made by such
Lender shall automatically convert into Base Rate Loans at the end of the then
current Interest Periods with respect thereto or sooner, if required by such law
or assertion and (b) all Loans thereafter made by such Lender and outstanding
prior to the Reinstatement Date shall be made as Base Rate Loans, with interest
thereon being payable on the same date that interest is payable with respect to
the corresponding Borrowing of LIBO Rate Loans made by Lenders not so affected.
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SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall have
determined that
(a) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the Administrative Agent in its
relevant market; or
(b) by reason of circumstances affecting the Administrative Agent's
relevant market, adequate means do not exist for ascertaining the interest
rate applicable hereunder to LIBO Rate Loans,
then, upon notice from the Administrative Agent to the Borrower and the Lenders,
the obligations of all Lenders under Section 2.3 and Section 2.4 to make or
continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall
forthwith be suspended until the Administrative Agent shall notify the Borrower
and the Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees to
reimburse each Lender and the Issuer for any increase in the cost to such Lender
or the Issuer of, or any reduction in the amount of any sum receivable by such
Person in respect of, making, continuing or maintaining (or of its obligation to
make, continue or maintain) any Loans as, or of converting (or of its obligation
to convert) any Loans into, LIBO Rate Loans that arise in connection with any
change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in after the date hereof of, any law or regulation,
directive, guideline, decision or request (whether or not having the force of
law) of any Governmental Authority, except for such changes with respect to
increased capital costs and Taxes which are governed by Sections 4.5 and 4.6,
respectively. Such Lender or the Issuer shall promptly notify the Administrative
Agent and the Borrower in writing of the occurrence of any such event, such
notice to state, in reasonable detail, the reasons therefor and the additional
amount required fully to compensate such Lender for such increased cost or
reduced amount. Such additional amounts shall be payable by the Borrower
directly to such Lender or the Issuer within five days of its receipt of such
notice, and such notice shall, in the absence of manifest error, be conclusive
and binding on the Borrower; provided, that each Lender and the Issuer agrees to
treat the Borrower in a similar manner as similarly situated borrowers in
connection with any such amounts.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss
or expense (including any loss or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as, or to
convert any portion of the principal amount of any Loan into, a LIBO Rate Loan)
as a result of
(a) any conversion or repayment or prepayment of the principal amount
of any LIBO Rate Loans on a date other than the scheduled last day of the
Interest Period applicable thereto, whether pursuant to Article III or
otherwise;
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(b) any Loans not being made as LIBO Rate Loans in accordance with the
Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO Rate
Loans in accordance with the Continuation/Conversion Notice therefor,
then, upon the written notice of such Lender to the Administrative Agent (with a
copy to the Borrower) within thirty days of the date such Lender would
reasonably be expected to become aware of such loss or expense, the
Administrative Agent shall, within five days of its receipt thereof, cause
payment to be made (from the account of the Borrower) directly to such Lender
such amount as will (in the reasonable determination of such Lender) reimburse
such Lender for such loss or expense. Such written notice shall, in the absence
of manifest error, be conclusive and binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any Governmental Authority, in each
case occurring after the applicable Lender becomes a Lender hereunder, affects
or would affect the amount of capital required or expected to be maintained by
any Lender or any Person controlling such Lender, and such Lender determines (in
its sole and absolute discretion) that the rate of return on its or such
controlling Person's capital as a consequence of its Commitments, participation
in Letters of Credit or the Loans made by such Lender is reduced to a level
below that which such Lender or such controlling Person could have achieved but
for the occurrence of any such circumstance, then, in any such case upon notice
from time to time by such Lender to the Borrower (which notice shall contain a
calculation of such amount in reasonable detail), the Borrower shall immediately
pay directly to such Lender additional amounts sufficient to compensate such
Lender or such controlling Person for such reduction in rate of return. A
statement of such Lender as to any such additional amount or amounts shall, in
the absence of manifest error, be conclusive and binding on the Borrower. In
determining such amount, such Lender may use any method of averaging and
attribution that it (in its sole and absolute discretion) shall deem applicable.
SECTION 4.6. Taxes. The Borrower covenants and agrees as follows with
respect to Taxes:
(a) Any and all payments by the Borrower and each other Obligor under
this Agreement and each other Loan Document shall be made without setoff,
counterclaim or other defense, and free and clear of, and without deduction
or withholding for or on account of, any Taxes. In the event that any Taxes
are required by law to be deducted or withheld from any payment required to
be made by the Borrower or any other Obligor to or on behalf of any Lender
under any Loan Document, then:
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(i) subject to clause (f), below, if such Taxes are Non-Excluded
Taxes, the amount of such payment shall be increased as may be
necessary such that such payment is made, after withholding or
deduction for or on account of such Taxes, in an amount that is not
less than the amount provided for herein or in such other Loan
Document; and
(ii) the Borrower shall withhold the full amount of such Taxes
from such payment (as increased pursuant to clause (a) (i)) and shall
pay such amount to the Governmental Authority imposing such Taxes in
accordance with applicable law.
(b) In addition, the Borrower and each other Obligor shall pay any and
all Other Taxes imposed to the relevant Governmental Authority imposing
such Other Taxes in accordance with applicable law.
(c) As promptly as practicable after the payment of any Taxes or Other
Taxes, and in any event within 45 days of any such payment being due, the
Borrower shall furnish to the Administrative Agent a copy of an official
receipt (or a certified copy thereof) evidencing the payment of such Taxes
or Other Taxes.
(d) Subject to clause (f), below, the Borrower shall indemnify any
Lender for any Non-Excluded Taxes and Other Taxes levied, imposed or
assessed on (and whether or not paid directly by) such Lender (whether or
not such Non-Excluded Taxes or Other Taxes are correctly or legally
asserted by the relevant Governmental Authority). Promptly upon having
knowledge that any such Non-Excluded Taxes or Other Taxes have been levied,
imposed or assessed, and promptly upon notice thereof by such Lender, the
Borrower shall pay such Non-Excluded Taxes or Other Taxes directly to the
relevant Governmental Authority (provided, however, that such Lender shall
not be under any obligation to provide any such notice to the Borrower). In
addition, the Borrower shall indemnify any Lender for any incremental Taxes
that may become payable by such Lender as a result of any failure of the
Borrower to pay any Taxes when due to the appropriate Governmental
Authority or to deliver to the Administrative Agent, pursuant to clause
(c), above, documentation evidencing the payment of Taxes or Other Taxes.
With respect to indemnification for Non-Excluded Taxes and Other Taxes
actually paid by any Lender or the indemnification provided in the
immediately preceding sentence, such indemnification shall be made within
30 days after the date such Lender makes written demand therefor. The
Borrower acknowledges that any payment made to the Administrative Agent,
for the account of each Lender or to any Governmental Authority in respect
of the indemnification obligations of the Borrower provided in this clause
shall constitute a payment in respect of which the provisions of clause
(a), above, and this clause shall apply.
(e) Each Non-U.S. Lender, shall (i) on or before the date (x) it
becomes a Lender and (y) that any predecessor form expired or became
obsolete or (ii) after the occurrence of any event requiring a change in
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the most recent forms or documentation previously delivered by such Lender
pursuant hereto, deliver to the Borrower
(i) (x) two duly completed copies of either (A) Internal Revenue
Service Form 1001 or (B) Internal Revenue Service Form 4224, or in
either case an applicable successor form, and (y) a duly completed
copy of Internal Revenue Service Form W-8 or W-9 or applicable
successor form; or
(ii) if such Non-U.S. Lender is not legally entitled to deliver
either form listed in clause (e)(i)(x), above, (x) a certificate of a
duly authorized officer of such Non-U.S. Lender to the effect that
such Non-U.S. Lender is not (A) a "bank" within the meaning of Section
881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of the
Borrower within the meaning of Section 881(c)(3)(B) of the Code, or
(C) a controlled foreign corporation receiving interest from a related
person within the meaning of Section 881 (c)(3)(C) of the Code (such
certificate, an "Exemption Certificate") and (y) two duly completed
copies of Internal Revenue Service Form W-8 or applicable successor
form.
(f) The Borrower shall not be obligated to gross up any payments to
any Lender pursuant to clause (a)(i), above, or to indemnify such Lender
pursuant to clause (d), above, in respect of United States federal
withholding taxes to the extent imposed as a result of (i) the failure of
such Lender to deliver to the Borrower the form or forms and/or an
Exemption Certificate, as applicable to such Lender, pursuant to clause
(e), above, (ii) such form or forms and/or Exemption Certificate not
establishing a complete exemption from U.S. federal withholding tax or the
information or certifications made therein by such Lender being untrue or
inaccurate on the date delivered in any material respect, (iii) such Lender
designating a successor lending office at which it maintains its Loans
which has the effect of causing such Lender to become obligated for tax
payments in excess of those in effect immediately prior to such designation
or (iv) such Lender or the Administrative Agent being treated as a "conduit
entity" within the meaning of U.S. Treasury regulations Section 1.881-3 or
any successor provision; provided, however, that the Borrower shall be
obligated to gross up any payments to such Lender pursuant to clause
(a)(i), above, and to indemnify such Lender pursuant to clause (d), above,
in respect of United States federal withholding taxes if (i) any such
failure to deliver a form or forms or an Exemption Certificate or the
failure of such form or forms or Exemption Certificate to establish a
complete exemption from U.S. federal withholding tax or inaccuracy or
untruth contained therein resulted from a change in any applicable statute,
treaty, regulation or other applicable law or any interpretation of any of
the foregoing occurring after the date hereof, which change rendered such
Lender no longer legally entitled to deliver such form or forms or
Exemption Certificate or otherwise ineligible for a complete exemption from
U.S. federal withholding tax, or rendered the information or certifications
made in such form or forms or Exemption Certificate untrue or inaccurate in
a material respect, (ii) the redesignation of such Lender's lending office
was made at the request of the Borrower or (iii) the obligation to gross up
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payments to any Lender pursuant to clause (a)(i) above, or to indemnify
such Lender pursuant to clause (d) above, is with respect to an Assignee
Lender that becomes an Assignee Lender as a result of an assignment made at
the request of the Borrower.
(g) If the Borrower pays any additional amount under this Section to a
Lender and such Lender determines in its sole discretion that it has
actually received or realized in connection therewith any refund or any
reduction of, or credit against, its Tax liabilities in or with respect to
the taxable year in which the additional amount is paid (a "Tax Benefit"),
such Lender shall pay to the Borrower an amount that the Lender shall, in
its sole discretion, determine is equal to the net benefit after tax, which
was obtained by the Lender in such year as a consequence of such Tax
Benefit; provided, however, that (i) any Lender may determine, in its sole
discretion consistent with the policies of such Lender, whether to seek a
Tax Benefit; (ii) any Taxes that are imposed on a Lender as a result of a
disallowance or reduction (including through the expiration of any tax
credit or carryover or carryback of such Lender that otherwise would not
have expired) of any Tax Benefit with respect to which such Lender had made
a payment to the Borrower pursuant to this clause shall be treated as a
Non-Excluded Tax for which the Borrower is obligated to indemnify such
Lender pursuant to this Section without any exclusions or defenses; and
(iii) nothing in this clause shall require the Lender to disclose any
confidential information to the Borrower (including its tax returns).
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided in any Loan Document, all payments by or on behalf of the Borrower
pursuant to this Agreement or any other Loan Document shall be made by the
Borrower to the Administrative Agent for the pro rata account of the Lenders,
Issuer, Agents or Co-Lead Arrangers, as applicable, entitled to receive such
payment. All such payments required to be made to the Administrative Agent shall
be made, without setoff, deduction or counterclaim, not later than 2:00 p.m.,
Denver, Colorado time, on the date due, in same day or immediately available
funds, to such account as the Administrative Agent shall specify from time to
time by notice to the Borrower. Funds received after that time shall be deemed
to have been received by the Administrative Agent on the next succeeding
Business Day. The Administrative Agent shall promptly remit in same day funds to
each Lender, Issuer, Agent or Co-Lead Arrangers, as the case may be, its share,
if any, of such payments received by the Administrative Agent for the account of
such Lender, Issuer, Agent or Co-Lead Arrangers, as the case may be. All
interest and fees shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) occurring during the period
for which such interest or fee is payable over a year comprised of 360 days (or,
in the case of interest on a Base Rate Loan, 365 days or, if appropriate, 366
days). Whenever any payment to be made shall otherwise be due on a day which is
not a Business Day, such payment shall (except as otherwise required by clause
(a) of the definition of the term "Interest Period") be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such payment.
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SECTION 4.8. Sharing of Payments. If any Lender shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan or Reimbursement Obligations (other than
pursuant to the terms of Sections 4.3, 4.4 and 4.5) in excess of its pro rata
share of payments then or therewith obtained by all Lenders entitled thereto,
such Lender shall purchase from the other Lenders such participation in the
Credit Extensions made by them as shall be necessary to cause such purchasing
Lender to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and each Lender which has sold a participation to the purchasing
Lender shall repay to the purchasing Lender the purchase price to the ratable
extent of such recovery together with an amount equal to such selling Lender's
ratable share (according to the proportion of (a) the amount of such selling
Lender's required repayment to the purchasing Lender in respect of such recovery
to (b) the total amount so recovered from the purchasing Lender) of any interest
or other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section may, to the fullest
extent permitted by law, exercise all its rights of payment (including pursuant
to Section 4.9) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of such participation. If
under any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a setoff to which this Section applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this Section to share in the benefits of any recovery on such secured
claim.
SECTION 4.9. Setoff. Each Secured Party shall, upon the occurrence of any
Event of Default described in clauses (a) through (d) of Section 8.1.9 with
respect to any Obligor or, with the consent of the Required Lenders, upon the
occurrence of any other Event of Default, to the fullest extent permitted by
law, have the right to appropriate and apply to the payment of the Obligations
then due to it, and (as security for such Obligations) the Borrower hereby
grants to each Secured Party a continuing security interest in, any and all
balances, credits, deposits, accounts or moneys of the Borrower then or
thereafter maintained with or otherwise held by such Secured Party; provided,
however, that any such appropriation and application shall be subject to the
provisions of Section 4.8. Each Secured Party agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application made
by such Secured Party; provided, however, that the failure to give such notice
shall not affect the validity of such setoff and application. The rights of each
Secured Party under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which such
Secured Party may have.
SECTION 4.10. Change of Lending Office. Each Lender agrees that if it makes
any demand for payment under Section 4.3, 4.4, 4.5, or 4.6, or if any adoption
or change of the type described in Section 4.1 shall occur with respect to it,
it will, if requested by the Borrower, use reasonable efforts (consistent with
its internal policy and legal and regulatory restrictions and so long as such
efforts would not be disadvantageous to it, as determined in its sole
discretion) to designate a different lending office if the making of such a
designation would reduce or obviate the need for the Borrower to make payments
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under Section 4.3, 4.4, 4.5, or 4.6, or would eliminate or reduce the effect of
any adoption or change described in Section 4.1.
SECTION 4.11. Replacement of Lenders. If any Lender (a "Subject Lender")
makes a demand upon the Borrower for (or if the Borrower is otherwise required
to pay) amounts pursuant to Section 4.3, 4.5 or 4.6, or gives notice pursuant to
Section 4.1 requiring a conversion of such Subject Lender's LIBO Rate Loans to
Base Rate Loans or suspending such Lender's obligation to make Loans as, or to
convert Loans into, LIBO Rate Loans, the Borrower may, within 90 days of receipt
by the Borrower of such demand or notice (or the occurrence of such other event
causing the Borrower to be required to pay such compensation), as the case may
be, give notice (a "Replacement Notice") in writing to the Agents and such
Subject Lender of its intention to replace such Subject Lender with a financial
institution (a "Replacement Lender") designated in such Replacement Notice. If
the Agents shall, in the exercise of their reasonable discretion and within 30
days of their receipt of such Replacement Notice, notify the Borrower and such
Subject Lender in writing that the designated financial institution is
satisfactory to the Agents (such consent not being required where the
Replacement Lender is already a Lender), then such Subject Lender shall, so long
as no Default or Event of Default shall have occurred and be continuing (and
subject to the payment of any amounts due pursuant to Section 4.4), assign, in
accordance with Section 10.11.1, all of its Commitments, Loans, Notes (if any)
and other rights and obligations under this Agreement and all other Loan
Documents (including, Reimbursement Obligations) to such designated financial
institution; provided, however, that (i) such assignment shall be without
recourse, representation or warranty and shall be on terms and conditions
reasonably satisfactory to such Subject Lender and such designated financial
institution and (ii) the purchase price paid by such designated financial
institution shall be in the amount of such Subject Lender's Loans and its
applicable Percentage of outstanding Reimbursement Obligations, together with
all accrued and unpaid interest and fees in respect thereof, plus all other
amounts (including the amounts demanded and unreimbursed under Sections 4.2,
4.3, 4.5 and 4.6), owing to such Subject Lender hereunder. Upon the effective
date of an assignment described above, the Borrower shall issue a replacement
Note (to the extent such Replacement Lender shall have requested a replacement
Note pursuant to Sections 2.7 and 10.11.1) to such Replacement Lender and such
institution shall become a "Lender" for all purposes under this Agreement and
the other Loan Documents.
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION 5.1. Initial Credit Extension. The obligations of the Lenders and,
if applicable, the Issuer to fund the initial Credit Extension shall be subject
to the prior or concurrent satisfaction of each of the conditions precedent set
forth in this Section 5.1.
SECTION 5.1.1. Resolutions, etc. The Agents shall have received from each
Obligor (a) a copy of a current good standing certificate, dated a date
reasonably close to the Closing Date, for each such Person and (b) a
certificate, dated the Closing Date, duly executed and delivered by such
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Person's Secretary or Assistant Secretary as to (i) resolutions of such Person's
Board of Directors then in full force and effect authorizing the execution,
delivery and performance of this Agreement and each other Loan Document to be
executed by such Person and the transactions contemplated hereby and thereby,
(ii) the incumbency and signatures of those of such Person's officers and
employees authorized to act with respect to this Agreement and each other Loan
Document to be executed by such Person, and (iii) the full force and validity of
each Organic Document of such Person and copies thereof, upon which certificates
each Agent and each Lender may conclusively rely until it shall have received a
further certificate of the Secretary or Assistant Secretary of such Obligor
canceling or amending such prior certificate.
SECTION 5.1.2. Delivery of Notes. The Agents shall have received, for the
account of each Lender requesting a Note, such Lender's Note duly executed and
delivered by an Authorized Officer of the Borrower.
SECTION 5.1.3. Transaction Documents. The Agents shall have received (with
copies for each Lender that shall have expressly requested copies thereof) fully
executed copies of the Transaction Documents and all certificates, opinions and
other documents delivered thereunder, certified to be true and complete copies
thereof by an Authorized Officer of the Borrower.
SECTION 5.1.4. Consummation of Transaction, etc. (a) The Agents shall have
received evidence satisfactory to each of them that all actions necessary to
consummate the Transaction shall have been taken in accordance with all
applicable law and in accordance with the terms of each applicable Transaction
Document, without amendment or waiver of any material provision thereof by
Parent, the Borrower or any of their Affiliates. There shall exist at and as of
the Closing Date (after giving effect to the Transaction and the initial Credit
Extensions hereunder) no conditions that would constitute a default or an event
of default under any of the Transaction Documents;
(b) Prior to or concurrently with the making of the initial Credit
Extension, (i) the Acquisition Transactions shall have been consummated, on
terms and conditions and pursuant to documentation reasonably satisfactory to
the Agents; (ii) the Capital Transactions shall have been consummated, on terms
and conditions and pursuant to documentation reasonably satisfactory to the
Agents; (iii) the Borrower shall have completed the Refinancing, on terms and
conditions and pursuant to documentation reasonably satisfactory to the Agents;
and (iv) the Borrower shall have paid all fees and expenses (or shall have
sufficient Excess Availability to pay any unpaid fees and expenses) relating to
the Transaction, which fees and expenses shall be satisfactory to the Agents;
and
(c) The Agents shall be reasonably satisfied with all aspects of the
Transaction, including, (i) the capital and corporate structure of Parent, the
Borrower and each of their respective Subsidiaries; (ii) the sources and uses of
the proceeds utilized to consummate the Transaction; (iii) the terms and
provisions of each of the Transaction Documents (including the Product Supply
Agreement); and (iv) the tax, legal and environmental due diligence
investigations of the Borrower and its Subsidiaries.
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SECTION 5.1.5. Intercreditor Agreement. The Agents shall have received
executed counterparts of the Intercreditor Agreement, dated as of the Closing
Date, duly executed and delivered by all parties thereto.
SECTION 5.1.6. Closing Date Certificate. The Agents shall have received,
with counterparts for each Lender, the Closing Date Certificate, dated the
Closing Date and duly executed and delivered by an Authorized Officer of the
Borrower, in which certificate the Borrower shall agree and acknowledge that the
statements made therein shall be deemed to be true and correct representations
and warranties of the Borrower made as of such date under this Agreement, and,
at the time such certificate is delivered, such statements shall in fact be true
and correct. All documents and agreements required to be appended to the
Borrower Closing Date Certificate shall be in form and substance reasonably
satisfactory to the Administrative Agent.
SECTION 5.1.7. Subsidiary Guaranty. The Agents shall have received the
Subsidiary Guaranty, dated as of the Closing Date, duly executed and delivered
by an Authorized Officer of each Restricted Subsidiary (that is not a Foreign
Subsidiary of the Borrower) in existence on the Closing Date.
SECTION 5.1.8. Pledge and Security Agreements, etc. The Agents shall have
received executed counterparts of
(a) the Parent Guaranty and Pledge Agreement, dated as of the Closing
Date, duly executed by an Authorized Officer of Parent, together with (i)
the certificates evidencing all of the issued and outstanding shares of
Capital Stock of the Borrower pledged pursuant to the Parent Guaranty and
Pledge Agreement, which certificates shall in each case be accompanied by
undated stock powers duly executed in blank and (ii) all promissory notes
evidencing intercompany Indebtedness payable to Parent duly endorsed to the
order of the Administrative Agent, together with UCC financing statements
(Form UCC-1) (or similar instruments) in respect of such promissory notes
executed by Parent to be filed in such jurisdictions as the Administrative
Agent may reasonably request; and
(b) each Pledge and Security Agreement, dated as of the Closing Date,
duly executed and delivered by an Authorized Officer of the Borrower and
each Restricted Subsidiary, as applicable, together with
(i) the certificates evidencing all of the issued and outstanding
shares of Capital Stock pledged pursuant to the applicable Pledge and
Security Agreement, which certificates shall in each case be
accompanied by undated stock powers or powers of transfer duly
executed in blank, or, if any such shares of Capital Stock pledged
pursuant to such Pledge and Security Agreement are uncertificated
securities, the Administrative Agent shall have obtained "control" (as
defined in the UCC) over such shares of Capital Stock and such other
instruments and documents as the Administrative Agent shall deem
necessary or in the reasonable opinion of the Administrative Agent
desirable under applicable law to perfect the first priority security
interest of the
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Administrative Agent in such shares of Capital Stock; provided,
however, that notwithstanding the foregoing, no Foreign Subsidiary
shall be required to execute the Subsidiary Pledge and Security
Agreement, nor will the Borrower or any Restricted Subsidiary be
required to deliver in pledge pursuant to the applicable Pledge and
Security Agreement in excess of 65% of the total combined voting power
of all classes of Capital Stock of a Foreign Subsidiary entitled to
vote;
(ii) copies of UCC financing statements (Form UCC-1) (or similar
instruments) as may be acceptable to the Agents and suitable for
filing, naming such Obligor as the debtor and the Administrative Agent
as the secured party, or other similar instruments or documents
suitable for filing under the UCC of all jurisdictions as may be
necessary or, in the opinion of the Agents, desirable to perfect the
first priority security interest of the Administrative Agent in the
interests of such Obligor in the collateral pledged pursuant to the
applicable Pledge and Security Agreement;
(iii) executed copies of proper UCC termination statements (Form
UCC-3), if any, necessary to release all Liens and other rights of any
Person (other than Liens permitted under Section 7.2.3)
(A) in any collateral described in the applicable Pledge and
Security Agreement previously granted by any Person, and
(B) securing any of the Indebtedness to be repaid in
connection with the Transaction on or prior to the Closing Date,
together with such other UCC termination statements (Form UCC-3) as
the Agents may reasonably request from such Obligor; and
(iv) certified copies of UCC Requests for Information or Copies
(Form UCC-11), or a similar search report certified by a party
acceptable to the Agents, dated a date reasonably near to the Closing
Date, listing all effective financing statements, tax liens and
judgment liens which name such Obligor (under its present names and
any previous names) as the debtor and which are filed in the
jurisdictions in which filings were made pursuant to clause (ii)
above, together with copies of such financing statements (none of
which (other than (x) those described in clause (ii) above, if such
Form UCC-11 or search report, as the case may be, is current enough to
list such financing statements described in clause (ii) above and (y)
financing statements evidencing Liens permitted pursuant to Section
7.2.3) shall cover any collateral described in the applicable Pledge
and Security Agreement); and
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(c) the Agents and their counsel shall be satisfied that (i)
the Lien granted to the Administrative Agent in the collateral
described in the documents described above is a first priority
(or local equivalent thereof) security interest and (ii) no Lien
exists on any of the collateral described above other than the
Lien created in favor of the Administrative Agent pursuant to a
Loan Document.
SECTION 5.1.9. UCC Filing Service. All UCC financing statements (Form
UCC-1), termination statements (Form UCC-3) or other similar financing
statements required pursuant to the Loan Documents (collectively, the "Filing
Statements") shall have been delivered to CT Corporation System or another
similar filing service company reasonably acceptable to the Agents (the "Filing
Agent"). The Filing Agent shall have acknowledged in writing reasonably
satisfactory to the Agents and their counsel (i) the Filing Agent's receipt of
all such Filing Statements, (ii) that such Filing Statements have either been
submitted for filing in the appropriate filing offices therefor or will be
submitted for filing in such appropriate offices within ten days of the Closing
Date and (iii) that the Filing Agent will notify the Agents and their counsel of
the result of such submissions within 30 days of the Closing Date.
SECTION 5.1.10. Solvency Opinion, Solvency Certificate. The Agents shall
have received
(a) a solvency opinion from Valuation Research Corporation, addressed
to the Agents and each of the Lenders and dated the Closing Date, and
supporting the conclusions that after giving effect to the Transaction and
the incurrence of the financings contemplated herein, the Borrower (on a
stand alone basis) and Parent, the Borrower and the Borrower's Restricted
Subsidiaries (on a consolidated basis) are not insolvent and will not be
rendered insolvent by the indebtedness incurred in connection herewith,
will not be left with unreasonably small capital with which to engage in
their respective businesses and will not have incurred debts beyond their
ability to pay such debts as they mature and become due and otherwise in
form and substance satisfactory to the Agents; and
(b) the Solvency Certificate, dated the Closing Date, duly executed
and delivered by an Authorized Officer of Parent.
SECTION 5.1.11. Reliance Letters. The Agents shall, unless otherwise
agreed, have received reliance letters, each dated the Closing Date and
addressed to each Lender and each Agent, in respect of each of the legal
opinions delivered in connection with the Acquisition Transactions.
SECTION 5.1.12. Borrowing Base Certificate; Compliance Certificate. The
Agents shall have received, with copies for each Lender,
(a) an initial Borrowing Base Certificate, dated the Closing Date, in
respect of the Borrower's and its Restricted Subsidiaries' Eligible
Accounts and Eligible Inventory as of a recent date satisfactory to the
Agents, duly executed by the chief financial or accounting Authorized
Officer of the Borrower (and showing that the Borrowing Base Amount on the
Closing Date will exceed the initial Credit Extension by no less than
$50,000,000); and
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(b) an initial Compliance Certificate, dated the Closing Date and
prepared on a pro forma basis as if the Transaction had been consummated
and the initial Credit Extensions had been made as of December 31, 1998 and
as to such items therein as the Agents reasonably request, duly executed
(and with all schedules thereto duly completed) and delivered by the chief
financial or accounting Authorized Officer of the Borrower.
SECTION 5.1.13. Financial Information, etc. The Agents shall have received,
with copies for each Lender,
(a) the audited consolidated income and cash flow statements and
balance sheet of the Borrower and its Restricted Subsidiaries for the 1993
through 1998 Fiscal Years;
(b) the audited combined income and cash flow statements and balance
sheets of the IMC Businesses and their respective Subsidiaries for the 1996
through 1998 Fiscal Years;
(c) the unaudited pro forma combined income and cash flow statements
and balance sheets of the Borrower and its Restricted Subsidiaries
(following the Transaction and as if the Transaction had taken place prior
to the Fiscal Year starting on January 1, 1996) for the 1996 through 1998
Fiscal Years;
(d) the unaudited income and cash flow statements and balance sheets
of the Borrower and its Restricted Subsidiaries (following the Transaction
and as if the Transaction had taken place prior to the Fiscal Year starting
on January 1, 1999) for the first two Fiscal Months of 1999; and
(e) a pro forma consolidated opening balance sheet of Parent, as of
the Closing Date (the "Pro Forma Balance Sheet"), giving effect to the
consummation of the Transaction and reflecting the proposed legal and
capital structures of Parent and its Subsidiaries, which legal and capital
structure shall be satisfactory in all respects to the Agents,
in each case above, certified by the chief financial or accounting Authorized
Officer of the Borrower.
SECTION 5.1.14. Closing Fees, Expenses, etc. The Agents and the Co-Lead
Arrangers shall have received, each for its own respective account, or, in the
case of the Administrative Agent, for the account of each Lender, as the case
may be, all fees, costs and expenses due and payable pursuant to Sections 3.3
and 10.3, if then invoiced.
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SECTION 5.1.15. Payment of Outstanding Indebtedness, etc. All Indebtedness
identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure
Schedule (including amounts paid in connection with the Refinancing), together
with all interest, all prepayment premiums and other amounts due and payable
with respect thereto, shall have been paid in full (including, to the extent
necessary, from proceeds of the initial Borrowing hereunder), and all Liens
securing payment of any such Indebtedness shall have been released and the
Administrative Agent shall have received all executed UCC termination statements
(Form UCC-3) or other instruments as may be suitable or appropriate in
connection therewith, or, in each case, shall be the subject of a "payoff" or
"estoppel" letter in form and substance acceptable to the Agents.
SECTION 5.1.16. Insurance. The Agents shall have received reasonably
satisfactory evidence of the existence of insurance in compliance with Section
7.1.4 (including all endorsements included therein), and the Administrative
Agent shall be named additional insured or loss payee, on behalf of the Lenders,
pursuant to documentation reasonably satisfactory to the Agents and the
Borrower.
SECTION 5.1.17. Opinions of Counsel. The Agents shall have received
opinions, each dated the Closing Date and addressed to the Agents and all
Lenders, from
(a) Stites & Harbison, local Kentucky counsel to Hutson, in form and
substance reasonably satisfactory to the Agents; and
(b) Dechert Price & Rhoads, special New York counsel to each of the
Obligors, in form and substance reasonably satisfactory to the Agents.
SECTION 5.2. All Credit Extensions. The obligation of each Lender and, if
applicable, the Issuer, to make any Credit Extension (including its initial
Credit Extension) shall be subject to the satisfaction of each of the conditions
precedent set forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before and
after giving effect to any Credit Extension the following statements shall be
true and correct:
(a) the representations and warranties set forth in Article VI and
in each other Loan Document shall, in each case, be true and correct in
all material respects with the same effect as if then made (unless stated
to relate solely to an earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of
such earlier date);
(b) the sum of the (i) aggregate outstanding principal amount of all
Loans and (ii) the aggregate amount of all Letter of Credit Outstandings
does not exceed the lesser of (A) the then existing Revolving Loan
Commitment Amount and (B) the then applicable Borrowing Base Amount; and
(c) no Default shall have then occurred and be continuing.
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SECTION 5.2.2. Credit Extension Request. The Agents shall have received a
Borrowing Request if Loans are being requested, or an Issuance Request if a
Letter of Credit is being requested or extended. Each of the delivery of a
Borrowing Request or Issuance Request and the acceptance by the Borrower of
proceeds of any Credit Extension shall constitute a representation and warranty
by the Borrower that on the date of such Credit Extension (both immediately
before and after giving effect thereto and the application of the proceeds
thereof) the statements made in Section 5.2.1 are true and correct.
SECTION 5.2.3. Satisfactory Legal Form. All documents executed or submitted
pursuant hereto by or on behalf of the Borrower or any of its Restricted
Subsidiaries or any other Obligors shall be in form and substance reasonably
satisfactory to the Agents and their counsel; the Agents and their counsel shall
have received all information, approvals, opinions, documents or instruments as
the Agents or their counsel may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuer and the Agents to enter into
this Agreement and to make Credit Extensions hereunder, the Borrower represents
and warrants unto the Agents, the Issuer and each Lender as set forth in this
Article VI.
SECTION 6.1. Organization, etc. Each of the Borrower and its Restricted
Subsidiaries is validly organized and existing and in good standing under the
laws of the state or jurisdiction of its incorporation or organization, is duly
qualified to do business and is in good standing as a foreign entity in each
jurisdiction where the nature of its business requires such qualification,
except where the failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect, and has full power and authority and holds all
requisite governmental licenses, permits and other approvals to enter into and
perform its Obligations under this Agreement and each other Loan Document to
which it is a party and to own and hold under lease its property, and to conduct
its business substantially as currently conducted by it, except where the
failure to hold such governmental licenses, permits and approvals could not
reasonably be expected to have a Material Adverse Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower of this Agreement and each other Loan
Document executed or to be executed by it, the execution, delivery and
performance by each other Obligor of each Loan Document executed or to be
executed by it, the Borrower's and each such other Obligor's participation in
the consummation of all aspects of the Transaction in which the Borrower or such
other Obligor participates, and the execution, delivery and performance by the
Borrower or (if applicable) any Obligor of the agreements executed and delivered
in connection with the Transaction (including the Stock Purchase Agreement and
the First Mortgage Note Documents) are in each case within the Borrower's and
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each such other Obligor's powers, have been duly authorized by all necessary
action, and do not
(a) contravene any such Person's Organic Documents;
(b) contravene any material contractual restriction, law or
governmental regulation or court decree or order binding on or affecting
any such Person; or
(c) result in, or require the creation or imposition of, any Lien
(other than Liens permitted under the Loan Documents) on any such Person's
properties.
SECTION 6.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any Governmental
Authority or regulatory body or other Person (other than those that have been,
or on the Closing Date will be, duly obtained or made and which are, or on the
Closing Date will be, in full force and effect) is required for the consummation
of the Transaction or the due execution, delivery or performance by the Borrower
or any other Obligor of any Loan Document to which it is a party, or for the due
execution, delivery and/or performance of Transaction Documents, in each case by
the parties thereto or the consummation of the Transaction, except for any of
the foregoing, the failure of which to make or obtain such authorization or
approval (individually or in the aggregate) could not reasonably be expected to
have a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries
is an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement and the Transaction Documents to
which it is a party constitute, and each other Loan Document executed by the
Borrower will, on the due execution and delivery thereof, constitute, the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms; and each other Loan Document executed
by each other Obligor will, on the due execution and delivery thereof by such
Obligor, constitute the legal, valid and binding obligation of such Obligor
enforceable against such Obligor in accordance with its terms (except, in any
case, as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and by principles of equity).
SECTION 6.5. Financial Information. The financial statements of the
Borrower and its Restricted Subsidiaries furnished to the Agents and each Lender
pursuant to (i) clauses (a) and (b) of Section 5.1.13 have been prepared in
accordance with GAAP consistently applied and (ii) clauses (c), (d) and (e) of
Section 5.1.13 have been prepared in accordance with Regulation S-X promulgated
under the Securities Act of 1933, as amended, and, in each case, present fairly
the consolidated financial condition of the Persons covered thereby as at the
dates thereof and the results of their operations for the periods then ended.
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All balance sheets, all statements of operations, shareholders' equity and cash
flow and all other financial information of each of the Borrower and its
Restricted Subsidiaries furnished pursuant to Section 7.1.1 have been and will
for periods following the Closing Date be prepared in accordance with GAAP
consistently applied, and do or will present fairly the consolidated financial
condition of the Persons covered thereby as at the dates thereof and the results
of their operations for the periods then ended.
SECTION 6.6. No Material Adverse Change. There has been no material adverse
change in the financial condition, results of operations, assets, business,
properties or, other than with respect to forecast weather conditions, prospects
of the Borrower and its Subsidiaries, taken as a whole, or each of the IMC
Businesses and their respective Subsidiaries, in each case taken as a whole,
since December 31, 1998.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending or,
to the knowledge of the Borrower or any of its Subsidiaries, threatened
litigation, action, proceeding or labor controversy
(a) except as disclosed in Item 6.7 ("Litigation") of the Disclosure
Schedule, affecting the Borrower, any of its Subsidiaries or any other
Obligor, or any of their respective properties, businesses, assets or
revenues, which could reasonably be expected to have a Material Adverse
Effect, and no development has occurred in any labor controversy,
litigation, arbitration or governmental investigation or proceeding
disclosed in Item 6.7 which could reasonably be expected to have a Material
Adverse Effect (provided, however, that the aggregate amount of liability
of the Borrower and its Restricted Subsidiaries in respect of the labor
controversies, litigations, arbitrations, governmental investigations and
proceedings set forth in Item 6.7 ("Litigation") of the Disclosure Schedule
will not exceed $3,500,000); or
(b) which purports to affect the legality, validity or enforceability
of this Agreement, any other Loan Document, the Transaction Documents or
the Transaction.
SECTION 6.8. Subsidiaries. The Borrower has no Subsidiaries, except those
Subsidiaries
(a) which are identified in Item 6.8 ("Existing Subsidiaries") of the
Disclosure Schedule; or
(b) which are permitted to have been organized or acquired in
accordance with Section 7.2.5 or 7.2.8.
SECTION 6.9. Ownership of Properties. Each Obligor owns (a) in the case of
owned real property, good and marketable fee title to, and (b) in the case of
owned personal property, good and valid title to, or, in the case of leased real
or personal property, valid and enforceable leasehold interests (as the case may
be) in, all of its properties and assets, real and personal, tangible and
intangible, of any nature whatsoever, free and clear in each case of all Liens
or claims, except for Liens permitted pursuant to Section 7.2.3, except where
the failure to have such title could not reasonably be expected to have a
Material Adverse Effect.
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SECTION 6.10. Taxes. Each Obligor has filed all tax returns and reports
required by law to have been filed by it and has paid all Taxes and governmental
charges thereby shown to be due and owing, except any such Taxes or charges
which are being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP shall have been set
aside on its books, except where the failure to pay such Taxes (individually or
in the aggregate) could not reasonably be expected to have a Material Adverse
Effect.
SECTION 6.11. Pension and Welfare Plans. During the twelve-consecutive-
month period prior to the date of the execution and delivery of this Agreement
and prior to the date of any Credit Extension hereunder, no steps have been
taken to terminate any Pension Plan, and no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which might result in the incurrence by the Borrower
or any member of the Controlled Group of any material liability, fine or
penalty. Except as disclosed in Item 6.11 ("Employee Benefit Plans") of the
Disclosure Schedule, neither the Borrower nor any member of the Controlled Group
has any contingent liability with respect to any post-retirement benefit under a
Welfare Plan, other than liability for continuation coverage described in Part 6
of Subtitle B of Title I of ERISA.
SECTION 6.12. Environmental Warranties. Except as set forth in Item 6.12
("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying groundwater)
owned or leased by the Borrower or any of its Subsidiaries are in material
compliance with all Environmental Laws;
(b) there have been no past unresolved, and there are no pending or,
to the Borrower's knowledge, threatened
(i) claims, complaints, notices or requests for information
received by the Borrower or any of its Subsidiaries with respect to
any alleged violation of any Environmental Law, or
(ii) complaints, notices or inquiries to the Borrower or any of
its Subsidiaries regarding potential liability under any Environmental
Law that, in either case, have, or could reasonably be expected to
have, a Material Adverse Effect;
(c) there have been no Releases of Hazardous Materials at, on or under
any property now or previously owned or leased by the Borrower or any of
its Subsidiaries that have, or could reasonably be expected to have, a
Material Adverse Effect;
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(d) the Borrower and its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters;
(e) no property now or, to the knowledge of the Borrower, previously
owned or leased by the Borrower or any of its Subsidiaries is listed or
proposed for listing (with respect to owned property only) on the National
Priorities List pursuant to CERCLA or on any similar state list of sites
requiring investigation or clean-up;
(f) there are no underground storage tanks, active or, to the
knowledge of the Borrower, abandoned, including petroleum storage tanks, on
or under any property now or, to the knowledge of the Borrower, when owned
or leased by the Borrower or any of its Subsidiaries that, singly or in the
aggregate, have, or could reasonably be expected to have, a Material
Adverse Effect;
(g) to the knowledge of the Borrower, neither the Borrower nor any
Subsidiary has directly transported or directly arranged for the
transportation of any Hazardous Material to any location which is listed or
proposed for listing on the National Priorities List pursuant to CERCLA or
on any similar state list or which is the subject of federal, state or
local enforcement actions or other investigations which may lead to claims
against the Borrower or such Subsidiary for any remedial work, damage to
natural resources or personal injury, including claims under CERCLA that
have, or could reasonably be expected to have, a Material Adverse Effect;
and
(h) there are no polychlorinated biphenyls or friable asbestos present
at any property now owned or leased by the Borrower or any Subsidiary that,
singly or in the aggregate, have, or could reasonably be expected to have,
a Material Adverse Effect;
provided, however, that the aggregate amount of liability of the Borrower and
its Restricted Subsidiaries in respect of the items set forth in Item 6.12
("Environmental Matters") of the Disclosure Schedule will not exceed $5,000,000.
SECTION 6.13. Accuracy of Information. None of the factual information
heretofore or contemporaneously furnished in writing to the Agents, the Issuer,
the Co-Lead Arrangers or any Lender by or on behalf of the Borrower or any other
Obligor for purposes of or in connection with this Agreement or any transaction
contemplated hereby (including the Transaction) (true and complete copies of
which were furnished to the Agents, the Issuer, the Co-Lead Arrangers and each
Lender requesting a copy thereof in connection with its execution and delivery
hereof), contains any untrue statement of a material fact, and no other factual
information hereafter furnished in connection with this Agreement or any other
Loan Document by the Borrower or any other Obligor to the Agents, the Issuer,
the Co-Lead Arrangers or any Lender will contain any untrue statement of a
material fact on the date as of which such information is dated or certified
and, as of the date of the execution and delivery of this Agreement by the
Agents, the Issuer, the Co-Lead Arrangers and each of the Lenders, the
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information delivered prior to the date of execution and delivery of this
Agreement (unless such information specifically relates to a prior date) does
not, and the factual information hereafter furnished shall not on the date as of
which such information is dated or certified, omit to state any material fact
necessary to make any information not misleading.
SECTION 6.14. Regulations U and X. No Obligor is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock, and no
proceeds of any Credit Extensions will be used to purchase or carry margin stock
or otherwise for a purpose which violates, or would be inconsistent with, F.R.S.
Board Regulation U or Regulation X. Terms for which meanings are provided in
F.R.S. Board Regulation U or Regulation X or any regulations substituted
therefor, as from time to time in effect, are used in this Section with such
meanings.
SECTION 6.15. Year 2000. Each Obligor has reviewed the areas within its
business and operations which could be adversely affected by, and has developed
or is developing a program (which program is expected to be completed and in
place by June 30, 1999) to address on a timely basis, the "Year 2000 Problem"
(that is, the risk that computer applications used by such Obligor may be unable
to recognize and properly perform date-sensitive functions involving certain
dates prior to and any date after December 31, 1999). Based on such review and
program, the Year 2000 Problem could not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.16. Status of Obligations as Senior Indebtedness; First Mortgage
Note Offering; First Mortgage Notes; etc. (a) The Borrower has the power and
authority to incur the Senior Indebtedness as provided for under the First
Mortgage Note Documents applicable thereto and has duly authorized, executed and
delivered the First Mortgage Note Documents applicable to such Senior
Indebtedness. The Borrower has issued, pursuant to due authorization, the Senior
Indebtedness under the applicable First Mortgage Note Documents, and such First
Mortgage Note Documents constitute the legal, valid and binding obligations of
the Borrower enforceable against the Borrower in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and by principles of equity).
(b) The First Mortgage Notes have been issued and sold to the initial
purchasers thereof on or prior to the Closing Date in accordance with and
pursuant to the terms of the Offering Memorandum and in compliance with all
laws, including Rule 144A of the Securities Act of 1933, as amended and all
other applicable federal and state securities laws. All representations and
warranties of the Borrower and each other applicable Obligor contained in the
purchase agreement relating to the First Mortgage Notes are true and correct in
all material respects as of the Closing Date.
SECTION 6.17. Solvency. The Transaction (including the incurrence of the
initial Credit Extension hereunder, the execution and delivery by each
Restricted Subsidiary of the Subsidiary Guaranty and the application of the
proceeds of the Credit Extensions), will not involve or result in any fraudulent
transfer or fraudulent conveyance under the provisions of Section 548 of the
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Bankruptcy Code (11 U.S.C. ss.101 et seq., as from time to time hereafter
amended, and any successor or similar statute) or any applicable state law
respecting fraudulent transfers or fraudulent conveyances. On the Closing Date,
after giving effect to the Transaction and the making of each Credit Extension
made on the Closing Date and after giving effect to the application of the
proceeds of such Credit Extensions, the Borrower and each Subsidiary is Solvent.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the Agents,
each Lender and the Issuer that, until the Termination Date, the Borrower will
perform, or cause to be performed, the obligations set forth in this Section
7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The Borrower
will furnish, or will cause to be furnished, to each Lender and each Agent
copies of the following financial statements, reports, notices and information:
(a) (i) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of the
Borrower, a copy of the consolidated and consolidating balance sheet of the
Borrower and its Restricted Subsidiaries as of the end of such Fiscal
Quarter, and the related consolidated and consolidating statements of
income and cash flow of the Borrower and its Restricted Subsidiaries for
such Fiscal Quarter and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal Quarter, and,
in each case, setting forth in comparative form (A) the figures for the
same quarterly accounting periods ending in the immediately preceding
Fiscal Year and (B) the figures for the same quarterly accounting periods
reflected in the financial projections most recently delivered (either
prior to the Closing Date or pursuant to clause (i) of Section
7.1.1)(provided, that, with respect to clause (A), for the first four
Fiscal Quarters following the Closing Date, the Borrower shall be required
to provide comparisons with respect to income statements only), certified
by the chief financial or chief accounting Authorized Officer of the
Borrower and (ii) as soon as available and in any event within 30 days
after the end of each Fiscal Month of the Borrower, a copy of the
consolidated and consolidating balance sheet of the Borrower and its
Restricted Subsidiaries as of the end of such Fiscal Month, and the related
consolidated and consolidating statements of income and cash flow of the
Borrower and its Restricted Subsidiaries for such Fiscal Month and for the
period commencing at the end of the previous Fiscal Year and ending with
the end of such Fiscal Month, and, in each case, setting forth in
comparative form (A) the figures for the same monthly accounting periods
ending in the immediately preceding Fiscal Year and (B) the figures for the
same monthly accounting periods reflected in the financial projections most
recently delivered (either prior to the Closing Date or pursuant to clause
(i) of Section 7.1.1)(provided, that, with respect to clause (A), for the
first twelve Fiscal Months following the Closing Date, the Borrower shall
be required to provide comparisons with respect to income statements only),
certified by the chief financial or chief accounting Authorized Officer of
the Borrower;
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(b) as soon as available and in any event within 90 days after the
end of each Fiscal Year of the Borrower, a copy of the consolidated and
consolidating balance sheet of the Borrower and its Restricted
Subsidiaries, and the related consolidated and consolidating statements of
income and cash flow of the Borrower and its Restricted Subsidiaries for
such Fiscal Year, setting forth in comparative form (A) the figures for
the immediately preceding Fiscal Year and (B) the figures for the same
period reflected in the financial projections most recently delivered
(either prior to the Closing Date or pursuant to clause (i) of Section
7.1.1)(provided, that, with respect to clause (A), for the first Fiscal
Year following the Closing Date, the Borrower shall be required to provide
comparisons with respect to income statements only), audited (without any
Impermissible Qualification) by independent public accountants acceptable
to the Agents, which shall include a calculation of the financial
covenants set forth in Section 7.2.4 and stating that, in performing the
examination necessary to deliver the audited financial statements of the
Borrower, no knowledge was obtained of any Event of Default;
(c) together with the delivery of the financial information pursuant
to clause (a)(i) and clause (b), a Compliance Certificate, executed by the
chief financial or chief accounting Authorized Officer of the Borrower,
showing (in reasonable detail and with appropriate calculations and
computations in all respects satisfactory to the Agents) compliance with
the financial covenants set forth in Section 7.2.4 and stating that no
Default has occurred and is continuing (or, if a Default has occurred,
specifying the details of such Default and the action that the Borrower or
such Obligor has taken or proposes to take with respect thereto);
(d) as soon as possible and in any event within three Business Days
after the Borrower or any other Obligor obtains knowledge (or could
reasonably be expected to have obtained knowledge) of the occurrence of a
Default, a statement of an Authorized Officer of the Borrower setting
forth details of such Default and the action that the Borrower or such
Obligor has taken and proposes to take with respect thereto;
(e) as soon as possible and in any event within three Business Days
after (i) the occurrence of any material adverse development with respect
to any litigation, action, proceeding, or labor controversy described in
Item 6.7 ("Litigation") of the Disclosure Schedule or (ii) the
commencement of any litigation, action, proceeding or labor controversy of
the type described in Section 6.7, notice thereof and, to the extent the
Agents request, copies of all documentation relating thereto;
(f) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to any of its security holders generally
in their capacity as security holders, and all reports, notices,
prospectuses and registration statements which any Obligor files with the
Securities and Exchange Commission or any national securities exchange;
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(g) promptly upon becoming aware of (i) the institution of any steps
by any Person to terminate any Pension Plan, (ii) the failure to make a
required contribution to any Pension Plan if such failure is sufficient to
give rise to a Lien under section 302(f) of ERISA, (iii) the taking of any
action with respect to a Pension Plan which could result in the
requirement that any Obligor furnish a bond or other security to the PBGC
or such Pension Plan, (iv) the occurrence of any event with respect to any
Pension Plan which could result in the incurrence by any Obligor of any
material liability, fine or penalty or (v) any material increase in the
contingent liability of any Obligor with respect to any post-retirement
Welfare Plan benefit, notice thereof and copies of all documentation
relating thereto;
(h) promptly upon receipt thereof, copies of all "management
letters" submitted to the Borrower or any other Obligor by the independent
public accountants referred to in clause (b) in connection with each audit
made by such accountants;
(i) promptly when available and in any event within 60 days
following the last day of each Fiscal Year of the Borrower, financial
projections for the Borrower and its Restricted Subsidiaries, on a
consolidated and consolidating basis (including an operating budget), for
the current Fiscal Year, prepared in reasonable detail by the chief
accounting or financial Authorized Officer of the Borrower;
(j) within 10 Business Days after the end of each semi-monthly
period, a Borrowing Base Certificate that is calculated as of the
fifteenth day and the last day of each Fiscal Month;
(k) within 30 days after the end of each Fiscal Quarter, or as
requested by any Agent from time to time: (i) a detailed aged trial
balance and a detailed summary of all Accounts indicating which Accounts
are thirty, sixty and ninety days past due and listing the names of all
Account Debtors, (ii) a detailed listing and a detailed summary of the
Borrower's accounts payable indicating which accounts payable are more
than thirty days past due, (iii) detailed inventory listings and a
detailed inventory listing summary, and (iv) a reconciliation of Accounts,
accounts payable and inventory to the financial statements delivered
pursuant to clause (a) of this Section 7.1.1 and to the Borrowing Base
Certificate delivered pursuant to clause (j) of this Section 7.1.1 for
each Fiscal Month which is the last Fiscal Month of a Fiscal Quarter;
provided, however, that the Borrower will only have to provide the
detailed listings in clause (i), (ii) and (iii) above to the
Administrative Agent. The Borrower will only distribute such detailed
listings to a Lender requesting such listings; and
(l) such other information relating to the condition or operations,
financial or otherwise, of the Borrower or any of its Restricted
Subsidiaries or any other Obligor as any Lender through the Administrative
Agent may from time to time reasonably request.
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SECTION 7.1.2. Maintenance of Existence. The Borrower will, and will cause
each of its Subsidiaries to, comply in all material respects with all applicable
laws, rules, regulations and orders, such compliance to include (without
limitation):
(a) the maintenance and preservation of its corporate existence and
qualification as a foreign corporation, except where the failure to so
qualify could not reasonably be expected to have a Material Adverse
Effect; and
(b) the payment, before the same become delinquent, of all material
Taxes, assessments and governmental charges imposed upon the Borrower or
its Subsidiaries or upon their property except to the extent being
diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside
on the books of the Borrower or its Subsidiaries, as applicable.
SECTION 7.1.3. Maintenance of Properties. The Borrower will, and will cause
each of its Subsidiaries to, maintain, preserve, protect and keep its and their
respective properties in good repair, working order and condition (ordinary wear
and tear excepted), and make necessary and proper repairs, renewals and
replacements so that its business carried on by the Borrower and its
Subsidiaries may be properly conducted at all times unless the Borrower or such
Subsidiary determines in good faith that the continued maintenance of such
property is no longer economically desirable.
SECTION 7.1.4. Insurance. (a) The Borrower will, and will cause each of its
Restricted Subsidiaries to maintain (i) insurance on its property with
financially sound and reputable insurance companies against loss and damage in
at least the amounts (and with only those deductibles) customarily maintained,
and against such risks as are typically insured against in the same general
area, by Persons of comparable size engaged in the same or similar business as
the Borrower and its Subsidiaries and (ii) all worker's compensation, employer's
liability insurance or similar insurance as may be required under the laws of
any state or jurisdiction in which it may be engaged in business.
(b) Without limiting clause (a) above, all insurance policies required
pursuant to this Section shall (a) name the Administrative Agent, on behalf of
Secured Parties, as additional insured, and provide that no cancellation or
modification of the policies will be made without thirty days' prior written
notice to the Administrative Agent and (b) be in addition to any requirements to
maintain specific types of insurance contained in the other Loan Documents.
SECTION 7.1.5. Books and Records. The Borrower will, and will cause each of
its Restricted Subsidiaries to, keep books and records in accordance with GAAP
which accurately reflect all of its business affairs and transactions and permit
the Agents, the Issuer and each Lender or any of their respective
representatives, at reasonable times and intervals and after reasonable notice
to the Borrower, (a) to visit each Obligor's offices and any other place where
"Collateral" (as defined in the applicable Pledge and Security Agreement) is
located, (b) to discuss such Obligor's financial matters with its officers and
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employees and its independent public accountants (and the Borrower hereby
authorizes such independent public accountant to discuss the Borrower's and each
Obligor's financial matters with each Lender or its representatives whether or
not any representative of the Borrower is present) and (c) to examine (and, at
the expense of the Borrower, photocopy extracts from) any of its books or other
corporate records. The Borrower shall pay any fees of such independent public
accountant incurred in connection with any Agent's, the Issuer's or any Lender's
exercise of its rights pursuant to this Section.
SECTION 7.1.6. Environmental Covenant. The Borrower will, and will cause
each of its Subsidiaries to,
(a) use and operate all of its and their facilities and properties in
material compliance with all Environmental Laws, keep all material permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material compliance with
all applicable Environmental Laws;
(b) promptly notify the Agents and provide copies upon receipt of all
written claims, complaints, notices or inquiries of a nature relating to
the condition of its facilities and properties in respect of, or as to
compliance with, Environmental Laws (which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect)
and shall resolve any non-compliance with Environmental Laws within the
time period required by such Environmental Laws and keep its property free
of any Lien imposed by any Environmental Law; and
(c) provide such information and certifications which the Agents may
reasonably request from time to time to evidence compliance with this
Section 7.1.6.
SECTION 7.1.7. Future Subsidiaries. Upon any Person becoming, after the
Closing Date, a Restricted Subsidiary, or upon the Borrower or any Restricted
Subsidiary acquiring additional Capital Stock of any existing Restricted
Subsidiary, the Borrower shall promptly notify the Agents of such acquisition,
and
(a) the Borrower shall promptly cause such Restricted Subsidiary to
execute and deliver to the Administrative Agent, with counterparts for each
Lender, a supplement to the Subsidiary Guaranty and a supplement to the
Subsidiary Pledge and Security Agreement, together with acknowledgment
copies of UCC financing statements (Form UCC-1) executed and delivered by
the Restricted Subsidiary naming the Restricted Subsidiary as the debtor
and the Administrative Agent as the secured party, or other similar
instruments or documents, filed under the UCC in all jurisdictions as may
be necessary or, in the opinion of the Administrative Agent, desirable to
perfect the security interest of the Administrative Agent pursuant to the
Subsidiary Pledge and Security Agreement (other than the perfection of
security interests in motor vehicles owned as of the date such entity
becomes a Restricted Subsidiary); and
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(b) the Borrower shall promptly deliver, or cause to be delivered, to
the Administrative Agent under a supplement to a Pledge Agreement
certificates (if any) representing all of the issued and outstanding shares
of Capital Stock of such Restricted Subsidiary or Foreign Subsidiary owned
by the Borrower or any Restricted Subsidiary, as the case may be, along
with undated stock powers for such certificates, executed in blank, or, if
any securities subject thereto are uncertificated securities, confirmation
and evidence satisfactory to the Agents that appropriate book entries have
been made in the relevant books or records of a securities intermediary or
the issuer of such securities, as the case may be, or other appropriate
steps shall have been taken under applicable law resulting in the
perfection of the security interest granted in favor of the Administrative
Agent pursuant to the terms of a Pledge Agreement;
together, in each case, with such opinions, in form and substance and from
counsel reasonably satisfactory to the Agents, as the Agents may reasonably
request; provided, however, that notwithstanding the foregoing, no Foreign
Subsidiary shall be required to execute and deliver a supplement to the
Subsidiary Guaranty or a supplement to the Subsidiary Pledge and Security
Agreement, nor will the Borrower or any Restricted Subsidiary be required to
deliver in pledge pursuant to a Pledge Agreement in excess of 65% of the total
combined voting power of all classes of Capital Stock of a Foreign Subsidiary
entitled to vote.
SECTION 7.1.8. Use of Proceeds. The Borrower shall apply the proceeds of
the Credit Extensions as follows:
(a) to consummate the Acquisition Transactions;
(b) in connection with the Refinancing, to make payment in full of all
Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the
Disclosure Schedule;
(c) to pay reasonable costs, fees and expenses related to the
Transaction, which costs, fees and expenses shall be reasonably
satisfactory to the Agents; and
(d) for working capital and general corporate purposes of the Borrower
and its Restricted Subsidiaries, including Permitted Acquisitions by such
Persons.
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SECTION 7.1.9. Cash Management Accounts. The Borrower shall
(a) within 10 Business Days of the Closing Date establish cash
management accounts subject to the control of the Administrative Agent, all
on terms and conditions and pursuant to documentation satisfactory to the
Administrative Agent and the Syndication Agent;
(b) provide instructions to the appropriate Person as often as
necessary to ensure that any and all amounts deposited in any such account
are transferred, either directly or indirectly, to the Administrative
Agent, to be applied against any outstanding Loans; and
(c) not close or transfer any such account, or open any new deposit
account, in any case without the prior written consent of the
Administrative Agent.
SECTION 7.2. Negative Covenants. The Borrower covenants and agrees with the
Agents, the Issuer and each Lender that, until the Termination Date, the
Borrower will, and will cause its Restricted Subsidiaries to, perform or cause
to be performed, the obligations set forth in this Section 7.2.
SECTION 7.2.1. Business Activities. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, engage in any business activity,
except for any business in which the Borrower and its Restricted Subsidiaries
are engaged on the Effective Date and such businesses as may be incidental,
similar or related thereto.
SECTION 7.2.2. Indebtedness. The Borrower will not, and will not permit any
of its Restricted Subsidiaries to, create, incur, assume or suffer to exist
("Incur") or otherwise become or be liable in respect of any Indebtedness, other
than, without duplication, the following:
(a) Indebtedness in respect of the Obligations;
(b) until the Closing Date, Indebtedness that is to be repaid in full
as further identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the
Disclosure Schedule;
(c) Indebtedness existing as of the Effective Date which is identified
in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure Schedule;
(d) unsecured Indebtedness (i) incurred in the ordinary course of
business of the Borrower and its Restricted Subsidiaries (including open
accounts extended by suppliers on normal trade terms in connection with
purchases of goods and services which are not overdue for a period of more
than 90 days or, if overdue for more than 90 days, as to which a dispute
exists and adequate reserves in conformity with GAAP have been established
on the books of the Borrower or such Restricted Subsidiary) and (ii) in
respect of performance, surety or appeal bonds provided in the ordinary
course of business, but excluding (in each case), Indebtedness incurred
through the borrowing of money or Contingent Liabilities in respect
thereof;
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(e) Indebtedness (i) in respect of industrial revenue bonds or other
similar governmental or municipal bonds, (ii) evidencing the deferred
purchase price of newly acquired property or incurred to finance the
acquisition of equipment of the Borrower and its Restricted Subsidiaries
(pursuant to purchase money mortgages or otherwise, whether owed to the
seller or a third party) used in the ordinary course of business of the
Borrower and its Restricted Subsidiaries (provided, that such Indebtedness
is incurred within 60 days of the acquisition of such property) and (iii)
Capitalized Lease Liabilities; provided, that the aggregate amount of all
Indebtedness outstanding pursuant to this clause (e) shall not at any time
exceed $5,000,000; provided, further, that neither the Borrower nor any
Restricted Subsidiary may have any Contingent Liability in respect of such
Indebtedness incurred by any Foreign Subsidiary;
(f) Indebtedness of any Restricted Subsidiary owing to the Borrower or
any Restricted Subsidiary, which Indebtedness (i) shall be evidenced by a
promissory note in form and substance satisfactory to the Administrative
Agent, duly executed and delivered in pledge to the Administrative Agent
pursuant to a Loan Document, and shall not be forgiven or otherwise
discharged for any consideration other than payment in full or in part in
cash (provided, that only the amount repaid in part shall be discharged);
and (ii) if incurred by a Foreign Subsidiary owing to the Borrower or a
Restricted Subsidiary, shall not (when aggregated with the amount of
Investments made by the Borrower and the Restricted Subsidiaries in Foreign
Subsidiaries under clause (e) of Section 7.2.5), exceed $1,000,000;
(g) Indebtedness of the Borrower evidenced by the First Mortgage
Notes, and Indebtedness of each Restricted Subsidiary in respect of its
guarantee of such First Mortgage Notes;
(h) Indebtedness of a Person existing at the time such Person became a
Restricted Subsidiary in an amount not to exceed $1,500,000, but only to
the extent that such Indebtedness was not created or incurred in
contemplation of such Person becoming a Restricted Subsidiary; provided,
that neither the Borrower nor any Restricted Subsidiary may have any
Contingent Liability in respect of such Indebtedness incurred by any
Foreign Subsidiary;
(i) Hedging Obligations (other than with respect to Commodity Hedging
Agreements) of the Borrower or any of its Restricted Subsidiaries in
respect of the Loans;
(j) Hedging Obligations of the Borrower or any of its Restricted
Subsidiaries in respect of Commodity Hedging Agreements in an aggregate
notional amount not to exceed $1,000,000 at any time outstanding;
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(k) unsecured Indebtedness of the Borrower evidenced by seller notes
issued in connection with any Permitted Acquisition, the aggregate amount
of which seller notes shall not exceed $10,000,000 at any time outstanding;
(l) unsecured Indebtedness of the Borrower evidenced by seller notes
issued in connection with any Permitted Acquisition; provided, that such
seller notes shall (i) be subordinated in right of payment to the payment
in full in cash of the Indebtedness in respect of the Obligations, (ii) be
non-cash pay or pay-in-kind notes, (iii) not have a maturity date prior to
the Stated Maturity Date and (iv) in any event, be issued on terms and
pursuant to documentation in all material respects reasonably satisfactory
to the Agents; and
(m) other Indebtedness of the Borrower and its Restricted Subsidiaries
(other than Indebtedness of Foreign Subsidiaries owing to the Borrower or
any Restricted Subsidiary that is not a Foreign Subsidiary) in an aggregate
amount at any time outstanding not to exceed $4,000,000;
provided, however, that (i) no Indebtedness otherwise permitted by clause (e),
(f)(ii), (h) or (m) shall be assumed or otherwise Incurred if a Default has
occurred and is then continuing or would result therefrom, (ii) Indebtedness
permitted by clause (a) may be refinanced, refunded, renewed, or extended in
accordance with Section 7.2.10, (iii) Indebtedness evidenced by each of the
Seller Notes and the 399VP Notes shall not be exchanged for First Mortgage Notes
without the consent of the Required Lenders and (iv) Indebtedness permitted
under clause (k) shall be exclusive of any Indebtedness permitted under clause
(l).
SECTION 7.2.3. Liens. The Borrower will not, and will not permit any of its
Restricted Subsidiaries to, Incur any Lien upon any of its property, revenues or
assets, whether now owned or hereafter acquired, except:
(a) Liens securing payment of the Obligations;
(b) until the Closing Date, Liens securing payment of Indebtedness of
the type described in clause (b) of Section 7.2.2;
(c) Liens existing as of the Effective Date and disclosed in Item
7.2.3(c) ("Ongoing Liens") of the Disclosure Schedule securing Indebtedness
described in clause (c) of Section 7.2.2, and refinancings of such
Indebtedness; provided, that no such Lien shall encumber any additional
property and the amount of Indebtedness secured by such Lien is not
increased from that existing on the Effective Date (as such Indebtedness
may have been permanently reduced subsequent to the Effective Date);
(d) Liens securing Indebtedness of the type permitted under clause (e)
of Section 7.2.2; provided, that such Lien (i) is granted within 60 days
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after such Indebtedness is incurred and (ii) secures only the assets that
are the subject of the Indebtedness referred to in such clause;
(e) Liens securing Indebtedness permitted by clause (h) of Section
7.2.2; provided, that such Liens existed prior to such Person becoming a
Restricted Subsidiary, were not created in anticipation thereof and attach
only to specific tangible assets of such Person (and not assets of such
Person generally);
(f) Liens in favor of carriers, warehousemen, mechanics, materialmen
and landlords granted in the ordinary course of business for amounts not
overdue or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall
have been set aside on its books;
(g) Liens incurred or deposits made in the ordinary course of business
in connection with workmen's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, bids, leases or other similar obligations
(other than for borrowed money) entered into in the ordinary course of
business or to secure obligations on surety and appeal bonds or performance
bonds;
(h) judgment Liens in existence for less than 45 days after the entry
thereof or with respect to which execution has been stayed or the payment
of which is covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance companies and which do not
otherwise result in an Event of Default under Section 8.1.6;
(i) easements, rights-of-way, zoning restrictions, minor defects or
irregularities in title and other similar encumbrances not interfering in
any material respect with the value or use of the property to which such
Lien is attached;
(j) Liens for Taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside
on its books;
(k) Liens on the Fixed Assets of the Borrower, its Restricted
Subsidiaries and each Farmarkets Subsidiary securing the First Mortgage
Notes; and
(l) Liens securing Indebtedness permitted by clause (m) of Section
7.2.2; provided, that the aggregate amount of Indebtedness secured thereby
shall not exceed $1,500,000 at any time outstanding.
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SECTION 7.2.4. Financial Covenants.
(a) Interest Coverage Ratio. The Borrower will not permit the Interest
Coverage Ratio as of the last day of any Fiscal Quarter occurring during
any period set forth below to be less than the ratio set forth opposite
such period:
Interest Coverage
Period Ratio
------ -----------------
Closing Date to 06/30/99 1.75:1
07/01/99 to 09/30/99 1.85:1
10/01/99 to 03/31/00 2.00:1
04/01/00 to 09/30/00 2.25:1
10/01/00 and thereafter 2.50:1
(b) Current Ratio. The Borrower will not permit the Current Ratio as
of the last day of any Fiscal Quarter occurring during any period set forth
below to be less than the ratio set forth opposite such period:
Period Current Ratio
------ -------------
Closing Date to 06/30/00 1.00:1
07/01/00 to 12/31/00 1.10:1
01/01/01 to 12/31/01 1.20:1
01/01/02 and thereafter 1.30:1
(c) Leverage Ratio. The Borrower will not permit the Leverage Ratio as
of the last day of any Fiscal Quarter occurring during any period set forth
below to be greater than the ratio set forth opposite such period:
Period Leverage Ratio
------ --------------
Closing Date to 06/30/99 5.50:1
07/01/99 to 09/30/99 5.25:1
10/01/99 to 06/30/00 5.00:1
07/01/00 to 09/30/00 4.75:1
10/01/00 to 06/30/01 4.50:1
07/01/01 to 09/30/01 4.25:1
10/01/01 and thereafter 4.00:1
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(d) Minimum Net Worth. The Borrower will not permit Net Worth during
any period set forth below to be less than the amount determined pursuant
to the calculations set forth opposite such period:
Determination of
Period Minimum Net Worth
------ -----------------
07/01/99 to 09/30/99 Base Net Worth less
$25,000,000
10/01/99 to 12/31/99 Base Net Worth less
$33,000,000
01/01/00 to 03/31/00 Base Net Worth less
$41,000,000
04/01/00 to 12/31/01 Net Worth Amount
01/01/02 to 06/29/02 Net Worth Amount for the
period ending on 12/31/01
06/30/02 to 06/29/03 Net Worth Amount for the
period ending on 12/31/01
plus $10,000,000
06/30/03 to 06/29/04 Net Worth Amount for the
period ending on 12/31/01
plus $20,000,000
06/30/04 and thereafter Net Worth Amount for the
period ending on 12/31/01
plus $30,000,000
(e) Fixed Charge Coverage Ratio. The Borrower will not permit the
Fixed Charge Coverage Ratio as of the last day of any Fiscal Quarter
occurring during any period set forth below to be less than the ratio set
forth opposite such period:
Fixed Charge
Period Coverage Ratio
------ --------------
Closing Date to 09/30/99 1.00:1
10/01/99 to 03/31/00 1.10:1
04/01/00 to 09/30/00 1.20:1
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Fixed Charge
Period Coverage Ratio
------ --------------
10/01/00 to 03/31/01 1.30:1
04/01/01 and thereafter 1.40:1
SECTION 7.2.5. Investments. The Borrower will not, and will not permit any
of its Restricted Subsidiaries to Incur any Investment in any other Person,
except:
(a) Investments existing on the Closing Date and identified in Item
7.2.5(a) ("Ongoing Investments") of the Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as Indebtedness
pursuant to Section 7.2.2;
(d) without duplication, Investments permitted as Capital Expenditures
pursuant to Section 7.2.7;
(e) Investments by the Borrower in any of its Restricted Subsidiaries,
or by any such Restricted Subsidiary in any other Restricted Subsidiary or
in the Borrower, by way of contributions to capital or purchases of equity;
(f) Investments constituting (i) accounts receivable arising, (ii)
trade debt granted, or (iii) deposits made in connection with the purchase
price of goods or services, in each case in the ordinary course of
business;
(g) Investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;
(h) Investments consisting of any deferred portion of the sales price
received by the Borrower or any Restricted Subsidiary in connection with
any asset sale permitted under Section 7.2.9;
(i) Investments made in connection with the Transaction;
(j) Investments in Parent to the extent necessary to enable Parent to
pay (i) its overhead expenses in an amount not to exceed the amount set
forth in clause (b)(i) of Section 7.2.6 (which amount shall be reduced
dollar-for-dollar to the extent of any Restricted Payments made pursuant to
such clause (b)(i)) and (ii) Taxes;
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(k) Investments constituting Permitted Acquisitions in an aggregate
amount not to exceed $50,000,000 in any Fiscal Year; provided, that (i)
such Investments shall result in the acquisition of a wholly-owned
Restricted Subsidiary and (ii) upon making such Investments, the provisions
of Section 7.1.7 are complied with;
(l) other Investments made by the Borrower or any of its Restricted
Subsidiaries in an aggregate amount not to exceed $2,500,000 at any time
outstanding;
provided, however, that
(m) any Investment which when made complies with the requirements of
clause (a), (b) or (c) of the definition of the term "Cash Equivalent
Investment" may continue to be held for no more than 180 days following the
date that such Investment no longer meets the requirements of such
definition;
(n) no Investment otherwise permitted by clause (d), (e), or (j) shall
be permitted to be made if any Default has occurred and is continuing or
would result therefrom.
SECTION 7.2.6. Restricted Payments, etc. The Borrower will not, and will
not permit any of its Restricted Subsidiaries to, declare or make a Restricted
Payment (including the making of any Restricted Payment to Parent to pay the
principal or interest accrued on either the Seller Notes or the 399VP Notes), or
make any deposit for any Restricted Payment, other than
(a) Restricted Payments made by Restricted Subsidiaries to the
Borrower or wholly-owned Restricted Subsidiaries,
(b) Restricted Payments made to Parent to the extent necessary to
enable Parent to (i) pay its overhead expenses in an amount not to exceed
$2,000,000 in the aggregate in any Fiscal Year (which amount shall be
reduced dollar-for-dollar to the extent of any Investments made pursuant to
clause (j)(i) of Section 7.2.5), (ii) pay Taxes and (iii) so long as (A) no
Default shall have occurred and be continuing on the date such Restricted
Payment is declared or to be made, nor would a Default result from the
making of such Restricted Payment, (B) after giving effect to the making of
such Restricted Payment, the Borrower shall be in pro forma compliance with
the covenants set forth in Section 7.2.4 for the most recent full Fiscal
Quarter immediately preceding the date of the making of such Restricted
Payment for which the relevant financial information has been delivered
pursuant to clause (a) or clause (b) of Section 7.1.1, and (C) an
Authorized Officer of the Borrower shall have delivered a certificate to
the Administrative Agent in form and substance satisfactory to the
Administrative Agent (including a calculation of the Borrower's compliance
with the covenants set forth in Section 7.2.4 in reasonable detail)
certifying as to the accuracy of clauses (A) and (B) above, repurchase,
redeem or otherwise acquire or retire for value any Capital Stock of
Parent, or any warrant, option or other right to acquire Capital Stock of
Parent, held by any member of management of the Borrower or any of its
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Restricted Subsidiaries pursuant to any management equity subscription
agreement or stock option agreement; provided that the aggregate price paid
for all such repurchased, redeemed, acquired or retired Capital Stock,
warrants, options and other rights shall not exceed $1,000,000 over the
life of this Agreement.
SECTION 7.2.7. Capital Expenditures. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, make or commit to make Capital
Expenditures in any Fiscal Year, except (subject (in the case of Capitalized
Lease Liabilities) to clause (e) of Section 7.2.2) Capital Expenditures which do
not aggregate in excess of the amount set forth below opposite such Fiscal Year:
Capital
Fiscal Year Expenditure Amount
----------- ------------------
1999 $27,000,000
2000 $28,000,000
2001 $30,000,000
2002 $30,000,000
2003 $32,000,000
2004 $35,000,000;
provided, however, that, to the extent the amount of Capital Expenditures
permitted to be made in any Fiscal Year pursuant to this Section exceeds the
aggregate amount of Capital Expenditures actually made during such Fiscal Year,
such excess amount (up to an aggregate of 25% of the amount of Capital
Expenditures permitted for such Fiscal Year, without giving effect to this
proviso) may be carried forward to (but only to) the next succeeding Fiscal Year
(any such amount to be certified by the Borrower to the Agents in the Compliance
Certificate delivered for the last Fiscal Quarter of such Fiscal Year, and any
such amount carried forward to a succeeding Fiscal Year shall be deemed to be
used prior to the Borrower and its Restricted Subsidiaries using the amount of
Capital Expenditures permitted by this Section in such succeeding Fiscal Year,
without giving effect to such carry-forward).
SECTION 7.2.8. Consolidation, Merger, etc. The Borrower will not, and will
not permit any of its Restricted Subsidiaries to, liquidate or dissolve,
consolidate with, or merge into ("Combine" or a "Combination") or with, any
other Person, or purchase or otherwise acquire all or substantially all of the
assets of any Person (or of any division thereof) except
(a) any such Restricted Subsidiary may Combine into the Borrower or
any Restricted Subsidiary, and the assets or stock of any Restricted
Subsidiary may be purchased or otherwise acquired by the Borrower or any
other Restricted Subsidiary; provided, that notwithstanding the above, a
Restricted Subsidiary may only Combine with and into another Restricted
Subsidiary if, after giving effect to such Combination, the Borrower
continues to own (d)rectly or indirectly), and the Administrative Agent
continues to have pledged to it pursuant to a Pledge Agreement, a
percentage of the issued and outstanding shares of Capital Stock (on a
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fully diluted basis) of the Restricted Subsidiary surviving such
Combination that is equal to or in excess of the percentage of the issued
and outstanding shares of Capital Stock (on a fully diluted basis) of the
Restricted Subsidiary that does not survive such Combination that was
(immediately prior to the Combination) owned by the Borrower or pledged to
the Administrative Agent, pursuant to such documentation and opinions as
shall be necessary in the opinion of the Agents to create, perfect or
maintain the collateral position of the Administrative Agent and the
Secured Parties therein as contemplated by this Agreement; and
(b) so long as no Default has occurred and is continuing or would
occur after giving effect thereto, the Borrower or any of its Restricted
Subsidiaries may purchase all or substantially all of the assets of any
Person (or any division thereof) not then a Restricted Subsidiary, or
acquire such Person by Combination, if permitted (without duplication)
pursuant to Section 7.2.7 to be made as a Capital Expenditure or if
permitted (without duplication) pursuant to Section 7.2.5 to be made as an
Investment.
SECTION 7.2.9. Asset Dispositions, etc. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, Dispose of any of the Borrower's
or such Restricted Subsidiaries' assets (including accounts receivable and
Capital Stock of Subsidiaries) to any Person in one transaction or series of
transactions unless such Disposition is
(a) inventory Disposed of in the ordinary course of its business,
(b) permitted by Section 7.2.8,
(c) a transfer of the Fixed Assets of the Borrower and its Restricted
Subsidiaries or
(d) (i) for fair market value and the consideration consists of no
less than 80% in cash or Marketable Securities (provided, that such
percentage shall be reduced to 50% with respect to the Disposition of any
asset with a fair market value which is not in excess of $500,000), (ii)
the Net Disposition Proceeds received from such assets, together with the
Net Disposition Proceeds of all other assets Disposed pursuant to this
clause (d) since the Closing Date (other than with respect to Net
Disposition Proceeds reinvested pursuant to clause (d) of Section 3.1.1),
does not exceed (individually or in the aggregate) $2,000,000 over the term
of this Agreement and (iii) an amount equal to the Net Disposition Proceeds
generated from such Disposition are applied as Net Disposition Proceeds to
prepay the Loans or for reinvestment by the Borrower pursuant to the terms
of Section 3.1.1 and Section 3.1.2.
SECTION 7.2.10. Modification of Certain Agreements. The Borrower will not,
and will not permit any of its Restricted Subsidiaries or any Farmarkets
Subsidiary to, consent to any material amendment, supplement, waiver or other
modification of, or enter into any forbearance from exercising any material
rights with respect to the terms or provisions contained in (a) any of the First
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Mortgage Note Documents, except (i) in connection with any refinancing,
refunding, renewal or extension of the Indebtedness evidenced by the First
Mortgage Notes (which refinancing, refunding, renewal or extension shall be on
No Less Favorable Terms and Conditions) or (ii) as otherwise permitted pursuant
hereto (and on terms and conditions and pursuant to documentation reasonably
satisfactory to the Agents) or (b) any of the other Transaction Documents.
SECTION 7.2.11. Transactions with Affiliates. The Borrower will not, and
will not permit any of its Restricted Subsidiaries to, enter into or cause or
permit to exist any arrangement or contract (including for the purchase, lease
or exchange of property or the rendering of services) with any of its other
Affiliates, unless such arrangement or contract (a) is on fair and reasonable
terms not materially less favorable to the Borrower or such Restricted
Subsidiary than it could obtain in an arm's-length transaction with a Person
that is not an Affiliate and (b) is of the kind which would be entered into by a
prudent Person in the position of the Borrower or such Restricted Subsidiary
with a Person that is not one of its Affiliates.
SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc. The Borrower
will not, and will not permit any of its Restricted Subsidiaries (other than
pursuant to a Permitted Acquisition) to, enter into any agreement prohibiting
(a) (i) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired (other than in
the case of any assets acquired with the proceeds of any Indebtedness
permitted under clause (e) of Section 7.2.2 or subject to Capitalized Lease
Liabilities permitted under such clause (e), customary limitations and
prohibitions contained in such Indebtedness), or (ii) the ability of the
Borrower or any other Obligor to amend or otherwise modify this Agreement
or any other Loan Document; or
(b) any Restricted Subsidiary from making any payments, directly or
indirectly, to the Borrower by way of dividends, advances, repayments of
loans or advances, reimbursements of management and other intercompany
charges, expenses and accruals or other returns on investments, or any
other agreement or arrangement which restricts the ability of any such
Subsidiary to make any payment, directly or indirectly, to the Borrower.
SECTION 7.2.13. Sale and Leaseback. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly enter into
any agreement or arrangement with any other Person providing for the sale or
transfer by it of any property (now owned or hereafter acquired) having a fair
market value of more than $2,000,000 in the aggregate at any time outstanding
which has been or is to be sold or transferred by the Borrower or any of its
Restricted Subsidiaries to a Person and the subsequent lease or rental of such
property or other similar property from such Person.
SECTION 7.2.14. Stock of Subsidiaries. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, (a) issue any Capital Stock
(whether for value or otherwise) to any Person other than the Borrower or
another wholly-owned Restricted Subsidiary or (b) become liable in respect of
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any obligation (contingent or otherwise) to purchase, redeem, retire, acquire or
make any other payment in respect of any shares of Capital Stock of the Borrower
or any Restricted Subsidiary or any option, warrant or other right to acquire
any such shares of Capital Stock.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following events or
occurrences described in this Section 8.1 shall constitute an "Event of
Default".
SECTION 8.1.1. Non-Payment of Obligations. (a) The Borrower shall default
in the payment or prepayment when due of any principal of any Loan, (b) the
Borrower shall default in the payment when due of any Reimbursement Obligation
or deposit of cash collateral for purposes pursuant to Section 2.6.4 or (c) the
Borrower or any other Obligor shall default (and such default shall continue
unremedied for a period of three Business Days) in the payment when due of any
interest or fee with respect to the Loans or Commitments or of any other
Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of any
Obligor made or deemed to be made in any Loan Document (including any
certificates delivered pursuant to Article V) is or shall be incorrect when made
or deemed to have been made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. The
Borrower shall default in the due performance and observance of any of its
obligations under Section 7.1.8 and Section 7.2.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. The
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan Document
executed by it, and such default shall continue unremedied for a period of 30
days after notice thereof shall have been given to the Borrower by the
Administrative Agent or any Lender; provided, however, the Borrower shall not be
in default of clause (a) of Section 7.1.6 if the Borrower and its Subsidiaries
commence their response to such non-compliance within the period permitted by
such Environmental Laws.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur in the
payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 8.1.1) of the Borrower or any of its Subsidiaries or any
other Obligor having a principal amount, individually or in the aggregate, in
excess of $1,000,000, or a default shall occur in the performance or observance
of any obligation or condition with respect to such Indebtedness if the effect
of such default is to accelerate the maturity of any such Indebtedness or such
default shall continue unremedied for any applicable period of time sufficient
to permit the holder or holders of such Indebtedness, or any trustee or agent
for such holders, to cause or declare such Indebtedness to become due and
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payable or to require such Indebtedness to be prepaid, redeemed, purchased or
defeased, or require an offer to purchase or defease such Indebtedness to be
made, prior to its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of money in
excess of $1,000,000 (not covered by insurance from a responsible insurance
company that is not denying its liability with respect thereto) shall be
rendered against the Borrower or any of its Subsidiaries or any other Obligor
and such judgment or order remains undischarged, unbonded or unstayed for a
period of thirty (30) consecutive days from the date of entry thereof.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur with
respect to any Pension Plan:
(a) the institution of any steps by the Borrower, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a
result of such termination, the Borrower or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan, in excess
of $1,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION 8.1.8. Change in Control. Any Change in Control shall occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of its
Subsidiaries or any other Obligor shall
(a) become insolvent or generally fail to pay, or admit in writing its
inability or unwillingness generally to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for any substantial part
of the property of any thereof, or make a general assignment for the
benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any of its Subsidiaries
or any other Obligor or for a substantial part of the property of any
thereof, and such trustee, receiver, sequestrator or other custodian shall
not be discharged within 60 days, provided that the Borrower, each
Subsidiary and each other Obligor hereby expressly authorizes the Agents,
the Issuer and each Lender to appear in any court conducting any relevant
proceeding during such 60-day period to preserve, protect and defend their
rights under the Loan Documents;
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(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower or any of its Subsidiaries or any
other Obligor, and, if any such case or proceeding is not commenced by the
Borrower or such Subsidiary or such other Obligor, such case or proceeding
shall be consented to or acquiesced in by the Borrower or such Subsidiary
or such other Obligor or shall result in the entry of an order for relief
or shall remain for 60 days undismissed, provided that the Borrower, each
Subsidiary and each other Obligor hereby expressly authorizes the Agents,
the Issuer and each Lender to appear in any court conducting any such case
or proceeding during such 60-day period to preserve, protect and defend
their rights under the Loan Documents; or
(e) take any action authorizing, or in furtherance of, any of the
foregoing.
SECTION 8.1.10. Impairment of Security, etc. (a) Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of any Obligor party thereto; (b) the
Borrower, any other Obligor or any other party shall, directly or indirectly,
contest in any manner such effectiveness, validity, binding nature or
enforceability; or (c) any Lien securing any Obligation shall, in whole or in
part, cease to be a perfected first priority Lien, subject only, in each case,
to those exceptions expressly permitted by such Loan Document except to the
extent any event referred to above (i) relates to assets of the Borrower or any
of its Subsidiaries which are immaterial, (ii) results from the failure of the
Administrative Agent to maintain possession of certificates representing
securities pledged under any Pledge Agreement or to file continuation statements
under the UCC of any applicable jurisdiction or (iii) is covered by a lender's
title insurance policy and the relevant insurer promptly after the occurrence
thereof shall have acknowledged in writing that the same is covered by such
title insurance policy.
SECTION 8.2. Action if Bankruptcy. If any Event of Default described in
clauses (a) through (e) of Section 8.1.9 shall occur, the Commitments (if not
theretofore terminated) shall automatically terminate and the outstanding
principal amount of all outstanding Loans and all other Obligations (including
Reimbursement Obligations) shall automatically be and become immediately due and
payable, without notice or demand to any Person and the Borrower shall be
obligated to immediately Cash Collateralize all Letter of Credit Outstandings.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than an Event of Default described in clauses (a) through (e) of Section
8.1.9) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Administrative Agent, upon the direction of the Required
Lenders, shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations (including
Reimbursement Obligations) to be due and payable, require the Borrower to Cash
Collateralize all Letter of Credit Outstandings and/or declare the Commitments
(if not theretofore terminated) to be terminated, whereupon the full unpaid
amount of such Loans and other Obligations which shall be so declared due and
payable shall be and become immediately due and payable, without further notice,
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demand or presentment, and/or, as the case may be, the Commitments shall
terminate and the Borrower shall be obligated to immediately Cash Collateralize
all Letter of Credit Outstandings.
ARTICLE IX
THE AGENTS
SECTION 9.1. Actions. Each Lender hereby appoints DLJ as its Syndication
Agent, Morgan as its Documentation Agent and U.S. Bancorp as its Administrative
Agent under and for purposes of this Agreement and each other Loan Document.
Each Lender authorizes the Agents to act on behalf of such Lender under this
Agreement and each other Loan Document and, in the absence of other written
instructions from the Required Lenders received from time to time by the Agents
(with respect to which each of the Agents agrees that it will comply, except as
otherwise provided in this Section or as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of the Agents by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. The Agents may execute any of
their respective duties under this Agreement and each other Loan Document by or
through their respective employees, agents and attorneys-in-fact. Each Lender
hereby indemnifies (which indemnity shall survive any termination of this
Agreement) the Agents, pro rata according to such Lender's Percentage of the
then existing Revolving Loan Commitment Amount, from and against any and all
liabilities, obligations, losses, damages, claims, costs or expenses of any kind
or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against, any of the Agents in any way relating to or arising out of
this Agreement and any other Loan Document, including reasonable attorneys'
fees, and as to which any Agent is not reimbursed by the Borrower or any other
Obligor (and without limiting the obligation of the Borrower or any other
Obligor to do so); provided, however, that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
claims, costs or expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted solely from such Agent's
gross negligence or wilful misconduct. An Agent shall not be required to take
any action hereunder or under any other Loan Document, or to prosecute or defend
any suit in respect of this Agreement or any other Loan Document, unless it is
indemnified hereunder to its satisfaction. If any indemnity in favor of either
of the Agents shall be or become, in such Agent's determination, inadequate,
such Agent may call for additional indemnification from the Lenders and cease to
do the acts indemnified against hereunder until such additional indemnity is
given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent shall
have been notified by telephone, confirmed in writing, by any Lender by 2:00
p.m., Denver, Colorado time, on the day prior to a Borrowing or Disbursement
with respect to a Letter of Credit pursuant to Section 2.6.2 that such Lender
will not make available the amount which would constitute its Percentage of such
Borrowing on the date specified therefor, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent and,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If and to the extent that such Lender shall not have made such amount
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available to the Administrative Agent, such Lender and the Borrower severally
agree to repay the Administrative Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date the
Administrative Agent made such amount available to the Borrower to the date such
amount is repaid to the Administrative Agent, at the interest rate applicable at
the time to Loans comprising such Borrowing.
SECTION 9.3. Exculpation. None of the Agents or the Co-Lead Arrangers nor
any of their respective directors, officers, employees or agents shall be liable
to any Lender for any action taken or omitted to be taken by it under this
Agreement or any other Loan Document, or in connection herewith or therewith,
except for its own willful misconduct or gross negligence, nor responsible for
any recitals or warranties herein or therein, nor for the effectiveness,
enforceability, validity or due execution of this Agreement or any other Loan
Document, nor for the creation, perfection or priority of any Liens purported to
be created by any of the Loan Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral security, nor
to make any inquiry respecting the performance by the Borrower or any other
Obligor of its obligations hereunder or under any other Loan Document. None of
the Agents or the Co-Lead Arrangers nor any of their respective directors,
officers, employees or agents shall be responsible for or have any duty to
ascertain, inquire into or verify (a) any statement, warranty or representation
made in connection with any Loan Document or any Borrowing hereunder, (b) the
performance or observance of any of the covenants or agreements of any Obligor
under any Loan Document, including any agreement by an Obligor to furnish
information directly to each Lender, (c) the satisfaction of any condition
specified in Article V, except receipt of items required to be delivered solely
to the Agents, (d) the existence or possible existence of any Default or Event
of Default, or (e) the financial condition of the Borrower or any other Obligor.
Any such inquiry which may be made by an Agent or the Issuer shall not obligate
it to make any further inquiry or to take any action. The Agents and the Issuer
shall be entitled to rely upon advice of counsel concerning legal matters and
upon any notice, consent, certificate, statement or writing which the Agents or
the Issuer, as applicable, believe to be genuine and to have been presented by a
proper Person.
SECTION 9.4. Successor. Each of the Syndication Agent and the Documentation
Agent may resign as such upon one Business Day's notice to the Borrower and the
Administrative Agent. The Administrative Agent may resign as such at any time
upon at least 30 days' prior notice to the Borrower and all Lenders. The
Administrative Agent may be removed at any time with or without cause by written
notice received by such Agent from the Required Lenders, such removal to be
effective on the date specified in such notice. If the Administrative Agent at
any time shall resign or be removed, the Required Lenders may, with the prior
consent of the Borrower (which consent shall not be unreasonably withheld or
delayed), appoint another Lender as a successor Agent which shall thereupon
become the Administrative Agent hereunder. If no successor Agent shall have been
so appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving notice of resignation or
receiving notice of removal, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be one of the Lenders or a
commercial banking institution organized under the laws of the U.S. (or any
State thereof) or a U.S. branch or agency of a commercial banking institution,
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and having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Agent shall be entitled to receive from the
retiring Agent such documents of transfer and assignment as such successor Agent
may reasonably request, and shall thereupon succeed to and become vested with
all rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Administrative Agent's resignation or removal
hereunder as such, the provisions of (a) this Article IX shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was such
Agent under this Agreement, and (b) Section 10.3 and Section 10.4 shall continue
to inure to its benefit. Notwithstanding anything else to the contrary in this
Section 9.4, the Administrative Agent may at any time, without the consent of
the Borrower or any Lender, appoint an Affiliate which is a commercial banking
institution as a successor Administrative Agent.
SECTION 9.5. Credit Extensions by Each Agent and Issuer. Each Agent and the
Issuer shall have the same rights and powers with respect to (a) in the case of
the Agents, the Credit Extensions made by it or any of its Affiliates and (b) in
the case of the Issuer, the Loans made by it or any of its Affiliates, as any
other Lender and may exercise the same as if it were not an Agent or the Issuer.
Each Agent, the Issuer and each of their respective Affiliates may accept
deposits from, lend money to, and generally engage in any kind of business with
the Borrower or any Subsidiary or Affiliate of the Borrower as if such Agent or
Issuer were not an Agent or Issuer hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Agents, the Co-Lead Arrangers, the Issuer and each other
Lender, and based on such Lender's review of the financial information of the
Borrower, this Agreement, the other Loan Documents (the terms and provisions of
which being satisfactory to such Lender) and such other documents, information
and investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitments. Each Lender also acknowledges that it will,
independently of the Agents, the Co-Lead Arrangers, the Issuer and each other
Lender, and based on such other documents, information and investigations as it
shall deem appropriate at any time, continue to make its own credit decisions as
to exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt notice
to each Lender of each notice or request required or permitted to be given to
the Administrative Agent by the Borrower pursuant to the terms of this Agreement
(unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute to each Lender each document or instrument
received for its account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Lenders by the
Administrative Agent in accordance with the terms of this Agreement. The Agent
shall have no duty to disclose to the Lenders information that is not required
to be furnished by the Borrower to the Agents, but that may be voluntarily
furnished by the Borrower to the Agents either in their capacity as Agent or in
their individual capacity).
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SECTION 9.8. The Syndication Agent and the Documentation Agent.
Notwithstanding anything else to the contrary contained in this Agreement or any
other Loan Document, the Syndication Agent and the Documentation Agent, each in
such capacity, shall have no duties or responsibilities under this Agreement or
any other Loan Document nor any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against the
Syndication Agent or the Documentation Agent, as applicable, in such capacity
except as are explicitly set forth herein or in the other Loan Documents.
SECTION 9.9. Notices of Default. Notwithstanding anything else to the
contrary contained in this Agreement or any other Loan Document, the
Administrative Agent shall not be deemed to have knowledge of the occurrence of
a Default (other than the non-payment of principal or of interest on any Loan or
any Reimbursement Obligation) unless the Administrative Agent has received
notice from a Lender or the Borrower specifying such Default and stating that
such notice is a "Notice of Default". In the event that the Administrative Agent
receives any Notice of Default, the Administrative Agent shall give prompt
notice thereof to the Lenders (and shall give each Lender prompt notice of each
such non-payment). The Administrative Agent shall take such action with respect
to a Default specified in any Notice of Default as shall be directed by the
Required Lenders; provided, that unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interests of the Lenders.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
in writing by the Borrower and each Obligor party thereto and the Required
Lenders; provided, however, that no such amendment, modification or waiver which
would:
(a) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders shall be effective
unless consented to in writing by each Lender;
(b) modify this Section 10.1 or clause (a) of Section 10.10, change
the definition of "Required Lenders", increase any Commitment Amount or the
Percentage of any Lender, reduce any fees described in Article III, release
any Restricted Subsidiary from its obligations under the Subsidiary
Guaranty, release Parent from its obligations under the Parent Guaranty and
Pledge Agreement, or release all or substantially all of the collateral
security (except in each case as otherwise specifically provided in this
Agreement, the Subsidiary Guaranty or either Pledge and Security Agreement)
or extend the Revolving Loan Commitment Termination Date unless consented
to in writing by each Lender;
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(c) extend the due date for, or reduce the amount of, any scheduled
repayment or prepayment of principal of or interest on any Loan or any
Reimbursement Obligation (or reduce the principal amount of or rate of
interest on any Loan or any Reimbursement Obligation) unless consented to
in writing by each Lender or, in the case of a Reimbursement Obligation,
the Issuer owed, and those Lenders participating in, such Reimbursement
Obligation;
(d) increase the Stated Amount of any Letter of Credit unless
consented to by the Issuer of such Letter of Credit;
(e) affect adversely the interests, rights or obligations of any
Agent, the Issuer or the Co-Lead Arrangers (in its capacity as Agent,
Issuer or as Co-Lead Arranger), unless consented to in writing by such
Agent, the Issuer or the Co-Lead Arrangers, as the case may be; or
(f) change the definition of "Borrowing Base Amount", "Eligible
Account", "Eligible Rebate Receivable", "Eligible Inventory", "Eligible
Prepaid Inventory" or "Net Asset Value", in each case if the effect of such
change would be to require a Lender to make or participate in a Credit
Extension in an amount that is greater than such Lender would have had to
make or participate in immediately prior to such amendment, modification or
waiver unless consented to in writing by each Lender.
No failure or delay on the part of any Agent, the Issuer or any Lender in
exercising any power or right under this Agreement or any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the Borrower or
any other Obligor in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by any Agent, the Issuer
or any Lender under this Agreement or any other Loan Document shall, except as
may be otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
For purposes of this Section 10.1, the Syndication Agent, in coordination
with the Administrative Agent, shall have primary responsibility, together with
the Borrower, in the negotiation, preparation, and documentation relating to any
amendment, modification or waiver of this Agreement, any other Loan Document or
any other agreement or document related hereto or thereto contemplated pursuant
to this Section.
SECTION 10.2. Notices. All notices, requests and other communications
provided to any party hereto under this Agreement or any other Loan Document
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shall be in writing or by facsimile and addressed, delivered or transmitted to
such party at its address or facsimile number set forth on Schedule II hereto
or, in the case of a Lender which becomes a party hereto after the date hereof,
as set forth in the Lender Assignment Agreement pursuant to which such Lender
becomes a Lender hereunder or at such other address or facsimile number as may
be designated by such party in a notice to the other parties. Any notice, (a) if
mailed and properly addressed with postage prepaid or (b) if properly addressed
and sent by pre-paid courier service, shall be deemed given when received, or
(c) if transmitted by facsimile, shall be deemed given when transmitted (and
telephonic confirmation of receipt thereof has been received).
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to pay on
demand all reasonable expenses of each Agent (including the reasonable fees and
out-of-pocket expenses of counsel to the Agents and of local or foreign counsel,
if any, who may be retained by counsel to the Agents) in connection with
(a) the syndication by the Syndication Agent, the Documentation Agent
and the Co-Lead Arrangers of the Loans, the negotiation, preparation,
execution and delivery of this Agreement and of each other Loan Document,
including schedules and exhibits, and any amendments, waivers, consents,
supplements or other modifications to this Agreement or any other Loan
Document as may from time to time hereafter be required, whether or not the
transactions contemplated hereby are consummated;
(b) the filing or refiling of the Pledge and Security Agreements
and/or any UCC financing statements relating thereto and all amendments,
supplements and modifications to any thereof and any and all other
documents or instruments of further assurance required to be filed or
refiled by the terms hereof or of any Pledge Agreement or any Security
Agreement; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Agents and the Lenders
harmless from all liability for, any stamp or other similar taxes which may be
payable in connection with the execution or delivery of this Agreement, the
Borrowings hereunder, the issuance of the Notes, the issuance of the Letters of
Credit, or any other Loan Documents. The Borrower also agrees to reimburse each
Agent and each Lender upon demand for all reasonable out-of-pocket expenses
(including reasonable attorneys' fees and legal expenses) incurred by such Agent
or such Lender in connection with (i) the negotiation of any restructuring or
"work-out", whether or not consummated, of any Obligations and (ii) the
enforcement of any Obligations, which shall include any action or participation
in any bankruptcy proceeding.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitment,
the Borrower indemnifies, exonerates and holds each Agent, the Co-Lead
Arrangers, the Issuer and each Lender and each of their respective partners,
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trustees, officers, directors, employees and agents (collectively, the
"Indemnified Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively, the
"Indemnified Liabilities"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Credit Extension;
(b) the entering into and performance of this Agreement and any other
Loan Document by any of the Indemnified Parties (including any action
brought by or on behalf of the Borrower as the result of any determination
by the Administrative Agent and the Required Lenders pursuant to Article V
not to make any Credit Extension hereunder but excluding any such action in
which a court of competent jurisdiction in a final non-appealable judgment
determined that such Lenders breached their obligations hereunder in
respect of such Credit Extension);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any Person,
whether or not such Agent, the Co-Lead Arrangers, the Issuer or such Lender
is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the Release by the Borrower or any of its
Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of any
Hazardous Material (including any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law),
regardless of whether caused by, or within the control of, the Borrower or
such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct. Each Obligor and its permitted successors and
assigns hereby waive, release and agree not to make any claim, or bring any cost
recovery action against, any Agent, the Co-Lead Arrangers, the Issuer or any
Lender under CERCLA or any state equivalent, or any similar law now existing or
hereafter enacted, except to the extent arising out of the gross negligence or
wilful misconduct of any Indemnified Party. It is expressly understood and
agreed that to the extent that any of such Persons is strictly liable under any
Environmental Laws, such Obligor's obligation to such Person under this
indemnity shall likewise be without regard to fault on the part of such Obligor,
to the extent permitted under applicable law, with respect to the violation or
condition which results in liability of such Person. If and to the extent that
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the foregoing undertaking may be unenforceable for any reason, such Obligor
hereby agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law.
SECTION 10.5. Survival. The obligations of the Borrower under Sections 4.3,
4.4, 4.5, 4.6, 10.3 and 10.4 shall in each case survive any termination of this
Agreement, the payment in full of all Obligations, the termination of all
Commitments and any assignment from one Lender to another (in the case of
Sections 10.3 and 10.4). The representations and warranties made by the Borrower
and each other Obligor in this Agreement and in each other Loan Document shall
survive the execution and delivery of this Agreement and each such other Loan
Document.
SECTION 10.6. Severability. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and of each
other Loan Document are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such other Loan Document or any
provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This Agreement
may be executed by the parties hereto in several counterparts, each of which
shall be deemed to be an original (whether such counterpart is originally
executed or an electronic copy of an original) and all of which shall constitute
together but one and the same agreement. This Agreement shall become effective
when counterparts hereof executed on behalf of the Borrower and each Lender (or
notice thereof satisfactory to the Agents) shall have been received by the
Syndication Agent and notice thereof shall have been given by the Administrative
Agent or the Syndication Agent to the Borrower and each Lender.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT AND EACH
OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCLUDING THE LAW OF
CONFLICTS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. This
Agreement and the other Loan Documents constitute the entire understanding among
the parties hereto with respect to the subject matter hereof and supersede any
prior agreements, written or oral, with respect thereto.
SECTION 10.10. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
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(a) the Borrower may not assign or transfer its rights or obligations
hereunder without the prior written consent of the Administrative Agent and
all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 10.11.
SECTION 10.11. Sale and Transfer of Loans; Participations in Loans and
Notes. Each Lender may assign, or sell participations in, its Loans and
Commitments to one or more other Persons in accordance with this Section 10.11.
SECTION 10.11.1. Assignments. Any Lender (an "Assignor Lender"),
(a) with the written consents (whether by originally executed
counterpart or electronic copy thereof) of the Borrower and the Syndication
Agent, and notice to the Administrative Agent ((i) which consents shall not
be unreasonably delayed or withheld and (ii) which consents shall not be
required (but notice to the Borrower, the Administrative Agent and the
Syndication Agent shall be required) in the case of assignments made (A) to
the Agents or any of their Affiliates, (B) by the Agents or any of their
Affiliates to any commercial bank, any fund which is regularly engaged in
making, purchasing or investing in loans or securities or any other
financial institution the long-term certificate of deposit rating or
long-term senior unsecured debt rating of which as determined by S&P or
Moody's is at least BBB or Baa2 and (C) at any time when an Event of
Default shall have occurred and be continuing), may at any time assign and
delegate to one or more commercial banks, funds which are regularly engaged
in making, purchasing or investing in loans or securities or other
financial institutions, and
(b) with notice to the Borrower and the Agents, but without the
consent of the Borrower, the Agents or the Issuer, may assign and delegate
to any of its Affiliates or to any other Lender or to a Related Fund of any
Lender
(each such Person described in either of the foregoing clauses as being the
Person to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignee Lender"), all or any fraction of such Lender's total
Loans, participations in Letters of Credit and Letter of Credit Outstandings
with respect thereto and Commitments (which assignment and delegation shall be,
as among Revolving Loan Commitments, Revolving Loans and participations in
Letters of Credit, of a constant, and not a varying, percentage) in a minimum
aggregate amount equal to the lesser of (i) $5,000,000 (if such assignment and
delegation is to a Person not then a Lender, an Affiliate of any Lender or a
Related Fund) or (ii) the then remaining amount of such Lender's Loans and
Commitments; provided, however, that any such Assignee Lender will comply, if
applicable, with the provisions contained in Section 4.6 and the Borrower, each
other Obligor and the Agents shall be entitled to continue to deal solely and
directly with such Lender in connection with the interests so assigned and
delegated to an Assignee Lender until (A) written notice of such assignment and
delegation, together with payment instructions, addresses and related
information with respect to such Assignee Lender, shall have been given to the
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Borrower and the Agents by such Lender and such Assignee Lender, (B) such
Assignee Lender shall have executed and delivered to the Borrower and the Agents
a Lender Assignment Agreement, accepted by the Agents, and (C) the processing
fees described below shall have been paid.
From and after the date that the Agents accept such Lender Assignment Agreement,
(i) the Assignee Lender thereunder shall be deemed automatically to have become
a party hereto and to the extent that rights and obligations hereunder have been
assigned and delegated to such Assignee Lender in connection with such Lender
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (ii) the Assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Agreement, shall be
released from its obligations hereunder and under the other Loan Documents.
Within ten Business Days after its receipt of notice that the Administrative
Agent has received an executed Lender Assignment Agreement, the Borrower shall
execute and deliver to the Administrative Agent (for delivery to the relevant
Assignee Lender), and to the extent requested, new Notes evidencing such
Assignee Lender's assigned Loans and Commitments and, if the Assignor Lender has
retained Loans and Commitments hereunder, replacement Notes in the principal
amount of the Loans and Commitments retained by the Assignor Lender hereunder
(such Notes to be in exchange for, but not in payment of, those Notes then held
by such Assignor Lender). Each such Note shall be dated the date of the
predecessor Notes. The Assignor Lender shall mark the predecessor Notes
"exchanged" and deliver them to the Borrower. Accrued interest on that part of
the predecessor Notes evidenced by the new Notes, and accrued fees, shall be
paid as provided in the Lender Assignment Agreement. Accrued interest on that
part of the predecessor Notes evidenced by the replacement Notes shall be paid
to the Assignor Lender. Accrued interest and accrued fees shall be paid at the
same time or times provided in the predecessor Notes and in this Agreement. Such
Assignor Lender or such Assignee Lender must also pay a processing fee to the
Administrative Agent upon delivery of any Lender Assignment Agreement in the
amount of $3,500; provided, that no such processing fee shall be required in
connection with any such assignment and delegation (i) by a Lender to its
Affiliate or to a Related Fund, (ii) by a Lender to a Federal Reserve Bank (or,
if such Lender is an investment fund, to the trustee under the indenture to
which such fund is a party in support of its obligations to such trustee), (iii)
by DLJ and such assignment and delegation is in connection with the primary
syndication of the Loans or (iv) if the non-payment of the processing fee is
otherwise consented to by the Administrative Agent. Any attempted assignment and
delegation not made in accordance with this Section 10.11.1 shall be null and
void. Nothing contained in this Section 10.11.1 shall prevent or prohibit any
Lender from pledging its rights (but not its obligations to make Loans or
participate in Letters of Credit of Letter of Credit Outstandings) under this
Agreement and/or its Loans and/or its Notes hereunder (i) to a Federal Reserve
Bank in support of borrowings made by such Lender from such Federal Reserve Bank
or (ii) in the case of a Lender that is an investment fund, to the trustee under
the indenture to which such fund is a party in support of its obligations to
such trustee; provided, that any such assignment to a trustee shall be subject
to the provisions of clause (a) of this Section 10.11.1. In the event that S&P,
Moody's or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case
of Lenders that are insurance companies (or Best's Insurance Reports, if such
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insurance company is not rated by Insurance Watch Ratings Service)) shall, after
the date that any Lender with a Commitment to make Revolving Loans or
participate in Letters of Credit becomes a Lender, downgrade the long-term
certificate of deposit rating or long-term senior unsecured debt rating of such
Lender, and the resulting rating shall be below BBB-, Baa3 or C (or BB, in the
case of Lender that is an insurance company (or B, in the case of an insurance
company not rated by InsuranceWatch Ratings Service)), respectively, then the
Borrower (with the consent of the Administrative Agent and the Issuer) shall
have the right, but not the obligation, upon notice to such Lender and the
Agents, to replace such Lender with an Assignee Lender in accordance with and
subject to the restrictions contained in this Section, and such Lender hereby
agrees to transfer and assign without recourse (in accordance with and subject
to the restrictions contained in this Section) all its interests, rights and
obligations in respect of its Revolving Loan Commitment under this Agreement to
such Assignee Lender; provided, however, that (i) no such assignment shall
conflict with any law, rule and regulation or order of any Governmental
Authority and (ii) such Assignee Lender shall pay to such Lender in immediately
available funds on the date of such assignment the principal of and interest and
fees (if any) accrued to the date of payment on the Loans made, and Letters of
Credit participated in, by such Lender hereunder and all other amounts accrued
for such Lender's account or owed to it hereunder.
SECTION 10.11.2. Participations. Any Lender may at any time sell to one or
more commercial banks or other Persons (each such commercial bank and other
Person being herein called a "Participant") participating interests in any of
the Loans, Commitments, participations in Letters of Credit and Letter of Credit
Outstandings or other interests of such Lender hereunder; provided, however,
that
(a) no participation contemplated in this Section shall relieve such
Lender from its Commitments or its other obligations hereunder or under any
other Loan Document;
(b) such Lender shall remain solely responsible for the performance of
its Commitments and such other obligations;
(c) the Borrower and each other Obligor and the Agents shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and each of the other
Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of such
Lender, or is itself a Lender, shall be entitled to require such Lender to
take or refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any Participant that such
Lender will not, without such Participant's consent, agree to any reduction
in the interest rate or amount of fees that such Participant is otherwise
entitled to, a decrease in the principal amount, or an extension of the
final Stated Maturity Date, of any Loan in which such Participant has
purchased a participating interest or a release of all or substantially all
of the collateral security under the Loan Documents or any Restricted
107
<PAGE>
Subsidiary under the Subsidiary Guaranty, in each case except as otherwise
specifically provided in a Loan Document; and
(e) the Borrower shall not be required to pay any amount under
Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4 that is greater than the amount
which it would have been required to pay had no participating interest been
sold.
The Borrower acknowledges and agrees, subject to clause (e) above, that, to the
fullest extent permitted under applicable law, each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4, shall be considered a
Lender.
SECTION 10.12. Confidentiality. The Lenders shall hold all non-public
information obtained pursuant to the requirements of this Agreement in
accordance with their customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices and in
any event may make disclosure to any of their examiners, Affiliates, outside
auditors, counsel and other professional advisors in connection with this
Agreement or as reasonably required by any bona fide transferee, participant or
assignee or as required or requested by any governmental agency or
representative thereof or pursuant to legal process; provided, however, that
(a) unless specifically prohibited by applicable law or court order,
each Lender shall notify the Borrower of any request by any governmental
agency or representative thereof (other than any such request in connection
with an examination of the financial condition of such Lender by such
governmental agency) for disclosure of any such non-public information
prior to disclosure of such information;
(b) prior to any such disclosure pursuant to this Section 10.12, each
Lender shall require any such bona fide transferee, participant and
assignee receiving a disclosure of non-public information to agree in
writing
(i) to be bound by this Section 10.12; and
(ii) to require such Person to require any other Person to whom
such Person discloses such non-public information to be similarly
bound by this Section 10.12; and
(c) except as may be required by an order of a court of competent
jurisdiction and to the extent set forth therein, no Lender shall be
obligated or required to return any materials furnished by the Borrower or
any Subsidiary.
SECTION 10.13. Other Transactions. Nothing contained herein shall preclude
the Agents or any other Lender from engaging in any transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with the
Borrower or any of its Affiliates in which the Borrower or such Affiliate is not
restricted hereby from engaging with any other Person.
108
<PAGE>
SECTION 10.14. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY SECURED PARTY OR THE BORROWER IN
CONNECTION HEREWITH OR THEREWITH SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN
THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SET
FORTH ON SCHEDULE II HERETO. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 10.15. Waiver of Jury Trial. EACH SECURED PARTY AND THE BORROWER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY SUCH SECURED PARTY OR THE BORROWER IN CONNECTION HEREWITH OR
THEREWITH. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
109
<PAGE>
MATERIAL INDUCEMENT FOR EACH SECURED PARTY ENTERING INTO THIS AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENT.
110
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ROYSTER-CLARK, INC.
By /s/ G. Kenneth Moshenek
-----------------------------------------
Name: G. Kenneth Moshenek
Title: President
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent and as Lender
By /s/ Harold Philipps
-----------------------------------------
Name: Harold Philipps
Title: Managing Director
J.P. MORGAN SECURITIES, INC.,
as Documentation Agent
By /s/ Timothy S. Broadbent
-----------------------------------------
Name: Timothy S. Broadbent
Title: Vice President
U.S. BANCORP AG CREDIT, INC.,
as the Administrative Agent and as Lender
By /s/ Alan V. Schuler
-----------------------------------------
Name: Alan V. Schuler
Title: Vice President
<PAGE>
LENDERS:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By /s/ Charles C. O'Brien
--------------------------------------
Name: Charles C. O'Brien
Title: Managing Director
LASALLE BUSINESS CREDIT, INC.
By /s/ Lawrence P. Garni
--------------------------------------
Name: Lawrence P. Garni
Title: First Vice President
COOPERATIVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A. "RABOBANK
NEDERLAND", NEW YORK BRANCH
By /s/ Michiel Van Der Voort
--------------------------------------
Name: Michiel Van Der Voort
Title: Vice President
By /s/ Ian Reece
--------------------------------------
Name: Ian Reece
Title: Senior Credit Officer
WELLS FARGO BANK
By /s/ Larry Chicoina
--------------------------------------
Name: Larry Chicoina
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By /s/ Christopher Fisher
--------------------------------------
Name: Christopher Fisher
Title: Vice President
<PAGE>
THE PROVIDENT BANK
By /s/ Barry A. Peterson
--------------------------------------
Name: Barry A. Peterson
Title: Vice President
NATIONSBANK, N.A.
By /s/ D. Stephen Hinds
--------------------------------------
Name: D. Stephen Hinds
Title: Vice President
MERCANTILE BANK NATIONAL ASSOCIATION
By /s/ Curtis A. Schrieber
--------------------------------------
Name: Curtis A. Schrieber
Title: Vice President
<PAGE>
SCHEDULE I
to Credit Agreement
DISCLOSURE SCHEDULE TO CREDIT AGREEMENT
ITEM 2.1.2 Existing Letters of Credit
ITEM 6.7 Litigation.
ITEM 6.8 Existing Subsidiaries
ITEM 6.11 Employee Benefit Plans.
ITEM 6.12 Environmental Matters.
ITEM 7.2.2(b) Indebtedness to be Paid.
CREDITOR OUTSTANDING PRINCIPAL AMOUNT
ITEM 7.2.2(c) Ongoing Indebtedness.
CREDITOR OUTSTANDING PRINCIPAL AMOUNT
ITEM 7.2.2(c) Ongoing Liens.
ITEM 7.2.5(a) Ongoing Investments.
<PAGE>
SCHEDULE II
to Credit Agreement
ADMINISTRATIVE INFORMATION
--------------------------
Agents:
Notice Information
------------------
Royster-Clark, Inc. 10 Rockefeller Plaza
11th Floor
New York, NY 10020
Telecopier: 212-332-2994
Attention: Francis P. Jenkins, Jr.
DLJ Capital Funding, Inc.
as Syndication Agent 277 Park Avenue
New York, NY 10172
Telecopier: 212-892-7542
Attention: Dana Klein
Morgan Guaranty Trust
Company of New York 61 Wall Street
as Documentation Agent New York, NY 10260
Telecopier: 212-648-5556
Attention: Monty Cook
U.S. Bancorp AG Credit, Inc.
as Administrative Agent 950 Seventeenth Street
Denver, CO 80202
Telecopier: 303-585-4732
Attention: Pam Leyba
<PAGE>
Lenders:
<TABLE>
<CAPTION>
Name of Lender Domestic Office LIBOR Office
- -------------- --------------- ------------
<S> <C> <C>
Donaldson, Lufkin & 277 Park Avenue 277 Park Avenue
Jenrette New York, NY 10172 New York, NY 10172
Telecopier: 212-892-7542 Telecopier: 212-892-7542
Attention: Dana Klein Attention: Dana Klein
U.S. Bancorp 950 Seventeenth Street 950 Seventeenth Street
Denver, CO 80202 Denver, CO 80202
Telecopier: 303-585-4732 Telecopier: 303-585-4732
Attention: Alan V. Schuler Attention: Alan V. Schuler
J.P. Morgan Securities, 61 Wall Street 61 Wall Street
Inc. New York, NY 10260 New York, NY 10260
Telecopier: 212-648-5556 Telecopier: 212-648-5556
Attention: Monty Cook Attention: Monty Cook
LaSalle Business Credit, 135 S. LaSalle Street 135 S. LaSalle Street
Inc. Chicago, IL 60606 Chicago, IL 60606
Telecopier: 312-904-1245 Telecopier: 312-904-1245
Attention: Bobbie Tucker Attention: Bobbie Tucker
Mercantile Bank National 7th and Washington 7th and Washington
Association St. Louis, MO 63101 St. Louis, MO 63101
Telecopier: 314-418-8430 Telecopier: 314-418-8430
Attention: Becky Mathews Attention: Becky Mathews
Rabobank Nederland, New 245 Park Avenue 245 Park Avenue
York Branch New York, NY 10167-0052 New York, NY 10167-0052
Telecopier: 212-916-7880 Telecopier: 212-916-7880
Attention: Edward Peyser Attention: Edward Peyser
Wells Fargo Bank 8405 N. Fresno Street, Suite 8405 N. Fresno Street, Suite
200 200
Fresno, CA 93720 Fresno, CA 93720
Telecopier: 559-261-0553 Telecopier: 559-261-0553
Attention: Angie Correa Attention: Angie Correa
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
NationsBank, N.A. 600 Peachtree Street, 13th 600 Peachtree Street, 13th
Floor Floor
Atlanta, GA 30308 Atlanta, GA 30308
Telecopier: 404-607-6431 Telecopier: 404-607-6431
Attention: Michele Boehnke Attention: Michele Boehnke
The Provident Bank One East Fourth Street, 249A One East Fourth Street, 249A
Cincinnati, Ohio 45202 Cincinnati, Ohio 45202
Telecopier: 513-579-2858 Telecopier: 513-579-2858
Attention: Janet Douglas Attention: Janet Douglas
Harris Trust and Savings 111 West Monroe Street 111 West Monroe Street
Bank 18th Fl. West 18th Fl. West
Chicago, IL 60603 Chicago, IL 60603
Telecopier: 312-293-4798 Telecopier: 312-293-4798
Attention: Henry Ollie Attention: Henry Ollie
</TABLE>
<PAGE>
LENDER PERCENTAGES
OF REVOLVING LOAN
LENDER ALLOCATION AMOUNT COMMITMENT PERCENTAGE
- ------ ----------------- ---------------------
DLJ Capital Funding, Inc. 25,000,000.00 9.0909%
J.P. Morgan Securities, Inc. 25,000,000.00 9.0909%
U.S. Bancorp AG Credit, Inc. 25,000,000.00 9.0909%
LaSalle Business Credit, Inc. 16,500,000.00 6.0000%
Mercantile Bank National Assc. 12,500,000.00 4.5455%
Rabobank Nederland NY Branch 24,000,000.00 8.7273%
Wells Fargo Bank 24,000,000.00 8.7273%
NationsBank, N.A. 24,000,000.00 8.7273%
The Provident Bank 12,500,000.00 4.5455%
Harris Trust and Savings Bank 24,000,000.00 8.7273%
<PAGE>
SCHEDULE III
LOCATION OF INVENTORY
<PAGE>
SCHEDULE IV
LIMITS ON BORROWING BASE AVAILABILITY
-------------------------------------
<TABLE>
<CAPTION>
($ amounts in
millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
--- --- --- --- --- --- --- --- ---- --- --- ---
Aggregate of $30 $30 $40 $50 $65 $65 $65 $60 $60 $60 $60 $50
Crop Term
Accounts and
Extended Term
Accounts on a
gross basis*
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
--- --- --- --- --- --- --- --- ---- --- --- ---
Rebate $3 $3 $3 $7 $10 $15 $20 $20 $20 $20 $20 $7
Receivables on
a margined
basis**
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
--- --- --- --- --- --- --- --- ---- --- --- ---
Prepaid $20 $20 $15 $10 $7 $5 $3 $3 $3 $3 $3 $5
Inventory on a
margined
basis**
</TABLE>
* Before applying the relevant advance rate.
** After applying the relevant advance rate.
ROYSTER-CLARK, INC.
ROYSTER-CLARK GROUP, INC.
$200,000,000
10 1/4% First Mortgage Notes due 2009
Purchase Agreement
April 15, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.
<PAGE>
$200,000,000
10 1/4% First Mortgage Notes due 2009
of ROYSTER-CLARK, INC.
PURCHASE AGREEMENT
April 15, 1999
Donaldson, Lufkin & Jenrette Securities Corporation
J.P. Morgan Securities Inc.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Royster-Clark, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
and J.P. Morgan Securities Inc. (each, an "Initial Purchaser" and, collectively,
the "Initial Purchasers") an aggregate of $200,000,000 in principal amount of
its 10 1/4% First Mortgage Notes due 2009 (the "First Mortgage Notes"), subject
to the terms and conditions set forth herein. The First Mortgage Notes are to be
issued pursuant to the provisions of an indenture (the "Indenture"), to be dated
as of the Closing Date (as defined below), among the Company, the Guarantors (as
defined below) and United States Trust Company of New York, as trustee (the
"Trustee"). The First Mortgage Notes and the Exchange Notes (as defined below)
issuable in exchange therefor are collectively referred to herein as the
"Notes." The Notes will be guaranteed (the "Guarantees") by each of the entities
listed on Schedule A, hereto (each, a "Guarantor" and collectively the
"Guarantors"). Upon the acquisition by the Company of IMC AgriBusiness, Inc.,
Hutson's Ag Services, Inc. and IMC Nitrogen Company (collectively,
"AgriBusiness") from IMC Global, Inc. and the formation by the Company of
Royster-Clark Realty LLC, Royster-Clark AgriBusiness Realty LLC, Royster-Clark
Hutson's Realty LLC, Royster-Clark Nitrogen Realty LLC and Royster-Clark
Resources LLC (collectively, the "Special Purpose Subsidiaries"), AgriBusiness
and the Special Purpose Subsidiaries will executive the Purchase Agreement
Supplement in substantially the form set forth in Exhibit B hereto (the
"Purchase Agreement Supplement") pursuant to Section 9(a) hereof. The
obligations of the Company under the First Mortgage Notes and Guarantees will be
secured by (i) first mortgages on 18 of the Company's and its subsidiaries'
principal properties and related fixtures and equipment and other related assets
and (ii) all of the equity interests of the Special Purpose Subsidiaries, that
collectively own substantially all of the Farmarkets and retail farm centers.
For purposes of this Agreement, Conetoe Chemical Corporation and George Smith
Ag. Services, Inc. will not be treated as subsidiaries of the Company.
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
<PAGE>
The Company intends to use the proceeds from the sale of the First Mortgage
Notes together with the proceeds from borrowings under the senior secured credit
agreement by and among the Company, the Guarantors (other than the Special
Purpose Subsidiaries), DLJ Capital Funding, Inc., as arranger and syndication
agent, and J.P. Morgan Securities Inc., as documentation agent, and U.S. Bancorp
Ag Credit, Inc., as administrative agent (the "Senior Secured Credit Facility")
and an equity investment from Royster-Clark Group, Inc., the parent of the
Company ("Royster-Clark Group") (the "Equity Investment") (i) to acquire (a)
AgriBusiness from IMC Global, Inc. pursuant to a definitive purchase agreement
dated January 21, 1999, as amended on April 13, 1999 (the "Acquisition
Agreement") and (b) Royster-Clark, Inc. from its current owners, (ii) to
refinance indebtedness, (iii) to provide for the working capital requirements of
the Company subsequent to the acquisitions and (iv) for general corporate
purposes.
1. Offering Memorandum.
The First Mortgage Notes will be offered and sold to the Initial Purchasers
pursuant to one or more exemptions from the registration requirements under the
Securities Act of 1933, as amended (the "Act"). The Company and the Guarantors
have prepared a preliminary offering memorandum, dated April 6, 1999 (the
"Preliminary Offering Memorandum") and a final offering memorandum, dated April
15, 1999 (the "Offering Memorandum"), relating to the First Mortgage Notes and
the Guarantees.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the First Mortgage Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"This First Mortgage Note (or its predecessor) has not been registered
under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, may not be offered, sold, pledged or otherwise transferred within
the United States or to, or for the account or benefit of, U.S. persons, except
as set forth in the next sentence. By its acquisition hereof or of a beneficial
interest herein, the holder:
(1) Represents that (a) it is a "Qualified Institutional Buyer" (as
defined in Rule 144A under the Securities Act) (a "QIB"), (b) it has
acquired this First Mortgage Note in an offshore transaction in compliance
with Regulation S under the Securities Act or (c) is otherwise permitted to
purchase this First Mortgage Note pursuant to clause (2) below,
(2) Agrees that it will not resell or otherwise transfer this First
Mortgage Note except (a) to the Company or any of its subsidiaries, (b) to
a person whom the seller reasonably believes is a QIB purchasing for its
own account or for the account of a QIB in a transaction meeting the
requirements of Rule 144A, (c) in an offshore transaction meeting the
requirements of Rule 904 of the Securities Act, (d) in a transaction
meeting the requirements of Rule 144 under the Securities Act, (e) in
accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel acceptable to the
Company) or (f) pursuant to an effective registration
2
<PAGE>
statement and, in each case, in accordance with the applicable securities
laws of any state of the United States or any other applicable jurisdiction
and
(3) Agrees that it will deliver to each person to whom this First
Mortgage Note or an interest herein is transferred a notice substantially
to the effect of this legend.
As used herein, the terms "offshore transaction" and "United States"
have the meanings given to them by Rule 902 of Regulation S under the
Securities Act. The Indenture contains a provision requiring the trustee to
refuse to register any transfer of this First Mortgage Note in violation of
the foregoing."
2. Agreements to Sell and Purchase.
On the basis of the representations, warranties and covenants contained in
this Agreement, and subject to the terms and conditions contained herein, the
Company agrees to issue and sell to the Initial Purchasers, and each Initial
Purchaser agrees, severally and not jointly, to purchase from the Company, the
principal amounts of First Mortgage Notes set forth opposite the name of such
Initial Purchaser on Schedule B hereto at a purchase price equal to 97.25% of
the principal amount thereof (the "Purchase Price").
3. Terms of Offering.
The Initial Purchasers have advised the Company that the Initial Purchasers
will make offers (the "Exempt Resales") of the First Mortgage Notes purchased
hereunder on the terms set forth in the Offering Memorandum, as amended or
supplemented, solely to (i) persons whom the Initial Purchasers reasonably
believe to be "qualified institutional buyers" as defined in Rule 144A under the
Act ("QIBs") and (ii) persons permitted to purchase the First Mortgage Notes in
offshore transactions in reliance upon Regulation S under the Act (each, a
"Regulation S Purchaser") (such persons specified in clauses (i) and (ii) being
referred to herein as the "Eligible Purchasers"). The Initial Purchasers will
offer the First Mortgage Notes to Eligible Purchasers initially at a price equal
to 100% of the principal amount thereof. Such price may be changed at any time
without notice.
Holders (including subsequent transferees) of the First Mortgage Notes will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such First Mortgage Notes
constitute "Transfer Restricted Securities" (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, the Company
and the Guarantors will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i) a
registration statement under the Act (the "Exchange Offer Registration
Statement") relating to the Company's 10 1/4% First Mortgage Notes due 2009 (the
"Exchange Notes"), to be offered in exchange for the First Mortgage Notes (such
offer to exchange being referred to as the "Exchange Offer") and the Guarantees
thereof and (ii) a shelf registration statement pursuant to Rule 415 under the
Act (the "Shelf Registration Statement" and, together with the Exchange Offer
Registration Statement, the "Registration Statements") relating to the resale by
certain holders of the First Mortgage Notes and to use its best efforts to cause
such Registration Statements to be declared and remain
3
<PAGE>
effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. This Agreement, the Purchase
Agreement Supplement, the Indenture, the Notes, the Guarantees, the Security
Agreements listed on Schedule C, the Registration Rights Agreement, the
Acquisition Agreement and the Senior Secured Credit Facility are hereinafter
sometimes referred to collectively as the "Operative Documents."
4. Delivery and Payment.
Delivery of, and payment of the Purchase Price for, the First Mortgage
Notes shall be made at the offices of Latham & Watkins, New York, New York 10022
or such other location as may be mutually acceptable. Such delivery and payment
shall be made at 9:00 a.m. New York City time, on April 22, 1999 or at such
other time on the same date or such other date as shall be agreed upon by the
Initial Purchasers and the Company in writing. The time and date of such
delivery and the payment for the First Mortgage Notes are herein called the
"Closing Date."
One or more of the First Mortgage Notes in definitive global form,
registered in the name of Cede & Co., as nominee of The Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the First Mortgage Notes (collectively, the "Global Note"),
shall be delivered by the Company to the Initial Purchasers (or as the Initial
Purchasers directs) in each case with any transfer taxes thereon duly paid by
the Company against payment by the Initial Purchasers of the Purchase Price
thereof by wire transfer in same day funds to the order of the Company. The
Global Note shall be made available to the Initial Purchasers for inspection not
later than 9:30 a.m., New York City time, on the business day immediately
preceding the Closing Date.
5. Agreements of the Company and the Guarantors.
Each of the Company and the Guarantors hereby agrees with the Initial
Purchasers as follows:
(a) Each of AgriBusiness and the Special Purpose Subsidiaries shall have
signed the Purchase Agreement Supplement, which shall substantially be in the
form of Exhibit B hereto.
(b) To advise the Initial Purchasers promptly and, if requested by the
Initial Purchasers, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the
qualification or exemption from qualification of any First Mortgage Notes for
offering or sale in any jurisdiction designated by the Initial Purchasers
pursuant to Section 5(f) hereof, or the initiation of any proceeding by any
state securities commission or any other federal or state regulatory
authority for such purpose and (ii) of the happening of any event during the
period referred to in Section 5(d) below that makes any statement of a
material fact made in the Preliminary Offering Memorandum or the Offering
Memorandum untrue or that requires any additions to or changes in the
Preliminary Offering Memorandum or the Offering Memorandum in order to make
the statements therein not misleading. The Company and the Guarantors shall
use their best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any First Mortgage Notes under
any state securities or Blue Sky laws and, if at any time any state
securities commission or
4
<PAGE>
other federal or state regulatory authority shall issue an order suspending
the qualification or exemption of any First Mortgage Notes under any
state securities or Blue Sky laws, the Company and the Guarantors shall use
their best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(c) To furnish the Initial Purchasers and those persons identified by
the Initial Purchasers to the Company as many copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as the Initial Purchasers may reasonably request for the
time period specified in Section 5(d). Subject to the Initial Purchasers'
compliance with its representations and warranties and agreements set forth
in Section 7 hereof, the Company consents to the use of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments and
supplements thereto required pursuant hereto, by the Initial Purchasers in
connection with Exempt Resales.
(d) During such period as in the opinion of counsel for the Initial
Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers and in connection
with market-making activities of the Initial Purchasers until the
consummation of the Exchange Offer, (i) not to make any amendment or
supplement to the Offering Memorandum of which the Initial Purchasers shall
not previously have been advised or to which the Initial Purchasers shall
reasonably object after being so advised and (ii) to prepare promptly upon
the Initial Purchasers' reasonable request, any amendment or supplement to
the Offering Memorandum which may be necessary or advisable in connection
with such Exempt Resales or such market-making activities.
(e) If, during the period referred to in Section 5(d) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchasers, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein,
in the light of the circumstances when such Offering Memorandum is delivered
to an Eligible Purchaser, not misleading, or if, in the opinion of counsel to
the Initial Purchasers, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of
the circumstances when it is so delivered, be misleading, or so that such
Offering Memorandum will comply with applicable law, and to furnish to the
Initial Purchasers and such other persons as the Initial Purchasers may
designate such number of copies thereof as the Initial Purchasers may
reasonably request.
(f) Prior to the sale of all First Mortgage Notes pursuant to Exempt
Resales as contemplated hereby, to reasonably cooperate with the Initial
Purchasers and counsel to the Initial Purchasers in connection with the
registration or qualification of the First Mortgage Notes for offer and sale
to the Initial Purchasers and pursuant to Exempt Resales under the securities
or Blue Sky laws of such jurisdictions as the Initial Purchasers may request
and to continue such registration or qualification in effect so long as
required for Exempt Resales and to file such consents to service of process
or other documents as may be necessary in order to effect such registration
or qualification; provided, however, that the Company shall not be required
in connection therewith to qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or
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taxation other than as to matters and transactions relating to the
Preliminary Offering Memorandum, the Offering Memorandum or Exempt Resales,
in any jurisdiction in which it is not now so subject.
(g) So long as the Notes are outstanding, (i) to mail and make generally
available as soon as reasonably practicable and in no event later than 90
days after the end of each fiscal year to the record holders of the Notes a
financial report of the Company and its subsidiaries on a consolidated basis
(and a similar financial report of all unconsolidated subsidiaries, if any),
all such financial reports to include a consolidated balance sheet, a
consolidated statement of operations, a consolidated statement of cash flows
and a consolidated statement of shareholders' equity as of the end of and for
such fiscal year, together with comparable information as of the end of and
for the preceding year, certified by the Company's independent public
accountants and (ii) to mail and make generally available as soon as
reasonably practicable and in no event later than 45 days after the end of
each quarterly period (except for the last quarterly period of each fiscal
year) to such holders, a consolidated balance sheet, a consolidated statement
of operations and a consolidated statement of cash flows (and similar
financial reports of all unconsolidated subsidiaries, if any) as of the end
of and for such period, and for the period from the beginning of such year to
the close of such quarterly period, together with comparable information for
the corresponding periods of the preceding year.
(h) So long as the Notes are outstanding and during any period in which
the Company is not subject to Section 13 or 15(d) of the Exchange Act of
1934, as amended (the "Exchange Act"), to furnish to the Initial Purchasers
as soon as available copies of all reports or other communications furnished
by the Company or any of the Guarantors to its security holders and in any
event such other publicly available information concerning the Company and/or
its subsidiaries as the Initial Purchasers may reasonably request.
(i) So long as any of the First Mortgage Notes remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d)
of the Exchange Act, to make available to any holder of First Mortgage Notes
in connection with any sale thereof and any prospective purchaser of such
First Mortgage Notes from such holder, the information ("Rule 144A
Information") required by Rule 144A(d)(4) under the Act.
(j) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company and
the Guarantors under this Agreement, including: (i) the fees, disbursements
and expenses of counsel to the Company and the Guarantors and accountants of
the Company and the Guarantors in connection with the sale and delivery of
the First Mortgage Notes to the Initial Purchasers and pursuant to Exempt
Resales, and all other fees and expenses in connection with the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum, the
Offering Memorandum and all amendments and supplements to any of the
foregoing (including financial statements), including the mailing and
delivering of copies thereof to the Initial Purchasers and persons designated
by it in the quantities specified herein, (ii) all costs and expenses related
to the transfer and delivery of the First Mortgage Notes to the Initial
Purchasers and pursuant to Exempt Resales, including any transfer or other
taxes payable thereon, (iii) all costs of printing or producing this
Agreement, the other Operative Documents and any other agreements or
documents in connection with the offering,
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purchase, sale or delivery of the First Mortgage Notes, (iv) all costs
of reproducing the documents, agreements and filings which are listed on
Schedule C hereto (collectively, the "Security Agreements") and any other
agreements or documents in connection with the offering, purchase, sale or
delivery of the First Mortgage Notes, (v) all expenses in connection with the
registration or qualification of the First Mortgage Notes and the Guarantees
for offer and sale under the securities or Blue Sky laws of the several
states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and fees and disbursements of counsel for the Initial Purchasers in
connection with such registration or qualification and memoranda relating
thereto not to exceed $7,500), (vi) the cost of printing certificates
representing the First Mortgage Notes and the Guarantees, (vii) all expenses
and listing fees in connection with the application for quotation of the
First Mortgage Notes in the National Association of Securities Dealers, Inc.
("NASD") Automated Quotation System - PORTAL ("PORTAL"), (viii) the fees and
expenses of the Trustee and the Trustee's counsel in connection with the
Indenture, the Notes and the Guarantees, (ix) the fees and expenses of the
Collateral Agent (as defined in the Offering Memorandum) in connection with
the Security Agreements, (x) the costs and charges of any transfer agent,
registrar and/or depositary (including DTC), (xi) any fees charged by rating
agencies for the rating of the Notes, (xii) all costs and expenses of the
Exchange Offer and any Registration Statement, as set forth in the
Registration Rights Agreement, and (xiii) and all other costs and expenses
incident to the performance of the obligations of the Company and the
Guarantors hereunder for which provision is not otherwise made in this
section.
(k) To use its commercially reasonable efforts to effect the inclusion
of the First Mortgage Notes in PORTAL and to maintain the listing of the
First Mortgage Notes on PORTAL for so long as the First Mortgage Notes are
outstanding.
(l) To obtain the approval of DTC for "book-entry" transfer of the
Notes, and to comply with all of its agreements set forth in the
representation letters of the Company and the Guarantors to DTC relating to
the approval of the Notes by DTC for "book-entry" transfer.
(m) During the period beginning on the date hereof and continuing to and
including the Closing Date, not to offer, sell, contract to sell or otherwise
transfer or dispose of any debt securities of the Company or any Guarantor or
any warrants, rights or options to purchase or otherwise acquire debt
securities of the Company or any Guarantor substantially similar to the Notes
and the Guarantees (other than (i) the Notes and the Guarantees, (ii) $10.0
million of non-cash pay subordinated notes purchased by IMC Global, Inc.,
(iii) $10.0 million of non-cash pay subordinated notes purchased by 399
Ventures and (iv) commercial paper issued in the ordinary course of
business), without the prior written consent of the Initial Purchasers.
(n) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the First Mortgage Notes to the Initial
Purchasers or pursuant to Exempt Resales in a manner that would require the
registration of any such sale of the First Mortgage Notes under the Act.
(o) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes and the
related Guarantees.
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(p) To the extent permitted by applicable law, to cause the Exchange
Offer to be made in the appropriate form to permit the Exchange Notes and the
guarantees thereof by the Guarantors registered pursuant to the Act to be
offered in exchange for the First Mortgage Notes and the Guarantees and to
comply with all applicable federal and state securities laws in connection
with the Exchange Offer.
(q) To comply with all of its agreements set forth in the Registration
Rights Agreement.
(r) To use its commercially reasonable efforts to do and perform all
things required or necessary to be done and performed under this Agreement by
it prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the First Mortgage Notes and the Guarantees.
6. Representations, Warranties and Agreements of the Company and the
Guarantors.
As of the date hereof, each of the Company and the Guarantors represents
and warrants to, and agrees with, the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum do
not, and any supplement or amendment to them will not, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that
the representations and warranties contained in this paragraph (a) shall not
apply to statements in or omissions from the Preliminary Offering Memorandum
or the Offering Memorandum (or any supplement or amendment thereto) based
upon information relating to the Initial Purchasers furnished to the Company
in writing by the Initial Purchasers expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting
that any of the transactions contemplated by this Agreement are subject to
the registration requirements of the Act, has been issued.
(b) Each of Royster-Clark Group, the Company and the Company's
subsidiaries has been duly incorporated, is validly existing as a corporation
in good standing under the laws of its jurisdiction of incorporation and has
the corporate power and authority to carry on its business as described in
the Preliminary Offering Memorandum and the Offering Memorandum and to own,
lease and operate its properties, and each is duly qualified and is in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing
of property requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the business,
prospects, financial condition or results of operations of Royster-Clark
Group, the Company and the Company's subsidiaries, taken as a whole, or on
the validity of this Agreement or the other Operative Documents (a "Material
Adverse Effect").
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(c) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights.
(d) All outstanding shares of capital stock of each Guarantor have been
duly authorized and validly issued and are fully paid, non-assessable and
were not issued in violation of preemptive or similar rights.
(e) On the Closing Date, the entities listed on Schedule A hereto are
the only subsidiaries, direct or indirect, of the Company. On the Closing
Date all of the outstanding ownership interests of AgriBusiness will have
been duly authorized and validly issued and will be fully paid and
non-assessable, and will be owned by the Company, directly or indirectly
through one or more subsidiaries, free and clear of any security interest,
claim, lien, encumbrance or adverse interest of any nature (each, a "Lien").
(f) This Agreement has been duly authorized, executed and delivered by
the Company and each of the Guarantors (other than AgriBusiness and the
Special Purpose Subsidiaries prior to, but not on or after, the Closing
Date). On the Closing Date, the Purchase Agreement Supplement will be duly
authorized, executed and delivered by AgriBusiness and each of the Special
Purpose Subsidiaries.
(g) The Indenture has been duly authorized by the Company and each of
the Guarantors (other than AgriBusiness and the Special Purpose Subsidiaries
prior to, but not on or after, the Closing Date) and, on the Closing Date,
will have been validly executed and delivered by the Company and each of the
Guarantors. When the Indenture has been duly executed and delivered by the
Company and each of the Guarantors, the Indenture will be a valid and binding
agreement of the Company and each Guarantor, enforceable against the Company
and each Guarantor in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability. On the Closing Date, the Indenture will
conform in all material respects to the requirements of the Trust Indenture
Act of 1939, as amended (the "TIA" or "Trust Indenture Act"), and the rules
and regulations of the Commission applicable to an indenture which is
qualified thereunder.
(h) The First Mortgage Notes have been duly authorized and, on the
Closing Date, will have been validly executed and delivered by the Company.
When the First Mortgage Notes have been issued, executed and authenticated in
accordance with the provisions of the Indenture and delivered to and paid for
by the Initial Purchasers in accordance with the terms of this Agreement, the
First Mortgage Notes will be entitled to the benefits of the Indenture and
will be valid and binding obligations of the Company, enforceable in
accordance with their terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On
the Closing Date, the First Mortgage Notes will conform as to legal matters
in all material respects to the description thereof contained in the Offering
Memorandum.
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(i) On the Closing Date, the Exchange Notes will have been duly
authorized by the Company. When the Exchange Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Exchange Notes will be entitled to the benefits of the
Indenture and will be the valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(j) On the Closing Date, the Security Agreements will have been duly
authorized by the Company and the Guarantors, as applicable, and upon
execution and delivery by the Company and the Guarantors, as applicable
(assuming the due execution and delivery by the Collateral Agent), will be
enforceable against the Company and the Guarantors, as applicable, in
accordance with their terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On
the Closing Date, the Security Agreements will conform as to legal matters in
all material respects to the description thereof contained in the Offering
Memorandum.
(k) The Guarantee to be endorsed on the First Mortgage Notes by each
Guarantor has been duly authorized by such Guarantor (other than AgriBusiness
and the Special Purpose Subsidiaries prior to, but not on or after, the
Closing Date) and, on the Closing Date, will have been duly executed and
delivered by each such Guarantor. When the First Mortgage Notes have been
issued, executed and authenticated in accordance with the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, the Guarantee of each Guarantor endorsed thereon
will be entitled to the benefits of the Indenture and will be the valid and
binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On
the Closing Date, the Guarantees to be endorsed on the First Mortgage Notes
will conform as to legal matters in all material respects to the description
thereof contained in the Offering Memorandum.
(l) The Guarantee to be endorsed on the Exchange Notes by each Guarantor
has been duly authorized by such Guarantor (other than AgriBusiness and the
Special Purpose Subsidiaries prior to, but not on or after, the Closing Date)
and, when issued, will have been duly executed and delivered by each such
Guarantor. When the Exchange Notes have been issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Guarantee of each Guarantor endorsed thereon will be entitled
to the benefits of the Indenture and will be the valid and binding obligation
of such Guarantor, enforceable against such Guarantor in accordance with its
terms, except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. When the Exchange
Notes are issued, authenticated and delivered, the Guarantees to be endorsed
on the Exchange Notes will conform as to legal matters in all material
respects to the description thereof in the Offering Memorandum.
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(m) All indebtedness of the Company and the Guarantors that will be
repaid with the proceeds of the issuance and sale of the First Mortgage Notes
was incurred, and the indebtedness represented by the First Mortgage Notes is
being incurred, for proper purposes and in good faith and each of the Company
and the Guarantors was, at the time of the incurrence of such indebtedness
that will be repaid with the proceeds of the issuance and sale of the First
Mortgage Notes, and will be on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the First Mortgage Notes)
solvent, and had at the time of the incurrence of such indebtedness that will
be repaid with the proceeds of the issuance and sale of the First Mortgage
Notes and will have on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the First Mortgage Notes)
sufficient capital for carrying on their respective business and were, at the
time of the incurrence of such indebtedness that will be repaid with the
proceeds of the issuance and sale of the First Mortgage Notes, and will be on
the Closing Date (after giving effect to the application of the proceeds from
the issuance of the First Mortgage Notes) able to pay their respective debts
as they mature.
(n) The Registration Rights Agreement has been duly authorized by the
Company and each of the Guarantors (other than AgriBusiness and the Special
Purpose Subsidiaries prior to, but not on or after, the Closing Date) and, on
the Closing Date, will have been duly executed and delivered by the Company
and each of the Guarantors. When the Registration Rights Agreement has been
duly executed and delivered, the Registration Rights Agreement will be a
valid and binding agreement of the Company and each of the Guarantors,
enforceable against the Company and each Guarantor in accordance with its
terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. On the Closing
Date, the Registration Rights Agreement will conform as to legal matters in
all material respects to the description thereof in the Offering Memorandum.
(o) The Acquisition Agreement, as amended on April 13, 1999 (the
"Acquisition Agreement"), (i) has been duly and validly authorized by
Royster-Clark Group and, when duly, executed and delivered by Royster-Clark
Group, will be the legal, valid and binding obligation of Royster-Clark
Group, enforceable against Royster-Clark Group in accordance with its terms,
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. On the Closing
Date, the Acquisition Agreement will conform in all material respects to the
description thereof in the Offering Memorandum.
(p) The Company has notified the Initial Purchasers of any and all
amendments to the Acquisition Agreement, including the amendment described in
paragraph (o) above, and has delivered a copy of all such amendments to the
Initial Purchasers. The Acquisition Agreement has not been amended after
April 13, 1999.
(q) As of the Closing Date, the Senior Secured Credit Facility (i) will
be duly and validly authorized executed and delivered by each of the Company
and the Guarantors (to the extent that each is a party thereto), will be the
legal, valid and binding obligation of the Company and the Guarantors (to the
extent that each is a party thereto), enforceable against each
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<PAGE>
of them in accordance with its terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency, or similar laws affecting
creditors' rights generally, (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability and (iii) securities laws prohibiting or limiting the
availability of, and public policy against, indemnification or contribution.
The Offering Memorandum contains a summary of the material terms of the
Senior Secured Credit Facility, which is accurate in all material respects.
(r) The Company will apply the net proceeds from the offering and sale
of the First Mortgage Notes in a manner substantially similar to the
description set forth in the Offering Memorandum under "Use of Proceeds."
(s) No action has been taken and no law, statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency or body
which prevents the execution, delivery and performance of this Agreement, the
Indenture, the Notes, the Guarantees, the Security Agreements listed on
Schedule C hereto, the Registration Rights Agreement, the issuance of the
First Mortgage Notes or the Guarantees, or suspends the sale of the First
Mortgage Notes or the Guarantees in any jurisdiction referred to in Section
5(f); and no injunction, restraining order or other order or relief of any
nature by a federal or state court or other tribunal of competent
jurisdiction has been issued with respect to the Company or any of its
subsidiaries which would prevent or suspend the issuance or sale of the First
Mortgage Notes or the Guarantees in any jurisdiction referred to in Section
5(f).
(t) Except that would not have a Material Adverse Effect, no action has
been taken and no law, statute, rule or regulation or order has been enacted,
adopted or issued by any governmental agency or body which prevents the
execution, delivery and performance of the Acquisition Agreement and the
Senior Secured Credit Facility, the issuance of the First Mortgage Notes or
the Guarantees, or suspends the sale of the First Mortgage Notes or the
Guarantees in any jurisdiction referred to in Section 5(f); and no
injunction, restraining order or other order or relief of any nature by a
federal or state court or other tribunal of competent jurisdiction has been
issued with respect to the Company or any of its subsidiaries which would
prevent or suspend the issuance or sale of the First Mortgage Notes or the
Guarantees in any jurisdiction referred to in Section 5(f).
(u) Neither Royster-Clark Group, the Company or any of the Company's
subsidiaries is in violation of its respective charter or by-laws or in
default in the performance of any obligation, agreement, covenant or
condition contained in any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to Royster-Clark Group, the
Company and the Company's subsidiaries, taken as a whole, to which
Royster-Clark Group, the Company or any of the Company's subsidiaries is a
party or by which Royster-Clark Group, the Company or any of the Company's
subsidiaries or their respective property is bound, except for any such
default which would not have a Material Adverse Effect.
(v) The execution, delivery and performance of this Agreement and the
other Operative Documents by the Company and each of the Guarantors (other
than AgriBusiness and the Special Purpose Subsidiaries prior to, but not on
or after, the Closing Date), compliance by the Company and each of the
Guarantors (other than AgriBusiness and the Special Purpose
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<PAGE>
Subsidiaries prior to, but not on or after, the Closing Date) with all
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency that has not been obtained (except such as may be
required under the securities or Blue Sky laws of the various states), (ii)
conflict with or constitute a breach of any of the terms or provisions of, or
a default under, the charter or by-laws of Royster-Clark Group, the Company
or any of the Company's subsidiaries or any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to
Royster-Clark Group, the Company and the Company's subsidiaries, taken as a
whole, to which Royster-Clark Group, the Company or any of the Company's
subsidiaries is a party or by which Royster-Clark Group, the Company or any
of the Company's subsidiaries or their respective property is bound, (iii)
violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency
having jurisdiction over Royster-Clark Group, the Company, any of the
Company's subsidiaries or their respective property, (iv) result in the
imposition or creation of (or the obligation to create or impose) a Lien
under, any agreement or instrument to which Royster-Clark Group, the Company
or any of the Company's subsidiaries is a party or by which Royster-Clark
Group, the Company or any of the Company's subsidiaries or their respective
property is bound, or (v) result in the termination, suspension or revocation
of any Authorization (as defined below) of Royster-Clark Group, the Company
or any of the Company's subsidiaries or result in any other impairment of the
rights of the holder of any such Authorization except for, in the case of
clauses (i) and (v), which would not have a Material Adverse Effect;
(w) There are no legal or governmental proceedings pending or to the
Company's knowledge threatened to which Royster-Clark Group, the Company or
any of the Company's subsidiaries is or to the Company's knowledge could be a
party or to which any of their respective property is or to the Company's
knowledge could be subject, which might result, singly or in the aggregate,
in a Material Adverse Effect.
(x) Except as disclosed in the Offering Memorandum, the Company and each
of the Company's subsidiaries is in material compliance with all applicable
existing federal, state, local and foreign laws and regulations relating to
protection of the environment or human health as affected by environmental
matters or imposing liability or standards of conduct concerning the
management or disposal of any Hazardous Material (as hereinafter defined)
("Environmental Laws"), and to the Company's and the Guarantors' knowledge,
after due inquiry, there are no circumstances that may prevent or interfere
with such compliance in the future except, in each case of any of the above,
where such noncompliance, singly or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. The term "Hazardous Material"
means (i) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
(ii) any "hazardous waste" as defined by the Resource Conservation and
Recovery Act, as amended, (iii) any petroleum or petroleum product, (iv) any
polychlorinated biphenyl and (v) any pollutant or contaminant or hazardous,
or toxic chemical, material, waste or substance regulated under or within the
meaning of any other applicable Environmental Law.
(y) Except as disclosed in the Offering Memorandum, none of the Company
or any of the Company's subsidiaries has received any written notice from any
person or entity alleging potential liability (including, without limitation,
potential liability for
13
<PAGE>
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) of the
Company or any of the Company's subsidiaries arising out of, based on or
resulting from (i) the presence or release into the environment of any
Hazardous Material at any location, whether or not owned by the Company or
any of the Company's subsidiaries or (ii) any violation or alleged violation
of any Environmental Law, except, in each case, where such potential
liability, singly or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(z) Except as disclosed in the Offering Memorandum, to the knowledge of
the Company and the Guarantors after due inquiry, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge or disposal
of any Hazardous Material, that could reasonably be expected to form the
basis under any Environmental Law of any liability of, or requirement to take
(or refrain from taking) any action by, (i) the Company or any of the
Company's subsidiaries or (ii) any person or entity whose liability for any
claim the Company or any of the Company's subsidiaries has retained or
assumed either contractually or by operation of law, except, in each case,
where such liability or requirement to take (or refrain from taking) action,
singly or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(aa) Each of Royster-Clark Group, the Company and the Company's
subsidiaries has such permits, licenses, consents, exemptions, franchises,
authorizations and other approvals (each, an "Authorization") of, and has
made all filings with and notices to, all governmental or regulatory
authorities and all courts and other tribunals, including without limitation,
under any applicable Environmental Laws, as are necessary to own, lease,
license and operate its respective properties and to conduct its business,
except where the failure to have any such Authorization or to make any such
filing or notice would not, singly or in the aggregate, have a Material
Adverse Effect. Each such Authorization is valid and in full force and effect
and each of Royster-Clark Group, the Company and the Company's subsidiaries
is in compliance with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having jurisdiction
with respect thereto; nor have they received any notice from any authority or
governing body which allows or, after notice or lapse of time or both, would
allow, revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any other
impairment of the rights of the holder of any such Authorization; and such
Authorizations contain no restrictions that are burdensome to Royster-Clark
Group, the Company or any of the Company's subsidiaries; except where such
failure to be valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction would
not, singly or in the aggregate, have a Material Adverse Effect.
(bb) Except as disclosed in the Offering Memorandum, neither the Company
or any of the Company's subsidiaries has violated any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations promulgated thereunder, except for such violations which could
not reasonably be expected, singly or in the aggregate, to have a Material
Adverse Effect.
(cc) There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or threatened against the Company
or any of the Company's
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subsidiaries before the National Labor Relations Board or any state or
local labor relations board, (ii) strike, labor dispute, slowdown or stoppage
pending or threatened against the Company or any of the Company's
subsidiaries or (iii) union representation question existing with respect to
the employees of the Company or any of the Company's subsidiaries, except in
the case of clauses (i), (ii) and (iii) for such actions which, singly or in
the aggregate, would not have a Material Adverse Effect. To the best
knowledge of the Company, no collective bargaining organizing activities are
taking place with respect to the Company or any of the Company's subsidiaries
that would have a Material Adverse Effect.
(dd) The Company and the Company's subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company and the Company's subsidiaries, in each case free and clear of all
Liens and defects, except for Permitted Liens described in the Offering
Memorandum in relation to the Mortgaged Property (as defined below) or such
as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
the Company's subsidiaries; and any real property and buildings held under
lease by the Company and the Company's subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and the Company's subsidiaries, in
each case except as described in the Offering Memorandum.
(ee) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names ("intellectual property") currently
employed by them in connection with the business now operated by them except
where the failure to own or possess or otherwise be able to acquire such
intellectual property would not, singly or in the aggregate, have a Material
Adverse Effect; and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any of such intellectual property which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect.
(ff) The accountants for the Company and AgriBusiness, KPMG Peat Marwick
LLP and Ernst & Young, LLP, respectively, that have certified the financial
statements and supporting schedules included in the Preliminary Offering
Memorandum and the Offering Memorandum, are independent public accountants
with respect to the Company and AgriBusiness as required by the Act and the
Exchange Act. The historical financial statements, together with related
schedules and notes, set forth in the Preliminary Offering Memorandum and the
Offering Memorandum comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under the Act.
(gg) The historical financial statements, together with related
schedules and notes forming part of the Offering Memorandum (and any
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the
Company and its subsidiaries on the basis stated in the Offering
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Memorandum at the respective dates or for the respective periods to
which they apply in all material respects; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; and the other financial and statistical
information and data set forth in the Offering Memorandum (and any amendment
or supplement thereto) are, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements and the
books and records of the Company.
(hh) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of the Company and its
subsidiaries and give effect to assumptions used in the preparation thereof
on a reasonable basis and in good faith and present fairly the historical and
proposed transactions contemplated by the Preliminary Offering Memorandum and
the Offering Memorandum; and such pro forma financial statements comply as to
form in all material respects with the requirements applicable to pro forma
financial statements included in registration statements on Form S-1 under
the Act. The other pro forma financial and statistical information and data
included in the Offering Memorandum are, in all material respects, accurately
presented and prepared on a basis consistent with the pro forma financial
statements.
(ii) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(jj) All material tax returns required to be filed by the Company and
each of its subsidiaries in any jurisdiction have been filed, other than
those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due pursuant to such returns or pursuant to any assessment
received by the Company or any of its subsidiaries have been paid, other than
those being contested in good faith and for which adequate reserves have been
provided.
(kk) The Company is not and, after giving effect to the offering and
sale of the First Mortgage Notes and the application of the net proceeds
thereof as described in the Offering Memorandum, will not be, an "investment
company," as such term is defined in the Investment Company Act of 1940, as
amended.
(ll) Except as described in the Offering Memorandum, there are no
contracts, agreements or understandings between the Company or any Guarantor
and any person granting such person the right to require the Company or such
Guarantor to file a registration statement under the Act with respect to any
securities of the Company or such Guarantor or to require the Company or such
Guarantor to include such securities with the Notes and Guarantees registered
pursuant to any Registration Statement.
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(mm) Neither the Company nor any of its subsidiaries nor any agent
thereof acting on the behalf of them has taken, and none of them will take,
any action that might cause this Agreement or the issuance or sale of the
First Mortgage Notes to violate Regulation T (12 C.F.R. Part 220), Regulation
U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
(nn) No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed
(or has informed the Company that it is considering imposing) any condition
(financial or otherwise) on the Company's or any Guarantor's retaining any
rating assigned to the Company or any Guarantor, any securities of the
Company or any Guarantor or (ii) has indicated to the Company or any
Guarantor that it is considering (a) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any change
in the outlook for any rating of the Company, any Guarantor or any securities
of the Company or any Guarantor.
(oo) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or
any development involving a prospective material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of Royster-Clark Group, the Company and the Company's
subsidiaries, taken as a whole, or on the validity of this Agreement or the
other Operative Documents, (ii) there has not been any material adverse
change or any development involving a prospective material adverse change in
the capital stock or in the long-term debt of Royster-Clark Group, the
Company or any of the Company's subsidiaries and (iii) neither Royster-Clark
Group, the Company or any of the Company's subsidiaries has incurred any
material liability or obligation, direct or contingent.
(pp) The Offering Memorandum, as of its date, contains all the
information specified in, and meeting the requirements of, Rule 144A(d)(4)
under the Act.
(qq) Assuming the accuracy of the representations and warranties of the
Initial Purchasers contained herein and compliance by the Initial Purchasers
of their agreements contained herein, prior to the effectiveness of any
Registration Statement, the Indenture is not required to be qualified under
the TIA.
(rr) No form of general solicitation or general advertising (as defined
in Regulation D under the Act) was used by the Company, the Guarantors or any
of their respective representatives (other than the Initial Purchasers, as to
whom the Company and the Guarantors make no representation) in connection
with the offer and sale of the First Mortgage Notes contemplated hereby,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising. No securities of
the same class as the First Mortgage Notes have been issued and sold by the
Company within the six-month period immediately prior to the date hereof.
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(ss) None of the Company, the Guarantors nor any of their respective
affiliates or any person acting on its or their behalf (other than the
Initial Purchasers, as to whom the Company and the Guarantors make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Act ("Regulation S") with
respect to the First Mortgage Notes or the Guarantees.
(tt) The Company has not and will not offer or sell the First Mortgage
Notes in reliance on Regulation S except in offshore transactions.
(uu) The Company has not and will not offer or sell the First Mortgage
Notes pursuant to Regulation S as part of a plan or scheme to evade the
registration provisions of the Act.
(vv) No registration under the Act of the First Mortgage Notes or the
Guarantees is required for the sale of the First Mortgage Notes and the
Guarantees to the Initial Purchasers as contemplated hereby or for the Exempt
Resales assuming the accuracy of the Initial Purchasers' representations and
warranties and agreements set forth in Section 7 hereof.
(ww) Except for the simultaneous closing of the offering of the First
Mortgage Notes contemplated hereby and the acquisition of AgriBusiness and
Royster-Clark from its owners, all conditions precedent to the Company's,
Royster-Clark Group's and the Company's subsidiaries' obligation to effect
the Transactions, as defined in the Offering Memorandum, have been performed,
complied with, otherwise satisfied, or duly waived and no other action is
required except for delivery of the proceeds of the sale of the First
Mortgage Notes in order to consummate the Transactions. If waived, any
material condition so waived has been identified to the Initial Purchasers.
(xx) Each certificate signed by any officer of the Company or any
Guarantor and delivered to the Initial Purchasers or counsel for the Initial
Purchasers shall be deemed to be a representation and warranty by the Company
or such Guarantor to the Initial Purchasers as to the matters covered
thereby.
(yy) To the Company's and each of the relevant Guarantor's knowledge
(other than AgriBusiness and the Special Purpose Subsidiaries prior to, but
not on or after, the Closing Date), the Company and the relevant Guarantors
own good, marketable and insurable fee simple title to the property, plant
and equipment and certain related assets of the Company and its subsidiaries
(the "Mortgaged Property") encumbered by the first priority security interest
listed on Schedule C hereto, which on the Closing Date, will be free and
clear of all Liens, other than the Permitted Liens applicable to the
Mortgaged Property. Except as disclosed in writing to the Collateral Agent,
there are no outstanding options to purchase or rights of first refusal or
restrictions on transferability affecting the Mortgaged Property.
(zz) To the Company's and each of the relevant Guarantor's knowledge
(other than AgriBusiness and the Special Purpose Subsidiaries prior to, but
not on or after, the Closing Date), the Company, the relevant Guarantors, the
Mortgaged Property and the Company's and such Guarantor's use thereof and
operations thereat comply with all applicable legal requirements (including,
without limitation, building and zoning ordinances and codes),
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except for noncompliance which would not have a Material Adverse Effect.
Neither the Company or any Guarantor (other than AgriBusiness and the Special
Purpose Subsidiaries prior to, but not on or after, the Closing Date) is in
default or violation of any order, writ, injunction, decree or demand of any
regulatory or governmental authority except for defaults or violations which
would not have a Material Adverse Effect.
(aaa) To the Company's and each Guarantor's knowledge (other than
AgriBusiness and the Special Purpose Subsidiaries prior to, but not on or
after, the Closing Date), no taking has been commenced or is contemplated
with respect to all or any portion of the Mortgaged Property or for the
relocation of roadways providing access to the Mortgaged Property. To the
Company's and each Guarantor's knowledge (other than AgriBusiness and the
Special Purpose Subsidiaries prior to, but not on or after, the Closing
Date), there are no actions, suits, claims, legal proceedings or other
proceedings affecting the Mortgaged Property or any portion thereof, before
any court or agency the adverse determination of which would have a Material
Adverse Effect.
(bbb) To the Company's and each Guarantor's knowledge (other than
AgriBusiness and the Special Purpose Subsidiaries prior to, but not on or
after, the Closing Date), the Mortgaged Property has adequate rights of
access to public ways and is served by water, electric, sewer, sanitary sewer
and storm drain facilities except as would not have a Material Adverse
Effect. To the Company's and each Guarantor's knowledge (other than
AgriBusiness and the Special Purpose Subsidiaries prior to, but not on or
after, the Closing Date), all public utilities necessary to the continued use
and enjoyment of the Mortgaged Property as presently used and enjoyed are
located in the public right-of-way abutting the premises or within easements
serving the premises, and all such utilities are connected so as to serve the
Mortgaged Property without passing over other property except for such
easements or land of the utility company providing such utility service, in
each case except as previously disclosed to the Collateral Agent or except
for matters which would not have a Material Adverse Effect. To the Company's
and each Guarantor's knowledge (other than AgriBusiness and the Special
Purpose Subsidiaries prior to, but not on or after, the Closing Date), all
roads necessary for the full utilization of the Mortgaged Property for its
current purpose have been completed and dedicated to public use and accepted
by all regulatory and governmental authorities or are the subject of leases
or access easements for the benefit of the Mortgaged Property except as would
not have a Material Adverse Effect.
(ccc) As of the Closing Date, the execution and delivery of (i) the
mortgages and Deeds of Trust (collectively, the "Mortgages") and (ii) the
security and pledge agreement providing for (a) the pledge of all of the
equity interests of the Special Purpose Subsidiaries and (b) the grant to the
Collateral Agent for the ratable benefit of the holders of First Mortgage
Notes of a first priority interest in the Mortgaged Property that constitute
equipment and certain other assets of the Company and its subsidiaries (the
"Security Agreement") will create a valid and enforceable first priority Lien
on the Mortgaged Property, as security for the repayment of the First
Mortgage Notes, subject only to Permitted Liens. As of the Closing Date, each
of the Mortgages and the Security Agreement will establish and create a
valid, subsisting and enforceable Lien on and a security interest in, or
claim to, the Company's or Guarantor's interest in the rights and property
described therein. As of the Closing Date, the Mortgages and the UCC
financing statements will be in appropriate form for recording and for filing
as a financing
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statement to protect, preserve and perfect the liens and security
interests, and will be filed or recorded, as appropriate, or irrevocably
delivered to an agent for recordation or filing, in all places necessary to
perfect a valid first priority lien with respect to the rights and property
that are the subject of any of the Security Agreements to the extent that
such security interest under the UCC can be perfected by such filing or
recording.
(ddd) Except as disclosed in writing to the Collateral Agent, and to the
Company's and the Guarantor's knowledge, there are no pending or proposed
special or other assessments for public improvements or otherwise affecting
the Mortgaged Property other than those that would not have a Material
Adverse Effect, nor are there any contemplated improvements to the Mortgaged
Property that may result in such special or other assessments other than
those that would not have a Material Adverse Effect.
(eee) To the Company's and each Guarantor's knowledge, the Company and
such Guarantor have obtained all permits necessary to the use and operation
of the Mortgaged Property, except where the failure to obtain such permit
would not have a Material Adverse Effect. The use being made of the Mortgaged
Property is in conformity in all material respects with the certificate of
occupancy and/or permits for the Mortgaged Property and any other
restrictions, covenants or conditions affecting the Mortgaged Property.
(fff) To the Company's and each Guarantor's knowledge, none of the
buildings within the Mortgaged Property is located in a special flood hazard
area as defined by the Federal Insurance Administration except as shown on
the survey or would not have a Material Adverse Effect.
(ggg) To the Company's and each Guarantor's knowledge, the Mortgaged
Property is free of material structural defects and all material building
systems contained therein are in good working order subject to ordinary wear
and tear.
(hhh) To the Company's and each Guarantors' knowledge, (i) no
improvements on adjoining properties encroach upon the Mortgaged Property,
(ii) no easements or other encumbrances upon the Mortgaged Property encroach
upon any of the improvements, so as to affect the value or marketability of
the Mortgaged Property except those which are insured against by title
insurance, (iii) no improvements encroach upon a property lien or easement,
requiring removal and relocation of all or a portion of the improvements at
the facility, and (iv) all of the Improvements comply with all requirements
of any applicable zoning and subdivision laws and ordinances, except for
noncompliance that would not have a Material Adverse Effect.
(iii) The Mortgaged Property is not subject to any leases. To the
Company's and each Guarantor's knowledge, no person has any possessory
interest in the Mortgaged Property or right to occupy the same which would
have a Material Adverse Effect on the Company's or a Guarantor's operation of
the Mortgaged Property, except under and pursuant to the provisions of the
leases set forth in the first sentence hereof.
The Company acknowledges that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Section
9 hereof, counsel to the
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Company and the Guarantors and counsel to the Initial Purchasers will
rely upon the accuracy and truth of the foregoing representations and hereby
consents to such reliance.
7. Initial Purchasers' Representations and Warranties.
Each of the Initial Purchasers, severally and not jointly, represents
and warrants to the Company and the Guarantors, and agrees that:
(a) Such Initial Purchaser is a QIB with such knowledge and experience
in financial and business matters as is necessary in order to evaluate the
merits and risks of an investment in the First Mortgage Notes.
(b) Such Initial Purchaser (A) is not acquiring the First Mortgage Notes
with a view to any distribution thereof or with any present intention of
offering or selling any of the First Mortgage Notes in a transaction that
would violate the Act or the securities laws of any state of the United
States or any other applicable jurisdiction and (B) will be reoffering and
reselling the First Mortgage Notes only to (x) QIBs in reliance on the
exemption from the registration requirements of the Act provided by Rule 144A
and (y) in offshore transactions in reliance upon Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the Act) has
been or will be used by such Initial Purchaser or any of its representatives
in connection with the offer and sale of the First Mortgage Notes pursuant
hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the First Mortgage
Notes only from, and will offer to sell the First Mortgage Notes only to,
Eligible Purchasers. Each Initial Purchaser further agrees that it will offer
to sell the First Mortgage Notes only to, and will solicit offers to buy the
First Mortgage Notes only from (A) Eligible Purchasers that the Initial
Purchaser reasonably believes are QIBs and (B) Regulation S Purchasers, in
each case, that agree that (x) the First Mortgage Notes purchased by them may
be resold, pledged or otherwise transferred within the time period referred
to under Rule 144(k) (taking into account the provisions of Rule 144(d) under
the Act, if applicable) under the Act, as in effect on the date of the
transfer of such First Mortgage Notes, only (I) to the Company or any of its
subsidiaries, (II) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Act, (III) in an offshore
transaction (as defined in Rule 902 under the Act) meeting the requirements
of Rule 904 of the Act, (IV) in a transaction meeting the requirements of
Rule 144 under the Act, (V) in accordance with another exemption from the
registration requirements of the Act (and based upon an opinion of counsel
acceptable to the Company) or (VI) pursuant to an effective registration
statement and, in each case, in accordance with the applicable securities
laws of any state of the United States or any other applicable jurisdiction
and (y) they will deliver to each person to whom such First
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Mortgage Notes or an interest therein is transferred a notice
substantially to the effect of the foregoing.
(e) Such Initial Purchaser and its affiliates or any person acting on
its or their behalf have not engaged or will not engage in any directed
selling efforts within the meaning of Regulation S with respect to the First
Mortgage Notes or the Guarantees.
(f) The First Mortgage Notes offered and sold by such Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered and
sold only in offshore transactions.
(g) The sale of the First Mortgage Notes offered and sold by such
Initial Purchaser pursuant hereto in reliance on Regulation S is not part of
a plan or scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser acknowledges that the Company and the
Guarantors and, for purposes of the opinions to be delivered to each Initial
Purchaser pursuant to Section 9 hereof, counsel to the Company and the
Guarantors and counsel to the Initial Purchaser will rely upon the accuracy
and truth of the foregoing representations and such Initial Purchaser hereby
consents to such reliance.
(i) Such Initial Purchaser agrees that it will not offer, sell or
deliver any of the First Mortgage Notes in any jurisdiction outside the
United States except under circumstances that will result in compliance with
the applicable laws thereof, and that it will take whatever reasonable action
is required to permit its purchase and resale of the First Mortgage Notes in
such jurisdictions. Such Initial Purchaser understands that no action has
been taken to permit a public offering in any jurisdiction outside the United
States where action would be required for such purpose.
8. Indemnification.
(a) The Company and each Guarantor agree, jointly and severally, to
indemnify and hold harmless the Initial Purchasers, its directors, its
officers and each person, if any, who controls such Initial Purchasers within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any reasonable legal or other expenses
incurred in connection with investigating or defending any matter, including
any action, that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum or any
Rule 144A Information provided by the Company or any Guarantor to any holder
or prospective purchaser of First Mortgage Notes pursuant to Section 5(i) or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to the Initial
Purchasers furnished in writing to the Company by such Initial Purchasers;
provided, however, that the foregoing indemnity agreement with respect to any
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Preliminary Offering Memorandum shall not inure to the benefit of any Initial
Purchasers who failed to deliver a Final Offering Memorandum, as then amended
or supplemented, (so long as the Final Offering Memorandum and any amendment
or supplement thereto was provided by the Company to the several Initial
Purchasers in the requisite quantity and on a timely basis to permit proper
delivery on or prior to the Closing Date) to the person asserting any losses,
claims, damages, liabilities or judgments caused by any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Offering Memorandum, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, if such material misstatement or
omission or alleged material misstatement or omission was cured in the Final
Offering Memorandum, as so amended or supplemented.
(b) Each Initial Purchaser agrees to severally and not jointly indemnify
and hold harmless the Company and the Guarantors, and their respective
directors and officers and each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company or the Guarantors, to the same extent as the foregoing indemnity from
the Company and the Guarantors to the Initial Purchaser but only with
reference to information relating to the Initial Purchaser furnished in
writing to the Company by each Initial Purchaser (and not with respect to the
information provided by any other Initial Purchaser) expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum or any amendment
or supplement thereto.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party")
in writing and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel,
as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b), the Initial
Purchasers shall not be required to assume the defense of such action
pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of the Initial
Purchasers). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties
to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party, and the indemnified party shall
have been advised in writing by such counsel that there may be one or more
legal defenses available to it which are different from or additional to
those available to the indemnifying party (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf
of the indemnified party). In any such case, the indemnifying party shall
not, in connection with any one action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (in
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addition to any local counsel) for all indemnified parties and all such
fees and expenses shall be reimbursed as they are incurred. Such firm shall
be designated in writing by Donaldson, Lufkin & Jenrette Securities
Corporation, in the case of the parties indemnified pursuant to Section 8(a),
and by the Company, in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written
consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party
shall have failed to comply with such reimbursement request. No indemnifying
party shall, without the prior written consent of the indemnified party
(which shall not be unreasonably withheld or delayed), effect any settlement
or compromise of, or consent to the entry of judgment with respect to, any
pending or threatened action in respect of which the indemnified party is or
could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability on claims that are or could have been
the subject matter of such action and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial Purchasers on
the other hand from the offering of the First Mortgage Notes or (ii) if the
allocation provided by clause 8(d)(i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause 8(d)(i) above but also the relative fault of
the Company and the Guarantors, on the one hand, and the Initial Purchasers,
on the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well
as any other relevant equitable considerations. The relative benefits
received by the Company and the Guarantors, on the one hand and the Initial
Purchasers, on the other hand, shall be deemed to be in the same proportion
as the total net proceeds from the offering of the First Mortgage Notes
(after underwriting discounts and commissions, but before deducting expenses)
received by the Company, and the total discounts and commissions received by
the Initial Purchasers bear to the total price to investors of the First
Mortgage Notes, in each case as set forth in the table on the cover page of
the Offering Memorandum. The relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand,
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Guarantors, on the one hand, or the Initial Purchasers, on the
other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
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The Company and the Guarantors, and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in
the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
judgments referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses incurred by such indemnified party in connection with investigating
or defending any matter, including any action, that could have given rise to
such losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, the Initial Purchasers shall not be required to
contribute any amount in excess of the amount by which the total discounts
and commissions received by such Initial Purchasers exceeds the amount of any
damages which the Initial Purchasers have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Initial Purchasers' obligations to contribute pursuant to this Section 8(d)
are several in proportion to the respective principal amount of First
Mortgage Notes purchased by each of the Initial Purchasers hereunder and not
joint.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
9. Conditions of Initial Purchasers' Obligations.
The obligations of the Initial Purchasers to purchase the First Mortgage
Notes under this Agreement are subject to the satisfaction of each of the
following conditions:
(a) All of the Company's subsidiaries that are not a party to this
Agreement on the date hereof shall have signed the Purchase Agreement
Supplement, which shall substantially be in the form of Exhibit B hereto.
(b) (i) The Special Purpose Subsidiaries will, on the Closing Date, (1)
hold indefeasible fee simple title to each of the properties listed on
Exhibit A hereto, subject only to recordation of recordable deeds which have
been delivered to the Chicago Title Company together with irrevocable
instructions to record such deeds immediately and (2) hold indefeasible fee
simple title to no fewer than 270 of the properties listed on Exhibit B
hereto (other than those properties that are owned by IMC Global, Inc. and
Vigoro Corporation), subject only to recordation of recordable deeds which
have been delivered to the Chicago Title Company together with irrevocable
instructions to record such deeds immediately and (ii) the Company and IMC
Global, Inc. will enter into an agreement, of which the Trustee will be a
third party beneficiary, reasonably satisfactory to the Initial Purchasers,
whereby (1) IMC Global, Inc. and each of its direct and indirect subsidiaries
that owns or has been represented to own one or more of the properties listed
on Exhibit B shall agree that it shall , as soon as practicable but no later
than 30 days after the Closing Date, after the confirmed record owner of each
Exhibit B property has been identified by the Company, (a) execute, deliver
and record a deed, or (b) obtain from the
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then record owner of each such property an executed deed, and deliver
and record the same, sufficient to convey indefeasible fee simple title to
each of such properties from the confirmed record owner of such property to
that Special Purpose Subsidiary designated by the Company, and (2) IMC
Global, Inc. will agree to indemnify the Trustee, as Collateral Agent for the
holders of the Notes, and each of the Special Purpose Subsidiaries, for the
full value of any of the properties (such value to be determined by Valuation
Research, Inc.) listed on Exhibit B as to which indefeasible fee simple title
has not been so conveyed unless such conveyance occurs no later than 30 days
after the Closing Date.
(c) All the representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the
Closing Date.
(d) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been
given of any potential or intended downgrading, suspension or withdrawal of,
or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of the Company or any Guarantor or any securities of the Company or
any Guarantor (including, without limitation, the placing of any of the
foregoing ratings on credit watch with negative or developing implications or
under review with an uncertain direction) by any "nationally recognized
statistical rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Act, (ii) there shall not have occurred any change, nor
shall any notice have been given of any potential or intended change, in the
outlook for any rating of the Company or any Guarantor or any securities of
the Company or any Guarantor by any such rating organization and (iii) no
such rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Notes than that on which the
Notes were marketed.
(e) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, or in the validity of this Agreement
or the other Operative Documents, (ii) there shall not have been any material
adverse change or any development involving a prospective change in the
capital stock or in the long-term debt of the Company or any of its
subsidiaries and (iii) neither the Company nor any of its subsidiaries shall
have incurred any liability or obligation, direct or contingent, the effect
of which, in any such case described in clause 9(c)(i), 9(c)(ii) or
9(c)(iii), in your judgment, is material and adverse and, in your judgment,
makes it impracticable to market the First Mortgage Notes on the terms and in
the manner contemplated in the Offering Memorandum.
(f) The Company shall have consummated The Transactions (as defined in
the Offering Memorandum) in the manner and on the terms described in the
Offering Memorandum under the caption "The Transactions," including (i) the
$10.0 million of non-cash pay junior subordinated notes purchased by IMC
Global, Inc., (ii) the $10.0 million of non-cash pay junior subordinated
notes purchased by 399 Ventures, (iii) the $20.5 million of rollover equity
contributed by certain members of management and (iv) there shall not have
been any amendment
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or material waiver under the Acquisition Agreement after
April 13, 1999. The Transactions shall have occurred simultaneously with the
sale of the First Mortgage Notes to the Initial Purchasers.
(g) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by the President and the Chief Financial Officer of the
Company and each of the Guarantors, confirming the matters set forth in
Sections 6(o), 6(oo), 9(c) and 9(d) and stating that each of the Company and
the Guarantors has complied with all the agreements and satisfied all of the
conditions in all material respects herein contained and required to be
complied with or satisfied on or prior to the Closing Date.
(h) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Initial Purchasers), dated the Closing Date, of
Dechert Price & Rhoads, counsel for the Company and the Guarantors, to the
effect that, among other things:
(i) each of Royster-Clark Group, the Company and the Company's
subsidiaries (other than Hutson's Ag Services, Inc. ("Hutson")) has
been duly incorporated or formed, is validly existing as a
corporation or limited liability company in good standing under the
laws of its jurisdiction of incorporation and has the corporate (or
limited liability company) power and corporate (or limited
liability company) authority to carry on its business as described
in the Offering Memorandum and to own, lease and operate its
properties;
(ii) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid, non-assessable and not issued in violation of any preemptive
or similar rights contained in the Company's certificate of
incorporation;
(iii) all the outstanding shares of capital stock of
Royster-Clark Group and the Special Purpose Subsidiaries have been
duly authorized and validly issued and are fully paid,
non-assessable and not issued in violation of any preemptive or
similar rights contained in their respective certificates of
incorporation or formation;
(iv) the First Mortgage Notes have been duly authorized by the
Company and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement,
will be entitled to the benefits of the Indenture and will be valid
and binding obligations of the Company, enforceable in accordance
with their terms except as (x) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (y) may be limited by equitable
principles of general applicability;
(v) the Guarantees have been duly authorized (other than
Hutson) and, when the First Mortgage Notes are executed and
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authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, the Guarantees
endorsed thereon will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Guarantors,
enforceable in accordance with their terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (y) may be
limited by equitable principles of general applicability;
(vi) the Indenture has been duly authorized, executed and
delivered by the Company and each Guarantor (other than Hutson) and
is a valid and binding agreement of the Company and each Guarantor,
enforceable against the Company and each Guarantor in accordance
with its terms except as (x) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (y) may be limited by equitable
principles of general applicability;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company and the Guarantors (other than Hutson);
(viii) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and the
Guarantors (other than Hutson) and is a valid and binding agreement
of the Company and each Guarantor, enforceable against the Company
and each Guarantor in accordance with its terms, except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (y) may be
limited by equitable principles of general applicability;
(ix) the Exchange Notes have been duly authorized;
(x) the Security Agreements have been duly authorized,
executed and delivered by the Company and each Guarantor (to the
extent that each is a party thereto and other than Hutson) and are
valid and binding agreements of the Company and each Guarantor (to
the extent that each is a party thereto), enforceable against the
Company and each Guarantor (to the extent that each is a party
thereto) in accordance with their terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (y) may be
limited by equitable principles of general applicability;
(xi) the Acquisition Agreement, as amended on April 13, 1999,
has been duly authorized, executed and delivered by Royster-Clark
Group and is a valid and binding agreement of Royster-Clark Group,
enforceable against Royster-Clark Group in accordance with its
terms except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) may be limited by
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equitable principles of general applicability;
(xii) the statements under the captions "Risk
Factors---Fraudulent Conveyance Matters," "Description of Certain
Other Indebtedness," "Description of First Mortgage Notes" and
"Certain Federal Tax Consequences" in the Offering Memorandum,
insofar as such statements constitute a summary of the legal
matters, documents (or a portion of such documents) or proceedings
referred to therein, fairly present in all material respects such
legal matters, documents (or such portions of such documents) and
proceedings;
(xiii) to such counsel's knowledge, no injunction, restraining
order or other order or relief of any nature by a federal or state
court or other tribunal of competent jurisdiction has been issued
with respect to Royster-Clark Group, the Company or any of the
Company's subsidiaries which would prevent or suspend the issuance
or sale of the First Mortgage Notes or the Guarantees in any
jurisdiction referred to in Section 5(f).
(xiv) the execution, delivery and performance of this
Agreement and the other Operative Documents by the Company and each
of the Guarantors (other than Hutson), the compliance by the
Company and each of the Guarantors with all provisions hereof and
thereof and the consummation of the transactions contemplated
hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court
or governmental body or agency that has not been made or obtained
(except such as may be required under the securities or Blue Sky
laws of the various states, the TIA and the Act in connection with
the Exchange Offer and as set forth in the Acquisition Agreement
and the schedules thereto and except in connection with the
transfers of real property and other assets to the Special Purpose
Subsidiaries and permits related thereto), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws of Royster-Clark Group, the
Company or any of the Company's subsidiaries (other than Hutson) or
any indenture, loan agreement, mortgage, lease or other agreement
or instrument which is included on an annexed schedule to the
opinion of such counsel, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree
of any court or any governmental body or agency having jurisdiction
over Royster-Clark Group, the Company, any of the Company's
subsidiaries or their respective property, (iv) result in the
imposition or creation of (or the obligation to create or impose) a
Lien under, any agreement or instrument which is included on an
annexed schedule to the opinion of such counsel and which will
include all documents that would be required to be filed on a
registration statement on Form S-1, and except that the foregoing
opinions in clauses (i) and (iii) are based on only those statutes,
rules or regulations which, in the opinion of such counsel, are
customarily applicable to securities underwriting and stock
purchase transactions or (v) result in the
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<PAGE>
termination, suspension or revocation of any Authorization (as
defined below) of the Company or any of its subsidiaries or result
in any other impairment of the rights of the holder of any such
Authorization except in the case of clauses (i) through (v) to the
extent any of the foregoing would not have a Material Adverse
Effect.
(xv) such counsel does not know of any legal or governmental
proceedings pending or threatened to which Royster-Clark Group or
any of the Special Purpose Subsidiaries is a party or to which any
of their respective property is subject, which if determined
adversely to Royster-Clark Group or the Special Purpose
Subsidiaries would result, singly or in the aggregate, in a
Material Adverse Effect;
(xvi) the Company is not and, after giving effect to the
offering and sale of the First Mortgage Notes and the application
of the net proceeds thereof as described in the Offering
Memorandum, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended;
(xvii) to such counsel's knowledge, except as described in the
Offering Memorandum, there are no contracts, agreements or
understandings between the Company or any Guarantor and any person
granting such person the right to require the Company or such
Guarantor to file a registration statement under the Act with
respect to any securities of the Company or such Guarantor or to
require the Company or such Guarantor to include such securities
with the Notes and Guarantees registered pursuant to any
Registration Statement;
(xviii) the Indenture complies as to form in all material
respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder. It is not necessary in connection with the
offer, sale and delivery of the First Mortgage Notes to the Initial
Purchasers in the manner contemplated by this Agreement or in
connection with the Exempt Resales to qualify the Indenture under
the TIA.
(xix) no registration under the Act of the First Mortgage
Notes is required for the sale of the First Mortgage Notes to the
Initial Purchasers as contemplated by this Agreement or for the
Exempt Resales assuming that (i) each Initial Purchasers is a QIB
or a Regulation S Purchaser, (ii) the accuracy of, and compliance
with, the Initial Purchasers' representations and agreements
contained in Section 7 of this Agreement, (iii) compliance by the
Initial Purchasers with the offering and transfer procedures and
restrictions described elsewhere in this Agreement and in the
Offering Memorandum and (iv) the accuracy of the representations of
the Company and the Guarantors set forth in Sections 6(rr), (ss)
and (tt) of this Agreement.
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(xx) The provisions of the Security Agreement to which the
Company and the Guarantors are a party, in each case, are
sufficient to create in favor of the Trustee a valid security
interest in all right, title and interest of the Company or such
Guarantor, as the case may be, in those items and types of
Collateral described in the Security Agreement in which a security
interest may be created under Article 9 of the UCC. The
uncertificated membership interests in the Special Purpose
Subsidiaries are collateral in which a security interest can be
created under Article 9 of the UCC. The Financing Statements have
been duly authorized and executed by the Company and the Guarantors
and have been delivered to the Trustee for filing. The presentment
of the Financing Statements set forth on Schedule B-1, together
with the payment of any required filing fees, at each filing office
indicated on Schedule B-1 and the recordation thereof is sufficient
to perfect the security interests created by the Security Agreement
in all right, title and interest of the Company and the Guarantors
in those items and types of collateral described in the Security
Agreement in which a security interest may be perfected under the
UCC by the filing of such financing statements under the UCC.
The opinion of Dechert Price & Rhoads described in Section 9(h) above
shall be rendered to you at the request of the Company and the Guarantors and
shall so state therein.
(i) Additionally, you shall have received on the Closing Date a letter
(satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers) dated the Closing Date, from Dechert Price & Rhoads, counsel to
the Company and the Guarantors, to the effect that such counsel has no reason
to believe that, as of the date of the Offering Memorandum or as of the
Closing Date, the Offering Memorandum, as amended or supplemented, if
applicable (except for the financial statements and other financial data
included therein, as to which such counsel need not express any belief)
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. In writing such
letter, Dechert Price & Rhoads may state that their belief is based upon
their participation in the preparation of the Offering Memorandum and any
amendment or supplement thereto and review and discussion of the contents
thereof, but are without independent check or verification except as
specified.
(j) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Initial Purchasers), dated the Closing Date, of
Randolph G. Abood, Director and General Counsel of the Company, to the effect
that, among other things:
(i) each of Royster-Clark Group, the Company and the Company's
subsidiaries (other than AgriBusiness) is duly qualified and is in
good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a
Material Adverse Effect;
(ii) all the outstanding shares of capital stock the Company
have
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been duly authorized and validly issued and are fully paid,
non-assessable and were not issued in violation of any preemptive
or similar rights contained in the Company's certificate of
incorporation;
(iii) the entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company;
(iv) to such counsel's knowledge, no injunction, restraining
order or other order or relief of any nature by a federal or state
court or other tribunal of competent jurisdiction has been issued
with respect to Royster-Clark Group, the Company or any of the
Company's subsidiaries which would prevent or suspend the issuance
or sale of the First Mortgage Notes or the Guarantees in any
jurisdiction referred to in Section 5(f) or would prevent the
consummation of the transactions contemplated by the Operative
Documents.
(v) such counsel does not know of any legal or governmental
proceedings pending or threatened to which Royster-Clark Group, the
Company or any of the Company's subsidiaries (other than
AgriBusiness) is a party or to which any of their respective
property is subject, which if determined adversely to Royster-Clark
Group, the Company or any of the Company's subsidiaries (other than
AgriBusiness) would result, singly or in the aggregate, in a
Material Adverse Effect.
(vi) the execution, delivery and performance of this Agreement
and the other Operative Documents by the Company and each of the
Guarantors (other than Hutson), the compliance by the Company and
each of the Guarantors with all provisions hereof and thereof and
the consummation of the transactions contemplated hereby and
thereby will not (i) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the charter or
by-laws of Royster-Clark Group, the Company or any of the Company's
subsidiaries (other than Hutson) or any indenture, loan agreement,
mortgage, lease or other agreement or instrument which is included
on an annexed schedule to the opinion of such counsel and (ii)
result in the imposition or creation of (or the obligation to
create or impose) a Lien under, any agreement or instrument which
is included on an annexed schedule to the opinion of such counsel
and which will include all documents that would be required to be
filed on a registration statement on Form S-1 to the extent any of
the foregoing would not have a Material Adverse Effect;
(k) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Initial Purchasers), dated the Closing Date, of
Phillip Gordon, Senior Vice President and General Counsel of IMC Global,
Inc., to the effect that, among other things:
(i) each of IMC AgriBusiness, Inc., IMC Nitrogen Company
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<PAGE>
and Hutson has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and corporate authority
to carry on its business as described in the Offering Memorandum
and to own, lease and operate its properties;
(ii) each of IMC AgriBusiness, Inc., IMC Nitrogen Company and
Hutson is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect;
(iii) all the outstanding shares of capital stock of each of
IMC AgriBusiness, Inc., IMC Nitrogen Company and Hutson have been
duly authorized and validly issued and are fully paid,
non-assessable and have not been issued in violation of any
preemptive or similar rights contained in each of the company's
certificates of incorporation;
(iv) such counsel does not know of any legal or governmental
proceedings pending or threatened to which AgriBusiness is a party
or to which any of its respective property is subject, which if
determined adversely to AgriBusiness would result, singly or in the
aggregate, in a Material Adverse Effect;
(l) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Initial Purchasers), dated the Closing Date, of
Stites & Harbison, to the effect that, among other things:
(i) Hutson has been duly incorporated, is validly existing as
a corporation in good standing under the laws of its jurisdiction
of incorporation and has the corporate power and corporate
authority to carry on its business as described in the Offering
Memorandum and to own, lease and operate its properties;
(ii) the Guarantee of Hutson has been duly authorized;
(iii) the Indenture has been duly authorized, executed and
delivered by Hutson;
(iv) this Agreement has been duly authorized, executed and
delivered by Hutson;
(v) The Registration Rights Agreement has been duly
authorized, executed and delivered by Hutson;
(vi) the Exchange Notes have been duly authorized;
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<PAGE>
(vii) the Security Agreements have been duly authorized,
executed and delivered by Hutson;
(m) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Latham & Watkins, counsel for the Initial
Purchasers, in form and substance reasonably satisfactory to the Initial
Purchasers.
(n) The Initial Purchasers shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof
or the Closing Date, as the case may be, in form and substance satisfactory
to the Initial Purchasers from KPMG Peat Marwick LLP and Ernst & Young LLP,
independent public accountants, containing the information and statements of
the type ordinarily included in accountants' "comfort letters" to the Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(o) The First Mortgage Notes shall have been approved by the NASD for
trading and duly listed in PORTAL.
(p) The Initial Purchasers shall have received a counterpart, conformed
as executed, of the Indenture which shall have been entered into by the
Company, the Guarantors and the Trustee.
(q) The Company and the Guarantors shall have executed the Registration
Rights Agreement and the Initial Purchasers shall have received an original
copy thereof, duly executed by the Company and the Guarantors.
(r) Neither the Company nor the Guarantors shall have failed at or prior
to the Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company or the
Guarantors, as the case may be, in any material respect at or prior to the
Closing Date.
(s) The Company (1) shall have consummated The Transactions (as defined
in the Offering Memorandum) in the manner and on the terms described in the
Offering Memorandum under the caption "The Transactions," including (i) the
$10.0 million of non-cash pay junior subordinated notes purchased by IMC
Global, Inc., (ii) the $10.0 million of non-cash pay junior subordinated
notes purchased by 399 Ventures, (iii) the $20.5 million of rollover equity
contributed by certain members of management and (iv) the transfer of
substantially all of the Farmarkets/retail centers to the Special Purpose
Subsidiaries and (2) there is no amendment or waiver under the Acquisition
Agreement. The Transactions shall have occurred simultaneously with the sale
of the First Mortgage Notes to the Initial Purchasers.
(t) The Acquisition Agreement, as amended on April 13, 1999, shall be in
full force and effect, all conditions thereto shall have been satisfied, and
no material condition shall have been waived without the express written
consent of the Initial Purchasers.
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(u) The Initial Purchasers shall have received on the Closing Date a
solvency opinion, dated the Closing Date, of Valuation Research Corporation,
in form and substance reasonably satisfactory to the Initial Purchasers.
10. Effectiveness of Agreement and Termination.
This Agreement shall become effective upon the execution and delivery of
this Agreement by the parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchasers by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or
other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere
that, in the Initial Purchasers' judgment, is material and adverse and, in
the Initial Purchasers' judgment, makes it impracticable to market the First
Mortgage Notes on the terms and in the manner contemplated in the Offering
Memorandum, (ii) the suspension or material limitation of trading in
securities or other instruments on the New York Stock Exchange, the American
Stock Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Chicago Board of Trade or the Nasdaq National Market or
limitation on prices for securities or other instruments on any such exchange
or the Nasdaq National Market, (iii) the suspension of trading of any
securities of the Company or any Guarantor on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority which in your opinion materially
and adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking
of any action by any federal, state or local government or agency in respect
of its monetary or fiscal affairs which in your opinion has a material
adverse effect on the financial markets in the United States.
If on the Closing Date any one or more of the Initial Purchasers shall
fail or refuse to purchase the First Mortgage Notes which it or they have
agreed to purchase hereunder on such date and the aggregate principal amount
of the First Mortgage Notes which such defaulting Initial Purchaser or
Initial Purchasers, as the case may be, agreed but failed to refused to
purchase is not more than one-tenth of the aggregate principal amount of the
First Mortgage Notes to be purchased on such date of all Initial Purchasers,
each non-defaulting Initial Purchaser shall be obligated severally, in the
proportion which the principal amount of the First Mortgage Notes set forth
opposite its name in Schedule B bears to the aggregate principal amount of
the First Mortgage Notes which all the non-defaulting Initial Purchasers, as
the case may be, have agreed to purchase, or in such other proportion as you
may specify, to purchase the First Mortgage Notes which such defaulting
Initial Purchaser or Initial Purchasers, as the case may be, agreed but
failed or refused to purchase on such date; provided that in no event shall
the aggregate principal amount of the First Mortgage Notes which any Initial
Purchasers have agreed to purchase pursuant to Section 2 hereof be increased
pursuant to this Section 10 by an amount in excess of one-ninth of such
principal amount of the First Mortgage Notes without the written consent of
such Initial Purchasers. If on the Closing Date any Initial Purchaser or
Initial Purchasers shall fail or refuse to purchase the First
35
<PAGE>
Mortgage Notes and the aggregate principal amount of the First Mortgage
Notes with respect to which such default occurs is more than one-tenth of the
aggregate principal amount of the First Mortgage Notes to be purchased by all
Initial Purchasers and arrangements satisfactory to the Initial Purchasers
and the Company for purchase of such the First Mortgage Notes are not made
within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Initial Purchasers and the
Company and the Guarantors. In any such case which does not result in
termination of this Agreement, either you or the Company shall have the right
to postpone the Closing Date, but in no event for longer than seven days, in
order that the required changes, if any, in the Offering Memorandum or any
other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Initial Purchaser from liability
in respect of any default of any such Initial Purchasers under this
Agreement.
11. Miscellaneous.
Notices given pursuant to any provision of this Agreement shall be
addressed as follows: (i) if to the Company or any Guarantor, to
Royster-Clark, Inc., 10 Rockefeller Plaza - Suite 1120, New York, New York
10020, (212) 332-2965 and (ii) if to the Initial Purchasers, Donaldson,
Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York
10172, Attention: Syndicate Department, or in any case to such other address
as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Guarantors and the
Initial Purchasers set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of
and payment for the First Mortgage Notes, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf
of the Initial Purchasers, the officers or directors of the Initial
Purchasers, any person controlling the Initial Purchasers, the Company, any
Guarantor, the officers or directors of the Company or any Guarantor, or any
person controlling the Company or any Guarantor, (ii) acceptance of the First
Mortgage Notes and payment for them hereunder and (iii) termination of this
Agreement.
If for any reason the First Mortgage Notes are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company and each
Guarantor (by execution of this Agreement or the Purchase Agreement
Supplement as applicable), jointly and severally, agree to reimburse the
Initial Purchasers for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination
of this Agreement, the Company shall be liable for all expenses which it has
agreed to pay pursuant to Section 5(j) hereof. The Company and each Guarantor
(by execution of this Agreement or the Purchase Agreement Supplement as
applicable) also agree, jointly and severally, to reimburse the Initial
Purchasers and its officers, directors and each person, if any, who controls
such Initial Purchasers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act for any and all reasonable fees and expenses
(including without limitation the reasonable fees and expenses of counsel)
incurred by them in connection with enforcing their rights under this
Agreement (including without limitation its rights under Section 8).
36
<PAGE>
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Guarantors, the
Initial Purchasers, the Initial Purchasers' directors and officers, any
controlling persons referred to herein, the directors of the Company and the
Guarantors and their respective successors and assigns, all as and to the
extent provided in this Agreement, and no other person shall acquire or have
any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the First Mortgage Notes
from the Initial Purchasers merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
[Signature Page Follows]
37
<PAGE>
[Purchase Agreement - Signature Page]
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
ROYSTER-CLARK, INC.
By: /s/ Walter R. Vance
-----------------------------------
Name:
Title:
<PAGE>
ROYSTER-CLARK GROUP, INC.
By: /s/ Walter R. Vance
-----------------------------------
Name:
Title:
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ David P. Faris
----------------------------------
Name: David P. Faris
Title: Vice President
J.P. MORGAN SECURITIES INC.
By: /s/ Kenneth A. Lang
----------------------------------
Name: Kenneth A. Lang
Title: MD
<PAGE>
SCHEDULE A
Guarantors
Royster-Clark Group, Inc.
Royster-Clark Realty LLC
Royster-Clark AgriBusiness Realty LLC
Royster-Clark Hutson's Realty LLC
Royster-Clark Nitrogen Realty LLC
Royster-Clark Resources LLC
IMC AgriBusiness, Inc.
Hutson's Ag Services, Inc.
IMC Nitrogen Company
<PAGE>
SCHEDULE B
Principal Amount of
Initial Purchasers First Mortgage Notes
- ------------------ --------------------
Donaldson, Lufkin & Jenrette $150,000,000
Securities Corporation
J.P. Morgan Securities Inc. $ 50,000,000
------------
Total $200,000,000
============
<PAGE>
SCHEDULE C
The Security Agreements
Deeds of Trust/Mortgages
1. Deed of trust, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by Royster-Clark, Inc., a Delaware corporation, to
Chicago Title Insurance Company, a Missouri corporation, as Trustee, for the
benefit of the United States Trust Company of New York, a bank and trust company
organized under the banking laws of New York, as Collateral Agent, for and on
behalf of the holders of the First Mortgage Notes (Wilmington);
2. Deed of trust, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by Royster-Clark, Inc., a Delaware corporation, to
Chicago Title Insurance Company, a Missouri corporation, as Trustee, for the
benefit of the United States Trust Company of New York, a bank and trust company
organized under the banking laws of New York, as Collateral Agent, for and on
behalf of the holders of the First Mortgage Notes (Washington);
3. Deed of trust, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
to Chicago Title Insurance Company, a Missouri corporation, as Trustee, for the
benefit of the United States Trust Company of New York, a bank and trust company
organized under the banking laws of New York, as Collateral Agent, for and on
behalf of the holders of the First Mortgage Notes (Winston-Salem);
4. Deed of trust, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by Royster-Clark, Inc., a Delaware corporation, to
Chicago Title Insurance Company, a Missouri corporation, as Trustee, for the
benefit of the United States Trust Company of New York, a bank and trust company
organized under the banking laws of New York, as Collateral Agent, for and on
behalf of the holders of the First Mortgage Notes (Chesapeake);
5. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
as successor in interest by merger with Hutson Company, Inc., to the United
States Trust Company of New York, a bank and trust company organized under the
banking laws of New York, as Collateral Agent, for and on behalf of the holders
of the First Mortgage Notes (Florence);
6. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
as successor in interest by merger with Hutson Company, Inc., to the United
States Trust Company of New York, a bank and trust company organized under the
banking laws of New York, as Collateral Agent, for and on behalf of the holders
of the First Mortgage Notes (Mulberry);
7. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
as successor in interest by merger with
<PAGE>
Hutson Company, Inc., to the United States Trust Company of New York, a
bank and trust company organized under the banking laws of New York, as
Collateral Agent, for and on behalf of the holders of the First Mortgage
Notes (Americus);
8. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
as successor in interest by merger with Hutson Company, Inc., to the United
States Trust Company of New York, a bank and trust company organized under the
banking laws of New York, as Collateral Agent, for and on behalf of the holders
of the First Mortgage Notes (Marseilles);
9. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
as successor in interest by merger with Hutson Company, Inc., to the United
States Trust Company of New York, a bank and trust company organized under the
banking laws of New York, as Collateral Agent, for and on behalf of the holders
of the First Mortgage Notes (Cincinnati);
10. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
as successor in interest by merger with Hutson Company, Inc., to the United
States Trust Company of New York, a bank and trust company organized under the
banking laws of New York, as Collateral Agent, for and on behalf of the holders
of the First Mortgage Notes (Columbus);
11. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
as successor in interest by merger with Hutson Company, Inc., to the United
States Trust Company of New York, a bank and trust company organized under the
banking laws of New York, as Collateral Agent, for and on behalf of the holders
of the First Mortgage Notes (Washington C.H.);
12. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
as successor in interest by merger with Hutson Company, Inc., to the United
States Trust Company of New York, a bank and trust company organized under the
banking laws of New York, as Collateral Agent, for and on behalf of the holders
of the First Mortgage Notes (Mt. Sterling);
13. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
as successor in interest by merger with Hutson Company, Inc., to the United
States Trust Company of New York, a bank and trust company organized under the
banking laws of New York, as Collateral Agent, for and on behalf of the holders
of the First Mortgage Notes (Hartsville);
14. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware corporation,
as successor in interest by merger with Hutson Company, Inc., to the United
States Trust Company of New York, a bank and trust company organized under the
banking laws of New York, as Collateral Agent, for and on behalf of the holders
of the First Mortgage Notes (Murray);
<PAGE>
15. Mortgage, assignment of rents and leases, security agreement and fixture
filing dated April 22, 1999, by Royster-Clark, Inc., a Delaware corporation, as
successor in interest by merger with Hutson Company, Inc., to the United States
Trust Company of New York, a bank and trust company organized under the banking
laws of New York, as Collateral Agent, for and on behalf of the holders of the
First Mortgage Notes (Madison);
16. Deed to secure debt, assignment of rents and leases, security agreement and
fixture filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware
corporation, as successor in interest by merger with Hutson Company, Inc., to
the United States Trust Company of New York, a bank and trust company organized
under the banking laws of New York, as Collateral Agent, for and on behalf of
the holders of the First Mortgage Notes (Americus); and
17. Deed to secure debt, assignment of rents and leases, security agreement and
fixture filing dated April 22, 1999, by IMC AgriBusiness, Inc., a Delaware
corporation, as successor in interest by merger with Hutson Company, Inc., to
the United States Trust Company of New York, a bank and trust company organized
under the banking laws of New York, as Collateral Agent, for and on behalf of
the holders of the First Mortgage Notes (Tifton).
Security Agreements
1. Security Agreement dated April 22, 1999, by IMC Nitrogen Company, a Delaware
corporation, in favor of United States Trust Company of New York, a bank and
trust company organized under the banking laws of New York, as Collateral Agent,
for and on behalf of the holders of the First Mortgage Notes;
2. Security Agreement dated April 22, 1999, by IMC AgriBusiness, Inc., a
Delaware corporation, in favor of United States Trust Company of New York, a
bank and trust company organized under the banking laws of New York, as
Collateral Agent, for and on behalf of the holders of the First Mortgage Notes;
and
3. Security Agreement dated April 22, 1999, by Royster-Clark, Inc., a Delaware
corporation, in favor of United States Trust Company of New York, a bank and
trust company organized under the banking laws of New York, as Collateral Agent,
for and on behalf of the holders of the First Mortgage Notes.
Collateral Assignments of LLC Interests
1. Collateral Assignment of LLC Interests dated April 22, 1999, by IMC Nitrogen
Company, a Delaware corporation, in favor of United States Trust Company of New
York, a bank and trust company organized under the banking laws of New York, as
Collateral Agent, for and on behalf of the holders of the First Mortgage Notes;
2. Collateral Assignment of LLC Interests dated April 22, 1999, by Hutson's Ag
Services, Inc., a Kentucky corporation, in favor of United States Trust Company
of New York, a bank and trust company organized under the banking laws of New
York, as Collateral Agent, for and on behalf of the holders of the First
Mortgage Notes;
<PAGE>
3. Collateral Assignment of LLC Interests dated April 22, 1999, by
Royster-Clark, Inc., a Delaware corporation, in favor of United States Trust
Company of New York, a bank and trust company organized under the banking laws
of New York, as Collateral Agent, for and on behalf of the holders of the First
Mortgage Notes; and
4. Collateral Assignment of LLC Interests dated April 22, 1999, by IMC
AgriBusiness, Inc., a Delaware corporation, in favor of United States Trust
Company of New York, a bank and trust company organized under the banking laws
of New York, as Collateral Agent, for and on behalf of the holders of the First
Mortgage Notes.
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT B
Purchase Agreement Supplement
THIS PURCHASE AGREEMENT SUPPLEMENT is a supplement to that certain
Purchase Agreement, dated as of April 15, 1999 (the "Purchase Agreement"),
among Royster-Clark, Inc. (the "Company"), a Delaware corporation,
Royster-Clark Group, Inc., as Guarantor, and Donaldson, Lufkin and Jenrette
Securities Corporation and J.P. Morgan Securities Inc.
As a result of the acquisition by the Company of IMC AgriBusiness, Inc.,
Hutson's Ag Services, Inc. and IMC Nitrogen Company (collectively,
"AgriBusiness") from IMC Global, Inc., and the formation of limited purpose
subsidiaries Royster-Clark Realty LLC, Royster-Clark AgriBusiness Realty LLC,
Royster-Clark Hutson's Realty LLC, Royster-Clark Nitrogen Realty LLC and
Royster-Clark Resources LLC (collectively, the "Limited Liability Companies"
and, together with AgriBusiness, the "New Guarantors"), each of the New
Guarantors has become a direct or indirect subsidiary of the Company and
hereby agrees to be bound by the terms and provisions applicable to the
Guarantors under the Purchase Agreement, including but not limited to the
agreements in Section 5 thereof and the representations in Section 6 thereof,
as if each of the undersigned had executed the Purchase Agreement on the date
thereof.
This Purchase Agreement Supplement does not cancel or extinguish any
right or obligation of the parties to the Purchase Agreement. The parties
hereto agree that the Purchase Agreement shall be supplemented only with
respect to the matters referred to herein and the provisions of the Purchase
Agreement are otherwise in full force and effect.
Terms used but not defined herein shall have the meanings given to them
in the Purchase Agreement. This Purchase Agreement Supplement may be executed
in one or more counterparts and, if executed in more that one counterpart,
the executed counterparts shall each be deemed to be an original and all such
counterparts shall together constitute one and the same instrument.
This Purchase Agreement Supplement shall be governed by and construed in
accordance with the laws of New York, without regard to the conflict of law
rules thereof.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Purchase
Agreement Supplement as of April 22, 1999.
NEW GUARANTORS:
IMC AGRIBUSINESS, INC.
HUTSON'S AG SERVICES, INC.
IMC NITROGEN COMPANY
By:
-----------------------------
Name:
Title:
<PAGE>
ROYSTER-CLARK REALTY LLC
ROYSTER-CLARK AGRIBUSINESS REALTY LLC
ROYSTER-CLARK HUTSON'S REALTY LLC
ROYSTER-CLARK NITROGEN REALTY LLC
ROYSTER-CLARK RESOURCES LLC
By:
-----------------------------
Name:
Title:
<PAGE>
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By:
-------------------------------
Name:
Title:
J.P. MORGAN SECURITIES INC.
By:
-------------------------------
Name:
Title:
<PAGE>
SCHEDULE B-1
I. UCC Filings - Security Agreement Collateral
A. Filing Office - Royster-Clark, Inc.
1. State Filings
a. North Carolina Secretary of State (Wilmington, Washington)
b. Virginia State Corporation Commission (Chesapeake)
c. Wisconsin Secretary of State (Madison)
d. Delaware Secretary of State
e. New York Secretary of State
2. County Filings
a. New Hanover County, North Carolina UCC Records (Wilmington)
b. Beaufort County, North Carolina UCC Records (Washington)
c. Independent City of Chesapeake, Virginia (Chesapeake)
d. New York County
B. Filing Office - IMC AgriBusiness, Inc.
1. State Filings
a. Alabama Secretary of State (Florence)
b. Illinois Secretary of State (Marseilles)
c. North Carolina Secretary of State (Winston-Salem)
d. Ohio Secretary of State (Cincinnati, Columbus, Washington
C.H., Mt. Sterling)
e. South Carolina Secretary of State (Hartsville)
f. Kentucky Secretary of State (Murray)
g. Florida Secretary of State (Mulberry)
<PAGE>
h. New York Secretary of State
i. Delaware Secretary of State
2. County Filings
a. Hamilton County, Ohio UCC Records (Cincinnati)
b. Franklin County, Ohio UCC Records (Columbus)
c. Fayette County, Ohio UCC Records (Washington C.H.)
d. Madison County, Ohio UCC Records (Mt. Sterling)
e. Forsyth County, North Carolina (Winston-Salem)
f. Jefferson County (where IMC AgriBusiness, Inc.'s Registered
Agent is located in Kentucky) (Murray)
g. New York County
h. Sumter County, Georgia (Americus, Tifton)
C. Filing Office - IMC Nitrogen Company
1. State Filings
a. Illinois Secretary of State (East Dubuque)
b. New York Secretary of State
c. Delaware Secretary of State
2. County Filings
a. New York County
II. UCC Filings - Pledge Agreement Collateral
A. Royster-Clark, Inc.
1. Delaware Secretary of State
2. New York Secretary of State
3. New York County
B. IMC AgriBusiness, Inc.
<PAGE>
1. Delaware Secretary of State
2. New York Secretary of State
3. New York County
C. Hutson's Ag Services, Inc.
1. Kentucky Secretary of State
2. New York Secretary of State
3. New York County
D. IMC Nitrogen Company
1. Delaware Secretary of State
2. New York Secretary of State
3. New York County
SUPPLY AGREEMENT
DATED AS OF APRIL 22, 1999
AMONG
IMC KALIUM LTD.,
IMC-AGRICO COMPANY
AND
ROYSTER-CLARK, INC.
<PAGE>
TABLE OF CONTENTS
(not part of the Agreement)
Page No.
--------
1. Sale and Purchase 1
2. Term 2
3. Price Terms
(a) Procedure for Determination of Price Terms 2
(b) Basis of Determination 3
(c) ** 3
4. Quantity 4
(a) Quantities 4
(b) Purchases in Excess of Requirements 4
(c) Purchase Estimates 4
(d) Purchase and Sale Requirements; Remedies 5
5. Delivery, Title and Risk of Loss 6
(a) Delivery 6
(b) Title and Risk of Loss 6
6. Purchase Orders 6
7. Product Exchanges 6
8. Billing and Payment 7
9. Taxes and Duties 7
10. Specifications/Quality 7
11. Warranties and Disclaimer 7
12. Claims Limited Remedies 7
13. Indemnification 8
(a) Scope of Indemnification by Purchaser 8
(b) Scope of Indemnification by Seller 8
(c) Defense 8
14. Measurements 8
15. Force Majeure 8
16. Breach; Termination 9
(a) Late Payment 9
(b) Termination 10
17. Consent to Jurisdiction; Service of Process 10
18. Miscel1aneous 10
(a) Entire Agreement 10
(b) Non-waiver 10
(c) Counterparts 10
(d) Assignment 11
(e) Severability and Violation of Laws 11
(f) Applicable Law 11
(g) Notices 11
(h) Headings 12
(i) Bankrurpcy/Insolvency 12
(j) Confidentiality 13
(k) Good Faith 13
(l) Setoff 13
(m) Binding Effect 13
(o) Storage and Handling Agreements 13
- ------------
** These portions of this agreement were omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
<PAGE>
SUPPLY AGREEMENT
----------------
This SUPPLY AGREEMENT ("Agreement") is made and entered into as of April
-----------
22, 1999 among IMC KALIUM LTD., a Delaware corporation ("Kalium"), IMC-AGRICO
--------
COMPANY, a Delaware partnership ("Agrico"); and together with Kalium the
------
"Seller"), and Royster-Clark, Inc., a Delaware corporation ("Purchaser")
------ ---------
(successor in interest to Royster-Clark Group, Inc., formerly known as R-C
Delaware Acquisition Inc.).
R E C I T A L
-------------
Pursuant to that certain Stock Purchase Agreement dated January 21, 1999
------------------------
(the "Stock Purchase Agreement") between IMC Global Inc., The Vigoro Corporation
------------------------
("TVC") and R-C Delaware Acquisition Inc., TVC has agreed to sell, and Purchaser
---
has agreed to purchase, the capital stock of three (3) subsidiaries of TVC
engaged in the business of manufacturing or purchasing and selling (through
wholesale and retail channels) crop production inputs and services (the
"Business").
--------
A G R E E M E N T S
-------------------
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in connection with the closing
of the transactions contemplated by the Stock Purchase Agreement, the parties
hereby agree as follows.
1. Sale and Purchase. During the Term (as defined herein), Seller shall sell and
-----------------
Purchaser shall purchase and take delivery of those products identified in
Schedule 1 hereto (individually, a "Product", and collectively, the "Products").
- ---------- ------- --------
Purchases and sales shall be made hereunder on the Price Terms (as defined
herein), in the quantities and upon the terms herein set forth. Seller and
Purchaser acknowledge that all parties to this Agreement are entering into a
long-term agreement, and that Purchaser's ability to conduct its business and
service its customers in a timely and professional manner will be to a
significant extent dependent on Seller's performance hereunder. Either Seller or
Purchaser may at any time initiate an audit to verify the other parties'
compliance with the terms of this Agreement, including Sections 3(a), 3(b), 3(c)
or 4 (the party initiating such an audit is referred to as the "Auditing Party"
--------------
and the party being audited is referred to as the "Audited Party"). Any such
-------------
audit shall be conducted by a national accounting firm (the "Accounting Firm")
---------------
selected by the Audited Party and consented to by the Auditing Party, such
consent not to be unreasonably withheld or delayed. The Accounting Firm shall be
directed by the Audited Party and the Auditing Party to identify the books and
records, and any other relevant information, including accountant's work papers
and reasonable access to personnel, of the Audited Party which are necessary for
the resolution of the disputed matter. The Audited Party shall make available to
the Accounting Firm such books, records and other information (including work
papers and reasonable access to personnel) as the Accounting Firm may reasonably
request during the review; provided that the audit performed by the Accounting
-1-
<PAGE>
Firm may not unreasonably interfere with the business and operations of the
Audited Party. The Accounting Firm may share the results of the audit with the
Auditing Party, but the Accounting Firm shall not disclose to the Auditing Party
the names of any customers or suppliers of the Audited Party or other
confidential information (including, without limitation, specific pricing or
volume information as to particular customers) to the Auditing Party. The fees
and expenses of the Accounting Firm shall be paid by the Auditing Party unless
the audit by the Accounting Firm demonstrates that the Audited Party has not
been in material compliance with the provisions of this Agreement, in which case
the Audited Party shall pay such fees and expenses. In the event that following
the audit, the parties disagree over any matter, such matter shall be determined
pursuant to the procedures set forth on Schedule 6.
2. Term. The initial term of this Agreement (the "Initial Term") shall be a
---- -------------
period of ten (10) consecutive Contract Years (as defined herein), unless
otherwise earlier terminated as provided herein. As used herein, a "Contract
--------
Year" shall be a one (1) year period commencing on January 1 of any calendar
- ----
year, except that the initial Contract Year shall commence on the date of this
Agreement and end on December 31, 1999 (the "Initial Contract Year"). Any
---------------------
termination of this Agreement shall not affect any rights or unsatisfied
obligations accrued hereunder prior to the date of termination. Following
expiration of the initial term, this contract shall be automatically renewed for
subsequent periods of five (5) years unless otherwise canceled, by either party
giving written notice six (6) months prior to the end of the Initial Term or any
renewal term. The Initial Term, together with and any renewal term(s) shall be
referenced herein as the "Term."
----
3. Price Terms.
-----------
**
- ------------
** These portions of this agreement were omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
-2-
<PAGE>
4. Quantity.
--------
(a)**
(b) Purchases in Excess of Requirements. If Purchaser shall desire to
-----------------------------------
purchase a quantity of any Product in excess of the Requirements, Purchaser
shall solicit quotations from suppliers thereof, including Seller. Purchaser
shall have the right to purchase such quantities in excess of Requirements from
suppliers other than Seller.
(c) Purchase Estimates. Pursuant to good faith negotiations between the
------------------
parties, Purchaser shall provide Seller with an estimate (the "Initial
Estimate") not later than sixty (60) days prior to the commencement of each
Contract Year of the quantity of each Product to be purchased by Purchaser
during such Contract Year, and of the Quarterly (as defined herein) amounts
thereof, in substantially the form of Schedule 5 hereto. The Quarterly amounts
shall be a good faith estimate of delivery requirements for the upcoming
Contract Year and shall be based substantially upon delivery requirements
- ------------
** These portions of this agreement were omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
-3-
<PAGE>
experienced during the preceding Contract Year (without giving effect to special
accommodations made by Purchaser to accept early delivery of Product); provided
that Purchaser shall be permitted to make reasonably adjustments to such
Quarterly amounts from year to year. As used herein, "Quarter" means a calendar
-------
quarter, that is, a 3-month period beginning on January 1, April 1, July 1 and
October 1. The Initial Estimate for the Initial Contract Year is included in
Schedule 5 attached hereto. Pursuant to good faith negotiations between the
parties, Purchaser shall update such estimate not later than the first day of
the month immediately preceding each Quarter (December 1, March 1, June 1 and
September 1, as applicable).
(d) Purchase and Sale Requirements; Remedies.
----------------------------------------
(i) (A) (1) **
(2) During each Contract Year, Seller shall use commercially
reasonable efforts to supply any Requirements in excess of the Initial
Estimate for each Product and to fill reasonable requests by Purchaser for
Product in excess of forecasted amounts in any particular Quarter.
(3) Notwithstanding any other provision of this Section 4, if Seller
is unable to supply the Requirements and shall have declared a national or
regional allocation for a Product or Products on account of any
circumstance other than a Force Majeure, Seller shall allocate its
available Product to Purchaser on a basis which is equal to or more
favorable than the allocation of Product to *
other large customer, and such allocation shall be Seller's sole supply
obligation for such Product or Products during such period of allocation.
(B) In the event Seller fails to supply any quantities of Product as
required by Section 4 (d)(i)(A)(1) or Section 4(d)(i)(A)(3), Purchaser
shall be entitled to obtain cover supplies of Product on such reasonable
terms and conditions as are available in the market for such quantities
from suppliers other than Seller, and Purchaser's sole and exclusive remedy
for any cause of action related thereto, whether based on breach of
contract, breach of warranty, strict liability in tort or any other cause
of action, is expressly limited to the greater of (x) the difference in the
price terms obtained by Purchaser for the quantities required by such
Sections to be supplied by Seller (but which were not so supplied) and the
applicable Price Terms or (y) 3% of the Price Terms for the Product Seller
failed to supply as required Section 4(d)(i)(A)(1) or Section
- ------------
** These portions of this agreement were omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
-4-
<PAGE>
4(d)(i)(A)(3); provided, however, that, at the election of Seller, Seller
-------- -------
may satisfy its failure to supply Product as required by Section
4(d)(i)(A)(1) or Section 4(d)(i)(A)(3) by delivering to Purchaser on the
Price Terms the quantity and type of Product it so failed to supply, or
another Product on the Price Terms in quantities to be agreed to by Seller
and Purchaser, in each case, pursuant to a Purchase Order agreed to by the
parties specifying the location for delivery of the Products. Seller and
Purchaser agree that with respect to any quantities to which Purchaser is
not entitled to an allocation pursuant to Section 4(d)(i)(A)(3), and with
respect to any quantities Seller is unable to supply pursuant to Section
4(d)(i)(A)(2), Purchaser shall have no recourse against Seller hereunder
with respect to such quantities, and the purchase of cover supplies by
Purchaser for such quantities from suppliers other than Seller shall not
constitute a breach of Purchaser's obligations hereunder.
(ii) (A) Each Contract Year, Purchaser shall deliver an officer's
certificate certifying that Purchaser purchased all of its Requirements for
such Product from Seller and not from an alternate producer or supplier
during such Contract Year.
(B) In the event it is determined that Purchaser has failed to
purchase the Requirements for any Product during a Contract Year, Purchaser
shall be obligated to pay Seller the greater of (x) 3% of the aggregate
price which would have been payable for such quantities pursuant to the
Price Terms or (y) the difference in the aggregate price paid by Purchaser
for such Product and the aggregate price which would have been paid for
such Product if purchased on the Price Terms; provided, however, that, at
-------- -------
the election of Purchaser, Purchaser may satisfy any such failure to
purchase Product by purchasing from Seller on the Price Terms the quantity
and type of Product Purchaser so failed to purchase, or another Product on
the Price Terms in quantities to be agreed to by Seller and Purchaser, in
each case, in excess of Requirements for such Contract Year pursuant to a
Purchase Order placed by Purchaser and accepted by Seller specifying the
location for delivery of the Products. The foregoing remedies shall be
Seller's sole and exclusive remedy for any cause of action related thereto,
whether based on breach of contract, breach of warranty, strict liability,
and tort, or any other cause of action, is expressly limited to such
payment.
5. Delivery, Title and Risk of Loss.
--------------------------------
(a) Delivery. Unless the parties otherwise mutually agree with respect to a
--------
particular Purchase Order: (i) Purchaser shall arrange for Product to be
delivered by truck to be picked up at a mutually agreeable Seller shipping point
and such Product shall be sold F.O.B. shipping point, and (ii) Seller shall
arrange for shipment of Product to be delivered by rail or barge and such
Product shall be sold F.O.B. destination.
(b) Title and Risk of Loss. Title to and risk of loss of any Product sold
----------------------
-5-
<PAGE>
hereunder F.O.B. destination shall pass to Purchaser upon delivery by the
carrier to Purchaser at the destination, and title to and risk of loss to any
Product sold hereunder F.O.B. shipping point shall pass to Purchaser upon
delivery to the carrier at the shipping point.
6. Purchase Orders. All sales and purchases of Product shall be made pursuant to
---------------
a specified purchase order from Purchaser to Seller ("Purchase Order"),
identifying and stating the quantity of Product to be purchased by Purchaser,
the Purchase Price for the Product to be purchased by Purchaser, the location to
which Product should be delivered and the means of transportation by which the
Product should be delivered. Product to be delivered by truck shall be only in
whole truckload quantities.
7. Product Exchanges. Seller may (a) fill any purchase order with Product
-----------------
obtained through exchange with a third party, or (b) provide Product, produced
by Seller to a mutually agreeable third party for sale to Purchaser; provided,
--------
however, that, in either event, Seller shall remain responsible for Product
- -------
quality as though Product were produced by Seller or its Affiliates and sold
directly to Purchaser.
8. Billing and Payment. Seller shall invoice Purchaser separately on the date of
-------------------
shipment for each shipment of Product sold hereunder.**
9. Taxes and Duties. Purchaser shall be responsible for, and shall promptly pay
----------------
or reimburse Seller if Seller pays, all taxes, charges, fees, duties and other
governmental charges (other than income taxes) imposed on the sale,
transportation or use of any Product sold hereunder.
10. Specifications/Quality. Seller shall provide Products meeting the
----------------------
specifications set forth in Schedule 1 hereto.
----------
11. Warranties and Disclaimer. Seller makes no warranty of any kind, express or
-------------------------
implied, except that Seller represents and warrants that (i) Products sold
hereunder shall at the time of delivery substantially conform to the
specifications set forth in Schedule 1 hereto, (ii) Seller will convey good
----------
title thereto, free from any security interest (except for a security interest
created by or through Purchaser) (iii) Products sold hereunder shall be of a
quality that is usual and customary in the industry, (iv) Products sold
hereunder shall have free-flowing characteristics, (v) Products sold hereunder
shall not be adulterated, and be generally free of foreign materials, all in
accordance with and subject to industry standards, and (vi) Products sold
hereunder shall contain only a immaterial amount of dust and shall have been
"cured" for an appropriate amount of time, all in accordance with industry
standards and (vii) Products sold hereunder shall be in conformity with, in all
material respects, any applicable statutes, rules or regulations.
- ------------
** These portions of this agreement were omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
-6-
<PAGE>
THE ABOVE WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ANY OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, WHICH ARE HEREBY EXPRESSLY DISCLAIMED. Seller makes no recommendations
for use of any of the Products and no warranty of the results to be obtained by
such use.
12. Claims/Limited Remedies. In the event any Product fails to conform to any of
-----------------------
the above warranties, Purchaser's sole and exclusive remedy for any cause of
action related thereto, whether based on breach of contract, breach of warranty,
strict liability in tort or any other cause of action, is expressly limited, at
Purchaser's option, with the consent of Seller, which consent shall not be
unreasonably withheld or delayed, to (a) a refund of the purchase price for the
nonconforming Product, (b) the replacement of the nonconforming Product or (c) a
refund of a portion of the purchase price for the nonconforming Product (as
determined by the parties in good faith). To the extent Purchaser is entitled to
either of the remedies set forth in clause (a) or (b) above, Purchaser shall
return, reroute or dispose of the nonconforming Product as requested by Seller.
All claims relating to quantity or condition of any Product delivered hereunder
(other than on account of the representations in Section 11(v), (vi) or (vii)
shall be waived unless received by Seller in writing within seven (7) days after
delivery. All claims relating to condition of any Product delivered hereunder on
account of the representations in Section 11(v), (vi) or (vii) shall be waived
unless received by Seller in writing within seven (7) days after noncomformity
with such representations shall have been discovered or should have been
discovered by Purchaser (and in no event later than ninety (90) days following
delivery).
13. Indemnification.
---------------
(a) Scope of Indemnification by Purchaser. Purchaser will indemnify and hold
-------------------------------------
harmless, and at Seller's election defend, Seller, its Affiliates and the third
parties referred to in Section 7, and their respective officers, directors,
shareholders, employees and agents and the heirs, personal representatives,
successors and assigns of all of the foregoing (collectively, the "Seller
Indemnitees") from and against all liabilities, demands, claims, actions and
causes of action, assessments, losses, penalties, costs, damages and expenses
(including reasonable attorneys' and expert witness fees) ("Losses") sustained
or incurred by any of the Seller Indemnitees as a result of or arising out of or
by virtue of the sale, use or storage of Products except to the extent such
Losses arise out of a breach of the representations and warranties of Seller in
Section 11 (whether or not Purchaser has a remedy under Section 12 in respect
thereof).
(b) Scope of Indemnification by Seller. Seller will indemnify and hold harmless,
----------------------------------
and at Purchaser's election defend, Purchaser, its Affiliates and their
respective officers, directors, shareholders, employees and agents and the
heirs, personal representatives, successors and assigns of all of the foregoing
(collectively, the "Purchaser Indemnitees") from and against all Losses
sustained or incurred by any of the Purchaser Indemnitees as a result of or
-7-
<PAGE>
arising out of or by virtue of the sale, use or storage of Products to the
extent such Losses arise out of a breach of the representations and warranties
of Seller in Section 11.
(c) Defense. Either party shall have the right, at its own expense, to
-------
participate in the defense of any action or proceeding brought by a third party
which results in a claim for indemnification, and if said right is exercised,
the parties shall cooperate in the defense of said action or proceeding.
14. Measurements. Seller's weights and analysis shall determine the quantities
------------
sold hereunder unless proved to be in material error.
15. Force Majeure. Either party's failure or inability to make or take any
-------------
delivery or deliveries when due, or the failure or inability of either party to
effect timely performance of any other obligation required of it hereunder,
except any obligation to pay money, if caused by Force Majeure (as defined
herein) shall not constitute a default hereunder or subject the party claiming
Force Majeure to any liability to the other party, if the party so claiming
shall have promptly notified the other party of the existence and expected
duration thereof and the estimated effect thereof on its ability to perform
hereunder. The party claiming Force Majeure shall promptly notify the other
party when the Force Majeure has ceased to affect its ability to perform
hereunder. In the event of Force Majeure, the total quantities to be delivered
hereunder shall be reduced to the extent of deliveries omitted during the Force
Majeure period and as a result of the Force Majeure. For so long as Seller's
ability to perform is affected by Force Majeure, Seller shall allocate its total
production among its various requirements therefor among Purchaser
** and other large customers on a basis which is more favorable
than the allocation of Product to any ** other large
customer, and Seller shall not be obligated to procure any quantity of Product
from any alternate producer or supplier and Seller shall not be liable for
resulting incomplete fulfillment of this Agreement. As used herein, "Force
Majeure" means and includes any act of God, the public enemy, any accident,
explosion, fire, storm, earthquake, flood, drought, perils at sea, strikes,
lockouts, labor disputes, riots, sabotage, embargo, war (whether or not declared
and whether or not the United States of America is a participant), prorations
mandated by federal, state, provincial or municipal law, failure or delay of
transportation beyond the reasonable control of the party affected thereby,
inability to obtain raw materials, supplies, equipment, fuel, power, labor, or
other operational necessity beyond the reasonable control of the party affected
thereby, interruption or curtailment of power supply, or any other circumstance
of a similar or different nature beyond the reasonable control of the party
affected thereby. In this connection, neither party shall be required to resolve
labor disputes or disputes with suppliers of raw materials, supplies, equipment,
fuel or power, except in accordance with such party's business judgment as to
its best interest.
- ------------
** These portions of this agreement were omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
-8-
<PAGE>
16. Breach; Termination.
-------------------
(a) Late Payment. If Purchaser shall be late in making any payment for Products
------------
hereunder (other than for payments which are the subject of a good faith dispute
between the parties, as to which no penalty shall accrue until the dispute has
been resolved), all late payments shall bear interest from the due date to the
date of payment in full at the rate of one and one-half percent (1.5%) per
month, and, if such delinquency remains uncured for 30 days following notice
thereof, Seller may at its sole discretion by notice to Purchaser elect one or
more of the following courses of action:
(i) cease to make any further deliveries hereunder until Purchaser has made
up the late payment and has taken steps to assure Seller to its
satisfaction that there shall be no such delinquencies in the future; and
(ii) refuse to make any further deliveries hereunder except upon cash
payments on delivery until Purchaser has made up the late payment and has
taken steps to assure Seller to its satisfaction that there shall be no
such delinquencies in the future.
If Purchaser has not paid in full all late payments within thirty (30) days of
such notice, Seller may at its option by notice to Purchaser terminate this
Agreement. The election by Seller of any of the remedies hereunder shall in no
way limit any other rights and remedies available to Seller in law or in equity.
(b) Termination. If either party shall fail to perform any material part of this
-----------
Agreement (other than provided for in Section 16(a)) and, upon notice of such
failure by the other party, shall fail to remedy the same within thirty (30)
days of such notice, then, in such event, this Agreement may be terminated
forthwith by written notice at the option of the other party with such other
party retaining all its other rights and remedies available to it in law and in
equity.
17. Consent to Jurisdiction; Service of Process. This Agreement has been
----------------------- ------------------
executed and delivered in Chicago, Illinois. Seller and Purchaser each
agrees to the exclusive jurisdiction of any state or Federal court within the
City of Chicago, with respect to any claim or cause of action arising under or
relating to this Agreement, and waives personal service of any and all process
upon it, and consents that all services of process be made by registered or
certified mail, return receipt requested, directed to it at its address set
forth in Section 18(g), and service so made shall be deemed to be completed when
received. Seller and Purchaser each waive any objection based upon forum non
---------
conveniens and waive any objection to venue of any action instituted hereunder.
- ----------
Nothing in this Section 17 shall affect the right of Seller or Purchaser to
serve legal process in any other manner permitted by law. Seller and Purchaser
each waives the right to a jury trial in connection with any suit, action or
proceeding seeking enforcement of such party's rights under, or by virtue of any
party's breach of, this Agreement.
-9-
<PAGE>
18. Miscellaneous.
-------------
(a) Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties hereto with respect to the subject matter of this Agreement. Any and all
prior discussions or agreements with respect hereto are merged into and
superseded by the terms of this Agreement. This Agreement may be modified or
amended only in a writing signed by both parties which expressly refers to this
Agreement and states its intention to modify or amend this Agreement. No such
amendment or modification shall be effected by use of any purchase order,
acknowledgment, invoice or other form of either party and in the event of
conflict between the terms of this Agreement and any such form, the terms of
this Agreement shall control (it being understood that no Purchase Order may
contain terms which are inconsistent with the terms of this Agreement).
(b) Non-waiver. The failure in any one or more instances of a party to
----------
insist upon performance of the terms, covenants or conditions of this Agreement,
to exercise any right or privilege in this Agreement conferred, or the waiver by
said party of any breach of any of the terms, covenants or conditions of this
Agreement, shall not be construed as a subsequent waiver of any such terms,
covenants, conditions, rights or privileges, but shall continue and remain in
full force as if no such forbearance or waiver had occurred. No waiver shall be
effective unless it is in writing and signed by an authorized representative of
the waiving party.
(c) Counterparts. This Agreement may be executed in multiple counterparts,
------------
each of which shall be deemed to be an original and all such counterparts shall
constitute but one instrument.
(d) Assignment. Neither party shall assign this Agreement, in whole or in
----------
part, without the prior written consent of the other party, provided, however,
-------- -------
that any party, its successors and other permitted assigns may assign this
Agreement and its rights and obligations hereunder, to a successor to or
assignee of substantially all of the assets and business of the assignor to
which this Agreement applies, or as a result of a merger or consolidation or to
an Affiliate, its successors or other permitted assigns. Any assignment or
attempted assignment in contravention of the foregoing shall be null and void,
shall be considered a material breach of the Agreement and shall permit the
other party, in addition to any other rights and remedies which may be available
by law or in equity, to terminate this Agreement.
(e) Severability and Violation of Laws. The invalidity of any provision of
----------------------------------
this Agreement or a portion of the provisions shall not effect the validity of
any other provision of this Agreement or the remaining portion of the applicable
provision. Notwithstanding anything herein to the contrary, no party shall be
obligated to perform any obligation herein or comply with any provision herein
to the extent such obligation or provision conflicts with or is in violation of
any applicable law.
(f) Applicable Law. This Agreement shall be governed and controlled as to
--------------
validity, enforcement, interpretation, construction, effect and all other
-10-
<PAGE>
respects while the internal laws of the State of Illinois applicable to
contracts made in that state, without giving effect to the conflict of laws
principles thereof.
(g) Notices. All notices and other communications hereunder, shall be in
-------
writing and shall be deemed validly given if delivered personally or sent by
certified or registered mail, postage prepaid, or by telex, fax or cable to the
following addresses, unless otherwise designated or changed by written notice to
the other parties hereto:
If to Agrico addressed to:
2345 Waukegan Road
Suite E-200
Bannockburn, IL 60015
Attention: Bob Turner
Fax: (847) 607-3535
with a copy to:
IMC Global Inc.
2100 Sanders Road
Northbrook, Illinois 60062-6146
Attention: General Counsel
Fax: (847) 205-4916
If to Kalium addressed to:
2345 Waukegan Road
Suite E-200
Bannockburn, IL 60015
Attention: Bob Turner
Fax: (847) 607-3535
with a copy to:
IMC Global Inc.
2100 Sanders Road
Northbrook, Illinois 60062-6146
Attention: General Counsel
Fax: (847) 205-4916
-11-
<PAGE>
If to Purchaser addressed to:
Royster-Clark, Inc.
10 Rockefeller Plaza, Suite 1120
New York, New York 10020
Attention: Randolph G. Abood
Fax: (212) 332-2994
Any notice delivered personally shall be deemed received when such delivery is
tendered and if mailed in one of the manners provided above, it shall be deemed
received on the second business day after it is postmarked. Notices sent by
other methods shall be deemed received when actually received by the addressee
or its authorized agent.
(h) Headings. The Section headings as to the contents of particular
--------
Sections are for the convenience of the parties and are in no way to be
construed as part of this Agreement or as a limitation of the scope of the
particular Sections to which they refer.
(i) Bankruptcy/Insolvency. If either Purchaser or Seller becomes insolvent
---------------------
or ceases to function as a going concern, or if a receiver for it is appointed
or applied for, or a petition under any bankruptcy or reorganization statute is
filed by it or against it, or if it makes an assignment for the benefit of
creditors or takes advantage of any insolvency statute, the other party hereto,
in addition to any other rights and remedies which may be available by law or in
equity, may terminate this Agreement.
(j) Confidentiality. During the Term, the parties shall keep in strict
---------------
confidence the content of this Agreement and all information disclosed by the
other parties hereunder or Affiliates of such parties unless otherwise required
by a governmental body or a court of law or by the applicable rules of any stock
exchange.
(k) Good Faith. Each party shall at all times act in good faith in taking
----------
all actions and performing all obligations, covenants and agreements in
connection with the transaction contemplated hereby.
(l) Setoff. Purchaser and Seller each hereby waives all rights of setoff
------
and recoupment it may have against the other party hereto with respect to all
amounts which may be owed from time to time pursuant to this Agreement.
(m) Binding Effect. This Agreement shall inure to the benefit of and be
--------------
binding upon the parties hereto, and their successors and permitted assigns.
(n) No Consequential Damages. IN NO EVENT SHALL SELLER OR PURCHASER BE
------------------------
LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL (INCLUDING LOSS OF
PROFIT) OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT, WHETHER BASED ON
BREACH OF CONTRACT, BREACH OF WARRANTY, STRICT LIABILITY IN TORT OR ANY OTHER
CAUSE OF ACTION.
(o) Storage and Handling Agreements. Within 45 days following the date of
-------------------------------
this Agreement, Purchaser and Agrico agree to enter into Storage and Handling
-12-
<PAGE>
Agreements in the form attached as Exhibit A hereto (the "Phosphate Warehousing
------- ---------------------
Agreements"), and Purchaser and Kalium agree to enter into Storage and Handling
- ----------
Agreements in the form attached as Exhibit B hereto (the "Potash Warehousing
------------------
Agreements" and, together with the Phosphate Warehousing Agreement,
- ----------
collectively, the "Warehousing Agreements" or, individually, a "Warehousing
---------------------- -----------
Agreement"). The Warehousing Agreements will provide for storage and handling at
- ---------
each of the facilities of IMC AgriBusiness which are being used by Kalium and
Agrico, respectively, to store Product as of the date hereof. The forms of each
of the Potash Warehousing Agreements and the Phosphate Warehousing Agreements
will be completed based upon the present arrangements under which Product is
stored at such facilities. Until the parties enter into the Warehousing
Agreements, the terms of such arrangements will be continued based upon existing
letter agreements between IMC AgriBusiness Inc. and each Seller.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
IMC KALIUM LTD.
By: /s/ Lynn F. White
-----------------------------
Its: SVP
-----------------------------
IMC-AGRICO COMPANY
By: IMC-AGRICO MP, INC.,
its managing general partner
By: /s/ Lynn F. White
-----------------------------
Its: SVP
-----------------------------
ROYSTER-CLARK, INC.
By: /s/ G. Kenneth Moshenek
-----------------------------
Its:
-----------------------------
-14-
Working Copy
ss.401(k) PROTOTYPE
BASIC PLAN DOCUMENT #02
1989 RESTATEMENT
AND
As Amended By
The FIRST AMENDMENT Effective January 1, 1993
The SECOND AMENDMENT Effective 1, 1993 and January 1, 1994
The THIRD AMENDMENT Effective January 1, 1994 and January 1, 1995
The FOURTH AMENDMENT Generally Effective December 12, 1994
Note: Material added or modified by the First, Second and Third Amendments is
shown in italics. Modified section numbers are not generally shown in
italics. Material deleted without replacement is indicated by a
(rectangle).
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1 INTRODUCTION................................................................................................1
1.1 Definitions......................................................................................1
1.1.1 Accounts................................................................................1
(a) Total Account...........................................................................1
(b) Retirement Savings Account..............................................................1
(c) Employer Matching Account...............................................................1
(d) Employer Contributions Account..........................................................1
(e) Rollover Account........................................................................1
(f) Nondeductible Voluntary Account.........................................................1
(g) Deductible Voluntary Account............................................................2
(h) Transfer Account........................................................................2
(i) Suspense Account........................................................................2
1.1.2 Administrator's Representative..........................................................2
1.1.3 Affiliate...............................................................................2
1.1.4 Annual Valuation Date...................................................................2
1.1.5 Beneficiary.............................................................................2
1.1.6 Board of Directors......................................................................3
1.1.7 Disability..............................................................................3
1.1.8 Effective Date..........................................................................3
1.1.9 Eligibility Service.....................................................................3
1.1.10 Employee................................................................................4
1.1.11 Employers...............................................................................6
1.1.12 Entry Date..............................................................................6
1.1.13 Event of Maturity.......................................................................6
1.1.14 Fund....................................................................................6
1.1.15 Hours of Service........................................................................6
1.1.16 Investment Manager......................................................................9
1.1.17 Normal Retirement Age...................................................................9
1.1.18 One-Year Break in Service...............................................................9
1.1.19 Participant.............................................................................9
1.1.20 Plan....................................................................................9
1.1.21 Plan Statement.........................................................................10
1.1.22 Plan Year..............................................................................10
1.1.23 Prior Plan Statement...................................................................10
1.1.24 Prototype Documents....................................................................10
1.1.25 Prototype Sponsor......................................................................10
1.1.26 Recognized Compensation................................................................10
1.1.27 Recognized Employment..................................................................11
1.1.28 Retirement Savings Agreement...........................................................12
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C> <C>
1.1.29 Trustee................................................................................12
1.1.30 Valuation Date.........................................................................12
1.1.31 Vested.................................................................................13
1.1.32 Vesting Service........................................................................13
1.2 Rules of Interpretation.........................................................................14
1.3 Establishment of New Plan.......................................................................14
1.4 Amendment And Change of Trustee.................................................................14
1.5 Amendment and Continuation......................................................................15
1.6 Automatic Exclusion From Prototype Plan.........................................................15
1.7 Special Requirements............................................................................15
1.7.1 Discriminatory Benefits................................................................15
1.7.2 Discriminatory Coverage................................................................15
1.7.3 Control Defined........................................................................15
SECTION 2 ELIGIBILITY AND PARTICIPATION.............................................................................17
2.1 Initial Entry Into Plan.........................................................................17
2.2 Special Rule For Former Participants............................................................17
2.3 Enrollment......................................................................................17
2.4 Waiver of Enrollment Procedures.................................................................17
2.5 Retirement Savings Agreement....................................................................18
2.6 Modifications Of Retirement Savings Agreement...................................................18
2.6.1 Increase...............................................................................18
2.6.2 Decrease...............................................................................18
2.6.3 Voluntary Termination..................................................................18
2.6.4 Termination Of Recognized Employment...................................................18
2.6.5 Form of Agreement......................................................................19
2.7 Section 401(k) Compliance.......................................................................19
2.7.1 Special Definitions....................................................................19
2.7.2 Special Rules..........................................................................20
2.7.3 The Tests..............................................................................21
2.7.4 Remedial Action........................................................................22
2.8 Annual Certification............................................................................22
SECTION 3 CONTRIBUTIONS AND ALLOCATION THEREOF......................................................................23
3.1 Employer Contributions - General................................................................23
3.1.1 Source of Employer Contributions.......................................................23
3.1.2 Limitation.............................................................................23
3.1.3 Form of Payment........................................................................23
3.2 Retirement Savings Contributions................................................................23
3.2.1 Amount.................................................................................23
3.2.2 Allocation.............................................................................23
3.3 Required Matching Contributions.................................................................23
3.3.1 Amount.................................................................................23
3.3.2 Allocation.............................................................................24
</TABLE>
- ii -
<PAGE>
<TABLE>
<S> <C> <C>
3.4 Discretionary Employer Contributions............................................................24
3.4.1 General................................................................................24
3.4.2 Curative Allocation - ss.401(k)........................................................24
3.4.3 Discretionary Matching Contributions...................................................25
3.4.4 Curative Allocation - ss.401(m)........................................................25
3.4.5 Discretionary Profit Sharing Contributions.............................................26
3.5 Eligible Participants...........................................................................28
3.6 Make-Up Contributions For Omitted Participants..................................................28
3.7 Rollover Contributions..........................................................................28
3.7.1 Eligible Contributions.................................................................28
3.7.2 Specific Review........................................................................29
3.7.3 Allocation.............................................................................29
3.8 Nondeductible Voluntary Contributions...........................................................29
3.8.1 Method of Contribution.................................................................29
3.8.2 Payment to Trustee.....................................................................29
3.8.3 Allocation.............................................................................30
3.9 Deductible Voluntary Contributions..............................................................30
3.10 Section 401(m) Compliance.......................................................................30
3.10.1 Special Definitions....................................................................30
3.10.2 Special Rules..........................................................................31
3.10.3 The Tests..............................................................................33
3.10.4 Remedial Action........................................................................34
3.11 Limitation on Allocations.......................................................................35
3.12 Effect of Disallowance Of Deduction Or Mistake Of Fact..........................................35
SECTION 4 INVESTMENT AND ADJUSTMENT OF ACCOUNTS.....................................................................36
4.1 Establishment Of Subfunds.......................................................................36
4.1.1 Establishing Commingled Subfunds.......................................................36
4.1.2 Individual Subfunds....................................................................36
4.1.3 Operational Rules......................................................................36
4.1.4 Revising Subfunds......................................................................36
4.1.5. ERISA Section 404(c) Compliance........................................................37
4.2 Valuation and Adjustment of Accounts............................................................38
4.3 Management And Investment of Fund...............................................................41
SECTION 5 VESTING...................................................................................................42
5.1. Employer Matching Account and Employer Contributions Account....................................42
5.1.1. Progressive Vesting....................................................................42
5.1.2. Full Vesting...........................................................................42
5.1.3. Special Rule for Partial Distributions.................................................42
5.1.4. Effect of Break on Vesting.............................................................43
5.2 Optional Vesting Schedule.......................................................................43
5.2.1. Election...............................................................................43
5.2.2. Qualifying Participant.................................................................43
</TABLE>
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5.2.3. Procedure for Election.................................................................43
5.2.4. Conclusive Election....................................................................44
5.3 Other Accounts..................................................................................44
SECTION 6 MATURITY..................................................................................................45
6.1. Events of Maturity..............................................................................45
6.2. Disposition of Non-Vested Portion of Account....................................................46
6.2.1. No Break...............................................................................46
6.2.2. A Break................................................................................46
6.2.3. Forfeiture Date........................................................................46
6.3 Restoration of Forfeited Accounts...............................................................46
SECTION 7 DISTRIBUTION..............................................................................................48
7.1 Application For Distribution....................................................................48
7.1.1. Application Required...................................................................48
7.1.2. Exception For Small Amounts............................................................48
7.1.3. Exception for Required Distributions...................................................48
7.1.4. Direct Rollover........................................................................49
7.1.5. Notices................................................................................49
7.1.6. Lost Distributees......................................................................50
7.2. Time of Distribution............................................................................50
7.2.1. Earliest Beginning Date................................................................50
7.2.2. Required Beginning Date................................................................51
7.3. Forms of Distribution...........................................................................52
7.3.1. Forms Available........................................................................52
7.3.2. Substantially Equal....................................................................53
7.3.3. Life Expectancy........................................................................54
7.3.4. Presumptive Forms......................................................................54
7.3.5. Effect Of Reemployment.................................................................58
7.3.6. TEFRA ss.242(b) Transitional Rules.....................................................58
7.4. Designation Of Beneficiaries....................................................................58
7.4.1. Right To Designate.....................................................................58
7.4.2. Spousal Consent........................................................................58
7.4.3. Failure Of Designation.................................................................59
7.4.4. Definitions............................................................................60
7.4.5. Special Rules..........................................................................60
7.5. Death Prior To Full Distribution................................................................61
7.6. Distribution In Cash............................................................................61
7.7. Deleted by the First Amendment..................................................................61
7.8. Withdrawals From Voluntary Accounts.............................................................61
7.8.1. When Available.........................................................................61
7.8.2. Sequence of Accounts...................................................................61
7.8.3 Limitations............................................................................62
7.8.4. Coordination With Section 4.1..........................................................62
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7.9. In-Service Distributions........................................................................62
7.9.1. When Available.........................................................................62
7.9.2. Purposes...............................................................................63
7.9.3 Limitations............................................................................63
7.9.4. Coordination With Retirement Savings Agreement.........................................64
7.9.5. Sequence of Accounts...................................................................64
7.9.6. Coordination With Section 4.1..........................................................64
7.10. Transitional Rules..............................................................................65
7.11. Loans...........................................................................................65
7.11.1. General Rules..........................................................................65
7.11.2. Interest Rate..........................................................................66
7.11.3. Loans Made From Participant's Accounts.................................................66
7.11.4. Loan Rules.............................................................................67
7.12. Corrective Distributions........................................................................67
7.12.1. Excess Deferrals ($7,000 Limit)........................................................67
7.12.2. Excess Contributions (Section 401(k) Test).............................................69
7.12.3. Excess Aggregate Contributions (Section 401(k) Test)...................................70
7.12.4. Priority...............................................................................72
7.12.5. Matching Contributions.................................................................72
SECTION 8 SPENDTHRIFT PROVISIONS....................................................................................73
SECTION 9 AMENDMENT AND TERMINATION.................................................................................74
9.1. Amendment.......................................................................................74
9.1.1. Amendment By Employer..................................................................74
9.1.2. Amendment By Prototype Sponsor.........................................................75
9.1.3. Limitation On Amendments...............................................................75
9.1.4. Resignation Of Prototype Sponsor.......................................................75
9.2 Discontinuance Of Contributions And Termination Of Plan.........................................75
9.3. Merger, Etc., With Another Plan.................................................................75
9.4. Adoption By Affiliates..........................................................................76
9.4.1. Adoption With Consent..................................................................76
9.4.2. Procedure For Adoption.................................................................76
9.4.3. Effect Of Adoption.....................................................................76
SECTION 10 CONCERNING THE TRUSTEE...................................................................................78
10.1. Dealings With Trustee...........................................................................78
10.1.1. No Duty To Inquire.....................................................................78
10.1.2. Assumed Authority......................................................................78
10.2. Compensation Of Trustee.........................................................................78
10.3. Resignation And Removal Of Trustee..............................................................79
10.3.1. Resignation, Removal And Appointment...................................................79
10.3.2. Surviving Trustees.....................................................................79
10.3.3. Successor Organizations................................................................79
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10.3.4. Co-Trustee Responsibility..............................................................79
10.4. Accountings By Trustee..........................................................................79
10.4.1. Periodic Reports.......................................................................79
10.4.2. Special Reports........................................................................80
10.4.3. Review Of Reports......................................................................80
10.5. Trustee's Power To Protect Itself On Account Of Taxes...........................................80
10.6. Other Trust Powers..............................................................................80
10.7. Investment Managers.............................................................................84
10.7.1. Appointment And Qualifications.........................................................84
10.7.2. Removal................................................................................85
10.7.3. Relation To Other Fiduciaries..........................................................85
10.8. Fiduciary Principles............................................................................85
10.9. Prohibited Transactions.........................................................................86
10.10. Indemnity.......................................................................................86
10.11. Investment In Insurance.........................................................................86
10.11.1. Limitation On Payment Of Premiums......................................................87
10.11.2. Miscellaneous Rules For Purchase Of Contract...........................................87
10.11.3. Payment Of Expenses....................................................................87
10.11.4. Authority For Contract.................................................................87
10.11.5. Payment Of Contract Upon Death.........................................................88
10.11.6. Payment Of Contract - Not Upon Death...................................................88
10.11.7. Value Of Contract......................................................................88
10.11.8. Interpretation.........................................................................88
10.12. Employer Directed Investments...................................................................88
SECTION 11 DETERMINATIONS -- RULES AND REGULATIONS..................................................................89
11.1. Determinations..................................................................................89
11.2. Rules And Regulations...........................................................................89
11.3. Method Of Executing Instruments.................................................................89
11.3.1. Employer Or Administrator's Representative.............................................89
11.3.2. Trustee................................................................................89
11.4. Claims Procedure................................................................................89
11.4.1. Original Claim.........................................................................89
11.4.2. Claims Review Procedure................................................................90
11.4.3. General Rules..........................................................................90
11.5. Information Furnished By Participants...........................................................90
SECTION 12 OTHER ADMINISTRATIVE MATTERS.............................................................................92
12.1. Employer........................................................................................92
12.1.1. Officers...............................................................................92
12.1.2. Delegation.............................................................................92
12.1.3 Board Of Directors.....................................................................92
12.2. Administrator's Representative..................................................................92
12.3. Limitation On Authority.........................................................................94
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12.4. Conflict Of Interest............................................................................94
12.5. Dual Capacity...................................................................................94
12.6. Administrator...................................................................................94
12.7. Named Fiduciaries...............................................................................94
12.8. Service of Process..............................................................................94
12.9. Residual Authority..............................................................................95
12.10. Administrative Expenses.........................................................................95
SECTION 13 IN GENERAL...............................................................................................96
13.1. Disclaimers.....................................................................................96
13.1.1. Effect On Employment...................................................................96
13.1.2. Sole Source Of Benefits................................................................96
13.1.3. Co-Fiduciary Matters...................................................................96
13.2. Reversion Of Fund Prohibited....................................................................96
13.3. Execution In Counterparts.......................................................................97
13.4. Continuity......................................................................................97
13.5. Contingent Top Heavy Plan Rules.................................................................97
APPENDIX A--SECTION 415 LIMITATIONS ON ALLOCATIONS...................................................................A-1
APPENDIX B--CONTINGENT TOP HEAVY PLAN RULES..........................................................................B-1
APPENDIX C--QUALIFIED DOMESTIC RELATIONS ORDERS......................................................................C-1
APPENDIX D--HIGHLY COMPENSATED EMPLOYEE..............................................................................D-1
APPENDIX E--TEFRA SS.242(B) TRANSITIONAL RULES.......................................................................E-1
APPENDIX F--TRANSITIONAL DISTRIBUTION RULES..........................................................................F-1
APPENDIX G--PLAN LOAN RULES..........................................................................................G-1
</TABLE>
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ss.401(k) PROTOTYPE
BASIC PLAN DOCUMENT #02
1989 RESTATEMENT
SECTION 1
INTRODUCTION
1.1. Definitions. When the following terms are used herein with initial capital
letters, they shall have the following meanings:
1.1.1. Accounts - the following Accounts will be maintained under this Plan
for Participants:
(a) Total Account - a Participant's entire interest in the Fund, including
his Retirement Savings Account, his Employer Matching Account, his
Employer Contributions Account, his Rollover Account, his Nondeductible
Voluntary Account, his Deductible Voluntary Account, and his Transfer
Account, if any, (but excluding his interest in a Suspense Account).
(b) Retirement Savings Account - the Account maintained for each
Participant to which are credited the Employer contributions made in
consideration of such Participant's earnings reductions pursuant to
Section 3.2 (or comparable provisions of the Prior Plan Statement, if
any) or made pursuant to Section 3.4.2 together with any increase or
decrease thereon.
(c) Employer Matching Account - the Account maintained for each Participant
to which is credited his allocable share of the Employer contributions
and his allocable share of forfeited Suspense Accounts made pursuant to
Section 3.3 or Section 3.4.3 (or comparable provisions of the Prior
Plan Statement, if any) or made pursuant to Section 3.4.4. together
with any increase or decrease thereon.
(d) Employer Contributions Account - the Account maintained for each
Participant to which is credited his allocable share of the Employer
contributions and his allocable share of forfeited Suspense Accounts
made pursuant to Section 3.4.5 (or comparable provisions of the Prior
Plan Statement, if any), together with any increase or decrease
thereon.
(e) Rollover Account - the Account maintained for each Participant to which
are credited his rollover contributions made pursuant to Section 3.7
(or comparable provisions of the Prior Plan Statement, if any),
together with any increase or decrease thereon.
(f) Nondeductible Voluntary Account - the Account maintained for each
Participant to which are credited his nondeductible voluntary
contributions made
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pursuant to Section 3.8 (or comparable provisions of the Prior Plan
Statement, if any), together with any increase or decrease thereon.
(g) Deductible Voluntary Account - the Account maintained for each
Participant to which are credited his deductible voluntary
contributions made pursuant to Section 3.6 of the Prior Plan Statement
(or other comparable provisions of the Prior Plan Statement, if any),
together with any increase or decrease thereon.
(h) Transfer Account - the Account maintained on behalf of a Participant to
which is credited the amount transferred to the Trustee pursuant to
Section 9.3, and not allocated to any other Account pursuant to that
section (or comparable provisions of the Prior Plan Statement, if any),
together with any increase or decrease thereon.
(i) Suspense Account - the Account maintained for each Participant to which
is credited the portion of his Employer Matching Account and his
Employer Contributions Account which is not Vested in him upon the
occurrence of an Event of Maturity (pending reemployment or forfeiture
pursuant to Section 6.2), together with any increase or decrease
thereon.
1.1.2. Administrator's Representative - the person or committee appointed
to make administrative decisions and rules, to communicate on behalf of the
Employer and to take other actions specified in this Plan Statement and which is
selected pursuant to Section 12.2.
1.1.3. Affiliate - a business entity which is under "common control" with
the Employer or which is a member of an "affiliated service group" that includes
the Employer, as those terms are defined in section 414(b), (c) and (m) of the
Internal Revenue Code. A business entity which is a predecessor to the Employer
shall be treated as an Affiliate if the Employer maintains a plan of such
predecessor business entity or if, and to the extent that, such treatment is
otherwise required by regulations prescribed by the Secretary of the Treasury
under section 414(a) of the Internal Revenue Code. A business entity shall also
be treated as an Affiliate if, and to the extent that, such treatment is
required by regulations prescribed by said Secretary under section 414(o) of
said Code. In addition to such required treatment, the Employer may, in its
discretion, designate as an Affiliate any business entity which is to such a
"common control," "affiliated service group" or "predecessor" business entity
but which is otherwise affiliate with the Employer, subject to such
nondiscriminatory limitations as the Employer may impose.
1.1.4. Annual Valuation Date - unless indicated otherwise in the Adoption
Agreement, the last day of the Employer's taxable year for federal income tax
purposes.
First Amendment Effective January 1, 1993
1.1.5. Beneficiary - a person designated by a Participant (or automatically
by operation of this Plan) to receive all or a part of the Participant's Vested
Total Account in the event of the Participant's death prior to full distribution
thereof. A person so designated shall not be considered a Beneficiary until the
death of the Participant.
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1.1.6. Board of Directors - the Board of Directors if the Employer is a
corporation, any general partner if the Employer is a partnership, or the
proprietor if the Employer is a sole proprietor. If the Employer is a
corporation, the Board of Directors shall also mean and refer to any properly
authorized committee of the directors. If there is more than one Employer under
this Plan, the Board of Directors shall be the Board of Directors of the
Employer which is the principal employ of this Plan.
1.1.7. Disability - a medically determinable physical or mental impairment
which is of such a nature that it (i) renders the individual incapable of
performing any substantial gainful employment, (ii) can be expected to be of
long-continued and indefinite duration or result in death, and (iii) is
evidenced by a determination to this effect by a doctor of medicine approved by
the Administrator's Representative. The Administrator's Representative shall
determine the date on which the Disability shall have occurred if such
determination is necessary. In lieu of such a certification, the Employer may
accept, as proof of Disability, the official written determination that the
individual will be eligible for disability benefits under the federal Social
Security Act as now enacted or hereinafter amended (when any waiting period
expires).
1.1.8. Effective Date - the date set forth in the Adoption Agreement as of
which this Plan Statement is effective; provided, however, certain provisions
specified in this Plan Statement shall be applicable prior to that date for any
Employer maintaining a Plan prior to the first day of the Plan year beginning
after December 31, 1988.
1.1.9. Eligibility Service - a measure of an Employee's service with the
Employer and all Affiliates (stated as a number of years) which is equal to the
number of computation periods for which the Employee is credited with one
thousand (1,000) or more Hours of Service; subject, however, to such of the
following rules as are applicable under the Adoption Agreement:
(a) Computation Periods. The computation periods for determining the
Employee's Eligibility Service (and One-Year Breaks in Service as
applied to his Eligibility Service) shall be (i) unless (ii) is
indicated in the Adoption Agreement:
(i) the twelve (12) consecutive month period beginning with the date
the Employee first performs an Hour of Service plus all Plan
Years beginning after the date the Employee first performs an
Hour of Service (irrespective of any termination of employment
and subsequent reemployment), or
(ii) the twelve (12) consecutive month period beginning with the date
the Employee first performs an Hour of Service plus all twelve
(12) consecutive month periods commencing on the annual
anniversaries of such date (irrespective of any termination of
employment and subsequent reemployment).
An employee who is credited with 1,000 Hours of Service in both the
initial eligibility period described in (i) above and the first Plan
Year commencing prior to the end of such initial eligibility period
shall be credited with two years of Eligibility Service.
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(b) Completion. A year of Eligibility Service shall be deemed completed
only as of the last day of the computation period (irrespective of the
date in such period that the Employee completed one thousand Hours of
Service). (Fractional years of Eligibility Service shall not be
credited.)
(c) Pre-Effective Date Service. Eligibility Service shall be credited for
Hours of Service earned and computation periods completed before the
Effective Date as if the rules of this Plan Statement were then in
effect.
(d) Breaks in Service - Before Effective Date. Eligibility Service
cancelled before the Effective Date by operation of the Plan's break in
service rules as they existed before the Effective Date shall continue
to be cancellation on and after the Effective Date.
(e) Break in Service. Subject to Section 1.1.9(d), if the Employee has any
break in service occurring before or after the Effective Date, his
service both before and after such break in service shall be taken into
account in computing his Eligibility Service for the purpose of
determining his entitlement to become a Participant in this Plan.
(f) Predecessor Employer. If the Employer maintains a plan previously
maintained by a business entity that is merged with or becomes an
Affiliate of the Employer, then Eligibility Service that would have
been earned by persons employed by such predecessor employer had the
rules of this Plan been in effect, shall be counted as Eligibility
Service under this Plan.
1.1.10. Employee - each individual who is, with respect to the Employer, or
an Affiliate, or both, a Common Law Employee (including Shareholder-Employee) or
a Self-Employed person (including an Owner-Employee) or a Leased Employee, which
shall be further defined as follows:
(a) Common Law Employee - an individual who performs services as an
employee of the Employer or an Affiliate (including, without limiting
the generality of the foregoing, a Shareholder-Employee) but who is not
a Self-Employed Person with respect to the Employer.
(b) Shareholder-Employee - an individual who owns, or is deemed with
attribution to own, more than five percent (5%) of the outstanding
stock of the Employer on any one day of the taxable year of the
Employer with respect to which the Plan is established; provided,
however, that during any taxable year that the Employer is not an
electing small business corporation (S corporation) there shall be no
Shareholder-Employees. All Shareholder-Employees are Common Law
Employees.
(c) Self-Employed Person - an individual who owns either a capital interest
or a profits interest in the Employer with respect to which the Plan is
maintained at a time when such Employer is either a partnership or a
proprietorship or an
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individual who has earned income from such Employer (or would have had
earned income if the Employer had had net profits). A proprietor shall
be deemed to be an Employee of a proprietorship which is the Employer
and each partner shall be deemed to be an Employee of a partnership
which is the Employer.
(d) Owner-Employee - an individual who is a Self-Employed Person and who is
either the proprietor of the Employer (when it is a proprietorship) or
a partner owning more than ten percent (10%) either of the capital
interests or profits interest of the Employer (when it is a
partnership). All Owners-Employees are Self-Employed Persons.
(e) Leased Employees - an individual (other than an employee) who, pursuant
to an agreement with a leasing organization has performed services for
the Employer, or for the Employer and related persons (determined in
accordance with section 414(n)(6) of the Internal Revenue Code) on a
substantially full-time basis for a period of at least one (1) year and
has performed services which are of a type historically performed by
employees of the Employer or an Affiliate. For services performed prior
to January 1, 1987, such an individual shall not be considered a Leased
Employee (with respect to the Employer or an Affiliate) if such
individual is covered by a money purchase pension plan which provides
for: (i) a nonintegrated employer contribution rate of at least seven
and one-half percent (7-1/2%) of compensation; and (ii) immediate
participation; and (iii) full and immediate vesting. For services
performed after December 31, 1986, such an individual shall not be
considered a Leased Employee (with respect to the Employer or an
Affiliate) if such individual is covered by a money purchase pension
plan which provides for: (i) a nonintegrated employer contribution rate
of at least ten percent (10%) of "ss.415 compensation" as defined in
Appendix A to this Plan Statement, but including amounts contributed by
the Employer pursuant to a salary reduction agreement which are
excludible from the individual's gross income under section 125,
section 402(a)(8), section 402(h) or section 403(b) of the Internal
Revenue Code; and (ii) immediate participation (except for those
individuals whose compensation from the leasing organization in each
plan year during the four-year period ending with the plan year is less
than one thousand dollars); and (iii) full and immediate vesting;
provided, however, that such an individual will be considered a Leased
Employee (with respect to the Employer or an Affiliate) if Leased
Employees constitute more than twenty percent (20%) of the recipient's
nonhighly compensated work force as determined in accordance with
section 414(n)(5)(C)(ii) of the Internal Revenue Code. An individual
shall also be treated as a Leased Employee of the Employer or an
Affiliate if, and to the extent that, such treatment is required by
regulations prescribed by the Secretary of the Treasury under section
414(o) of the said Code. Contributions or benefits provided by the
leasing organization to a Leased Employee which are attributable to
services performed for the recipient Employer shall be treated as
provided by the recipient Employer.
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Third Amendment-Effective January 1, 1994
1.1.11. Employers - the business entity which establishes a Plan by
executing the Adoption Agreement and any Affiliate of any such business entity
that adopts this Plan with the consent of the Employer as provided in Section
9.4. If any such business entity adopts this Plan, the business entity that
executed the Adoption Agreement (the "principal employer") retains the sole
authority to amend the Adoption Agreement, terminate the Plan, act as the Plan
Administrator and take other actions as are described in Section 9.4. A sole
proprietor shall be treated as his or her own Employer. A partnership shall be
treated as the Employer of each partner.
1.1.12. Entry Date - the dates (as indicated in the Adoption Agreement)
which shall be either:
(i) the first day of the Plan Year, or
(ii) the first day of the Plan Year and the first day of the seventh
month of the Plan Year, or
(iii) the first day of the Plan Year and the first day of the fourth,
seventh and tenth months of the Plan Year, or
(iv) the first day of the Plan Year and the first day of the second
through twelfth months of the Plan Year.
The Entry Date shall also include (i) the date upon which an individual who had
previously met the age and service requirements of Section 2.1 but who was not
then in Recognized Employment is transferred to Recognized Employment, (ii) the
date upon which an individual who had previously been a Participant is
reemployed in Recognized Employment, and (iii) such other dates as the
Administrator's Representative may by uniform, nondiscriminatory rules
established from time to time for the commencement of retirement savings under
Section 2.5.
1.1.13. Event of Maturity - any of the occurrences described in Section 6
by reason of which a Participant or Beneficiary may become entitled to a
distribution from the Plan.
1.1.14. Fund - the assets of the Plan held by the Trustee from time to
time, including all contributions and the investments and reinvestments,
earnings, profits and losses thereon, whether invested under the general
investment authority of the Trustee or under the terms applicable to any
investment Subfund established pursuant to Section 4.1.
1.1.15. Hours of Service - a measure of an Employee's service with the
Employer and all Affiliates, determined for a given computation period and equal
to the number of hours credited to the Employee according to the following
rules:
(a) Paid Duty. An Hour of Service shall be credited for each hour for which
the Employee is paid, or entitled to payment, for the performance of
duties for the
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Employer or an Affiliate. These hours shall be credited to the Employee
for the computation period or periods in which the duties are
performed.
(b) Paid Nonduty. An Hour of Service shall be credited for each hour for
which the Employee is paid, or entitled to payment, by the Employer or
an Affiliate on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence;
provided, however, that:
(i) no more than five hundred one (501) Hours of Service shall be
credited on account of a single continuous period during which
the Employee performs no duties (whether or not such period
occurs in a single computation period).
(ii) no Hours of Service shall be credited on account of payments made
under a plan maintained solely for the purpose of complying with
applicable worker's compensation, unemployment compensation or
disability insurance laws.
(iii) no Hours of Service shall be credited on account of payments
which solely reimburse the Employee for medical or medically
related expenses incurred by the Employee, and
(iv) payments shall be deemed made by or due from the Employer or an
Affiliate whether made directly or indirectly from a trust fund
or an insurer to which the Employer or an Affiliate contributes
or pays premiums.
These hours shall be credited to the Employee for the computation
period for which payment is made or, if the payment is not computed by
reference to units of time, the hours shall be credited to the first
computation period in which the event, for which any part of the
payment is made, occurred.
(c) Back Pay. An Hour of Service shall be credited for each hour for which
back pay, irrespective of mitigation of damages, has been either
awarded or agreed to by the Employer or an Affiliate. The same Hours of
Service credited under paragraph (a) or (b) shall not be credited under
this paragraph (c). The crediting of Hours of Service under this
paragraph (c) for periods and payments described in paragraph (b) shall
be subject to all the limitations of that paragraph. These hours shall
be credited to the Employee for the computation period or periods to
which the award or agreement pertains rather than the computation
period in which the award, agreement or payment is made.
(d) Unpaid Absences.
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(i) Leaves of Absence. If (and to the extent that) the Employer so
provides in written rules of nondiscriminatory application which
are in writing and approved by the Employer before the date upon
which they are effective, an assumed eight (8) hour day and forty
(40) hour week shall be credited during each unpaid leave of
absence authorized by the Employer or an Affiliate for Plan
purposes under such rules; provided, however, that if the
Employee does not return to employment for any reason other than
death, Disability or attainment of Normal Retirement Age at the
expiration of the leave of absence, such Hours of Service shall
not be credited.
(ii) Military Leaves. If an Employee returns to employment with the
Employer or an Affiliate within the time prescribed by law for
the retention of veteran's reemployment rights, an assumed eight
(8) hour day and forty (40) hour week shall be credited during
service in the Armed Forces of the United States if the Employee
both entered such service and returned to employment with the
Employer or an Affiliate from such service under circumstances
entitling him to reemployment rights granted veterans under
federal law.
(iii) Parenting Leaves. To the extent not otherwise credited and solely
for the purpose of determining whether a One-Year Break in
Service has occurred. Hours of Service shall be credited to an
Employee for any period of absence from work beginning after
December 31, 1984, due to pregnancy of the Employee, the birth of
a child of the Employee, the placement of a child with the
Employee in connection with the adoption of such child by the
Employee, or for the purpose of caring for such child for a
period beginning immediately following such birth or placement.
The Employee shall be credited with the number of Hours of
Service which otherwise would normally have been credited to such
Employee but for such absence. If it is impossible to determine
the number of Hours of Service which would otherwise normally
have been so credited, the Employee shall be credited with eight
(8) Hours of Service for each day of absence. In no event,
however, shall the number of Hours of Service credited for any
such absence exceed five hundred one (501) Hours of Service. Such
Hours of Service shall be credited to the computation period in
which such absence from work begins if crediting all or any
portion of such Hours is necessary to prevent the Employee from
incurring a One-Year Break in Service in such computation period.
If the crediting of such Hours of Service is not necessary to
prevent the occurrence of a One-Year Break in Service in that
computation period, such Hours of Service shall be credited in
the immediately following computation period (even though no part
of such absence may have occurred in such subsequent computation
period). These Hours of Service shall not be credited until the
Employee furnishes timely information which may reasonably be
required by the Administrator's Representative to establish that
the absence from work is for a reason for which these Hours of
Service may be credited.
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<PAGE>
(e) Special Rules. To the extent not inconsistent with other provisions
hereof, Department of Labor regulations 29 C.F.R. ss.2530.200b-2(b) and
(c) are hereby incorporated by reference herein. For periods prior to
the first day of the Plan Year beginning after 1975, Hours of Service
may be determined using whatever records are reasonably accessible and
by making whatever calculations are necessary to determine the
approximate number of Hours of Service completed during such prior
period.
(f) Equivalency for Employees. Notwithstanding anything to the contrary in
the foregoing, if the Adoption Agreement shall so provide, Hours of
Service for an Employee shall be credited on the basis that, without
regard to actual hours, such Employee shall be credited with ten (10)
Hours of Service for a Calendar day, forty-five (45) Hours of Service
for a calendar week, ninety-five (95) Hours of Service for each
semi-monthly pay period, or one hundred ninety (190) Hours of Service
for a calendar month if, under the provisions of this section (other
than this paragraph), such Employee would be credited with at least one
(1) Hour of Service during such day, week, semimonthly pay period or
month.
1.1.16. Investment Manager - that person other than the Trustee appointed
pursuant to Section 10.7 to manage all or a portion of the Fund.
1.1.17. Normal Retirement Age - the date a Participant attains the age
specified in the Adoption Agreement or, if none is specified in the Adoption
Agreement, age sixty-five (65) years. If the Employer enforces a mandatory
retirement age, the Normal Retirement Age is the lesser of that mandatory
retirement age or the age specified in the Adoption Agreement. WARNING:
Generally, federal and state law prohibits enforcement of a mandatory retirement
age for Common Law Employees.
1.1.18. One-Year Break in Service - a computation period for which an
Employee is not credited with more than five hundred (500) Hours of Service. (A
One-Year Break in Service shall be deemed to occur only on the last day of such
computation period.)
1.1.19. Participant - an Employee who becomes a Participant in this Plan in
accordance with the provisions of Section 2. An Employee who has become a
Participant shall be considered to continue as a Participant in the Plan until
the date of his death or, if earlier, the date when he is no longer employed in
Recognized employment and upon which the Participant no longer has any Account
under the Plan (that is, he has both received a distribution of all of his
Vested Total Account, if any, and his Suspense Account, if any, has been
forfeited and disposed of as provided in Section 6.2).
1.1.20. Plan - the tax-qualified defined contribution profit sharing plan
of the Employer established for the benefit of Employees eligible to participate
therein, as set forth in the Prior Plan Statement and this Plan Statement. (As
used herein, "Plan" refers to the legal entity established by the Employer and
not to the instruments or documents pursuant to which the Plan is maintained.
Those instruments and documents are referred to herein as the "Prior Plan
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<PAGE>
Statement" and the "Plan Statement.") The Plan shall be referred to by the name
indicated in the Adoption Agreement.
1.1.21. Plan Statement - the Prototype Documents as completed and adopted
by the Employer and pursuant to which this Plan is maintained on and after the
Effective Date.
1.1.22. Plan Year - the twelve (12) consecutive month period ending on any
Annual Valuation Date.
1.1.23. Prior Plan Statement - the written instrument or instruments or the
series of written instruments under which this Plan was established and
maintained from time to time prior to the Effective Date. (If this Plan was
first established by the Employer's adoption of this Plan Statement, there will
have been no Prior Plan Statement and all references thereto shall be
disregarded.)
1.1.24. Prototype Documents - the unexecuted form of document entitled
"ss.401(k) Prototype Basic Plan Document #02 1989 Restatement," including all
Appendices thereto, and the unexecuted and uncompleted form of Adoption
Agreement #001 used in connection with it, including the prototype documents
prior to this 1989 Restatement.
1.1.25. Prototype Sponsor - First Trust National Association, a national
trust association of St. Paul, Minnesota (which has submitted the Prototype
Documents to the National Office of the Internal Revenue Service for an opinion
as to the acceptability of the form of the Prototype Documents under the
Internal Revenue Code and has retained the right to amend as provided in Section
9).
First Amendment-Effective January 1, 1993
1.1.26. Recognized Compensation - an amount determined for a Participant
for a Plan Year which is the Participant's "ss.415 compensation" as defined in
the Appendix A to this Plan Statement, subject, however, to the following:
(a) Included Items. In determining a Participant's Recognized Compensation
there shall be included elective contributions made by the Employer on
behalf of the Participant that are not includible in gross income under
sections 125, 402(a)(8), 402(h), 403(b), 414(h)(2) and 457 of the
Internal Revenue Code including elective contributions authorized by
the Participant under a Retirement Savings Agreement, a cafeteria plan
or any other qualified cash or deferred arrangement under section
401(k) of the Internal Revenue Code.
(b) Excluded Items. For purposes of allocating the Employer's discretionary
profit sharing contribution, if any, under Section 3.4.5 and forfeited
Suspense Accounts, if any, Recognized Compensation shall not include
remuneration excluded by the Employer in the Adoption Agreement.
(c) Pre-Participation Employment. Remuneration paid by the Employer
attributable to periods prior to the date the Participant became a
Participant in the Plan shall
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<PAGE>
not be taken into account in determining the Participant's Recognized
Compensation.
(d) Non-Recognized Employment. Remuneration paid by the Employer for
employment that is not Recognized Employment shall not be taken into
account in determining a Participant's Recognized Compensation.
(e) Attribution to Periods. A Participant's Recognized Compensation shall
be considered attributable to the period in which it is actually paid
and not when earned or accrued.
Second Amendment-Effective January 1, 1994
(f) Annual Maximum. A Participant's Recognized Compensation for a Plan year
shall not exceed the annual compensation limit under section 401(a)(17)
of the Internal Revenue Code. In determining a Participant's Recognized
Compensation, the rules of section 414(q)(6) of the Internal Revenue
Code apply, except that in applying such rules, the term "family" shall
include only the spouse of the Participant and lineal descendants of
the Participant who have not attained age nineteen (19) years before
the close of the Plan Year; provided, however, that the rule in this
sentence shall not apply to the Seven Thousand Dollar ($7,000) limit
specified in Section 2.5. If Participants are aggregated as such family
members (and do not otherwise agree in writing), the Recognized
Compensation of each family member shall equal the annual compensation
limit under section 401(a)(17) of the Internal Revenue Code multiplied
by a fraction, the numerator of which is such family member's
Recognized Compensation (before application of such annual compensation
limit) and the denominator of which is the total Recognized
Compensation (before application of such annual compensation limit) of
all such family members. For purposes of the foregoing, the annual
compensation limit under section 401(a)(17) of the Internal Revenue
Code shall be Two Hundred Thousand Dollars ($200,000) (as adjusted
under the Internal Revenue Code for cost of living increases) for Plan
Years beginning before January 1, 1994, and shall be One Hundred and
Fifty Thousand Dollars ($150,000) (as so adjusted) for Plan Years
beginning on or after January 1, 1994.
Third Amendment-Effective January 1, 1994
1.1.27. Recognized Employment - all employment with the Employer excluding,
however, employment classified by the Employer as:
(a) employment in a unit of Employees whose terms and conditions of
employment are subject to a collective bargaining agreement between the
Employer and employee representatives (for this purposed, the term
"employee representatives" does not include any organization where more
than half of its members are Employees who are owners, officers or
executives of the Employer). If retirement benefits were the subject of
good faith bargaining and if two percent or less of the
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<PAGE>
Employees who are covered pursuant to such collective bargaining
agreement are professionals as defined in Treas. Reg. Section 1.410(b)
9 unless (and to the extent) such collective bargaining agreement
provides for the inclusion of those Employees in the Plan,
(b) employment of a nonresident alien (within the meaning of section
7701(b)(1)(B) of the Internal Revenue Code) who is not receiving any
earned income (within the meaning of section 911(d)(2) of the Internal
Revenue Code) from the Employer which constitutes income from sources
within the United States (within the meaning of section 861(a)(3) of
the Internal Revenue Code) unless and until the Administrator's
Representative shall declare such employment to be Recognized
Employment,
(c) employment in a division or facility of the Employer which is not in
existence on the Effective Date (that is, was acquired, established,
founded or produced by the liquidation or similar discontinuation of a
separate subsidiary after the Effective Date) unless and until the
Administrator's Representative shall declare such employment to be
Recognized Employment,
(d) employment of a United States citizen or a United States resident alien
outside the United States unless and until the Administrator's
Representative shall declare such employment to be Recognized
Employment,
(e) services of a person who is not a Common Law Employee of the Employer
including, without limiting the generality of the foregoing, services
of a Leased Employee, leased owner, leased manager, shared employee,
shared leased employee or other similar classification unless and until
the Administrator's Representative shall declare such employment to be
Recognized Employment,
(f) employment of a highly compensated Employee (as defined in Appendix D
to the Plan Statement) to the extent agreed to in writing by the
Employee, and
(g) employment described as excluded in the Adoption Agreement.
1.1.28. Retirement Savings Agreement - the agreement which may be entered
into by a Participant as provided in Section 2.
1.1.29. Trustee - the Trustee originally named in the Adoption Agreement
and its successor or successors in trust.
Third Amendment-Effective January 1, 1994
1.1.30. Valuation Date - the Annual Valuation Date and each other date, if
any, specified in the Adoption Agreement. If so permitted in the Adoption
Agreement, Valuation Date for accounting purposes may be different than
Valuation Date for distribution purposes.
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<PAGE>
1.1.31. Vested - nonforfeitable, i.e., claim obtained by a Participant or
his Beneficiary to that part of an immediate or deferred benefit hereunder which
arises from the Participant's service, which is unconditional and which is
legally enforceable against the Plan.
1.1.32. Vesting Service - a measure of an Employee's service with the
Employer and all Affiliates (stated as a number of years) which is equal to the
number of computation periods for which the Employee is credited with one
thousand (1,000) or more Hours of Service; subject, however, to such of the
following rules as are applicable under the Adoption Agreement:
(a) Computation Periods. The computation periods for determining the
Employee's Vesting Service (and One-Year Breaks in Service as applied
to his Vesting Service) shall be Plan Years.
(b) Completion. A year of Vesting Service shall be deemed completed as of
the date in the computation period that the Employee completes one
thousand (1,000) Hours of Service. (Fractional years of Vesting Service
shall not be credited.)
(c) Pre-Effective Date Service. Vesting Service shall be credited for Hours
of Service earned and computation periods completed prior to the
Effective Date as if the rules of this Plan Statement were then in
effect.
(d) Breaks in Service -- Before Effective Date. Vesting Service cancelled
before the Effective Date by operation of the Plan's break in service
rules as they existed before the Effective Date shall continue to be
cancelled on and after the Effective Date.
(e) Vesting in Pre-Break Accounts. If the Employee has five (5) or more
consecutive One-Year Breaks in Service, his service after such One-Year
Breaks in Service shall not be counted as years of Vesting Service for
the purpose of determining the Vested percentage of that portion of his
Employer contributions allocated with respect to his service before
such One-Year Breaks in Service and separately accounted for under
Section 5.1.4.
(f) Vesting in Post-Break Accounts (Vesting Rule of Parity). Except as
provided in the following sentence and subject to Section 1.1.32(d), if
the Employee has any break in service occurring before or after the
Effective Date, his service both before and after such break in service
shall be taken into account in computing his Vesting Service for the
purpose of determining the Vested percentage of that portion of his
Employer Matching Account or Employer Contributions Account derived
from Employer contributions allocated with respect to his service after
such break in service and separately accounted for under Section 5.1.4.
If the Employee does not have any Vested right to any portion of an
Employer Matching Account or Employer Contributions Account, however,
when he incurs a One-Year Break in Service, Vesting Service completed
before any One-Year Break in Service shall be disregarded in
determining his Vesting Service (upon a subsequent return to
employment) if the number of his One-Year Breaks in Service equals or
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<PAGE>
exceeds the greater of five (5) or the aggregate number of his years of
Vesting Service (whether or not consecutive) completed before such
One-Year Breaks in Service. Such aggregate number of his years of
Vesting Service completed before such One-Year Breaks in Service shall
not include any years of Vesting Service which have been disregarded
under the preceding sentence by reason of any prior One-Year Breaks in
Service.
1.2. Rules of Interpretation. An individual shall be considered to have attained
a given age on his birthday for that age (and not on the day before). The
birthday of any individual born on a February 29 shall be deemed to be February
28 in any year that is not a leap year. Notwithstanding any other provision of
this Plan Statement or any election or designation made under the Plan, any
individual who feloniously and intentionally kills a Participant or Beneficiary
shall be deemed for all purposes of this Plan and all elections and designations
made under this Plan to have died before such Participant or Beneficiary. A
final judgment of conviction of felonious and intentional killing is conclusive
for the purposes of this section. In the absence of a conviction of felonious
and intentional killing, the Administrator's Representative shall determine
whether the killing was felonious and intentional for purposes of this section.
Whenever appropriate, words used herein in the singular may be read in the
plural, or words used herein in the plural may be read in the singular; the
masculine may include the feminine; and the words "hereof," "herein" or
"hereunder" or other similar compounds of the word "here" shall mean and refer
to the entire Plan Statement and not to any particular paragraph or section of
this Plan Statement unless the context clearly indicates to the contrary. The
titles given to the various sections of this Plan Statement are inserted for
convenience of reference only and are not part of this Plan Statement, and they
shall not be considered in determining the purpose, meaning or intent of any
provision hereof. Any reference in this Plan Statement to a statute or
regulation shall be considered also to mean and refer to any subsequent
amendment or replacement of that statute or regulation. This instrument has been
executed and delivered in the State where the Trustee has its principal place of
business and has been drawn in conformity to the laws of that State and shall,
except to the extent that federal law is controlling, be construed and enforced
in accordance with the laws of that State.
1.3. Establishment of New Plan. If the Employer's execution of the Adoption
Agreement is an establishment of a new Plan by the Employer, such approval and
adoption is conditioned upon the qualification of the Plan under the pertinent
provisions of the Internal Revenue Code. If this Plan is found not to so
qualify, the Employer may, at its election, amend the Plan Statement, terminate
the Plan in its entirety, or both. If the denial of qualification was in
response to an application for advance determination on the establishment of a
new Plan which was made by the time prescribed by law for filing the Employer's
tax return for the taxable year in which the Plan is adopted (or effective, if
later), the Trustee may be directed by the Employer to return all contributions
made under this Plan to the Participants or to the Employer, as the case may be,
adjusted for their pro rata share of earnings and market gains or losses which
accrued while they were held in the Fund. Such a return of the contribution
shall not be made, however, unless the return is made within one (1) year after
the date the initial qualification of the Plan is denied.
1.4. Amendment And Change of Trustee. If the Employer's execution of the
Adoption Agreement is an amendment of a Prior Plan Statement of which the
Trustee was not the trustee,
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<PAGE>
such execution shall not be considered to be a termination of one plan and the
establishment of another but, on the contrary, shall be considered to be the
express continuation of the Plan under new documents. The Employer has caused,
or will forthwith cause, the transfer of the existing trust fund to the Trustee
to be held in trust under this Plan Statement.
1.5. Amendment and Continuation. If the Employer's execution of the Adoption
Agreement is an amendment of a Prior Plan Statement of which the Trustee was the
trustee, such execution shall not be considered to be a termination of one plan
and the establishment of another but, on the contrary, shall be considered to be
the express continuation of the Plan under new documents.
1.6. Automatic Exclusion From Prototype Plan. In the event an Employer adopting
these Prototype Documents fails to obtain or fails to retain qualified status
under sections 401(a) and 501(a) of the Internal Revenue Code, such Employer
shall immediately cease participation under these Prototype Documents and, when
applicable, will be deemed to maintain its Plan under an individually designed
successor retirement plan document.
1.7. Special Requirements
1.7.1. Discriminatory Benefits. If this Plan provides contributions or
benefits for one or more Owner-Employees who control both the business with
respect to which this Plan is established and one or more other trades or
businesses, this Plan and any plan established for such other trades or
businesses must, when looked at as a single plan, satisfy sections 401(a) and
(d) of the Internal Revenue Code for the employees of this and all other trades
or businesses.
1.7.2. Discriminatory Coverage. If this Plan provides contributions or
benefits for one or more Owner-Employees who control one or more other trades or
businesses, the employees of the other trades or businesses must be included in
a plan which satisfies sections 401(a) and (d) of the Internal Revenue Code and
which provides contributions and benefits not less favorable than provided for
Owner-Employees under this Plan. If an individual is covered as an
Owner-Employee under the plans of two (2) or more trades or businesses which are
not controlled and the individual controls a trade or business, the
contributions or benefits for the employees under the plan of the trades or
businesses which are controlled must be as favorable as those provided for the
Owner-Employee under the most favorable plan of the trade or business which is
not controlled.
1.7.3. Control Defined. For purposes of this Section 1.7, an
Owner-Employee, or two or more Owner-Employees, will be considered to control a
trade or business if the Owner-Employee, or two or more Owner-Employees
together:
(i) own the entire interest in an unincorporated trade or business,
or
(ii) in the case of a partnership, own more than 50 percent of either
the capital interest or the profits interest in the partnership.
An Owner-Employee, or two or more Owner-Employees, shall be treated as owning
any interest in a partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
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<PAGE>
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1. Initial Entry Into Plan. If this Plan Statement is adopted as an amendment
of a Prior Plan Statement, each Employee who immediately before the Effective
Date was a Participant in the Plan prior to the Effective Date and who continues
in Recognized Employment on the Effective Date shall continue as a Participant
in this Plan.
On and after the Effective Date (without regard to whether this Plan Statement
is an amendment of a Prior Plan Statement or the establishment of a new Plan),
each other Employee shall become a Participant on the first Entry Date
coincident with or next following the date that such Employee has both:
(a) satisfied the age requirement set forth in the Adoption Agreement, if
any, and
(b) satisfied the service requirement set forth in the Adoption Agreement,
if any,
Third Amendment-Effective January 1, 1994
if he is then employed in Recognized Employment. If he is not then employed in
Recognized Employment, he shall become a Participant on the first date
thereafter upon which he is employed in Recognized Employment. In the Adoption
Agreement, the Employer may elect different service requirements for eligibility
to enroll for retirement savings contributions under Section 3.2 and to share in
the Employer required matching contributions and Employer discretionary
contributions under Sections 3.3 and 3.4.
2.2. Special Rule for Former Participants. A Participant whose employment with
the Employer terminates and who subsequently is reemployed by the Employer shall
immediately reenter the Plan as a Participant as of the date of his return to
Recognized Employment.
2.3. Enrollment. Each Employee who is or will become a Participant as provided
in Section 2.1 or Section 2.2 may enroll for retirement savings by completing a
Retirement Savings Agreement and delivering it to the Administrator's
Representative at least fifteen (15) days (or some other time period specified
by the Administrator's Representative) prior to the Entry Date as of which the
Employee desires to make it effective. If an Employee does not enroll when first
eligible to do so, he may enroll as of any subsequent Entry Date by completing a
Retirement Savings Agreement and delivering it to the Administrator's
Representative at least fifteen (15) days (or some other time period specified
by the Administrator's Representative) prior to that Entry Date.
2.4. Waiver of Enrollment Procedures. The Administrator's Representative shall
have the authority to adopt rules that modify and waive the enrollment
procedures set forth in this Section 2 during the period beginning on the
Effective Date and ending twelve (12) months later, in order that an orderly
first enrollment might be completed. This authority to modify and waive the
enrollment procedures does not authorize the Administrator's Representative to
modify the minimum service, age or job classification requirements for
participation in the Plan.
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<PAGE>
2.5. Retirement Savings Agreement. Subject to the following rules, the
Retirement Savings Agreement which each Participant may execute shall provide
for a reduction equal to not more than the percentage specified in the Adoption
Agreement of the amount of Recognized Compensation which otherwise would be paid
to him by the Employer each payday. Effective for Plan Years beginning after
December 31, 1986, the reduction in earnings agreed to by the Participant,
however, shall not exceed Seven Thousand Dollars ($7,000) for that Participant's
taxable year. Such Seven Thousand Dollar ($7,000) limit shall be adjusted for
cost of living at the same time and in the same manner as under section 415(d)
of the Internal Revenue Code. In the case of a Participant who is a
Self-Employed Person, the reduction in earnings shall be determined by
multiplying such Participant's Recognized Compensation (for the entire Plan
Year) by the enrollment percentage elected by the Participant and multiplying
the resulting amount by the fraction of the Plan Year that each election is in
effect. The Administrator's Representative may, from time to time under uniform,
nondiscriminatory rules, change the minimum and maximum allowable reductions in
earnings. The reductions in earnings agreed to by the Participant shall be made
by the Employer from the Participant's remuneration each payday on or after the
Effective Date for so long as the Retirement Savings Agreement remains in
effect.
2.6. Modifications of Retirement Savings Agreement. The retirement Savings
Agreement of a Participant may be modified. Unless modified or terminated, the
Retirement Savings Agreement will remain in effect.
2.6.1. Increase. A Participant whose Retirement Savings Agreement does not
provide for the full, allowable reduction may, upon giving fifteen (15) days'
prior written notice to the Administrator's Representative, amend his Retirement
Savings Agreement to increase the amount of reduction as of the first payday on
or after any subsequent Entry Date.
2.6.2. Decrease. A Participant whose Retirement Savings Agreement provides
for more than the minimum allowable reduction may, upon giving fifteen (15)
days' prior written notice to the Administrator's Representative, amend his
Retirement Savings Agreement to decrease the amount of reduction as of the first
payday on or after any subsequent Entry Date.
2.6.3. Voluntary Termination. A Participant who has a Retirement Savings
Agreement in effect may, upon giving fifteen (15) days' prior written notice to
the Administrator's Representative, completely terminate the Retirement Savings
Agreement as of the first day of any payroll period. Thereafter, such
Participant may, upon giving fifteen (15) days' prior written notice to the
Administrator's Representative, enter into a new Retirement Savings Agreement
effective as of the first payday on or after any subsequent Entry Date if, on
that Entry Date, he is employed in Recognized Employment.
2.6.4. Termination of Recognized Employment. The Retirement Savings
Agreement of a Participant who ceases to be employed in Recognized Employment
(and who thereby ceases to have Recognized Compensation) shall be terminated
automatically as of the date he ceased to be employed in Recognized Employment.
If such Participant returns to Recognized Employment, he may enter into a new
Retirement Savings Agreement effective as of any Entry Date following his return
to Recognized Employment upon giving fifteen (15) days' prior written notice to
the Administrator's Representative.
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2.6.5. Form of Agreement. The Administrator's Representative shall specify
the form of the Retirement Savings Agreement, the form of any notices modifying
the Retirement Savings Agreement and all procedures for the delivery and
acceptance of forms and notices.
2.7. Section 401(k) Compliance(1)
2.7.1. Special Definitions. For purposes of this Section 2.7, the following
special definitions shall apply:
(a) "Covered employee" means an individual who was entitled to enter into a
Retirement Savings Agreement for all or a part of the Plan Year
(whether or not he did so).
(b) "Highly compensated covered employees" means those covered employees
defined as highly compensated employees in Appendix D to this Plan
Statement.
First Amendment-Effective January 1, 1993
(c) "Deferral percentage" means the ratio (calculated separately for
each covered employee) of":
(i) the total amount, for the Plan Year, of Employer contributions
credited to the covered employee's Retirement Savings Account
(excluding Employer contributions to the Retirement Savings
Account taken into account in determining the contribution
percentage in Section 3.10, provided the 401(k) test in this
Section 2.7 is satisfied both with and without exclusion of such
Employer contributions, and excluding Employer contributions to
the Retirement Savings Account returned to the covered employee
pursuant to Appendix A to this Plan Statement as an excess annual
addition), and if the Administrator's Representative elects, all
or a portion of the amount, for the Plan Year, of Employer
contributions credited to the covered employee's Employer
Matching Account or Employer Profit Sharing Account, or both, to
(ii) the covered employee's compensation, as defined below, for the
portion of such Plan Year that the employee is a covered
employee.
For this purpose, Employer contributions will be considered made in the Plan
Year if they are allocated as of a date during such Plan Year and are delivered
to the Trustee within twelve (12) months after the end of such Plan Year. A
covered employee who did not enter into a Retirement Savings Agreement shall be
treated as having elected a deferred percentage of zero.
Second Amendment - Effective January 1, 1994
- ---------------
(1) Except as otherwise specifically provided in this Section, the provisions
of this Section apply for Plan Years beginning after December 31, 1986.
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<PAGE>
(d) "Compensation" means compensation for services performed for the
Employer defined as "ss. 415 compensation" in Appendix A to this Plan
Statement. The Administrator's Representative may elect to include as
compensation any elective contributions made by the Employer on behalf
of the covered employee that are includible in gross income under
sections 125, 402(a)(B), 402(h), 403(b), 414(h)(2) and 457 of the
Internal Revenue Code. Notwithstanding the definition of "ss. 415
compensation" in Appendix A to this Plan Statement, compensation shall
always be determined on a cash (and not on an accrual) basis and
compensation shall be determined on a Plan Year basis (which is not
necessarily the same as the limitation year). A covered employee's
compensation for a Plan Year shall not exceed the annual compensation
limit under section 401(a)(17) of the Internal Revenue Code. For
purposes of the foregoing, the annual compensation limit under Section
401(a)(17) of the Internal Revenue Code shall be Two Hundred Thousand
Dollars ($200,000) (as adjusted under the Internal Revenue Code for
cost of living increases) for Plan Years beginning before January 1,
1994, and shall be One Hundred and Fifty Thousand Dollars ($150,000)
(as so adjusted) for Plan Years beginning on or after January 1, 1994.
(e) "Average deferral percentage" means, for a specified group of covered
employees for the Plan Year, the average of the deferral percentages
for all covered employees in such group.
2.7.2. Special Rules. For purposes of this Section 2.7, the following
special rules apply:
(a) Rounding. Effective for Plan Years beginning after December 31, 1988,
the deferral percentages and average deferral percentage for each group
of covered employees shall be calculated to the nearest one-hundredth
of one percent of the covered employee's compensation.
Second Amendment-Effective January 1, 1994
(b) Family Member. If a highly compensated covered employee is subject to
the family aggregation rules of section 414(q)(6) of the Internal
Revenue Code because such employee is either a five percent (5%) owner
or one of the ten (10) most highly compensated employees (as defined in
Appendix D to this Plan Statement), the combined deferral percentage
for the family group (which is treated as one highly compensated
covered employee) shall be determined by combining the amounts
described in Section 2.7.1(c)(i) and by combining the compensation
described in Section 2.7.1(d) of all family members who are covered
employees. The family members who are aggregated with respect to a
highly compensated covered employee shall be disregarded as separate
covered employees in determining the average deferral percentage of
highly compensated covered employees and the average deferral
percentage of all other covered employees. If a covered employee is
required to be aggregated as a member of more than one family group in
the Plan, all covered employees who are members of those family groups
that include that covered employee are aggregated as one
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<PAGE>
family group. With respect to any highly compensated covered employee,
"family" shall mean the employee's spouse and lineal ascendants and
descendants and the spouses of such lineal ascendants and descendants.
The annual compensation limit under section 401(a)(17) of the Internal
Revenue Code applies to the above deferral percentage determination
except that for purposes of that limit, the term "family" shall include
only the spouse of the covered employee and lineal descendants of the
covered employee who have not attained age nineteen (19) years before
the close of that Plan Year. For purposes of the foregoing, the annual
compensation limit under section 401(a)(17) of the Internal Revenue
Code shall be Two Hundred Thousand Dollars ($200,000) (as adjusted
under the Internal Revenue Code for cost of living increases) for Plan
Years beginning before January 1, 1994, and shall be One Hundred and
Fifty Thousand Dollars ($150,000) (as so adjusted) for Plan Years
beginning on or after January 1, 1994.
(c) Multiple Plans. The average deferral percentage for any Participant who
is a highly compensated covered employee for the Plan Year with respect
to two or more arrangements described in section 401(k) of the Internal
Revenue Code, that are maintained by the Employer, shall be determined
as if all such arrangements were a single arrangement. If a highly
compensated covered employee participates in two or more such
arrangements that have different Plan Years, all arrangements ending
with or within the same calendar year shall be treated as a single
arrangement. In the event that this Plan satisfies the requirements of
sections 401(k), 401(a)(4) or 410(b) of the Internal Revenue Code only
if aggregated with one or more other plans, satisfy the requirements of
such sections of the Internal Revenue Code only if aggregated with this
Plan, then this section 2.7.2(c) shall be applied by determining the
average deferral percentage of covered employees as if all such plans
were a single plan. For Plan Years beginning after December 31, 1989,
plans may be aggregated in order to satisfy section 401(k) of the
Internal Revenue Code only if they have the same Plan Year.
(d) Records. The Employer shall maintain records sufficient to demonstrate
satisfaction of the average deferral percentage test and the amount of
matching contributions (as defined in section 401(m)(4)(A) of the
Internal Revenue Code which meet the requirements of section
401(k)(2)(B) and (C) of the Internal Revenue Code) or qualified
nonelective contributions (within the meaning of section 401(m)(4)(C)
of the Internal Revenue Code), or both, used in such test. The
determination and treatment of the average deferral percentage amounts
of any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
2.7.3. The Tests. Notwithstanding the foregoing provision, Retirement
Savings Agreements in effect for each Plan Year shall be limited and modified
under uniform and nondiscriminatory rules established by the Administrator's
Representative and by the rules hereinafter provided in order that all such
Retirement Savings Agreements (in the aggregate) will satisfy at least one of
the following two (2) tests for that Plan Year:
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<PAGE>
Test 1: The average deferral percentage for the group of highly
compensated covered employees is not more than the average
deferral percentage of all other covered employees multiplied
by one and twenty-five hundredths (1.25).
Test 2: The excess of the average deferral percentage for the group of
highly compensated covered employees over that of all other
covered employees is not more than two (2) percentage points,
and the average deferral percentage for the group of highly
compensated covered employees is not more than the average
deferral percentage of all other covered employees multiplied
by two (2).
The Administrator's Representative shall maintain records to demonstrate
compliance with one of the two (2) tests described above, including the extent
to which qualified matching contributions (as defined in Section 2.7.1(c)) and
qualified nonelective contributions (as defined in Section 2.7.1(c)) are used in
determining the deferral percentage.
2.7.4. Remedial Action. If the Administrator's Representative determines
that neither of the tests will be satisfied (or may not be satisfied) for a Plan
Year, then during such Plan Year, the following actions may be taken so that one
of the tests will be satisfied for such Plan Year:
(a) The highly compensated covered employees who have the highest
enrollment percentage under Section 2.5 shall be deemed for all
purposes of the Plan to have elected for that Plan Year a lower
enrollment percentage (and the amounts credited pursuant to Section
3.2, and the applicable amount, if any, credited pursuant to Section
3.3, shall be reduced accordingly).
(b) If neither of the tests is satisfied after such adjustment, the
enrollment percentage under Section 2.5 of the highly compensated
covered employees who then have the highest enrollment percentage
(including any reduced under (a) above) shall be reduced to a lower
enrollment percentage.
(c) If neither of the tests is satisfied after such adjustment, this method
of adjustment shall be repeated one or more additional times until one
of the tests is satisfied.
The Administrator's Representative shall prescribe rules concerning such
adjustments, including the frequency of applying the tests and the commencement
and termination dates for any adjustments. Any amounts required to be
distributed as provided above which are distributed more than 2 1/2months after
the close of the Plan Year being tested, will result in a ten percent (10%)
penalty tax on the Employer as provided in Section 4979 of the Internal Revenue
Code.
2.8. Annual Certification. As of each Annual Valuation Date during the
continuance of the Plan, the Administrator's Representative shall certify in
writing the names of all Participants who are entitled to participate in the
Employer contribution for the Plan Year ending on that date and all other facts
that may be required to properly administer the provisions of this Plan.
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<PAGE>
SECTION 3
CONTRIBUTIONS AND ALLOCATION THEREOF(2)
3.1. Employer Contributions - General
3.1.1. Source of Employer Contributions. All Employer contributions to the
Plan may be made without regard to profits.
3.1.2. Limitation. The contribution of the Employer to the Plan for any
year, when considered in light of its contribution for that year to all other
tax-qualified plans it maintains, shall, in no event, exceed the maximum amount
deductible by it for federal income tax purposes as a contribution to a
tax-qualified profit sharing plan under section 404 of the Internal Revenue
Code. Each such contribution to the Plan is conditioned upon its deductibility
for such purpose.
3.1.3. Form of Payment. The appropriate contribution of the Employer to the
Plan, determined as herein provided, shall be paid to the Trustee and may be
paid either in cash or in other assets of any character of a value equal to the
amount of the contribution or in any combination of the foregoing ways.
3.2. Retirement Savings Contributions.
3.2.1. Amount. Within the time required by regulations of the United States
Department of Labor, the Employer shall contribute to the Trustee for deposit in
the Fund the reduction Recognized Compensation which was agreed to by each
Participant pursuant to a Retirement Savings Agreement. The Retirement Savings
Agreement shall not apply retroactively.
Third Amendment-Effective January 1, 1994
3.2.2. Allocation. The portion of this contribution made with respect to
each Participant shall be allocated to that Participant's Retirement Savings
Account for the Plan Year with respect to which it is made and, for the purposes
of Section 4, shall be credited as of the Valuation Date coincident with or
immediately following the date such contribution is received by Trustee or, if
the Employer has selected daily Valuation Dates for accounting purposes in the
Adoption Agreement, as soon as practicable after such contribution is received
by the Trustee.
3.3. Required Matching Contributions.
3.3.1. Amount. The Employer shall contribute to the Trustee for deposit in
the Fund and for crediting to the Participant's Employer Matching Account such
amounts, if any, as are required pursuant to the Adoption Agreement as Employer
contributions to match each Participant's reduction in Recognized Compensation
which was agreed to by the Participant pursuant to a Retirement Savings
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(2) Minimum contribution and allocation requirements apply in any Plan Year that
this Plan is top heavy. (See Appendix B, ss.3.3)
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<PAGE>
Agreement; provided, however, that a reduction in Recognized Compensation above
a percentage of a Participant's Recognized Compensation specified in the
Adoption Agreement shall not be used in allocating such contribution. Such
contributions shall be made only for Participants who are eligible Participants
within the meaning of Section 3.5. Such contributions shall be delivered to the
Trustee for deposit in the Fund not later than the time prescribed by federal
law (including extensions) for filing the federal income tax return of the
Employer for the taxable year in which the Plan Year ends.
Third Amendment-Effective January 1, 1994
3.3.2. Allocation. The Employer matching contribution (including forfeited
Suspense Accounts, if any) which is made with respect to an eligible Participant
shall be allocated to that Participant's Employer Matching Account for the Plan
Year with respect to which it is made and, for the purposes of Section 4, shall
be credited as of the Valuation Date coincident with or immediately following
the date such contribution is received by the Trustee or, if the Employer has
selected daily Valuation Dates for accounting purposes in the Adoption
Agreement, as soon as practicable after such contribution is received by the
Trustee.
3.4. Discretionary Employer Contributions.
3.4.1. General. If the Adoption Agreement so provides, the Employer may
(but shall not be required to) make discretionary contributions form year to
year during the continuance of the Plan in such amounts as the Employer shall
from time to time determine. Such contributions shall be delivered to the
Trustee for deposit in the Fund not later than the time prescribed by federal
law (including extensions) for filing the federal income tax return of the
Employer for the taxable year in which the Plan Year ends.
The Employer's discretionary contribution, including forfeited Suspense
Accounts, if any, to be included with that contribution or reallocated as of the
Annual Valuation Date of such Plan Year, for a Plan Year shall be allocated as
follows.
Third Amendment-Effective January 1, 1994
3.4.2. Curative Allocation - ss.401(k). If, for any Plan Year, neither of
the tests set forth in Section 2.7 has been satisfied and a distribution of
"Excess Contributions" has not been made pursuant to Section 7, then all or a
portion of the Employer's discretionary contribution for that Plan Year shall be
allocated as provided in this Section 3.4.2. Forfeited Suspense Accounts,
however, will not be included in this allocation. The Participants eligible to
share in such allocation shall be only those Participants who, during such Plan
Year, were not "highly compensated covered employees" (as defined in Section
2.7) for that Plan Year and for whom some contribution was made pursuant to
Section 3.2 for such Plan Year. No other Participant shall be eligible to share
in this allocation of the Employer discretionary contribution under this Section
3.4.2. The allocation to be made under this Section 3.4.2 shall be made to the
eligible Participant with the least amount of compensation (as defined in
Section 2.7) and then, in ascending order of compensation (as defined in Section
2.7), to other eligible Participants. The amount of the Employer discretionary
contribution to be allocated under this Section 3.4.2 shall be that amount
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<PAGE>
required to cause the Plan to satisfy either of the tests set forth in Section
2.7 for the Plan Year; provided, however, that in no case shall amounts be
allocated to a Participant's Retirement Savings Account under this paragraph
which would cause that Participant's deferral percentage (as defined in Section
2.7) to exceed twenty percent (20%). The Employer discretionary contribution so
made under this Section 3.4.2 shall be allocated to that Participant's
Retirement Savings Account for the Plan Year with respect to which the
contribution is made and, for the purposes of Section 4, shall be credited as of
the Valuation Date coincident with or immediately following the date such
contribution is received by the Trustee or, if the Employer has selected daily
Valuation Dates for accounting purposes in the Adoption Agreement, as soon as
practicable after such contribution is received by the Trustee.
Third Amendment-Effective January 1, 1994
3.4.3. Discretionary Matching Contributions. If the Adoption Agreement so
provides, any portion of the Employer's discretionary contribution not allocated
under Section 3.4.2 shall be allocable to the Employer Matching Accounts of
Participants eligible to share in the allocation pursuant to Section 3.5;
provided, however, that the Employer's discretionary contribution to be
allocated under this Section 3.4.3 shall be reduced by any amounts necessary to
make the curative allocation described in Section 3.4.4. The contribution, if
any, made by the Employer for a given Plan Year shall be allocated to the
Employer Matching Account of eligible Participants to match a percentage,
determined by the Employer, of each eligible Participant's reduction in
Recognized Compensation which was agreed to by the Participant pursuant to a
Retirement Savings Agreement; provided, however, that a reduction in Recognized
Compensation above a percentage of a Participant's Recognized Compensation
specified in the Adoption Agreement shall not be used in allocating such
contribution. The Employer matching contribution which is made with respect to
an eligible Participant shall be allocated to that Participant's Employer
Matching Account for the Plan Year with respect to which it is made and, for the
purposes of Section 4, shall be credited as of the Valuation Date coincident
with or immediately following the date such contribution is received by the
Trustee or, if the Employer has selected daily Valuation Dates for accounting
purposes in the Adoption Agreement, as soon as practicable after such
contribution is received by the Trustee.
3.4.4. Curative Allocation - ss.401(m). If, for any Plan Year, neither of
the tests set forth in Section 3.10 has been satisfied and a distribution of
"Excess Aggregate Contributions" has not been made pursuant to Section 7, then
all or any portion of the Employer's discretionary contribution for that Plan
Year which has not been allocated under Section 3.4.2 above shall be allocated
as provided in this Section 3.4.4. Forfeited Suspense Accounts, however, will
not be included in this allocation. The Participants eligible to share in such
allocation shall be only those Participants who, during such Plan Year, were not
highly compensated eligible employees (as defined in Section 3.10) for that Plan
Year and who were entitled to receive an Employer matching contribution pursuant
to Section 3.3 or Section 3.4.3 (or would have been entitled to receive an
Employer matching contribution if one had been made). No other Participant shall
be eligible to share in this allocation of the Employer discretionary
contribution under this Section 3.4.4. The allocation to be made under this
Section 3.4.4 shall be made to the Participant with the least amount of
compensation (as defined in Section 3.10) and then, in ascending order of
compensation (as defined in Section 3.10), to other Participants. The amount of
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<PAGE>
the Employer discretionary contribution to be allocated under this Section 3.4.4
shall be that amount required to cause the Plan to satisfy either of the tests
set forth in Section 3.10 for the Plan Year. The Employer discretionary
contribution so allocated to a Participant shall be credited to that
Participant's Employer Matching Account as of the Annual Valuation Date in the
Plan Year for which this Employer discretionary contribution is made. The
Employer discretionary contribution so made under this Section 3.4.4 shall be
allocated to that Participant's Employer Matching Account for the Plan Year with
respect to which the contribution is made and, for the purposes of Section 4,
shall be credited as of the Valuation Date coincident with or immediately
following the date such contribution is received by the Trustee or, if the
Employer has selected daily Valuation Dates for accounting purposes in the
Adoption Agreement, as soon as practicable after such contribution is received
by the Trustee.
3.4.5. Discretionary Profit Sharing Contributions. If the Adoption
Agreement so provides, any portion of the Employer's discretionary contribution
not allocated under Section 3.4.2, Section 3.4.3 and Section 3.4.4 shall be
allocated to the Employer Contributions Accounts of eligible Participants under
Section 3.5. The discretionary contribution for a Plan Year shall be allocated
to the Employer Contributions Accounts of eligible Participants under the
formula set forth in Section 3.4.5(a) or Section 3.4.5(b) as indicated in the
Adoption Agreement.
(a) Straight Percent of Pay Profit Sharing Allocation. If the
discretionary profit sharing contribution is adopted as a non-integrated
straight percent of pay profit sharing contribution, the contribution, if
any, made by the Employer for a given Plan Year shall be allocated to the
Employer Contributions Accounts of eligible Participants in the ratio which
the Recognized Compensation of each such eligible Participant for the Plan
Year bears to the Recognized Compensation for such Plan Year of all such
eligible Participants.
(b) Integrated Profit Sharing Allocation. If the discretionary profit
sharing contribution is adopted as an integrated profit sharing
contribution, the contribution, if any, made by the Employer for a given
Plan Year shall be determined and allocated under the following rules:
(i) Base Contribution Percentage. Subject to the rules in Section
3.4.5(b)(iii) and (iv), the Employer shall determine a uniform base
contribution percentage for the Plan Year and shall contribute to each
eligible Participant's Employer Profit Sharing Account an amount equal
to that base contribution percentage multiplied by each such eligible
Participant's Recognized Compensation up to the Integration Level (as
defined in the Adoption Agreement) for that Plan Year.
(ii) Excess Contribution Percentage. Subject to the rules in
Section 3.4.5(b)(iii) and (iv), the Employer shall determine a uniform
excess contribution percentage for the Plan Year and shall contribute
to each eligible Participant's Employer Profit Sharing Account an
amount equal to that excess contribution percentage multiplied by each
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<PAGE>
such eligible Participant's Recognized Compensation in excess of the
Integration Level (as defined in the Adoption Agreement) for that Plan
Year.
(iii) Rules for Non-Top Heavy Plan. The base contribution
percentage and the excess contribution percentage for a Plan Year in
which the Plan is not top heavy as defined in Appendix B to this Plan
Statement shall be determined as follows:
o Two Times Rule. If the base contribution percentage is
equal to or less than the integration rate (as determined in the
Adoption Agreement), the excess contribution percentage shall not
exceed the product of the base contribution percentage multiplied
by two (2).
o Integration Limitation. If the base contribution
percentage is greater than the integration rate (as determined in
the Adoption Agreement), the excess contribution percentage shall
not exceed the sum of the base contribution percentage plus the
integration rate.
(iv) Rules for Top Heavy Plan. The base contribution percentage
and the excess contribution percentage for a Plan Year in which the
Plan is top heavy as defined in Appendix B to this Plan Statement
shall be determined in accordance with the following rules:
o Less Than Three Percent Rule. If the base contribution
percentage is less than three percent (3%), the excess
contribution percentage shall not exceed the base contribution
percentage.
o Three Percent Rule. If the base contribution percentage is
three percent (3%), the excess contribution percentage may be a
percentage between three percent (3%) and six percent (6%).
o Two Times Rule. If the base contribution percentage is
greater than three percent (3%) but not greater than the
integration rate (as determined in the Adoption Agreement), the
excess contribution percentage shall not exceed the product of
the base contribution percentage multiplied by two (2).
o Integration Limitation. If the base contribution
percentage is greater than the integration rate (as determined in
the Adoption Agreement), the excess contribution percentage shall
not exceed the sum of the base contribution percentage plus the
integration rate.
The Employer discretionary profit sharing contribution which is made with
respect to an eligible Participant shall be allocated to that Participant's
Employer Contributions Account for the Plan Year with respect to which it is
made and, for the purposes of Section 4, shall be credited as of the Valuation
Date coincident with or immediately following the date such contribution is
received by the Trustee or, if the Employer has selected daily Valuation Dates
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<PAGE>
for accounting purposes in the Adoption Agreement, as soon as practicable after
such contribution is received by the Trustee.
3.5. Eligible Participants. A Participant shall be considered eligible to share
in the allocation of Employer matching or discretionary contributions pursuant
to Section 3.3, Section 3.4.3 and Section 3.4.5, if any, and forfeited Suspense
Accounts to be reallocated with such contributions as of the Annual Valuation
Date in such Plan Year, if any, only if such Participant satisfies all of the
following requirements:
(a) Participant. The Participant was a Participant at some time during
the Plan Year.
(b) Compensation. The Participant has Recognized Compensation for such
Plan Year.
(c) Last Day Rule. If the Adoption Agreement so provides, the
Participant was an Employee on the last day of the Plan Year (including,
for this purpose, individuals temporarily absent due to illness, vacation
or layoff and individuals inducted into the Armed Forces of the United
States during such Plan Year) or the Participant died, became Disabled or
retired at or after his Normal Retirement Age during such Plan Year.
(d) Hours of Service Rule. If the Adoption Agreement so provides, the
Participant has that number of Hours of Service in the Plan Year required
by the Adoption Agreement, or the Participant died, became Disabled or
retired at or after his Normal Retirement Age during such Plan Year.
No other Participant shall be considered an eligible Participant for such Plan
Year.
3.6. Make-Up Contributions For Omitted Participants. If, after the Employer's
annual contribution for a Plan Year has been made and allocated, it should
appear that, through oversight or a mistake of fact or law, a Participant (or an
Employee who should have been considered a Participant) who should have been
entitled to share in such contribution, received no allocation or received an
allocation which was less than he should have received, the Employer may, at its
election, and in lieu of reallocating such contribution, make a special make-up
contribution for the Account of such Participant in an amount adequate to
provide for him the same addition to his Account for such Plan Year as he should
have received.
3.7. Rollover Contributions.
First Amendment-Effective January 1, 1993
3.7.1. Eligible Contributions. Unless the Adoption Agreement precludes
it, Employees (whether or not they are Participants) in Recognized Employment
may contribute to this Plan, within such time and in such form and manner as may
be prescribed by the Administrator's Representative in accordance with those
provisions of federal law relating to rollover contributions, property
acceptable to the Trustee (or cash proceeds thereof) received by them in
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<PAGE>
eligible rollover distributions from certain types of qualified plan or trusts,
employee annuities and individual retirement accounts or annuities. The
provisions of this Section shall be subject to such conditions and limitations
as the Administrator's Representative may prescribe from time to time for
administrative convenience and to preserve the tax-qualified status of this
Plan. Also, the Administrator's Representative may establish rules and
conditions regarding the acceptance of direct rollovers under section 401(a)(31)
of the Internal Revenue Code from trustees or custodians of other qualified
pension, profit sharing or stock bonus plans.
3.7.2. Specific Review. The Administrator's Representative shall have the
right to reject or return any such rollover contribution if, in its opinion, the
acceptance thereof might jeopardize the tax-qualified status of this Plan or
unduly complicate its administration, but the acceptance of any such rollover
contribution shall not be regarded as an opinion or guarantee on the part of the
Employer, the Trustee, the Administrator's Representative or the Plan as to the
tax consequences which may result to the contributing Participant thereby.
Third Amendment-Effective January 1, 1994
3.7.3. Allocation. All rollover contributions made by an Employee to this
Plan shall be allocated to a Rollover Account established for such Employee
except that any portion thereof which represents deductible voluntary employee
contributions shall be allocated to a Deductible Voluntary Account for such
Employee. For the purposes of Section 4, rollover contributions shall be
credited to such Employee's Rollover Account or Deductible Voluntary Account as
of the Valuation Date coincident with or immediately following the date such
contribution is received by the Trustee or, if the Employer has selected daily
Valuation Dates for accounting purposes in the Adoption Agreement, as soon as
practicable after such contribution is received by the Trustee.
3.8. Nondeductible Voluntary Contributions.
3.8.1. Method of Contribution. If the Adoption Agreement so provides, each
Participant may make a nondeductible voluntary contribution to this Plan that is
included in the Participant's gross income. Such contribution shall be either a
direct contribution in cash or pursuant to a payroll withholding arrangement
agreed to by the Employer. The provisions of this section shall be subject to
the provisions of Section 3.10 and shall also be subject to such uniform and
nondiscriminatory conditions and limitations as the Administrator's
Representative may prescribe from time to time for administrative convenience
and to preserve the tax-qualified status of this Plan.
3.8.2. Payment to Trustee. The nondeductible voluntary contributions of
Participants shall be collected by the Employer by such means as the
Administrator's Representative shall specify. Within the time required by
regulations of the United States Department of Labor, the Employer shall remit
all such nondeductible voluntary contributions to the Trustees for deposit in
the Fund.
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Third Amendment-Effective January 1, 1994
3.8.3. Allocation. A nondeductible voluntary contribution made by a
Participant to this Plan shall be allocated to that Participant's Nondeductible
Voluntary Account for the Plan Year with respect to which it is made and, for
the purposes of Section 4, shall be credited as of the Valuation Date coincident
with or immediately following the date such contribution is received by the
Trustee or, if the Employer has selected daily Valuation Dates for accounting
purposes in the Adoption Agreement, as soon as practicable after such
contribution is received by the Trustee.
3.9. Deductible Voluntary Contributions. Prior to January 1, 1987, the Plan
accepted deductible voluntary contributions made in accordance with Section 3.6
of the Prior Plan Statement. All such contributions held in the Deductible
Voluntary Account shall continue to share in any trust earnings or losses, and
be distributed in accordance with the provisions of Section 7. Effective January
1, 1987, however, the Plan shall not accept deductible voluntary contributions
for a taxable year of the Participant beginning after December 31, 1986.
3.10. Section 401(m) Compliance.(3)
3.10.1. Special Definitions. For purposes of this Section 3.10, the
following special definitions shall apply:
(a) "Eligible employee" means an individual who is eligible to make
nondeductible voluntary contributions to this Plan for any portion of the
Plan Year (whether or not he does so) or an individual who is eligible to
receive an Employer matching contribution for any portion of the Plan Year
(whether or not he does so).
(b) "Highly compensated eligible employees" means those eligible
employees defined as highly compensated employees in Appendix D to this
Plan Statement.
First Amendment-Effective January 1, 1993
(c) "Contribution percentage" means, the ratio (calculated separately
for each eligible employee in such group) of:
(i) the total amount, for the Plan Year, of nondeductible
voluntary contributions credited to the eligible employee's
Nondeductible Voluntary Account and the total amount, for the Plan
Year, of Employer matching contributions credited to the eligible
employee's Employer Matching Account (but if the Administrator's
Representative elects to include the Employer matching contributions
in the section 401(k) test in Section 2, the Administrator's
Representative may elect to not include the Employer matching
contributions in this section 401(m) test), and if the Administrator's
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(3) Except as otherwise specifically provided in this Section, the provisions of
this Section apply for Plan Years beginning after December 31, 1986.
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<PAGE>
Representative elects all or a portion of the amount, for the Plan
Year, of Employer contributions credited to the eligible employee's
Retirement Savings Account or Employer Profit Sharing Account, or
both, to
(ii) the eligible employee's compensation, as defined below, for
the portion of such Plan Year that the employee is an eligible
employee.
For this purpose, nondeductible voluntary contributions are considered
to have been made in the Plan Year in which contributed to the Fund.
Also, for this purpose, Employer contributions will be considered made
in the Plan Year if they are allocated as of a date during such Plan
Year and are delivered to the Trustee within twelve (12) months after
the end of such Plan Year. Such "contribution percentage" shall not
include Employer matching contributions that are forfeited either to
correct excess aggregate contributions or because the contributions to
which they relate are excess deferrals, excess contributions or excess
aggregate contributions pursuant to Section 7.12.
Second Amendment-Effective January 1, 1994
(d) "Compensation" means compensation for services performed for the
Employer defined as "ss.415 compensation" in Appendix A to this Plan
Statement. The Administrator's Representative may elect to include as
compensation any elective contributions made by the Employer on behalf of
the eligible employee that are not includible in gross income under
sections 125, 402(a)(8), 402(h), 403(b), 414(h)(2) and 457 of the Internal
Revenue Code. Notwithstanding the definition of "ss.415 compensation" in
Appendix A to this Plan Statement compensation shall always be determined
on a cash (and not on an accrual) basis and compensation shall be
determined on a Plan Year basis (which is not necessarily the same as the
limitation year). An eligible employee's compensation for a Plan Year shall
not exceed the annual compensation limit under section 401(a)(17) of the
Internal Revenue Code. For purposes of the foregoing, the annual
compensation limit under section 401(a)(17) of the Internal Revenue Code
shall be Two Hundred Thousand Dollars ($200,000) (as adjusted under the
Internal Revenue Code for cost of living increases) for Plan Years
beginning before January 1, 1994, and shall be One Hundred and Fifty
Thousand Dollars ($150,000) (as so adjusted) for Plan Years beginning on or
after January 1,1994.
(e) "Average contribution percentage" means, for a specified group of
eligible employees for the Plan Year, the average of the contribution
percentage for all eligible employees in such group.
3.10.2. Special Rules. For purposes of this Section 3.10, the following
special rules apply:
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(a) Rounding. Effective for Plan Years beginning after December 31,
1988, the contribution percentages and average contribution percentage for
each group of eligible employees shall be calculated to the nearest
one-hundredth of one percent of the eligible employee's compensation.
Second Amendment-Effective January 1, 1994
(b) Family Member. If a highly compensated eligible employee is
subject to the family aggregation rules of section 414(q)(6) of the
Internal Revenue Code because such employee is either a five percent (5%)
owner or one of the ten (10) most highly compensated employees (as defined
in Appendix D), the combined contribution percentage for the family group
(which is treated as one highly compensated eligible employee) shall be
determined by combining the amounts described in Section 3.10.1(c)(i) and
by combining the compensation described in Section 3.10.1(d) of all family
members who are eligible employees. The family members who are aggregated
with respect to a highly compensated eligible employee shall be disregarded
as separate eligible employees in determining the average contribution
percentage of highly compensated eligible employees and the average
contribution percentage of all other eligible employees. If an eligible
employee is required to be aggregated as a member of more than one family
group in the Plan, all eligible employees who are members of those family
groups that include that eligible employee are aggregated as one family
group. With respect to any highly compensated eligible employee, "family"
shall mean the employee's spouse and lineal ascendants and descendants and
the spouses of such lineal ascendants and descendants. The limit on annual
compensation under section 401(a)(17) of the Internal Revenue Code applies
to the above contribution percentage determination except that for purposes
of that limit, the term "family" shall include only the spouse of the
eligible employee and lineal descendants of the eligible employee who have
not attained age nineteen (19) years before the close of that Plan Year.
For purposes of the foregoing, the annual compensation limit under section
401(a)(17) of the Internal Revenue Code shall be Two Hundred Thousand
Dollars ($200,000) (as adjusted under the Internal Revenue Code for cost of
living increases) for Plan Years beginning before January 1, 1994, and
shall be One Hundred and Fifty Thousand Dollars ($150,000) (as so adjusted)
for Plan Years beginning on or after January 1, 1994.
(c) Multiple Use. Effective for Plan Years beginning after December
31, 1988, if one or more highly compensated employees (as defined in
Appendix D) are subject to the 401(k) test described in Section 2.7 and to
the 401(m) test described in this Section 3.10 and the sum of the average
deferral percentage and the average contribution percentage of those highly
compensated employees subject to either or both tests exceeds the aggregate
limit (as defined in this Section 3.10), then the average contribution
percentage of those highly compensated eligible employees who are also
subject to the 401(k) test described in Section 2.7 will be reduced
(beginning with such highly compensated eligible employee whose
contribution percentage is the highest) so that the aggregate limit is not
exceeded. The amount by which each highly compensated eligible employee's
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<PAGE>
contribution percentage is reduced shall be treated as an Excess Aggregate
Contribution (as defined in Section 7). The average deferral percentage and
the average contribution percentage of the highly compensated eligible
employees are determined after any corrections required to meet the tests
described in Section 2.7 and in Section 3.10. Multiple use does not occur
if both the average deferral percentage and the average contribution
percentage of the highly compensated employees does not exceed one and
twenty-five hundredths (1.25) multiplied by the average deferral percentage
and average contribution percentage of the other eligible employees. For
purposes of this Section 3.10, the "aggregate limit" shall mean the sum of
(i) one hundred twenty-five percent (125%) of the greater of (A) the
average deferral percentage of employees other than the highly compensated
covered employees for the Plan Year, or (B) the average contribution
percentage of employees other than the highly compensated eligible
employees subject to the 401(m) test in this Section 3.10 for the Plan Year
and (ii) the lesser of two hundred percent (200%) or two (2) plus the
lesser of such average deferral percentage or average contribution
percentage.
(d) Multiple Plans. For purposes of this Section 3.10. the
contribution percentage for any highly compensated eligible employee who
participates in two or more arrangements described in section 401(k) of the
Internal Revenue Code that are maintained by the Employer, shall be
determined as if the total of the amounts described in Section 3.10.1(c)(i)
above was made under each such plan. If a highly compensated eligible
employee participates in two or more such arrangements that have different
plan years, all arrangements ending with or within the same calendar year
shall be treated as a single arrangement. In the event that this Plan
satisfies the requirements of section 401(m), 401(a)(4) or 410(b) of the
Internal Revenue Code only if aggregated with one or more other plans, or
if one or more other plans satisfy the requirements of such sections of the
Internal Revenue Code only if aggregated with this Plan, then this Section
3.10 shall be applied by determining the contribution percentage of
eligible employees as if all such plans were a single plan. For plan years
beginning after December 31, 1989, plans may be aggregated in order to
satisfy section 401(m) of the Internal Revenue Code only if they have the
same Plan Year.
(e) Records. The Employer shall maintain records sufficient to
demonstrate satisfaction of one of the tests described in Section 3.10.3
and the amount of matching contributions (as defined in section
401(m)(4)(A) of the Internal Revenue Code which meet the requirements of
section 401(k)(2)(B) and (C) of the Internal Revenue Code) or qualified
nonelective contributions (within the meaning of section 401(m)(4)(C) of
the Internal Revenue Code). The determination and treatment of the
contribution percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
3.10.3. The Tests. Notwithstanding the provisions of Section 3.3 or Section
3.4.4. and Section 3.8. the nondeductible voluntary contributions and Employer
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matching contributions made for each Plan Year shall be limited and modified
under uniform and nondiscriminatory rules established by the Administrator's
Representative and by the rules hereinafter provided in order that one of the
following two (2) tests is satisfied for that Plan Year:
Test 1: The average contribution percentage for the group of highly
compensated eligible employees is not more than the average
contribution percentage of all other eligible employees multiplied by
one and twenty-five hundredths (1.25).
Test 2: The excess of the average contribution percentage for the group of
highly compensated eligible employees over that of all other eligible
employees is not more than two (2) percentage points, and the average
contribution percentage for the group of highly compensated eligible
employees is not more than the average contribution percentage of all
other eligible employees multiplied by two (2).
The Administrator's Representative shall maintain records to demonstrate
compliance with one of the two (2) tests described above, including the extent
to which Employer contributions credited to Retirement Savings Accounts and
qualified nonelective contributions (as defined in Section 3.10.1(c)) are used
in determining the contribution percentage.
3.10.4. Remedial Action. If the Administrator's Representative determines
that neither of the tests will be satisfied (or may not be satisfied) for a Plan
Year, then during such Plan Year, the following actions may be taken so that one
of the tests will be satisfied for such Plan Year:
(a) The nondeductible voluntary contributions of the highly
compensated eligible employees who have the highest contribution percentage
shall be reduced to the extent necessary to reduce their contribution
percentage to the next lower percentage.
(b) If neither of the tests is satisfied after such adjustment, the
nondeductible voluntary contributions of the highly compensated eligible
employees who then have the highest contribution percentage (including
those reduced under (a) above) shall be reduced to the extent necessary to
reduce their contribution percentage to the next lower percentage.
(c) If neither of the tests is satisfied after such adjustment, this
method of adjustment shall be repeated one or more additional times until
one of the tests is satisfied or until no further adjustments can be made
in the nondeductible voluntary contributions of the highly compensated
eligible employees.
(d) If neither of the tests is satisfied after adjusting the
nondeductible voluntary contributions of the highly compensated eligible
employees, then the Employer matching contributions for the highly
compensated eligible employees who have the highest contribution percentage
(including those reduced under (a) through (c) above) shall be reduced to
the extent necessary to reduce their contribution percentage to the next
lower percentage.
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(e) If neither of the tests is satisfied after such adjustment, the
Employer matching contributions for the highly compensated eligible
employees who then have the highest contribution percentage (including
those reduced under (d) above) shall be reduced to the extent necessary to
reduce their contribution percentage to the next lower percentage.
(f) If neither of the tests is satisfied after such adjustment, this
method of adjustment shall be repeated one or more additional times until
one of the tests is satisfied.
The Administrator's Representative shall prescribe rules concerning such
adjustments, including the frequency of applying the tests and the commencement
and termination dates for any adjustments. Any amounts required to be
distributed as provided above which are distributed more than 2-1/2 months after
the close of the Plan Year being tested, will result in a ten percent (10%)
penalty tax on the Employer as provided in section 4979 of the Internal Revenue
Code.
3.11. Limitation on Allocations. In no event shall any amount be allocated to
the Account of any Participant if, or to the extent, such amounts would exceed
the limitations set forth in the Appendix A to this Plan Statement.(4)
First Amendment-Effective January 1, 1993
3.12. Effect of Disallowance Of Deduction Or Mistake Of Fact. All Employer
contributions to the Plan are conditioned on their qualification for deduction
for federal income tax purposes under section 404 of the Internal Revenue Code.
If the deduction for federal income tax purposes under section 404 of the
Internal Revenue Code should be disallowed, in whole or in part, for any
Employer contribution to this Plan for any year, or if any Employer contribution
to this Plan is made by reason of a mistake of fact, then there shall be
calculated the excess of the amount contributed over the amount that would have
been contributed had there not occurred a mistake in determining the deduction
or a mistake of fact. The Employer, at its election, may direct the Trustee to
return such excess, adjusted for its pro rata share of any net loss (but not any
net gain) in the value of the Fund which accrued while such excess was held
therein, to the Employer within one (1) year of the disallowance of the
deduction or the mistaken payment of the contribution, as the case may be. If
the return of such amount would cause the balance of any Account of any
Participant to be reduced to less than the balance which would have been in such
Account had the mistaken amount not been contributed, however, the amount to be
returned to the Employer shall be limited so as to avoid such reduction.
- ------------
(4) The provisions of Appendix A apply to Plan Years beginning after December
31, 1986.
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SECTION 4
INVESTMENT AND ADJUSTMENT OF ACCOUNTS
4.1. Establishment Of Subfunds.
4.1.1. Establishing Commingled Subfunds. The Administrator's Representative
may (but is not required to) direct the Trustee in writing to divide the Fund
into two (2) or more investment Subfunds, which shall serve as vehicles for the
investment of Participants' Accounts and which shall be managed either by the
Trustee or by one or more Investment Managers, as the Administrator's
Representative shall determine. The Administrator's Representative shall
determine the general investment characteristics and objectives of each
investment Subfund. The Trustee or Investment Manager, as the case may be, shall
have complete investment discretion over each investment Subfund assigned to it,
subject only to the general investment characteristics and objectives
established for the particular investment Subfund. The Account of each investing
Participant shall have a ratable interest in the Subfund.
4.1.2. Individual Subfunds. The Administrator's Representative may (but is
not required to) direct the Trustee in writing to establish investment Subfunds
that consist solely of all or a part of the assets of a single Participant's
Total Account, whose assets the Participant controls by investment directives to
the Trustee and which may not be commingled with the assets of any other
Participant's Accounts. If any Participant is permitted to direct the Trustee
with regard to the investment of his individual investment Subfund, then all
Participants shall be permitted to direct the Trustee with respect to their
individual investment Subfunds. In no event, however, shall the Participant be
allowed to direct the investment of assets in such individual investment Subfund
in any work of art, rug or antique, metal or gem, stamp or coin, alcoholic
beverage or other similar tangible personal property if the investment in such
property shall have been prohibited by the Secretary of the Treasury.
Notwithstanding anything apparently to the contrary in Section 10.6, all voting
or similar rights exercisable with respect to assets held in an individually
directed subfund shall be exercisable solely by the Participant or Beneficiary
whose Account is invested in such individually directed subfund.
4.1.3. Operational Rules. In accordance with uniform rules, the
Administrator's Representative shall determine the circumstances under which a
particular investment Subfund may be elected, or shall be automatically
utilized, the minimum or maximum amount or percentage of an Account which may be
invested in a particular investment Subfund, the procedures for making or
changing investment elections and the effect of a Participant's or Beneficiary's
failure to make an effective election with respect to all or any portion of an
Account.
4.1.4. Revising Subfunds. The Administrator's Representative shall have the
power, from time to time, to dissolve investment Subfunds, to direct that
additional investment Subfunds be established, to change Investment Managers for
any one or more of the investment Subfunds, and, under uniform rules, to
withdraw or limit participation in a particular investment Subfund. In
connection with the power to commingle reserved to the Trustee under Section
10.6. the Administrator's Representative shall also have the power to direct the
Trustee to consolidate any separate investment Subfunds hereunder with any other
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separate investment Subfunds having the same investment objectives which are
established under any other retirement plan trust fund of the Employer or any
corporation affiliated in ownership or management with the Employer of which the
Trustee is trustee and which are managed by the Trustee or the same Investment
Manger.
First Amendment-Effective January 1, 1993
4.1.5. ERISA Section 404(c) Compliance. If the Administrator's
Representative and Trustee agree, the Administrator's Representative may
establish investment subfunds and operational rules which are intended to
satisfy section 404(c) of the Employee Retirement Income Security Act of 1974
and the regulations thereunder. Such investment subfunds shall permit
Participants and Beneficiaries the opportunity to choose from at least three
investment alternatives, each of which is diversified, each of which present
materially different risk and return characteristics, and which in the
aggregate, enable Participants and Beneficiaries to achieve a portfolio with
appropriate risk and return characteristics consistent with minimizing risk
through diversification. Such operational rules shall provide the following, and
shall otherwise comply with section 404(c) of the Employee Retirement Income
Security Act of 1974 and the regulations and rules promulgated thereunder from
time to time:
(a) Participants and Beneficiaries may give investment instructions to
the Trustee at least once every three months:
(b) the Trustee must follow the investment instructions of
Participants and Beneficiaries that comply with the Plan's operational
rules, provided that the Trustee may in any event decline to follow any
investment instructions that:
(i) would result in a prohibited transaction described in section 406
of the Employee Retirement Income Security Act of 1974 or section
4975 of the Internal Revenue Code;
(ii) would result in the acquisition of an asset that might generate
income which is taxable to the Plan;
(iii) would not be in accordance with the documents and instruments
governing the Plan insofar as they are consistent with Title I of
the Employee Retirement Income Security Act of 1974;
(iv) would cause a fiduciary to maintain indicia ownership of any
assets of the Plan outside of the jurisdiction of the district
courts of the United States other than as permitted by section
404(b) of the Employee Retirement Income Security Act of 1974 and
Department of Labor regulation section 2050.404b-1;
(v) would jeopardize the Plan's tax status under the Internal Revenue
code;
(vi) could result in a loss in excess of a Participant's or
Beneficiary's Account balance;
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<PAGE>
(vii) would result in the acquisition or sale of any employer real
property or any employer security unless such employer security
acquisition satisfies the conditions of section 408(e) of the
Employee Retirement Income Security Act of 1974 and Department of
Labor regulation section 2550.404c-1.
Third Amendment-Effective January 1, 1994
(c) Participants and Beneficiaries shall be periodically informed of
transactional fees and expenses (e.g., commissions, sales loads, deferred
sales charges, redemption or exchange fees) that affect their Accounts and
are related to their Plan investment decisions:
First Amendment-Effective January 1, 1993
(d) with respect to any subfund consisting of Employer securities and
intended to satisfy the requirements of section 404(c) of the Employee
Retirement Income Security Act of 1974, (i) Participants and Beneficiaries
shall be entitled to all voting, tender and other rights appurtenant to the
ownership of such securities, (ii) procedures shall be established to
ensure the confidential exercise of such rights, except to the extent
necessary to comply with federal and state laws not preempted by the
Employee Retirement Income Security Act of 1974, and (iii) the Trustee
shall ensure the sufficiency of and compliance with such confidentiality
procedures.
Third Amendment-Effective January 1, 1994
4.2. Valuation and Adjustment of Accounts. The Trustee shall value each
investment Subfund as of each Valuation Date (which for purposes of this Section
4.2 shall include any Valuation Date which a distribution is to be made pursuant
to Section 7), which valuation shall reflect, as nearly as possible, the then
fair market value of the assets comprising such Subfund (including income
accumulation therein). In making such valuations, the Trustee may rely upon
information supplied by an Investment Manager having investment responsibility
over the particular Subfund.
As of each Valuation Date (the "current Valuation Date"), the value of each
Account or portion of an Account invested in a particular investment Subfund,
including Suspense Accounts, determined as of the last preceding Valuation Date
(the "initial Account Value") shall be increased (or decreased) by the following
adjustments made in the following sequence:
(a) Intermediate Distributions Adjustment. The initial Account value
shall be adjusted by the total amount:
(i) distributed in fact to (or with respect to) the Participant
from such Account, and
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(ii) loaned to the Participant, whether the loan was made before
or after the date on which the initial Account value is
determined, if the Adoption Agreement provides that loans
shall be made from the individual Account of the Participant
who received the loan, and
(iii) transferred from such Account to another Account of that
Participant (or any other Participant) within this Plan
(including amounts transferred to other investment subfunds)
or to the trustee of another plan pursuant to an arrangement
contemplated under Section 9.3, and
(iv) transferred into such Account from another Account of that
Participant (or any other Participant) within this Plan
(including amounts transferred from other investment
Subfunds), or from the trustee of another plan pursuant to
an arrangement contemplated under Section 9.3, and
(v) paid as expenses incurred by the Plan which were charged
specifically against that Account (as distinguished from
being a general charge against the assets of the Fund).
as of a date subsequent to the last preceding Valuation Date but
prior to the current Valuation Date.
(b) Investment Adjustment. The initial Account value (as adjusted
above) shall be increased (or decreased), in the ratio that such
Account value bears to all Account Values, for the:
(i) realized and unrealized gains and losses on the assets of
the Fund, and
(ii) income earned by the Fund (excluding income, if any,
allocated as provided in item (iii) and the last sentence of
this Section 4.2(b)), and
(iii) if the Adoption Agreement so provides, income earned on
contributions made by to the Account in advance of the
Valuation Date as of which such contributions are allocated
to the Account, and
(iv) expenses incurred by the Plan and paid generally from the
Fund (rather than charged specifically against a particular
Account).
as of a date subsequent to the last preceding Valuation Date but
not later than the current Valuation Date. In addition, the
initial value of each Retirement Savings Account shall also be
increased (or decreased) for its proportionate share of income
earned on retirement savings contributions, as described in
Section 3.2 deposited to the Account as of any date subsequent to
the last preceding Valuation Date but before the current
Valuation Date.
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<PAGE>
Third Amendment-Effective January 1, 1994
(c) Contribution Adjustment. The initial Account value (as adjusted
above) shall be increased by the total amount credited to such
Account under Section 3 as of a date subsequent to the last
preceding Valuation Date but not later than the current Valuation
Date.
(d) Final Distribution Adjustment. The initial Account value (as
adjusted above) shall be adjusted by the total amount:
(i) distributed in fact to (or with respect to) the Participant
from such Account, and
(ii) transferred from such Account to another Account of that
Participant (or any other Participant) within this Plan
(including amounts transferred to other investment
Subfunds), or to the trustee of another plan pursuant to an
arrangement contemplated under Section 9.3, and
(iii) paid as expenses incurred by the Plan which were charged
specifically against that Account (as distinguished from
being a general charge against the assets of the Fund).
as of the current Valuation Date.
First Amendment-Effective January 1, 1993
(e) Other Rules. Notwithstanding the foregoing, the Administrator's
Representative and the Trustee may agree in writing to revised
rules or additional rules for the adjustment of Accounts
including, without limiting the generality of the foregoing, the
times when contributions shall be credited under Section 3 for
the purposes of allocating gains or losses under this Section 4.
Third Amendment-Effective January 1, 1994
(f) Daily Valuation Rules. Notwithstanding the foregoing, if the
Employer has selected daily Valuation Dates in the Adoption
Agreement, the following accounting rules will apply:
(i) Valuation of the Fund. The Trustee shall value each Subfund
from time to time (but not less frequently than each Annual
Valuation Date), which valuation shall reflect, as nearly as
possible, the then fair market value of the assets
comprising such Subfund (including income accumulations
therein). In making such valuations, the Trustee may rely
upon information supplied by an Investment Manager having
investment responsibility over the particular Subfund.
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(ii) Adjustment of Accounts. The Employer shall cause the value
of each Account or portion of an Account invested in a
particular Subfund (including undistributed Total Accounts)
to be increased (or decreased) from time to time for
distributions, contributions, investment gains (or losses)
and expenses charged to the Account.
4.3. Management And Investment of Fund. The Fund in the hands of the Trustee,
together with all additional contributions made thereto and together with all
net income thereof, shall be controlled, managed, invested, reinvested and
ultimately paid and distributed to Participants and Beneficiaries by the Trustee
with all the powers, rights and discretions generally possessed by trustees, and
with all the additional powers, rights and discretions conferred upon the
Trustee under the Plan Statement, except to the extent that the Trustee is
subject to the authorized and properly given investment directions of the
Employer, Participants, Beneficiaries or Investment Manager. Except to the
extent that the Trustee is subject to the authorized and properly given
investment directions of the Employer, Participants, Beneficiaries or Investment
Manager, and subject to the directions of the Administrator's Representative
with respect to the payment of benefits hereunder, the Trustee shall have the
exclusive authority to manage and control the assets of the Fund in its custody
and shall not be subject to the direction of any person in the discharge of its
duties, nor shall its authority be subject to delegation or modification except
by formal amendment of the Plan Statement.
If the Trustee is subject to the investment directions of the Employer,
Participants, Beneficiaries or Investment Manager, the Trustee shall not make
any investment or dispose of any investment in the Fund except upon the express
verbal or written direction of the Employer, Participants, Beneficiaries or
Investment Manager. Also, the Trustee shall be under no duty to question any
investment directions of the Employer, Participants, Beneficiaries or Investment
Manager, to review or monitor any securities or property held in the fund or the
Participant's Accounts, or to give any advice to the Employer, Participants,
Beneficiaries or Investment Manager with respect to the investment, retention or
disposition of any assets held in the Fund or the Participants' Accounts.
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SECTION 5
VESTING
5.1. Employer Matching Account and Employer Contributions Account.
5.1.1. Progressive Vesting.(5) The Employer Matching Account and Employer
Contributions Account of each Participant shall become Vested in him in
accordance with the schedule set forth in the Adoption Agreement; provided,
however, that the Vested percentage of a Participant's Employer Matching Account
and Employer Contributions Account determined as of the Effective Date (or the
date of the execution of the Adoption Agreement by the Employer, if later) shall
be not less than such Vested percentage computed under the Plan Statement, if
any, as of that date.
5.1.2. Full Vesting. Notwithstanding the foregoing, the entire Employer
Matching Account and Employer Contributions Account of each Participant shall be
fully Vested in him upon the earliest occurrence of any of the following events
while in the employment of the Employer or an Affiliate.
(a) his death.
(b) his attainment of age sixty-five (65) years or, if earlier, his
attainment of his Normal Retirement Age or his attainment of any
earlier age specified in the Adoption Agreement,
(c) the occurrence of his Disability,
(d) a partial termination of the Plan which is effective as to him,
or
(e) a complete termination of the Plan or a complete discontinuance
of Employer contributions hereto.
In addition, a Participant who is not in the employment of the Employer or an
Affiliate upon a complete termination of the Plan or a complete discontinuance
of Employer contributions hereto, shall be so fully Vested if, on the date of
such termination or discontinuance, such Participant has not had a "forfeiture
date" as described in Section 6.2.3.
First Amendment-Effective January 1, 1993
5.1.3. Special Rule for Partial Distributions. If a distribution is made of
less than the entire Employer Contributions Account of a Participant who is not
then fully (100%) Vested, then until the Participant becomes
- --------------
(5) The vesting schedule in the Adoption Agreement may be superseded for a Plan
Year if the Plan becomes top heavy for that Plan Year (See Appendix B,
ss.3.2.1). The effect of this may continue for several years after the Plan
ceases to be top heavy. (See Appendix B, ss.3.2.2.)
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<PAGE>
fully Vested in his Employer Contributions Account or until he incurs five (5)
or more consecutive One-Year Breaks in Service, whichever first occurs, his
Vested interest in such account at any relevant time shall not be less than an
amount ("X") determined by the formula: X=P (B+D) - D. For the purpose of
applying the formula "P" is the Vested percentage at the relevant time
(determined pursuant to Section 5); "B" is the account balance at the relevant
time; and "D" is the amount of the distribution.
5.1.4. Effect of Break on Vesting. If a Participant who is not fully (100%)
Vested incurs five (5) or more consecutive One-Year Breaks in Service, returns
to Recognized Employment and is thereafter eligible for any additional
allocation of Employer contributions, his undistributed Employer Matching
Account or Employer Contributions Account, if any, attributable to Employer
contributions allocated as of a date before such five (5) consecutive One-Year
Breaks in Service, and in which he has a Vested interest by reason of such prior
service, and his new Employer Matching Account or Employer Contributions
Account, in which he may become Vested by reason of future service, shall be
separately maintained for vesting purposes until he is fully (100%) Vested in
each such Account under the rules of Section 1.1.32 and this Section 5.
5.2. Optional Vesting Schedule.
5.2.1. Election. If an amendment of this Plan's vesting schedule should be
adopted or the Plan is amended in any way that directly or indirectly affects
the computation of the Participant's Vested percentage, a qualifying Participant
may elect to have the Vested portion of his Employer Matching Account or
Employer contributions Account determined under the vesting schedule as it
existed immediately before the adoption of such amendment. (In no event shall an
amendment of this Plan's vesting schedule reduce a Participant's Vested
percentage as of the date of such amendment is adopted or, if later, the date
such amendment is effective.)
5.2.2. Qualifying Participant. A participant in this Plan qualifies for the
election described in this Section 5.2 only if, as of the expiration of the
period described in Section 5.2.3. he has five (5) or more years of Vesting
Service; provided, however, effective for Plan Years beginning after December
31, 1988, a Participant who has one (1) or more Hours of Service in any Plan
Year beginning after December 31, 1988, qualifies for the election described in
this Section 5.2, only if, as of the expiration of the period described in
Section 5.2.3. he has three (3) or more years of Vesting Service.
5.2.3. Procedure for Election. The election described in Section 5.2.1.
shall be effective only if it is executed in writing upon forms to be prepared
by the Administrator's Representative and delivered to the Administrator's
Representative after the date upon which the amendment is formally adopted and
before the latest of:
(a) the date sixty (60) days after such formal adoption.
(b) the date sixty (60) days after the date such amendment becomes
effective, or
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(c) the date sixty (60) days after the date the Participant is issued
written notice of the adoption of the amendment.
5.2.4. Conclusive Election. Failure to file an election will be deemed an
irrevocable waiver of the election. An election filed in accordance with this
provision will be irrevocable from the date it is filed.
5.3. Other Accounts. The Retirement Savings Account, Rollover Account,
Nondeductible Voluntary Account, Deductible Voluntary Account, and Transfer
Account of each Participant shall be fully (100%) Vested in him at all times.
Each Account will be credited with applicable contributions, forfeitures,
earnings and losses as provided in Section 4.
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SECTION 6
MATURITY
6.1. Events of Maturity. A Participant's Total Account shall mature and the
Vested portion shall become distributable in accordance with Section 7 upon the
earliest occurrence of any of the following events while in the employment of
the Employer or an Affiliate:
(a) his death,
(b) his separation from service, whether voluntary or involuntary,
(c) his attainment of age seventy and one-half (701/2) years,
(d) crediting of any amount to his Account after his attainment of age
seventy and one-half (70 1/2) years,
(e) his Disability,
(f) termination of the Plan without the establishment or maintenance of
another defined contribution plan (other than an employee stock
ownership plan as defined in section 4975(e)(7) of the Internal
Revenue Code),
Third Amendment-Effective January 1, 1994
(g) the disposition by the Employer to an unrelated organization of
substantially all the assets (within the meaning of section 409(d)(2)
of the Internal Revenue Code) used by the Employer in a trade or
business of the Employer, but only with respect to employees who
continue employment with the organization acquiring such assets and
only if the purchase and sale agreement specifically authorizes
distribution of this Plan's assets in connection with such disposition
and the Employer continues to maintain the Plan after the disposition.
(h) the disposition by the Employer to an unrelated organization of the
Employer's interest in a subsidiary (within the meaning of section
409(d)(3) of the Internal Revenue Code), but only with respect to
employees who continue employment with such subsidiary and only if the
purchase and sale agreement specifically authorized distribution of
this Plan's assets in connection with such disposition and the
Employer continues to maintain the Plan after the disposition, or
(i) if the Adoption Agreement so provides, his attainment of age
fifty-nine and one-half (59 1/2) years.
provided, however, that a transfer from Recognized Employment to employment with
the Employer that is other than Recognized Employment or a transfer from the
employment of one Employer participating in this Plan to another such Employer
or to any Affiliate shall not constitute an Event of Maturity.
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6.2. Disposition of Non-Vested Portion of Account. Upon the occurrence of a
Participant's Event of Maturity, if any portion of his Employer Matching Account
or his Employer Contributions Account is not Vested in him, such portion shall
be transferred to his Suspense Account as of the Valuation Date coincident with
or next following such Event of Maturity.
6.2.1. No Break. If such former Participant is employed by the Employer of
an Affiliate on or before the Annual Valuation Date coincident with or
immediately following his "forfeiture date" (as defined in Section 6.2.3), the
portion of his Employer Matching Account or his Employer Contributions Account
which was not Vested in him upon his Event of Maturity (and therefore became his
Suspense Account) shall be transferred back to and held in his Employer Matching
Account or his Employer Contributions Account under the Plan as of the Valuation
Date coincident with or next following the reemployment date and it shall be
held there pending the occurrence of another Event of Maturity effective as to
him, during which period of subsequent employment he may earn a Vested interest
in some or all of such portion in accordance with the provisions of Section 5.
First Amendment-Effective January 1, 1993
6.2.2. A Break. If, however, such former Participant is not reemployed by
the Employer or an Affiliate on or before the Annual Valuation Date coincident
with or immediately following his forfeiture date, the entire portion of his
Employer Matching Account or his Employer contributions Account which was not
Vested in him upon his Event of Maturity (and therefore became his Suspense
Account) shall be forfeited as of such Annual Valuation Date and shall be used
to restore any forfeited Suspense Accounts as required in Section 6.3, to reduce
administrative expenses due on that Annual Valuation Date and not paid by the
Employer and to reduce any Employer contribution to be made of that Annual
Valuation Date. Any remaining portion of the forfeiture shall be used to reduce
administrative expenses or any Employer contribution to be made as of any
Valuation Date in the succeeding Plan Year until disposed of. In all events, any
forfeitures otherwise not disposed of in the preceding sentences, shall be
allocated as of the Annual Valuation Date of the succeeding Plan Year as
provided in Section 3.4.
6.2.3. Forfeiture Date. For the purpose of the foregoing, a Participant's
forfeiture date shall be the date (following his Event of Maturity) as of which
occurred the earliest of:
(i) his fifth (5) consecutive One-Year Break in Service following his
Event of Maturity,
(ii) the distribution of his entire Vested Account, or
(iii) his Event of Maturity if he has no Vested interest in his Total
Account (that is, his Vested interest, consisting of zero, will
be deemed to be distributed).
6.3. Restoration of Forfeited Accounts. If a Participant:
(a) incurs an Event of Maturity at a time when he was not fully (100%)
Vested in his Employer Matching Account or Employer contributions
Account, and
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(b) has had his suspense Account (which was established on account of that
Event of Maturity) forfeited and disposed of as provided in Section
6.2, and
(c) becomes an employee of the Employer or an Affiliate before he has five
(5) consecutive One-Year Breaks in Service following the Event of
Maturity.
then there shall be restored to his Employer Matching Account or his Employer
contributions Account an amount equal to the amount which was forfeited from his
Suspense Account (without any adjustment for income, gains or losses). This
restoration shall occur as of the Annual Valuation Date next following his
return to participation in the Plan and shall be conditioned upon his remaining
in employment with the Employer or Affiliate until that Annual Valuation Date.
The amount so restored shall be held in a separate account and shall become
Vested in accordance with the rules of Section 5.1.3. The amount necessary to
make the restoration shall come first from Suspense Accounts to be forfeited on
the Annual Valuation Date on which the restoration is to occur. If Suspense
Accounts to be forfeited as of that Annual Valuation Date are not adequate for
this purpose, the Employer shall make a contribution adequate to make the
restoration as of that Annual Valuation Date (in addition to any contributions
required to be made under Section 3).
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SECTION 7
DISTRIBUTION
7.1. Application For Distribution.
7.1.1. Application Required. No distribution shall be made from the Plan
under the Administrator's Representative has received a written application for
distribution from the Participant or the Beneficiary entitled to receive
distribution (the "Distributee"). The Administrator's Representative may
prescribe rules regarding the form of such application, the manner of filing
such application and the information required to be furnished in connection with
such application.
Unless the Participation elects otherwise, distribution of the Participant's
Vested Total Account will begin no later than the 60th day after the latest of
the close of the Plan Year in which:
(a) The Participant attains age 65 (or Normal Retirement Age, if earlier);
(b) occurs the tenth anniversary of the year in which the Participant
commenced participation in the Plan; or
(c) the Participant separates from service with the Employer
Notwithstanding the foregoing, the failure of the Participant (and, if
necessary, the Participant's spouse) to apply for a distribution after the
Participant has had an Event of Maturity shall be an election to defer payment
in satisfaction of the previous sentence.
Subject to Section 7.3.4, the requirements of Section 7.1 and 7.2 shall apply to
any distribution of a Participant's interest and will take precedence over any
inconsistent provisions of the Plan Statement. Unless otherwise specified, these
provisions apply to calendar years beginning after December 31, 1984. All
distributions required under the plan shall be made in accordance with the
provisions of this Section 7 and the regulations under section 401(a)(9) of the
Internal Revenue Code, including the minimum distribution incidental benefit
requirement of Treas. Reg. 1.401(a)(9)-2 (proposed).
Third Amendment-Effective January 1, 1994
7.1.2. Exception For Small Amounts. A Vested Total Account which does not
exceed (and has never exceeded) Three Thousand Five Hundred Dollars (3,500) as
of the Valuation Date permitted Article X of the Adoption Agreement that is
coincident with or next following the occurrence of an Event of Maturity
effective as to a Participant, shall be distributed automatically in a single
lump sum as soon as administratively practical after that Valuation Date without
a written application for distribution. A Participant who has no Vested interest
in the Participant's Total Account as of the Participant's Event of Maturity
shall be deemed to have received an immediate distribution of the Participant's
entire interest in the Plan as of such Event of Maturity.
7.1.3. Exception for Required Distributions. Any Vested Total Account for
which no application for distribution has been received prior to the required
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beginning date effective as to the Distributee under Section 7.2.2 or, subject
to Section 9.2, following termination of the Plan, shall be distributed
automatically in a lump sum (if the Plan is not an exempt profit sharing plan,
however, the Vested Total Account shall be distributed in a form provided under
Section 7.3.4) on the required beginning date without a written application for
distribution.
7.1.4. Direct Rollover. Effective for distributions made on or after
January 1, 1993, a Distributee who is eligible to elect a direct rollover may
elect, at the time and in the manner prescribed by the Administrator's
Representative, to have all or any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the Distributee in a
direct rollover. A Distributee who is eligible to elect a direct rollover
includes only a Participant, a Beneficiary who is the surviving spouse of a
Participant and a Participant's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Appendix C.
(a) Eligible rollover distribution means any distribution of all or any
portion of a Total Account to a Distributee who is eligible to elect a
direct rollover except (i) any distribution that is one of a series of
substantially equal installments payable not less frequently than
annually over the life expectancy of such Distributee or the joint and
last survivor life expectancy of such Distributee and such
Distributee's designated Beneficiary, and (ii) any distribution that
is one of a series of substantially equal installments payable not
less frequently than annually over a specified period of ten (10)
years or more, and (iii) any distribution to the extent such
distribution is required under section 401(a)(9) of the Code, and (iv)
the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(b) Eligible retirement plan means (i) an individual retirement account
described in section 408(a) of the code, or (ii) an individual
retirement annuity described in section 408(b) of the code, or (iii)
an annuity plan described in section 403(a) of the code or (iv) a
qualified trust described in section 401(a) of the code that accepts
the eligible rollover distribution. However, in the case of an
eligible rollover distribution to a Beneficiary who is the surviving
spouse of a Participant, an eligible retirement plan is only an
individual retirement account or individual retirement annuity as
described in section 408 of the Code.
(c) Direct rollover means the payment of an eligible rollover distribution
by the Plan to the eligible retirement plan specified by the
Distributee who is eligible to elect a direct rollover.
Second Amendment-Effective January 1, 1993
7.1.5. Notices. The Administrator's Representative will issue such notices
as may be required under section 402(f), 411(a)(11), 417(a)(3) and other
sections of the Internal Revenue Code in connection with distributions from the
Plan. No distribution will be made unless it is consistent with such notice
requirements. If the Plan is an exempt profit sharing plan as defined in Section
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7.3.4 (d), distribution may commence less than thirty (30) days after the notice
required under section 1.411(a)-11(c) of the Income Tax Regulations or the
notice required under section 1.402(f)-2T of the Income Tax Regulations is
given, provided that:
(a) The Administrator's Representative informs the Distributee that the
Distributee has a right to a period of at least thirty (30) days after
receiving the notice to consider the decision of whether or not to
elect distribution (and, if applicable, a particular distribution
option); and
(b) The Distributee, after receiving the notice, affirmatively elects in
the manner prescribed by the Administrator's Representative a
distribution.
Third Amendment-Effective January 1, 1994
7.1.6. Lost Distributees. In the event of Plan termination or a
distribution permitted under Sections 7.1.2, if a Distributee cannot be found
after two (2) first class return receipt mailings to the Distributee's last know
address, then such Distributee's Vested Total Account shall be either deposited
into an interest-bearing savings account in the name of the Distributee with a
bank or similar financial institution, including the Trustee or an affiliate of
the Trustee or shall be treated as unclaimed property pursuant to the laws of
the State in which the Trustee is domiciled and shall be turned over to such
State in accordance with that State's unclaimed property laws. After a lost
Distributee's Vested Total Account has been deposited into either a savings
account or turned over to the State, the Distributee is no longer a Participant
in the Plan and has no right to a claim of benefits against the Plan and has no
claim whatsoever against the Trustee with respect to the Plan. A Distributee
whose Vested Total Account has been turned over to a State because the
Distributee could not be found may request distribution from the State in
accordance with the State's unclaimed property laws. A Distributee whose Vested
Total Account has been deposited with a bank or financial institution because
the Distributee could not be found may request distribution from such bank or
financial institution.
7.2. Time of Distribution. Upon the receipt of a proper application for
distribution from the Distributee, and after the occurrence of an Event of
Maturity effective as to a Participant, and after the Participant's Vested Total
Account has been determined and the right of the Distributee to receive a
distribution has been established, the Administrator's Representative shall
cause the Trustee to make or commence distribution of such Vested Total Account
as soon as administratively feasible after the Valuation Date specified by the
Distributee which is permitted in Article X of the Adoption Agreement and which
is not earlier than nor later than the dates specified below.
7.2.1. Earliest Beginning Date. Distribution to a Distributee shall not be
made or commenced earlier than the earliest beginning date.
(a) Participant. If the Distributee is a Participant, the earliest
beginning date is the Valuation Date permitted in Article X of the
Adoption Agreement that is coincident with or next following the date
of the Participant's Event of Maturity; provided, however, that if
daily Valuation Dates have been selected in Article X of the Adoption
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Agreement, the earliest beginning date is the Participant's Event of
Maturity.
(b) Beneficiary. If the Distributee is a Beneficiary of a Participant, the
earliest beginning date is the Valuation Date permitted in Article X
of the Adoption Agreement that is coincident with or next following
the date of such Participant's death; provided, however, that if daily
Valuation Dates have been selected in Article X of the Adoption
Agreement, the earliest beginning date is the date of such
Participant's death.
In no event, however, shall distribution be made or commenced to a Distributee
earlier than the date the Administrator's Representative receives any required
application for distribution and the notice requirements identified in Section
7.1.5 have been satisfied.
7.2.2. Required Beginning Date. Distribution shall be made or commenced as
soon as administratively feasible after the last Valuation Date permitted in
Article X of the Adoption Agreement occurring in the calendar year immediately
preceding the required beginning date effective as to the Distributee. In all
events, however, distribution shall be made or commenced not later than the
required beginning date.
(a) Participant. If the Distributee is a Participant, the required
beginning date is the April 1 following the calendar year in which the
Participant attains age seventy and one-half (70 1/2) years.
(b) Beneficiary. If the Distributee is the Beneficiary of a Participant
who died on or after the April 1 following the calendar year in which
the Participant attained age seventy and one-half (70-1/2) years, the
required beginning date is the date or dates which provide for
distribution to such Beneficiary at a rate (considering both time and
amount) that is cumulatively at least as rapid as the rate of
distribution scheduled and commenced prior to the death of the
Participant.
(c) Beneficiary. If the Distributee is the Beneficiary of a Participant
who died on or after the April 1 following the calendar year in which
the Participant attained age seventy and one-half (70 1/2) years, the
required beginning date is the date or dates that allow distribution
of the entire amount to be completed not later than December 31 of the
calendar year in which occurs the fifth (5th) anniversary of the
Participant's death; provided, however, that:
(i) if the Beneficiary is an individual who is not the surviving
spouse of the Participant (or a trust for such individual's
benefit which satisfies the requirements of Treas. Reg.
1.401(a)(9)-1(b), Q & A D-5) and if distributions will be made to
such individual Beneficiary (or such trust) in substantially
equal annual amounts over a period of time not extending beyond
the life expectancy of such Beneficiary, distributions must
commence not later than December 31 of the year following the
year of the Participant's death, or
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(ii) if the Beneficiary is the surviving spouse of the Participant (or
trust for such spouse's benefit which satisfies the requirements
of Treas. Reg. 1.401(a)(9)-1(b), Q & A D-5) and if distributions
will be made to such surviving spouse in substantially equal
annual amount over a period of time not extending beyond the life
expectancy of the surviving spouse (or such trust), distributions
must commence not later than the date specified in paragraph (i)
above or, if later, the December 31 of the calendar year in which
the Participant would have attained age seventy and one-half
(70 1/2) years.
If distributions are made to a Beneficiary in installments, the second and all
subsequent distributions must be made on or before December 31 of the year for
which the distribution is made. A Beneficiary must elect the method of
distribution no later than the earlier of (a) December 31 of the calendar year
in which the distributions would be required to begin under this Section 7.2.2,
or (b) December 31 of the calendar year in which occurs the fifth (5th)
anniversary of the Participant's death. If a Beneficiary makes no election,
distribution of the Beneficiary's entire interest must be completed by December
31 of the calendar year containing the fifth (5th) anniversary of the
Participant's death.
7.3. Forms of Distribution
7.3.1. Forms Available. At the direction of the Administrator's
Representative (subject to Section 7.3.4), the Trustee shall make distributions
of the Participant's Vested Total Account to the Distributee in one of the
following optional forms of benefit as permitted in the Adoption Agreement and
as designated by the Distributee in writing:
(a) Lump Sum. If the Distributee is either a Participant or a
Beneficiary, in a lump sum as described in the Adoption
Agreement.
(b) Fixed Installments to Participant. If the Distributee is a
Participant, in a series of substantially equal installments
payable annually over a fixed period selected by the Participant
before the first payment which does not exceed the life
expectancy of the Participant. The election to recalculate life
expectancy described in Section 7.3.3 does not apply to this form
of distribution.
(c) Minimum Installments To Participants. If the Distributee is a
Participant, in a series of substantially equal installments
payable annually over the life expectancy of the Participant or
the joint and last survivor life expectancy of the Participant
and his Beneficiary determined as of the date of the first such
installment payment; provided, however, that the amount of such
installments shall automatically be increased if the series of
substantially equal installments payable annually over the life
expectancy of the Participant or the joint and last survivor life
expectancy of the Participant and his Beneficiary determined
again as of the Participant's required beginning date (see
Section 7.2.2(a)) and based on the facts then in existence is
greater than the amount determined as of the first such
installment payment. For calendar years beginning before January
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1, 1989, if the Participant's spouse is not the Beneficiary, then
the method of distribution selected must assure that at least
fifty percent (50%) of the Vested Total Account is paid within
the life expectancy of the Participant.
(d) Installments To Beneficiary. If the Distributee is an individual
who is a Beneficiary of a deceased Participant who died before
the April 1 following the calendar year in which the participant
would have attained age seventy and one-half (70-1/2) years, in a
series of substantially equal installments payable annually over
a period selected by the Beneficiary which does not exceed the
period permitted by the Adoption Agreement. If the Distributee is
an individual who is a Beneficiary of a deceased Participant who
died on or after the April 1 following the calendar year in which
the Participant attained age seventy and one-half (70-1/2) years,
in a series of substantially equal installments which are a
continuation of the payments commenced (or scheduled) prior to
the date of the Participant's death (or in a lump sum if the
Adoption Agreement permits such a payment to the Beneficiary).
7.3.2. Substantially Equal. Distributions shall be considered to be
substantially equal if the distributions are determined in whichever of the
following manners is applicable:
(a) Fixed Installments. If distributions are in the form of
installments payable over a fixed period, the amount of the
distribution required to be made for each calendar year (the
"distribution year") shall be determined by dividing the amount
of the Vested Total Account as of the last Valuation Date in the
calendar year immediately preceding the distribution year (such
preceding calendar year being the "valuation year") by the number
of remaining installment payments to be made (including the
distribution being determined). The amount of the Vested Total
Account as of such Valuation Date shall be increased by the
amount of any contributions and forfeitures allocated to the
Vested Total Account during the valuation year and after such
Valuation Date (including contributions and forfeitures, if any,
made after the end of the valuation year which are allocated as
of dates in the valuation year). The amount of the Vested Total
Account shall be decreased by the amount of any distributions
made in the valuation year and after such Valuation Date.
(b) Lifetime Installments. If distributions are in the form of
installments over the life expectancy of the recipient or the
joint and last survivor life expectancy of the Participant and
his Beneficiary, the amount of the distribution required to be
made for each calendar year (the "distribution year") shall be
determined by dividing the amount of the Vested Total Account as
of the last Valuation Date in the calendar year immediately
preceding the distribution year (such preceding calendar year
being the "valuation year") by the remaining life expectancy as
of the distribution year. The amount of the Vested Total Account
as of the last Valuation Date in the valuation year shall be
increased by the amount of any contributions and forfeitures
allocated to the Vested Total Account during the valuation year
and after such Valuation Date (including contributions and
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forfeitures, if any, made after the end of the valuation year
which are allocated as of dates in the valuation year). The
amount of the Vested Total Account shall be decreased by
distributions made in the valuation year and after such Valuation
Date.
7.3.3. Life Expectancy. Life expectancy and joint and last survivor
expectancy shall be determined by use of the expected return multiples in Tables
V and VI of Treas. Reg. 1.72-9. An individual's life expectancy shall be based
upon the individual's attained age on his birthday in the calendar year for
which life expectancy is first being determined and, in the absence of an
election as provided below, shall be reduced by one (1) year in each succeeding
calendar year.
(a) Election To Recalculate Life Expectancy. In the case of a Participant
or a Beneficiary who is the surviving spouse of a Participant (but not
in the case of any other individual), the Participant or such
Beneficiary may elect to have life expectancy redetermined for each
succeeding calendar year that a distribution is required to be made.
The election must be made no later than the time of the first required
distribution. The election is irrevocable and must apply to all
subsequent years.
(b) Joint and Last Survivor. Joint and last survivor life expectancy shall
be determined for the Participant and the individual who is the
Participant's Beneficiary in accordance with the rules of section
401(a)(9) of the Internal Revenue Code and the regulations thereunder.
(c) Minimum Distribution Incidental Benefit Requirement. In the case of a
Participant and a Beneficiary who is not a spouse of the Participant,
the life expectancy factor used to compute the amount of the
substantially equal payment during the Participant's lifetime shall
not be greater than the factor determined under Treas. Reg.
1.401(a)(9)-2 (the minimum distribution incidental benefit
requirement).
7.3.4. Presumptive Forms. The selection of a form of distribution shall be
subject, however. to the following rules:
(a) Required Lump Sum. As provided in Section 7.1.2, if the value of the
participant's Vested Total Account is not greater than Three Thousand
Five Hundred Dollars ($3,500) when distributed, the distribution shall
be made in a single lump sum.
(b) QJ&SA Contract. A QJ&SA contract is an immediate, nontransferable
annuity contract issued as an individual policy or under a master or
group contract which provides for an annual or more frequent annuity
payable to and for the lifetime of the Participant beginning as of a
date designated by the Participant which is not later than the dates
specified in Section 7.2.2, with a survivor annuity payable on an
annual or more frequent basis after the death of the Participant to
and for the lifetime of the surviving spouse of the Participant (to
whom the Participant was married on the Valuation Date as of which
such contract is issued) in an amount equal to fifty percent (50%) of
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the amount payable during the joint lives of the Participant and the
surviving spouse. If payments had started to the Participant prior to
his death, payments of the survivor annuity shall commence immediately
after death. If payments had not started prior to the Participant's
death, the surviving spouse shall designate the commencement date
which shall not be later than the date the Participant would have
attained age seventy and one-half (70 1/2) years. The contract shall
be a QJ&SA contract only if it is issued on a premium basis which does
not discriminate on the basis of the sex of the Participant or the
surviving spouse and if it complies with the requirements of this Plan
and section 401(a)(9) of the Internal Revenue Code and the regulations
thereunder.
(c) Life Annuity Contract. A Life Annuity contract is an immediate,
nontransferable annuity contract issued as an individual policy or
under a group or master contract which provides for an annual or more
frequent annuity payable to and for (i) the lifetime of an unmarried
Participant beginning as of a date designated by the Participant which
is not later than the dates specified in Section 7.2.2, or (ii) the
lifetime of the surviving spouse of a Participant beginning as of the
first day of the month following the Participant's death or any later
date designated by the surviving spouse which is not later than the
date the Participant would have attained age seventy and one-half (70
1/2) years. The contract shall be a Life Annuity contract only if it
is issued on a premium basis which does not discriminate on the basis
of the sex of the Participant or the surviving spouse and if it
complies with the requirements of this Plan and section 401(a)(9) of
the Internal Revenue Code and the regulations thereunder.
(d) Exempt Profit Sharing Plan. This Plan is an exempt profit sharing plan
if the following conditions are satisfied:
(i) (triangle)
(ii) no Participant under this Plan can elect to receive payments in
the form of a lifetime annuity, and
(iii) this Plan is not a direct or indirect transferee of assets from
a defined benefit pension plan, money purchase pension plan or
target benefit money purchase pension plan, and
(iv) this Plan is not a direct or indirect transferee from a stock
bonus plan or a profit sharing plan which was otherwise required
to make available to Participants with respect to whom assets and
liabilities were transferred distribution in the form of a
lifetime annuity.
(triangle)
(e) Married Participant. In the case of any distribution which is to be
made:
(i) if this Plan is not an exempt profit sharing plan. and
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(ii) when paragraph (a) above is not applicable, and
(iii) to a participant who is married on the Valuation Date as of
which such distribution is to be made or commenced to him, and
(iv) to a Participant who has not rejected distribution in the form
of a QJ&SA contract,
distribution shall be effected for such Participant by applying the
entire Vested Total Account to purchase and distribute to such
Participant a QJ&SA contract. A Participant may reject distribution in
the form of a QJ&SA contract by filing with the Administrator's
Representative an affirmative written rejection of distribution in
that form not more than ninety (90) days before the Valuation Date as
of which the distribution is made or commenced. Such a rejection may
be made or revoked at any time and any number of times until the
Valuation Date as of which the distribution to the Participant is made
or commenced. A rejection shall not be effective unless the
Participant's spouse consents. To be valid, the consent of the spouse
must be in writing, must acknowledge the effect of the distribution,
must be witnessed by a notary public, must be given during the ninety
(90) day period before the Valuation Date as of which the distribution
is made or commenced and must relate to that specific distribution.
The consent of the spouse must be to a specific form of distribution
(other than the QJ&SA contract) which may not be changed without
further spousal consent unless the Participant elects a QJ&SA
contract, or alternatively, the consent of the spouse must expressly
permit the Participant to elect and to change the form of distribution
(other than the QJ&SA contract) without any requirement of further
spousal consent. The consent of the spouse shall be irrevocable and
shall be effective only with respect to that spouse. No less than
thirty (30) days and no more than ninety (90) days prior to the date
distribution is to be made or commenced to the Participant, there
shall be furnished to the Participant a written explanation of the
terms and conditions of the QJ&SA contract, the Participant's right to
reject, and the effect of a rejection of distribution in the form of
the QJ&SA contract, the requirement for the consent of the
Participant's spouse, the right to revoke a prior rejection of
distribution in the form of a QJ&SA contract, and the right to make
any number of further revocations or rejections until the Valuation
Date as of which the distribution actually is made or commenced.
Notwithstanding the consent requirement described above, if the
Participant establishes to the satisfaction of the Administrator's
Representative that such written consent cannot be obtained because
there is no spouse, or the spouse cannot be located, a Participant's
rejection shall be deemed a valid rejection.
(f) Unmarried Participant. In the case of any distribution which is to be
made:
(i) if this Plan is not an exempt profit sharing plan, and
(ii) when paragraph (a) above is not applicable, and
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(iii) to a Participant who is not married on the Valuation Date as of
which such distribution is to be made or commenced to him, and
(iv) to a Participant who has not rejected distribution in the form
of a Life Annuity contract.
distribution shall be effected for such Participant by applying the
entire Vested Total Account to purchase and distribute to such
Participant a Life Annuity contract. A Participant may reject
distribution in the form of a Life Annuity contract by filing with the
Administrator's Representative an affirmative written rejection of
distribution in that form not more than ninety (90) days before the
Valuation Date as of which the distribution is made or commenced. Such
a rejection may be made or revoked at any time and any number of times
until the Valuation Date as of which the distribution to the
Participant is made or commenced. No less than thirty (30) days and no
more than ninety (90) days prior to the date distribution is to be
made or commenced to the Participant, there shall be furnished to the
Participant a written explanation of the terms and conditions of the
Life Annuity contract, the Participant's right to reject and the
effect of a rejection of, distribution in the form of the Life Annuity
contract, the right to revoke a prior rejection of distribution in the
form of a Life Annuity contract, and the right to make any number of
further revocations or rejections until the Valuation Date as of which
distribution actually is made or commenced.
(g) Surviving Spouse. In the case of a distribution which is made:
(i) if this Plan is not an exempt profit sharing plan, and
(ii) when paragraph (a) above is not applicable, and
(iii) to the surviving spouse of a deceased Participant, and
(iv) when such surviving spouse has not rejected distribution in the
form of a Life Annuity contract,
distributions hall be effected for such surviving spouse by applying
the entire Vested Total Account to purchase and distribute to such
surviving spouse a Life Annuity contract as soon as administratively
feasible after the Participant's death; but in no event earlier than
the date upon which the surviving spouse makes application for the
distribution, or, if earlier, the date upon which the Participant (if
he continued to live) would have attained age seventy and one half
(70-1/2) years. A Surviving spouse may reject distribution in the form
of a Life Annuity contract by filing with the Administrator's
Representative an affirmative written rejection of distribution in
that form not more than ninety (90) days before the Valuation Date as
of which the distribution is made or commenced. Any number of
rejections and revocations of rejections may be made at any time until
the Valuation Date as of which the distributions are made or commence
to such surviving spouse. No less than thirty (30) days and no more
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than ninety (90) days prior to the date distribution is to be made or
commenced to the surviving spouse, there shall be furnished to the
surviving spouse a written explanation of the terms and conditions of
the contract, the surviving spouse's right to reject, and the effect
of a rejection of distribution in the form of the Life Annuity
contract, the right to revoke a prior rejection of distribution in the
form of the Life Annuity contract, and the right to make any number of
further revocations or rejections until the Valuation Date as of which
distribution actually is made or commenced.
7.3.5. Effect Of Reemployment. If a Participant is reemployed by the
Employer or an Affiliate after distribution has been made or commenced to him
but before his Normal Retirement Age, further distribution of his Vested Total
Account shall be suspended and the undistributed remainder of his Vested Total
Account shall continue to be held in the Fund until another Event of Maturity
effective as to him shall occur after his reemployment. It is the general intent
of this Plan that no distribution shall be made while a Participant is
maintaining an employment relationship with the Employer or an Affiliate.
7.3.6. TEFRA ss.242(b) Transitional Rules. Notwithstanding the other
provisions of this Section 7, distributions to or with respect to each
individual eligible to make a designation (before January 1, 1984) of a method
of distribution pursuant to section 242(b) of the Tax Equity and Fiscal
Responsibility Act of 1982 shall be made on and after the first day of the Plan
Year beginning in 1984 in accordance with the provisions set forth in the
Appendix E to this Plan Statement; provided, however, that if the Plan is not an
exempt profit sharing plan, the QJ&SA contract or Life Annuity contract has been
rejected as described in Section 7.3.4.
7.4. Designation Of Beneficiaries.
7.4.1. Right To Designate. Each Participant may designate, upon forms to be
furnished by and filed with the Administrator's Representative, one or more
primary Beneficiaries or alternative Beneficiaries to receive all or a specified
part of his Vested Total Account in the event of his death and may change or
revoke any such designation from time to time. No such designation, change or
revocation shall be effective unless executed by the Participant and accepted by
the Administrator' Representative during the Participant's lifetime. If,
however, the Plan is not an exempt profit sharing plan and such designation is
made to a nonspouse Beneficiary before the first day of the Plan Year in which
the Participant attains age thirty-five (35) years and the Participant dies on
or after that date while married, the beneficiary designation is void.
7.4.2. Spousal Consent. Notwithstanding the foregoing, a designation will
not be valid for the purpose of paying benefits from the Plan to anyone other
than a surviving spouse of the Participant (if there is a surviving spouse)
unless that surviving spouse consents in writing to the designation of another
person as Beneficiary. To be valid, the consent of such spouse must be in
writing, must acknowledge the effect of the designation of the Beneficiary and
must be witnessed by a notary public. The consent of the spouse must be to the
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designation of a specific named Beneficiary which may not be changed without
further spousal consent, or alternatively, the consent of the spouse must
expressly permit the Participant to make and to change the designation of
Beneficiaries without any requirement of further spousal consent. The consent of
the spouse to a nonspouse Beneficiary is a waiver of the spouse's rights to
benefits under the Plan. In a plan that is not an exempt profit sharing plan,
these benefits are known as a qualified preretirement survivor annuity. The
consent of the surviving spouse need not be given at the time the designation is
made. The consent of the surviving spouse need not be given before the death of
the Participant. The consent of the surviving spouse will be required, however,
before benefits can be paid to any person other than the surviving spouse. The
consent of a spouse shall be irrevocable and shall be effective only with
respect to that spouse
In the case of a distribution to which Section 7.3.4(g) applies, the
Administrator's Representative shall provide each Participant within the
applicable period for such Participant a written explanation of the Life Annuity
Contract in such terms and in such manner as would be comparable to the
explanation provided for meeting the requirements of Section 7.3.4(e) applicable
to a QJ&SA contract.
The applicable period for a Participant is whichever of the following
periods ends last: (i) the period beginning with the first day of the Plan Year
in which the Participant attains age 32 and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains age 35; (ii) a
reasonable period ending after the individual becomes a Participant; and (iii) a
reasonable period ending after this paragraph first applies to the Participant.
Notwithstanding the foregoing, notice must be provided within a reasonable
period ending after separation from service in the case of a Participant who
separates from service before attaining age 35.
For the purposes of applying the preceding paragraph, a reasonable period
ending after the enumerated events described in (ii) and (iii) is the end of the
two-year period beginning one year prior to the date the applicable event
occurs, and ending one year after that date. In the case of a Participant who
separates from service before the Plan Year in which age 35 is attained, notice
shall be provided within the two-year period beginning one year prior to
separation and ending one year after separation. If such a Participant
thereafter returns to employment with the employer, the applicable period for
such Participant shall be redetermined.
7.4.3. Failure Of Designation. If a Participant:
(a) fails to designate a Beneficiary,
(b) designates a Beneficiary and thereafter revokes such designation
without naming another Beneficiary, or
(c) designates one or more Beneficiaries and all such Beneficiaries so
designated fail to survive the Participant,
such Participant's Vested Total Account, or the part thereof as to which such
Participant's designation fails, as the case may be, shall be payable to the
first class of the following classes of automatic Beneficiaries with a member
surviving the Participant and (except in the case of his surviving issue) in
equal shares if there is more than one member in such class surviving the
Participant:
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Participant's surviving spouse
Participant's surviving issue per stirpes and not per capita
Participant's surviving parents
Participant's surviving brothers and sisters
Representative of Participant's estate.
7.4.4. Definitions. When used herein and, unless the Participant has
otherwise specified in his Beneficiary designation, when used in a Beneficiary
designation, "issue" means all persons who are lineal descendants of the person
whose issue are referred to, including legally adopted descendants and their
descendants but not including illegitimate descendants and their descendants;
"child" means an issue of the first generation; "per stirpes" means in equal
shares among living children of the person whose issue are referred to and issue
(taken collectively) of each deceased child of such person, with such issue
taking by right of representation of such deceased child; and "survive" and
"surviving" mean living after the death of the Participant.
7.4.5. Special Rules. Unless the Participant has otherwise specified in his
Beneficiary designation, the following rules shall apply:
(a) if there is not sufficient evidence that a Beneficiary was living
after the death of the Participant, it shall be deemed that the
Beneficiary was not living after the death of the Participant.
(b) The automatic Beneficiaries specified in Section 7.4.3 and the
Beneficiaries designated by the Participant shall become fixed as of
the Participant's death so that, if a Beneficiary survives the
Participant but dies before the receipt of all payments due such
Beneficiary hereunder, such remaining payments shall be payable to the
representative of such Beneficiary's estate.
(c) If the Participant designates as a Beneficiary the person who is the
Participant's spouse on the date of the designation, either by name or
by relationship, or both, the dissolution, annulment or other legal
termination of the marriage between the Participant and such person
shall automatically revoke such designation. (The foregoing shall not
prevent the Participant from designating a former spouse as a
Beneficiary on a form executed by the Participant and received by the
Committee after the date of the legal termination of the marriage
between the Participant and such former spouse, and during the
Participant's lifetime.)
(d) Any designation of a nonspouse Beneficiary by name that is accompanied
by a description of relationship to the Participant shall be given
effect without regard to whether the relationship to the Participant
exists either then or at the Participant's death.
(e) Any designation of a Beneficiary only by statement of relationship to
the Participant shall be effective only to designate the person or
persons standing in such relationship to the Participant at the
Participant's death.
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A Beneficiary designation is permanently void if it either is executed or is
filed by a Participant who, at the time of such execution or filing, is then a
minor under the law of the state of his legal residence. The Committee (and not
the Trustee) shall be the sole judge of the content, interpretation and validity
of a purported Beneficiary designation.
7.5. Death Prior To Full Distribution. If a Participant dies after his Event of
Maturity but before distribution of his Vested Total Account has been completed,
the remainder of his undistributed Vested Total Account shall be distributed in
the same manner as hereinbefore provided in the Event of Maturity by reason of
death. If, at the death of the Participant, any payment to the Participant was
due or otherwise pending but not actually paid, the amount of such payment shall
be included in the Vested Total Account which is payable to the Beneficiary (and
shall not be paid to the Participant's estate).
7.6. Distribution In Cash. Subject to the requirements of Section 7.3 for a Plan
that is not an exempt profit sharing plan, distribution of a Participant's
Vested Total Account shall be made in cash. If, however, (i) the Vested Total
Account to be distributed consists in whole or in part of a Participant's unpaid
promissory note, the Trustee shall cause distribution of that portion of the
Vested Total Account to be made in the form of that unpaid promissory note, or
(ii) the Vested Total Account to be distributed consists in whole or in part of
a life insurance contract acquired pursuant to the Participant's direction under
Section 10.11, the Trustee shall cause distribution of that portion of the
Vested Total Account to be made in the form of the life insurance contract so
acquired, or (iii) the Vested Total Account to be distributed consist in whole
or in part of a Participant's individually directed Subfund established pursuant
to Section 4.1.2, the Trustee shall cause distribution of that portion of the
Vested Total Account to be made in the form of the assets held in the
individually directed Subfund.
7.7. Deleted by the First Amendment.
7.8. Withdrawals From Voluntary Accounts.
Third Amendment-Effective January 1, 1994
7.8.1. When Available. If the Adoption Agreement so provides, a Participant
(whether or not then employed by the Employer) may make withdrawals from time to
time from the Participant's Nondeductible Voluntary Account (if any) and the
Participant's Deductible Voluntary Account (if any). To receive such a
withdrawal, the Participant must file a written application specifying the
dollar amount to be withdrawn. Such withdrawal application shall be approved by
the Administrator's Representative to be made in a lump sum cash payment as soon
as administratively practicable after the Valuation Date permitted in Article X
of the Adoption Agreement that is coincident with or next following approval of
the completed application by the Administrator's Representative.
7.8.2. Sequence of Accounts. The amount of such withdrawals by a
Participant shall be deemed to first come from the aggregate amount of voluntary
contributions theretofore made by him and only thereafter from the earnings or
gains in, or attributable to, either Voluntary Account. Notwithstanding the
foregoing, any such withdrawal shall be deemed to have been first taken from the
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Participant's nondeductible voluntary contributions made prior to January 1,
1987, to the extent of the aggregate amount not previously withdrawn.
Thereafter, the withdrawal shall be deemed to have been taken from a combination
of (i) the Participant's nondeductible voluntary contributions made after
December 31, 1986, to the extent of the aggregate amount thereof not previously
withdrawn, and (ii) a portion of the earnings in the Nondeductible Voluntary
Account. The portion of each such withdrawal that is deemed to be earnings will
be in the same ratio as the total earnings of the Nondeductible Voluntary
Account bear to the total Nondeductible Voluntary Account. All withdrawals shall
be deemed to come first from the Nondeductible Voluntary Account, and only after
the amount which may be withdrawn from the Nondeductible Voluntary Account is
exhausted will a withdrawal come from the Deductible Voluntary Account.
7.8.3. Limitations. Notwithstanding the foregoing, no distribution shall be
made pursuant to this Section 7.8 unless this Plan is an exempt profit sharing
plan (as defined in Section 7.3.4) or the spouse of the Participant, if any,
consents in writing to the distribution. To be valid, the consent of such spouse
must be in writing, must acknowledge the effect of the withdrawal and must be
witnessed by a notary public. The consent of the spouse must be given within
ninety (90) days prior to the Valuation Date as of which the withdrawal is made
and must relate to that specific withdrawal. The consent given by one spouse
shall be effective only with respect to that spouse.
7.8.4. Coordination With Section 4.1. If a withdrawal is made from an
Account which is invested in more than one (1) investment Subfund authorized and
established under Section 4.1, the amount withdrawn shall be charged to each
such investment Subfund in the same proportions as the account is invested in
such investment Subfunds, unless otherwise directed by the Administrator's
Representative.
7.9. In-Service Distributions.
Third Amendment Effective January 1, 1994
7.9.1. When Available. If the Adoption Agreement so provides, a Participant
(whether or not then employed by the Employer) may receive an in-service
distribution from the Vested portion of the Participant's Total Account (unless
the Adoption Agreement specifically prohibits in-service distributions from a
particular Account) if the Administrator's Representative determines that such
in-service distribution is for one of the purposes described in Section 7.9.2
and the conditions in Sections 7.9.3 and 7.9.4 have been fulfilled. To receive
an in-service distribution, the Participant must file an in-service distribution
application with the Administrator's Representative. In the application, the
participant shall specify the dollar amount to be distributed. Such in-service
distribution application shall be approved by the Administrator's Representative
to be made in a lump sum cash payment as soon as administratively practicable
after the Valuation Date permitted in Article X of the Adoption Agreement that
is coincident with or next following approval of the completed application by
the Administrator's Representative.
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First Amendment-Effective January 1, 1993
7.9.2. Purposes. In-service distributions shall be allowed under Section
7.9.1 for only such of the following purposes as are permitted in the Adoption
Agreement and only if the Participant establishes that the in-service
distribution is to be made for one of the following permitted purposes:
(a) expenses for medical care described in section 213(d) of the Internal
Revenue Code previously incurred by the Participant, the Participant's
spouse or any dependents of the Participant (as defined in section 152
of the Internal Revenue Code) or necessary for these persons to obtain
medical care described in Section 213(d) of the Internal Revenue Code.
(b) costs directly related to the purchase of a principal residence for
the Participant (excluding mortgage payments),
Third Amendment-Effective January 1, 1995
(c) payment of tuition, room and board and related educational fees for
the next twelve (12) months of post-secondary education for the
Participant, or the Participant's spouse, children or dependents (as
defined in section 152 of the Internal Revenue Code), or
First Amendment-Effective January 1, 1993
(d) payments necessary to prevent the eviction of the Participant from the
Participant's principal residence or foreclosure on the mortgage of
that principal residence.
Such purposes shall be considered to be an immediate and heavy financial need of
the Participant.
7.9.3. Limitations. In no event shall the cumulative amount of in-service
distributions withdrawn from a Participant's Retirement Savings Account exceed
the amount of contributions to that Account made pursuant to Section 3.2 (i.e.,
in-service distributions from that Account shall not include any earnings on
such contributions or any curative allocations or earnings on curative
allocations made pursuant to Section 3.4.2). The amount of the in-service
distribution shall not exceed the amount of the Participant's immediate and
heavy financial need; provided, however, that the amount of the immediate and
heavy financial need may include amounts necessary to pay any federal, state, or
local income taxes or penalties reasonably anticipated to result from the
distribution. In addition, a hardship distribution which includes a portion of
the Participant's Retirement Savings Account shall not be allowed unless the
Participant has obtained all distributions, other than hardship distributions,
and all nontaxable loans (at the time of the loan) currently available under all
plans maintained by the Employer and Affiliates. Other funds are not currently
available unless the funds are available prior to or coincidently with the date
the hardship distribution is available.
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Notwithstanding the foregoing, no distribution shall be made pursuant to this
Section 7.9 unless the Plan is an exempt profit sharing plan (as defined in
Section 7.3.4) or the spouse of the Participant, if any, consents in writing to
the distribution. To be valid, the consent of the spouse must be in writing,
must acknowledge the effect of the distribution and must be witnessed by a
notary public. The consent of the spouse must be given within ninety (90) days
prior to the date as of which the distribution is made and must relate to the
specific distribution. The consent of the spouse shall be irrevocable and shall
be effective only with respect to that spouse.
7.9.4. Coordination With Retirement Savings Agreement. The Participant's
Retirement Savings Agreement shall be cancelled for twelve (12) months after
receipt of an in-service distribution and shall not be automatically reinstated.
Thereafter, such Participant may, upon giving fifteen (15) days' prior written
notice to the Plan Administrator, enter into a new Retirement Savings Agreement
effective as of the payday on or after any subsequent Enrollment Date following
such twelve (12) month period, provided he is in Recognized Employment on that
date. Also, a Participant shall not be allowed to make nondeductible voluntary
contributions to this Plan for such twelve (12) month period. In addition, such
a Participant shall not be allowed to make retirement savings contributions for
the Participant's taxable year immediately following the taxable year of the
in-service distribution which exceeds the adjusted Seven Thousand Dollar
($7,000) limit (as described in Section 2.5) for such next taxable year less the
amount of such Participant's retirement savings contributions for the taxable
year of the in-service distribution. The rules described in this Section 7.9.4
only apply if the hardship distribution includes a portion of the Participant's
Retirement Savings Account.
7.9.5. Sequence of Accounts. Each and every accelerated distribution made
pursuant to this Section 7.9 shall first be taken from and charged to the
Participant's Accounts (if the Adoption Agreement permits distribution from such
Account) in the following sequence.
(i) Nondeductible Voluntary Account
(ii) Rollover Account
(iii) Transfer Account
(iv) Employer Contributions Account
(v) Employer Matching Account
(vi) Deductible Voluntary Account
(vii) Retirement Savings Account.
Distributions from the Participant's Nondeductible Voluntary Account shall be
distributed in the sequence described in Section 7.8.
7.9.6. Coordination With Section 4.1. If a withdrawal is made from an
Account which is invested in more than one (1) investment Subfund authorized and
established under Section 4.1, the amount withdrawn shall be charged to each
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such investment Subfund in the same proportions as the Account is invested in
such investment Subfunds, unless otherwise directed by the Administrator's
Representative.
7.10. Transitional Rules. Participants or Beneficiaries who have actually
started receiving installment payments before January 1, 1989, shall continue to
receive such payments under the rules specified in the Plan Statement prior to
the adoption of the rules described in Appendix F to this Plan Statement to the
extent such rules are not inconsistent with the current Plan Statement and
current laws and regulations including, specifically, section 401(a)(9) and
section 411(d)(6) of the Internal Revenue Code. The rules in Section 7.1,
through and including, Section 7.9 to this Plan Statement are effective for Plan
Years beginning after December 31, 1988.
First Amendment-Effective January 1, 1993
7.11. Loans. Unless the Adoption Agreement precludes it, loans may be made to
Participants from this Plan who are not Owner-Employees or Shareholder-Employees
subject to this Section 7.11.
7.11.1. General Rules. The Trustee shall, at the direction of the
Administrator's Representative, make a loan or loans to a Participant or
Beneficiary (other than an Owner-Employee or a Shareholder-Employee). To receive
a loan from the Plan, a Participant or Beneficiary must submit a written request
to the Administrator's Representative. The written request must specify the
amount of the loan, term of loan and, if required, include spousal consent. The
amount of such loan to any Participant or Beneficiary, when added to the
outstanding balance of the other loans to the borrower from the Plan, shall not
exceed the lesser of: (i) fifty percent (50%) of the Vested amount of the
Participant's Total Account, or (ii) Fifty Thousand Dollars ($50,000). The Fifty
Thousand Dollar ($50,000) limitation shall be reduced by the excess (if any) of:
(i) the highest outstanding balance of loans from the Plan during the one-year
period ending on the day before the new loan is made, over (ii) the outstanding
balance of all loans from the Plan on the day the new loan is made (but not
including the new loan).
By acceptance of such loan, the Participant or Beneficiary automatically
(by operation of the rules of this Plan Statement) grants a lien upon such of
his Accounts from which monies were withdrawn to make up the loan in an amount
not less than the amount of such loans (including unpaid interest). The borrower
may grant a security interest in his or her "qualified residence" as defined in
section 163(h) of the Code if the borrower's unrestricted equity interest is
adequate to do so. No other security shall be required or permitted as a
condition of granting any such loans. Any such loan shall provide that it shall
be repaid within a definite period of time, which period shall not exceed five
(5) years unless such loan is used to acquire any dwelling unit which within a
reasonable time (determined at the time the loan is made) is to be used as a
principal residence of the Participant in which event such period shall not
exceed fifteen (15) years. Any such loan must be repaid in substantially level
amounts including principal and interest, over the term of the loan; provided,
however, that a loan may be prepaid or accelerated prior to the end of the term
of the loan. Loan payments must be made at least once each Plan Year quarter.
Notwithstanding the foregoing, no loan shall be made pursuant to this
Section 7.11 unless this Plan is an exempt profit sharing plan (as defined in
Section 7.3.4) or the spouse of the Participant, if any, consents to the loan.
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To be valid, the consent of such spouse must be in writing, must acknowledge the
effect of the loan and the use of the Account as security for the loan and must
be witnessed by a notary public. The consent of the spouse must be given within
ninety (90) days prior to the date the loan is made and must relate to a
specific loan. The consent given by the spouse to whom the Participant was
married at the time the loan was made shall be effective with respect to that
spouse and each subsequent spouse of the Participant. A new consent shall be
required if the Account is used for renegotiation, extension, renewal or other
revision of the loan. If a valid spousal consent has been obtained as described
above or such consent is not required, then, notwithstanding any other
provisions of this Plan Statement, the portion of the Participant's Vested Total
Account used as a security interest held by the Plan by reason of a loan
outstanding to the Participant shall be taken into account for purposes of
determining the amount of the Vested Total Account payable at the time of death
or distribution, but only if the reduction is used as repayment of the loan. If
less than one hundred percent (100%) of the Participant's Vested Total Account
(determined without regard to the preceding sentence) is payable to the
surviving spouse of the Participant, then the Vested Total Account shall be
adjusted by first reducing the Vested Total Account by the amount of the
security used as repayment of the loan, and then determining the benefit payable
to the surviving spouse.
Third Amendment-Effective January 1, 1995
7.11.2. Interest Rate. The interest rate on each loan must be a reasonable
interest rate determined on the first business day of the calendar month
immediately preceding the date as of which the loan is issued.
7.11.3. Loans Made From Participant's Accounts. If the Adoption Agreement
so provides, each loan will be made from the individual Accounts of the
Participant who receives the loan and the following rules will apply:
(a) Accounting For Loan. For the purposes of determining the extent to
which such Participant's Total Account is entitled to share in income,
gains or losses of the Fund under Section 4, the same shall be deemed
to be reduced by the unpaid balance of any outstanding loans to the
Participant, and the interest payments on such loans shall be credited
to his Total Account.
First Amendment-Effective January 1, 1993
(b) Coordination With Section 4.1. If a loan is made from an Account which
is invested in more than one investment Subfund authorized and
established under Section 4.1, the amount withdrawn in order to make
the loan shall be charged pro rata to each investment Subfund. All
repayments of principal and interest shall be allocated among the
investment Subfunds that the borrower has elected for investment at
the time repayment is received.
(c) Sequence of Accounts. If a loan is made to a Participant who has
assets in more than one Account, such loan shall be deemed to have
been made from the Participant's Accounts in the following sequence:
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(i) Rollover Account
(ii) Transfer Account
(iii) Employer Contributions Account
(iv) Employer Matching Account
(v) Deductible Voluntary Account
(vi) Nondeductible Voluntary Account
(vii) Retirement Savings Account (but see the last sentence of this
subsection (c)).
Repayments of principal and payments of interest shall be apportioned
among the Accounts from which the loan was made in proportion to the
amounts by which the Accounts were initially reduced in order to make
the loan. If the borrower's "qualified residence" as defined in
section 163(h) of the Code is given as security for the loan, then no
portion of the borrowed amount may come from the Participant's
Retirement Savings Account.
First Amendment-Effective January 1, 1993
7.11.4. Loan Rules. All loans must comply with the loan rules established
by the Trustee from time to time. If the Employer adopts other loan rules
inconsistent with the rules established by the Trustee, the Employer will have
made an unauthorized amendment to the Plan and will be governed by the
provisions of Section 9.1.1.
7.12. Corrective Distributions.
7.12.1. Excess Deferrals ($7,000 Limit)
(a) In General. A Participant may assign to this Plan any excess
deferrals made during a taxable year of the Participant by
notifying the Administrator's Representative in writing not later
than the March 1 following such taxable year of the amount of the
excess deferral to be assigned to the Plan. A Participant shall
be deemed to have notified the Plan of excess deferrals to the
extent the Participant has excess deferrals for the taxable year
calculated by taking into account only the amount of elective
contributions allocated to the Participant's Retirement Savings
Account and to any other plan of the Employer and Affiliates.
Notwithstanding any other provision of the Plan Statement, a
Participant's excess deferrals, plus any income and minus any
loss allocable thereto, shall be distributed to the Participant
no later than the first April 15 following the close of the
Participant's taxable year.
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(b) Definitions. For purposes of this Section, "excess deferrals"
shall mean the amount of elective contributions allocated to the
Participant's Retirement Savings Account for a Participant's
taxable year and which the Participant or the Employer, where
applicable, allocates to this Plan pursuant to the claim
procedures described below.
(c) Claims. The Participant's claim shall be in writing; shall be
submitted to the Administrator's Representative not later than
March 1 with respect to the immediately preceding taxable year;
shall specify the amount of the Participant's excess deferrals
for the preceding taxable year; and shall be accompanied by the
Participant's written statement that if such amounts are not
distributed, such excess deferrals, when added to amounts
deferred under other plans or arrangements described in sections
401(k), 408(k), 457, 501(c)(18) or 403(b) of the Internal Revenue
Code, will exceed the limit imposed on the Participant by section
402(g) of the Internal Revenue Code for the taxable year in which
the deferral occurred. The Employer shall notify the Plan on
behalf of the Participant where the excess deferrals occur in the
Plan or the combined plans of the Employer and Affiliates.
(d) Determination of Income Or Loss. The excess deferrals shall be
adjusted for income or loss. Unless the Administrator's
Representative and the Trustee agree otherwise in writing, the
income or loss allocable to excess deferrals shall be determined
by multiplying the income or loss allocable to the Participant's
elective contributions for the Plan Year ending within such
preceding taxable year by a fraction, the numerator of which is
the excess deferrals on behalf of the Participant for such
preceding taxable year and the denominator of which is the
Participant's Retirement Savings Account balance attributable to
elective contributions on the Valuation Date coincident with or
immediately before the last day of such preceding taxable year
without regard to any income or loss occurring during such
taxable year. Also, unless the Administrator's Representative and
the Trustee agree otherwise in writing, the excess deferral shall
not be adjusted for income or loss for the period between the
Valuation Date coincident with or immediately before the last day
of such preceding taxable year and the date of distribution of
the excess deferral. If the Administrator's Representative and
the Trustee agree in writing to adjust for income or loss for the
period between the Valuation Date coincident with or immediately
before the last day of such preceding taxable year, the income or
loss allocable for such period shall be equal to ten percent
(10%) of the income or loss allocable to the distributable excess
deferral for the applicable taxable year multiplied by the number
of whole calendar months that have elapsed since the Valuation
Date coincident with or immediately before the last day of such
taxable year, including the month of distribution if distribution
occurs after the fifteenth (15th) of such month.
(e) Accounting For Excess Deferrals. Excess deferrals shall be
distributed from the Participant's Retirement Savings Account.
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7.12.2. Excess Contributions (Section 401(k) Test).
(a) In General. Notwithstanding any other provision of the Plan
Statement, excess contributions for a Plan Year, plus any income
and minus any loss allocable thereto, shall be distributed no
later than the last day of the following Plan Year, to
Participants to whose accounts elective contributions, and if
used to determine the deferral percentage under Section 2,
matching contributions (as defined in section 401(m)(4)(A) of the
Internal Revenue Code which meet the requirements of sections
401(k)(2)(B) and 401(k)(2)(C) of the Internal Revenue Code) or
qualified nonelective contributions (within the meaning of
section 401(m)(4)(C) of the Internal Revenue Code), or both, were
allocated. If such excess contributions are distributed more than
two and one half (2 1/2) months after the last day of the Plan
Year in which such excess contributions arose, a ten percent
(10%) excise tax will be imposed on the Employer maintaining the
Plan with respect to such excess contributions. Such
distributions shall be made to highly compensated eligible
employees (as defined in Section 2) on the basis of the
respective portions of the excess contributions attributable to
each of such employees.
(b) Excess Contributions. For purposes of this Section, "excess
contributions" shall mean, with respect to any Plan Year, the
excess of:
(i) the aggregate amount of Employer contributions taken into
account in computing the average deferral percentage (as
defined in Section 2) of highly compensated covered
employees (as defined in Section 2) for such Plan Year, over
(ii) the maximum amount of such contributions permitted by the
section 401(k) test described in Section 2 (determined by
reducing contributions made on behalf of the highly
compensated covered employees in order of the deferral
percentage, as defined in section 2, beginning with the
highest such percentage).
(c) Determination Of Income Or Loss. The excess contributions shall
be adjusted for income or loss. Unless the Administrator's
Representative and the Trustee agree otherwise in writing, the
income or loss allocable to excess contributions shall be
determined by multiplying income or loss allocable to the
Participant's elective contributions, and if used to determine an
eligible employee's deferral percentage under Section 2, matching
contributions (as defined in section 401(m)(4) of the Internal
Revenue Code which meet the requirements of sections 401(k)(2)(B)
and 401(k)(2)(C) of the Internal Revenue Code) or qualified
nonelective contributions (within the meaning of section
401(m)(4)(C) of the Internal Revenue Code), or both, for the Plan
Year by a fraction, the numerator of which is the excess
contributions on behalf of the Participant for the Plan Year and
the denominator of which is the sum of the Participant's account
balances attributable to elective contributions and such matching
contributions or qualified nonelective contributions, or both, on
the last day of the Plan Year, without regard to any income or
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loss occurring during such Plan Year. Also, unless the
Administrator's Representative and the Trustee agree otherwise in
writing, excess contributions shall not be adjusted for income or
loss for the period between the Valuation Date coincident with or
immediately before the last day of such preceding taxable year
and the date of distribution of the excess contributions. If the
Administrator's Representative and the Trustee agree in writing
to adjust for income or loss for the period between the Valuation
Date coincident with or immediately before the last day of such
preceding taxable year, the income or loss allocable for such
period shall be equal to ten percent (10%) of the income or loss
allocable to the distributable excess contributions for the
applicable taxable year multiplied by the number of whole
calendar months that have elapsed since the Valuation Date
coincident with or immediately before the last day of such
taxable year, including the month of distribution if distribution
occurs after the fifteenth (15th) of such month.
(d) Accounting For Excess Contributions. Excess contributions shall
be distributed from the Participant's Retirement Savings Account
and Employer Matching Account, if applicable, in proportion to
the Participant's elective contributions and matching
contributions, if applicable, (as defined in section 401(m)(A) of
the Internal Revenue Code which meet the requirements of sections
401(k)(2)(B) and 401(k)(2)(C) of the Internal Revenue Code) for
the Plan Year. Excess contributions shall be distributed from the
Participant's Employer Contributions Account, if applicable (but
only applicable if qualified nonelective contributions within the
meaning of section 401(m)(4)(C) of the Internal Revenue Code are
held in the Employer Contributions Account), only to the extent
such excess contributions exceed the balance in the Participant's
Retirement Savings Account and Employer Matching Account.
(e) Special Family Member Rule. If the deferral percentage of a
highly compensated covered employee is determined under Section
2.7.2(b), then the deferral percentage is reduced as required
under this Section and the excess contributions for the family
group shall be allocated among the family members in proportion
to the elective contributions of each family member that are
combined to determine the deferral percentage.
7.12.3. Excess Aggregate Contributions (Section 401(m) Test).
(a) In General. Subject to Section 7.12.3(f), but otherwise
notwithstanding any other provision of the Plan Statement, excess
aggregate contributions, plus any income and minus any loss
allocable thereto, shall be distributed no later than the last
day of the following Plan Year to Participants to whose accounts
nondeductible voluntary contributions or Employer matching
contributions, and if used to determine the contribution
percentage under Section 3, elective contributions or qualified
nonelective contributions (within the meaning of section
401(m)(4)(C) of the Internal Revenue Code), or both, were
allocated. Such distributions shall be made to highly compensated
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eligible employees (as defined in Section 3) on the basis for the
respective portions of the excess aggregate contributions
attributable to each of such employees.
(b) Excess Aggregate Contributions. For purposes of this Section,
"excess aggregate contributions" shall mean, with respect to any
Plan Year, the excess of:
(i) the aggregate amount of contributions taken into account in
computing the average contribution percentage (as defined in
Section 3) of highly compensated eligible employees (as
defined in Section 3) for such Plan Year, over
(ii) the maximum amount of such contributions permitted by the
section 401(m) test described in Section 3 (determined by
reducing contributions made on behalf of the highly
compensated eligible employees in order of the contribution
percentage, as defined in Section 3, beginning with the
highest such percentage).
(c) Determination Of Income. The excess aggregate contributions shall
be adjusted for income or loss. Unless the Administrator's
Representative and the Trustee agree otherwise in writing, the
income or loss allocable to excess aggregate contributions shall
be determined by multiplying the income or loss allocable to the
Participant's nondeductible voluntary contributions and Employer
matching contributions (to the extent used to determine the
eligible employee's contribution percentage under Section 3), and
if used to determine an eligible employee's contribution
percentage under Section 3, elective contributions or qualified
nonelective contributions (within the meaning of section
401(m)(4)(C) of the Internal Revenue Code), or both, for the Plan
Year by a fraction, the numerator of which is the excess
aggregate contributions on behalf of the Participant for the Plan
Year and the denominator of which is the sum of the account
balances attributable to nondeductible voluntary contributions,
Employer matching contributions and such elective contributions
or qualified nonelective contributions, or both, on the last day
of the Plan Year without regard to any income or loss occurring
during such Plan Year. Also, unless the Administrator's
Representative and the Trustee agree otherwise in writing, excess
aggregate contributions shall not be adjusted for income or loss
for the period between the Valuation Date coincident with or
immediately before the last day of such preceding taxable year
and the date of distribution of the excess contributions. If the
Administrator's Representative and the Trustee agree in writing
to adjust for income or loss for the period between the Valuation
Date coincident with or immediately before the last day of such
preceding taxable year, the income or loss allocable for such
period shall be equal to ten percent (10%) of the income or loss
allocable to the distributable excess aggregate contributions for
the applicable taxable year multiplied by the number of whole
calendar months that have elapsed since the Valuation Date
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coincident with or immediately before the last day of such
taxable year, including the month of distribution if distribution
occurs after the fifteenth (15th) of such month.
(d) Accounting For Excess Aggregate Contributions. Excess aggregate
contributions shall be distributed from the Participant's
Voluntary Account, the Participant's Employer Matching Account
(and, if applicable, the Participant's Retirement Savings Account
or Employer Contributions Account, or both) in proportion to the
Participant's nondeductible voluntary contributions, Employer
matching contributions, and if used to determine the contribution
percentage under Section 3, elective contributions or qualified
nonelective contributions (within the meaning of section
401(m)(4)(C) of the Internal Revenue Code), or both, for the Plan
Year.
(e) Special Family Member Rule. If the contribution percentage of a
highly compensated eligible employee is determined under Section
3.10.2(b), then the contribution percentage is reduced as
required under this Section and the excess aggregate
contributions for the family group shall be allocated among the
family members in proportion to the nondeductible voluntary
contributions and Employer matching contributions of each family
member that are combined to determine the contribution
percentage.
(f) Special Rule for Partial Vesting. If the Participant is not fully
(100%) Vested in the Employer Matching Account as of the last day
of the Plan Year to which the excess aggregate contributions
relate, then the distribution of the Participant's excess
aggregate contributions under this Section shall be deemed to
have been distributed from the fully (100%) Vested portion of the
Employer Matching Account and such Account shall become Vested in
accordance with the special rule for partial distributions in
Section 5.1.3. To the extent the excess aggregate contributions
exceed the fully (100%) Vested portion of the Participant's
Employer Matching Account, the excess aggregate contributions
shall be forfeited and reallocated as provided in Section 6.2.
7.12.4. Priority. The determination of the excess aggregate contributions
shall be made after first determining the excess deferrals, and then determining
the excess contributions. The amount of excess contributions shall be reduced by
excess deferrals previously distributed to such Participant for the
Participant's taxable year ending with or within such Plan Year.
7.12.5. Matching Contributions. If excess deferrals, excess contributions
or elective contributions treated as excess aggregate contributions are
distributed pursuant to this Section 7.12, applicable matching contributions
under Section 3.3 or 3.4 shall be treated as forfeitures and reallocated as
provided in Section 6.2.
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SECTION 8
SPENDTHRIFT PROVISIONS
No Participant or Beneficiary shall have any transmissible interest in any
Account nor shall any Participant or Beneficiary have any power to anticipate,
alienate, dispose of, pledge or encumber the same while in the possession or
control of the Trustee, nor shall the Trustee, the Administrator's
representative or the Employer recognize any assignment thereof, either in whole
or in part, nor shall any Account herein be subject to attachment, garnishment,
execution following judgment or other legal process while in the possession or
control of the Trustee.
The power to designate Beneficiaries to receive the Vested Total Account of a
Participant in the event of his death shall not permit or be construed to permit
such power or right to be exercised by the Participant so as thereby to
anticipate, pledge, mortgage or encumber his Account or any part thereof, and
any attempt of a Participant so to exercise said power in violation of this
provision shall be of no force and effect and shall be disregarded by the
Trustee, the Administrator's Representative and the Employer.
This section shall not prevent the Trustee, the Administrator's Representative
or the Employer from exercising, in their discretion, any of the applicable
powers and options granted to them upon the occurrence of an Event of Maturity,
as such powers may be conferred upon them by any applicable provision hereof,
nor prevent the Plan from foreclosing on the lien granted to secure any and all
loans made to him as a Participant from the Fund. (In the event of a default on
a Participant loan, foreclosure on the promissory note and the attachment of the
security interest in the Account will not occur until an Event of Maturity
occurs with respect to such Participant.) This section does not prevent the
Administrator's Representative or Trustee from observing the forms of a
qualified domestic relations order as provided in the Appendix C to this Plan
Statement.
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SECTION 9
AMENDMENT AND TERMINATION
9.1. Amendment.
9.1.1. Amendment By Employer. The Employer reserves the right to amend the
designations and elections made by it under the Adoption Agreement from time to
time by making and delivering a new Adoption Agreement to the Trustee, to add
overriding language in the Adoption Agreement when such language is necessary to
satisfy the requirements of section 415 of the Internal Revenue Code or to avoid
duplication of minimum benefits under section 4l6 of the Internal Revenue Code
because of the required aggregation of multiple plans, which amendment shall
become effective only if expressly accepted in writing by the Trustee, and to
add certain model amendments published by the Internal Revenue Service, which
specifically provide that their adoption will not cause the plan to be treated
as individually designed. An Employer that amends the Plan for any other reason,
will no longer participate in these Prototype Documents and will be considered
to have an individually designed plan. The Employer further reserves the right
to amend its plan in its entirety by the adoption of another master, prototype
or individually designed successor retirement plan document in place of this
Plan Statement, and by entering into such agreement with the Trustee or with a
successor trustee, or other successor funding medium selected by the Employer as
may be required for the purpose of carrying such successor retirement plan
document into effect. The Employer may not amend the Prototype Documents (as
distinguished from amending its elections in the Adoption Agreement). If an
Employer should take action to:
(i) remove and replace the Trustee originally designated in this Plan
Statement, or name a Trustee who is not the Prototype Sponsor (or
a Trustee approved by the Prototype Sponsor), or
(ii) amend this Plan Statement by the adoption of another document in
lieu of this Plan Statement, or
(iii) attempt to amend the Prototype Documents, or
(iv) attempt to complete the Adoption Agreement in a manner not
permitted by the Adoption Agreement, or
(v) affirmatively refuse to consent to an amendment effected by the
Prototype Sponsor under Section 9.1.2.
such action shall not be considered a termination of the Plan adopted or
continued under this Plan Statement. Upon the occurrence of such action, the
Employer shall no longer be considered to be maintaining a Plan under these
Prototype Documents but rather under an individually designed document. No
amendment shall be effective so as to increase the duties of the Trustee without
its consent and provided, further, that the right of the Employer to designate a
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successor retirement plan or funding medium shall be subject to the notice
requirements affecting the removal of the Trustee set forth in Section 10.3.
9.1.2. Amendment By Prototype Sponsor. The Employer has delegated to the
Prototype Sponsor the right to amend this Plan Statement (either as to its form
or the elections specified in the Adoption Agreement). Although it is intended
that this power of amendment will be used principally to assure compliance with
applicable provisions of the Employee Retirement Income Security Act of 1974 and
the Internal Revenue Code as they may be now or hereafter amended, this power of
amendment may be exercised for any purpose deemed appropriate by the Prototype
Sponsor. Any such amendment shall be effective only upon notice in writing to
the Employer. The Employer shall be deemed to have consented to such amendment
unless prior to the expiration of thirty (30) days after notice is sent to the
Employer, the Employer exercises its reserved power of amendment by adopting a
successor retirement plan and funding medium, as provided in Section 9.1.
9.1.3. Limitation On Amendments. No amendment shall be effective to reduce
or divest the Account of any Participant unless the same shall have been adopted
with the consent of the Secretary of Labor pursuant to section 412(c)(8) of the
Internal Revenue Code. No amendment shall eliminate an optional form of
distribution with respect to benefits attributable to service before the
amendment was adopted, unless such amendment is adopted pursuant to regulations
issued by the Secretary of the Treasury.
9.1.4. Resignation Of Prototype Sponsor. By giving the Employer thirty (30)
days' written notice of its intention to do so, the Prototype Sponsor may
withdraw its consent to the Employer's use of the Prototype Documents. Upon the
occurrence of such action, the Employer shall no longer be considered to be
maintaining a Plan under these Prototype Documents but rather under an
individually designed document.
9.2. Discontinuance Of Contributions And Termination Of Plan. The Employer also
reserves the right to reduce, suspend or discontinue its contributions to this
Plan and to terminate the Plan herein embodied in its entirety. If the Plan is
terminated, the assets will be distributed as soon as administratively feasible.
9.3. Merger, Etc., With Another Plan. The Employer may cause all or a part of
this Plan to be merged with all or a part of any other plan and may cause all or
a part of the assets and liabilities to be transferred from this Plan to another
plan. In the case of merger or consolidation of this Plan with, or transfer of
assets and liabilities of this Plan to, any other plan, each Participant shall
(if such other plan were then terminated) receive a benefit immediately after
the merger, consolidation or transfer which is not less than the benefit he
would have been entitled to receive immediately before the merger, consolidation
or transfer (if this Plan had then terminated). If the Employer agrees to a
transfer of assets and liabilities to or from another plan, the agreement under
which such transfer is concluded shall specify the Accounts to which the
transferred amounts are to be credited.
In no event shall assets be transferred from any other plan to this Plan unless
this Plan complies (or has been amended to comply) with the optional form of
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benefit requirements of section 411(d)(6)(B)(ii) of the Internal Revenue Code
(or, where applicable, the distribution rules of section 40l(k) of the Internal
Revenue Code) with respect to such transferred assets.
In no event shall assets be transferred from this Plan to any other plan unless
such other plan complies (or has been amended to comply) with the optional form
of benefit requirements of section 411(d)(6)(B)(ii) of the Internal Revenue Code
and the distribution rules of section 40l(k) of the Internal Revenue Code with
respect to such transferred assets.
Fourth Amendment - Effective December 12, 1994 or, if later, March 12, 1995
Notwithstanding any provision of the Plan to the contrary, to the extent that
any optional form of benefit under this Plan permits a distribution prior to the
Employee's retirement, death, disability or severance from employment, and prior
to Plan termination, the optional form of benefit is not available with respect
to benefits attributable to assets (Including post-transfer earning thereon) and
liabilities that are transferred within the meaning of ss.414(l) of the Internal
Revenue Code, to this Plan from a money purchase pension plan qualified under
ss.40l(a) of the Internal Revenue Code (other than any portion of those assets
and liabilities attributable to voluntary employee contributions).
9.4. Adoption By Affiliates.
9.4.1. Adoption With Consent. The Employer executing the Adoption Agreement
(herein called the "principal employer") may consent to the adoption of this
Plan by any business entity affiliated in ownership with the principal employer
(subject to such conditions as the principal employer may impose).
9.4.2. Procedure For Adoption. Any such adopting business entity shall
initiate its adoption of this Plan by delivery of a certified copy of the action
of its directors (if a corporation). general partner (if a partnership) or
proprietor (if a sole proprietorship), adopting this Plan Statement to the
principal employer. Upon the consent by said principal employer of the adoption
by the adopting business entity, and the delivery to the Trustee of written
evidence of the principal employer's consent, the adoption of this Plan by the
adopting business entity shall be effective as of the date specified by the
principal employer.
9.4.3. Effect Of Adoption. Upon the adoption of this Plan by an adopting
business entity as heretofore provided, the adopting business entity shall be an
Employer hereunder in all respects. Each adopting business entity (and each
other business entity joining the principal employer in the execution of the
Adoption Agreement), as a condition of continued participation in this Plan
delegates to the principal employer the sole power and authority:
(a) to terminate the Plan (except that each adopting business entity shall
have the power to terminate this Plan as applied to it); to amend the
Plan Statement (except that each adopting business entity shall have
the power to amend the Plan Statement as applied to it by establishing
a successor plan to which assets and liabilities may be transferred as
provided in Section 9.3),
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(b) to appoint, remove and accept the resignation of a Trustee; to appoint
or remove the Administrator's Representative; to appoint or remove an
Investment Manager; to act as the plan administrator,
(c) to direct the Trustee to return an Employer contribution that was made
by mistake or which is not deductible,
(d) to consent to the adoption of this Plan by affiliated employers; to
establish conditions and limitations upon such adoption of this Plan
by affiliated employers, and
(e) to cause this Plan to be merged with another plan and to transfer
assets and liabilities between this Plan and another.
Each reference herein to the Employer shall include the principal employer and
all adopting business entities unless the context clearly requires otherwise.
Employment with the principal employer and all adopting business entities shall
be credited with each other and all Affiliates of any of them for the purposes
of determining Eligibility Service, Vesting Service, One-Year Breaks In Service
and the minimum annual service requirement for allocation of contributions and
forfeited Suspense Accounts. Contributions of the principal employer and each
adopting business entity shall be identical, as a percentage of each
Participant's Recognized Compensation, as determined by the principal employer,
but shall be allocated only among those persons who were the Employees during
the Plan Year of the particular business entity making the contribution.
Notwithstanding Section 6.2 to the contrary. forfeited Suspense Accounts shall
only be used, first, to restore prior forfeitures for an Employee of the
particular business entity for which a current forfeiture occurs. second, to
reduce the required matching contribution, if any, for such business entity,
and, finally. to reduce the discretionary contributions of such business entity.
If necessary, the foregoing steps shall be followed in Plan Years subsequent to
the Plan Year in which the forfeiture occurs until such Suspense Accounts are
exhausted. Any unallocated Suspense Accounts remaining at the termination of the
Plan shall be allocated to the Employer Contributions Accounts of all
Participants then employed by the principal employer and all adopting business
entities in proportion to the relative value of each such Account.
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SECTION 10
CONCERNING THE TRUSTEE
10.1. Dealings With Trustee.
10.1.1. No Duty To Inquire. No person, firm or corporation dealing
with the Trustee shall be required to take cognizance of the provisions of this
Plan Statement or be required to make inquiry as to the authority of the Trustee
to do any act which the Trustee shall do hereunder. No person, firm or
corporation dealing with the Trustee shall be required to see either to the
administration of the Plan or Fund or to the faithful performance by the Trustee
of its duties hereunder (except to the extent otherwise provided by the Employee
Retirement Income Security Act of 1974). Any such person, firm or corporation
shall be entitled to assume conclusively that the Trustee is properly authorized
to do any act which it shall do hereunder. Any such person, firm or corporation
shall be under no liability to anyone whomsoever for any act done hereunder
pursuant to the written direction of the Trustee.
10.1.2. Assumed Authority. Any such person, firm or corporation may
conclusively assume that the Trustee has full power and authority to receive and
receipt for any money or property becoming due and payable to the Trustee. No
such person shall be bound to inquire as to the disposition or application of
any money or property paid to the Trustee or paid in accordance with the written
directions of the Trustee.
10.2. Compensation Of Trustee. The corporate Trustee shall be entitled to
receive compensation for its services as Trustee hereunder as may be agreed upon
from time to time by the Administrator's Representative and the Trustee. The
Trustee shall be entitled to receive reimbursement for reasonable expenses,
fees, costs and other charges incurred by it or payable by it on account of the
administration of the Plan and the Fund to the extent approved by the
Administrator's Representative, except to the extent that the Employer, in its
discretion, directly pays the Trustee, such items of expense and compensation
shall be payable out of:
(i) the annual Employer contribution to the Fund, or
(ii) the income of the Fund, or
(iii) the principal of the Fund, including any accumulations of income that
have been added thereto, or
(iv) to or out of any combination of the foregoing sources in the event the
service in question has been for the benefit, protection or
administration of more than one such source of payment.
The Trustee's determination in such respect made in good faith of the amount so
to be allocated and charged to each such source of payment shall be binding and
conclusive upon all persons interested or becoming interested in the Plan or the
Fund. Each such charge of the Trustee shall be a lien upon the Fund, and,
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ratably, in accordance with the method of allocation used as aforesaid, shall be
a lien upon the interest of Participants in the source of payment to which the
same is charged until the same is paid and discharged in full.
10.3. Resignation And Removal Of Trustee.
10.3.1. Resignation, Removal And Appointment. The Trustee may resign by
giving the Employer thirty (30) days' written notice of its intention so to do.
The Employer may agree in writing to a lesser period of notice. The notice
period shall begin on the date such notice is mailed. The Employer may remove
any Trustee or successor Trustee hereunder by giving such Trustee thirty (30)
days' written notice of removal. The Trustee may agree in writing to a lesser
period of notice. The notice period shall begin on the date such notice is
mailed. The Employer shall have the power to appoint one or more individual or
corporate Trustees, or both, as additional or successor Trustees. Such
appointments shall not be effective until a written acceptance of trusteeship is
filed with the then acting Trustee.
10.3.2. Surviving Trustees. When any person or corporation appointed,
qualified and serving as a Trustee hereunder shall cease to be a Trustee of the
Fund, the remaining Trustee or Trustees then serving hereunder, or the successor
Trustee or Trustees appointed hereunder, as the case may be, shall thereupon be
and become vested with full title and right to possession of all assets and
records of the Plan and Fund in the possession or control of such prior Trustee,
and the prior Trustee shall forthwith account for and deliver the same to such
remaining or successor Trustee or Trustees.
10.3.3. Successor Organizations. By designating a corporate Trustee,
original or successor, hereunder, there is included in such designation and as a
part thereof any other corporation possessing trust powers and authorized by law
to accept the Plan and Fund into which or with which the designated corporate
Trustee, original or successor, shall be converted, consolidated or merged, and
the corporation into which or with which any corporate Trustee hereunder shall
be so converted, consolidated or merged shall continue to be the corporate
Trustee of the Plan and Fund.
10.3.4. Co-Trustee Responsibility. No Trustee shall be or become liable for
any act or omission of a co-trustee serving hereunder with him or it (except to
the extent that liability is imposed under the Employee Retirement Income
Security Act of 1974) or of a prior Trustee hereunder, it being the purpose and
intent that each Trustee shall be liable only for his or its own acts or
omissions during his or its term of service as Trustee hereunder.
10.4. Accountings By Trustee.
10.4.1. Periodic Reports. The Trustee shall render to the Employer and to
the Administrator's Representative an account and report as soon as practicable
after the Annual Valuation Date in each year (and as soon as may be practicable
after each other Valuation Date) showing all transactions affecting the
administration of the Plan and the Fund, including, but not necessarily limited
to, such information concerning the Plan and the Fund and the administration
thereof by the Trustee as shall be requested in writing by the Employer.
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10.4.2. Special Reports. The Trustee shall also render such further reports
from time to time as may be requested by the Employer and shall submit its final
report and account to the Employer when it shall cease to be Trustee hereunder,
whether by resignation or other cause.
10.4.3. Review Of Reports. After giving Participants and other persons
interested therein a reasonable opportunity to examine the annual account of the
Trustee to the Employer as provided in Section 10.4.1, provided that no
exceptions are asserted thereto by any person (including the Employer)
interested therein, the Employer may settle and allow such accounts by agreement
with the Trustee. Except as may be otherwise required by the Employee Retirement
Income Security Act of 1974 the Trustee shall upon such settlement and allowance
be released and relieved of all liability for all matters set forth therein.
10.5. Trustee's Power To Protect Itself On Account Of Taxes. The Trustee, as a
condition to the making of distribution of a Participant's Vested Total Account
during his lifetime, may require the Participant, or in the event of his death
may require the person or persons entitled to receive his Vested Total Account
in such event, to furnish the Trustee with proof of payment of all income,
inheritance, estate, transfer, legacy and/or succession taxes and all other
taxes of any different type or kind that may be imposed under or by virtue of
any state or federal statute or law upon the payment, transfer, descent or
distribution of such Vested Total Account and for the payment of which the
Trustee may in its judgment, be directly or indirectly liable. In lieu of the
foregoing, the Trustee may deduct, withhold and transmit to the proper taxing
authorities any such tax which it may be permitted or required to deduct and
withhold and the Vested Total Account to be distributed in such case shall be
correspondingly reduced.
10.6. Other Trust Powers. Except to the extent that the Trustee is subject to
the authorized and properly given investment directions of a Participant,
Beneficiary or Investment Manager (and in extension, but not in limitation, of
the rights, powers and discretions conferred upon the Trustee herein), the
Trustee shall have and may exercise from time to time in the administration of
the Plan and the Fund, for the purpose of distribution after the termination
thereof, and for the purpose of distribution of Vested Total Accounts, without
order or license of any court, any one or more or all of the following rights,
powers and discretions:
First Amendment-Effective January 1, 1993
(a) To invest and reinvest any investment Subfunds established pursuant to
Section 4.1 in accordance with the investment characteristics and
objectives determined therefor and to invest and reinvest the assets
of the Fund in any securities or properties in which an individual
could invest his own funds and which it deems for the best interest of
the Fund, without limitation by any statute, rule of law or regulation
of any governmental body prescribing or limiting the investment of
trust assets by corporate or individual trustees, in or to certain
kinds, types or classes of investments or prescribing or limiting the
portion of the Fund which may be invested in any one property or kind,
type or class of investment. Specifically and without limiting the
generality of the foregoing, the Trustee may invest and reinvest
principal and accumulated income of the Fund in any real or personal
property; preferred or common stocks of any kind or class of any
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corporation, including but not limited to investment and small
business investment companies of all types; voting trust certificates;
interests in investment trusts; interests in any limited or general
partnership or other business enterprise, however organized and for
whatever purpose; group or individual annuity contracts (which may
involve investment in the issuer's general account or any of its
separate accounts); interests in common or collective trusts, variable
interest notes or any other type of collective fund maintained by a
bank or similar institution (whether or not the Trustee hereunder);
shares of any regulated investment company (mutual fund) provided,
however, if the Trustee or any of its affiliates acts as investment
advisor or other service provider for such mutual fund (including the
First American Funds, Inc. and the First American Investment Funds,
Inc.), then the Employer (or other fiduciary independent of the
Trustee) must first acknowledge that it has received the current
prospectus for the mutual fund and a detailed written disclosure of
the investment advisory and other fees charged or to be paid by the
Plan or the mutual fund and the Employer (or such other fiduciary)
must approve the investment advisory fee and other fees paid by the
Plan directly or through the mutual fund and the investment of Plan
assets in the mutual funds; any interest-bearing certificates,
accounts or similar interest-bearing instruments in a bank or similar
financial institution, including the Trustee or an affiliate of the
Trustee, provided such certificates, accounts or instruments bear a
reasonable rate of interest; bonds, notes and debentures, secured or
unsecured; mortgages, leases or other interests in real or personal
property; interests in mineral, gas, oil or timber properties or other
wasting assets; options; commodity or financial futures contracts;
foreign currency; insurance contracts on the life of any "keyman" or
shareholder of the Employer; or conditional sales contracts. The Plan
may not acquire or hold any securities issued by an Employer or real
estate leased to an Employer except that the Trustee acting pursuant
to the express written directions of the Employer as provided in
Section 10.12 may acquire and hold Employer securities which are
"qualifying employer securities" (within the meaning of section
407(d)(5) of the Employee Retirement Income Security Act of 1974) and
Employer real property which is "qualifying employer real property"
(within the meaning of section 407(d)(4) of the aforesaid Act); and,
provided further, that the Plan may acquire any such Employer
securities or Employer real property only if immediately after such
acquisition the aggregate fair market value of Employer securities and
Employer real property held by the Plan does not exceed the lesser of
(i) the percentage indicated in the Adoption Agreement of the fair
market value of the assets of the Plan, or (ii) the then value of all
Employer Matching Accounts and Employer Contributions Accounts. If the
Trustee determines to invest in any "qualifying employer security,"
such securities shall be held only in the Employer Matching Accounts
or Employer Contributions Accounts or in the Suspense Accounts
attributable to such Accounts. Investment of the entire Fund in common
stocks shall be deemed appropriate at any phase of the economic
business cycle, but it is not, however, the purpose hereof to direct
that the Fund shall be invested either entirely or to any extent
whatsoever in such common stocks. Prior to maturity and distribution
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of the Vested Total Accounts of Participants, the Trustee shall
commingle the Accounts of Participants and former Participants in each
investment Subfund and invest, reinvest, control and manage each of
the same as a common trust fund.
(b) To sell, exchange or otherwise dispose of any asset of whatsoever
character at any time held by the Trustee in trust hereunder.
(c) To segregate any part or portion of the Fund for the purpose of
administration or distribution thereof and, in its sole discretion, to
hold the Fund uninvested whenever and for so long as, in the Trustee's
discretion, the same is likely to be required for the payment in cash
of Accounts normally expected to mature in the near future, or
whenever, and for as long as, market conditions are uncertain, or for
any other reason which, in the Trustee's discretion, requires such
action or makes such action advisable.
(d) In connection with the Trustee's power to hold uninvested reasonable
amounts of cash whenever it is deemed advisable to do so, to deposit
the same, with or without interest, in the commercial or savings
departments of any corporate Trustee serving hereunder or of any other
bank, trust company or other financial institution including those
affiliated in ownership with the Trustee named in the Adoption
Agreement.
(e) To register any investment held in the Fund in the name of the
Trustee, without trust designation, or in the name of a nominee or
nominees, and to hold any investment in bearer form, but the records
of the Trustee shall at all times show that all such investments are
part of the Fund, and the Trustee shall be as responsible for any act
or default of any such nominee as for its own.
(f) To retain and employ such attorneys, agents and servants as may be
necessary or desirable. In the opinion of the Trustee, in the
administration of the Fund, and to pay them such reasonable
compensation for their services as may be agreed upon as an expense of
administration of the Fund, including power to employ and retain
counsel upon any matter of doubt as to the meaning of or
interpretation to be placed upon this Plan Statement or any provisions
thereof with reference to any question arising in the administration
of the Fund or pertaining to the rights and liabilities of the Trustee
hereunder. The Trustee, in any such event, may act in reliance upon
the advice, opinions, records, statements and computations of any
attorneys and agents and on the records, statements and computations
of any servants so selected by it in good faith and shall be released
and exonerated of and from all liability to anyone in so doing (except
to the extent that liability is imposed under the Employee Retirement
Income Security Act of 1974).
(g) To institute, prosecute and maintain, or to defend, any proceeding at
law or in equity concerning the Plan or Fund or the assets thereof or
any claims thereto, or the interests of Participants and Beneficiaries
hereunder at the sole cost and expense of the Fund or at the sole cost
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and expense of the Total Account of the Participant that may be
concerned therein or that may be affected thereby as, in the Trustee's
opinion, shall be fair and equitable in each case, and to compromise,
settle and adjust all claims and liabilities asserted by or against
the Plan or Fund or asserted by or against the Trustee, on such terms
as the Trustee, in each such case, shall deem reasonable and proper.
The Trustee shall be under no duty or obligation to institute,
prosecute, maintain or defend any suit, action or other legal
proceeding unless it shall be indemnified to its satisfaction against
all expenses and liabilities which it may sustain or anticipate by
reason thereof.
Third Amendment-Effective January 1, 1994
(h) To institute, participate and join in any plan of reorganization,
readjustment, merger or consolidation with respect to the issuer of
any securities held by the Trustee hereunder. and to use any other
means of protecting and dealing with any of the assets of the Fund
which it believes reasonably necessary or proper and, in general, to
exercise each and every other power or right with respect to each
asset or investment held by it hereunder as individuals generally have
and enjoy with respect to their own assets and investment, including
power to vote upon any securities or other assets having voting power
which it may hold from time to time, and to give provides with respect
thereto, with or without power of substitution or revocation, and to
deposit assets or investments with any protective committee, or with
trustees or depositories designated by any such committee or by any
such trustees or any court. Notwithstanding the foregoing, an
Investment Manager shall have any or all of such powers and rights
with respect to Plan assets for which it has investment responsibility
but only if (and only to the extent that) such powers and rights are
expressly given to such Investment Manager in a written Agreement
signed by it with a copy delivered to the Trustee.
(i) In any matter of doubt affecting the meaning, purpose or intent of any
provision of this Plan Statement which directly affects its duties, to
determine such meaning, purpose or intent; and the determination of
the Trustee in any such respect shall be binding and conclusive upon
all persons interested or who may become interested in the Plan or the
Fund.
(j) To require, as a condition to distribution of any Vested Total
Account, proof of identity or of authority of the person entitled to
receive the same, including power to require reasonable
indemnification on that account as a condition precedent to its
obligation to make distribution hereunder.
(k) To collect, receive, receipt and give quittance for all payments that
may be or become due and payable on account of any asset in trust
hereunder which has not, by act of the Trustee taken pursuant thereto,
been made payable to others; and payment thereof by the company
issuing the same, or by the party obligated thereon, as the case may
be, when made to the Trustee hereunder or to any person or persons
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designated by the Trustee, shall acquit, release and discharge such
company or obligated party from any and all liability on account
thereof.
(l) To determine from time to time, as required for the purpose of
distribution or for the purpose of allocating trust income or for any
other purpose of the Plan, the then value of the Fund and the Accounts
in the Fund, the Trustee, in each such case, using and employing for
that purpose the fair market value of each of the assets constituting
the Fund. Each such determination so made by the Trustee in good faith
shall be binding and conclusive upon all persons interested or
becoming interested in the Plan or the Fund.
(m) To receive and retain contributions made in a form other than cash in
the form in which the same are received until such time as the
Trustee, in its sole discretion, deems it advisable to sell or
otherwise dispose of such assets.
(n) To commingle, for investment purposes, the assets of the Fund with the
assets of any other qualified retirement plan trust fund of the
Employer, provided that the records of the Trustee shall reflect the
relative interests of the separate trusts in such commingled fund.
(o) To grant an option or options for the sale or other disposition of a
trust asset, including the issuance of options for purchase of common
stock held by the Trust in return for the receipt of a premium from
the optionee (it being expressly intended that said options may be in
such form and terms as to permit their being freely traded on an
option exchange) and including the repurchase of any such option
granted, or in lieu thereof, the repurchase of an option identical in
terms to the one issued.
(p) To have and to exercise such other and additional powers as may be
advisable or proper in its opinion for the effective and economical
administration of the Fund.
(q) If so provided in the Adoption Agreement, one (l) or more declarations
of trust executed by the Trustee (or by banks or trust companies
affiliated in ownership with the Trustee) shall be incorporated by
reference into this Agreement and not withstanding any other provision
of the Agreement to the contrary, the Trustee may cause all or any
part of the Fund, without limitation as to amount, to be commingled
with the money of trusts created by others by causing such money to be
invested as a part of any or all of the funds created by said
declarations of trust and the Fund so added to any of said funds shall
be subject to all of the provisions of said declarations of trust as
the same may be amended from time to time.
10.7. Investment Managers.
10.7.1. Appointment And Qualifications. The Employer shall have the power
to appoint from time to any one or more Investment Managers to direct the
Trustee in the investment of, or to assume complete investment responsibility
over all or any portion of the Fund. An Investment Manager may be any person or
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firm (a) which is either (l) registered as an Investment adviser under the
Investment Advisers Act of 1940. (2) a bank, or (3) an insurance company which
is qualified to perform the services of an Investment Manager under the laws of
more than one state; and (b) which acknowledges in writing that it is a
fiduciary with respect to the Plan because it has been appointed as an
Investment Manager with respect to the Plan. The conditions prescribed in the
preceding sentence shall apply to the issuer of any group annuity contract
hereunder only if, and to the extent that, such issuer would otherwise be
considered a "fiduciary" with respect to the Plan, within the meaning of the
Employee Retirement Income Security Act of 1974.
10.7.2. Removal. The Employer may remove any such Investment Manager and
shall have the power to appoint a successor or successors from time to time in
succession to any Investment Manager who shall be removed, shall resign or shall
otherwise cease to serve hereunder. The Employer shall furnish the Trustee with
such written evidence as the Trustee may require of the appointment, removal and
scope of the authority of the Investment Manager.
10.7.3. Relation To Other Fiduciaries. The Trustee shall comply with all
investment directions given to the Trustee with respect to the designated
portion of the Fund, and the Trustee shall be released and exonerated of and
from all liability for or on account of any action taken or not taken by it
pursuant to the directions of such Investment Manager, except to the extent that
liability is imposed under the Employee Retirement Income Security Act of 1974.
Neither the Employer, nor any officer, director or Employee thereof, nor any
member of the Administrator's Representative shall be liable for the acts or
omissions of the Trustee or of any Investment Manager appointed hereunder. The
fees and expenses of any Investment Manager, as agreed upon from time to time
between the Investment Manager and the Employer, shall be charged to and paid
from the Fund in a fair and equitable manner. except to the extent that the
Employer, in its discretion, may pay such directly to the Investment Manager.
10.8. Fiduciary Principles. The Trustee and each other fiduciary hereunder, in
the exercise of each and every power or discretion vested in them by the
provisions of this Plan Statement shall (subject to the provisions of the
Employee Retirement Income Security Act of 1974) discharge their duties with
respect to the Plan solely in the interest of the Participants and Beneficiaries
and:
(a) for the exclusive purpose of:
(i) providing benefits to Participants and Beneficiaries, and
(ii) defraying reasonable expenses of administering the Plan,
(b) with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise
of a like character and with like aims.
(c) by diversifying the investments of the Plan so as to minimize the risk
of large losses, unless under the circumstances it is clearly prudent
not to do so, and
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(d) in accordance with the documents and instruments governing the Plan,
insofar as they are consistent with the provisions of the Employee
Retirement Income Security Act of 1974.
Notwithstanding anything in this Plan Statement to the contrary, any provision
hereof which purports to relieve a fiduciary from responsibility or liability
for any responsibility, obligation or duty under Part 4 of Subtitle B of Title I
of the Employee Retirement Income Security Act of 1974 shall, to the extent the
same is inconsistent with said Part 4, be deemed void.
10.9. Prohibited Transactions. Except as may be permitted by law, no Trustee or
other fiduciary hereunder shall permit the Plan to engage, directly or
indirectly, in any of the following transactions with a person who is a
"disqualified person" (as defined in section 4975 of the Internal Revenue Code)
or a "party in interest" (as defined in section 3(14) of the Employee Retirement
Income Security Act of 1974):
(a) sale, exchange or leasing of any property between the Plan and such
person,
(b) lending of money or other extension of credit between the Plan and
such person,
(c) furnishing of goods, services or facilities between the Plan and such
person,
(d) transfer to, or use by or for the benefit of, such person of the
income or assets of the Plan,
(e) act by such person who is a fiduciary hereunder whereby he deals with
the income or assets of the Plan in his own interest or for his own
account, or
(f) receipt of any consideration for his own personal account by such
person who is a fiduciary from any party dealing with the Plan in
connection with a transaction involving the income or assets of the
Plan.
10.10. Indemnity. The Trustee, and directors, officers and employees of the
Employer shall, except as prohibited by law, be indemnified and held harmless by
the Employer from any and all liabilities, costs and expenses (including legal
fees), to the extent not covered by liability insurance, arising out of any
action taken by such Trustee or individuals as Trustee, fiduciary or in any
other capacity with respect to this Plan, whether imposed under the Employee
Retirement Income Security Act of 1974 or otherwise unless such liability arises
from the proven gross negligence, the bad faith or, if such Trustee or
individuals have reasonable cause to believe their conduct was unlawful, the
criminal misconduct of such Trustee, director, officer or employee. This
indemnification shall continue as to a Trustee, director, officer or employee
after such Trustee or individual ceases to be a Trustee, director, officer or
employee.
10.11. Investment In Insurance. If the Employer shall so designate in the
Adoption Agreement. a Participant may, with the consent of the Administrator's
Representative and subject to such conditions as the Administrator's
Representative may impose, elect to have a portion of his Vested Total Account
(excluding any Deductible Voluntary Account) invested in life insurance
contracts issued by any insurance company licensed to do business in the State
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of where the Trustee has its principal place of business (any such insurance
contract held for a Participant hereunder being herein referred to as a
"contract").
10.11.1. Limitation On Payment Of Premiums. No more than fifty percent
(50%) of the aggregate Employer contributions allocated to a Participant's
Employer Matching Account and Employer Contributions Account may be used to
purchase ordinary life insurance contracts. Ordinary life insurance contracts
are contracts with both nondecreasing death benefits and nonincreasing premiums.
No more than twenty-five percent (25%) of the aggregate Employer contributions
allocated to the Participant s Employer Matching Account and Employer
Contributions Account may be used to purchase term life insurance contracts,
universal life insurance contracts and all other life insurance contracts which
are not ordinary life insurance contracts. If both ordinary life insurance
contracts and other insurance contracts are required, the sum of one-half (l/2)
of the premiums paid to acquire ordinary life insurance contracts plus one
hundred percent (100%) of all premiums paid to acquire other forms of life
insurance contracts shall not be permitted to exceed twenty-five percent (25%)
of the aggregate Employer contributions allocated to the Participant's Employer
Matching Account and Employer Contributions Account. All amounts used to
purchase term life insurance, to fund "P.S. 58" costs or to acquire any other
non-cash value benefits under this section shall be deemed to come from the
Employer Matching Account and then from the Employer Contributions Accounts
subject to the limits specified above. If the Participant's Employer Matching
Account and Employer Contributions Account are insufficient within the
limitations herein contained to pay any premium on a contract when the same
becomes due, the Trustee shall, unless the Participant directs the Trustee to
use his Nondeductible Voluntary Account, Rollover Account or Transfer Account
for this purpose or pays to the Trustee a sum sufficient to pay such premium
(any such payment being deemed a nondeductible voluntary contribution
hereunder), cause such contract to be rewritten for its then paid-up value, if
any, and retain the same for the Participant, in which event no further premium
payments shall thereafter be made thereon. All dividends on a contract shall be
used to reduce premiums.
10.11.2. Miscellaneous Rules For Purchase Of Contract. The Participant
shall take such physical examinations and furnish such information as may be
necessary to procure a contract. To the extent possible, all contracts shall
have a uniform premium due date. The Trustee shall be the owner of all
contracts, with full power to execute all insurance applications and to exercise
all available options, and shall be the death beneficiary thereunder.
10.11.3. Payment Of Expenses. Any charge or expense of the Trustee in
handling a Participant's contract shall be paid from that Participant's Total
Account; provided, that the Employer may, in its discretion, directly pay such
charge or expense.
10.11.4. Authority For Contract. Any insurance company issuing contracts
may deal with the Trustee alone and without the consent of any Participant or
Beneficiary and shall not be required to examine the provisions of this Plan
Statement or any amendment thereto, nor shall it be responsible for the failure
of the Trustee to perform its duties, nor shall it be obliged to see to the
application or disposition of any money paid by it to the Trustee, and any such
payment shall fully discharge such insurance company for the amount so paid.
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10.11.5. Payment Of Contract Upon Death. Upon the death of the Participant,
the proceeds of the contracts held for him hereunder shall be deemed a death
benefit under this Plan and shall be added to the Vested Total Account and
distributed to his Beneficiary or Beneficiaries in the manner prescribed in
Section 7.
10.11.6. Payment Of Contract - Not Upon Death. Upon the occurrence of an
Event of Maturity other than the death of the Participant, the Trustee shall, as
directed by the Administrator's Representative, either: (i) surrender the
contracts held for him hereunder for cash and distribute the proceeds in the
manner described in Section 7, (ii) distribute the contracts to the Participant
(provided, however, that the optional modes of settlement under any such
contract shall be limited to those available under this Plan), or (iii) convert
the contracts into an annuity contract or contracts of the type described in
Section 7.3 and distribute the same to the Participant, or (iv) any combination
of the foregoing. In no event, however, shall any such contract be distributed
in a manner which is inconsistent with the requirements in Section 7.3.
10.11.7. Value Of Contract. For the purpose of determining the value of a
contract hereunder, such contract shall be valued at the greater of the premiums
theretofore paid thereon or its then cash value, but such contract shall not be
considered a part of the Fund for the purpose of allocating income, market gains
and losses of the Fund in accordance with Section 4.
10.11.8. Interpretation. If any provision of any contract is inconsistent
with any provision of the Plan Statement, the provision of the Plan Statement
shall control.
Third Amendment-Effective January 1, 1994
10.12. Employer Directed Investments. If so indicated in the Adoption Agreement,
the Trustee shall be subject in the investment, management and control of the
Fund to the property given directions of the person, persons or committee
identified in the Adoption Agreement or certified to the Trustee by an officer
of the Employer. The Trustee shall not make any investment or dispose of any
investments in the Fund except upon the express verbal or written direction of
the Employer. The Trustee shall be under no duty to question any investment
direction of the Employer, to review or monitor any securities or property held
in the Fund, or to advise the Employer with respect to the investment, retention
or disposition of any assets in the Fund. The Trustee is acting pursuant to and
in reliance on such directions shall be fully and completely indemnified and
held harmless by the Employer from any liability, loss or expense (including
legal fees) arising out of its actions so directed notwithstanding that such
directions, and the Trustee's conduct pursuant thereto, may constitute a breach
of fiduciary obligations to the plan the Participants and Beneficiaries. The
Employer may direct the Trustee to purchase shares of any regulated investment
company (mutual fund) for which the Trustee or any of its affiliates acts as
investment advisor or other service provider, provided, however, that the
Employer (or other fiduciary independent of the Trustee) must first acknowledge
it has received the current prospectus for the mutual fund (including the First
American Funds, Inc. and the First American Investment Funds, Inc.) and a
detailed disclosure of the investment advisory and other fees charged or to be
paid by the Plan and the Employer must approve the investment advisory fee and
other fees paid by the Plan directly or through the mutual funds and the
investment of Plan assets in the mutual fund.
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SECTION 11
DETERMINATIONS - RULES AND REGULATIONS
11.1. Determinations. The Administrator's Representative shall make such
determinations as may be required from time to time in the administration of
this Plan. The Trustee and other interested parties may act and rely upon all
information reported to them hereunder and need not inquire into the accuracy
thereof, nor be charged with any notice to the contrary.
11.2. Rules And Regulations. Any rule not in conflict or at variance with the
provisions hereof may be adopted by the Administrator's Representative.
11.3. Method Of Executing Instruments.
11.3.1. Employer Or Administrator's Representative. Information to be
supplied or written notices to be made or consents to be given by the Employer
or the Administrator's Representative pursuant to any provision of this Plan
Statement may be signed in the name of the Employer by any officer thereof who
has been authorized to make such certification or to give such notices or
consents or by the Administrator's Representative.
11.3.2. Trustee. Any instrument or written notice required, necessary or
advisable to be made or given by the Trustee may be signed by any Trustee, if
all Trustees serving hereunder are individuals, or by any authorized officer or
Employee of the Trustee, if a corporate Trustee shall be acting hereunder as
sole Trustee, or by any such officer or Employee of the corporate Trustee or by
an individual Trustee acting hereunder, if corporate and individual Trustees
shall be serving as co- trustees hereunder.
11.4. Claims Procedure. The Administrator's Representative shall establish
procedures for the resolution of disputes and disposition of claims arising
under this Plan. An application for a distribution under Section 7 shall be
considered as a claim for the purposes of this Section l l.4. Until modified by
the Administrator's Representative, this claims procedure is as described below.
11.4.1. Original Claim. Any Employee, former Employee or Beneficiary of
such Employee or former Employee may, if he so desires, file with the
Administrator's Representative a written claim for benefits under this Plan.
Within ninety (90) days after the filing of such a claim, the Administrator's
Representative shall notify the claimant in writing whether his claim is upheld
or denied in whole or in part or shall furnish the claimant a written notice
describing specific special circumstances requiring a specified amount of
additional time (but not more than one hundred eighty days from the date the
claim was filed) to reach a decision on the claim. If the claim is denied in
whole or in part, the Administrator's Representative shall state in writing:
(a) the specific reasons for the denial,
(b) the specific references to the pertinent provisions of the Plan
Statement on which the denial is based,
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(c) a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such
material or information is necessary, and
(d) an explanation of the claims review procedure set forth in this
section.
11.4.2. Claims Review Procedure. Within sixty (60) days after receipt of
notice that his claim has been denied in whole or in part, the claimant may file
with the Administrator's Representative a written request for a review and may,
in conjunction therewith, submit written issues and comments. Within sixty (60)
days after the filing of such a request for review, the Administrator's
Representative shall notify the claimant in writing whether, upon review, the
claim was upheld or denied in whole or in part or shall furnish the claimant a
written notice describing specific special circumstances requiring a specified
amount of additional time (but not more than one hundred twenty days from the
date the request for review was filed) to reach a decision on the request for
review.
11.4.3. General Rules.
(a) No inquiry or question shall be deemed to be a claim or a request for a
review of a denied claim unless made in accordance with the claims
procedure. The Administrator's Representative may require that any
claim for benefits and any request for a review of a denied claim be
filed on forms to be furnished by the Administrator's Representative
upon request.
(b) All decisions on claims and on requests for a review of denied claims
shall be made by the Administrator's Representative.
(c) The Administrator's Representative may, in its discretion, hold one or
more hearings on a claim or a request for a review of a denied claim.
(d) Claimants may be represented by a lawyer or other representative (at
their own expense), but the Administrator's Representative reserves the
right to require the claimant to furnish written authorization. A
claimant's representative shall be entitled to copies of all notices
given to the claimant.
(e) The decision of the Administrator's Representative on a claim and on a
request for a review of a denied claim shall be served on the claimant
in writing. If a decision or notice is not received by a claimant
within the time specified, the claim or request for a review of a
denied claim shall be deemed to have been denied.
(f) Prior to filing a claim or a request for a review of a denied claim,
the claimant or his representative shall have a reasonable opportunity
to review a copy of the Plan Statement and all other pertinent
documents in the possession of the Employer, the Administrator's
Representative and the Trustee.
11.5. Information Furnished By Participants. Neither the Employer nor the
Administrator's Representative nor the Trustee shall be liable or responsible
for any error in the computation of
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the Account of a Participant resulting from any misstatement of fact made by the
Participant, directly or indirectly, to the Employer, the Administrator's
Representative or the Trustee and used by them in determining his Account.
Neither the Employer nor the Administrator's Representative nor the Trustee
shall, be obligated or required to increase the Account of such Participant
which, on discovery of the misstatement, is found to be understated as a result
of such misstatement of the Participant. However, the Account of any Participant
which is overstated by reason of any such misstatement shall be reduced to the
amount appropriate for him in view of the truth. Any refund received upon
reduction of an Account so made shall be used to reduce the next succeeding
contribution of the Employer to the Plan.
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SECTION 12
OTHER ADMINISTRATIVE MATTERS
12.1. Employer.
12.1.1. Officers. Except as hereinafter provided, functions generally
assigned to the Employer shall be discharged by its officers or delegated and
allocated as provided herein.
12.1.2. Delegation. Except as hereinafter provided, the Board of Directors
may delegate or redelegate and allocate and reallocate to one or more persons or
to a committee of persons jointly or severally, and whether or not such persons
are directors, officers or Employees, such fiduciary and other functions
assigned to it or to the Employer hereunder as it may from time to time deem
advisable.
12.1.3. Board Of Directors. The Board of Directors shall have the exclusive
authority, which authority may not be delegated, to act for the Employer:
(a) to adopt the Plan, to terminate the Plan, and
(b) to appoint or remove a Trustee, to appoint or remove an Investment
Manager, to appoint or remove the Administrator's Representative.
12.2. Administrator's Representative. The Employer shall designate an
Administrator's Representative to act for the Employer. The Administrator's
Representative may be one person or a committee of such members as may be
determined and appointed from time to time by the Employer and shall serve at
the pleasure of the Employer. The Administrator's Representative shall serve
without compensation, but its reasonable expenses shall be an expense of the
administration of the Fund and shall be paid by the Trustee from and out of the
Fund except to the extent the Employer, in its discretion, directly pays such
expenses. If it is a committee, the Administrator's Representative may elect
such officers as the Administrator's Representative may decide upon. The
Administrator's Representative shall:
(a) if a committee, establish rules for the functioning of the
Administrator's Representative, including the times and places for
holding meetings, the notices to be given in respect of such meetings
and the number of members who shall constitute a quorum for the
transaction of business,
(b) if a committee, organize and delegate to such of its members as it
shall select authority to execute or authenticate rules, advisory
opinions or instructions, and other instruments adopted or authorized
by the Administrator's Representative; adopt such bylaws or regulations
as it deems desirable for the conduct of its affairs; appoint a
secretary, who need not be a member of the Administrator's
Representative, to keep its records and otherwise assist the
Administrator's Representative in the performance of its duties,
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(c) keep a record of all its proceedings and acts and keep all books of
account, records and other data as may be necessary for the proper
administration of the Plan; notify the Trustee and the Employer of any
action taken by the Administrator's Representative and, when required,
notify any other interested person or persons,
(d) determine from the records of the Employer the compensation, service
records, status and other facts regarding Participants and other
Employees,
(e) cause to be compiled at least annually, from the records of the
Administrator's Representative and the reports and accountings of the
Trustee, a report and accounting of the status of the Plan and the
Accounts of the Participants, and make it available to each Participant
who shall have the right to examine that part or portion of such report
and accounting (or a true and correct copy of such part) which sets
forth his benefits and his ratable interest in the Fund,
(f) prescribe forms to be used for applications for participation,
distributions, withdrawals, notifications, etc., as may be required in
the administration of the Plan,
(g) set up such rules, applicable to all Participants similarly situated,
as are deemed necessary to carry out the terms of the Plan Statement,
(h) perform all other acts reasonably necessary for administering the Plan
and carrying out the provisions of the Plan Statement and performing
the duties imposed on its by the Employer,
(i) interpret and construe the Plan Statement,
(j) resolve questions of eligibility and status under the Plan, and the
rights of Employees, Participants and Beneficiaries and the amounts of
their interests,
(k) resolve all questions of administration of the Plan not specifically
referred to in this section, and
(l) delegate or redelegate to one or more persons, jointly or severally,
and whether or not such persons are members of a committee which is the
Administrator's Representative or Employees of the Employer, such
functions assigned to the Administrator's Representative hereunder as
it may from time to time deem advisable.
If the Administrator's Representative is a committee and there shall at any time
be three (3) or more members serving hereunder who are qualified to perform a
particular act, the same may be performed, on behalf of all, by a majority of
those qualified, with or without the concurrence of the minority. No person who
failed to join or concur in such act shall be held liable for the consequences
thereof, except to the extent that liability is imposed under the Employee
Retirement Income Security Act of 1974.
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If the Employer does not designate an Administrator's Representative, the
President (or other chief executive officer) of the Employer shall be the
Administrator's Representative.
12.3. Limitation On Authority. No action taken by any fiduciary, if authority to
take such action has been delegated or redelegated to it hereunder, shall be the
responsibility of any other fiduciary except as may be required by the
provisions of the Employee Retirement Income Security Act of 1974. Except to the
extent imposed by the Employee Retirement Income Security Act of 1974, no
fiduciary shall have the duty to question whether any other fiduciary is
fulfilling all of the responsibility imposed upon such other fiduciary by this
Plan Statement or by the Act or by any regulations or rulings issued thereunder.
The Trustee shall have no authority or duty to determine or enforce payment of
any Employer contribution under this Plan or to determine the existence, nature
or extent of any individual's rights in the Fund or under the Plan or question
any determination made by the Employer or the Administrator's Representative
regarding the same. The responsibilities and obligations of the Trustee shall be
strictly limited to those set forth in this Plan Statement.
12.4. Conflict Of Interest. If any Trustee, any Administrator's Representative,
any member of the Board of Directors or any officer or Employee of the Employer
to whom authority has been delegated or redelegated hereunder shall also be a
Participant in this Plan, he shall have no authority as such Trustee, member,
officer or Employee with respect to any matter specially affecting his
individual interest hereunder (as distinguished from the interests of all
Participants and Beneficiaries or a broad class of Participants and
Beneficiaries), all such authority being reserved exclusively to the other
Trustees, members, officers or Employees, as the case may be, to the exclusion
of such Participant, and such Participant shall act only in his individual
capacity in connection with any such matter.
12.5. Dual Capacity. Individuals, firms, corporations or partnerships identified
herein or delegated or allocated authority or responsibility hereunder may serve
in more than one fiduciary capacity.
First Amendment-Effective January 1, 1993
12.6. Administrator. The principal employer shall be the administrator for
purposes of section 3(16)(A) of the Employee Retirement Income Security Act of
1974.
12.7. Named Fiduciaries. The Trustee, the Employer, the Board of Directors and
the Administrator's Representative shall be named fiduciaries for the purpose of
section 402(a) of the Employee Retirement Income Security Act of 1974.
First Amendment-Effective January 1, 1993
12.8. Service of Process. In the absence of any designation to the contrary by
the principal employer, the President of the principal employer is designated as
the appropriate and exclusive agent for the receipt of service of process
directed to the Plan in any legal proceeding, including arbitration, involving
the Plan.
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12.9. Residual Authority. In the event the principal employer, Administrator's
Representative, Board of Directors, or other person designated as having the
authority to act or a duty to act on any matter hereunder, is prevented by
death, dissolution, incapacity or other similar cause from acting hereunder and
there is no other person then empowered to act on such matter, the Trustee shall
be empowered to act in its place.
12.10. Administrative Expenses. The reasonable expenses of administering the
Plan shall be payable out of the Fund except to the extent that the principal
employer, in its discretion, directly pays the expenses.
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SECTION 13
IN GENERAL
13.1. Disclaimers.
13.1.1. Effect On Employment. Neither the terms of this Plan Statement nor
the benefits hereunder nor the continuance thereof shall be a term of the
employment of any Employee, and the Employer shall not be obliged to continue
this Plan. The terms of this Plan Statement shall not give any Employee the
right to be retained in the employment of the Employer.
13.1.2. Sole Source Of Benefits. Neither the Trustee nor the
Administrator's Representative nor the Employer or any of its officers or
members of its Board of Directors in any way guarantee the Fund against loss or
depreciation, nor do they guarantee the payment of any benefit or amount which
may become due and payable hereunder to any Participant or to any Beneficiary or
to any creditor of a Participant, a Beneficiary or the Trustee. Each
Participant, Beneficiary or other person entitled at any time to payments
hereunder shall look solely to the assets of the Fund for such payments or to
the Vested Total Account distributed to any Participant or Beneficiary, as the
case may be, for such payments. In each case where a Vested Total Account shall
have been distributed to a former Participant or a Beneficiary or to the person
or any one of a group of persons entitled jointly to the receipt thereof and
which purports to cover in full the benefit hereunder, such former Participant
or Beneficiary, or such person or persons, as the case may be, shall have no
further right or interest in the other assets of the Fund.
13.1.3. Co-Fiduciary Matters. Neither the Employer nor any of its
officers or members of its Board of Directors nor the Administrator's
Representative shall in any manner be liable to any Participant, Beneficiary or
other person for any act or omission of the Trustee (except to the extent that
liability is imposed under the Employee Retirement Income Security Act of 1974).
Neither the Trustee nor the Administrator's Representative nor the Employer or
any of its officers or members of its Board of Directors shall be under any
liability or responsibility (except to the extent that liability is imposed
under the Employee Retirement Income Security Act of 1974) for failure to effect
any of the objectives or purposes of this Plan by reason of loss or fluctuation
in the value of Fund or for the form, genuineness, validity, sufficiency or
effect of any Fund asset at any time held hereunder, or for the failure of any
person, firm or corporation indebted to the Fund to pay such indebtedness as and
when the same shall become due or for any delay occasioned by reason of any
applicable law, order or regulation or by reason of any restriction or provision
contained in any security or other asset held by the Fund. Except as is
otherwise provided in the Employee Retirement Income Security Act of 1974, the
Employer, its officers and the members of its Board of Directors, the Trustee,
the Administrator's Representative and other fiduciaries shall not be liable for
an act or omission of another person with regard to a fiduciary responsibility
that has been allocated to or delegated to such other person pursuant to the
terms of this Plan Statement or pursuant to procedures set forth in this Plan
Statement.
13.2. Reversion Of Fund Prohibited. The Fund from time to time hereunder shall
at all times be a trust fund separate and apart from the assets of the Employer,
and no part thereof shall be or become available to the Employer or to creditors
of the Employer under any circumstances other
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than those specified in Section 1.3, Section 3.12, Section 11.5 and Appendix A
hereof. It shall be impossible for any part of the corpus or income of the Fund
to be used for, or diverted to, purposes other than for the exclusive benefit of
Participants and Beneficiaries (except as provided in Section 1.3, Section 3.12,
Section 11.5 and Appendix A).
13.3. Execution In Counterparts. This Plan Statement may be executed in any
number of counterparts, each of which, without production of the others, shall
be deemed to be an original.
13.4. Continuity. If this Plan Statement is adopted as an amendment of a prior
Plan statement the tenure and membership of the any committee previously
appointed, the rules of administration adopted and the Beneficiary designations
in effect under the Prior Plan Statement immediately before the Effective Date
shall, to the extent not inconsistent with this Plan Statement, continue in full
force and effect until altered as provided herein.
13.5. Contingent Top Heavy Plan Rules. The rules set forth in the Appendix B to
this Plan Statement (concerning additional provisions that apply if the Plan
becomes top heavy) are incorporated herein.
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(6) Except as otherwise specifically provided in Appendix B, the provisions of
Appendix B apply for Plan Years beginning after December 31, 1986.
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APPENDIX A
SECTION 415 LIMITATIONS ON ALLOCATIONS
SECTION 1
INTRODUCTION
Terms defined in the Plan Statement shall have the same meanings when used
in this Appendix. References to the "Code" shall mean the Internal Revenue Code,
as amended from time to time. In addition, when used in this Appendix, the
following terms shall have the following meanings:
1.1 Annual Addition. Annual addition means, with respect to any Participant for
a limitation year, the sum of:
(i) all employer contributions (including employer contributions of
the Participant's earnings reductions under section 410(k),
section 403(b) and section 408(k) of the Code) allocable as of a
date during such limitation year to the Participant under all
defined contribution plans.
(ii) all forfeitures allocable as of a date during such limitation
year to the Participant under all defined contribution plans.
(iii) all Participant contributions made as of a date during such
limitation year to all defined contribution plans.
(iv) all amounts allocated after March 31, 1984, to an individual
medical account which is part of a pension or annuity plan
maintained by the employer.
(v) all amounts derived from contributions paid or accrued after
December 31, 1985, in taxable year ending after such date, under
a welfare benefit fund, and
(vi) all amounts allocable as of a date during such limitation year
to the Participant under Section 2.4, Section 3.6, Section 4 or
Section 5 of this Appendix A.
1.1.1. Specific Inclusions. With regard to a plan which contains a
qualified cash or deferred arrangement or matching contributions or employee
contributions, excess deferrals and excess contributions and excess aggregate
contributions (whether or not distributed during or after the limitation year)
shall be considered annual additions in the year contributed.
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1.1.2. Specific Exclusions. The annual addition shall not, however, include
any portion of a Participant's rollover contributions or any additions to
accounts attributable to a plan merger or a transfer of plan assets or
liabilities or any other amounts excludible under law.
1.1.3. ESOP Rule. In the case of an employee stock ownership plan within
the meaning of section 4975(e)(7) of the Code under which no more than one-third
(1/3rd) of the Employer contributions for a limitation year which are deductible
under section 404(a)(9) of the Code are allocated to highly compensated
employees (as defined in section 414(q) of the Code), annual additions shall not
include forfeitures of employer securities under the employee stock ownership
plan if such securities were acquired with the proceeds of an exempt loan or
employer contributions to the employee stock ownership plan which are deductible
by the Employer under section 404(a)(9)(B) of the Code and charged against the
Participant's account (i.e., interest payments).
1.2. Controlled Group Member. Controlled group member means the Employer and
each member of a controlled group of corporations (as defined in section 414(b)
and as modified by Code section 415(h) of the Code), all commonly controlled
trades or business (as defined in section 414(c) and as modified by Code section
415(h) of the Code) and affiliated service groups (as defined in section 414(m)
of the Code) of which the Employer is a part.
1.3. Defined Benefit and Defined Contribution Plans. Defined benefit plan and
defined contribution plan have the meanings assigned to those terms by section
415(k)(1) of the Code. Whenever reference is made to defined benefit plans and
defined contribution plans in this Appendix, it shall include all such plans
maintained by the Employer and all controlled group members.
1.4. Defined Benefit Fraction.
1.4.1. General Rule. Defined benefit fraction means a fraction the
numerator of which is the sum of the Participant's projected annual benefits
under all defined benefit plans (whether or not terminated) determined as of the
close of the limitation year, and the denominator of which is the lesser of:
(i) one hundred twenty-five percent (125%)(7) of the dollar
limitation in effect under sections 415(b) and (d) of the Code as
of the close of such limitation year (i.e., 125% of $90,000 as
adjusted for cost of living, commencement dates, length of
service and other factors), or
(ii) one hundred forty percent (140%) of the dollar amount which may
be taken into account under section 415(b)(1)(B) of the Code
with respect to such Participant as of the close of such
limitation year (i.e., 140% of the
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(7) Lower limitations may apply in any Plan Year that this Plan is super top
heavy. (See Appendix B, ss.3.5.)
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Participant's highest average compensation as adjusted for cost
of living, length of service and other factors).
1.4.2. Transition Rule. Notwithstanding the above, if the Participant was a
participant as of the first day of the first limitation year beginning after
December 31, 1986, in one or more defined benefit plans which were in existence
on May 6, 1986, the denominator of this fraction will not be less than one
hundred twenty-five percent (125%) of the sum of the annual benefits under such
plans which the Participant had accrued as of the close of the last limitation
year beginning before January 1, 1987, disregarding any changes in the terms and
conditions of the Plan after May 5, 1986. The preceding sentence applies only if
the defined benefit plans individually and in the aggregate satisfied the
requirements of Code section 415 for all limitation years beginning before
January 1, 1987.
1.5. Defined Contribution Fraction.
1.5.1. General Rule. Defined contribution fraction means a fraction, the
numerator of which is the sum of the Participant's annual additions (including
Employer contributions which are allocated to a separate account established for
the purpose of providing medical benefits or life insurance benefits with
respect to a key employee (as defined in Appendix B) under a welfare benefit
fund or individual medical account) as of the close of the limitation year and
for all prior limitation years, and the denominator of which is the sum of the
amounts determined under paragraph (i) or (ii) below, whichever is the lesser,
for such limitation year and for each prior limitation year in which the
Participant had any service with the employer (regardless of whether that or any
other defined contribution plan was in existence during those years or continues
in existence):
(i) one hundred twenty-five percent (125%)(8) of the dollar
limitation determined under sections 415(b) and (d) of the Code
and in effect under section 415(c)(1)(A) of the Code for such
limitation year determined without regard to section 415(c)(6)
of the Code (i.e., 125% of $30,000 as adjusted for cost of
living), or
(ii) one hundred forty percent (140%) of the dollar amount which may
be taken into account under section 415(c)(1)(B) of the Code
with respect to such individual under the Plan for such
limitation year (i.e., 140% of 25% of the Participant's ss.415
compensation for such limitation year).
1.5.2. TEFRA Transition Rule. The Employer may elect that the amount taken
into account for each Participant for all limitation years ending before January
1, 1983 under paragraphs (i) and (ii) above shall be determined pursuant to the
special transition rule provided in section 415(e)(6) of the Code.
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(8) Lower limitations may apply in any Plan Year that this plan is super top
heavy. (See Appendix B, ss.3.5.)
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1.5.3. Employee Contributions. Notwithstanding the definition of "annual
additions," for the purpose of determining the defined contribution fraction in
limitation years beginning before January 1, 1987, employee contributions shall
not be taken into account to the extent that they were not required to be taken
into account under section 415 of the Code prior to the Tax Reform Act of 1986.
1.5.4. Annual Denominator. The amounts to be determined under paragraphs
(i) or (ii) above for the limitation year and for all prior limitation years in
which the Participant had any service with the employer shall be determined
separately for each such limitation year on the basis of which amount is the
lesser for each such limitation year.
1.5.5. Relevant Law. For all limitation years ending before January 1,
1976, the dollar limitation under section 415(c)(1)(A) of the Code is
Twenty-five Thousand Dollars ($25,000). For limitation years ending after
December 31, 1975 and before January 1, 1990, the amount shall be:
For limitation years The ss.415(c)(1)(A)
ending during: dollar amount is:
- ---------------------- -------------------
1976 $26,825
1977 $28,175
1978 $30,050
1979 $32,700
1980 $36,875
1981 $41,500
1982 $45,475
1983-1989 $30,000
1.5.6. Relief Rule. If the Participant was a participant as of the end of
the first day of the first limitation year beginning after December 31, 1986, in
one or more defined contribution plans which were in existence on May 6, 1986,
the numerator of this fraction will be adjusted if the sum of this fraction and
the defined benefit fraction would otherwise exceed one (1.0) under the terms of
this Plan Statement. Under the adjustment, an amount equal to the product of the
excess of the sum of the fractions over one (10), times the denominator of this
fraction, will be permanently subtracted from the numerator of this fraction.
The adjustment is calculated using the fractions as they would be computed as of
the end of the last limitation year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the plan made after May
5, 1986, but using the section 415 limitations applicable to the first
limitation year beginning on or after January 1, 1987.
1.6. Highest Average Compensation. Highest average compensation means the
average ss.415 compensation for the three (3) consecutive years of service with
the controlled group members that produce the highest average. A year of service
with the controlled group members is the Plan Year.
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1.7. Individual Medical Account. Individual medical account means an account, as
defined in section 415(1)(2) of the Code, maintained by the Employer or an
Affiliate which provides an annual addition.
1.8. Limitation Year. The limitation year shall be the Plan Year, unless the
Adoption Agreement specifies a different limitation year. All qualified plans
maintained by the Employer must use the same limitation year. If the limitation
is amended to a different 12-consecutive month period, the new limitation year
must begin on a date within the limitation year in which the amendment is made.
1.9. Master or Prototype Plan. A plan the form of which is the subject of a
favorable opinion letter from the Internal Revenue Service.
1.10. Maximum Permissible Addition.
1.10.1. General Rule. The maximum permissible addition (to defined
contribution plans) for any one (1) limitation year shall be the lesser of:
(i) Thirty Thousand Dollars ($30,000), or if greater, one-fourth
(1/4) the defined benefit limitation set forth in section
415(b)(1) of the Code as in effect for the limitation year, or
(ii) Twenty-five percent (25%) of the Participant'sss.415
compensation for such limitation year.
The compensation limitation referred to in (ii) shall not apply to any
contribution for medical benefits (within the meaning of section 401(h) or
section 419A(f)(2) of the Code) which is otherwise treated as an annual addition
under section 415(l)(1) or 419(A(d)(2) of the Code.
1.10.2. ESOP Rule. In the case of an employee stock ownership plan within
the meaning of section 4975(e)(7) of the Code under which no more than one third
(1/3rd) of the Employer contributions for a limitation year are allocated to
highly compensated employees (as defined in section 414(q) of the Code), the
dollar limitation in (i) above (after adjustment for cost of living) shall be
increased to be equal to the sum of:
(i) the dollar limitation in (i) above (after adjustment for cost of
living), and
(ii) the lesser of the dollar limitation in (i) above (after
adjustment for cost of living) or the amount of employer
securities contributed or purchased with case contributed to the
employee stock ownership plan.
1.10.3. Medical Benefits. The dollar limitation in (i) above (after
adjustment for cost of living) shall be reduced by the amount of Employer
contributions which are allocated to a separate account established for the
purpose of providing medical benefits or life insurance benefits with respect to
a key employee (as defined in Appendix B) under a welfare benefit fund or an
individual medical account.
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1.10.4. Short Year. If a short limitation year is created because of an
amendment changing the limitation year to a different 12-consecutive month
period, the maximum permissible amount will not exceed the amount described in
Section 1.10.1(i) multiplied by the following fraction:
Number of months in the short limitation year
---------------------------------------------
12
1.11. Projected Annual Benefit. Projected annual benefit means the annual
annuity benefit payable to the Participant at his normal retirement age (as
defined in the defined benefit plan) adjusted to an actuarially equivalent
straight life annuity form (or, if it would be a lesser amount, to an
actuarially equivalent qualified joint and survivor annuity form that is
available under the defined benefit plan) assuming that:
(i) the Participant continues employment and participation under the
defined benefit plan until his normal retirement age (as defined
in the defined benefit plan) or until the current age if later,
and
(ii) the Participant's ss.415 compensation and all other factors used
to determine benefits under the defined benefit plan remain
unchanged for all future limitation years.
First Amendment-Effective January 1, 1993
1.12. ss.415 Compensation.
1.12.1. ss.415 Compensation. Section 415 compensation (sometimes, "ss.415
compensation") shall mean, with respect to any limitation year, the wages, tips
and other compensation paid to the Participant by the Employer and reportable in
the box designated "wages, tips, other compensation" on Treasury Form W-2 (or
any comparable successor box or form) for the limitation year but determined
without regard to any rules that limit the remuneration included in wages based
on the nature or location of the employment or the services performed (such as
the exception for agricultural labor in section 3401(a)(2) of the Internal
Revenue Code). For limitation years beginning after December 31, 1991, ss.415
compensation shall be determined on a cash basis.
1.12.2. Earned Income. Section 415 compensation for a Self-Employed Person
shall be such Self-Employer Person's earned income. Earned income is a
Self-Employed Person's net earnings from self-employment in the trade or
business indicated in the Adoption Agreement as the trade or business of the
Employer with regard to which this Plan is established (but only if such trade
or business is one in which personal services of the Self-Employed Person is a
material income-producing factor) for a Plan Year during which the Self-Employed
Person is a Participant, reduced by the amount of the Employer contributions
made under the terms of this Plan for Common Law Employees. Earned income shall
include gains (other than any gain which is treated as gain from the sale or
exchange of a capital asset for the purpose of determining the self-employed
individual's federal income tax) and net earnings derived from the sale or other
disposition of the, the transfer of any interest in, or the licensing of the use
of
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property (other than good will) by an individual whose personal efforts created
such property. Earned Income shall be determine without regard to items not
included in gross income and the deductions allocable to such items. Net
earnings shall be determined with regard to the deduction allowed to the
Self-Employed Person by section 164(f) of the Code for taxable years beginning
after December 31, 1989.
1.13. Welfare Benefit Fund. Welfare benefit fund means a fund as defined in
section 419(e) of the Code which provides post-retirement medical benefits
allocated to separate accounts for key employees as defined in section
419A(d)(3).
SECTION 2
THIS PLAN ALONE
This Section 2 applies only if the Participant does not participate in and
has never participated in another qualified plan or a welfare benefit fund or an
individual medical account maintained by any controlled group member.
2.1. General Rule. The amount of annual additions which may be credited to the
Participant's Account under this Plan for any limitation year will not exceed
the maximum permissible amount. If the Employer contribution that would
otherwise be contributed or allocated to the Participant's Account would cause
the annual additions for the limitation year to exceed the maximum permissible
amount, the amount contributed or allocated will be reduced so that the annual
additions for the limitation year will equal the maximum permissible amount.
2.2. Estimation. Prior to determining the Participant's actual total
compensation for the limitation year, the Employer may determine the maximum
permissible amount for a participant on the basis of a reasonable estimation of
the Participant's total compensation for the limitation year, uniformly
determined for all Participants similarly situated.
2.3. Final Determination. As soon as is administratively feasible after the end
of the limitation year, the maximum permissible amount for the limitation year
will be determined by the Employer on the basis of the Participant's actual
total compensation for the limitation year.
First Amendment-Effective January 1, 1993
2.4. Remedial Action. If the Participant's annual additions for a limitation
year would exceed the maximum permissible additions applicable to defined
contribution plans alone, the Employer shall, to the extent they cause such
excess to occur, cause the following to occur until such excess is eliminated.
(i) return any unmatched employee contributions made by the
Participant for the limitation year to the Participant (adjusted
for their proportionate share of gains but not losses while held
in the Plan), and
(ii) distribute unmatched elective deferrals (within the meaning of
section 402(g)(3) of the Code) made for the limitation year to
the Participant
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(adjusted for their proportionate share of gains but not losses
while held in the Plan), and
(iii) return any matched employee contributions made by the
Participant for the limitation year to the Participant (adjusted
for their proportionate share of gains but not losses while held
in the Plan), and
(iv) distribute matched elective deferrals (within the meaning of
section 402(g)(3) of the Code) made for the limitation year to
the Participant (adjusted for their proportionate share of gains
but not losses while held in the Plan).
To the extent either matched employee contributions are returned or matched
elective deferrals are distributed, any matching contribution made with respect
thereto shall be forfeited and reallocated to Participants as provided in the
Plan Statement.
If, after returning such employee contributions to the Participant and
distributing elective deferrals to the Participant, an excess still exists, the
Employer shall cause such excess to be used to reduce Employer contributions for
the next limitation year ("second limitation year") (and succeeding limitation
years, as necessary) for that Participant if that Participant is covered by the
Plan at the end of the second limitation year (or succeeding limitation years).
If the Participant is not covered by the Plan at the end of the second
limitation year (or succeeding limitation years), however, then the excess
amounts must be held unallocated in an "excess account" for the second
limitation year (or succeeding limitation years) and allocated and reallocated
in the second limitation year (or succeeding limitation year) to all the
remaining participants in the Plan as if an employer contribution for the second
limitation year (or succeeding limitation year). However, if the allocation or
reallocation of the excess amounts pursuant to the provisions of the Plan causes
the limitations of this Appendix to be exceeded with respect to each Participant
for the second limitation year (or succeeding limitation years), then these
amounts must be held unallocated in an excess account. If an excess account is
in existence at any time during the second limitation year (or any succeeding
limitation year), all amounts in the excess account must be allocated and
reallocated to Participants' accounts (subject to the limitations of this
Appendix) as if they were additional Employer contributions before any employer
contribution and any Participant contributions which would constitute annual
additions may be made to the Plan for that limitation year. Furthermore, the
excess amounts must be used to reduce Employer contributions for the second
limitation year (and succeeding limitation years, as necessary) for all of the
remaining Participants. Excess amounts may not be distributed from the Plan to
Participants or former Participants. If an excess account is in existence at any
time during a limitation year, the gains and losses and other income
attributable to the excess account shall be allocated to such excess account. To
the extent that investment gains or other income or investment losses are
allocated to the excess account, the entire amount allocated to Participants
from the excess account, including any such gains or other income or less any
losses, shall be considered as an annual addition. If the Plan should be
terminated prior to the date any such temporarily held, unallocated excess can
be allocated to the Accounts of Participants, the date of termination shall be
deemed to be an Annual Valuation Date for the purpose of allocating such excess
and, if any portion of such
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excess cannot be allocated as of such deemed Annual Valuation Date by reason of
the limitations of this Appendix, such remaining excess shall be returned to the
Employer.
SECTION 3
THIS PLAN AND ANOTHER PROTOTYPE DEFINED CONTRIBUTION PLAN
This Section 3 applies only if, in addition to this Plan, the Participant
is covered under another master or prototype qualified defined contribution
plan, a welfare benefit fund or an individual medical account maintained by any
controlled group member
3.1. General Rule. The annual additions which may be credited to a Participant's
Account under this Plan for any limitation year will not exceed the maximum
permissible amount reduced by the annual additions credited to a Participant's
account under the other plans and welfare benefit funds for the same limitation
year. If the annual additions with respect to the Participant under other
defined contribution plans and welfare benefit funds maintained by any
controlled group member are less than the maximum permissible amount and the
Employer contribution that would otherwise be contributed or allocated to the
Participant's Account under this Plan would cause the annual additions for the
limitation year to exceed this limitation, the amount contributed or allocated
will be reduced so that the annual additions under all such plans and funds for
the limitation year will equal the maximum permissible amount. If the annual
additions with respect to the Participant under such other defined contribution
plans and welfare benefit funds in the aggregate are equal to or greater than
the maximum permissible amount, no amount will be contributed or allocated to
the Participant's Account under this Plan for the limitation year.
3.2. Estimation. Prior to determining the Participant's actual total
compensation for the limitation year, the Employer may determine the maximum
permissible amount for a Participant on the basis of a reasonable estimation of
the participant's compensation for the limitation year, uniformly determined for
all participants similarly situated.
3.3. Final Determination. As soon as is administratively feasible after the end
of the limitation year, the maximum permissible amount for the limitation year
will be determined by the Employer on the basis of the Participant's actual
total compensation for the limitation year.
3.4. Priority. If, pursuant to Section 3.3 of this Appendix or as a result of
the allocation of forfeitures, a Participant's annual additions under this Plan
and such other plans would result in an excess amount for a limitation year and
the allocations to accounts under such plans are made as of more than one (1)
date during the limitation year, the excess amount will be deemed to consist of
the annual additions last allocated during the limitation year, except that the
annual additions attributable to a welfare benefit fund or individual medical
account will be deemed to have been allocated first regardless of the actual
allocation date.
3.5. Apportionment. If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of another
plan, the excess amount attributed to this Plan will be the product of,
(a) the total excess amount allocated as of such date, multiplied by
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(b) the ratio of (i) the annual additions allocated to the Participant for
the limitation year as of such date under this Plan to (ii) the total
annual additions allocated to the Participant for the limitation year
as of such date under this Plan and all the other master or prototype
qualified defined contribution plans.
3.6. Remedial Action. Any excess amount attributed to this Plan will be disposed
in the manner described in Section 2.4 of this Appendix.
SECTION 4
THIS PLAN AND A NON-PROTOTYPE DEFINED CONTRIBUTION PLAN
If the Participant is covered under another qualified defined contribution
plan maintained by any controlled group member which is not a master or
prototype plan, annual additions which may be credited to the Participant's
Account under this Plan for any limitation year will be limited in accordance
with Section 3.1 through 3.6 of this Appendix as though the other plan was a
master or prototype qualified defined contribution plan unless the Employer
provides other limitations in the Adoption Agreement.
SECTION 5
THIS PLAN AND A DEFINED BENEFIT PLAN
If any controlled group member maintains, or at any time maintained, a
qualified defined benefit plan covering any Participant in this Plan, the sum of
a Participant's defined benefit plan fraction and defined contribution plan
fraction will not exceed one (1.0) at the close of any limitation year. The
annual additions which may be credited to the Participant's Account under this
Plan for any limitation year will be limited in accordance with the Adoption
Agreement.
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APPENDIX B
CONTINGENT TOP HEAVY PLAN RULES
Notwithstanding any of the foregoing provisions of the Plan Statement, if,
after applying the special definitions set forth in Section 1 of this Appendix,
this Plan is determined under Section 2 of this Appendix to be a Top Heavy Plan
for a Plan Year, then the special rules set forth in Section 3 of this Appendix
shall apply. For so long as this Plan is not determined to be a Top Heavy Plan,
the special rules in Section 3 of this Appendix shall be inapplicable to this
Plan.
SECTION 1
SPECIAL DEFINITIONS
Terms defined in the Plan Statement shall have the same meanings when used in
this Appendix. References to the "Code" shall mean the Internal Revenue Code, as
amended from time to time. In addition, when used in this Appendix, the
following terms shall have the following meanings:
1.1. Aggregated Employers -- the Employer and each other corporation,
partnership or proprietorship which is a "predecessor" to the Employer, or is
under "common control" with the Employer, or is a member of an "affiliated
service group" that includes the Employer, as those terms are defined in section
414(b), (c), (m) or (o) of the Code.
1.2. Aggregation Group -- a grouping of this Plan and:
(a) if any Participant in the Plan is a Key Employee, each other qualified
pension, profit sharing or stock bonus plan of the Aggregated
Employers in which a Key Employee is a Participant (and for this
purpose, a Key Employee shall be considered a Participant only during
periods when he is actually accruing benefits and not during periods
when he has preserved accrued benefits attributable to periods of
participation when he was not a Key Employee); and
(b) each other qualified pension, profit sharing or stock bonus plan of
the Aggregated Employers which is required to be taken into account
for this Plan or any plan described in paragraph (a) above to satisfy
the qualification requirement that this Plan cover a nondiscriminatory
group of employees (i.e., either the so-called "70% test," the
"70%/80% test" or the "nondiscriminatory classification test") or the
requirement that benefits be nondiscriminatory under section 401(a)(4)
of the Code; and
(c) each other qualified pension, profit sharing or stock bonus plan of
the Aggregated Employers which is not included in paragraph (a) or (b)
above, but which the Employer elects to include in the Aggregation
Group and which, when included, would not cause the Aggregation Group
to fail to satisfy the qualification requirement that the Aggregation
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Group of plans cover a nondiscriminatory group of employees (i.e.,
either the so-called "70% test," the "70%/80% test" or the
"nondiscriminatory classification test") and the requirement that
benefits be nondiscriminatory under section 401(a)(4) of the Code.
1.3. Determination Date -- for the first (1st) plan year of a plan, the last day
of such first (1st) plan year, and for each subsequent plan year, the last day
of the immediately preceding plan year.
1.4. Five Percent Owner -- for each Aggregated Employer that is a
corporation, any person who owns (or is considered to own within the meaning of
the Shareholder Attribution Rules) more than five percent (5%) of the value of
the outstanding stock of the corporation or stock possessing more than five
percent (5%) of the total combined voting power of the corporation, and, for
each Aggregated Employer that is not a corporation, any person who owns more
than five percent (5%) of the capital interest or the profits interest in such
Aggregated Employer. For the purposes of determining ownership percentages, each
corporation, partnership and proprietorship otherwise required to be aggregated
shall be viewed as a separate entity.
1.5. Key Employee -- each Participant (whether or not then an employee) who at
any time during a plan year (or any of the four preceding plan years) is:
(a) an officer of any Aggregated Employer (excluding persons who have the
title of an officer but not the authority and including persons who
have the authority of an officer but not the title) having an annual
compensation from all Aggregated Employers for any such plan year in
excess of fifty percent (50%) of the amount in effect under section
415(b)(1)(A) of the Internal Revenue Code for any such plan year, or
(b) one (1) of the ten (10) employees (not necessarily Participants)
owning (or considered to own within the meaning of the Shareholder
Attribution Rules) both more than one-half of one percent (1/2%)
ownership interest in value and the largest percentage ownership
interests in value of any of the Aggregated Employers (which are owned
by employees) and who has an annual compensation from all the
Aggregated Employers in excess of the limitation in effect under
section 415(c)(1)(A) of the Internal Revenue Code for any such plan
year, or
(c) a Five Percent Owner, or
(d) a One Percent Owner having an annual compensation from the Aggregated
Employers of more than One Hundred Fifty Thousand Dollars ($150,000);
provided, however, that no more than fifty (50) employees (or, if lesser, the
greater of three of all the Aggregated Employers' employees or ten percent of
all the Aggregated Employers' employees) shall be treated as officers. The
determination of whether a Participant is a Key Employee will be made in
accordance with this definition and section 416(i)(1) of the Code and
regulations thereunder. For the purposes of determining ownership percentages,
each corporation, partnership and proprietorship otherwise required to be
aggregated shall be viewed as a separate entity. For purposes of paragraph (b)
above, if two (2) employees have the same interest in any of the Aggregated
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Employers, the employee having the greatest annual compensation from that
Aggregated Employer shall be treated as having a larger interest. For the
purpose of determining compensation, however, all compensation received from all
Aggregated Employers shall be taken into account. The term "Key Employee" shall
include the beneficiaries of a deceased Key Employee. Annual compensation means
"ss.415 compensation" as defined in Appendix A to this Plan Statement but
including amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludible from the Participant's gross income under section
125, section 402(a)(8), section 402(h) or section (403(b) of the Internal
Revenue Code.
1.6. One Percent Owner -- for each Aggregated Employer that is a corporation,
any person who owns (or is considered to own within the meaning of the
Shareholder Attribution Rules) more than one percent (1%) of the value of the
outstanding stock of the corporation or stock possessing more than one percent
(1%) of the total combined voting power of the corporation, and for each
Aggregated Employer that is not a corporation, any person who owns more than one
percent (1%) of the capital or the profits interest in such Aggregated Employer.
For the purposes of determining ownership percentages, each corporation,
partnership and proprietorship otherwise required to be aggregated shall be
viewed as a separate entity.
1.7. Shareholder Attribution Rules -- the rules of section 318 of the Code,
(except that subparagraph (C) of section 318(a)(2) of the Code shall be applied
by substituting "5 percent" for "50 percent") or, if the Employer is not a
corporation, the rules determining ownership in such Employer which shall be set
forth in regulations prescribed by the Secretary of the Treasury.
1.8. Top Heavy Aggregation Group -- any Aggregation Group for which, as of the
Determination Date, the sum of:
(i) the present value of the cumulative accrued benefits for Key
Employees under all defined benefit plans included in such
Aggregation Group; and
(ii) the aggregate of the accounts of Key Employees under all defined
contribution plans included in such Aggregation Group,
exceed sixty percent (60%) of a similar sum determined for all employees. In
applying the foregoing, the following rules shall be observed:
(a) For the purpose of determining the present value of the cumulative
accrued benefit for any employee under a defined benefit plan, or the
amount of the account of any employee under a defined contribution
plan, such present value or amount shall be increased by the aggregate
distributions made with respect to such employee under the plan during
the five (5) year period ending on the Determination Date.
(b) Any rollover contribution (or similar transfer) initiated by the
employee, made from a plan maintained by one employer to a plan
maintained by another employer and made after December 31, 1983 to a
plan shall not be taken into account with respect to the transferee
plan for the purpose of determining whether such transferee plan is a
Top Heavy Plan (or whether any Aggregation Group which includes such
plan is a Top Heavy Aggregation Group). Any rollover contribution (or
similar transfer) not described in the preceding sentence shall be
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taken into account with respect to the transferee plan for the purpose
of determining whether such transferee plan is a Top Heavy Plan (or
whether any Aggregation Group which includes such plan is a Top Heavy
Aggregation Group).
(c) If any individual is not a Key Employee with respect to a plan for any
plan year, and was not a Key Employee for any of the four preceding
plan years, but such individual was a Key Employee with respect to a
plan for any prior plan year, the cumulative accrued benefit of such
employee and the account of such employee shall not be taken into
account.
(d) The determination of whether a plan is a Top Heavy Plan shall be made
once for each plan year of the plan as of the Determination Date for
that plan year.
(e) In determining that present value of the cumulative accrued benefits
of employees under a defined benefit plan, the determination shall be
made as of the actuarial valuation date last occurring during the
twelve (12) months preceding the Determination Date and shall be
determined on the assumption that the employees terminated employment
on the valuation date except as provided in section 416 of the Code
and the regulations thereunder for the first and second plan years of
a defined benefit plan. The accrued benefit of any employee (other
than a Key Employee) shall be determined under the method which is
used for accrual purposes for all plans of the employer or if there is
no method which is used for accrual purposes under all plans of the
employer, as if such benefit accrued not more rapidly than the slowest
accrual rate permitted under Code section 411(b)(1)(C). Unless
otherwise specified in the Adoption Agreement, in determining this
present value, the mortality and interest assumptions shall be those
which would be used by the Pension Benefit Guaranty Corporation in
valuing the defined benefit plan if it terminated on such valuation
date. The accrued benefit to be valued shall be the benefit expressed
as a single life annuity.
(f) In determining the accounts of employees under a defined contribution
plan, the account values determined as of the most recent asset
valuation occurring within the twelve (12) month period ending on the
Determination Date shall be used. In addition, amounts required to be
contributed under either the minimum funding standards or the plan's
contribution formula shall be included in determining the account. In
the first year of the plan, contributions made or to be made as of the
Determination Date shall be included even if such contributions are
not required.
(g) If any individual has not performed any services for any employer
maintaining the plan at any time during the five (5) year period
ending on the Determination Date, any accrued benefit of the
individual under a defined benefit plan and the account of the
individual under a defined contribution plan shall not be taken into
account.
(h) For this purpose, a terminated plan shall be treated like any other
plan and must be aggregated with other plans of the employer if it was
maintained within the last five (5) years ending on the determination
date for the plan year in question and would, but for the fact that it
terminated, be part of the Aggregation Group for such plan year.
1.9. Top Heavy Plan -- a qualified plan under which (as of the Determination
Date):
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(i) if the plan is a defined benefit plan, the present value of the
cumulative accrued benefits for Key Employees exceeds sixty
percent (60%) of the present value of the cumulative accrued
benefits for all employees; and
(ii) if the plan is a defined contribution plan, the aggregate of the
accounts of Key Employees exceeds sixty percent (60%) of the
aggregate of all of the accounts of all employees.
In applying the foregoing, the following rules shall be observed:
(a) Each plan of an Employer required to be included in an Aggregation
Group shall be a Top Heavy Plan if such Aggregation Group is a Top
Heavy Aggregation Group.
(b) For the purpose of determining the present value of the cumulative
accrued benefit for any employee under a defined benefit plan, or the
amount of the account of any employee under a defined contribution
plan, such present value or amount shall be increased by the aggregate
distributions made with respect to such employee under the plan during
the five (5) year period ending on the Determination Date.
(c) Any rollover contribution (or similar transfer) initiated by the
employee, made from a plan maintained by one employer to a plan
maintained by another employer and made after December 31, 1983 to a
plan shall not be taken into account with respect to the transferee
plan for the purpose of determining whether such transferee plan is a
Top Heavy Plan (or whether any Aggregation Group which includes such
plan is a Top Heavy Aggregation Group). Any rollover contribution (or
similar transfer) not described in the preceding sentence shall be
taken into account with respect to the transferee plan for the purpose
of determining whether such transferee plan is a Top Heavy Plan (or
whether any Aggregation Group which includes such a plan is a Top
Heavy Aggregation Group).
(d) If any individual is not a Key Employee with respect to a plan for any
plan year, and was not a Key Employee for any of the four preceding
plan years, but such individual was a Key Employee with respect to the
plan for any prior plan year, the cumulative accrued benefit of such
employee and the account of such employee shall not be taken into
account.
(e) The determination of whether a plan is a Top Heavy Plan shall be made
once for each plan year of the plan as of the Determination Date for
that plan year.
(f) In determining the present value of the cumulative accrued benefits of
employees under a defined plan, the determination shall be made as of
the actuarial valuation date last occurring during the twelve (12)
months preceding the Determination Date and shall be determined on the
assumption that the employees terminated employment of the valuation
date except as provided in section 416 of the Code and the regulations
thereunder for the first and second plan years of a defined benefit
plan. The accrued benefit of any employee (other than a Key Employee)
shall be determined under the method which is used for accrual
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purposes for all plans of the employer or if there is no method which
is used for accrual purposes under all plans of the employer, as if
such benefit accrued not more rapidly than the slowest accrual rate
permitted under Code section 411(b)(1)(C). Unless otherwise specified
in the Adoption Agreement, in determining this present value, the
mortality and interest assumptions shall be those which would be used
by the Pension Benefit Guaranty Corporation in valuing the defined
benefit plan if it terminated on such valuation date. The accrued
benefit to be valued shall be the benefit expressed as a single life
annuity.
(g) In determining the accounts of employees under a defined contribution
plan, the account values determined as of the most recent asset
valuation occurring within the twelve (12) month period ending on the
Determination Date shall be used. In addition, amounts required to be
contributed under either the minimum funding standards or the plan's
contribution formula shall be included in determining the account. In
the first year of the plan, contributions made or to be made as of the
Determination Date shall be included even if such contributions are
not required.
(h) If any individual has not performed any services for any employer
maintaining the plan at any time during the five (5) year period
ending on the Determination Date, any accrued benefit of the
individual under a defined benefit plan and the account of the
individual under a defined contribution plan shall not be taken into
account.
(i) For this purpose, a terminated plan shall be treated like any other
plan and must be aggregated with other plans of the employer if it was
maintained within the last five (5) years ending on the determination
date for the plan year in question and would, but for the fact that it
terminated, be part of the Aggregation Group for such plan year.
SECTION 2
DETERMINATION OF TOP HEAVINESS
Once each Plan Year, as of the Determination Date for that Plan Year, the
administrator of this Plan shall determine if this Plan is a Top Heavy Plan.
SECTION 3
CONTINGENT PROVISIONS
3.1. When Applicable. If this Plan is determined to be a Top Heavy Plan for any
Plan Year, the following provisions shall apply for that Plan Year (and, to the
extent hereinafter specified, for subsequent Plan Years), notwithstanding any
provisions to the contrary in the Plan Statement.
3.2. Vesting Requirement.
3.2.1. General Rule. During any Plan Year that the Plan is determined to be
a Top Heavy Plan, then all accounts of all Participants in a defined
contribution plan that is a Top Heavy Plan and the accrued benefits of all
Participants in a defined benefit plan that is a Top Heavy Plan shall be vested
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and nonforfeitable in accordance with the following schedule if, and to the
extent, that it is more favorable than other provisions of the Plan Statement:
If the Participant Has His Vested
Completed the Following Percentage
Years of Vesting Service: Shall Be:
------------------------- ----------
Less than 2 years 0%
2 years but less than 3 years 20%
3 years but less than 4 years 40%
4 years but less than 5 years 60%
5 years but less than 6 years 80%
6 years or more 100%
The above vesting schedule, if applicable, shall apply to all accounts and
benefits within the meaning of section 411(a)(7) of the Code except those
attributable to employee contributions including contributions made and benefits
accrued before the effective date of section 416 of the Code and before the Plan
was a Top Heavy Plan. However, this Section 3.2.1 does not apply to the accounts
of any Participant who does not have an Hour of Service after the Pan has
initially become a Top Heavy Plan, and such Participant's Vested interests shall
be determined without regard to this Section 3.2.1. The minimum allocation
required (to the extent required to be Vested under section 416(b) of the Code)
may not be forfeited under section 411(a)(3)(B) or 411 (a)(3)(D) of the Code,
and will be determined without regard to any contribution by the Employer for
the Participant under the Federal Insurance Contribution Act.
3.2.2. Subsequent Year. In each subsequent Plan Year that the Plan is
determined not to be a Top Heavy Plan, the other nonforfeitability provisions of
the Plan Statement (and not this section) shall apply in determining the vested
and nonforfeitable rights of Participants who do not have five (5) or more years
of Vesting Service (three (3) or more years of Vesting Service for Participants
who have one (1) or more Hours of Service in any Plan Year beginning after
December 31, 1988) as of the beginning of such subsequent Plan Year; provided,
however, that they shall not be applied in a manner which would reduce the
vested and nonforfeitable percentage of any Participant. The accounts and
accrued benefits of all other Participants shall be vested and nonforfeitable in
accordance with the more favorable of the schedule in Section 3.2.1 above or
other provisions of the Plan Statement. If the Vesting Schedule under the Plan
shifts in or out of the schedule set forth in Section 3.2.1 for any Plan Year
(because of the Plan's status as a Topy Heavy Plan), such shift is an amendment
to the Vesting schedule and the election described in Section 5.2 of the Plan
Statement shall apply.
3.3. Defined Contribution Plan Minimum Benefit Requirement.
3.3.1. General Rule. If this Plan is a defined contribution plan, then for
any Plan Year that this Plan is determined to be a Top Heavy Plan, the Employer
shall make a contribution for allocation to the account of each employee who is
a Participant for that Plan Year and who is not a Key Employee in an amount
(when combined with other Employer contributions and forfeited accounts
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allocated to his account) which is at least equal to three percent (3%) of such
Participant's compensation attributable to Recognized Employment while a
Participant. This contribution shall be made for each Participant who has not
separated from service with the Employer at the end of the Plan Year (including
for this purpose any Participant who is then on temporary layoff or authorized
leave of absence or who, during such Plan Year, was inducted into the Armed
Forces of the United States from employment with the Employer) including, for
this purpose, each employee of the Employer who would have been a Participant if
he had:
(a) completed one thousand (1,000) Hours of Service (or the equivalent)
during the Plan Year, and
(b) made any mandatory contributions to the Plan, and
(c) earned compensation in excess of the stated amount required for
participation in the Plan.
The provision in this Section 3.3.1 shall not apply to any Participant to the
extent the Participant is covered under any other plan or plans of the Employer
and the Employer has provided in Article XIV of the Adoption Agreement that the
minimum allocation or benefit requirement applicable to top-heavy plans will be
met in the other plan or plans.
3.3.2. Special Rule. Subject to the following rules, the percentage
referred to in Section 3.3.1 of this Appendix shall not exceed the percentage at
which contributions are made (or required to be made) under this Plan for the
Plan Year for that Key Employee for whom that percentage is the highest for the
Plan Year.
Second Amendment-Effective January 1, 1994
(a) The percentage referred to above shall be determined by dividing the
Employer contributions for such Key Employee for such Plan Year by so
much of his compensation for such Plan Year as does not exceed One
Hundred and Fifty Thousand Dollars ($150,000) (as adjusted for cost of
living in accordance with section 401(a)(17)(B) of the Internal
Revenue Code).
(b) For the purposes of this Section 3.3, all defined contribution plans
required to be included in an Aggregation Group shall be treated as
one (1) plan.
(c) The exception contained in this Section 3.3.2. shall not apply to (be
available to) this Plan if this Plan is required to be included in an
Aggregation Group if including this Plan in an Aggregation Group
enables a defined benefit plan to satisfy the qualification
requirement that the defined benefit plan cover a nondiscriminatory
group of employees (i.e., either the so-called "70% test," the
"70%/80% test" or the "nondiscriminatory classification test").
3.3.3. Salary Reduction and Matching Contributions. For the purpose of this
Section 3.3, all Employer contributions attributable to a salary reduction or
similar arrangement shall be taken into account both for the purpose of
determining the minimum percentage contribution required to be made for a
particular Plan Year for a Participant who is not a Key Employee and for the
purpose of determining whether that minimum contribution requirement has been
satisfied. Effective for Plan Years beginning after December 31, 1988, for the
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purpose of this Section 3.3, all Employer contributions attributable to a salary
reduction or similar arrangement and all Employer matching contributions shall
be taken into account for the purpose of determining the minimum percentage
contribution required to be made for a particular Plan Year for a Participant
who is not a Key Employee but not for the purpose of determining whether that
minimum contribution requirement has been satisfied.
3.4. Priorities Among Plans. In applying the minimum benefit provisions of this
Appendix in any Plan Year that this Plan is determined to be a Top Heavy Plan,
the following rules shall apply:
(a) If an employee participates only in this Plan, the employee shall
receive the minimum benefit applicable to this Plan.
(b) If an employee participates in both a defined benefit plan and a
defined contribution plan and only one (1) of such plans is a Top
Heavy Plan for the Plan Year, the employee shall receive the minimum
benefit applicable to the plan which is a Top Heavy Plan.
(c) If an employee participates in both a defined contribution plan and a
defined benefit plan and both are Top Heavy Plans, then the employee,
for that Plan Year, shall receive the defined benefit plan minimum
benefit unless for that Plan Year the employee has received employer
contributions and forfeitures allocated to his account in the defined
contribution plan in an amount which is at least equal to five percent
(5%) of his compensation.
(d) If an employee participates in this Plan, and other defined
contribution plans that are Top Heavy, the minimum benefit shall be
made in the plan according to chronological order as determined by the
effective date of each plan (using the original effective date of the
plan) beginning with the most recently established plan. Any
contribution required under this Section 3.5 for this Plan is reduced
by any contribution made to any other plan sponsored by the Employer.
3.5. Annual Contribution Limits.
3.5.1. General Rule. Notwithstanding anything apparently to the contrary in
the Appendix A to the Plan Statement, for any Plan Year that this Plan is a Top
Heavy Plan, the defined benefit fraction and defined contribution fraction of
the Appendix A to the Plan Statement shall be one hundred percent (100%) and not
one hundred twenty-five percent (125%).
3.5.2. Special Rule. Section 3.5.1. of this Appendix shall not apply to any
Top Heavy Plan if such Top Heavy Plan satisfies the following requirements:
(a) Minimum Benefit Requirement. The Topy Heavy Plan (and any plan
required to be included in an Aggregation Group with such plan)
satisfies the requirements of section 416(c)(1)(B) of the Code is
applied by substituting three percent (3%) for two percent (2%) and by
increasing (but by no more than ten percentage points) twenty percent
(20%) by one percentage point for each year for which the plan was
taken into account under this Section 3.5. Section 3.3.1 of this
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Appendix shall be applied by substituting "four percent (4%)" for
"three percent (3%)." Section 3.4(c) of this Appendix shall be applied
by substituting "seven and one-half percent (7-1/2%)" for "five
percent (5%)."
(b) Ninety Percent Rule. A Top Heavy Plan would not be a Top Heavy Plan if
"ninety percent (90%)" were substituted for "sixty percent (60%)" each
place that it appears in the definitions of Top Heavy Plan and Top
Heavy Aggregation Group.
3.5.3. Transition Rule. If, but for this Section 3.5.3, Section 3.5.1 of
this Appendix would begin to apply with respect to this Plan because it is a Top
Heavy Plan, the application of Section 3.5.1 of this Appendix shall be suspended
with respect to any individual so long as there are no:
(a) employer contributions, forfeitures or voluntary nondeductible
contributions allocated to such individual (if this Plan is a defined
contribution plan), or
(b) accruals for such individual (if the Plan is a defined benefit plan).
3.5.4. Coordinating Change. If this Plan is a Topy Heavy Plan for any Plan
Year, then for purposes of the Appendix A to the Plan Statement, section
415(e)(6)(i) of the Code shall be applied by substituting "Forty-one Thousand
Five Hundred Dollars ($41,500)" for "Fifty-one Thousand Eight Hundred
Seventy-five Dollars ($51,875)."
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APPENDIX C
QUALIFIED DOMESTIC RELATIONS ORDERS
SECTION 1
GENERAL MATTERS
Terms defined in the Plan Statement shall have the same meanings when used
in this Appendix.:
1.1. General Rule. The Plan shall not honor the creation, assignment or
recognition of any right to any benefit payable with respect to a Participant
pursuant to a domestic relations order unless that domestic relations order is a
qualified domestic relations order.
1.2. Alternative Payee Defined. The only persons eligible to be considered
alternate payees with respect to a Participant shall be that Participant's
spouse, former spouse, child or other dependent.
1.3. DRO Defined. A domestic relations order is any judgment, decree or order
(including an approval of a property settlement agreement) which relates to the
provision of child support, alimony payments, or marital property rights to a
spouse, former spouse, child or other dependent of a Participant and which is
made pursuant to a state domestic relations law (including a community property
law).
1.4. QDRO Defined. A qualified domestic relations order is a domestic relations
order which creates or recognizes the existence of an alternate payee's right to
(or assigns to an alternate payee the right to) receive all or a portion of the
Account of a Participant under the Plan and which satisfies all of the following
requirements.
1.4.1. Names and Addresses. The order must clearly specify the name and the
last known mailing address, if any, of the Participant and the name and mailing
address of each alternate payee covered by the order.
1.4.2. Amount. The order must clearly specify the amount or percentage of
the Participant's Account to be paid by the Plan to each such alternate payee or
the manner in which such amount or percentage is to be determined.
1.4.3. Payment Method. The order must clearly specify the number of
payments or period to which the order applies.
1.4.4. Plan Identity. The order must clearly specify that it applies to
this Plan.
1.4.5. Settlement Options. Except as provided in Section 1.4.8 of this
Appendix, the order may not require the Plan to provide any type or form of
benefits or any option not otherwise provided under the Plan.
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1.4.6. Increased Benefits. The order may not require the Plan to provide
increased benefits.
1.4.7. Prior Awards. The order may not require the payment of benefits to
an alternate payee which are required to be paid to another alternate payee
under another order previously determined to be a qualified domestic relations
order.
1.4.8. Exceptions. Notwithstanding Section 1.4.5 of this Appendix:
(a) The order may require payment of benefits be made to an alternate
payee before the Participant has separated from service:
(i) If the order requires payment as of a date that is on or after
the date on which the Participant attains (or would have
attained) the earliest payment date described in Section 1.4.10
of this Appendix, or
(ii) If the order requires (A) that payment of benefits be made to an
alternate payee in a single lump sum as soon as is
administratively feasible after the order is determined to be a
qualified domestic relations order, and (B) does not contain any
of the provisions described in Section 1.4.9 of this Appendix,
and (C) provides that the payment of such single lump sum fully
and permanently discharges all obligations of the Plan to the
alternate payee.
(b) The order may require that payment of benefits be made to an alternate
payee as if the Participant had retired on the date on which payment
is to begin under such order (but taking into account only the present
value of benefits actually accrued).
(c) The order may require payment of benefits to be made to an alternate
payee in any form in which benefits may be paid under the plan to the
Participant (other than in the form of a joint and survivor annuity
with respect to the alternate payee and his or her subsequent spouse).
1.4.9. Deemed Spouse. Notwithstanding the foregoing:
(a) The order may provide that the former spouse of a Participant shall be
treated as a surviving spouse of such Participant for the purposes of
Section 7 of the Plan Statement (and that any subsequent or prior
spouse of the Participant shall not be treated as a spouse of the
Participant for such purposes), and
(b) The order may provide that, if the former spouse has been married to
the Participant for at least one (1) year at any time, the surviving
former spouse shall be deemed to have been married to the Participant
for the one (1) year period ending on the date of the Participant's
death.
1.4.10. Payment Date Defined. For the purpose of Section 1.4.8 of this
Appendix, the earliest payment date means the earlier of:
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(a) The date on which the Participant is entitled to a distribution under
the Plan, or
(b) The later of (i) the date the Participant attains age fifty (50)
years, or (ii) the earliest date on which the Participant could begin
receiving benefits under the plan if the Participant separated from
service.
SECTION 2
PROCEDURES
2.1. Actions Pending Review. During any period when the issue of whether a
domestic relations order is a qualified domestic relations order is being
determined by the Administrator's Representative, the Administrator's
Representative shall cause the Plan to separately account for the amounts which
would be payable to the alternate payee during such period if the order were
determined to be a qualified domestic relations order.
2.2. Reviewing DRO's. Upon the receipt of a domestic relations order, the
Administrator's Representative shall determine whether such order is a qualified
domestic relations order.
2.2.1. Receipt. A domestic relations order shall be considered to have been
received only when the Administrator's Representative shall have received a copy
of a domestic relations order which is complete in all respects and is
originally signed, certified or otherwise officially authenticated.
2.2.2. Notice to Parties. Upon receipt of a domestic relations order, the
Administrator's Representative shall notify the Participant and all persons
claiming to be alternate payees and all prior alternate payees with respect to
the Participant that such domestic relations order has been received. The
Administrator's Representative shall included with such notice a copy of this
Appendix.
2.2.3. Comment Period. The Participant and all persons claiming to be
alternate payees and all prior alternate payees with respect to the Participant
shall be afforded a comment period of thirty (30) days from the date such notice
is mailed by the Administrator's Representative in which to make comments or
objections to the Administrator's Representative concerning whether the domestic
relations order is a qualified domestic relations order. By the unanimous
written consent of the Participant and all persons claiming to be alternate
payees and all prior alternate payees with respect to the Participant, the
thirty (30) day comment period may be shortened.
2.2.4. Initial Determination. Within a reasonable period of time after the
termination of the comment period, the Administrator's Representative shall give
written notice to the Participant and all persons claiming to be alternate
payees and all prior alternate payees with respect to the Participant of its
decision that the domestic relations order is or is not a qualified domestic
relations order. If the Administrator's Representative determines that the order
is not a qualified domestic relations order or if the Administrator's
Representative determines that the written objections of any party to the order
being found a qualified domestic relations order are not valid, the
Administrator's Representative shall include in its written notice.
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(i) the specific reasons for its decision.
(ii) the specific reference to the pertinent provisions of this Plan
Statement upon which its decision is based.
(iii) a description of additional material or information, if any,
which would cause the Administrator's Representative to reach a
different conclusions, and
(iv) an explanation of the procedures for reviewing the initial
determination of the Administrator's Representative.
2.2.5. Appeal Period. The Participant and all persons claiming to be
alternate payees and all prior alternate payees with respect to the Participant
shall be afforded an appeal period of sixty (60) days form the date such an
initial determination and explanation is mailed in which to make comments or
objections concerning whether the original determination of the Administrator's
Representative is correct. By the unanimous written consent of the Participant
and all persons claiming to be alternate payees and all prior alternate payees
with respect to the Participant, the sixty (60) day appeal period may be
shortened.
2.2.6. Final Determination. In all events, the final determination of the
Administrator's Representative shall be made not later than eighteen (18) months
after the date on which first payment would be required to be made under the
domestic relations order if it were a qualified domestic relations order. The
final determination shall be communicated in writing to the Participant and all
persons claiming to be alternate payees and all prior alternate payees with
respect to the Participant.
2.3. Final Disposition. If the domestic relations order is finally determined to
be a qualified domestic relations order and all comment and appeal periods have
expired, the Plan shall pay all amounts required to be paid pursuant to the
domestic relations order to the alternate payee entitled thereto. If the
domestic relations order is finally determined not to be a qualified domestic
relations order and all comment and appeal periods have expired, benefits under
the Plan shall be paid to the person or persons who would have been entitled to
such amounts if there had been no domestic relations order.
2.4. Orders Being Sought. If the Administrator's Representative has notice that
a domestic relations order is being or may be sought but has not received the
order, the Administrator's Representative shall not (in the absence of a written
request from the Participant) delay payment of benefits to a Participant or
beneficiary which otherwise would be due. If the Administrator's Representative
has determined that a domestic relations order is not a qualified domestic
relations order and all comment and appeal periods have expired, the
Administrator's Representative shall not (in the absence of a written request
from the Participant) delay payment of benefits to a Participant or beneficiary
which otherwise would be due even if the Administrator's Representative has
notice that the party claiming to be an alternate payee or the Participant or
both are attempting to rectify any deficiencies in the domestic relations order.
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SECTION 3
PROCESSING OF AWARD
3.1. General Rules. If a benefit is awarded to an alternate payee pursuant to an
order which has been finally determined to be a qualified domestic relations
order, the following rules shall apply.
3.1.1. Source of Award. If a Participant shall have a Vested interest in
more than one Account under the Plan, the benefit awarded to an alternate payee
shall be withdrawn from the Participant's Account in proportion to his Vested
interest in each of them.
3.1.2. Effect on Account. For all purposes of the Plan, the Participant's
Account (and all benefits payable under the Plan which are derived in whole or
in part by reference to the Participant's Account) shall be permanently
diminished by the portion of the Participant's Account which is awarded to the
alternate payee. The benefit awarded to an alternate payee shall be considered
to have been a distribution from the Participant's Account for the limited
purpose of applying the rules of Section 5.1.3 of the Plan Statement.
3.1.3. After Death. After the death of an alternate payee, all amounts
awarded to the alternate payee which have not been distributed to the alternate
payee and which continue to be payable shall be paid in a single lump sum
distribution to the personal representative of the alternate payee's estate as
soon as administratively feasible unless the qualified domestic relations order
clearly provides otherwise. The Participant's beneficiary designation shall not
be effective to dispose of any portion of the benefit awarded to an alternate
payee unless the qualified domestic relations order clearly provides otherwise.
3.1.4. In-Service Benefits. The in-service distribution and the loan
provisions of Section 7 of this Plan Statement shall not be applicable to the
benefit awarded to an alternate payee.
3.2. Segregated Account. If the Administrator's Representative determines that
it would facilitate the administration or the distribution of the benefit
awarded to the alternate payee or if the qualified domestic relations order so
requires, the benefit awarded to the alternate payee shall be established on the
books and records of the Plan as a separate account belonging to the alternate
payee.
3.3. Former Alternate Payees. If an alternate payee has received all benefits to
which the alternate payee is entitled under a qualified domestic relations
order, the alternate payee will not at any time thereafter be deemed to be an
alternate payee or prior alternate payee for any substantive or procedural
purpose of this Plan.
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APPENDIX D
HIGHLY COMPENSATED EMPLOYEE
SECTION 1
GENERAL RULE
1.1. Highly Compensated Employee. A "highly compensated employee" is an employee
who, during the "determination year" or the "look-back year":
(i) was at any time a five percent (5%) owner;
(ii) received compensation from the Employer in excess of Seventy-Five
Thousand Dollars ($75,000);
(iii) received compensation from Employer in excess of Fifty Thousand
Dollars ($50,000) and was in the top-paid group of employees for
such year; or
(iv) was at any time an officer and received compensation greater than
50 percent (50%) of the amount in effect under section
415(b)(1)(A) of the Code for such year.
The group of employees (including former employees) who are highly compensated
employees consists of both highly compensated active employees and highly
compensated former employees. The determination of who is a highly compensated
employee will be made in accordance with this Appendix D and section 414(q) of
the Code and the regulations thereunder.
1.2. Determination Year. The determination year is the current Plan Year (that
is, the Plan Year for which the determination of which employees are highly
compensated employees is being made).
1.3. Look-back Year. The look-back year is the twelve-month period immediately
preceding the determination year (generally, the preceding Plan Year). The
Employer does not elect to make the look-back year calculation on the basis of
the calendar year ending with or within the determination year.
1.4. Special Rule for Determination Year. An employee not described in Section
1.1(ii), (iii) or (iv) for the look-back year shall not be treated as described
in Section 1.1(ii), (iii) or (iv) for the determination year unless such
employee is a member of the group consisting of the one hundred (100) employees
paid the greatest compensation during the determination year. If there is no
difference in compensation between the 100th employee and the 101st employee,
then those employees receiving the same compensation as the 100th employee shall
be ranked in descending order of seniority, with the employee with the greatest
seniority being ranked first.
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1.5. Highly Compensated Active Employee. A highly compensated active employee is
any highly compensated employee who performs services for the Employer during
the determination year.
1.6. Highly Compensated Former Employees. A highly compensated former employee
is any former employee who had a "separation year" (as defined in Section 2.9)
prior to the determination year and was a highly compensated active employee for
either (1) such employee's separation year or (2) any determination year ending
on or after the employee's 55th birthday. An employee who performs no services
for the Employer during a determination year is treated as a former employee.
SECTION 2
SPECIAL RULES & DEFINITIONS
2.1. Incorporated Definitions. Terms defined in the Plan Statement shall have
the same meanings when used in this Appendix. References to the "Code" shall
mean the Internal Revenue Code, as amended from time to time.
2.2. Five Percent Owner. An employee shall be treated as a five percent (5)
owner for any determination year or look-back year if at any time during such
year such employee was a five percent (5%) owner (as defined in the Appendix B
to this Plan Statement) of the Employer.
2.3. Top Paid Group. An employee is in the top-paid group of employees for any
determination year or look-back year if such employee is in the group consisting
of the top twenty percent (20%) of the employees when ranked on the basis of
compensation paid during such year, excluding those employees described in
Section 2.10. For purposes of the preceding sentence the top twenty percent
(20%) shall be determined by disregarding fractional numbers (i.e., the top 20%
of 118 employees shall be the top 23 employees). Employees who perform no
services for the Employer during the year are not included in determining the
top-paid group of employees for that year.
2.4. Special Rules for Officers.
2.4.1. No More Than 50 Officers. For purposes of Section 1.1(iv) of this
Appendix, no more than fifty (50) employees (or, if lesser, the greater of three
employees or ten percent of the employees) shall be treated as officers. If the
actual number of officers exceeds this limit, then the officers who will be
considered as includible officers under Section 1.1(iv) are those who receive
the greatest compensation from the Employer during the determination year or the
look-back year.
2.4.2. At least 1 Officer. If for any determination year or look-back year
no officer of the Employer is described in Section 1.1(iv) of this Appendix, the
highest paid officer of the Employer for such year shall be treated as described
in such Section 1.1(iv). This is true whether or not such employee is also a
highly compensated employee on any other basis.
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2.5. Former Employees Excluded For Certain Purposes. Former employees are not
included in the top-paid group, the group consisting of the one hundred (100)
employees paid the greatest compensation or the group of includible officers for
purposes of determining who are highly compensated active employees. In
addition, former employees are not counted as employees for purposes of
determining the number of employees in the top-paid group.
2.6. Employees Described in Several Groups. An employee who is a highly
compensated active employee for a determination year by reason of being
described in one group under Section 1.1 for either the determination year or
the look-back year, shall not be disregarded in determining whether another
employee is a highly compensated active employee by reason of being described in
another group under Section 1.1.
2.7. Certain Family Members
2.7.1. In General. If any individual is a member of the family of a five
percent (5%) owner or of a highly compensated employee in the group consisting
of the ten (10) highly compensated employees paid the greatest compensation
during the determination year or the look-back year, then:
(i) such individual shall not be considered a separate employee; and
(ii) any compensation paid to such individual (and any applicable
contribution or benefit on behalf of such individual shall be
treated as if it were paid to (or on behalf of) the five percent
(5%) owner or highly compensated employee.
Family member are subject to this aggregation rule whether or not they may be
excluded under Section 2.10 for purposes of determining the top-paid group and
whether or not they are highly compensated employees when considered separately.
2.7.2. Family. For purposes of Section 2.7.1 of this Appendix, the term
"family" means, with respect to any employee, such employee's spouse and lineal
ascendants or descendants and the spouses of such lineal ascendants or
descendants.
2.7.3. Priority. The determination of which employees are highly
compensated employees and which highly compensated employees are among the ten
highly compensated employees paid the greatest compensation during the
determination year or the look-back year shall be made prior to the application
of the family aggregation rules. Similarly, the determination of the number and
identity of employees in the top-paid group for a determination year or a
look-back year and the identity of the group of employees consisting of the 100
employees paid the greatest compensation for a determination year shall be made
prior to the application of the family aggregation rules. The family aggregation
rules apply separately to the determination year and the look-back year.
2.7.4. Change in Family Relationship. An individual is a family member with
respect to an employee or former employee if such individual is a family member
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on any day during the determination year or the look-back year, even though such
relationship changes during such year as a result of death or divorce.
2.8. Compensation. For purposes of this Appendix the term "compensation" means
"ss.415 compensation" as defined in Appendix A to this Plan Statement but
including amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludible from the Participant's gross income under section
125, section 402(a)(8), section 402(h) or section 403(b) of the Code.
Compensation for any employee who performed services for only part of a year is
not annualized for purposes of determining such employee's compensation for the
determination year or the look-back year.
2.9. Separation Year. Generally the "separation year" is the determination year
during which the employee separates from service with the Employer. An employee
who performs no services for the Employer during a determination year will be
treated as having separated from service in the year in which that employee last
performed services for the Employer.
2.9.1. Deemed Separation. Solely for the purpose of determining whether an
employee is a highly compensated former employee after the employee actually
separates from service, an employee may be deemed to have separated from service
during a determination year in which the employee actually performs some
services for the Employer. An employee will be deemed to have a separation year
if, in a determination year prior to the employee's attaining the age of 55, the
employee receives compensation in an amount less than 50% of the employee's
average annual compensation for the three consecutive calendar year's preceding
such determination year during which the employee received the greatest amount
of compensation for the Employer (or the total period of the employee's service
with the Employer, if less). This deemed separation from service may occur
without regard to whether the reduction in compensation occurs on account of the
employee's leave of absence from service with the Employer.
2.9.2. Deemed Resumption. An employee who is treated as having a deemed
separation year by reason of Section 2.9.1 will not be treated as a highly
compensated former employee after such employee actually separates from service
with the Employer if, after such compensation from the Employer for a particular
determination year increased significantly so that such employee is treated as
having a deemed resumption of employment. In order for a deemed resumption of
employment to occur, there must be an increase in compensation from the Employer
to the extent that such compensation would not result in a deemed separation
year under Section 2.9.1 using the same three year period taken into account for
purposes of that Section.
2.10. Excluded Employees.
2.10.1 General Exclusions. For purposes of determining the number of
employees in the top-paid group for a determination year or a look-back year
under Section 2.3 of this Appendix, the following employees shall be excluded:
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(i) employees who have not completed six (6) months of service by the
end of the year;
(ii) employees who normally work less than seventeen and one-half
(17 1/2) hours per week;
(iii) employees who normally work during less than six (6) months
during the year; and
(iv) employees who have not attained age twenty-one (21) by the end of
the year.
For purposes of computing months of service, an employee's service in the
immediately preceding year is added to service in the current year to determine
whether an employee is excluded in the current year.
2.10.2. Employees Covered By Collective Bargaining Agreements. In general,
employees who are included in a unit of employees covered by a collective
bargaining agreement are included in determining the number of employees in the
top-paid group. However, if ninety percent (90%) or more of all employees are
covered under collective bargaining agreements, and this Plan covers only
employees who are not covered under such agreements, then the employees who are
covered under such collective bargaining agreements shall not be counted in
determining the number of employees who will be included in the top-paid group.
In addition, the employees covered by such agreements will not be included in
the top-paid group.
2.10.3 Minimum Hour Rule. An employee who works at least 17 1/2 hours a
week for 50% or more of the total weeks worked by such employee during a
determination year or look-back year is deemed to normally work more than 17 1/2
hours a week. An employee who works less than 17 1/2 hours a week for fifty
percent (50%) or more of the total weeks worked by such employee during a
determination year or look-back year is deemed to normally work less than 17 1/2
hours a week. The foregoing determination may be made separately with respect to
each employee or on the basis of groups of employees who fall within particular
job categories as established by the Employer on a reasonable basis. In general,
eighty percent (80%) of the positions within a particular job category must be
filled by employees who normally work less than 17 1/2 hours a week before any
employees may be excluded under this rule on the basis of their membership in
that job category. Alternatively, an Employer may exclude employees who are
members of a particular job category if the median number of hours credited to
employees in that category during a determination year or look-back year is 500
or less.
2.10.4. Minimum Period of Time Rule. The determination of whether an
employee normally works during less than six months in any determination year or
look-back year is made on the basis of the facts and circumstances of the
Employer as evidenced by the Employer's customary experience in the years
preceding such year. An employee who works on one day during a month is deemed
to have worked during that month.
2.10.5. Nonresident Aliens. Employees who are nonresident aliens and who
receive no earned income (within the meaning of section 911(d)(2) of the Code)
from the employer which constitutes income from sources within the United States
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(within the meaning of section 861(a)(3) of the Code) are excluded for all
purposes of this Appendix.
2.11. Adjustments to Dollar Amounts. The dollar amounts described in Section
1.1(ii) and (iii) shall be adjusted for cost-of-living increases as provided by
regulations or other rulings by the Secretary of the Treasury. The applicable
dollar amount for a particular determination year shall be the dollar amount for
the calendar year in which the determination year begins. For determination
years beginning before January 1, 1987, the dollar amounts in Section 1.1 (ii)
and (iii) shall be $75,000 and $50,000 respectively.
2.12. Election to Include Leased Employees. The term "employee" shall include
all leased employees of the Employer, whether or not such leased employees are
covered by a "safe harbor plan" as described in section 414(n)(5) of the Code.
2.13. Aggregation. Subsections (b), (c), (m), (n), and (o) of section 414 of the
Code shall be applied before the application of the rules in this Appendix.
2.14. Election of Special Rule for Employees Who Separated From Service before
January 1, 1987. For purposes of determining who is a highly compensated former
employee for this Plan and for all plans of the Employer with respect to all
situations for which section 414(q) of the Code is applicable to the Employer, a
former employee who separated from service prior to January 1, 1987, shall be
considered a highly compensated former employee if, during the employee's
separation year (or the year preceding such separation year) or during any year
ending on or after such employee's 55th birthday (or the last year ending before
such employee's 55th birthday), the employee was a five percent (5%) owner of
the Employer at any time during such year, or the employee received compensation
in excess of $50,000 during such year. This determination may be made on the
basis of the calendar year, the Plan Year or any other twelve month period
selected by the Employer and applied on a reasonable and consistent basis.
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APPENDIX E
TEFRA ss.242(B) TRANSITIONAL RULES
Section 1. In General. Prior to January 1, 1984, each individual who was either:
(a) an actively employed Participant having an Account (or a contribution
accrued to an Account) as of December 31, 1983,
(b) a Participant not actively employed but having an Account (or a
contribution accrued to an Account) as of December 31, 1983, or
(c) a Beneficiary of a deceased Participant having an Account (or a
contribution accrued to an Account) as of December 31, 1983
was given the opportunity to make a designation (before January 1, 1984) of a
method of distribution, that would not have disqualified the Plan under section
401(a)(9) of the Code as in effect prior to amendment by the Deficit Reduction
Act of 1984, pursuant to ss.242(b) of the Tax Equity and Fiscal Responsibility
Act of 1982 (hereinafter a "ss.242(b) designation"). Some of those individuals
elected to make a ss.242(b) designation and some did not. The distribution rules
set forth in this Appendix shall, notwithstanding any provisions of Section 7 of
the Plan Statement to the contrary, determine the distributions made with
respect to all individuals entitled to make a ss.242(b) designation, provided
that if the Plan is not an exempt profit sharing plan, the QJ&SA contract or
Life Annuity contract has been rejected as described in Section 7 of the Plan
Statement. Distributions made with respect to individuals not entitled to make a
ss.242(b) designation shall be governed solely by Section 7 of the Plan
Statement.
Section 2. No Designation. In the case of distributions to an individual where
no ss.242(b) designation was made, distributions after December 31, 1983 shall
be made as follows:
(a) If such individual is a Participant whose benefits were in pay status
on December 31, 1983, and the method of distribution in effect for
such Participant was consistent with provisions of the Plan Statement
at the time such distribution commenced, then distribution shall
continue to be made to such Participant in accordance with the method
of distribution in effect on December 31, 1983, notwithstanding that
distribution could not have commenced under such method after December
31, 1983.
(b) If such individual is a Beneficiary whose benefits were in pay status
on December 31, 1983, and the method of distribution in effect for
such Beneficiary was consistent with the provisions of the Plan
Statement at the time such distribution commenced, then distribution
shall continue to be made to such Beneficiary in accordance with the
method of distribution in effect on December 31, 1983, notwithstanding
that distribution could not have commenced under such method after
December 31, 1983.
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(c) If such individual is a Participant or a Beneficiary whose benefits
were not in pay status on December 31, 1983, distribution shall be
made in accordance with Section 7 of the Plan Statement and, to the
extent distribution cannot then be made upon terms which are
consistent with the provisions of Section 7 of the Plan Statement,
distribution shall be made as soon as practicable after December 31,
1983 in a single lump sum.
(d) For the purpose of the foregoing, benefits shall be considered to have
been in pay status on December 31, 1983 if distribution had commenced
on or prior to that date and was being made under a written instrument
signed by the Participant or Beneficiary which fixed the person to
whom such benefits were payable, the time or times at which
distributions would be made and the amount (or formula pursuant to
which the amount would be determined) of each distribution and was not
subject to variation at the discretion of the Participant or the
Administrator's Representative unless such variation would cause the
acceleration of distributions.
(e) Examples of circumstances in which distribution could not be made upon
terms consistent with the provisions of Section 7 of the Plan
Statement (and therefore would have to be made in a single lump sum)
include, but are not be limited to, distribution to a Participant who
was a key employee in a top heavy plan and who had attained age
seventy and one-half (70-1/2) years before 1984, distribution to a
Beneficiary who was not the surviving spouse of the Participant if the
Participant died prior to 1979, and distribution to a Beneficiary who
is the surviving spouse of a Participant who dies after December 31,
1983 at a time when distributions were being made to such Participant
for a term certain which extended beyond the life expectancy of such
Participant and surviving spouse.
Section 3. Designation Made. In the case of distributions to an individual where
a ss.242(b) designation was made before January 1, 1984, the Administrator's
Representative shall honor such ss.242(b) designation in making distributions
hereunder to all individuals identified in such ss.242(b) designation. For this
purpose:
(a) A ss.242(b) designation shall, to the extent necessary, be deemed to
incorporate by reference either the written beneficiary designation
filed by the Participant prior to or coincident with the filing of
a ss.242(b) designation or, if no such written beneficiary designation
has been filed, the automatic sequence of Beneficiaries provided under
the Plan document in effect on December 31, 1983.
(b) An individual who made a ss.242(b) designation shall have the right to
revoke any ss.242(b) designation filed by him at any time by a written
instrument delivered to the Employer. Upon such revocation,
distribution shall be made in accordance with the provisions of
Section 7 of the Plan Statement. To the extent that distribution
cannot then be made upon terms consistent with the provisions of
Section 7 of the Plan Statement, distribution shall be made, as soon
as practicable after such revocation, in a single lump sum.
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(c) A Beneficiary entitled to distribution under this Plan shall have the
right to revoke the ss.242(b) designation insofar as it applies to
such Beneficiary. Upon such revocation, distribution shall be made in
accordance with the provisions of Section 7 of the Plan Statement. If
a designation is revoked subsequent to the date distributions are
required to begin under Section 7 of the Plan Statement, the trust
must distribute by the end of the calendar year following the calendar
year in which the revocation occurs the total amount not yet
distributed which would have been required to have been distributed to
satisfy Section 7 of the Plan Statement, but for the ss.242(b)
election. For calendar years beginning after December 31, 1988, such
distributions must meet the minimum distribution incidental benefit
requirements in Treas. Reg. 1.401(a)(9)-2 (proposed). Any changes in
the ss.242(b) designation will be considered to be a revocation of
the ss.242(b) designation. However, the mere substitution or addition
of another beneficiary (one not named in the ss.242(b) designation)
under the ss.242(b) designation will not be considered to be a
revocation of the ss.242(b) designation, so long as such substitution
or addition does not alter the period over which distribution are to
be made under the ss.242(b) designation, directly or indirectly (for
example, by altering the relevant measuring life). In the case in
which an amount is transferred or rolled rolled from one plan to
another plan, the rules in Q&A J-2 and Q&A J-3 of Treas. Reg.
1.401(a)(9)-1 (proposed) shall apply.
(d) If a Participant shall have file a ss.242(b) designation and shall
subsequently file (or amend) a written beneficiary designation under
the Plan, the ss.242(b) designation shall not be deemed to be revoked
and the relevant measuring life or lives for purposes of the ss.242(b)
designation shall continue to be determined as described in paragraph
(a) above, without regard to any subsequent filing (or amendment) a
written beneficiary designation or any subsequent amendment of the
automatic sequence of Beneficiaries under the Plan Statement.
(e) A distribution to a Beneficiary will be governed by Section 7 of the
Plan Statement, unless the ss.242(b) designation identifies the
Beneficiary, specifies the time at which distribution will commence
and the period over which distribution will be made with respect to
the distribution to be made upon the death of the Participant.
(f) For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Participant or the Beneficiary,
to whom such distribution is being made, will be presumed to have
designated the method of distribution under which the distribution is
being made if the method of distribution was specified in writing and
the distribution satisfied the requirements in Section 1 and Section
3(e) of this Appendix.
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APPENDIX F
TRANSITIONAL DISTRIBUTION RULES
The Prototype Sponsor adopted the following memorandum and amendment:
MEMORANDUM AND AMENDMENT
TO: Sponsoring Employers of 401(k) Prototype
FROM: First Trust National Association ("Prototype Sponsor")
RE: Distributions from Plan
DATE: December 23, 1988
The Internal Revenue Service recently issued regulations which limit the
existence or the use of any Employer, Trustee, Administrator's Representative or
other similar discretion over the benefits forms under qualified plans. In
response to those regulations, the Prototype Sponsor decided to amend the 401(k)
Prototype pursuant to its reserved power of amendment. This amendment is being
adopted to protect and preserve the sponsoring Employer's ability to design its
own distribution rules for its Plan. If the Prototype Sponsor did not take this
action, all the options and decisions would be surrendered to Participants or
Beneficiaries. Accordingly, the Prototype Sponsor's decision to amend the 401(k)
Prototype gives sponsoring Employers time to decide how to respond to these
regulations.
Pursuant to Section 9.1.2 of the Basic Plan Document, the Prototype Sponsor
hereby amends the Basic Plan Document (and corresponding Adoption Agreement)
effective as of January 1, 1989, as follows:
Small Amount Distributions. A Vested Total Account which does not exceed Three
Thousand Five Hundred Dollars ($3,500) on the Annual Valuation Date immediately
following a Participant's Event of Maturity shall be automatically distributed
to the Participant in a lump sum as of that Annual Valuation Date without a
written application. The sponsoring Employer may in a written agreement with the
Prototype Sponsor modify this rule to increase the number of times each year
that a small amount distribution can be made (within limitations established by
the Prototype Sponsor).
Time of Distribution. Distributions from the Plan may only be made as of an
Annual Valuation Date coincident with or following a Participant's Event of
Maturity. Thus, distributions shall only be made once a Plan Year. The
sponsoring Employer may in a written agreement with the Prototype Sponsor modify
this rule to increase the number of times each year that distributions can be
made (within limitations established by the Prototype Sponsor).
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Form of Distribution. Distributions from the Plan shall only be made in a lump
sum payment. This rule shall not apply to Participants and Beneficiaries
currently receiving payments under a specified plan of installment payments or
to Participants who have made a valid designation of a method of distribution
pursuant to section 242(b) of the Tax Equity and Fiscal Responsibility Act of
1982. The sponsoring Employer may in a written agreement with the Prototype
Sponsor modify this rule to increase the distribution options (within
limitations established by the Prototype Sponsor).
Election to Defer. The election to defer described in Section 7.2.3 of the Basic
Plan Document and all references to that Section are deleted.
Distribution in Cash. All distributions from the Plan shall be made in cash. If,
however, the Vested Total Account to be distributed consists in whole or in part
of a Participant's unpaid promissory note, the distribution of that portion of
the Vested Total Account shall be made in the form of that promissory note. If
the Vested Total Account to be distributed consists in whole or in part of a
Participant's individually directed investments, the distribution of that
portion of the Vested Total Account shall be made in the form of the assets held
pursuant to that individual direction.
Withdrawals from Voluntary Accounts. If the Adoption Agreement allows
Participants to withdraw their nondeductible voluntary contributions and
deductible voluntary contributions, a Participant must submit a written
application specifying the amount of the withdrawal. The withdrawal will be made
as of the Annual Valuation Date coincident with or next following the approval
of a completed application and such withdrawal shall be made in a lump such cash
payment as soon as practicable after such Annual Valuation Date. The sponsoring
Employer may in a written agreement with the Prototype Sponsor modify this rule
to increase the number of times each year that withdrawals can be made (within
limitations established by the Prototype Sponsor).
Withdrawals from Retirement Savings Account (401(k)). Notwithstanding the
elections made in the previously completed Adoption Agreement, distributions
from the Retirement Savings Account during employment shall not be allowed. The
sponsoring Employer may in a written agreement with the Prototype Sponsor modify
this rule to allow in-service distributions in limited circumstances (within
limitations established by the Prototype Sponsor).
Withdrawals from Other Accounts. Notwithstanding the elections made in the
previously completed Adoption Agreement, distributions from accounts (other than
from the Retirement Savings Account) during employment shall not be allowed. The
sponsoring Employer may in a written agreement with the Prototype Sponsor modify
this rule to allow in-service distributions in limited circumstances (within
limitations established by the Prototype Sponsor).
Section 9.1.2 of the Basic Plan Document provides that an Employer shall be
deemed to have consented to the amendment described in this memorandum unless
prior to thirty (30) days after the date this memorandum is sent, the Employer
exercises its reserved power of amendment by adopting a successor retirement
plan. You will note that a number of the rules described in this memorandum
allow the sponsoring Employer and the Prototype Sponsor to agree to
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modifications. If you want to modify those rules, please contact your Trust
Officer to discuss possible modifications.
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APPENDIX G
PLAN LOAN RULES
Until the Employer adopts rules for the administration of Plan loans, this
Appendix G shall apply to all loans from the Plan.
(1) All Plan loans shall be administered by the Administrator's
Representative. Applications for loans shall be made to the
Administrator's Representative on forms available from the
Administrator's Representative.
(2) Loans shall be made available to all Participants and Beneficiaries on
a reasonably equivalent basis. Loans may be made for any purpose, and
all applications for loans that comply with Section 7.11 of the Plan
Statement will be granted. For this purpose, Participant shall include
only Participants who are active employees, a person shall be a
Beneficiary only after the death of the Participant who designated
such person as a Beneficiary, and an alternate payee shall be
considered a Beneficiary after the domestic relations order has been
finally determined to be a qualified domestic relations order.
(3) Loans shall not be made available to highly compensated employees (as
defined in Appendix D) in an amount (expressed as a percentage of
Vested Total Account) greater than the amount made available to other
Employees.
(4) No loans will be made to any Shareholder-Employee or Owner-Employee.
(5) All loans shall be secured by that portion of the Participant's Vested
Total Account equal to the lesser of (i) the amount of the loan, or
(ii) 50% of the Vested Total Account determined immediately before the
loan and reduced by the amount of any unpaid principal and interest on
any other loans secured by the Vested Total Account. The borrower may
grant a security interest in his or her "qualified residence" as
defined in section 163(h) of the Code if the borrower's unrestricted
equity interest is adequate to do so. No other security will be
permitted.
Third Amendment-Effective January 1, 1995
(6) All loans shall bear a reasonable rate of interest determined on the
first business day of the calendar month immediately preceding the
date as of which the loan is issued.
(7) Loans shall be for any term not to exceed 5 years except that loans to
acquire a dwelling unit which within a reasonable time (determined at
the time the loan is made) is to be used as the principal residence of
the Participant may be for any term that does not exceed 15 years.
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(8) Loans shall be issued effective as of the first business day following
each Valuation Date for the Plan as selected by the Employer in the
Adoption Agreement.
(9) Applications for loans must be received at least fifteen (15) days
before the date as of which the loan is issued.
(10) Loans will be made only in multiples of $100.
(11) All loans must be repaid no less frequently than quarterly. The
Administrator's Representative may establish uniform and
nondiscriminatory rules governing the frequency and method of loan
payments.
(12) All loans must be repaid in substantially level amounts including
principal and interest over the term of the loan.
(13) Loans may be prepaid in their entirety (and not otherwise) on any
regular payment date.
(14) No loan shall be made to a married Participant without the consent of
the Participant's spouse, unless the Plan is an exempt profit sharing
plan as defined in Section 7.3.4 of the Plan Statement. To be valid,
the spouse's consent must be in writing, must acknowledge the effect
of the loan and the use of the Account as security, must be witnessed
by a notary public and must be given within ninety (90) days of the
date the loan is made. Spousal consent shall never be required for a
loan to 4) Beneficiary.
(15) Loans will be in default upon the occurrence of one of the following
"events of default": (a) the death of the borrower, and (b) the
failure to make any payment when it is due.
(16) Upon an event of default, the following procedures shall be followed:
(a) The Administrator's Representative shall notify the borrower of
the event of default as soon as reasonably possible after it has
occurred.
(b) If, but only if, this is the borrower's first default for this
particular loan, the borrower shall have ten (10) days after
receipt of notice or twenty (20) days after notice is mailed,
whichever occurs first, to cure the default.
(c) If this is the second default for the loan, there shall be no
opportunity to cure.
(d) If the default is not or cannot be cured, the entire outstanding
principal and accrued interest shall be immediately due and
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payable. If not paid within five (5) days after demand for
payment is made, the loan shall be in actual default.
(17) If the actual default of a loan occurs after an Event of Maturity has
occurred for the Participant, the trustee shall foreclose on the
promissory note and attach the security therefor. If an Event of
Maturity has not then occurred, the trustee shall foreclose on the
promissory note and attach the security therefor as soon as the first
Event of Maturity occurs for the Participant.
(18) While any loan is outstanding, no distribution shall be made from the
Participant's Account which would result in the remaining assets
(exclusive of a borrower's promissory notes) having a value less than
one hundred percent (100%) of the outstanding principal and accrued
but unpaid interest on all outstanding loans.
(19) Loans in default which have not been foreclosed shall continue to
accrue interest until paid or foreclosed.
(20) No loan shall be made to a borrower who has any loan in default.
(21) If required by applicable law, the Trustee shall file reports with the
taxing authorities regarding loans in default, treat such loans as
taxable distributions to the Participant or Beneficiary and withhold
tax payments from the Participant's Accounts.
(22) If a loan is made from the individual Account of a Participant and the
Account is invested in more than one investment Subfund authorized and
established under Section 4.1 of the Plan Statement, the borrower may
specify the Subfunds from which the loan shall be taken, and the
amount from each. If the borrower does not specify, the amount
withdrawn to make the loan shall be charged to each investment Subfund
in accordance with the priority rules established by the
Administrator's Representative to be applied in a uniform and
nondiscriminatory manner.
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ROYSTER-CLARK GROUP, INC.
1999 RESTRICTED STOCK PURCHASE AND OPTION PLAN
The purpose of the Royster-Clark Group, Inc. 1999 Restricted Stock Purchase
and Option Plan (the "Plan") is to provide (i) designated employees of
Royster-Clark Group, Inc. (the "Company") and its subsidiaries, (ii) certain
advisors who perform services for the Company or its subsidiaries and (iii)
non-employee members of the Board of Directors of the Company (the "Board") with
the opportunity to receive grants of nonqualified options and restricted shares.
The Company believes that the Plan will encourage the participants to contribute
materially to the growth of the Company, thereby benefiting the Company's
shareholders, and will align the economic interests of the participants with
those of the shareholders.
1. Administration
(a) Committee. The Plan shall be administered and interpreted by a
committee (the "Committee") appointed by the Board consisting of the Chairman of
the Board and such other directors as the Board may from time to time appoint.
Prior to the Company's becoming a "Reporting Company" as described in Section
15(b) of the Plan, the Board may exercise any power or authority of the
Committee under the Plan and, in such case, references to the Committee
hereunder, as they relate to Plan administration, shall be deemed to include the
Board as a whole. After the Company becomes a Reporting Company, the Committee
shall consist of two or more persons appointed by the Board, all of whom shall
be "outside directors" as defined under section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), and related Treasury regulations and
shall be "non-employee directors" as defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) Committee Authority. Subject to any limitations set forth in the Plan,
the Committee shall have the sole authority to (i) determine the individuals to
whom grants shall be made under the Plan, (ii) determine the type, size,
purchase price, and terms of the grants to be made to each such individual,
(iii) determine the time when the grants will be made and the duration of any
applicable exercise or restriction period, including the criteria for
exercisability and the acceleration of exercisability, and (iv) deal with any
other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations,
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan, and
need not be uniform as to similarly situated individuals.
<PAGE>
2. Grants
Awards under the Plan may consist of grants of (i) nonqualified options as
described in Section 5 ("Options") exercisable for Units (as defined in the
related Grant Instruments) representing Shares and/or (ii) restricted shares of
Class A Common Stock as described in Section 6 ("Incentive Shares"). All grants
of Options or Incentive Shares shall be subject to the terms and conditions set
forth herein and to such other terms and conditions consistent with this Plan as
the Committee deems appropriate and as are specified in writing by the Committee
to the individual in a restricted stock grant instrument or stock option
agreement (each, a "Grant Instrument") or an amendment to the Grant Instrument.
The Committee shall approve the form and provisions of each Grant Instrument.
Grants under a particular Section of the Plan need not be uniform as among the
grantees.
3. Shares Subject to the Plan
(a) Shares Authorized. The shares of capital stock of the Company subject
to the Plan (the "Shares") shall consist of an aggregate of (i) 200,000 shares
of Class A Common Stock, $.01 par value, of the Company (the "Class A Common
Stock") reserved for issuance to Eligible Participants (as defined below)
pursuant to grants of Incentive Shares and (ii) (x) 39,980 shares of Class A
Common Stock, (y) 14,795 shares of the 12% Series A Senior Cumulative
Compounding Preferred Stock, $.01 par value, of the Company (the "Series A
Preferred Stock"), and (z) 8,320 shares of the 12% Series B Junior Cumulative
Compounding Preferred Stock, $.01 par value, of the Company (the "Series B
Preferred Stock" and together with the Series A Preferred Stock, the "Preferred
Stock"), reserved for issuance upon the exercise of outstanding Options to
acquire Units (as defined in the related Grant Instrument) comprising such
Shares. The Shares may be authorized but unissued Shares or reacquired Shares
held by the Company. If and to the extent Options granted under the Plan
terminate, expire, or are canceled, forfeited, exchanged or surrendered without
having been exercised, the Shares underlying Units (as defined in the related
Grant Instrument) subject to such Option shall not again be available for
issuance pursuant to the Plan. If and to the extent any Incentive Shares are
forfeited or repurchased by the Company pursuant to the Stockholder Agreements
(as defined), the Shares subject to such grants shall again be available for
issuance pursuant to the Plan. The Company shall at all times reserve and keep
available for issuance upon the exercise of Options such number of shares of
Class A Common Stock, Series A Preferred Stock and Series B Preferred Stock as
will from time to time be sufficient to permit the exercise of all outstanding
Options, and shall take all actions required to increase the authorized number
of shares of Class A Common Stock, Series A Preferred Stock and Series B
Preferred Stock if at any time there shall be insufficient authorized but
unissued or treasury shares to permit such reservation or to permit the exercise
of all outstanding Options. All references to "Shares" in the Plan shall give
effect to any adjustments to the number of Shares made pursuant to Section 3(b)
below.
(b) Adjustments. If any outstanding Shares are subdivided, consolidated,
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, capital adjustment or otherwise, or if the
Company shall issue shares of capital stock or other securities as a dividend or
upon a stock split, then the number and kind of Shares available for
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<PAGE>
purposes of the Plan and all Shares subject to the unexercised portion of any
Option previously granted and the exercise price of those Options shall be
appropriately adjusted. However, no such adjustment shall change the total
exercise price applicable to the unexercised portion of any outstanding Option.
Adjustments under this Section 3(b) shall be made by the Committee, whose
determination as to what adjustments shall be made shall be final, binding and
conclusive.
4. Eligibility for Participation
(a) Eligible Participants . All employees of the Company and its
subsidiaries, including employees who are officers or members of the Board, all
members of the Board who are not employees, and any advisors who perform bona
fide services to the Company or any of its subsidiaries (other than in
connection with the offer or sale of securities in a capital-raising
transaction) (collectively, "Eligible Participants") shall be eligible to
participate in the Plan.
(b) Selection of Grantees. The Committee shall select the Eligible
Participants who receive grants of Options and Incentive Shares and shall
determine the number of Shares subject to a particular grant of Incentive Shares
and the number of Units subject to a particular grant of an Option in such
manner as the Committee determines. Eligible Participants who receive grants of
Options and/or Incentive Shares under this Plan are referred to as "Grantees."
5. Options
(a) Manner of Exercise. Unless the Committee shall otherwise determine, an
Option, to the extent exercisable under the Plan and the related Stock Option
Agreement, may be exercised by delivery to the Chief Financial Officer of the
Company, at its principal office, of a written notice, signed by the person
entitled to exercise the option, specifying the number of Units purchasable
under the Option which the Grantee then wishes to purchase. Such notice must be
accompanied by payment in full of the exercise price therefor and any
withholding tax due, either in cash, certified check, bank check, personal check
(in which case the Company reserves the right to withhold issuance of such
shares until the funds have cleared) or in securities of the Company (valued at
the fair market value thereof (as determined by the Board in good faith, without
regard to any minority or lack of liquidity discount) as of the date of
exercise) or, at the discretion of the Committee, in the form of a note (with
full recourse) issued by the Grantee, or any combination thereof.
(b) Stockholders Agreement and Preferred Stockholders Agreement. As a
condition to each grant of Options, the Grantee shall have executed and
delivered and agreed to become bound by (i) the Securities Purchase and Holders
Agreement, dated as of April 22, 1999 (the "Stockholders Agreement"), by and
among the Company, 399 Venture Partners Inc., a Delaware corporation ("399
Venture Partners") and certain Management Investors from time to time party
thereto and (ii) the Preferred Stockholders Agreement, dated as of April 22,
1999 (the "Preferred Stockholders Agreement"), by and among the Company, 399
Venture Partners and certain stockholders from time to time party thereto. All
Shares issued pursuant to the purchase of Units under any Option granted under
this Plan shall be subject to the terms and provisions of the Stockholders
Agreement and the Preferred Stockholders Agreement, as each may be modified or
amended from time to time in accordance with its terms. Each certificate for
Shares issued in
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connection with exercise of an Option shall contain a legend giving appropriate
notice of the restrictions in the Stockholders Agreement and Preferred
Stockholders Agreement and such other legends as are contemplated therein.
(c) Option Shares Not Incentive Shares. Securities of the Company issuable
in connection with the exercise of an Option shall in no event be deemed to be
Incentive Shares.
6. Incentive Share Grants
The Company may issue or transfer Shares to an Eligible Participant under a
grant of Incentive Shares, upon such terms as the Committee deems appropriate.
The following provisions are applicable to Incentive Shares:
(a) General Requirements. Shares issued or transferred pursuant to
Incentive Share grants may be issued or transferred for consideration, as
determined by the Committee.
(b) Number of Shares. The Committee shall determine the number of Incentive
Shares to be issued or transferred and the restrictions applicable to such
grant.
(c) Stockholders Agreement. As a condition to each grant of Incentive
Shares, the Grantee shall have executed and delivered and agreed to become bound
by Stockholders Agreement. All Incentive Shares issued under this Plan shall be
subject to the terms and provisions of the Stockholders Agreement, as the same
may be modified or amended from time to time in accordance with its terms. Each
certificate for Incentive Shares shall contain a legend giving appropriate
notice of the restrictions in the Stockholders Agreement and such other legends
as are contemplated therein.
(d) Right to Vote and to Receive Dividends. Subject to the terms of the
Stockholders Agreement, a Grantee of Incentive Shares shall have the right to
vote Incentive Shares (to the extent such Shares are eligible to vote) and to
receive any dividends or other distributions paid on such Shares.
7. Withholding of Taxes
(a) Required Withholding. All grants of Options and Incentive Shares under
the Plan shall be subject to applicable federal (including FICA), state and
local tax withholding requirements. The Company shall have the right to deduct
from all grants paid in cash, or from other wages paid to the Grantee, any
federal, state or local taxes required by law to be withheld with respect to
such grants. In the case of Options and other grants paid in Shares, the Company
may require the Grantee or other person receiving such Shares to pay to the
Company the amount of any such taxes that the Company is required to withhold
with respect to such grants, including, if applicable, upon the vesting thereof,
or the Company may deduct from other wages paid by the Company the amount of any
withholding taxes due with respect to such grants.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee may
elect to satisfy the Company's income tax withholding obligation with respect to
an Option or Incentive Shares paid in Company Shares by having Shares withheld
or redeemed by the
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Company and the fair market value of the Shares so withheld
or redeemed (as determined by the Board in good faith without regard to any
minority or lack of liquidity discount) will be credited against the amount of
cash otherwise payable by the Grantee with respect to tax withholding under
Section 7(a). The election must be in a form and manner prescribed by the
Committee and shall be subject to the prior approval of the Committee.
8. Reorganization of the Company
(a) Reorganization. As used herein, a "Reorganization" means (i) the merger
or consolidation of the Company with another corporation where the stockholders
of the Company immediately prior to the merger or consolidation will not
beneficially own (within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934), immediately after the merger or consolidation, Shares entitling
such stockholders to more than 50% of all votes to which all stockholders of the
surviving corporation would be entitled in the election of directors (without
consideration of the rights of any class of stock to elect directors by a
separate class vote), (ii) the sale or other disposition (by any means) of all
or substantially all of the assets or voting stock of the Company, or (iii) a
liquidation or dissolution of the Company.
(b) Assumption of Grants. Upon a Reorganization where the Company is not
the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable options
or rights granted by, the surviving (or parent) corporation.
(c) Other Alternatives. Notwithstanding the foregoing, in the event of a
Reorganization, the Committee may (i) require that Grantees surrender their
outstanding Options as of a specified date (the "Termination Date") in exchange
for a payment by the Company, in cash or Shares as determined by the Committee,
in an amount equal to the amount by which the then fair market value (as
determined in good faith by the Board, without regard to any minority or lack of
liquidity discount) of the Shares comprising Units subject to the Grantee's
unexercised Options exceeds the exercise price of the Options, and/or (ii) give
Grantees an opportunity to exercise their outstanding Options as of the
Termination Date. If one or more of the alternative choices specified in the
previous sentence is given to any Grantee and such Grantee does not take the
required action on or prior to the Termination Date, any or all of such
Grantee's unexercised Options may be terminated by the Company at such time as
the Committee deems appropriate. Any surrender or termination pursuant to this
Section 8(c) shall take place as of the Termination Date, the date of the
Reorganization or such other date as the Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the contrary, in
the event of a Reorganization, the Committee shall not have the right to take
any actions described in the Plan (including without limitation actions
described in Section 8(b) or 8(c) above) that would make the Reorganization
ineligible for pooling of interests accounting treatment or that would make the
Reorganization ineligible for desired tax treatment if, in the absence of such
right, the Reorganization would qualify for such treatment and the Company
intends to use such treatment with respect to the Reorganization, unless the
Board has issued prior written approval of such action.
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9. Requirements for Issuance or Transfer of Shares
No Shares shall be issued or transferred in connection with any grant of
Options or Incentive Shares hereunder unless and until all legal requirements
applicable to the issuance or transfer of such Shares have been complied with to
the satisfaction of the Committee. The Committee shall have the right to
condition any grant made to any Grantee hereunder on such Grantee's undertaking
in writing to comply with such restrictions on his or her subsequent disposition
of such Shares as the Committee shall deem necessary or advisable as a result of
any applicable law, regulation or official interpretation thereof, and
certificates representing such Shares may be legended to reflect any such
restrictions. Certificates representing Shares issued or transferred under the
Plan will be subject to such stop-transfer orders and other restrictions as may
be required by applicable laws, regulations and interpretations, including any
requirement that a legend be placed thereon.
10. Amendment and Termination of the Plan
(a) Amendment. Subject to Section 10(c), the Board may amend or terminate
the Plan at any time.
(b) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Board in accordance with Section 10(c) or is extended
by the Board with the approval of the members.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a grant of Options or Incentive Shares
is made shall not alter the terms of, or impair the rights of the Grantee under,
such grant without the Grantee's consent. The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
grant. Whether or not the Plan has terminated, an outstanding grant may be
terminated or amended in accordance with the Plan or may be amended by agreement
of the Company and the Grantee.
(d) Governing Document. In the event of any inconsistency between the terms
and conditions of the Plan and the Stockholders Agreement or Preferred
Stockholders Agreement, the terms and conditions of the Stockholders Agreement
or Preferred Stockholders Agreement, as the case may be, shall govern. Except as
set forth in the previous sentence, the Plan shall be the controlling document.
No other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
11. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of any grants of Options or Incentive Shares under this Plan.
In no event shall interest be paid or
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accrued on any grant of Options or Incentive Shares, including unpaid
installments of grants of Options or Incentive Shares.
12. Rights of Participants
Nothing in this Plan shall entitle any Eligible Participant or other person
to any claim or right to be granted a grant under this Plan. Neither this Plan
nor any action taken hereunder shall be construed as giving any Grantee,
Eligible Participant or other person any rights to be retained by or continue in
the employ of the Company or any other employment rights.
13. No Fractional Shares
No fractional Shares shall be issued or delivered pursuant to the Plan or
any grant. The Committee shall determine whether cash, other awards or other
property shall be issued or paid in lieu of such fractional Shares.
14. Headings
Section headings are for reference only. In the event of a conflict between
a title and the content of a Section, the content of the Section shall control.
15. Effective Date of the Plan; Definition of Terms
(a) Effective Date. The Plan shall be effective as of April 22, 1999.
(b) Reporting Company. The provisions of the Plan that refer to the
Company's becoming a Reporting Company, or that refer to, or are applicable to
persons subject to, Section 16 of the Exchange Act or section 162(m) of the
Code, shall be effective, if at all, upon the initial registration of the Shares
under Section 12(b) or Section 12(g) of the Exchange Act, and shall remain
effective thereafter for so long as such Shares are so registered.
16. Miscellaneous
(a) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer Shares under grants of Options
or Incentive Shares shall be subject to all applicable laws and to approvals by
any governmental or regulatory agency as may be required. The Committee may
revoke any grant if it is contrary to law or modify a grant to bring it into
compliance with any valid and mandatory government regulation. The Committee may
also adopt rules regarding the withholding of taxes on payments to Grantees. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(b) Governing Law. The validity, construction, interpretation and effect of
the Plan and Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the State of Delaware
without regard to conflicts of laws principles.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of April 22, 1999, between
Royster-Clark Group, Inc., a Delaware corporation ("RCGI"), Royster-Clark, Inc.,
a Delaware corporation and wholly-owned subsidiary of RCGI (the "Company"), and
Francis P. Jenkins, Jr. ("Jenkins").
Background
RCGI and the Company wish to retain the services of Jenkins to assist in
the management of the Company and its subsidiaries.
Terms
In consideration of the premises and of the mutual covenants herein
contained, the parties agree as follows:
1. Position. During the term of Jenkins' employment with RCGI and the
Company hereunder, Jenkins shall serve as the Chairman of the Board and Chief
Executive Officer of each of RCGI and the Company and may also serve as an
officer of the Company's subsidiaries.
Jenkins shall diligently devote Jenkins' entire business skill, time and
effort to Jenkins' employment hereunder; provided, however, that Jenkins shall
be entitled annually to vacation and sick leave pursuant to policies adopted by
the Company from time to time for executive officers of the Company.
Notwithstanding the foregoing, and provided that such activities do not
interfere with the fulfillment of Jenkins' obligations hereunder, Jenkins may
(a) serve as a director or trustee of any charitable or non-profit entity and of
not more than two for profit business corporations so long as such entities are
not, directly or indirectly in competition with RCGI or any entity directly or
indirectly controlling, controlled by or under common control with RCGI and its
direct and indirect subsidiaries (an "Affiliate"); (b) deliver lectures, fulfill
speaking engagements and teach at educational institutions; and (c) acquire
solely as an investment any securities of any entity so long as (i) Jenkins
remains a passive investor in such entity and (ii) such entity is not, directly
or indirectly, in competition with RCGI and its direct or indirect subsidiaries
or any Affiliate.
2. Term of Employment. Jenkins' term of employment under this Agreement
shall begin on the date hereof and shall continue for a period of sixty (60)
months (the "Employment Term") (the termination date being hereafter referred to
as the "Normal Termination Date") and shall continue for successive additional
12 month periods thereafter (each continued term, the "Extended Employment
Term") unless written notice to the contrary is given by either Jenkins or RCGI
to the other at least one hundred eighty (180) days prior to the then current
termination date, unless sooner terminated as hereinafter provided.
3. Compensation. As compensation for the services contemplated hereby,
Jenkins shall receive from the Company during the Employment Term and each
Extended
<PAGE>
Employment Term a base salary equal to $500,000 per annum to be paid in
accordance with the Company's normal payroll policies for its officers. Such
salary rate shall be subject to annual merit increase reviews by the Board of
Directors of RCGI (such salary as adjusted from time to time being the "Base
Salary"). The Base Salary (including any increases thereto) shall not be
decreased during the Employment Term or any Extended Employment Term.
4. Other Payment; Bonus. (a) In addition to the compensation provided to
Jenkins in Section 3 hereof, Jenkins shall be entitled to participate, during
the Employment Term and each Extended Employment Term, in an annual performance
bonus plan to be established by the Company and based on individual criteria
and/or executive incentive programs to be determined from time to time by the
Board of Directors of RCGI (it being understood that Jenkins' performance
criteria and allocations under any such plan shall be as determined by the Board
of Directors) (the "Performance Bonus").
b) The Company shall maintain a term life insurance policy for Jenkins,
which policy shall name such beneficiaries as Jenkins shall designate and
provide for a death benefit of $25,000,000, provided, that the Company shall not
be required to pay premiums in excess of $50,000 per year.
5. Jenkins Benefits. (a) Jenkins shall be entitled to participate, during
the Employment Term and each Extended Employment Term, in all medical benefit
plans, hospitalization plans, group life insurance, long term disability or
other Jenkins welfare benefit plans (collectively, the "Group Insurance Plans")
and any pension plans (including any supplemental executive retirement plans)
that may be provided by the Company or its subsidiaries to senior executive
officers from time to time during the Employment Term or Extended Employment
Term, as the case may be.
6. Expenses. The Company shall pay or reimburse Jenkins for any expenses
reasonably incurred by Jenkins in furtherance of Jenkins' duties hereunder,
including, but not limited to, reasonable expenses for traveling, meals and
hotel accommodations, and business related entertainment upon submission by
Jenkins of appropriate documentation thereof, all so prepared in compliance with
such policies and procedures relating thereto as the Company may from time to
time adopt.
7. Termination.
a) Termination by Company for Cause or Without Cause. The Board of
Directors of RCGI may terminate this Agreement and (except as provided below)
all of RCGI's and the Company's obligations hereunder, either for "Cause" or
"Without Cause." Such termination shall be effected by notice thereof delivered
by RCGI to Jenkins, and shall be effective as of the date of such notice. In the
event that Jenkins is terminated by RCGI for Cause, Jenkins shall be entitled to
receive all Base Salary earned and accrued to the date of termination, but all
other rights of Jenkins hereunder shall terminate as of the effective date of
Jenkins' termination, except as otherwise provided by law.
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b) Jenkins shall be entitled to participate in equity incentive programs
established by the Company, including the 1999 Restricted Stock Plan, provided
that any allocations to Jenkins and the terms of any grants thereunder shall be
as determined by the Board of Directors.
In the event that Jenkins is terminated by RCGI Without Cause or
Jenkins resigns with Good Reason, and for so long as Jenkins complies with the
provisions of Sections 8 and 9, Jenkins shall be entitled (i) to receive all
payments due as Base Salary during the remainder of the Employment Term or the
then current Extended Employment Term (as applicable), as and when the same
would have otherwise been payable had Jenkins not been terminated, (such term,
the "Continuation Period"), (ii) to receive any Performance Bonus for the year
in which Jenkins is terminated or resigns which shall be payable at the time
such bonus would have otherwise been payable had Jenkins not been terminated or
resigned, and (iii) to continue to participate at the Company's expense in the
Group Insurance Plans during the Continuation Period.
As used herein, (i) "Cause" means (A) the willful and continued
failure by Jenkins to perform Jenkins' duties hereunder (in the good faith
determination of the Board of Directors) (other than any such failure resulting
from the termination of Jenkins' employment for death, Total Disability (as
hereinafter defined) or Good Reason), after written notice of such failure has
been given by the Board of Directors of RCGI, and which failure has not been
corrected within the 30-day period after written notice has been given; (B) the
willful commission by Jenkins of acts that, in the good faith determination of
the Board of Directors of RCGI, are dishonest and demonstrably and materially
injurious to the Company, monetarily or otherwise; (C) Jenkins' conviction of a
felony; (D) the failure by Jenkins to perform Jenkins' duties hereunder (other
than any such failure resulting from the termination of Jenkins' employment for
death, Total Disability (as hereinafter defined) at a satisfactory level as
determined by a majority of the members of the Board of Directors of RCGI in
good faith, which failure has not been corrected within the 90-day period after
written notice has been given; or (E) a breach of any of the covenants set forth
in Sections 8 and 9 of this Agreement; (ii) "Without Cause" means any
termination of Jenkins other than (i) by RCGI for Cause, (ii) by reason of
Jenkins' resignation, and (iii) by Total Disability or death, except that
"Without Cause" shall include resignation by Jenkins for Good Reason; and (iii)
"Good Reason" means (A) the failure of the Company to pay Jenkins the
compensation or of RCGI or the Company to provide other material benefits as
specified in Sections 3, 4, 5 and 6 of this Agreement during the Employment Term
or the Extended Employment Term, as the case may be or (B) assignment of duties
inconsistent with Jenkins' position as defined in Section 1, or a material
reduction in his duties or authority (in each case, which situation has not been
cured to Jenkins' reasonable satisfaction within 30 days after notice thereof is
given to the Board of Directors of RCGI).
c) Resignation of Jenkins. In the event that Jenkins resigns (except in
the case of resignation due to Total Disability or for Good Reason) during the
Employment Term or any Extended Employment Term, Jenkins shall be entitled to
receive all Base Salary earned and accrued to the date of resignation, but all
other rights of Jenkins hereunder shall terminate as of the date of Jenkins'
resignation, except as otherwise provided by law.
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d) Jenkins' Total Disability. In the event that Jenkins is terminated by
RCGI or Jenkins resigns due to Jenkins' Total Disability, Jenkins shall be
entitled to receive (i) all Base Salary earned and accrued to the date of
termination or resignation and (ii) any Performance Bonus for the year in which
Jenkins is terminated or resigns due to Jenkins Total Disability which shall be
payable at the time such bonus would otherwise have been payable had Jenkins not
been so terminated or resigned, but all other rights of Jenkins hereunder shall
terminate as of the date of Jenkins' termination or resignation, except as
otherwise provided by law.
As used herein, "Total Disability" shall mean any physical or mental
ailment or incapacity as determined in good faith by the Board of Directors of
RCGI which prevents the Jenkins from performing the duties incident to the
Jenkins' employment hereunder at the level expected of such Jenkins by the Board
of Directors of RCGI, which has continued for a period of either (i) ninety (90)
consecutive days in any 12-month period or (ii) one hundred eighty (180) total
days in any 12-month period, and which is expected to be of permanent duration.
Jenkins shall permit a licensed and board certified physician designated by RCGI
and reasonably acceptable to Jenkins to examine Jenkins from time to time prior
to Jenkins' being determined to be Totally Disabled, to enable the Board of
Directors of RCGI to determine whether Jenkins has suffered a Total Disability
hereunder. Notwithstanding the foregoing, the Board of Directors of RCGI may, in
its sole discretion, determine that Jenkins has suffered a Total Disability
prior to the 90th consecutive day referred to in clause (i) above and terminate
Jenkins by reason of Total Disability, at which time Jenkins would be considered
for purposes of this Agreement and this Section 7(c) to have been terminated due
to Total Disability, provided, however, that if Jenkins submits to the Board of
Directors of RCGI the written opinion of a licensed and board certified
physician that Jenkins did not have a Total Disability at any time following his
termination pursuant to this provision and on or prior to the 90th consecutive
day referred to in clause (i) above, then Jenkins shall be considered to have
been terminated Without Cause for purposes of this Agreement.
e) Death. In the event that Jenkins dies during the Employment Term,
Jenkins' estate shall be entitled to receive all Base Salary earned and accrued
to the date of death, but all other rights of Jenkins hereunder shall terminate,
except as otherwise provided by law.
8. Protection of Confidential Information.
a) Covenant. Jenkins acknowledges that Jenkins' employment by the
Company will, throughout the term of this Agreement, bring him into close
contact with many confidential affairs of the Company and its Affiliates,
including information concerning the Company's finances and operating results,
its markets, key personnel, operational methods and other business affairs and
methods, technical data, computer software and other proprietary intellectual
property, other information not readily available to the public, and plans for
future developments relating thereto. Jenkins further acknowledges that the
services to be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character. In recognition of the foregoing,
Jenkins covenants and agrees that Jenkins shall, and shall cause his
representatives and agents to, keep confidential and not disclose to any other
person (other than his legal and financial advisors and accountants) or use for
their own benefit or the benefit of any other person, any information regarding
the business and affairs of RCGI, the Company or any of their subsidiaries.
Jenkins' obligations hereunder shall not apply to information which:
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(i) is or becomes generally available to the public without breach of the
commitment provided for in this Section 8; (ii) was otherwise available to
Jenkins on a non-confidential basis; or (iii) is required to be disclosed by
law, order or regulation of a court or tribunal or government or disclosures
necessary to implement the provisions of this Agreement; provided, however,
that, in the case of clause (iii) above, Jenkins shall provide RCGI and the
Company as much advance notice of the possibility of such disclosure as
practical so RCGI and the Company may attempt to stop such disclosure or obtain
a protective order concerning such disclosure.
b) Specific Remedy. If Jenkins commits a breach of any of the provisions
of Section 8(a), RCGI, the Company and its Affiliates shall have the right and
remedy to have such provisions specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and its
Affiliates and that money damages will not provide an adequate remedy to the
Company and its Affiliates.
9. Covenant Not to Compete and Non-Interference.
a) Covenant. In consideration of the benefits of this Agreement to
Jenkins and in order to induce RCGI and the Company to enter into this
Agreement, Jenkins hereby covenants and agrees that from and after the Closing
and until the date that is two (2) years after the cessation of Jenkins'
employment by RCGI and the Company, Jenkins shall not, and shall cause any
employee or Affiliate not to, directly or indirectly, as a partner, stockholder,
director, consultant, joint venturer, investor or in any other capacity, engage
in, or own, manage, operate or control, or participate in the ownership,
management, operation or control of, any business or entity which engages
anywhere in the United States of America in a substantially similar business or
line of businesses as those conducted by the Company or any of its direct or
indirect subsidiaries at the time of the termination of the Employment Term or
Extended Employment Term, as the case may be (a "Competing Business"); provided,
however, that nothing herein shall prohibit Jenkins from (i) owning not more
than 2.0% of any class of securities of a publicly traded entity in a Competing
Business, (ii) acquiring and following such acquisition, actively engaging in,
any business enterprise partially engaged in a Competing Business, so long as
not more than 20% of the fair market value of such business, as determined in
good faith by Jenkins and certified to RCGI and the Company by Jenkins, is
attributable to such Competing Business, or (iii) acquiring, and following such
acquisition, actively engaging in, any business enterprise partially engaged in
a Competing Business, provided that if more than 20% of the fair market value of
such business, as determined in good faith by Jenkins and certified to RCGI and
the Company by Jenkins, is attributable to such Competing Business, then such
business shall divest itself of the subsidiary, division, group, franchise or
segment which engages in such Competing Business as soon as practicable after
the date of such acquisition, and provided, further, that with respect to any
purchase intended to be accounted for as a pooling of interests under GAAP or
treated for federal income tax purposes as a tax-free reorganization, no such
divestiture shall be required until, in the reasonable opinion of the acquiror,
such divestiture would no longer endanger the accounting of such acquisition as
a pooling of interests under GAAP or the treatment for federal income tax
purposes of such acquisition as a tax-free reorganization.
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b) From the date hereof until the later of two (2) years after the
cessation of Jenkins' employment by RCGI and the Company, Jenkins shall not,
without prior written approval of RCGI, directly or indirectly, solicit for
employment any current officer, senior manager, general manager, sales or
technical employee of RCGI or Company or any of their subsidiaries; provided,
however, that the foregoing shall not prevent Jenkins, or any of his Affiliates
from hiring any such person (i) who contacts Jenkins or his Affiliates on his or
her own initiative without solicitation from any of Jenkins or his Affiliates,
(ii) in connection with general employment advertisements published in
magazines, journals, newspapers and other publications that are not targeted at
RCGI or the Company or any of their employees or (iii) who has been discharged
by RCGI or the Company prior to any such solicitation.
c) Jenkins acknowledges that given the nature of the business of RCGI
and the Company the covenants contained in this Section 9 contain reasonable
limitations as to time, geographic area and scope of activity to be restrained,
and do not impose a greater restraint than is necessary to protect and preserve
for the benefit of RCGI the goodwill of the Company and to protect the
legitimate business interests of the Company. If, however, this Section 9 is
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too long a period of time or over too large a geographic
area or by reason of its being too extensive in any other respect or for any
other reason it will be interpreted to extend only over the longest period of
time for which it may be enforceable and/or over the largest geographic area as
to which it may be enforceable and/or to the maximum extent in all other aspects
as to which it may be enforceable, all as determined by such court and in such
action.
d) Specific Remedy. Jenkins agrees that RCGI's and the Company's
remedies at law for any breach or threat of breach by Jenkins of the provisions
of this Section 9 will be inadequate, and that RCGI and the Company shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Section 9 and to enforce specifically the terms and provisions hereof,
in addition to any other remedy to which RCGI and the Company may be entitled at
law or equity. In the event of litigation regarding this Section 9, the
prevailing party in such litigation shall, in addition to any other remedies
that prevailing party may obtain in such litigation, be entitled to recover from
the other party all reasonable legal fees and out-of-pocket expenses incurred by
such party in enforcing or defending its rights hereunder.
10. Independence, Severability and Non-Exclusivity. Each of the rights and
remedies enumerated in Sections 8(b) and 9(d) shall be independent of the others
and shall be severally enforceable and all of such rights and remedies shall be
in addition to and not in lieu of any other rights and remedies available to the
Company or its Affiliates under the law or in equity. If any of the provisions
contained in Sections 8 or 9 or if any of the rights or remedies enumerated in
Sections 8 or 9 is hereafter construed to be invalid or unenforceable, the same
shall not affect the remainder of the covenant or covenants, or rights or
remedies, which shall be given full effect without regard to the invalid
portions. If the courts of any one or more jurisdictions shall hold all or any
part of such provisions wholly unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the parties that such determination
shall not bar or in any way affect RCGI's, the Company's or their Affiliates'
right to relief in the court of any other jurisdiction as to failures to observe
such provisions in such other jurisdictions, the above provisions as they relate
to each jurisdiction, being, for this purpose, severable into diverse and
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independent provisions. If any of the provisions contained in Sections 8 or 9 is
held to be unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision and in
its reduced form such provision shall then be enforceable.
11. Assignment of Jenkins Benefits; Successors and Assigns. Absent the
prior written consent of RCGI, and subject to the laws of descent and
distribution, Jenkins shall have no right to exchange, convert, encumber or
dispose of the rights of Jenkins to receive benefits and payments under this
Agreement, which payments, benefits and rights thereto are non-assignable and
non-transferable. This Agreement shall inure to the benefit of and shall be
binding upon RCGI, the Company and Jenkins and, subject to the preceding
sentence, their respective heirs, executors, personal representatives,
successors and assigns. Nothing in this Section 11, however, shall prevent
Jenkins from making assignments or transfers for purposes of personal estate
planning.
12. Notices. All notices hereunder shall be given in writing by personal
delivery or by registered or certified mail addressed to RCGI at its principal
place of business and to Jenkins at Jenkins' residence address as then listed in
the Company's records.
13. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or any breach thereof, shall be settled by arbitration in
accordance with the rules of the American Arbitration Association and judgment
upon such award rendered by the arbitrators(s) may be entered in any court
having jurisdiction thereof. The arbitration shall be held in New York, New York
unless another location shall be mutually agreed to by the parties at the time
of arbitration.
14. General.
a) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the state of New York without giving
effect to conflicts of laws principles thereof which might refer such
interpretations to the laws of a different state or jurisdiction.
b) Captions. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
c) Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, between the parties.
d) No Other Representations. No representation, promise or inducement
has been made by any party hereto that is not embodied in this Agreement, and no
party shall be bound by or liable for any alleged representation, promise or
inducement not so set forth.
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e) Amendments; Waivers. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms or covenants hereof
may be waived, only by a written instrument executed by all of the parties
hereto, or in the case of a waiver, by the party waiving compliance. The failure
of any party at any time or times to require performance of any provision hereof
shall in no manner affect the right of such party at a later time to enforce the
same. No waiver by any party of the breach of any term or covenant contained in
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first set forth above.
ROYSTER-CLARK GROUP, INC.
By: /s/ Paul M. Murphy
------------------------------------
Name:
Title:
ROYSTER-CLARK, INC.
By: /s/ Paul M. Murphy
------------------------------------
Name:
Title:
FRANCIS P. JENKINS, JR.
/s/ Francis P. Jenkins, Jr.
----------------------------------------
MASTER CONVEYANCE AGREEMENT
Master Conveyance Agreement (the "Agreement"), dated as of April 22, 1999,
among IMC Global Inc., a Delaware corporation ("Global"), The Vigoro
Corporation, a Delaware corporation ("Vigoro" and, together with Global, the
"Seller"), Royster-Clark, Inc., a Delaware corporation ("RC" or the
"Purchaser"), and United States Trust Company of New York, as Trustee (the
"Trustee"), under that certain indenture (the "Indenture"), dated April 22,
1999, with respect to the First Mortgage Notes due 2009 (the "First Mortgage
Notes") of the Purchaser.
Global and the Purchaser agree as follows for the benefit of each other and
for the Trustee, as collateral agent for the holders of the First Mortgage
Notes:
STATEMENTS
A. Global, Vigoro and Royster-Clark Group, Inc. (formerly known as R-C
Delaware Acquisition Inc.) have entered into that certain stock purchase
agreement dated as of January 21, 1999 (as amended, the "Stock Purchase
Agreement") pursuant to which the Purchaser, as assignee of certain rights of
Royster-Clark Group, Inc. under the Stock Purchase Agreement will purchase all
of the outstanding shares of IMC AgriBusiness Inc., a Delaware corporation
("AgriBusiness"), IMC Nitrogen Company, a Delaware corporation ("Nitrogen"), and
Hutson's Ag Services, Inc., a Kentucky corporation ("Hutson's" and, together
with AgriBusiness and Nitrogen, the "IMC Operating Companies").
B. In the Stock Purchase Agreement, Global and Vigoro have represented (the
"RE Representations") that one of the IMC Operating Companies has good and
marketable title to each of the parcels of the real property identified as the
Owned Premises on Schedule 2.3.23 of the Stock Purchase Agreement (each, a
"Parcel" and together the "Real Property") free and clear of any Encumbrance (as
defined in the Stock Purchase Agreement), easement, covenant or other
restriction, except for Encumbrances, easements, covenants and other
restrictions of record which do not affect materially and adversely the current
use, occupancy or marketability of title of the parcel subject thereto
("Permitted Title Matters").
C. In connection with the transaction contemplated by the Stock Purchase
Agreement, Purchaser is entering into a financing transaction for which the Real
Property or interests in the entities holding title to the Real Property are
intended to serve as collateral to be held by the Trustee. Purchaser has agreed
to transfer the Real Property listed on Schedule 1 and 2 hereto owned by the IMC
Operating Companies and Royster-Clark, Inc. or one of its subsidiaries, to one
of the Special Purpose Restricted Subsidiaries (as defined in the Indenture) on
or prior to September 15, 1999.
D. In furtherance of its obligations pursuant to Sections 3.4.1 and 6.5 of
the Stock Purchase Agreement, Seller hereby agrees to take the actions set forth
herein after the Closing (as defined in the Stock Purchase Agreement) to cause
all of the Real Property to conform to the RE Representations.
<PAGE>
E. It is a condition to the closing of the offering of First Mortgage Notes
that the properties listed on Schedule 1 and 2 will be owned by one of the
Special Purpose Restricted Subsidiaries and that a pledge of their equity
interests will be granted to the Trustee as collateral agent for and on behalf
of the holders of the First Mortgage Notes. Purchaser hereby agrees to take the
actions set forth herein to satisfy its obligations under the Indenture.
Capitalized terms not defined herein shall have the meanings ascribed to such
terms in the Stock Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Purchaser's Due Diligence Period
With respect to the Real Property listed on Schedule 1 attached, Purchaser
shall have until June 1, 1999 (the "Due Diligence Period") to notify Seller in
writing of each such Parcel which, in the view of Purchaser, does not conform to
the RE Representations (each, a "Title Notice"). Each such Title Notice for a
Parcel shall specify, as applicable, the current record owner (the "Record
Owner"), the name of the IMC Operating Company in which title should be vested,
any releases of liens ("Needed Releases") and any other correcting instruments
("Needed Correcting Instruments") which, in the view of Purchaser, are necessary
to cause such Parcel to conform to the RE Representations, and shall include a
copy of Purchaser's title report confirming such matters.
2. Conveyances
(a) Seller agrees that, promptly after (but no later than September 15,
1999) Purchaser's delivery of a Title Notice identifying the current Record
Owner of any Parcel to be an entity other than one of the IMC Operating
Companies, Seller will, at Seller's sole expense, cause the Record Owner to
convey good and marketable title to such Parcel to the IMC Operating Company or
subsidiary thereof designated by Purchaser, in accordance with this Agreement,
together with all buildings and other improvements thereon, all fixtures
thereon, and all reversions, remainders, easements, rights-of-way,
appurtenances, tenements, hereditaments and water rights (if any) appertaining
to or otherwise benefiting such Parcel or any improvements thereon.
(b) Purchaser agrees that, as soon as possible (but no later than September
15, 1999), Purchaser shall convey good and marketable title to the Real Property
listed on Schedule 2 hereto to one of the Special Purpose Restricted
Subsidiaries, in accordance with this Agreement, together with all buildings and
other improvements thereon, all fixtures thereon, and all reversions,
remainders, easements, rights-of-way, appurtenances, tenements, hereditaments
and water rights (if any) appertaining to or otherwise benefiting such Parcel or
any improvements thereon.
3. Seller's Correction Of Other Title Matters
2
<PAGE>
Promptly after (but no later than September 15, 1999) receipt of Title
Notice from Purchaser in accordance with Section I identifying any Needed
Releases and/or Needed Correcting Instruments with respect to any Parcel of the
Real Property, Seller shall, at Seller's sole expense, deliver or cause to be
delivered to Purchaser such certificates of name change, certificates of merger,
Needed Releases and/or Needed Correcting Instruments, all legally sufficient and
in recordable form, as are necessary to cause such Parcel to conform to the RE
Representations; it being understood that upon such delivery, Seller shall have
fulfilled its obligation with respect to prompt delivery and shall not be held
responsible for delays caused by governmental bodies in processing or recording
any such document. If any Needed Release or Needed Correcting Instrument is
required as a result of a lease or a party in possession of a Parcel, Seller
also shall, at Seller's sole expense, deliver exclusive possession of such
Parcels to Purchaser.
4. Expenses
(a) As to the Real Property on Schedule 1, Seller shall pay all conveyance
and transfer taxes and recording fees for each Deed, Needed Release and Needed
Correcting Instrument. To the extent a lien relates to a liability for which
Purchaser would be entitled to indemnification under the Stock Purchase
Agreement, any liens to be paid by Seller in order to obtain Needed Releases
shall be paid and satisfied at Seller's expense. All expenses of operating the
Real Property shall be borne by the IMC Operating Companies according to the
Stock Purchase Agreement, notwithstanding any conveyance of title after the
Closing.
(b) As to the Real Property on Schedule 2, Purchaser shall pay all
conveyance and transfer taxes and recording fees for each Deed, Needed Release
and Needed Correcting Instrument.
5. Indemnification
(a) Notwithstanding any provisions to the contrary or limiting Seller's
liability under Section 7.3.8(a) or 7.3.8(b) of the Stock Purchase Agreement,
Seller shall indemnify Purchaser and the Collateral Agent for the benefit of the
holders of the First Mortgage Notes by October 15, 1999 from and against any and
all Damages incurred by Purchaser by reason of or arising out of a breach of any
covenant of Seller contained in this Agreement, including, for any Parcel not
conveyed to an IMC Operating Company in accordance with this Agreement by
September 30, 1999, an amount equal to the full fair market value of such Parcel
not conveyed, determined by an appraisal prepared for Purchaser by Valuation
Research Corporation, or if Valuation Research Corporation does not exist, by
another independent appraiser of similar standing to be agreed to by Seller and
Purchaser, provided, however, that Seller shall be required to indemnify and
hold harmless Purchaser or any third party beneficiary under this Agreement only
to the extent that the aggregate amount required to be paid by Seller pursuant
to this Agreement together with any amount paid pursuant to Section 7.3 of the
Stock Purchase Agreement does not exceed 10% of the Purchase Price. It is
understood and agreed by the parties hereto that (i) all amounts paid by Seller
hereunder shall be included in calculating any limitation on the amounts to be
paid by Seller pursuant to Article VII of the Stock Purchase
3
<PAGE>
Agreement on account of the cap set forth in Section 7.3.8(d) of the Stock
Purchase Agreement, and (ii) any Damages incurred by any Purchaser Indemnitee
indemnified hereunder shall be excluded in calculating the amount of Damages
incurred by any Purchaser Indemnitee for purposes of the deductibles of Section
7.3.8 of the Stock Purchase Agreement.
(b) Purchaser shall indemnify the Collateral Agent for the benefit of the
holders of the First Mortgage Notes by September 30, 1999, from and against any
and all losses, damages, liabilities, costs and expenses (including attorney's
fees) incurred by the Collateral Agent by reason of or arising out of a breach
of any covenant of Purchaser contained in this Agreement, including, for any
Parcel listed on Schedule 2 not conveyed to a Special Purpose Restricted
Subsidiary in accordance with this Agreement by September 15, 1999, an amount
equal to the full fair market value of such Parcel not conveyed, determined by
an appraisal prepared for Purchaser by Valuation Research Corporation, or if
Valuation Research Corporation does not exist, by another independent appraiser
of similar standing to be agreed to by Seller and Purchaser, provided, however,
that Purchaser shall be required to indemnify and hold harmless the Collateral
Agent or any third party beneficiary under this Agreement only to the extent
that the aggregate amount required to be paid by Seller pursuant to this
paragraph 2(b) does not exceed $5,000,000.
(c) The indemnification provided for in this Agreement shall terminate on
October 15, 1999 (and no claims shall be made by Purchaser or any third party
beneficiary under this Agreement thereafter), except that the indemnification by
Seller or Purchaser, as the case may be, shall continue as to any Damages of
which Purchaser, the Collateral Agent or a third party beneficiary has notified
Seller or Purchaser, as the case may be, in accordance with the requirements of
this Agreement on or prior to the date such indemnification would otherwise
terminate in accordance with this Section 5, as to which the obligation of
Seller and Purchaser shall continue until the liability of Seller and Purchaser
shall have been determined pursuant to this Agreement, and Seller and Purchaser,
as the case may be, shall have reimbursed Purchaser, the Collateral Agent or
such third party beneficiary, as the case may be, for the full amount of such
Damages that are payable in accordance with this Agreement.
(d) Except to the extent remedies cannot be waived as a matter of law,
indemnification pursuant to the provisions of this section shall be the
exclusive remedy (including any remedy which any party would otherwise have
pursuant to the Stock Purchase Agreement) of Purchaser for any of the matters
identified on Schedule 1 or which become the subject of a Title Notice.
(e) The indemnification provisions in paragraphs (a) and (b) above are
several but not joint obligations of the Seller and the Purchaser. No amounts
paid under each of the above paragraphs shall be applied against the maximum
indemnification limits of the other.
(f) Notwithstanding any of the foregoing, Purchaser shall not give any
notice or make any claims or demands pursuant to the indemnification provisions
of the Stock Purchase Agreement until the later of (i) October 15, 1999 or (ii)
the date on which all indemnification obligations of Seller hereunder shall have
been satisfied.
4
<PAGE>
6. Purchaser Obligations
(a) On or before September 15, 1999, Purchaser shall deliver to the Trustee
an Officers' Certificate (as defined in the Indenture) stating (i) those Parcels
listed on Schedule 1 hereto that have been properly conveyed to one of the IMC
Operating Companies or a subsidiary thereof in accordance with Paragraph 2
entitled "Conveyances" and the entity to which each was conveyed, (ii) those
Parcels that have not been properly conveyed and (iii) that no Default or Event
of Default exists with respect to the Indenture. Purchaser shall also attach to
the Officers' Certificate a valuation report prepared in accordance with
Paragraph 5 entitled "Seller's Indemnification" for those Parcels listed in
clause (ii) above and shall apply the proceeds pursuant to Section 4.22 of the
Indenture.
(b) On or before September 15, 1999, Purchaser shall deliver to the Trustee
an Officers' Certificate (as defined in the Indenture) stating (i) those Parcels
listed on Schedule 2 hereto that have been properly conveyed to one of the
Special Purpose Restricted Subsidiaries in accordance with Paragraph 2 entitled
"Conveyances" and the entity to which each was conveyed, (ii) those Parcels that
have not been properly conveyed and (iii) that no Default or Event of Default
exists with respect to the Indenture. Purchaser shall also attach to the
Officers' Certificate a valuation report prepared in accordance with Paragraph 5
entitled "Indemnification" for those Parcels listed in clause (ii) above and
shall apply the proceeds pursuant to Section 4.22 of the Indenture.
7. Sellers' Representations
Other than with respect to Article VII of the Stock Purchase Agreement,
this Agreement shall be considered an Ancillary Document for purposes of the
Stock Purchase Agreement.
8. General Provisions
(a) Time of Essence. Time is of the essence of each and every provision of
---------------
this Agreement.
(b) Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties and their respective successors and assigns.
(c) Notices. Notices under this Agreement shall be in writing and if
-------
personally delivered, delivered by courier, or telefaxed shall be effective when
received. If mailed, a notice shall be deemed effective on the third business
day after deposited as registered or certified mail, postage prepaid, return
receipt requested, directed to the other party at the address shown above. All
notices to Seller shall be given to Seller at 2100 Sanders Road, Northbrook,
Illinois 60062-6146, to the attention of General Counsel with a copy to Sidley &
Austin, One First National Plaza, Chicago, Illinois 60603, to the attention of
David J. Zampa. All notices to Purchaser shall be given to Purchaser at
Royster-Clark, Inc., 10 Rockefeller Plaza, Suite 1120, NY, NY 10020 to
5
<PAGE>
the attention of Walter Vance, with a copy to Dechert Price & Rhoads, 90 State
House Square, Hartford, Connecticut 06103, Attention: Nadine Kline Young, Esq.,
Telecopier: (860) 524-3930. All notices to the Trustee shall be given to Trustee
at 114 West 47th Street, 25th Floor, NY, NY 10036-1532 to the attention of Louis
P. Young, with a copy to Akin Gump Strauss Hauer & Feld LLP, 1700 Pacific
Avenue, Suite 4100, Dallas, TX 75201, Attention: Nancy C. Rush, Esq.,
Telecopier: (214) 969-2838. Any party may change its address for notices by at
least five (5) days advance written notice to the other.
(d) Waiver. Failure of either party at any time to require performance of
------
any provision of this Agreement shall not limit the party's right to enforce the
provision. Waiver of any breach of any provision shall not be a waiver of any
succeeding breach of the provision or a waiver of the provision itself or any
other provision.
(e) Applicable Law. This Agreement shall be construed, applied and enforced
--------------
in accordance with the laws of the State of New York.
(f) Changes in Writing. This Agreement and any of its terms may only be
------------------
changed, waived, discharged or terminated by a written instrument signed by the
party against whom enforcement of the change, waiver, discharge or termination
is sought.
(g) Invalidity of Provisions. In the event any provision of this Agreement
------------------------
is declared invalid or is unenforceable for any reason, such provision shall be
deleted from such document and shall not invalidate any other provision
contained in this Agreement.
(h) Counterparts. This Agreement may be executed simultaneously or in
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate as of the day and year first above written.
SELLER: IMC GLOBAL INC.
By: /s/ Lynn White
-------------------------------------
Its: Sr. VP of Corporate Development
THE VIGORO CORPORATION
By: /s/ Lynn White
-------------------------------------
Its: Sr. VP of Corporate Development
PURCHASER ROYSTER-CLARK, INC.,
a Delaware corporation
By: /s/ G. Kenneth Moshenek
-------------------------------------
Its:
TRUSTEE UNITED STATES TRUST COMPANY OF NEW YORK
a bank and trust company organized under the
banking laws of New York
By: /s/ Louis P. Young
-------------------------------------
Its: Vice President
7
<PAGE>
Schedule 1
----------
List of Real Property of IMC
8
<PAGE>
Schedule 2
----------
List of Real Property of Royster Clark
*ALL SITES ARE RETAIL UNLESS OTHERWISE NOTED
OWNED PREMISES
- --------------
MARYLAND
- --------
1. 10413 River Landing Rd., Denton, MD (Caroline County)
2. 12200 Massey Road - Rt. 299, Massey, MD (Kent County)
3. 308 Timmons Street, Snow Hill, MD (Worcester County)
NORTH CAROLINA
- --------------
1. Highway 55, Alliance, NC (Pamlico County)
2. Hwy. 11, Brick Mill Rd., Aulander, NC (Bertie County)
3. State Road 1901, Ayden, NC (Pitt County)
4. 7460 New Bern Highway, Belgrade, NC (aka Maysville) (Onslow County)
5. Highway 264 West, Belhaven, NC (Beaufort County)
6. 6717 Hwy. 67-E, Boonville, NC (Yadkin County)
7. 7218 Brown Summit Road, Brown Summit, NC (Guilford County)
8. Hwy. 94 South, Columbia, NC (Tyrrell County)
9. Highway 64, Creswell, NC (Tyrrell County)
10. Pitts Chapel Road, Elizabeth City (aka Weeksville), NC (Pasquotank
County)
11. 10140 Piney Woods Road, Fairfield, NC (Hyde County)
12. S. Fields Street, Farmville, NC (Pitt County)
13. Albermarle Street, Hertford, NC (Perquimans County)
14. 108 E. Washington Street, LaGrange, NC (Lenoir County)
15. Business Hwy. 74 East, Laurinburg, NC (Scotland County)
9
<PAGE>
16. Bladenboro Hwy., 211 East, Lumberton, NC (Robeson County)
17. 1030 Hart Street, Murfreesboro, NC (Hertford County)
18. Windley Street, New Bern, NC (Craven County) (New Bern Nitgrogen
Terminal)
19. 1000 N. Craven Street, New Bern, NC (Craven County) (Blend Plant)
20. 722 Pembroke, New Bern, NC (Craven County) ("Potash" Plant)
21. Box 401F, Rte. 1, Ormondsville, NC (Greene County)
22. Clay Street, Hwy. 11, Pink Hill, NC (Lenoir County)
23. Hwy. 111 S., Pink Hill, NC (Lenoir County) (Surplus Property)
24. 1665 NC Hwy. 64E, Plymouth, NC (Washington County) (Mallinckrodt
Storage Terminal and Retail Site)
25. 141 Ludy Smith Road, Princeton, NC (Wayne County)
26. 312 W. Fourth Avenue, Red Springs, NC (Robeson County) (Buildings)
27. 3330 Brake Road, Rocky Mount, NC (Edgecomb County)
28. Autryville Highway, Salemburg, NC (Sampson County)
29. Hwy. 34, Shawboro, NC (Currituck County)
30. 706 Washburn Switch Road, Shelby, NC (Cleveland County)
31. Old Edgar Road, Sophia, NC (Randolph County) (Blend Plant)
32. 3210 Taylorsville Road, Statesville, NC (Iredell County)
33. 1600 W. St. James St. Ext., Tarboro, NC (Edgecombe County)
34. 1600 W. St. James St. Ext., Tarboro, NC (Edgecombe County) (Telone
Repackaging Plant) (Distribution Ctr.)
35. 409 Main Street, Tarboro, NC (Edgecombe County) (Corporate Office)
36. 495 W. St. James Street, Tarboro, NC (Edgecombe County) (Tarboro
Distribution Ctr.)
37. Main & Daniel Streets, Tarboro, NC (Edgecomb County) (Car Wash)
38. N. Water St. Extension & N. Side, Tarboro, NC (Edgecomb County) (Vacant
Lot)
10
<PAGE>
39. St. James Street, Tarboro, NC (Edgecomb County) (Whse. Albemarle
Bldg.#13 & 14)
40. Albermarie Avenue, Tarboro, NC (Edgecomb County) (Vacant Land)
41. 29 Bogey Farm, Tarboro, NC (Edgecomb County) (Lot)
42. State Road 1616, Terra Ceia, NC (aka Pentego) (Beaufort County)
43. Highway 58, Trenton, NC (Jones County)
44. Highway 17 Business, Vanceboro, NC (Craven County)
45. Warren Plains Road, Warenton, NC (Warren County)
46. North Front Street, Warsaw, NC (Duplin County)
47. 736 E. Main Street, Williamston, NC (Martin County) (Williamston
Nitrogen Terminal)
48. 800 Railroad Street, Wilson, NC (Wilson County)
49. 244 North Lee Street, Yadkinville, NC (Yadkin County) (Retail and
Distribution Ctr.)
VIRGINIA
- --------
1. 397 Elm Street SW, Abingdon, VA (Washington County)
2. 22468 Lankford Hwy. Rt. 13, Atlantic, VA (aka Cape Charles) (Accomack
County)
3. Old Axton Depot Street, Axton, VA (Henry County)
4. Hwy. 47, Chase City, VA (Mecklenburg County)
5. 128 Depot Street, Chatham, VA (Pittsylvania County)
6. 500 Tidewater Chem Rd., Chesapeake, VA (Chesapeake City County)
7. 6236 Howard P. Anderson Road, Crystall Hill, VA (Halifax County)
8. 760 Holbrook Avenue, Danville, VA (Danville Circuit Court)
9. 2410 Mayflower Drive, Lynchburg, VA (Campbell County) (Blend Plant)
10. Highway 727, Red House, VA (Charlotte County)
11
<PAGE>
11. 204 S. Lunenburg, South Hill, VA (Mecklenburg County)
12. 270 Pamunkey Road, West Point, VA (King William County) (West Point
Seed Plant and Retail Site)
13. Highway 15 S., Wylliesburg, VA (Charlotte County) (Distribution Ctr.).
12
The Board of Directors
Royster-Clark, Inc.:
We consent to the use of our reports included herein (or incorporated herein by
reference) and to the reference to our firm under the heading "Experts" in the
registration statement.
/s/ KPMG LLP
- -------------------------
Norfolk, Virginia
June 21, 1999
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary Selected
Financial Data", "Selected Historical Financial Data", and "Experts" in the
Registration Statement (Form S-4 No. 333-xxxxx) and the related Prospectus of
Royster-Clark, Inc. for the registration of 10 1/4% percent First Mortgage Notes
due 2009, and to the inclusion of our report dated January 18, 1999 with respect
to the combined financial statements of IMC AgriBusiness as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31, 1998.
Our audits also included the related financial statement schedule of IMC
AgriBusiness included in the Registration Statement as Schedule 2 - Allowance
for Doubtful Accounts. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
St. Louis, Missouri
June 18, 1999
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
=====================
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
=====================
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
------------------------------ -------------------
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
114 West 47th Street
New York, New York 10036-1532
-------------------- ----------
(Address of principal (Zip Code)
executive offices)
None
---------------------------------------------------------
(Name, address and telephone number of agent for service)
========================
Royster-Clark, Inc.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
Delaware 76-0329525
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Rockefeller Plaza - Suite 1120
New York, New York 10020
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
10 1/4% First Mortgage Notes Due 2009
-------------------------------------
(Title of the indenture securities)
<PAGE>
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.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
The obligor is currently not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15
of Form T-1 are not required under General Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the State of New
York Banking Department to transact business as a Trust Company, is
incorporated by reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform Act of 1990
(Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
16. List of Exhibits
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as amended, is
incorporated by reference to Exhibit T-1.4 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform Act of 1990
(Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform Act
of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law
or the requirements of its supervising or examining authority.
NOTE
As of June 15, 1999 the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U.S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility 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 16th of
June, 1999.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Louis P. Young
------------------
Louis P. Young
Vice President
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
December 19, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Gerard F. Ganey
---------------------
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
March 31, 1999
(IN THOUSANDS)
ASSETS
- ------
Cash and Due from Banks $ 139,755
Short-Term Investments 85,326
Securities, Available for Sale 528,160
Loans 2,081,103
Less: Allowance for Credit Losses 17,114
----------
Net Loans 2,063,989
Premises and Equipment 57,765
Other Assets 125,780
----------
Total Assets $3,000,775
----------
LIABILITIES
Deposits:
Non-Interest Bearing $ 623,046
Interest Bearing 1,875,364
----------
Total Deposits 2,498,410
Short-Term Credit Facilities 184,281
Accounts Payable and Accrued Liabilities 126,652
----------
Total Liabilities $2,809,343
----------
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 53,041
Retained Earnings 121,759
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 1,637
----------
Total Stockholder's Equity 191,432
----------
Total Liabilities and
Stockholder's Equity $3,000,775
----------
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
May 18, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 42 42
<SECURITIES> 0 0
<RECEIVABLES> 25,369 38,792
<ALLOWANCES> (1,800) (1,872)
<INVENTORY> 55,205 91,831
<CURRENT-ASSETS> 84,673 137,280
<PP&E> 40,161 41,119
<DEPRECIATION> (11,055) (11,661)
<TOTAL-ASSETS> 120,397 173,407
<CURRENT-LIABILITIES> 53,947 74,968
<BONDS> 33,817 65,760
12,000 12,000
0 0
<COMMON> 1 1
<OTHER-SE> 15,152 15,218
<TOTAL-LIABILITY-AND-EQUITY> 120,397 173,407
<SALES> 218,672 53,487
<TOTAL-REVENUES> 218,672 53,487
<CGS> 185,646 44,042
<TOTAL-COSTS> 24,031 7,111
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 451 110
<INTEREST-EXPENSE> 5,489 1,607
<INCOME-PRETAX> 3,055 617
<INCOME-TAX> 1,223 251
<INCOME-CONTINUING> 1,832 366
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,832 366
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 6,100 0
<SECURITIES> 0 0
<RECEIVABLES> 67,400 83,400
<ALLOWANCES> (3,700) (4,100)
<INVENTORY> 157,100 214,800
<CURRENT-ASSETS> 227,400 294,800
<PP&E> 262,400 268,100
<DEPRECIATION> (104,600) (110,300)
<TOTAL-ASSETS> 440,300 507,200
<CURRENT-LIABILITIES> 85,600 166,700
<BONDS> 4,600 4,600
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 317,800 303,100
<TOTAL-LIABILITY-AND-EQUITY> 440,300 507,200
<SALES> 787,000 127,600
<TOTAL-REVENUES> 787,000 127,600
<CGS> 659,200 114,800
<TOTAL-COSTS> 102,395 27,359
<OTHER-EXPENSES> 1,900 100
<LOSS-PROVISION> 905 441
<INTEREST-EXPENSE> 13,200 3,000
<INCOME-PRETAX> 9,400 (18,100)
<INCOME-TAX> 4,100 (7,500)
<INCOME-CONTINUING> 5,300 (10,600)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,300 (10,600)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
Schedule 1
ROYSTER-CLARK, INC.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
Balance, Amounts
Beginning Charged to Balance,
of Year Expense Deduction End of Year
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996 $ 802,401 $1,509,338 $ (894,465) $1,417,274
Year Ended December 31, 1997 $1,417,274 $ 687,706 $ (304,980) $1,800,000
Year Ended December 31, 1998 $1,800,000 $ 451,259 $ (451,259) $1,800,000
</TABLE>
S-1
Schedule 2
IMC AGRIBUSINESS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
Balance, Amounts
Beginning Charged to Balance,
of Year Expense Deduction End of Year
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996 $2,828,287 $3,687,300 $(2,406,772) $4,108,815
Year Ended December 31, 1997 $4,108,815 $4,177,554 $(3,956,848) $4,329,521
Year Ended December 31, 1998 $4,329,521 $ 905,138 $(1,550,731) $3,683,928
</TABLE>
S-2
