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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 33-11634
TRANS-RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2729497
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 888-3044
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act: NONE
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
State the aggregate market value of the voting stock held by
non-affiliates of registrant.
None held by non-affiliates
Indicate the number of shares outstanding of each of registrant's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at March 20, 1998
----- -----------------------------
<S> <C>
Common Stock, par value $.01 per share 3,000 shares
(Owned by TPR Investment Associates, Inc.)
</TABLE>
Documents incorporated by reference.
None
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business.......................................................... 1
Item 2. Properties........................................................ 11
Item 3. Legal Proceedings................................................. 11
Item 4. Submission of Matters to a Vote of Security Holders............... 13
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters........................................... 14
Item 6. Selected Financial Data........................................... 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 15
Item 8. Financial Statements and Supplementary Data....................... 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................... 20
PART III
Item 10. Directors and Executive Officers of the Registrant................ 21
Item 11. Executive Compensation............................................ 23
Item 12. Security Ownership of Certain Beneficial Owners and Management.... 25
Item 13. Certain Relationships and Related Transactions.................... 25
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K... 26
Signatures .............................................................. 27
<PAGE> 3
PART I
ITEM 1. Business
Trans-Resources, Inc., a privately-owned Delaware corporation ("TRI"),
operates through its independently managed and financed subsidiaries and is a
leading global developer, producer and marketer of specialty plant nutrients and
specialty industrial and agricultural chemicals. As used herein, the term "the
Company" means TRI, together with direct and indirect subsidiaries. The Company
is the world's largest producer and distributor of agricultural grade potassium
nitrate, which is a leading specialty plant nutrient. Potassium nitrate is
utilized in specialized agricultural applications for the growth of high-value
crops such as fruits, vegetables, flowers and tobacco. The Company is also: (i)
the largest global and sole U.S. producer of propanil, which is a leading rice
herbicide; (ii) the world's largest producer of technical grade potassium
nitrate, used in a variety of industrial applications; (iii) the sole supplier
to the U.S. Air Force of nitrogen tetroxide, an aerospace fuel additive; and
(iv) the only North American producer of 3,4 dichloroanaline ("DCA"), the
principal raw material in the production of propanil. The Company also produces
a variety of other chemical products used in agricultural, industrial and
pharmaceutical markets. In addition, the Company utilizes its production
capacity and manufacturing expertise to provide contract manufacturing services
for other chemical companies. The Company sells its products through an
established global sales, marketing and distribution network to customers in 95
countries and conducts its operations through three product groups: Specialty
Plant Nutrients, Industrial Chemicals and Organic Chemicals, which during 1997
contributed approximately 58.6%, 28.9% and 12.5%, respectively, of the Company's
total revenues. Of the Company's total revenues for the year ended December 31,
1997, approximately 34% and 39% were derived from sales in the United States and
Europe, respectively, with the remainder derived from sales in many other
countries.
TRI's direct and indirect wholly-owned subsidiaries include Haifa
Chemicals Limited ("HCL"), an Israeli corporation, and HCL's wholly-owned
subsidiary, Haifa Chemicals South, Ltd., an Israeli corporation ("HCSL"); Cedar
Chemical Corporation, a Delaware corporation ("Cedar"), and Cedar's wholly-owned
subsidiary, Vicksburg Chemical Company, a Delaware corporation ("Vicksburg");
and Na-Churs Plant Food Company ("Na-Churs"), a Delaware corporation (Na-Churs
was acquired in March 1995). TRI was incorporated in Delaware in 1971 under the
name Trans-Pacific Resources, Inc.
SIGNIFICANT DEVELOPMENTS
On August 16, 1996, Cedar's wholly-owned subsidiary, NMPC, Inc.,
(formerly New Mexico Potash Corporation), a New Mexico corporation ("NMPC"), and
EDP, Inc. (formerly Eddy Potash, Inc.), a Delaware corporation ("EDP"), sold
substantially all of their assets for an aggregate consideration of $56,154,000,
including a payment for working capital of $11,154,000 and the assumption of
specified liabilities (but excluding, among other things, certain antitrust
litigation - see Item 3 "Legal Proceedings"). NMPC and EDP had conducted the
Company's potash mining and production operations. The sale of the Company's
potash operations resulted in a pre-tax gain, after considering certain costs
relating thereto, of $22,579,000. Such gain is included in "Interest and other
income - net" in the Consolidated Statements of Operations. During the years
ended December 31, 1995 and 1996, the potash operations contributed
approximately $54,000,000 (14%) and $35,000,000 (9%), respectively, to the
Company's consolidated revenues, after eliminating intercompany sales.
Approximately 50% of the aggregate sales proceeds received from the buyers were
applied to partially prepay debt secured in part by the assets of NMPC or EDP.
In connection with the sale, Vicksburg entered into a five year potash supply
agreement at prevailing market rates during the period (subject to certain
adjustments), with the buyer.
During August 1997, Cedar and a subsidiary of Westrade, Inc., a
privately-held Cayman Islands corporation ("Westrade"), formed Riceco LLC, a
Delaware limited liability company ("Riceco"), to market propanil, combination
rice herbicides and other rice-related chemicals (other than fertilizers) on a
worldwide basis. Westrade's interest in Riceco is now held by a corporation (the
"Westrade Member") which is 50% owned by E.I. Du pont de Nemours and Company
("DuPont") and 50% by the private investment group which currently owns 50% of
Westrade. Westrade produces, markets and distributes various agricultural
chemicals. Under a long-term supply agreement, the Company will produce all of
the propanil required by Riceco. See "Riceco" below and Part II - Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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On November 9, 1997, Laser Industries Limited ("Laser"), a publicly
traded manufacturer of lasers for medical use in which the Company had an
ownership interest accounted for by the equity method, and ESC Medical Systems
Ltd. ("ESC"), signed a definitive agreement (the "Agreement") to combine the two
companies through an exchange of shares. The transaction closed on February 23,
1998. The Company's ability to sell the ESC shares it will receive pursuant to
the combination will be governed by securities law volume restrictions. As of
December 31, 1997, the Company carried its investment in the Laser shares at
approximately $9,100,000, which amount is included in the caption "other assets"
in the Consolidated Balance Sheet. Based on the quoted market value of the ESC
shares ($35.00 per share), as of February 20, 1998, the last day of trading
before the combination, the Company will recognize an after-tax gain of
approximately $22,400,000 which will be recorded during the first quarter of
1998. In addition to the ownership of the Laser shares described above, the
Company also owned a warrant (the "Laser Warrant") which enabled the Company to
purchase additional Laser shares. The Laser Warrant, which had a carrying value
of $750,000, was distributed as a dividend in February 1998.
On February 4, 1998, HCL completed the purchase of approximately 42% of
the equity of Lego Irrigation Ltd., an Israeli developer, manufacturer and
marketer of drip irrigation systems, for approximately $11,000,000. During 1996,
Lego had revenues of approximately $20,000,000. Under certain circumstances, HCL
could be required to increase its equity investment in Lego by an additional
$11,000,000.
See "Employees" below and Part II - Item 7 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for certain
information regarding a labor dispute at HCL commencing in October 1996 and
resulting in work stoppages and an HCL plant shut-down from December 3, 1996 to
March 10, 1997 (the "HCL Labor Dispute"), which significantly impacted the
Company's financial results during the fourth quarter of 1996 and the first two
quarters of 1997.
In March, 1998 the Company refinanced its 11 7/8% Senior Subordinated
Notes and issued $100,000,000 principal amount of 10 3/4% Senior Notes due 2008
(the "Senior Notes") and $135,000,000 principal amount of Senior Discount Notes
due 2008 to provide gross proceeds to the Company of approximately $75,400,000
(the "Senior Discount Notes"). See Note G of Notes to Consolidated Financial
Statements.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Report constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical facts included in this Report are
forward-looking statements, including, but not limited to, statements concerning
future revenues (e.g., impact of the HCL Labor Dispute and inflation in Israel);
expenses (e.g., labor savings resulting from the new SCA, future environmental
costs and capital expenditures); and access to lending sources and Israeli
Government entitlement. Such forward-looking statements involve unknown and
uncertain risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors ("Cautionary Factors") include,
among others, the following: political stability, inflation and currency rates
in those foreign countries (including, without limitation, Israel) in which the
Company generates a significant portion of its production, sales and earnings;
current or future environmental developments or regulations which would require
the Company to make substantial expenditures, and changes in, or the failure of
the Company to comply with, such government regulations; the potentially
hazardous nature of certain of the Company's products; the ability to achieve
anticipated labor cost reductions at HCL; the Company's ability to continue to
service and refinance its debt; new plant start-up costs; competition; changes
in business strategy or expansion plans; raw material costs and availability;
the final outcome of the legal proceedings to which the Company is a party (see
Item 3- "Legal Proceedings"); and other factors referenced in this Report.
Given these uncertainties, investors and prospective investors are
cautioned not to place undue reliance on such forward-looking statements. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on behalf of the Company are expressly qualified in
their entirety by the Cautionary Factors.
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PRODUCTS
The Company develops, produces and distributes a range of specialty
chemicals products for a variety of agricultural and industrial end-uses. The
Company has grouped its operations into three general product categories that
reflect the different industries and end-use markets serviced by the Company.
These product groups are: Specialty Plant Nutrients, Industrial Chemicals and
Organic Chemicals.
Specialty Plant Nutrients. The Company's Specialty Plant Nutrients
consist of high-value nutrients designed for intensive agriculture, including
greenhouses, nurseries and orchards. The Company's flagship product is potassium
nitrate, which is marketed principally under the brand names K-Power
domestically and Multi-K internationally (collectively referred to as
"K-Power"). Potassium nitrate provides potassium and nitrogen, two of the three
essential plant nutrients, is water soluble and does not contain chlorine or
other environmentally harmful chemical residues that are generally found in
commodity fertilizers. The unique combination of these performance
characteristics allows potassium nitrate to command a price premium over other
potassic plant nutrients and fertilizers and has led to a compound annual growth
rate in tons shipped of approximately 6% for the industry over the past five
years. With current annual production capacity of approximately 630,000 tons,
the Company is the world's largest producer of potassium nitrate. The Company is
in the process of increasing its annual potassium nitrate capacity to
approximately 770,000 tons by year-end 1999. The Company believes that it
currently accounts for approximately 60% of the world's production of potassium
nitrate and 100% of North American production of potassium nitrate.
The Company's other Specialty Plant Nutrients include those designed for
highly specialized horticultural applications. These include: (i) Polyfeed, a
fully soluble and chlorine-free blend of varying combinations of plant nutrients
containing the three essential plant nutrients, nitrogen, phosphorus and
potassium; (ii) Magnisal, which acts as a magnesium supplement; (iii)
monoammonium phosphate, or Multi-MAP, a fully soluble source of nitrogen and
phosphorus; (iv) monopotassium phosphate, or Multi-MKP, a fully soluble,
chlorine-free source of potassium and phosphorus; and (v) Multicote, a polymer
coated specialty plant nutrient which provides for the controlled release of
nutrients over specific periods of time ranging from four to 12 months, which
optimizes plant feeding and minimizes labor requirements. The Company, through
Na-Churs, is also the largest U.S. producer and marketer of high purity liquid
fertilizers, which are sold under its Na-Churs brand name and are used both as a
starter nutrient in growing corn and in growing high-value crops such as fruits,
vegetables and flowers. Specialty Plant Nutrients revenues were approximately
$220,500,000 in 1997.
The following table sets forth the Company's principal Specialty Plant
Nutrients products, markets and applications:
<TABLE>
<CAPTION>
Principal Products Primary Markets Applications
- ---------------------------------- ----------------------------------------------- -----------------------------------------
<S> <C> <C>
Potassium Nitrate - Fruits and vegetables, flowers, - Fertigation, foliar sprays and
(K-Power) cotton and tobacco soil applications
Polyfeed - Horticulture - Fertigation and foliar sprays
Multi-MAP - Horticulture - Fertigation and foliar sprays
Multi-MKP - Horticulture - Fertigation and foliar sprays
Magnisal - Vegetables, citrus, tropical - Fertigation and foliar sprays
fruits and flowers
Multicote - Vegetables, turf, fruit trees and - Time release of nutrients
potted plants
Na-Churs Liquid Fertilizers - Corn, soybeans, wheat and - Furrow applied starter, foliar
high-value crops sprays and fertigation
</TABLE>
Industrial Chemicals. The Company's Industrial Chemicals consist of a
variety of specialty and other chemicals with applications in multiple end-use
markets. The Company's Industrial Chemicals products are generally produced as
co-products in the Company's potassium nitrate manufacturing processes. These
products provide the Company with the ability to diversify its revenue base
while maintaining its leadership position in potassium nitrate and to allocate
its
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fixed costs over a broader base of revenues and products. The Company is the
world's largest manufacturer and marketer of technical grade potassium nitrate,
a high purity product used for many industrial applications, including the
production of television picture tubes, computer screens, other specialty
glasses, ceramics, food additives and explosives. The Company, through
Vicksburg, is also a manufacturer of potassium carbonate, marketed under the
brand name K-Carb. K-Carb is used in the production of television picture tubes,
computer screens, ceramics, detergents, in agricultural applications, and in the
production of other potassic chemicals. In addition, the Company is the sole
supplier to the U.S. Air Force of nitrogen tetroxide, an aerospace fuel
additive.
Additional Industrial Chemicals produced by the Company include
phosphoric acid, with approximately 66,000 tons of current annual production
capacity, used for metal treatment, industrial cleaning solutions, fermentation
and in the food and fertilizer industries; and a variety of phosphate products
including: sodium tripolyphosphate ("STPP"), an ingredient in detergents;
monoammonium phosphate ("MAP"), used in fire extinguishers and fire retardants;
monopotassium phosphate ("MKP"), used in the fermentation process; monosodium
phosphate ("MSP") and disodium phosphate ("DSP"), which are used by food
processing companies as emulsifiers for cheese processing and as a buffer in
foodstuffs; and sodium acid pyrophosphate ("SAPP"), used by food processing
companies in baking powders and potato processing. The Company also produces
chlorine sold to industrial and chemical manufacturing companies for water
purification and production of paper pulp and PVC pipe. Industrial Chemicals
revenues were approximately $109,000,000 in 1997.
The following table sets forth the Company's principal Industrial
Chemicals products, markets and applications:
<TABLE>
<CAPTION>
Principal Products Primary Markets Applications
- ------------------------------------ --------------------------------------------- -------------------------------------
<S> <C> <C>
Technical Grade Potassium - Glass, ceramics, explosives, - Oxidization and ion exchange
Nitrate metal, petrochemical and heat
treatment industries
Potassium Nitrate USP Grade - Pharmaceutical industry - Ingredient in certain toothpaste
Potassium Carbonate (K -Carb) - Glass, detergents and fertilizer - Oxidization and cleansing
industry
Phosphoric Acid - Industrial production, food and - Metal treatment, industrial
fertilizer industries cleaning and fermentation
Sodium Tripolyphosphate Food - Food processing companies - Meat and seafood processing
Grade
Sodium Tripolyphosphate - Soap and detergent industry - Cleansing ingredient
Monoammonium Phosphate - Chemical manufacturers - Fire retardant formulations
Monopotassium Phosphate - Food processing companies - Fermentation process
Monosodium Phosphate - Food processing companies - Emulsifiers and buffers
Disodium Phosphate - Food processing companies - Emulsifiers and buffers
Sodium Acid Pyrophosphate - Food processing companies - Baking powders and potato
processing
Chlorine - Chemical companies - Water purification, production
of paper pulp and PVC pipe
Nitrogen Tetroxide - United States Government - Aerospace fuel additive
</TABLE>
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Organic Chemicals. The Company's Organic Chemicals consist primarily of
a variety of herbicides and other products requiring expertise in complex
organic synthesis. The Company's Organic Chemicals products include propanil,
the world's leading rice herbicide, and DCA, the principal raw material for the
production of propanil. The Company is the sole U.S. producer, and the only
fully integrated producer worldwide, of propanil, and is the sole producer of
DCA in North America. Other Organic Chemicals include Butoxone, a leading peanut
and soybean herbicide; diuron, a broad use herbicide used on various crops,
including alfalfa and cotton; and ethephon, a cotton, fruit and vegetable growth
regulator. The Company also produces and sells trishydroxyaminomethane ("THAM"),
a proprietary buffering agent used in pharmaceutical applications, including
contact lens solutions. In addition, the Company utilizes its manufacturing
expertise and capacity and serves as a contract manufacturer of organic
chemicals for chemical companies. The Company recently formed Riceco with a
strategic partner to market propanil, combination rice herbicides and other
rice-related chemicals (other than fertilizers) on a worldwide basis. Organic
Chemicals revenues were approximately $47,000,000 in 1997.
The following table sets forth the Company's principal Organic
Chemicals products, markets and applications:
<TABLE>
<CAPTION>
Principal Products Primary Markets Applications
- -------------------------------------- ------------------------------------------ ---------------------------------------
<S> <C> <C>
Propanil - Rice - Broad spectrum weed control
Dichloroanaline - Organic chemicals - Primary propanil raw material
manufacturers
Butoxone - Peanuts and soybeans - Weed control
Diuron - Food crops, alfalfa and cotton - Broad use herbicide
Ethephon - Cotton, fruit and vegetables - Plant growth regulator
THAM - Pharmaceutical companies - Buffering agent
Contract Manufacturing - Various industrial companies - Various organic syntheses
</TABLE>
SALES AND MARKETING
The Company's sales and marketing network consists of a direct sales
force of approximately 115 professionals as well as over 150 independent agents,
distributors and brokers who market and distribute the Company's products in
particular markets in which the Company does not have a significant direct sales
and marketing presence. The Company's sales efforts are complemented by its
product development and technical support staff, who work with customers to
demonstrate the performance of the Company's existing products under specific
climatic, soil and growing conditions and to develop new products and markets
based on customer needs. At present, the Company maintains resident development
and technical support staff in the United States, Israel, Italy, Spain, France,
the United Kingdom, Greece, Mexico, South Africa, China, Japan and the Benelux
countries.
The Industrial Chemicals produced by the Company are generally marketed
through the Company's marketing network and through the Company's subsidiaries
throughout the world. Nitrogen tetroxide is primarily sold under a long-term
contract to the U.S. Air Force. Contract manufacturing business is generally
secured on the basis of reputation for quality, efficiency and speed of
execution and promotional activity, such as participation in trade shows.
In order to provide prompt and responsive service the Company uses
warehouse and distribution facilities which are strategically located throughout
the Company's global network. The Company maintains inventories of its products
internationally to facilitate prompt deliveries to customers.
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CUSTOMERS AND MARKETS
The Company's customers include blenders, distributors, professional
growers, agrichemical companies, governmental agencies, and multinational
manufacturers in many geographic markets throughout the world. The following
chart sets forth the breakdown of the Company's sales by geographic market for
the three year period ended December 31, 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------------- ---------------- ---------------
(Dollars in Millions)
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Europe ................. $146 38% $160 39% $148 39%
United States .......... 136 35 145 35 128 34
Asia ................... 34 9 37 9 29 8
Canada and Latin America 22 6 24 6 22 6
Israel ................. 21 5 23 6 19 5
Australia .............. 6 2 6 1 6 2
Africa and other ....... 21 5 17 4 25 6
---- --- ---- --- ---- ---
Total .............. $386 100% $412 100% $377 100%
==== === ==== === ==== ===
</TABLE>
The Company's customers are diversified across each of the Company's
product groups. Specialty Plant Nutrients are generally sold through the
Company's network of representative offices and through its sales, technical
support and distribution affiliates who in turn generally sell to blenders,
growers or other end-users. In addition, the Company sells Specialty Plant
Nutrients directly to certain large blenders and end-users. The Company sells
its Industrial Chemicals principally through its own worldwide network of
representative offices and through its sales, support and distribution
affiliates to various industrial consumers. The Company's Organic Chemicals
Group sells its products through distributors, co-operatives, regional dealers,
international brokers and multinationals, as well as to Riceco. In addition, the
Company sells its Organic Chemicals directly to some customers domestically and
through a joint venture partner internationally. During the year ended December
31, 1997, no customer accounted for more than 4% of consolidated revenues and
the 10 largest customers accounted for less than 18% of consolidated revenues.
RESEARCH AND DEVELOPMENT
As of December 31, 1997, the Company employed approximately 54 research
and development scientists, engineers and technicians, who are involved in the
development and evaluation of process technologies, efficiencies and quality
control. For the years ended December 31, 1995, 1996 and 1997, the Company spent
approximately $3,158,000, $2,693,000 and $2,421,000, respectively, on these
efforts, which have been charged to current operations. The Company's extensive
agronomic data base, which consists of the results of thousands of experiments
under a wide range of soil and climatic conditions, enhances the Company's
ability to develop and introduce new products, as horticultural and agricultural
growers generally require substantial testing under their own specific climatic,
soil and growing conditions before they will adopt a new plant nutrient. The
Company also utilizes cooperative agronomic research and development
partnerships with universities to further develop new products and applications.
RAW MATERIALS
The Company's raw materials consist primarily of ammonia, potash and
phosphate rock. Other raw materials include orthodichlorobenzene, propionic acid
and various other chemicals. In the United States, all of the Company's raw
materials are readily available from multiple suppliers. A minimum of
approximately 50% of Vicksburg's potash requirements are required to be
purchased pursuant to a five year contract entered into in connection with the
Company's 1996 sale of its potash operations with the buyer of the potash
operations. This supplier has the right to supply Vicksburg's remaining potash
requirements if it can meet market prices and specified quality standards. The
contract is renewable for additional one year periods if mutually agreed. The
remainder of Vicksburg's potash requirements are
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available from multiple suppliers. Ammonia is generally purchased from a
supplier under a renewable contract expiring in August 1999 at negotiated prices
and is also available from multiple sources.
HCL (including HCSL) sources its potash exclusively from Dead Sea Works
Ltd. ("DSW") under two long-term contracts which expire in 1999 and 2005, and
sources its phosphate rock solely from Rotem Amfert Negev Ltd. ("Rotem")
according to the terms of a variable price contract which expired in 1996 and
which is currently being renegotiated. The potash contracts provide for prices
to be established quarterly, based on the weighted average of the FOB Israeli
port prices paid to DSW by its overseas customers during the preceding quarter
plus certain adjustments thereto. DSW and Rotem are both subsidiaries of a large
Israeli chemical company. While the Company believes that alternative sources of
supply for raw materials supplied by Rotem and DSW are available, the loss of
supply from DSW and Rotem could have an adverse impact on the Company's
financial performance. Ammonia is sourced from a European supplier under a one
year contract renewable at negotiated prices and is available from a number of
alternative suppliers. Approximately 85% of HCL's energy requirements and
approximately 50% of its steam requirements at its Haifa facility are provided
by a co-generation plant owned and operated by a third party under a three year
contract expiring in 2001 and renewable for an additional two years. The
remainder of HCL's steam requirements in Haifa are supplied by HCL's own steam
facility. Such third party also operates this steam facility for HCL under a
contract having a similar term and at prices generally below those available
from alternative steam sources other than the co-generation plant.
The Company has historically experienced fluctuations in the price of
ammonia. The Company has not generally passed on ammonia price changes to its
customers as price changes have generally been temporary.
MANUFACTURING
The production of Specialty Plant Nutrients, Organic Chemicals and
Industrial Chemicals are each integrated multi-stage processes which in some
cases involve chemical synthesis, formulation and mixing. Following these
processes, the product is packaged based upon customer requirements.
The Company utilizes two unique synthetic manufacturing processes in
producing Specialty Plant Nutrients and Industrial Chemicals. HCL utilizes a
"solvent extraction" process in Israel and Vicksburg utilizes a "direct
reaction" process in the United States. The solvent extraction process is based
on reacting potassium chloride with nitric acid in the presence of an aqueous
recycled brine and an organic solvent, producing potassium nitrate and
hydrochloric acid as co-products. The hydrochloric acid is used on-site to
acidulate phosphate rock and produce phosphoric acid, which in turn is used to
manufacture a variety of phosphate products. The direct reaction process is
based on the reaction of potassium chloride and nitric acid, which produces
potassium nitrate and chlorine and nitrogen tetroxide as co-products. In the
production of the Company's Organic Chemicals and contract manufacturing
products, major processes and chemistries include the complex synthesis of
organic chemicals to produce agrichemicals and pharmaceutical chemicals.
Propanil is produced at Cedar's West Helena, Arkansas facility by reacting DCA
with propionic acid and propionic anhydride to produce propanil technical, the
active ingredient in all propanil products. Propanil technical is formulated
into emulsifiable concentrate and then sold. Cedar also sells propanil
technical in molten form and flake form.
RICECO
During August 1997, Cedar and Westrade formed Riceco to market propanil,
combination rice herbicides and other rice-related chemicals (other than
fertilizers) on a worldwide basis. The Company and the Westrade Member each have
a 50% equity interest in Riceco and each exercises equal voting rights. Riceco's
profits and losses are currently allocated 60% to the Company and 40% to the
Westrade Member, but under specified conditions would be adjusted to 50% to
each. At closing, both members contributed product registrations, labels and
customer lists to Riceco and subsequently each member provided an interim
working capital loan of $1,250,000 to be repaid in 1998 in accordance with
covenants contained in a Riceco loan agreement. Under a long-term supply
agreement, the Company will produce all of the propanil required by Riceco.
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INTELLECTUAL PROPERTY
The Company seeks to protect the confidentiality of its manufacturing
processes by maintaining these processes as trade secrets, and accordingly, has
generally not sought patent protection. In addition, the Company has
differentiated its products in the marketplace by pursuing a branded strategy.
As a result, the Company has developed several brand names, such as K-Power,
Magnisal, Polyfeed, Multicote, Poni, K-Carb and Na-Churs.
COMPETITION
In Specialty Plant Nutrients, the Company primarily competes with
Sociedad Quimica y Minera de Chile, S.A., a Chilean corporation, and to a lesser
extent with other producers. Competition among producers of agricultural grade
potassium nitrate is primarily driven by customer preferences for quality,
reliability, custom specifications and price.
In Industrial Chemicals, the Company competes with a wide variety of
large and small specialty and commodity chemical companies. The primary
competitive factors in the industrial chemicals market are product quality,
technical specifications and price.
In Organic Chemicals, the Company primarily competes with a wide variety
of large and small specialty and commodity chemical companies. Competitive
factors in the production of organic chemicals primarily consist of
manufacturing expertise in specific complex chemical processes, vertical
integration, flexible manufacturing facilities and price.
FACILITIES
Vicksburg owns the property, plant and equipment located at its
Vicksburg, Mississippi facility and Cedar owns the property, plant and equipment
located at its West Helena, Arkansas facility. The Vicksburg plant consists of
three manufacturing plants situated on 600 contiguous acres. The West Helena
facility is ISO 9002 certified and is located on a 60 acre site. The plants are
encumbered by first mortgages and security interests securing long-term bank
indebtedness. The Company's corporate office in New York City and administrative
office in Memphis, Tennessee are both in leased facilities.
HCL owns its machinery and equipment and leases the land for its Haifa,
Israel operations from Oil Refineries Ltd. ("ORL"), a corporation which is
majority-owned by the Israeli Government. The leases expire at various dates,
primarily in the years 2015 and 2016. HCSL owns the machinery and equipment and
leases the land for its Mishor Rotem, Israel operations from the Israeli Land
Administration Authority under a 49 year lease which commenced in 1994. All of
such lease payments for the Mishor Rotem land have already been paid and were
included in the construction costs for this facility. HCL also owns ammonia
terminal facilities located on leased property in the port in Haifa and leases
from ORL a pipeline which transports ammonia from the port in Haifa to HCL's
plant. Substantially all of these assets are subject to security interests in
favor of the State of Israel or banks.
Management believes that its facilities are in good operating condition
and adequate for its current needs.
EMPLOYEES
As of December 31, 1997 the Company employed approximately 840 people.
Approximately 220 employees have advanced technical and academic qualifications.
Except for certain employees at the Company's Israeli operations, none of the
Company's employees are represented by any collective bargaining unit.
During the fourth quarter of 1996 and the first two quarters of 1997, the
Company's operations were adversely impacted by the HCL Labor Dispute.
Most HCL employees are members of the "Histadrut," the Israeli national
labor federation, and are represented by collective bargaining units. Terms of
employment of most HCL employees are currently governed predominantly
8
<PAGE> 11
by a Specific Collective Agreement ("SCA") negotiated by HCL with the Histadrut,
the respective unions representing the employees and representatives of the
employees.
In 1994, HCL signed an agreement with the unions and representatives of
the technicians and engineers for the three year period ended December 31, 1996.
In 1995, an SCA was signed with the unions and representatives of the other
employees for the two year period ended December 31, 1996. In September 1996,
the Company announced the cancellation of such agreements effective upon their
expiration dates and its intention to negotiate a new SCA with basic changes
aimed at reducing labor costs and enhancing operating flexibility for the period
following December 31, 1996.
As a result of the announced cancellation of the labor agreements, HCL
suffered several work stoppages and other job actions which adversely affected
productivity during October and November 1996, including a period of temporary
plant shut-down. On December 3, 1996 the plant was shutdown until March 10, 1997
when a new SCA providing for certain wage freezes and reductions in benefits was
signed for the three year period ending December 31, 1999. Subsequent to March
10, 1997, the HCL plant re-opened and gradually began production. By the end of
May 1997 and subsequent thereto, the HCL plant was generally operating at
approximately full capacity; however, there have been several periods of
operations at less than full capacity due to the need for increased maintenance
for certain equipment resulting from the lengthy period of shut-down.
Management believes that the new SCA will result in cost savings for the
Company compared to the costs it would otherwise have incurred during the next
few years had HCL merely renewed the terms of the prior SCAs and continued the
pattern of increased costs included in recent SCAs. Further, management believes
that the aggregate amount of such cost savings over the next few years will
substantially exceed the incremental costs experienced during the HCL Labor
Dispute. Such savings commenced during the second quarter of 1997.
Following the settlement of the HCL Labor Dispute, HCL achieved the
following objectives: (i) a reduction in absenteeism from about 7% per annum to
about 2% per annum; (ii) greater ability to freely transfer employees between
departments and production units; (iii) increased flexibility regarding the
ability to promote employees and incentivize them based on performance measures
and evaluations developed and implemented by management; (iv) greater ability to
dismiss employees on the basis of poor performance (which has already been
utilized); (v) on-going and more effective communication between management and
employees; and (vi) increased freedom to use sub-contractors. In addition,
following the settlement of the HCL Labor Dispute, HCL restructured its
workforce with the result being a net 100 person reduction (or 18%) in the
number of its employees, and an approximate 16% reduction in the average cost
per employee. Under the new labor agreement, such reductions in headcount and in
average cost per employee resulted in estimated annual cost savings of
$9,000,000. See Part II - Item 7--"Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Special Note Regarding
Forward Looking Statements" above.
A third party provides operating and management services for HCSL's
Mishor Rotem, Israel facility as a subcontractor, and is reimbursed for costs
based on an approved budget plus a variable incentive fee designed to increase
efficiency, volumes produced and quality of production.
ENVIRONMENTAL MATTERS
Cedar and Vicksburg.Vicksburg's plant located in Vicksburg, Mississippi
and Cedar's West Helena, Arkansas plant discharge process waste water and storm
water pursuant to permits issued in accordance with the Federal Clean Water Act
and related state statutes. Air emissions at each plant are regulated by permits
issued pursuant to the Federal Clean Air Act and related state statutes.
The Federal Environmental Protection Agency ("EPA") notified the Company
in 1989 that unspecified corrective action will be required under the Federal
Resource Conservation and Recovery Act of 1976, as amended, to protect against
the release of contaminants allegedly present at the Vicksburg plant as a result
of previous pesticide manufacturing operations. As a result of the notice, an
agreement was reached with the EPA and the Department of Justice on the terms of
a Consent Decree which was filed in the United States District Court at Jackson,
Mississippi in January 1992. Pursuant to the Consent Decree, a facility
investigation work plan was submitted to the EPA. Following
9
<PAGE> 12
its approval, Vicksburg intends to undertake a site investigation and corrective
measures study, followed by implementation of appropriate corrective action.
Compliance with the Consent Decree is expected to occur over a five to six year
period following the EPA's approval of the facility investigation work plan.
Cedar's West Helena plant utilizes a surface impoundment for biological
treatment of non-hazardous waste streams which was the subject of an enforcement
proceeding initiated by the Arkansas Department of Pollution Control and Ecology
(the "ADPCE") in 1986 which required Cedar to carry out various studies,
ultimately leading to the implementation of a groundwater monitoring system.
Based in part on the results of groundwater monitoring and in part on the
discovery of a drum burial area on the West Helena plant site, the ADPCE
requested Cedar to initiate an expanded plant-wide investigation pursuant to a
Consent Administrative Order entered in 1991 (the "Order"). In December 1997,
ADPCE accepted the final facility investigation report and requested Cedar to
initiate a corrective measures study to address eight separate locations on
Cedar's West Helena plant site which ADPCE believes may require remedial action.
In addition, ADPCE requested a plan for interim measures to address groundwater
contamination on and adjacent to the West Helena plant. Cedar removed the buried
drums from the West Helena site in accordance with a work plan incorporated in
the Order and, shortly thereafter, filed a suit against a former operator of the
plant site for contribution for the costs incurred. In October 1994, Cedar
reached a settlement pursuant to which it recovered a substantial portion of its
previously incurred drum removal and investigative costs. The settlement also
provides for binding arbitration among Cedar and two former operators at the
plant site to apportion future investigative and remedial costs required under
the Order.
The Company believes that the future costs required to complete the site
investigation and corrective measures studies at Vicksburg and any supplemental
plant-wide investigation (if required) and the corrective measures studies at
West Helena will be between $500,000 and $1,000,000 and will be expended over
two to three years. Interim corrective measures may also be implemented at one
or both of these locations during this same period. As of December 31, 1997, the
Company has accrued an aggregate of $1,250,000 for these matters. Until these
investigations are completed, it is not possible to determine the costs of any
final corrective actions which will be required. Any such corrective action
costs will be expended over a period of years. There can be no assurance that
such costs will not be material.
In December 1997, the EPA requested 34 companies, including Cedar, to
provide information about their dealings with the previous owners and operators
of a drum reclamation and recycling site known as the W&R Drum Superfund Site in
Memphis, Tennessee. Cedar could have potential liability to share costs of
remediating this site, which is on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended.
HCL. As a result of the production of phosphoric acid, HCL generates acid
sludge and liquid acid effluents. In accordance with a permit issued pursuant to
the Law for the Prevention of Sea Pollution (Disposing of Wastes) of 1983, HCL
is now disposing of the acid sludge in a designated site in the Mediterranean
Sea, situated 20 nautical miles from the Israeli coast. The permit allows for
the disposal of a quantity which is sufficient to satisfy HCL's needs. The
permit is effective until September 30, 1998, after which disposal of acid
sludge to the sea should cease in accordance with the Plan described below.
HCL currently disposes of its liquid acid effluents to the Haifa Bay
through a local river in accordance with a permit issued pursuant to the Law for
the Prevention of Sea Pollution from Land Sources of 1988, effective until
September 30, 1998. Both above-mentioned permits set forth restrictions on
quantities and concentrations, inspection, reporting duties and certain other
conditions.
During July 1996 the Ministry of Environment (the "Ministry") approved a
proposed comprehensive land solution plan for the handling and disposal of the
sludge and effluents produced by HCL's plant (the "Plan"). The Plan was based on
the joint work of HCL and representatives of the Ministry. In general, the Plan
consists of two objectives: (i) decreasing the quantities and concentrations of
the effluents, and (ii) a permanent land solution for the sludge currently being
disposed of in the Mediterranean Sea, by filtering and purifying it in a
purifying plant to be built by HCL, and the disposal thereof at a land site to
be approved by the Ministry. The overall time schedule for the complete
10
<PAGE> 13
execution of the Plan is four and one-half years, with up to an additional one
and one-half year grace period available under certain conditions, with
estimated capital expenditures of up to $15,000,000 which commenced in 1997.
In November 1996 HCL signed a settlement agreement (the "Agreement") for
resolution of a private criminal complaint, alleging violation of specified
Israeli environmental laws as a result of HCL's dumping of chemical waste into a
local river without adequate permits, which was submitted against HCL and its
directors on December 21, 1994 by Man, Nature and Law, an Israeli fellowship for
the protection of the environment (the "Society") and six fishing companies
(collectively, the "Petitioners") before the Magistrate's Court of Haifa. On
November 26, 1996 the court approved the Agreement, and the Petitioners withdrew
the complaint.
While the Agreement is consistent with the Plan, it is more specific
regarding prescribed time schedules, concentrations of effluents and the
maintenance of such concentrations. It also establishes a Supervising Committee
to review and supervise HCL's progress in complying with the Agreement and
prescribes enforcement penalty provisions. In addition, HCL compensated the
Petitioners and reimbursed the Society for certain legal expenses and agreed to
contribute to an educational and monitoring fund to be established under the
Agreement. The Society agreed that after implementation of the plans pursuant to
the Agreement, it would not make any further demands on HCL or to any judicial
or administrative body regarding the alleged contamination of water or the sea
unless the Agreement is breached.
HCSL disposes of liquid effluents in plastic lined evaporation ponds in
accordance with a business license issued under the Business Licenses Act of
1968. Based on recent results of groundwater monitoring in the area, the
Ministry notified HCSL of its intention to seek an alternate solution to be
implemented in the future, including the imposition of a requirement to decrease
the concentrations of acid effluents. HCSL believes that the solution used by it
heretofore in coordination with the authorities provides adequate protection to
avoid groundwater contamination. HCSL notified the Ministry of its objection to
the imposition of new purifying requirements.
On March 3, 1998, a criminal proceeding was initiated against HCL and its
Managing Director in the Magistrate's Court of Haifa for alleged 1995 nitrous
oxide air emissions beyond prescribed levels. During 1995, HCL adopted
additional technical and administrative measures to monitor such emissions and
believed that it had resolved this matter with the Ministry in 1995. The Company
believes that even if this proceeding were adversely decided, the penalty would
be a fine which would not have a material adverse effect on it operations or
financial conditions.
Appropriate provisions have been made in the consolidated financial
statements with respect to the above matters. See Notes A and O of Notes to
Consolidated Financial Statements.
ITEM 2. Properties
Reference is made to "Facilities" in Item 1 above, "Business," for
information concerning the Company's properties. See also Note D of Notes to
Consolidated Financial Statements for additional information.
ITEM 3. Legal Proceedings
Beginning in April 1993 a number of class action lawsuits were filed in
several United States District Courts against the major Canadian and United
States potash producers, including EDP and NMPC. The purported class actions
were filed on behalf of all direct United States purchasers of potash from any
of the named defendants or their respective affiliates, at any time during the
period from April 1987 to the present, and alleged that the defendants conspired
to fix, raise, maintain and stabilize the prices of potash in the United States
purchased by the plaintiffs and the other members of the class in violation of
the United States antitrust laws. The complaints sought unspecified treble
damages, attorneys' fees and injunctive relief against the defendants. Pursuant
to an order of the Judicial Panel for Multidistrict Litigation, all of the
Federal District Court actions were consolidated for pretrial purposes in the
United States District Court for Minnesota and captioned In Re Potash Antitrust
Litigation. Several additional and/or amended complaints were filed in the
Minnesota Federal District Courts making substantially the same allegations as
the earlier complaints. These complaints have been superseded by or deemed
included in the Third Amended and Consolidated Class Action
11
<PAGE> 14
Complaint, to which NMPC and EDP served and filed answers denying all the
material allegations thereof on or about July 22, 1994. On or about January 12,
1995 the Court granted plaintiffs' motion to certify the plaintiff class. On or
about December 21, 1995, the defendants filed motions for summary judgement. On
September 13, 1996 Magistrate Judge Erickson issued a Report and Recommendation
recommending that U.S. District Court Judge Kyle grant the motions filed by
NMPC, EDP and the other defendants for summary judgment as to all of the
plaintiffs' claims. Plaintiffs filed objections to the Report and Recommendation
under Rule 72 F.R.Civ.P. On January 2, 1997, after written briefs were submitted
by plaintiffs and defendants and after oral argument before Judge Kyle on
December 19, 1996, Judge Kyle issued an order accepting and adopting Magistrate
Judge Erickson's Report and Recommendation and ordering that the motions filed
by NMPC, EDP and the other defendants for summary judgment as to all of the
plaintiffs' claims be granted. Plaintiffs, by Notice of Appeal dated January 31,
1997, appealed Judge Kyle's order to the U.S. Court of Appeals for the Eighth
Circuit, before which oral argument on the appeal occurred on November 17, 1997.
On or about May 27, 1993 a purported class action captioned Angela
Coleman v. New Mexico Potash Corp., et al. was filed against the major Canadian
and United States potash producers, including EDP and NMPC, and unnamed
co-conspirators in the Superior Court of the State of California for the County
of Los Angeles. The Coleman action was commenced by Angela Coleman on behalf of
a class consisting of all California indirect purchasers of potash, and alleges
that the defendants conspired to fix, raise, maintain and stabilize the prices
of potash indirectly purchased by the members of the class in violation of
specified California antitrust and unfair competition statutes. The complaint in
Coleman seeks unspecified treble damages, attorneys' fees and injunctive relief
against the defendants. In addition, on or about March 29, 1994, a purported
class action captioned Neve Bros. et al. v. Potash Corporation of Saskatchewan,
et. al., was commenced in the Superior Court of the State of California for the
City and County of San Francisco against the major Canadian and United States
potash producers and unnamed co-conspirators. EDP, NMPC, NMPC's parent, Cedar,
Cedar's parent corporation, Nine West Corporation ("Nine West"), and the Company
are among the named defendants in the Neve action. The Neve action, also brought
on behalf of a class of indirect purchasers of potash in California, makes
substantially the same allegations as made in the Coleman action and seeks
substantially the same legal and equitable remedies and relief. Nine West and
the Company have been dismissed from the Neve action, in each case for lack of
personal jurisdiction. Cedar, EDP and NMPC have served and filed answers in the
Neve action, and EDP and NMPC have served and filed answers in the Coleman
action, in each case denying all material allegations of the respective
complaint. The Coleman action has been consolidated with the Neve action in the
Superior Court of the State of California for the City and County of San
Francisco. By stipulation, this consolidated action has been stayed pending the
outcome of the appeal to the Court of Appeals for the Eighth Circuit in the
federal action discussed above.
Management has no knowledge of any conspiracy of the type alleged in
these complaints.
In June 1996, the grand jury authorized by the U.S. Department of Justice
Antitrust Division to investigate possible violations of the antitrust laws in
connection with the allegations made in the civil actions described above closed
its investigation without bringing any action.
On October 24, 1995, several suits were filed in both the State Court in
Bogalusa, Louisiana and in the United States District Court for the Eastern
District of Louisiana, each purporting to be class actions arising out of an
October 23, 1995 explosion of a tank car at a plant of a Vicksburg customer
located in Bogalusa, Louisiana. The tank car contained nitrogen tetroxide which
had been produced and sold by Vicksburg. Subsequently, approximately 146 suits
were filed in the State Court for the 22nd Judicial District, Washington Parish,
Louisiana. The cases have been consolidated in this State Court and the
consolidated suit certified as a class action. The class is estimated to contain
approximately 8,000 claimants. Vicksburg, Cedar and the Company are included
among the defendants in the class action. In addition, two later suits, one on
behalf of the City of Bogalusa, have been filed in the same court naming, among
the defendants, Vicksburg, Cedar and the Company. Also, 10 separate suits naming
an aggregate of more than 8,000 plaintiffs have been filed in the Circuit Court
of Hinds County, Mississippi naming, among the defendants, Vicksburg, Cedar and
the Company. Among other defendants included in the consolidated Louisiana class
action and in the Mississippi suits are Gaylord Chemical Company and its parent
corporation, Gaylord Container Corporation; Union Tank Car Company; Illinois
Central Railroad; and Kansas City Southern Railroad. The plaintiffs in all of
these suits seek unspecified damages arising out of the alleged exposure to
toxic fumes which were allegedly released as a result of the explosion and the
City of Bogalusa also seeks reimbursement of expenses allegedly resulting from
the
12
<PAGE> 15
explosion. The Company has filed motions and/or exceptions in the Mississippi
and Louisiana actions denying personal jurisdiction, which motions/exceptions
remain pending. The Mississippi court has established a trial date for an
initial group of plaintiffs to be determined for September 1998. The Louisiana
court has established a plan culminating in a trial in October 1998. The suits
have been tendered to the Company's liability insurance carriers for defense and
indemnification. Vicksburg and Cedar have commenced an action in the 22nd
Judicial District Court, Washington Parish, Louisiana against their principal
insurance carriers (whose insurance policies also include the Company as an
additional named insured) seeking a declaratory judgement that Cedar and
Vicksburg are entitled to defense costs and indemnification with respect to
these claims.
There are several other legal proceedings pending against the Company and
certain of its subsidiaries arising in the ordinary course of its business which
management does not consider material.
Management of the Company believes, based upon its assessment of the
actions and claims outstanding against the Company and certain of its
subsidiaries, and after discussion with counsel, that the eventual disposition
of the matters described or referred to above should not have a material adverse
effect on the financial position, future operations or liquidity of the Company.
However, management of the Company cannot predict with certainty the outcome of
the potash and Louisiana matters described above.
For information relating to certain environmental proceedings affecting
the Company, see "Environmental Matters" in Item 1 above, "Business."
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1997.
13
<PAGE> 16
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
All of the Company's equity securities are owned by TPR Investment
Associates, Inc. ("TPR"). See Part III Item 12 - "Security Ownership of Certain
Beneficial Owners and Management." In addition, see Note G of Notes to
Consolidated Financial Statements for information regarding certain restrictions
on the Company's payment of dividends. During 1995, 1996 and 1997, the Company
paid or declared dividends on its Common Stock in the amounts of $856,000,
$5,208,000 and $3,736,000, respectively.
ITEM 6. Selected Financial Data
The following table presents selected consolidated financial data of
the Company for the five year period ended December 31, 1997. This data has been
derived from the consolidated financial statements of the Company and should be
read in conjunction with the notes thereto.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues .............................. $ 326,315 $ 334,107 $ 385,564 $ 412,305 $ 376,531
Operating costs and expenses:
Cost of goods sold .................. 255,563 265,795 323,126 343,930 305,588
General and administrative .......... 38,375 37,780 43,193 46,419 42,622
--------- --------- --------- --------- ---------
Operating income ...................... 32,377 30,532 19,245 21,956 28,321
Interest expense ...................... (27,405) (28,369) (34,498) (32,195) (29,475)
Interest and other income - net (1) ... 6,014 15,056 9,128 25,448 5,550
--------- --------- --------- --------- ---------
Income (loss) before income taxes,
and extraordinary item .............. 10,986 17,219 (6,125) 15,209 4,396
Income tax provision .................. 7,920 14,669 733 4,016 2,952
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item 3,066 2,550 (6,858) 11,193 1,444
Extraordinary item - net .............. (8,830) -- (103) (553) --
--------- --------- --------- --------- ---------
Net income (loss) ..................... $ (5,764) $ 2,550 $ (6,961) $ 10,640 $ 1,444
========= ========= ========= ========= =========
Dividends:
Preferred stock ....................... $ -- $ -- $ 851 $ 851 $ 850
Common stock .......................... 7,508 4,466 856 5,208 3,736
</TABLE>
(1) Includes (a) gains of $18,100,000 and $1,700,000 in the years ended
December 31, 1994 and 1995, respectively, representing the excess of
insurance proceeds over the carrying value of certain HCL property
destroyed in a fire, (b) security gains (losses) of $2,261,000,
($1,178,000), ($413,000), $341,000 and $2,713,000 for the years ended
December 31, 1993, 1994, 1995, 1996 and 1997, respectively, (c) foreign
currency gains (losses) of $850,000, ($3,800,000), $5,400,000,
($1,600,000) and $0 for the years ended December 31, 1993, 1994, 1995,
1996 and 1997, respectively, and (d) a gain of $22,579,000 in the year
ended December 31, 1996 relating to the Company's sale of its potash
operations in 1996. See Item 7 - "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Notes A and K of
Notes to Consolidated Financial Statements.
14
<PAGE> 17
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Financial Position:
Cash and cash equivalents ........ $ 25,742 $ 15,571 $ 32,872 $ 29,112 $ 19,757
Working capital .................. 103,776 66,294 82,011 86,986 73,597
Total assets ..................... 365,865 550,954 467,102 426,631 462,016
Short-term debt, including current
maturities of long-term debt ... 47,282 157,986(a) 46,848 32,829 49,660
Long-term debt, excluding current
maturities and subordinated debt 61,328 102,059 174,506 152,539 154,726
Senior subordinated debt - net ... 140,133 140,385 114,074 114,175 114,288
Junior subordinated debt - net ... 15,495 7,981 -- -- --
Stockholder's equity ............. 15,794 20,550 20,675 26,254 23,607
</TABLE>
(a) Was collateralized, in part, by $100,000,000 of certificates of
deposit, which were included in "other current assets" in the December
31, 1994 Consolidated Balance Sheet.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The following table sets forth as a percentage of revenues and the
percentage change of those items as compared to the prior period, certain items
appearing in the Consolidated Financial Statements.
<TABLE>
<CAPTION>
Percentage of Revenue
-----------------------------------
Year Ended December 31,
-----------------------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Revenues:
Specialty Plant Nutrients ........ 49.1% 52.5% 58.6%
Industrial Chemicals ............. 25.4 28.4 28.9
Organic Chemicals ................ 11.6 10.6 12.5
Potash ........................... 13.9 8.5 --
----- ----- -----
Total revenues ................... 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of goods sold ............... 83.8 83.4 81.2
General and administrative ....... 11.2 11.3 11.3
----- ----- -----
Operating income ...................... 5.0 5.3 7.5
Interest expense ................. (8.9) (7.8) (7.8)
Interest and other income - net .. 2.3 6.2 1.5
----- ----- -----
Income (loss) before income taxes and
extraordinary item ............... (1.6) 3.7 1.2
Income tax provision .................. 0.2 1.0 0.8
----- ----- -----
Income (loss) before extraordinary item (1.8) 2.7 0.4
Extraordinary item - net .............. -- (0.1) --
----- ----- -----
Net income (loss) ..................... (1.8)% 2.6% 0.4%
===== ===== =====
</TABLE>
1997 Compared with 1996
Revenues decreased by 8.7% to $376,531,000 in 1997 from $412,305,000 in
1996, a decrease of $35,774,000. The decrease resulted from a $35,300,000
reduction in sales associated with the Company's sale of its potash operations
15
<PAGE> 18
and a $3,900,000 decrease in sales of Specialty Plant Nutrients and Industrial
Chemicals primarily as a result of the HCL Labor Dispute and less favorable
currency exchange rates in 1997. These decreases in sales were partially offset
by higher sales of Organic Chemicals of $3,400,000. See Part I - Item 1 -
"Business" - "Significant Developments" and "Employees" above.
Cost of goods sold as a percentage of revenues decreased to 81.2% in 1997
compared with 83.4% in 1996. Gross profit was $70,943,000 in 1997, or 18.8% of
revenues, compared with $68,375,000 in 1996, or 16.6% of revenues. The primary
factors resulting in the increased gross profit were related to higher Organic
Chemicals margins in the 1997 period, lower raw material and energy costs and
increased selling prices for the Company's Specialty Plant Nutrients and
Industrial Chemicals, with such increases partially offset by less favorable
currency exchange rates in the 1997 period of $15,000,000.
Both 1997 and 1996 were adversely affected by the HCL Labor Dispute. The
adverse effect of the HCL Labor Dispute related to: (i) a reduction in sales
volume; (ii) the increased cost of production resulting from reduced
manufacturing during the period which affected the fixed charge component of
cost of sales; and (iii) lower gross margins due to inventory shortages which
required purchases from third parties at substantially increased costs compared
to the Company's costs. These adverse impacts were partially offset by lower
labor costs during the HCL Labor Dispute and the net proceeds received from the
Israeli manufacturers association under HCL's claim for damages, amounting to
$3,100,000 and $2,000,000 in the years ended December 31, 1997 and 1996,
respectively, applied for partial contribution towards the costs suffered during
the period of the labor disruption.
General and administrative expense decreased by $3,797,000 to $42,622,000
in 1997, from $46,419,000 in 1996, but remained the same as a percentage of
revenues at 11.3%. Most of the decreased expense related to the Company's potash
operations, which were sold in 1996. In addition, during the 1997 period,
certain HCL general and administrative expenses declined as a result of lower
wages.
As a result of the matters described above, the Company's operating
income increased by $6,365,000 to $28,321,000 in 1997 as compared with
$21,956,000 in 1996. As a percentage of revenues operating income increased to
7.5% in 1997 from 5.3% in 1996.
Interest expense decreased by $2,720,000 to $29,475,000 in 1997 compared
with $32,195,000 in 1996 primarily as a result of: (i) the maturity of the
Company's Senior Subordinated Reset Notes in September 1996 and (ii) the
prepayment of senior bank debt with a portion of the proceeds from the sale of
the Company's potash operations. Interest and other income - net decreased in
1997 by $19,898,000, principally as the result of the gain on the sale of the
Company's potash operations of $22,579,000 in the 1996 period, partially offset
by increased realized gains on sales of marketable securities in the 1997
period.
As a result of the above factors, income before income taxes and
extraordinary item decreased by $10,813,000 in 1997. The Company's provisions
for income taxes are impacted by the mix between domestic and foreign earnings
and vary from the U.S. Federal statutory rate principally due to the impact of
foreign operations and certain losses for which there is no current tax benefit.
In the 1996 period the Company acquired $19,122,000 principal amount of
its Senior Subordinated Reset Notes, which resulted in a loss of $553,000. Such
loss (which has no current tax benefit) is classified as an extraordinary item
in the accompanying Consolidated Statements of Operations. No such debt was
acquired in the 1997 period.
1996 Compared with 1995
Revenues increased by 6.9% to $412,305,000 in 1996 from $385,564,000 in
1995, an increase of $26,741,000. This increase resulted from increased sales of
Specialty Plant Nutrients and Industrial Chemicals of $45,900,000, partially
offset by decreased sales of Organic Chemicals of $800,000 and Potash of
$18,400,000. Effective August 16, 1996, the Company sold its potash operations -
see Note A of Notes to Consolidated Financial Statements.
16
<PAGE> 19
Cost of goods sold as a percentage of revenues decreased to 83.4% in 1996
compared with 83.8% in 1995. Gross profit was $68,375,000 in 1996, or 16.6% of
revenues, compared with $62,438,000, or 16.2% of revenues, an increase of
$5,937,000. The primary factors resulting in the increased 1996 gross profit
were (i) more favorable currency rates, (ii) higher quantities of potassium
nitrate sold, (iii) the inclusion of the results of Na-Churs for the full year
in 1996 as compared with only nine months in 1995 and (iv) lower ammonia prices
in 1996. These increases were partially offset by lower Potash and Organic
Chemicals margins in 1996 and the adverse effect of the labor dispute and strike
at HCL commencing in October, 1996. See Part I - Item 1 - "Business" -
"Significant Developments" and "Employees" above.
As a result of the HCL Labor Dispute, the fourth quarter of 1996 was
significantly impacted by: (i) a reduction in sales volume; (ii) increased cost
of production resulting from reduced manufacturing which affected the fixed
charge component of cost of sales; (iii) the cost of raw materials destroyed in
the production process during work stoppages and job actions; (iv) lower gross
margins due to inventory shortages requiring purchases from third parties at
substantially increased costs compared to the Company's cost of production; and
(v) increased general and administrative expenses arising from higher security
and other costs. This adverse impact was partially offset by lower labor costs
during the HCL Labor Dispute and the net proceeds received from the Israeli
manufacturers association under HCL's claim for damages, applied for partial
contribution towards the costs suffered during the period of labor disruption.
General and administrative expense increased to $46,419,000 in 1996, or
11.3% of revenues, from $43,193,000 in 1995, or 11.2% of revenues, primarily as
a result of (i) the inclusion of the results of Na-Churs for the full year in
1996 and (ii) the inclusion in 1995 of a $750,000 reimbursement of certain
general and administrative expenses incurred in prior years on behalf of an
entity in which the Company has an investment.
As a result of the matters described above, the Company's operating
income increased by $2,711,000 to $21,956,000 in 1996 as compared with
$19,245,000 in 1995.
Interest expense decreased by $2,303,000 to $32,195,000 in 1996 compared
with $34,498,000 in 1995, primarily as a result of reduced interest expense
resulting from the repurchase and maturity of the Company's outstanding Senior
Subordinated Reset Notes, partially offset by increased interest on the
long-term debt that financed the construction of HCSL's Plant in Mishor Rotem,
Israel. Interest and other income - net increased in 1996 by $16,320,000
principally as the result of (i) the 1996 period including a $22,579,000 gain
relating to the sale of the Company's potash operations and an increase in
equity in the earnings of Laser of $2,600,000, partially offset by (ii) the net
change in adjustments relating to the marking-to-market of forward exchange
contracts which do not qualify as hedges of $7,000,000 and (iii) the inclusion
in 1995 of a $1,700,000 gain relating to the February, 1994 fire at HCL. See
Note K of Notes to Consolidated Financial Statements.
As a result of the above factors, income before income taxes and
extraordinary item increased by $21,334,000 in 1996. The Company's provisions
for income taxes are impacted by the mix between domestic and foreign earnings
and vary from the U.S. Federal statutory rate principally due to the impact of
foreign operations and certain losses for which there is no current tax benefit.
In addition, during 1995 HCL recorded a tax benefit for a $1,100,000 tax refund
related to prior years. See Note J of Notes to Consolidated Financial Statements
for information regarding effective tax rates.
In 1995 and 1996 the Company acquired $3,250,000 and $19,122,000,
respectively, of principal amount of its Senior Subordinated Reset Notes, which
resulted in losses of $103,000 and $553,000, respectively. Such losses (which
have no current tax benefit) are classified as extraordinary items in the
accompanying Consolidated Statements of Operations. See Note G of Notes to
Consolidated Financial Statements.
CAPITAL RESOURCES AND LIQUIDITY
The Company's consolidated working capital at December 31, 1997 and
1996 was $73,597,000 and $86,986,000, respectively.
17
<PAGE> 20
Operations for the years ended December 31, 1997, 1996 and 1995, after
adding back non-cash items, provided cash of approximately $22,800,000,
$11,100,000 and $16,100,000, respectively. During such years, other changes in
working capital used cash of approximately $13,100,000, $7,700,000 and
$14,300,000, respectively, resulting in net cash being provided from operating
activities and working capital management of approximately $9,700,000,
$3,400,000 and $1,800,000, respectively.
Investment activities during the years ended December 31, 1997, 1996
and 1995 provided (used) cash of approximately ($33,500,000), $35,300,000 and
$84,800,000, respectively. These amounts include: (i) additions to property in
1997, 1996 and 1995 of $26,900,000, $13,600,000 and $35,700,000, respectively;
(ii) purchases of marketable securities and other short-term investments in
1997, 1996 and 1995 of $7,700,000, $9,400,000 and $4,400,000, respectively;
(iii) sales of marketable securities and other short-term investments in 1997,
1996 and 1995 of $8,000,000, $2,000,000 and $132,300,000, respectively,
including a 1995 liquidation of certificates of deposit securing a bank loan,
and (iv) other items providing (using) cash in 1997, 1996 and 1995 of
($6,900,000), $56,400,000 and ($7,400,000), respectively, including, in 1996,
the gross proceeds relating to the Company's sale of its potash operations. The
property additions in 1995 include the completion of two major capital projects:
(i) replacement of the Company's potassium nitrate production facility in Haifa,
Israel damaged in a fire in 1994; and (ii) construction of the Company's new
operating facility in Mishor Rotem, Israel.
Financing activities during the years ended December 31, 1997, 1996
and 1995 provided (used) cash of approximately $14,400,000, ($42,500,000) and
($69,300,000), respectively. These amounts include: (i) a $100,000,000 loan
borrowed from a bank in 1994 and prepaid in 1995; (ii) borrowings to finance the
Company's construction of its Mishor Rotem facility in 1995; (iii) the Company's
acquisition of its Senior Subordinated Reset Notes in 1995 and 1996; and (iv)
the prepayment of certain bank debt in 1996 with a portion of the proceeds from
the sale of the Company's potash operations.
As of December 31, 1997, the Company had outstanding long-term debt
(excluding current maturities) of $269,014,000. The Company's primary sources of
liquidity are cash flow generated from operations and the unused credit lines
described in Note E of Notes to Consolidated Financial Statements. See also Note
G of Notes to Consolidated Financial Statements for information relating to the
Company's refinancing (the "Refinancing") of its 11 7/8% Senior Subordinated
Notes.
FORWARD-LOOKING LIQUIDITY AND CAPITAL RESOURCES
Upon consummation of the Refinancing, interest payments on the Senior
Notes and interest and principal repayments under other indebtedness will
represent significant obligations of the Company and its subsidiaries. For a
description of the amortization required on the Company's other indebtedness see
Note G of Notes to Consolidated Financial Statements. In 1997, the Company spent
approximately $26,900,000 on capital projects, of which: (i) approximately
$10,800,000 relates to the Company's initial capital expenditures pursuant to
its plan to increase capacity for potassium nitrate, food grade phosphates and
the construction of a plant to manufacture MAP and MKP; and (ii) $3,800,000
relates to the Company's construction of a co-generation facility. In addition,
the Company plans to complete its plan to increase capacity for potassium
nitrate and food grade phosphates and the construction of the MAP and MKP plant
by spending approximately $63,000,000 during 1998 and 1999. Ongoing maintenance
capital expenditures are expected to be approximately $13,000,000 per year.
The Company's primary sources of liquidity will be cash flows from
operations and borrowings under the credit facilities of the Company and its
subsidiaries. As of December 31, 1997, the Company and its subsidiaries had
approximately $72,000,000 of borrowing availability, consisting of $37,000,000
of borrowing availability of the Company and $35,000,000 of total availability
at the Company's subsidiaries. HCL intends to enter into a new $80,000,000
credit facility which will be used primarily to finance its planned capacity
expansion at its Mishor Rotem facility. Dividends and other distributions from
the Company's subsidiaries are, in part, a source of cash flow available to the
Company. The Company believes that, based on current and anticipated financial
performance, cash flow from operations, borrowings under the Company's credit
facilities and dividends and other distributions available from the Company's
subsidiaries will be adequate to meet anticipated requirements for capital
expenditures, working capital and
18
<PAGE> 21
scheduled interest payments. However, the Company's capital requirements may
change, particularly if the Company would complete any material acquisitions.
The ability of the Company to satisfy its capital requirements and to repay or
refinance its indebtedness will be dependent upon the future financial
performance of the Company, which in turn will be subject to general economic
conditions and to financial, business and other factors, including factors
beyond the Company's control.
FOREIGN CURRENCIES
The Company has no significant foreign currency denominated revenues
except at HCL. Approximately $135,000,000 of HCL's total sales for the year
ending December 31, 1998 will be made outside of Israel in currencies other than
the U.S. dollar (principally Western European currencies). Accordingly, to the
extent that the U.S. dollar weakens or strengthens versus the applicable
corresponding foreign currency, HCL's results are favorably or unfavorably
affected. In order to mitigate the impact of currency fluctuations against the
U.S. dollar, the Company has a policy of hedging a significant portion of its
foreign sales denominated in Western European currencies by entering into
forward exchange contracts. A portion of these contracts qualify as hedges
pursuant to Statement of Financial Accounting Standards No. 52 and, accordingly,
applicable unrealized gains and losses arising therefrom are deferred and
accounted for in the subsequent year as part of sales. Unrealized gains and
losses for the remainder of the forward exchange contracts are recognized in
income currently. If the Company had not followed such a policy of entering into
forward exchange contracts in order to hedge its foreign sales, and instead
recognized income based on the then prevailing foreign currency rates, the
Company's income before income taxes for the years ended December 31, 1997, 1996
and 1995 would have increased (decreased) by approximately ($7,000,000),
($5,300,000) and $11,200,000, respectively.
The principal purpose of the Company's hedging program (which is for
other than trading purposes) is to mitigate the impact of fluctuations against
the U.S. dollar, as well as to protect against significant adverse changes in
exchange rates. Accordingly, the gains and losses recognized relating to the
hedging program in any particular period and the impact on revenues had the
Company not had such a program are not necessarily indicative of its
effectiveness.
INFLATION
Inasmuch as only approximately $59,000,000 of HCL's annual operating costs
are denominated in New Israeli Shekels ("NIS"), HCL is exposed to inflation in
Israel to a limited extent. The combination of price increases coupled with
devaluation of the NIS have in the past generally enabled HCL to avoid a
material adverse impact from inflation in Israel. However, HCL's earnings could
increase or decrease to the extent that the rate of future NIS devaluation
differs from the rate of Israeli inflation. For the years ended December 31,
1997, 1996 and 1995, the inflation rate of the NIS as compared to the U.S.
Dollar was greater (less) than the devaluation rate in Israel by (1.8%), 6.9%
and 4.2%, respectively.
ENVIRONMENTAL MATTERS
See Part I - Item 1 - "Business" - "Environmental Matters" above and Note O
of Notes to Consolidated Financial Statements for information regarding
environmental matters relating to the Company's various facilities.
OTHER MATTERS
The Company is evaluating the potential impact of the situation commonly
referred to as the "Year 2000 problem". The Year 2000 problem, which is common
to most corporations, concerns the inability of information systems, primarily
computer software programs, to properly recognize and process date sensitive
information related to the year 2000. Preliminary assessment indicates that
solutions will involve a mix of purchasing new systems and modifying existing
systems and confirming vendor compliance. The Company is currently evaluating
the expected costs to be incurred in connection with the Year 2000 problem, but
expects that such costs will not be significant.
19
<PAGE> 22
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"), and SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 131 establishes standards
for reporting financial and descriptive information for reportable segments on
the same basis that is used internally for evaluating segment performance and
the allocation of resources to segments. The Company is evaluating the effect,
if any, of SFAS 131, on its operating segment reporting disclosure. SFAS 130
establishes standards for presenting certain items that are excluded from net
income and reported as components of stockholders' equity, such as foreign
currency translation. These statements are effective for fiscal years beginning
after December 15, 1997. The adoption of these statements will not have a
material effect on the Company's results of operations or financial position.
ITEM 8. Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements and Schedules on page F-1.
ITEM 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
20
<PAGE> 23
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Arie Genger 52 Chairman of the Board and Chief Executive Officer
Thomas G. Hardy 52 President and Chief Operating Officer; Director
Gabriel Politzer 48 Senior Vice President
Lester W. Youner 52 Vice President, Treasurer and Chief Financial Officer and Secretary
John J. Lewandowski 42 Vice President--Corporate Development
Michael P. Oravec 46 Vice President--Corporate Taxation
Martin A. Coleman 67 Director
Sash A. Spencer 66 Director
</TABLE>
In addition, the following are key employees of the Company's
subsidiaries:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Amiad Cohen 60 Managing Director of HCL; President of HCL, effective April 1, 1998
Esther Eldan 43 General Manager of HCL's Specialty Fertilizer Division; Managing
Director of HCL, effective April 1, 1998
J. Randal Tomblin 55 Senior Vice President of Cedar and President of the Organic
Chemicals Division
Yale L. Schalk 42 President of Vicksburg
</TABLE>
The Financial Advisory Committee advises the Board of Directors regarding
financial matters and, when the Committee deems appropriate, makes
recommendations to the Board of Directors. The members of the Financial Advisory
Committee are Mr. Lawrence M. Small and Messrs. Hardy and Spencer.
The following are descriptions of the directors, executive officers and
key employees of the Company.
Arie Genger has been a director and Chairman of the Board of Directors
and Chief Executive Officer of the Company since 1986, the sole member of the
Executive Committee since June 1988, and was President of the Company from 1986
to December 1993.
Thomas G. Hardy has been President and Chief Operating Officer of the
Company since December 1993, was Executive Vice President of the Company from
June 1987 to December 1993 and has been a director and member of the Financial
Advisory Committee since October 1992. He was a director of Laser from January
1990 until February
21
<PAGE> 24
1998 and has been a director of ESC since February 1998 (see Part I - Item 1 -
"Business" - "Significant Developments").
Gabriel Politzer has been a Senior Vice President of the Company since
January 1, 1998, with responsibilities for the Company's worldwide Specialty
Plant Nutrients products. He was Executive Vice President of Vicksburg from
September 1993 to January 1998. From January 1989 through September 1993, he was
Vice President of Sales and Marketing at HCL. From 1983 to 1989 he was Chief
Financial Officer of Negev Phosphates (a major subsidiary of Israel Chemicals
Ltd.).
Lester W. Youner has been Vice President, Treasurer and Chief Financial
Officer of the Company since October 1987 and has been Secretary since December
31, 1996. From June 1979 until October 1987 he was a Partner of Deloitte &
Touche LLP, a public accounting firm. He was a director of Laser from November
1996 to February 1998.
John J. Lewandowski has been Vice President-Corporate Development of the
Company since September 1996. From September 1995 until August 1996 he served as
the President of the Company's Potash Group. From January 1995 (when he accepted
a position with the Company) until September 1995 he served as the Company's
Director of Business Development. From 1991 through 1994 he served in a variety
of consulting and business advisory roles for several chemical producers in the
United States and Eastern Europe. From 1983 to 1990 he was employed by Arcadian
Corporation, in positions of increasing responsibility, his last position being
Director--Nitrogen Products.
Michael P. Oravec has been Vice President-Corporate Taxation since
January 1997. From December 1994 (when he accepted a position with the Company)
until December 1996 he served as the Company's Director of Taxes. From 1980 to
1994 he was employed by The Mennen Company, in positions of increasing
responsibility, his last position being Director of Taxes.
Martin A. Coleman has been a director since March 1993. Since January
1991 he has been a private investor. Prior to that he was a member of the law
firm of Rubin Baum Levin Constant & Friedman, general counsel to the Company,
for more than five years.
Sash A. Spencer has been a director since October 1992 and a member of
the Financial Advisory Committee since March 1993. He has been an investor and
Chairman of Holding Capital Management Corp., a private investment firm, for
more than five years and is on the board of directors of several private
companies.
Amiad Cohen has been the Managing Director of HCL since 1988. Mr. Cohen
has over thirty years of experience in the chemical industry. Effective April 1,
1998, Mr. Cohen will become the President of HCL.
Esther Eldan has been general manager of HCL's Specialty Fertilizer
Division since its inception in January 1996. Previously, she was the Chief
Financial Officer of HCL for more than five years. Ms. Eldan joined HCL in 1981.
Effective April 1, 1998, Ms. Eldan will become the Managing Director of HCL.
J. Randal Tomblin has been Senior Vice President of Cedar and President
of its Organics Division since 1989. He was Vice President of NMPC from 1985 to
1986, President and Chief Executive Officer of Vertac Chemical Corporation from
1986 to 1987 and was in private business for a period between 1987 and 1989.
Prior to joining NMPC, he served for 20 years with Hoechst Celanese Corporation,
most recently as a Director of Manufacturing with Hoechst Celanese Chemical
Company, and Director of Strategic Planning and Director of New Business
Development with Hoechst Celanese Fibers Division.
Yale L. Schalk joined the Company in December of 1997 as President of
Vicksburg after over 20 years of experience with Shell Oil Company and DuPont,
where he held a variety of positions in sales, marketing and business
management. Most recently from 1994 to 1997, he was U.S. Marketing Manager,
interim Director of U.S. Business and North American Business Unit Leader of
DuPont's Agricultural Products Division.
22
<PAGE> 25
Lawrence M. Small, 56, has been Chairman of the Financial Advisory
Committee of the Board of Directors since October 1992. Mr. Small is President
and Chief Operating Officer of Fannie Mae, the country's largest investor in
home mortgages and issuer of mortgage-backed securities, headquartered in
Washington, DC, which he joined in September 1991. Prior to that, he was Vice
Chairman and Chairman of the Executive Committee of the Boards of Directors of
Citicorp and Citibank, N.A., where he was employed for 27 years. He serves as a
director of Fannie Mae, The Chubb Corporation and Marriott International, Inc.
Directors hold office until the next annual meeting of stockholders or
until their successors are elected and qualified. There are no arrangements or
understandings between any director or executive officer of the Company and any
other person pursuant to which such person was elected as a director or
executive officer. The executive officers serve at the discretion of the Board
of Directors.
There are no family relationships among any directors, executive officers
or key employees of the Company.
ITEM 11. Executive Compensation
The following table sets forth the aggregate compensation paid or accrued
by the Company for the past three fiscal years to its Chief Executive Officer
and to other executive officers during the 1997 fiscal year whose annual
compensation exceeded $100,000 for the year ended December 31, 1997:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (a)
------------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(b)
- ---------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C>
Arie Genger ............................ 1997 $750,000 $400,000 $ 797,000
Chairman of the Board and Chief ..... 1996 750,000 750,000 682,000
Executive Officer ................... 1995 675,000 -- 510,000
Thomas G. Hardy ........................ 1997 425,000 150,000 5,000
President and Chief Operating Officer 1996 400,000 175,000 1,405,000
and Director ........................ 1995 360,000 130,000 5,000
Lester W. Youner ....................... 1997 263,000 75,000 5,000
Vice President, Treasurer and Chief . 1996 251,000 100,000 5,000
Financial Officer and Secretary ..... 1995 241,000 65,000 5,000
John J. Lewandowski .................... 1997 125,000 35,000 4,000
Vice President--Corporate Development 1996 120,000 105,000 4,000
Michael P. Oravec ...................... 1997 118,000 18,000 5,000
Vice President--Corporate Taxation
</TABLE>
- ------------------
(a) During the period covered by the table, the Company did not make any
restricted stock awards and did not have in effect any stock option or stock
appreciation rights plan. See "Compensation Agreements" for Mr. Hardy's bonus
arrangement.
(b) Includes the cost to the Company of split-dollar life insurance policies on
the life of Mr. Genger. The Company paid premiums on these policies of $286,000
in 1997. The Company is entitled to a refund of the cumulative annual premiums
paid by it to the insurers pursuant to the split-dollar life insurance
arrangements before any benefits are paid by the insurers to the owner or
beneficiaries of the policies. Additionally, for 1997, includes: (i) in the case
of Mr. Genger, $250,000 for an annual premium on ordinary life insurance,
$250,000 for related income tax gross-up, $4,000 for the Company's matching
contribution to a profit sharing thrift plan, and $7,000 for the premium on term
life insurance; (ii) in the case of Messrs. Hardy, Youner, Lewandowski and
Oravec, $4,000 each for the Company's matching contribution to a profit sharing
thrift plan; and (iii) $1,000 each for Messrs. Hardy, Youner and Oravec for the
premium on term life and disability insurance.
23
<PAGE> 26
Includes the cost to the Company of split-dollar life insurance policies
on the life of Mr. Genger. The Company paid premiums on these policies of
$171,000 in 1996. The Company is entitled to a refund of the cumulative annual
premiums paid by it to the insurers pursuant to the split-dollar life insurance
arrangements before any benefits are paid by the insurers to the owner or
beneficiaries of the policies. Additionally, for 1996, includes: (i) in the case
of Mr. Genger, $250,000 for an annual premium on ordinary life insurance,
$250,000 for related income tax gross-up, $4,000 for the Company's matching
contribution to a profit sharing thrift plan, and $7,000 for the premium on term
life insurance; (ii) in the case of Messrs. Hardy, Youner and Lewandowski,
$4,000 each for the Company's matching contribution to a profit sharing thrift
plan; and (iii) $1,000 each for Messrs. Hardy and Youner for the premium on term
life insurance. In the case of Mr. Hardy, also includes $1,400,000 deposited in
trust for Mr. Hardy. See "Compensation Agreements".
For 1995, consists of: (i) in the case of Mr. Genger, $250,000 for an
annual premium on ordinary life insurance, $250,000 for related income tax
gross-up, $4,000 for the Company's matching contribution to a profit sharing
thrift plan, and $6,000 for the premium on term life insurance; (ii) in the case
of Messrs. Hardy and Youner, $4,000 each for the Company's matching contribution
to a profit sharing thrift plan; and (iii) $1,000 each for Messrs. Hardy and
Youner for the premium on term life insurance.
COMPENSATION AGREEMENTS
Pursuant to an Agreement entered into in March 1994 (the "New
Agreement"), which modified and superseded a 1988 bonus arrangement under which
no payments had been made, the Company was required to irrevocably deposit in
trust for the benefit of Mr. Hardy an aggregate of $2,800,000, of which
$1,400,000 was deposited upon execution of the New Agreement, and the remaining
$1,400,000 was deposited in March, 1996. The deposited funds are held under a
Trust Agreement (the "Trust Agreement"), which provides that the assets held
thereunder are subject to the claims of the Company's general creditors in the
event of insolvency of the Company. The Trust Agreement provides that the assets
are payable in a lump sum to Mr. Hardy or his beneficiaries upon the earlier of
December 1, 2001 or the termination of his employment with the Company.
An employment agreement between the Company and Mr. Hardy, effective as
of June 1, 1993, having a primary term of seven years, renewable for 10
additional years unless either party gives at least 12 months' prior written
notice of termination, provides for an annual salary of $400,000, subject to
negotiated annual increases commencing in the year 2000. With certain
restrictions, Mr. Hardy will be entitled to receive a bonus (the "Bonus") based
on a percentage of the fair market value (the "Value") of the Company's equity
at December 31st of the year Mr. Hardy's employment terminates, he turns 65 or
certain acceleration events, including a change of control of the Company,
occur. If the Company and Mr. Hardy cannot agree on the Value, each may propose
an amount. If only one makes a proposal, that would constitute the Value. If
each makes a proposal, an investment banker would choose between them. The
Bonus, generally payable in installments, would be equal to the excess over
$2,800,000 (the aggregate amount Mr. Hardy received under the New Agreement) of
specified percentages of different ranges of Value. Mr. Hardy is not entitled to
the Bonus if he voluntarily terminates his employment during the primary term
(other than by death or disability) or if Mr. Hardy's employment is terminated
for cause (as defined).
Pursuant to a salary continuation agreement between the Company and
Lester W. Youner, the Company is obligated to pay Mr. Youner a retirement
allowance (the "Allowance") of $100,000 per year for life commencing at age 65.
In the event of Mr. Youner's death after the commencement of the payment of the
Allowance, Mr. Youner's designated beneficiary is to receive the Allowance until
10 annual payments shall have been made to Mr. Youner and his beneficiary. Mr.
Youner became 30% vested in the Allowance on December 31, 1997 and shall
continue to vest at the rate of 5% per year thereafter provided that he remains
in the employ of the Company. Notwithstanding the foregoing, the Allowance will
become 100% vested on the earlier of Mr. Youner's 65th birthday or the
occurrence of an acceleration event, including a change of control of the
Company. Mr. Youner forfeits the Allowance if his employment is terminated for
cause (as defined) or, if within two years after the voluntary termination of
his employment, Mr. Youner engages directly or indirectly in any activity
competitive with the Company or any of its subsidiaries. The agreement further
provides that in the event of Mr. Youner's death prior to his 65th birthday
while in
24
<PAGE> 27
the active employ of the Company, his designated beneficiary is to receive an
annual death benefit of $100,000 for 10 years. Mr. Youner's death benefit is
currently 100% vested.
The Company is also a party to certain split-dollar insurance agreements
on the life of Mr. Genger as described above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors does not have a Compensation Committee. Executive
officer compensation matters were determined by the Board of Directors, whose
four members currently include Mr. Genger, Chairman of the Board and Chief
Executive Officer of the Company, and Mr. Hardy, President and Chief Operating
Officer of the Company. No director has a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.
COMPENSATION OF DIRECTORS
Officers of the Company who serve as directors do not receive any
compensation for serving as directors. Martin A. Coleman and Sash A. Spencer
each receive $15,000 annually for serving as directors.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of March 20, 1998,
as to the beneficial ownership of the Common Stock of the Company, which is the
only outstanding class of voting security of the Company:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OWNED PERCENT OF CLASS
- ---------------- ------------ ----------------
<S> <C> <C>
Common Stock, $.01 par value(a):
TPR(b)
9 West 57th Street
New York, NY 10019 ........................ 3,000 100%
All executive officers and directors
as a group (eight persons)(b) ............. 3,000 100%
</TABLE>
- -----------------
(a) All of the shares of the Common Stock of the Company are pledged to secure
an outstanding TPR note of $7,000,000 issued to a former indirect stockholder
and director of the Company. See Item 13--"Certain Relationships and Related
Transactions" regarding TPR's ownership of shares of a non-voting preferred
stock of the Company.
(b) Mr. Genger and members of his family own all of the capital stock of TPR.
ITEM 13. Certain Relationships and Related Transactions
The Company is, for Federal income tax purposes, a member of a
consolidated tax group of which TPR is the common parent. The Company, TPR, EDP,
Cedar, Na-Churs and certain other subsidiaries are parties to a tax sharing
agreement, dated as of December 30, 1991, under which, among other things, the
Company and such other parties have each agreed to pay TPR amounts equal to the
amounts of Federal income taxes that each such party would be required to pay if
it filed a Federal income tax return on a separate return basis (or in the case
of Cedar, a consolidated Federal income tax return for itself and its eligible
subsidiaries), computed without regard to net operating loss carrybacks and
25
<PAGE> 28
carryforwards. However, TPR may, at its discretion, allow tax benefits for such
losses. See Note A of Notes to Consolidated Financial Statements.
See Notes G and L of Notes to Consolidated Financial Statements for a
description of a 1994 transaction pursuant to which TPR acquired the Company's
outstanding $9,000,000, 9.5% junior subordinated debentures due 2005 (the "9.5%
Debentures") and became the obligor on an outstanding 8.75%, $4,000,000 note due
2005 payable to the Company. Upon TPR's acquisition of the 9.5% Debentures, TPR
exchanged the 9.5% Debentures for a new preferred stock of the Company described
in said Note L. In addition, during 1995 TPR assumed the Company's obligation
for $9,000,000 principal amount of outstanding 9.5% Debentures due in 1998 and
Company's liability thereon was extinguished. TPR pledged the above-mentioned
Company preferred stock to secure TPR's $9,000,000 obligation.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1)-(2) See Index to Consolidated Financial Statements and Schedule on
Page F-1.
(3) See Index to Exhibits on Page E-1.
(b) No reports on Form 8-K were filed during the last quarter of the year ended
December 31, 1997.
26
<PAGE> 29
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Trans-Resources, Inc.
(Registrant)
By Lester W. Youner
---------------------
Lester W. Youner
Vice President, Treasurer
and Chief Financial Officer
Dated: March 20, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED:
PRINCIPAL EXECUTIVE OFFICER:
ARIE GENGER
Chairman of the Board and Chief Executive Officer
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
LESTER W. YOUNER
Vice President, Treasurer and Chief Financial Officer
By Lester W. Youner
Lester W. Youner
For Himself and As Attorney-In-Fact
Directors:
Arie Genger Dated: March 20, 1998
Thomas G. Hardy
Martin A. Coleman
Sash A. Spencer
POWERS OF ATTORNEY AUTHORIZING LESTER W. YOUNER TO SIGN THIS REPORT AND ANY
AMENDMENTS HERETO ON BEHALF OF THE PRINCIPAL EXECUTIVE OFFICER AND THE DIRECTORS
ARE BEING FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITH THIS REPORT.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT:
No annual report or proxy materials have been sent to the Company's
security holders. This Annual Report on Form 10-K will be furnished to the
holders of the Company's 11 7/8% Notes.
27
<PAGE> 30
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
FINANCIAL STATEMENTS Page
- -------------------- ----
Independent Auditors' Report...................................... F-2
Report of Independent Accountants................................. F-3
Consolidated Balance Sheets, December 31, 1996 and 1997........... F-4
Consolidated Statements of Operations,
for the Years Ended December 31, 1995, 1996 and 1997.......... F-5
Consolidated Statements of Stockholder's Equity,
for the Years Ended December 31, 1995, 1996 and 1997.......... F-6
Consolidated Statements of Cash Flows,
for the Years Ended December 31, 1995, 1996 and 1997.......... F-7
Notes to Consolidated Financial Statements........................ F-8
SCHEDULE
- --------
Schedule I - Condensed Financial Information of Registrant,
for the Years Ended December 31, 1995, 1996 and 1997.......... S-1
F - 1
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of Trans-Resources, Inc.
New York, New York
We have audited the accompanying consolidated financial statements and financial
statement schedule of Trans-Resources, Inc. (a wholly-owned subsidiary of TPR
Investment Associates, Inc.) and Subsidiaries listed in the foregoing Index.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We did not audit the consolidated financial statements of Cedar
Chemical Corporation, a wholly-owned subsidiary, which statements reflect total
assets constituting 22 percent and 20 percent of consolidated total assets as of
December 31, 1997 and 1996, respectively, and total revenues constituting 31
percent, 33 percent and 34 percent of consolidated total revenues for the years
ended December 31, 1997, 1996 and 1995, respectively. Such financial statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for Cedar Chemical
Corporation, is based solely on the report of such other auditors.
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Trans-Resources, Inc. and Subsidiaries as of December 31,
1997 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, based on our
audits and (as to the amounts included for Cedar Chemical Corporation) the
report of other auditors, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
February 25, 1998 (except as to Note G, the date of which is March 16, 1998)
New York, New York
F - 2
<PAGE> 32
Report of Independent Accountants
To the Board of Directors and Shareholder
of Cedar Chemical Corporation:
In our opinion, the consolidated balance sheets and the related consolidated
statements of income and retained earnings and of cash flows (not presented
separately herein) present fairly, in all material respects, the financial
position of Cedar Chemical Corporation (a wholly-owned subsidiary of
Trans-Resources, Inc.) and its subsidiaries ("Cedar") at December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Cedar's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Memphis, Tennessee
January 30, 1998
F - 3
<PAGE> 33
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1996 1997
--------- ---------
(in thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 29,112 $ 19,757
Accounts receivable .................................................. 71,551 82,551
Inventories .......................................................... 51,207 60,126
Other current assets ................................................. 24,664 33,578
Prepaid expenses ..................................................... 14,635 16,122
--------- ---------
Total Current Assets ............................................. 191,169 212,134
PROPERTY, PLANT AND EQUIPMENT - net ....................................... 200,774 207,487
OTHER ASSETS .............................................................. 34,688 42,395
--------- ---------
Total ............................................................ $ 426,631 $ 462,016
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ................................. $ 17,481 $ 13,080
Short-term debt ...................................................... 15,348 36,580
Accounts payable ..................................................... 38,033 58,662
Accrued expenses and other current liabilities ....................... 33,321 30,215
--------- ---------
Total Current Liabilities ........................................ 104,183 138,537
--------- ---------
LONG-TERM DEBT - net:
Senior indebtedness, notes payable and other obligations ............. 152,539 154,726
Senior subordinated debt - net ....................................... 114,175 114,288
--------- ---------
Long-Term Debt - net ............................................. 266,714 269,014
--------- ---------
OTHER LIABILITIES ......................................................... 29,480 30,858
--------- ---------
STOCKHOLDER'S EQUITY:
Preferred stock, $1.00 par value, 100,000 shares
authorized, issued and outstanding ............................... 7,960 7,960
Common stock, $.01 par value, 3,000 shares
authorized, issued and outstanding ............................... -- --
Additional paid-in capital ........................................... 8,682 8,682
Retained earnings .................................................... 9,345 6,203
Cumulative translation adjustment .................................... (367) (67)
Unrealized gain on marketable securities ............................. 634 829
--------- ---------
Total Stockholder's Equity ....................................... 26,254 23,607
--------- ---------
Total ....................................................... $ 426,631 $ 462,016
========= =========
</TABLE>
See notes to consolidated financial statements.
F - 4
<PAGE> 34
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
REVENUES .............................. $ 385,564 $ 412,305 $ 376,531
OPERATING COSTS AND EXPENSES:
Cost of goods sold ................. 323,126 343,930 305,588
General and administrative ......... 43,193 46,419 42,622
--------- --------- ---------
OPERATING INCOME ...................... 19,245 21,956 28,321
Interest expense ................... (34,498) (32,195) (29,475)
Interest and other income - net .... 9,128 25,448 5,550
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM ................. (6,125) 15,209 4,396
INCOME TAX PROVISION .................. 733 4,016 2,952
--------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (6,858) 11,193 1,444
EXTRAORDINARY ITEM - Loss on repurchase
of debt (no income tax benefit) .... (103) (553) --
--------- --------- ---------
NET INCOME (LOSS) ..................... $ (6,961) $ 10,640 $ 1,444
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F - 5
<PAGE> 35
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE UNREALIZED
PREFERRED COMMON PAID-IN RETAINED TRANSLATION GAIN (LOSS)
STOCK STOCK CAPITAL EARNINGS ADJUSTMENT ON SECURITIES TOTAL
------ ----- ------ ------- --------- ------ -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995.................. $7,960 $ - $ 505 $13,432 $ (360) $ (987) $20,550
Net loss............................... (6,961) (6,961)
Dividends:
Common stock........................ (856) (856)
Preferred stock..................... (851) (851)
Capital contribution by parent company
upon assumption of 9 1/2% junior
subordinated debentures............. 8,177 8,177
Net change during year................. (234) 850 616
------ ----- ------ ------- --------- ------ -------
BALANCE, DECEMBER 31, 1995................ 7,960 - 8,682 4,764 (594) (137) 20,675
Net income............................. 10,640 10,640
Dividends:
Common stock........................ (5,208) (5,208)
Preferred stock..................... (851) (851)
Net change during year................. 227 771 998
------ ----- ------ ------- --------- ------ -------
BALANCE, DECEMBER 31, 1996................ 7,960 - 8,682 9,345 (367) 634 26,254
Net income............................. 1,444 1,444
Dividends:
Common stock........................ (3,736) (3,736)
Preferred stock..................... (850) (850)
Net change during year................. 300 195 495
------ ----- ------ ------- --------- ------ -------
BALANCE, DECEMBER 31, 1997................ $7,960 $ - $8,682 $ 6,203 $ (67) $ 829 $23,607
====== ===== ====== ======= ========= ====== =======
</TABLE>
See notes to consolidated financial statements.
F - 6
<PAGE> 36
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
--------- -------- --------
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) .................................. $ (6,961) $ 10,640 $ 1,444
Items not requiring (providing) cash:
Depreciation and amortization .................. 22,409 22,689 22,099
Increase (decrease) in other liabilities ....... (37) 236 (1,043)
Deferred taxes and other - net, including gain
on sale of potash operations in 1996 ...... 688 (22,488) 281
--------- -------- --------
Total ..................................... 16,099 11,077 22,781
Working capital management:
Accounts receivable and other current assets ... 15,585 (3,912) (20,153)
Inventories .................................... (11,274) 5,603 (8,919)
Prepaid expenses ............................... (443) 469 (1,487)
Accounts payable ............................... (7,753) (11,239) 20,629
Accrued expenses and other current liabilities . (10,381) 1,360 (3,106)
--------- -------- --------
Cash provided by operations and
working capital management ................ 1,833 3,358 9,745
--------- -------- --------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment ........... (35,661) (13,570) (26,862)
Sales of marketable securities and short-term
investments, including in 1995 liquidation
of CD's securing a bank loan ....................... 132,260 1,965 7,982
Purchases of marketable securities and short-
term investments ................................... (4,371) (9,432) (7,743)
Other - net, including proceeds from sale of
potash operations in 1996 .......................... (7,441) 56,376 (6,909)
--------- -------- --------
Cash provided by (used in) investment activities 84,787 35,339 (33,532)
--------- -------- --------
FINANCING ACTIVITIES:
Increase in long-term debt ........................... 101,616 44,168 12,000
Repurchases, payments and current maturities of
long-term debt ..................................... (141,452) (89,769) (14,214)
Increase (decrease) in short-term debt ............... (27,776) 9,203 21,232
Dividends to stockholders ............................ (1,707) (6,059) (4,586)
--------- -------- --------
Cash provided by (used in) financing activities (69,319) (42,457) 14,432
--------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ..................................... 17,301 (3,760) (9,355)
CASH AND CASH EQUIVALENTS:
Beginning of year .................................... 15,571 32,872 29,112
--------- -------- --------
End of year .......................................... $ 32,872 $ 29,112 $ 19,757
========= ======== ========
</TABLE>
See notes to consolidated financial statements.
F - 7
<PAGE> 37
TRANS-RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The consolidated financial statements of Trans-Resources, Inc. ("TRI"),
include TRI and its direct and indirect wholly-owned subsidiaries, after
elimination of intercompany accounts and transactions. TRI's principal
subsidiaries are Cedar Chemical Corporation ("Cedar"), and Cedar's two
wholly-owned subsidiaries, NMPC, Inc. (name changed from New Mexico Potash
Corporation upon completion of the sale of its potash operations in August,
1996; "NMPC"); and Vicksburg Chemical Company ("Vicksburg"); EDP, Inc. (name
changed from Eddy Potash, Inc. upon completion of the sale of its potash
operations in August, 1996; "EDP"); Na-Churs Plant Food Company ("Na-Churs");
and Haifa Chemicals Ltd. ("HCL") and HCL's wholly-owned subsidiary, Haifa
Chemicals South, Ltd. ("HCSL"). TRI is a wholly-owned subsidiary of TPR
Investment Associates, Inc. ("TPR"). As used herein, the term "the Company"
means TRI together with its direct and indirect subsidiaries.
On August 16, 1996 NMPC and EDP sold their potash producing assets for
an aggregate consideration of $56,154,000, including a payment for working
capital of $11,154,000, and the assumption of specified liabilities (but
excluding, among other things, certain antitrust litigation - see Part I - Item
3 - "Legal Proceedings"). The sale of the Company's potash operations resulted
in a pre-tax gain, after considering certain costs relating thereto, of
$22,579,000. Such gain is included in "Interest and other income - net" in the
accompanying Consolidated Statements of Operations (see Note K).
During the years ended December 31, 1995 and 1996, the potash
operations contributed approximately $54,000,000 (14%) and $35,000,000 (9%),
respectively, to the Company's consolidated revenues, after eliminating
intercompany sales.
Approximately 50% of the aggregate sales proceeds were applied to
prepay debt secured by the assets of NMPC or EDP. In connection with the sale,
Vicksburg entered into a five year potash supply agreement, at prevailing market
rates during the period (subject to certain adjustments), with the buyer.
Substantially all of the companies' revenues, operating profits and
identifiable assets are related to the chemical industry. The Company is a
global developer, producer and marketer of specialty plant nutrients and
specialty industrial and agricultural chemicals and distributes its products
internationally.
F - 8
<PAGE> 38
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets and liabilities
and disclosure of contingencies at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Management believes that the
estimates used are reasonable.
Operating Data
The Company's revenues by region for the years ended December 31, 1995,
1996 and 1997 are set forth below:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
(in millions)
<S> <C> <C> <C>
Europe .................................... $146 $160 $148
United States ............................. 136 145 128
Asia ...................................... 34 37 29
Canada and Latin America .................. 22 24 22
Israel .................................... 21 23 19
Australia ................................. 6 6 6
Africa and other .......................... 21 17 25
---- ---- ----
Total ................................. $386 $412 $377
==== ==== ====
</TABLE>
As of December 31, 1996 and 1997, the Company's assets were located in
the United States (36% and 37%, respectively) and abroad (principally Israel)
(64% and 63%, respectively). The Company has no single customer accounting for
more than 10% of its revenues.
HCL leases land and buildings from Oil Refineries Ltd. ("ORL"), a
corporation which is majority-owned by the Israeli Government. The leases expire
at various dates, principally in the years 2015 and 2016. HCL also has a lease
from ORL of a pipeline which transports ammonia from the port in Haifa to HCL's
plant. HCSL leases its land from the Israeli government under a 49 year lease
which commenced in 1994.
HCL obtains its major raw materials, potash and phosphate rock, in
Israel. Potash is purchased solely from Dead Sea Works, Ltd. ("DSW") in
accordance with two supply contracts which expire in 1999 and 2005. HCL
currently sources phosphate rock from Rotem Amfert Negev Ltd. ("Rotem")
according to the terms of a variable price contract which expired in 1996, which
is currently being renegotiated. DSW and Rotem are subsidiaries of Israel
Chemicals Ltd., a large Israeli chemical company, and are the sole suppliers in
Israel of potash and phosphate rock, respectively. While management views its
current relationships with both of its principal suppliers to be good, the loss
of supply from either of these sources could have a material adverse effect on
the Company.
Functional Currency and Transaction Gains and Losses
Approximately 90% of HCL's sales are made outside of Israel in various
currencies, of which approximately 40% are in U.S. dollars, with the remainder
principally in Western European currencies. Accordingly, to the extent the U.S.
dollar weakens or strengthens versus the applicable corresponding currency,
HCL's results are favorably or unfavorably affected. In order to mitigate the
impact of currency fluctuations against the U.S. dollar, the Company has a
policy of hedging a significant portion of its foreign sales denominated in
Western European currencies by entering into forward exchange contracts. A
portion of these contracts qualify as hedges pursuant to Statement of Financial
Accounting Standards No. 52 and, accordingly, unrealized gains and losses
arising therefrom are deferred and accounted for in the subsequent year as part
of sales. Unrealized gains and losses for the remainder of the forward exchange
contracts are recognized in operations currently. At December 31, 1996 and 1997,
there were outstanding
F - 9
<PAGE> 39
contracts to purchase $53 million and $27 million, respectively, in various
European currencies, principally Deutsche Marks and Italian Lira in 1996 and
British Pounds and Spanish Pesetas in 1997. In addition, at December 31, 1996
there were outstanding contracts to purchase 26 million Deutsche Marks and to
sell a corresponding aggregate amount of Italian Lira and Spanish Pesetas. No
gains or losses were deferred at December 31, 1996 and 1997 for foreign exchange
contracts which qualify as hedges.
If the Company had not followed such a policy of entering into forward
exchange contracts in order to hedge its foreign sales, and instead recognized
income based on the then prevailing foreign currency rates, the Company's
operating income for the years ended December 31, 1995, 1996 and 1997 would have
increased (decreased) by $16,600,000, ($6,900,000) and ($7,000,000),
respectively, and income before income taxes would have increased (decreased) by
approximately $11,200,000, ($5,300,000) and ($7,000,000), respectively.
The Company determines when to enter into hedging transactions based on
its ongoing review of the currency markets. The principal purpose of the
Company's hedging program (which is for other than trading purposes) is to
mitigate the impact of fluctuations against the U.S. dollar, as well as to
protect against significant adverse changes in exchange rates. Accordingly, the
gains and losses recognized relating to the hedging program in any particular
period and the impact on revenues had the Company not had such a program are not
necessarily indicative of its effectiveness.
Raw materials purchased in Israel are mainly quoted at prices linked to
the U.S. dollar. The U.S. dollar is the functional currency and accordingly the
financial statements of HCL are prepared, and the books and records of HCL
(except for a subsidiary described below) are maintained, in U.S. dollars.
The assets, liabilities and operations of one of HCL's foreign
subsidiaries are measured using the currency of the primary economic environment
in which the subsidiary operates. Assets and liabilities are translated at the
exchange rate as of the balance sheet date. Revenues, expenses, gains and losses
are translated at the weighted average exchange rate for the period. Translation
adjustments, resulting from the process of translating such subsidiary's
financial statements from its currency into U.S. dollars, are recorded as a
separate component of stockholder's equity.
Inventories
Inventories are carried at the lower of cost or market. Cost is
determined on the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment are carried at cost, less accumulated
depreciation and amortization. Depreciation is recorded under the straight-line
method at generally the following annual rates:
Buildings.................................... 3 - 8%
Machinery, plant and equipment............... 5 - 25%
Office furniture and equipment............... 6 - 20%
Expenditures for maintenance and repairs are charged to expense as
incurred. Investment grants from the Israeli Government are initially recorded
as a reduction of the capitalized asset and are recognized in income over the
estimated useful life of the respective asset. HCL recorded investment grants
for the years ended December 31, 1995, 1996 and 1997 amounting to $995,000,
$248,000 and $1,646,000, respectively.
F - 10
<PAGE> 40
Investments In Marketable Securities and Other Short-Term Investments
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"),
the Company classifies its equity and fixed maturity securities as
available-for-sale and reports such securities at fair value, with unrealized
gains and losses recorded as a separate component of stockholder's equity.
Income Taxes
The Company is included in the consolidated Federal income tax return
of TPR. Under the tax allocation agreement with TPR, the annual current Federal
income tax liability for the Company and each of its domestic subsidiaries
reporting profits is determined as if such entity had filed a separate Federal
income tax return; no tax benefits are given for companies reporting losses.
However, TPR may, at its discretion, allow tax benefits for such losses.
For purposes of the consolidated financial statements, taxes on income
have been computed as if the Company and its domestic subsidiaries filed its own
consolidated Federal income tax return without regard to the tax allocation
agreement. Payments to TPR, if any, representing the excess of amounts
determined under the tax allocation agreement over amounts determined for the
purposes of consolidated financial statements are charged to retained earnings.
During the three years in the period ended December 31, 1997, TPR did not
require payment of amounts different from that which was computed as if the
Company and its consolidated subsidiaries filed its own consolidated income tax
returns.
The Company accounts for income taxes under the asset and liability
method. Deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates that are
expected to be in effect when the differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities are
expected to reverse. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
Environmental Costs
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations (including fines levied under environmental
laws, reclamation costs and litigation costs), and which do not contribute to
current or future revenue generation ("environmental clean-up costs"), are
expensed. Such environmental clean-up costs do not encompass ongoing operating
costs relating to compliance with environmental laws, including disposal of
waste. Liabilities are recorded when environmental assessments and/or remedial
efforts are probable, the cost can be reasonably estimated and the Company's
responsibility is established. Generally, the timing of these accruals coincides
with the earlier of completion of a feasibility study or the Company's
commitment to a formal plan of action. Accruals relating to costs to be
incurred, if any, at the end of the useful life of equipment, facilities or
other assets are made over the useful life of the respective assets.
During 1995, 1996 and 1997 the Company incurred environmental clean-up
costs of approximately $300,000, $300,000 and $400,000, respectively. In
addition, at both December 31, 1996 and 1997, the Company has accrued
approximately $1,600,000 related to the estimated costs to be incurred for
various environmental liabilities.
In October, 1996 the AICPA Accounting Standards Executive Committee
issued Statement of Position 96-1, "Environmental Remediation Liabilities",
which required adoption in 1997. The adoption of this pronouncement did not have
a material effect on the Company's consolidated financial condition or results
of operations.
F - 11
<PAGE> 41
Research and Development Costs
Research and development costs are charged to expense as incurred and
amounted to $3,158,000, $2,693,000 and $2,421,000 for the years ended December
31, 1995, 1996 and 1997, respectively.
Risk Management Derivatives
Amounts receivable or payable under interest rate swap agreements are
recognized as interest expense.
Long-Lived Assets
Management evaluates the recoverability of its long-lived assets
whenever events or changes in circumstances indicate that a recorded asset might
not be recoverable by taking into consideration such factors as recent operating
results, projected undiscounted cash flows and plans for future operations. At
December 31, 1996 and 1997 there were no impairments of the Company's assets.
Cash and Cash Equivalents
Investments with original maturities of three months or less are
classified as cash equivalents by the Company.
Concentration of Credit Risk
The Company believes no significant concentration of credit risk exists
with respect to investments and accounts receivable. The Company places its cash
investments with high quality financial institutions, and the Company's
receivables are diversified across a diverse customer base and geographical
regions.
Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131"), and SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 131 establishes standards
for reporting financial and descriptive information for reportable segments on
the same basis that is used internally for evaluating segment performance and
the allocation of resources to segments. The Company is evaluating the effect,
if any, of SFAS 131, on its operating segment reporting disclosure. SFAS 130
establishes standards for presenting certain items that are excluded from net
income and reported as components of stockholders' equity, such as foreign
currency translation. These statements are effective for fiscal years beginning
after December 15, 1997. The adoption of these statements will not have a
material effect on the Company's results of operations or financial position.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
manner of presentation in the current year.
F - 12
<PAGE> 42
B. OTHER CURRENT ASSETS AND INVESTMENT IN LASER INDUSTRIES LIMITED
Other Current Assets
Other current assets consist of the following at December 31, 1996 and
1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
(in thousands)
<S> <C> <C>
Marketable securities (carried at market) .. $ 8,557 $ 6,523
Miscellaneous receivables, other securities,
deferred income taxes, etc ............ 16,107 27,055
------- -------
Total ............................ $24,664 $33,578
======= =======
</TABLE>
The Company classifies all of its marketable securities (including U.S.
Government obligations) as available-for-sale securities as of December
31, 1996 and 1997:
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
------ ---------- ---------- ---------
(in thousands)
December 31, 1996
<S> <C> <C> <C> <C>
Foreign Government obligations $1,005 $ -- $ 10 $ 995
Other debt securities ........ 432 41 -- 473
------ ------ ---- ------
Total debt securities ... 1,437 41 10 1,468
------ ------ ---- ------
Common stocks and mutual funds
investing primarily therein 6,099 505 -- 6,604
Preferred stocks ............. 387 98 -- 485
------ ------ ---- ------
Total equity securities . 6,486 603 -- 7,089
------ ------ ---- ------
Total ................... $7,923 $ 644 $ 10 $8,557
====== ====== ==== ======
December 31, 1997
Foreign Government obligations $ 866 $ -- $ 17 $ 849
Other debt securities ........ 492 29 -- 521
------ ------ ---- ------
Total debt securities ... 1,358 29 17 1,370
------ ------ ---- ------
Common stocks and mutual funds
investing primarily therein 4,383 1,009 239 5,153
Preferred stocks ............. -- -- -- --
------ ------ ---- ------
Total equity securities . 4,383 1,009 239 5,153
------ ------ ---- ------
Total ................... $5,741 $1,038 $256 $6,523
====== ====== ==== ======
</TABLE>
F - 13
<PAGE> 43
The cost and estimated fair value of debt securities at December 31,
1997, by contractual maturity, are as follows:
<TABLE>
<CAPTION>
Estimated
Cost Fair Value
------ ------
(in thousands)
<S> <C> <C>
Due in one year or less .............. $ 408 $ 407
Due after one year through three years 592 576
Due after three years ................ 358 387
------ ------
Total .......................... $1,358 $1,370
====== ======
</TABLE>
During 1995, the gross realized gains on sales of securities totaled
approximately $555,000 and the gross realized losses totaled approximately
$968,000; during 1996, the gross realized gains on sales of securities totaled
approximately $411,000 and the gross realized losses totaled approximately
$70,000; during 1997 the gross realized gains on sales of securities totaled
approximately $3,052,000 and the gross realized losses totaled approximately
$339,000 (see Note K).
Investment in Laser Industries Limited ("Laser")
On November 9, 1997, Laser, a publicly traded manufacturer of lasers
for medical use in which the Company had an ownership interest accounted for by
the equity method, and ESC Medical Systems Ltd. ("ESC"), signed a definitive
agreement (the "Agreement") to combine the two companies through an exchange of
shares. The transaction closed on February 23, 1998. The Company's ability to
sell the ESC shares it will receive pursuant to the combination will be governed
by securities law volume restrictions.
As of December 31, 1997, the Company carried its investment in the
Laser shares at approximately $9,100,000, which amount is included in the
caption "other assets" in the accompanying Consolidated Balance Sheet. Based on
the quoted market value of the ESC shares ($35.00 per share) as of February 20,
1998, the last day of trading before the combination, the Company will recognize
an after-tax gain of approximately $22,400,000 which will be recorded during the
first quarter of 1998.
In addition to the ownership of the Laser shares described above, the
Company also owned a warrant (the "Laser Warrant") which enabled the Company to
purchase additional Laser shares. The Laser Warrant, which had a carrying value
of $750,000, was distributed to TPR as a dividend in February 1998 prior to
Laser's combination with ESC.
During the years ended December 31, 1995, 1996 and 1997, the Company
recorded equity in Laser's earnings (losses), inclusive of goodwill
amortization, of ($478,000), $2,280,000 and $1,558,000, respectively. Such
amounts are included in "Interest and other income-net" in the accompanying
Consolidated Statements of Operations (see Note K).
ESC develops, manufactures and markets medical devices utilizing both
state-of-the-art lasers and proprietary intense pulsed light source technology
for non-invasive treatment of varicose veins and other benign vascular lesions,
as well as for hair removal, skin cancer, skin rejuvenation and other clinical
applications. ESC shares are traded in the United States on the NASDAQ National
Market System. The Company's investment in ESC will be accounted for pursuant to
SFAS 115.
F - 14
<PAGE> 44
C. INVENTORIES
Inventories consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
(in thousands)
<S> <C> <C>
Raw materials .................... $17,589 $13,362
Finished goods ................... 33,618 46,764
------- -------
Total ........................ $51,207 $60,126
======= =======
</TABLE>
D. PROPERTY, PLANT AND EQUIPMENT - NET
Property, plant and equipment at December 31, 1996 and 1997 consists of
the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
(in thousands)
<S> <C> <C>
Land ......................................... $ 4,272 $ 4,272
Buildings .................................... 22,178 22,416
Machinery, plant and equipment ............... 262,763 279,734
Office furniture, equipment and water rights . 8,731 9,714
Construction-in-progress ..................... 13,927 20,339
-------- --------
Total, at cost ........................... 311,871 336,475
Less accumulated depreciation and amortization 111,097 128,988
-------- --------
Property, plant and equipment - net ...... $200,774 $207,487
======== ========
</TABLE>
The Company capitalized interest costs aggregating $953,000, $0 and
$35,000 during the years ended December 31, 1995, 1996 and 1997, respectively,
with respect to several construction projects. Certain property, plant and
equipment has been pledged as collateral for long-term debt (see Note G).
On February 7, 1994, the smaller of HCL's two potassium nitrate
production units was damaged by a fire, causing a temporary reduction of the
Company's potassium nitrate production capacity. The Company completed the
replacement of the damaged unit during 1995. The impact of the loss of the
facility, including the effect of business interruption, was substantially
covered by insurance. The insurance proceeds relating to the property damage was
for replacement value, which was greater than the recorded carrying value of the
damaged assets. Accordingly, during the year ended December 31, 1995 HCL
recorded a pre-tax gain of approximately $1,700,000, (which amount was the
residual adjustment over and above the initial gain recorded in 1994). Such
pre-tax gain is included in the caption "Interest and other income-net" in the
accompanying Consolidated Statements of Operations (see Note K).
E. SHORT-TERM DEBT AND UNUSED CREDIT LINES
The weighted average interest rates for short-term debt outstanding at
December 31, 1996 and 1997 were 5.9% and 6.4%, respectively.
As of December 31, 1997, the Company and its subsidiaries have unused
revolving loan commitments and other credit lines from banks aggregating
approximately $72,000,000.
F - 15
<PAGE> 45
F. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following
at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
(in thousands)
<S> <C> <C>
Compensation and payroll taxes $ 9,241 $ 7,104
Interest 10,229 10,455
Income taxes 840 607
Other 13,011 12,049
------- -------
Total $33,321 $30,215
======= =======
</TABLE>
G. LONG-TERM DEBT - NET
Long-term debt consists of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
Payable
Description Interest Rate* Through 1996 1997
----------- -------------- ------- ---- ----
(in thousands)
TRI:
<S> <C> <C> <C> <C>
Bank loans (1)..................................... Various 2004 $ - $ 3,000
$115,000,000 principal amount of 11.875%
Senior subordinated notes, net of unamortized
debt discount of $825,000 and $712,000
(effective interest rate of 12.1%) (2) 11.875% 2002 114,175 114,288
Subsidiaries:
Bank loans and other financing..................... Various 2020 170,020 164,806
-------- --------
Total............................................ 284,195 282,094
Less current portion............................. 17,481 13,080
-------- --------
Long-term debt - net............................. $266,714 $269,014
======== ========
</TABLE>
* As prevailing on respective balance sheet dates. Such rates (other than
the subordinated debt) generally "float" according to changes in the Prime or
LIBOR rates. At December 31, 1997 such rates were approximately 8.25% and 5.80%,
respectively.
1. As of December 29, 1995, the Company entered into a Loan Agreement with
a bank for borrowings upon the Company's request prior to December 29, 1998 in
the aggregate principal amount not to exceed $40,000,000. The loan matures on
December 29, 2004. The Company pledged all of the capital stock of HCL to secure
its obligations under the Loan Agreement.
2. The 11 7/8% senior subordinated notes (the "11 7/8% Notes") mature July
1, 2002 and are redeemable at the option of the Company at any time after July
1, 1998 at stipulated redemption prices. There are no mandatory sinking fund
requirements. On March 11, 1998, the Company commenced the sale in a private
placement of $100,000,000 principal amount of 10 3/4% Senior Notes due 2008 (the
"Senior Notes") and $135,000,000 principal amount of 12% Senior Discount Notes
due 2008 to provide gross proceeds to the Company of approximately $75,400,000
(the "Senior Discount Notes"). The sale of the Senior Notes and the Senior
Discount Notes closed on March 16, 1998. A substantial portion (approximately
$118,000,000) of the net proceeds from the sale was used to purchase (pursuant
to a tender offer) approximately $110,000,000 principal amount of the 11 7/8%
Notes (the "Refinancing"), resulting in an extraordinary charge for the early
extinguishment of debt of approximately $10,900,000 (no tax effect) which will
be recorded in the first quarter of 1998.
F - 16
<PAGE> 46
The Senior Notes and the Senior Discount Notes are unsecured
obligations of the Company and are pari passu in right of payment with all
existing and future unsecured and unsubordinated indebtedness of the Company and
senior in right to payment of all subordinated indebtedness of the Company.
Interest on the Senior Notes is payable semi-annually. Interest on the Senior
Discount Notes will accrue and compound semi-annually but will not be payable
until 2003, after which interest will be payable semi-annually.
The Company intends to use the balance of the proceeds from the sale of
the Senior Notes and Senior Discount Notes for working capital, general
corporate purposes, and the repayment of $13,900,000 of borrowings (of which
$10,900,000 was borrowed subsequent to December 31, 1997, of which $9,000,000
was dividended to TPR) under the Loan Agreement discussed above.
- ------------------
On November 28, 1986, the Company issued junior subordinated debentures
(the "9.5% Debentures") in the aggregate principal amount of $9,000,000, with
interest payable quarterly. The 9.5% Debentures were initially recorded at
$6,700,000, the estimated value on the date of issue, and were scheduled to
mature in 1998.
During 1991, the Company's then outstanding redeemable preferred stock
was converted into another $9,000,000 principal amount of the Company's 9.5%
Debentures. Subsequently, during 1991, the then holder of this $9,000,000
principal amount of 9.5% Debentures agreed to extend the maturity date of such
principal amount by seven years to the year 2005. The carrying value of the 9.5%
Debentures issued upon conversion of the redeemable preferred stock was
equivalent to the previous carrying value of the preferred stock. During 1994,
as a result of the settlement of certain litigation with a former indirect
stockholder and director of the Company, TPR acquired the 9.5% Debentures then
held by the wife of such stockholder. Upon TPR's acquisition of such 9.5%
Debentures, TPR exchanged these 9.5% Debentures for a new Company preferred
stock (see Note L). Also as part of the settlement of such litigation, TPR
assumed a $4,000,000 obligation that was previously owed to the Company by the
wife of the former indirect stockholder and director. Such obligation, which is
included in "other assets" in the accompanying Consolidated Balance Sheets,
bears interest at the rate of 8.75% per year and is due in the year 2005.
During 1995, TPR assumed the Company's obligation for the remaining
outstanding 9.5% Debentures and the Company's liability thereon was
extinguished. The Company recorded such assumed obligation as an $8,177,000
capital contribution by TPR, the amount equivalent to the then net carrying
value of the 9.5% Debentures.
Certain of the Company's and its subsidiaries' loan agreements and its
Indentures require the Company and/or the respective subsidiary to, among other
things, maintain various financial ratios including minimum net worth, ratios of
debt to net worth, interest and fixed charge coverage tests and current ratios.
In addition, there are certain limitations on the Company's ability make certain
Restricted Payments and Restricted Investments (each as defined), etc. In the
event of a Change in Control (as defined), the Company is required to offer to
purchase all the Senior Notes and Senior Discount Notes as well as to repay
certain bank loans. Certain of the respective instruments also limit the payment
of dividends, capital expenditures and the incurring of additional debt and
liens by both the Company and its subsidiaries. As of December 31, 1997, the
Company and its subsidiaries are in compliance with the covenants of each of the
respective loan agreements and the Indenture then in effect.
F - 17
<PAGE> 47
The aggregate maturities of long-term debt at December 31, 1997 (after
giving effect to the Refinancing of the 11 7/8% Notes) are set forth below.
<TABLE>
<CAPTION>
Years Ending
December 31, (in thousands)
------------
<S> <C>
1998................................ $ 13,080
1999................................ 15,433
2000................................ 13,685
2001................................ 13,840
2002................................ 38,081
Thereafter.......................... 187,975
--------
Total........................... $282,094
========
</TABLE>
Substantially all of the assets of HCL and HCSL are subject to security
interests in favor of the State of Israel and/or banks. In addition,
substantially all of the assets of the Company's United States subsidiaries are
subject to security interests in favor of banks pursuant to loan agreements. The
capital stock of HCL and Cedar have also been pledged to the banks pursuant to
these agreements. The Company's common stock is pledged to secure the repayment
obligations of TPR under a note issued by it to a former indirect shareholder of
the Company.
During 1995 and 1996, the Company acquired $3,250,000 and $19,122,000,
respectively, principal amount of its senior subordinated reset notes (the
"Reset Notes") prior to their scheduled maturity of September 1, 1996. In
connection with such acquisitions of the Reset Notes, the Company has recorded
extraordinary losses of $103,000 and $553,000, respectively. Such losses had no
current tax benefit.
Interest paid, net of capitalized interest, totaled $33,445,000,
$31,672,000 and $28,193,000 for the years ended December 31, 1995, 1996 and
1997, respectively.
H. OTHER LIABILITIES
Under Israeli law and labor agreements, HCL is required to make
severance and pension payments to dismissed employees and to employees leaving
employment in certain other circumstances. These liabilities are covered by
regular deposits to various severance pay funds and by payment of premiums to an
insurance company for officers and non-factory personnel under approved plans.
"Other liabilities" in the Consolidated Balance Sheets as of December 31, 1996
and 1997 include accruals of $2,731,000 and $1,653,000, respectively, for the
estimated unfunded liability of complete severance of all HCL employees. Costs
incurred were approximately $2,060,000, $2,629,000 and $1,912,000 for the years
ended December 31, 1995, 1996 and 1997, respectively.
No information is available regarding the actuarial present value of
HCL's pension plans and the plans' net assets available for benefits, as these
plans are multi-employer, external and independent of HCL.
Cedar has a defined benefit pension plan which covers all of the
full-time employees of Cedar and Vicksburg. Funding of the plan is made through
payment to various funds managed by a third party and is in accordance with the
funding requirements of the Employee Retirement Income Security Act of 1974
("ERISA").
F - 18
<PAGE> 48
Cedar's net pension cost for the years ended December 31, 1995, 1996
and 1997 included the following benefit and cost components:
<TABLE>
<CAPTION>
1995 1996 1997
----- ------- -------
(in thousands)
<S> <C> <C> <C>
Service cost $ 603 $ 796 $ 819
Interest cost 844 1,014 1,133
Amortization of unrecognized prior service cost 109 109 109
Actual return on plan assets (793) (904) (1,091)
Amortization of unrecognized net transition obligation 59 59 59
----- ------- -------
Net pension cost $ 822 $ 1,074 $ 1,029
===== ======= =======
</TABLE>
The funded status and the amounts recognized in the Company's December
31, 1996 and 1997 Consolidated Balance Sheets for Cedar's benefit plan was as
follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
(in thousands)
<S> <C> <C>
Plan assets at market value ........................... $ 12,157 $ 14,239
Actuarial present value of projected benefit obligation 15,140 18,215
-------- --------
Funding status ........................................ (2,983) (3,976)
Unrecognized net transition obligation ................ 293 234
Unrecognized prior service cost ....................... 843 734
Unrecognized net loss ................................. 1,754 2,418
-------- --------
Prepaid (accrued) pension cost ........................ $ (93) $ (590)
======== ========
</TABLE>
At December 31, 1996 and 1997 the actuarial present value of Cedar's
vested benefit obligation was $10,666,000 and $12,865,000 and the accumulated
benefit obligation was $11,304,000 and $13,614,000, respectively.
Actuarial assumptions used at December 31, 1996 and 1997 were
as follows:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Discount rate - projected benefit obligation ........ 7.5% 7.0%
Rate of increase in compensation levels ............. 5.0% 5.0%
Expected long-term rate of return on assets ......... 9.0% 9.0%
</TABLE>
The unrecognized net transition obligation is being amortized on a
straight-line basis over fifteen years beginning January 1, 1987.
Certain of the Company's United States subsidiaries have profit sharing
thrift plans designed to conform to Internal Revenue Code Section 401(k) and to
the requirements of ERISA. The plans, which cover all full-time employees (and
one of which includes Company headquarters employees), allow participants to
contribute as much as 15% of their annual compensation, up to a maximum
permitted by law, through salary reductions. The companies' contributions to the
plans are based on a percentage of the participant's contributions, and the
companies may make additional contributions to the plans at the discretion of
their respective Boards of Directors. The contribution expense relating to the
profit sharing thrift plans totaled $559,000, $505,000 and $202,000 for the
years ended December 31, 1995, 1996 and 1997, respectively.
F - 19
<PAGE> 49
I. OPERATING LEASES
The Company and its subsidiaries are obligated under non-cancelable
operating leases covering principally land, office facilities and equipment. At
December 31, 1997, minimum annual rental commitments under these leases are:
<TABLE>
<CAPTION>
Years Ending
December 31, (in thousands)
------------
<S> <C>
1998.................................. $3,664
1999.................................. 2,544
2000.................................. 1,589
2001.................................. 1,099
2002.................................. 1,041
Thereafter............................ 8,360
-------
Total............................. $18,297
=======
</TABLE>
Rent expense for 1995, 1996 and 1997 was $5,308,000, $4,683,000 and
$4,489,000, respectively, covering land, office facilities and equipment.
J. INCOME TAXES
The Company's income tax provision for the years ended December 31,
1995, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
1995 1996 1997
----- ------- ------
(in thousands)
<S> <C> <C> <C>
Current expense (benefit):
Federal .............. $ -- $ -- $ --
Foreign .............. (364) 3,146 652
State ................ 392 (121) 570
----- ------- ------
Total current .. 28 3,025 1,222
----- ------- ------
Deferred expense:
Foreign .............. 507 385 1,647
State ................ 198 606 83
----- ------- ------
Total deferred . 705 991 1,730
----- ------- ------
Total .......... $ 733 $ 4,016 $2,952
===== ======= ======
</TABLE>
F - 20
<PAGE> 50
The provision for income taxes for the years ended December 31, 1995,
1996 and 1997 amounted to $773,000, $4,016,000 and $2,952,000, respectively,
representing effective income tax rates of 12.0%, 26.4% and 67.2%, respectively.
These amounts differ from the amounts of ($2,144,000), $5,323,000 and
$1,539,000, respectively, computed by applying the statutory Federal income tax
rates to income (loss) before income taxes and extraordinary item. The reasons
for such variances from statutory rates were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Statutory Federal rates ................................ (35.0)% 35.0% 35.0%
Increase (decrease) in income tax rate resulting from:
Israeli operations - net impact of Israeli statutory
rate, effects of "inflation allowances",
withholding taxes, etc ........................ (53.5) 0.5 (33.9)
Net losses without current tax benefit
and other ..................................... 96.1 13.4 56.5
Utilization of capital loss carryforwards .......... -- (22.6) --
Additional depletion expense ....................... (1.9) (2.0) --
State and local income taxes - net ................. 6.3 2.1 9.6
---- ---- ----
Effective income tax rates ............................. 12.0% 26.4% 67.2%
==== ==== ====
</TABLE>
At December 31, 1996 and 1997, deferred tax assets (liabilities)
consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
(in thousands)
<S> <C> <C>
Depreciation and property and equipment basis differences $(29,981) $(33,534)
Nondeductible reserves .................................. 5,695 4,582
Net operating loss carryforwards ........................ 20,244 28,744
Foreign tax credit carryovers ........................... 4,753 5,427
Alternative minimum tax credit carryovers ............... 5,401 5,401
Investment tax credit carryovers ........................ 200 200
Other ................................................... 1,320 392
-------- --------
Deferred taxes - net, exclusive of valuation allowance .. 7,632 11,212
Valuation allowance ..................................... (28,384) (33,694)
-------- --------
Deferred taxes - net .................................... $(20,752) $(22,482)
======== ========
</TABLE>
At December 31, 1996, deferred tax assets of $2,563,000 are classified
as "other current assets" and deferred tax liabilities of $23,315,000 are
classified as "other liabilities". At December 31, 1997, deferred tax assets of
$3,325,000 are classified as "other current assets" and deferred tax liabilities
of $25,807,000 are classified as "other liabilities".
F - 21
<PAGE> 51
At December 31, 1997, the Company had various tax loss and credit
carryovers which expire as follows:
<TABLE>
<CAPTION>
U.S. Federal
-----------------------------------------------------------
Investment Net Alternative State Net Foreign Net
Foreign Tax Operating Minimum Operating Operating
Expiration Tax Credit Credit Loss Tax Credit Loss Loss
---------- ---------- ------ ---- ---------- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
1998......... $2,053
1999......... 3,265
2000......... 41
2001......... 32 $200
2002......... 36
2010......... $22,208 $15,600
2011......... 17,442 11,200
2012......... 9,313 9,600
Unlimited.... $5,401 $38,013
------ ---- ------- ------ ------- -------
Total........ $5,427 $200 $48,963 $5,401 $36,400 $38,013
====== ==== ======= ====== ======= =======
</TABLE>
Income taxes paid, including prepaid amounts, totaled approximately
$3,700,000, $3,100,000 and $3,800,000, respectively, during the years ended
December 31, 1995, 1996 and 1997. These amounts are exclusive of a prior year
tax refund received by HCL in 1995 of approximately $4,000,000.
No taxes on income have been provided on approximately $47,000,000 of
undistributed earnings of foreign subsidiaries as of December 31, 1997, since
management believes these amounts to be permanently invested.
K. INTEREST AND OTHER INCOME - NET
Interest and other income - net for the years ended December 31, 1995,
1996 and 1997 consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Interest and dividend income .......................... $ 2,459 $ 1,408 $1,131
Security gains (losses) - net (see Note B) ............ (413) 341 2,713
Gain on involuntary conversion (see Note D) ........... 1,700 -- --
Gain on sale of potash operations (see Note A) ........ -- 22,579 --
Equity on earnings (losses) of Laser - net (see Note B) (478) 2,280 1,558
Other, including gains (losses) of $5,400,000 and
($1,600,000) in 1995 and 1996, respectively,
relating to foreign currencies (see Note A) ....... 5,860 (1,160) 148
------- -------- ------
Total ............................................. $ 9,128 $ 25,448 $5,550
======= ======== ======
</TABLE>
L. PREFERRED STOCK
As discussed in Note G, preferred stock was issued to TPR in December,
1994. The dividend on the preferred stock is cumulative at the rate of $8.50 per
share per annum. The preferred shares are non-voting and were recorded at
$7,960,000, TRI's carrying value of the 9.5% Debentures held by TPR on the date
of conversion. The preferred shares are redeemable, at the option of the
Company, at any time, at a redemption price of $79.60 per share, plus an amount
equal to cumulative dividends, accrued and unpaid thereon up to the date of
redemption.
F - 22
<PAGE> 52
M. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In connection with a credit agreement, Cedar has entered into five
three-year interest rate swap agreements with a bank to effectively convert a
portion of its floating rate debt to fixed, thereby managing its credit risk. An
interest rate swap generally involves the exchange of fixed for floating rate
interest payment streams on specified notional principal amounts for an
agreed-upon period of time, without the exchange of the underlying principal
amounts. Notional amounts often are used to express the volume of these
transactions, but the amounts potentially subject to credit risk are much
smaller. Cedar's credit risk involves the possible default of the counter party
(the bank). No collateral requirements are imposed.
Cedar entered into the following interest rate swap agreements which
are used to manage its interest-rate risk. Cedar receives variable rate payments
and pays fixed rate payments. The following is a summary of the contracts
outstanding (in thousands of dollars) at December 31, 1997:
<TABLE>
<CAPTION>
Variable
Nominal Fixed Rate Rate Maturity
Amount Paid Received Date
------ ---- -------- ----
<S> <C> <C> <C>
$10,000 6.17% 5.78% 10/98
10,000 6.04% 5.78% 10/98
7,500 5.99% 5.78% 10/98
5,000 5.27% 5.81% 2/99
15,000 6.70% 5.81% 10/01
</TABLE>
The variable rate received is tied to the three-month LIBOR rate.
N. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments". The estimated fair value amounts have been determined
by the Company, using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1997
--------------------------- ----------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Assets:
Marketable securities (included within
"other current assets") ........... $ 8,557 $ 8,557 $ 6,523 $ 6,523
Investments in certain securities
(included within "other assets" and
accounted for by the equity method) 8,290 13,454 9,848 38,824
Liabilities:
Long-term debt ........................ 284,195 285,020 282,094 288,556
Off-balance sheet financial instruments:
Foreign currency contracts ............ 659 659 503 503
Risk management derivatives ........... -- (44) -- (317)
</TABLE>
F - 23
<PAGE> 53
Cash and Cash Equivalents, Accounts Receivable, Short-Term Debt and
Accounts Payable - The carrying amounts of these items are a reasonable estimate
of their fair value.
Investments in Securities - The fair value of these securities is
estimated based on quoted market prices.
Long-Term Debt - Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining maturities are
used on a discounted cash flow basis to estimate fair value for debt issues for
which no market quotes are available.
Foreign Currency Contracts - The fair value of foreign currency
purchase contracts is estimated by obtaining quotes from brokers. The
contractual amount of these contracts totals approximately $70,000,000 and
$27,000,000 as of December 31, 1996 and 1997, respectively.
Risk Management Derivatives - The fair value generally reflects the
estimated amounts that the Company would receive or pay to terminate the
contracts at the reporting date.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1996 and 1997. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.
O. CONTINGENT LIABILITIES AND OTHER MATTERS
For a description of certain pending legal proceedings, see Part I -
Item 3 - "Legal Proceedings", which is an integral part of these financial
statements. The Company is vigorously defending against the allegations
described therein.
Management of the Company believes, based upon its assessment of the
actions and claims outstanding against the Company and certain of its
subsidiaries, and after discussion with counsel, that the eventual disposition
of the matters referred to above should not have a material adverse effect on
the financial position, future operations or liquidity of the Company. However,
management of the Company cannot predict with certainty the outcome of the
potash and Louisiana matters described in Part I - Item 3 - "Legal Proceedings".
The production of fertilizers and chemicals involves the use, handling
and processing of materials that may be considered hazardous within the meaning
of applicable environmental or health and safety laws. Accordingly, the
Company's operations are subject to extensive Federal, state and local
regulatory requirements in the United States and regulatory requirements in
Israel relating to environmental matters. Operating permits are required for the
operation of the Company's facilities, and these permits are subject to
revocation, modification and renewal. Government authorities have the power to
enforce compliance with these regulations and permits, and violators are subject
to civil and criminal penalties, including civil fines, injunctions or both. The
Company has entered into consent decrees and administrative orders with certain
governmental authorities which are expected to result in unspecified corrective
actions - see Part I - Item 1 - "Business" - "Environmental Matters". There can
be no assurance that the costs of such corrective actions will not be material.
The Company has accrued for the estimated costs of facility
investigations, corrective measures studies and known remedial measures relating
to environmental clean-up costs. However, the Company has been unable to
ascertain the range of reasonably possible costs that may be incurred for
environmental clean-up costs pending completion of investigations and studies.
Based on currently available information, Management believes that the
Company's expenditures for environmental capital investment and remediation
necessary to comply with present regulations governing environmental protection
and other expenditures for the resolution of environmental actions will not have
a material
F - 24
<PAGE> 54
adverse effect on the Company's liquidity and capital resources, competitive
position or financial statements. However, Management cannot assess the possible
effect of compliance with future requirements.
During the fourth quarter of 1996 and the first two quarters of 1997,
the Company's operations were adversely impacted by a labor dispute at HCL (the
"Haifa Labor Dispute") - see Part I - Item 1 - "Business" - "Employees".
Most employees at HCL's manufacturing facility (the "Haifa Facility")
are members of the "Histradrut," the Israeli national labor federation, and are
represented by collective bargaining units. Terms of employment of most
employees at the Haifa Facility are currently governed predominantly by a
Specific Collective Agreement ("SCA") negotiated by the Company with the
Histadrut, the respective unions representing the employees and representatives
of the employees.
In 1994, an agreement was signed with the unions and the
representatives of the technicians and engineers at the Haifa Facility for the
three year period ended December 31, 1996. In 1995, an SCA was signed with the
unions and representatives of the other employees for the two year period ended
December 31, 1996. In September 1996, the Company announced the cancellation of
such agreements effective upon their expiration dates and its intention to
negotiate a new SCA with basic changes aimed at reducing labor costs and
enhancing operating flexibility for the period following December 31, 1996.
As a result of the announced cancellation of the labor agreements, the
Company suffered several work stoppages and other job actions which adversely
affected productivity at the Haifa Facility during October and November 1996,
including a period of temporary plant shut-down. On December 3, 1996 the plant
was shut down until March 10, 1997 when a new SCA providing for certain wage
freezes and reductions in benefits was signed for the three year period ending
December 31, 1999. Subsequent to March 10, 1997, the Haifa Facility re-opened
and gradually began production. By the end of May 1997 and subsequent thereto,
the Haifa Facility was generally operating at approximately full capacity;
however, there have been several periods of operations at less than full
capacity due to the need for increased maintenance for certain equipment
resulting from the lengthy period of shut-down.
The Company's financial results subsequent to the commencement of the
Haifa Labor Dispute have been adversely affected (particularly in the fourth
quarter of 1996 and the first quarter of 1997) as a result of several factors,
including: (i) the increased cost of production resulting from reduced
manufacturing during the periods which affected the fixed charge component of
cost of sales; (ii) the cost of raw materials destroyed in the production
process during work stoppages and job actions; (iii) lower gross margins due to
inventory shortages which required purchases from third parties at substantially
increased costs compared to the Company's costs; and (iv) increased general and
administrative expenses arising from higher security and other costs. These
adverse impacts were partially offset by lower labor costs during the Haifa
Labor Dispute.
Management believes that the new SCA will result in substantial cost
savings for the Company compared to the costs it would otherwise have incurred
during the next few years had the Company merely renewed the terms of the prior
SCAs and continued the pattern of increased costs included in recent SCAs.
Further, management believes that the aggregate amount of such cost savings over
the next few years will substantially exceed the incremental costs experienced
during the period of the Haifa Labor Dispute. Such savings commenced during the
second quarter of 1997.
Prior to 1996, HCL's last major labor dispute took place in July 1991
and related to negotiations of the SCA for 1990 and 1991. As a result of this
dispute, HCL's employees went on strike for approximately four weeks during the
third quarter of 1991. Prior to that, the last major labor dispute took place in
1983, which resulted in a strike of approximately two weeks.
F - 25
<PAGE> 55
CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE I
TRANS-RESOURCES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1997
--------- ---------
ASSETS (in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 20,261 $ 12,924
Receivables and other assets .............................. 8,925 8,854
Prepaid expenses .......................................... 466 2,741
--------- ---------
Total Current Assets .................................. 29,652 24,519
INVESTMENTS IN SUBSIDIARIES ................................. 91,363 93,363
DUE FROM SUBSIDIARIES - net ................................. 5,699 4,894
OTHER ASSETS ................................................ 26,650 28,393
--------- ---------
Total ................................................. $ 153,364 $ 151,169
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES -
Accrued expenses and other current liabilities ......... $ 9,899 $ 7,203
--------- ---------
LONG-TERM DEBT - net:
Senior indebtedness, notes payable and other obligations -- 3,000
Senior subordinated debt - net ......................... 114,175 114,288
--------- ---------
Long-Term Debt - net (Note) ........................ 114,175 117,288
--------- ---------
OTHER LIABILITIES ........................................ 3,036 3,071
--------- ---------
STOCKHOLDER'S EQUITY:
Preferred stock, $1.00 par value, 100,000 shares
authorized, issued and outstanding ................. 7,960 7,960
Common stock, $.01 par value, 3,000 shares authorized,
issued and outstanding ............................. -- --
Additional paid-in capital ............................. 8,682 8,682
Retained earnings ...................................... 9,345 6,203
Cumulative translation adjustment ...................... (367) (67)
Unrealized gain on marketable securities ............... 634 829
--------- ---------
Total Stockholder's Equity ......................... 26,254 23,607
--------- ---------
Total ......................................... $ 153,364 $ 151,169
========= =========
</TABLE>
- ---------------------
Note - The aggregate maturities of long-term debt during the next
five years, after giving effect to the Refinancing of the 11 7/8% Notes
referred to in Note G of Notes to Consolidated Financial Statements is
approximately as follows: 1998-$0; 1999-$0; 2000-$1,000,000;
2001-$1,000,000 and 2002 - $1,000,000.
S - 1
<PAGE> 56
CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE I
(continued)
TRANS-RESOURCES, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
(in thousands)
REVENUES - EQUITY IN NET
EARNING OF SUBSIDIARIES:
<S> <C> <C> <C>
Dividends received from subsidiaries . $ 8,609 $ 76,556 $ 13,400
Undistributed (dividends in excess of)
earnings of subsidiaries .......... 7,021 (55,685) 1,693
-------- -------- --------
Total ................................ 15,630 20,871 15,093
COSTS AND EXPENSES ..................... (4,148) (4,559) (6,142)
INTEREST EXPENSE ....................... (22,250) (15,568) (14,324)
INTEREST AND OTHER INCOME - Net ........ 1,868 2,024 3,666
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM ................... (8,900) 2,768 (1,707)
INCOME TAX BENEFIT ..................... 2,042 8,425 3,151
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (6,858) 11,193 1,444
EXTRAORDINARY ITEM - Loss on repurchase
of debt (no income tax benefit) ...... (103) (553) --
-------- -------- --------
NET INCOME (LOSS) ...................... $ (6,961) $ 10,640 $ 1,444
======== ======== ========
</TABLE>
S - 2
<PAGE> 57
CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE I
(concluded)
TRANS-RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
(in thousands)
OPERATING ACTIVITIES AND WORKING
CAPITAL MANAGEMENT:
Operations:
<S> <C> <C> <C>
Net income (loss) .............................. $ (6,961) $ 10,640 $ 1,444
Items not requiring (providing) cash:
Unremitted earnings of subsidiaries .......... (7,021) 55,685 (1,693)
Depreciation and amortization ................ 1,147 478 1,363
Increase in other liabilities ................ 31 33 35
Deferred taxes and other - net ............... (1,064) (4,314) (1,148)
--------- -------- --------
Total .......................................... (13,868) 62,522 1
Working capital management:
Receivables and other current assets ......... 6,115 (546) (312)
Prepaid expenses ............................. (251) (175) (2,275)
Accrued expenses and other current liabilities (4,118) (1,066) (2,696)
--------- -------- --------
Cash provided by (used in) operations and
working capital management ................ (12,122) 60,735 (5,282)
--------- -------- --------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment ....... (3) (21) (29)
Sales of marketable securities and short-term
investments, including in 1995 liquidation
of CD's securing a bank loan ................... 132,436 1,987 8,035
Purchases of marketable securities and short-
term investments ............................... (4,371) (9,354) (7,652)
Other - net ...................................... 7,207 6,213 (823)
--------- -------- --------
Cash provided by (used in) investment activities . 135,269 (1,175) (469)
--------- -------- --------
FINANCING ACTIVITIES:
Increase in long-term debt ....................... -- -- 3,000
Repurchases, payments and current maturities of
long-term debt ................................ (113,250) (51,000) --
Dividends to stockholders ........................ (1,707) (6,059) (4,586)
--------- -------- --------
Cash provided by (used in) financing activities .. (114,957) (57,059) (1,586)
--------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ................................. 8,190 2,501 (7,337)
CASH AND CASH EQUIVALENTS:
Beginning of year ................................ 9,570 17,760 20,261
--------- -------- --------
End of year ...................................... $ 17,760 $ 20,261 $ 12,924
========= ======== ========
Interest paid ...................................... $ 23,289 $ 16,446 $ 13,666
========= ======== ========
Income taxes paid .................................. $ 3,255 $ 2,268 $ 3,339
========= ======== ========
</TABLE>
S - 3
<PAGE> 58
TRANS-RESOURCES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description Page No.
------- ----------- --------
<S> <C> <C>
2.1 Asset Purchase Agreement dated as of May 21, 1996, by and among Mississippi
Chemical Corporation, Mississippi Acquisition I, Inc., Mississippi
Acquisition II, Inc., New Mexico Potash Corporation and Eddy Potash, Inc.,
filed as Exhibit 2.1 to the Company's Current Report on Form 8-K for August
16, 1996 (the "Form 8-K"), which is incorporated herein by reference. The
Company hereby agrees to furnish supplementally to the Securities and
Exchange Commission upon request a copy of any omitted schedule or exhibit,
all of which are listed at the end of the Table of Contents to the Asset
Purchase Agreement. *
2.2 Amendment to Asset Purchase Agreement, dated August 16, 1996, filed as
Exhibit 2.2 to the Form 8-K, which is incorporated herein by reference. The
Company hereby agrees to furnish supplementally to the Securities and
Exchange Commission upon request a copy of any omitted exhibit, all of which
are referenced on the first page of the Amendment. *
3.1 Certificate of Incorporation of the Company, as amended (in restated form),
filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 (the "1994 Form 10-K"), which is incorporated herein
by reference. *
3.2 By-laws of the Company, filed as Exhibit 3.2 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1991 (the "1991 Form 10-K"),
which is incorporated herein by reference. *
4.1 Indenture, dated as of March 30, 1993 between the Company and Regions Bank
(formerly First Alabama Bank), as Trustee ("Regions Bank"), relating to the
11 7/8% Senior Subordinated Notes due 2002 (the "11 7/8% Notes"), filed as
Exhibit 4.1 to the Registration Statement of the Company on Form S-1, filed
on April 16, 1993, as amended, Registration No. 33-61158, which is
incorporated herein by reference. *
4.2 Form of 11 7/8% Senior Subordinated Notes due 2002, Series A and Series B
(contained in Exhibit 4.1 as Exhibit A and B thereto, respectively) *
4.3 First Supplemental Indenture, dated as of February 27, 1998, between the
Company and Regions Bank, relating to the 11 7/8% Notes. E-5
4.4 Indenture, dated as of March 16, 1998, between the Company and State Street
Bank and Trust Company ("State Street"), as Trustee, relating to the 10 3/4%
Senior Notes due 2008 (the "10 3/4% Notes"). E-6
</TABLE>
E - 1
<PAGE> 59
<TABLE>
<CAPTION>
Exhibit Description Page No.
------- ----------- --------
<S> <C> <C>
4.5 Form of 10 3/4% Senior Notes due 2008, Series A and Series B (contained in
Exhibit 4.4 as Exhibit A and B thereto, respectively).
4.6 Indenture, dated as of March 16, 1998, between the Company and State Street,
as Trustee, relating to the 12% Senior Discount Notes due 2008 (the "12%
Notes"). E-7
4.7 Form of 12% Senior Discount Notes due 2008, Series A and Series B (contained
in Exhibit 4.6 as Exhibit A and B thereto, respectively).
4.8 Exchange and Registration Rights Agreement, dated March 16, 1998, among the
Company, Chase Securities Inc. ("CSI") and Donaldson Lufkin & Jenrette
Securities Corporation ("DLJ"), relating to the 10 3/4% Notes. E-8
4.9 Exchange and Registration Rights Agreement, dated March 16, 1998, among the
Company, CSI and DLJ, relating to the 12% Notes. E-9
4.10 Credit Agreement, dated as of November 3, 1995 and Amended and Restated as of
July 31, 1997 (the "Cedar Credit Agreement"), among Cedar Chemical
Corporation, the Lenders listed on the signature pages thereof and the Chase
Manhattan Bank, as Administrative Agent (exhibits and schedules omitted),
filed as Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997, which is incorporated herein by
reference. *
4.11 Amendment No. 1, dated as of February 26, 1998, to the Cedar Credit
Agreement. E-10
Certain instruments which define the rights of holders of long-term debt of
the Company and its consolidated subsidiaries have not been filed as Exhibits
to this Report since the total amount of securities authorized under any such
instrument does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis, as of December 31, 1997. For a
description of such indebtedness see Note G of Notes to Consolidated
Financial Statements. The Company agrees to furnish copies of such
instruments to the Securities and Exchange Commission upon its request.
10.1 Potash Sales Agreement between Haifa Chemicals Ltd. and Dead Sea Works
Limited, dated as of January 1, 1990 concerning the supply of potash. E-11
10.2 Agreement of Use of Ammonia Pipeline between Haifa Chemicals Ltd. and Oil
Refineries Ltd., dated August 7, 1977, as amended, concerning the use of an
ammonia pipeline, filed as Exhibit 10.8 to the Registration Statement of the
Company on Form S-1, filed on January 30, 1987, as amended, Registration No.
33-11634 (the "1987 Form S-1") which is incorporated herein by reference. *
10.3 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated December
20, 1968, concerning real property, filed as Exhibit 10.9 to the 1987 Form
S-1, which is incorporated herein by reference. *
</TABLE>
E - 2
<PAGE> 60
<TABLE>
<CAPTION>
Exhibit Description Page No.
------- ----------- --------
<S> <C> <C>
10.4 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated March 31,
1974, concerning real property, filed as Exhibit 10.10 to the 1987 Form S-1,
which is incorporated herein by reference. *
10.5 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated April 5,
1978, concerning real property, filed as Exhibit 10.11 to the 1987 Form S-1,
which is incorporated herein by reference. *
10.6 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated June 25,
1978, concerning real property, filed as Exhibit 10.12 to the 1987 Form S-1,
which is incorporated herein by reference. *
10.7 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated September
25, 1986, concerning real property, filed as Exhibit 10.13 to the 1987 Form
S-1, which is incorporated herein by reference. *
10.8 Agreement between the Company and Thomas G. Hardy, dated March 22, 1994,
concerning incentive bonus compensation, including, as Exhibit A thereto, the
related Trust Agreement, filed as Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993, which is
incorporated herein by reference. (1) *
10.9 Employment Agreement between the Company and Thomas G. Hardy, dated as of
June 1, 1993, filed as Exhibit 10.11 to the 1994 Form 10-K, which is
incorporated herein by reference. (1) *
10.10 Salary Continuation Agreement between the Company and Lester W. Youner,
dated as of August 24, 1994, filed as Exhibit 10.12 to the 1994 Form 10-K,
which is incorporated herein by reference. (1) *
10.11 Tax Sharing Agreement, dated as of December 30, 1991, among TPR Investment
Associates, Inc., the Company, EDP, Inc., Nine West Corporation, TR Media
Corporation and Cedar Chemical Corporation, filed as Exhibit 10.23 to the
1991 Form 10-K, which is incorporated herein by reference. *
10.12 Split Dollar Insurance Agreement, entered into as of August 26, 1988, between
the Company and Arie Genger, filed as Exhibit 10.27 to the Registration
Statement of the Company on Form S-1, filed on October 20, 1992, as amended,
Registration No. 33-53486, which is incorporated herein by reference. (1) *
10.13 Split Dollar Agreement and Collateral Assignment, made as of December 31,
1996, between the Company and the trustees of the Arie Genger 1995 Life
Insurance Trust. (1) E-12
</TABLE>
E - 3
<PAGE> 61
<TABLE>
<CAPTION>
Exhibit Description Page No.
------- ----------- --------
<S> <C> <C>
10.14 Lease contract between Haifa Chemicals South, Ltd. and Israel Land
Administration Authority, dated as of March 6, 1995, concerning real property. E-13
10.15 Potash Sales Agreement between Haifa Chemicals South, Ltd. and Dead Sea
Works Limited, dated April 24, 1995, concerning the supply of potash. E-14
21 Subsidiaries of the Company. E-15
24 Power of Attorney authorizing Lester W. Youner to sign this report and any
amendments hereto on behalf of the principal executive officer and the
directors. E-16
27 Financial Data Schedule. E-17
</TABLE>
- -------------------
* Incorporated by reference
(1) Management contract or compensatory plan or arrangement
E - 4
<PAGE> 1
EXHIBIT 4.3
FIRST SUPPLEMENTAL INDENTURE, dated as of February 27, 1998, between
TRANS-RESOURCES, INC., a corporation organized and existing under the laws of
the State of Delaware (the "Company"), and REGIONS BANK (formerly known as First
Alabama Bank), an Alabama corporation, as trustee (the "Trustee"), under an
indenture dated as of March 30, 1993 (the "Indenture"). Capitalized terms used
herein without definition have the meanings assigned to them in the Indenture.
WHEREAS, the Company and the Trustee have heretofore executed the
Indenture, pursuant to which $115,000,000 aggregate principal amount of the
Company's 117/8% Senior Subordinated Notes due 2002 (the "Notes") were issued
and are outstanding; and
WHEREAS, the Company wishes to amend the Indenture in order to eliminate
substantially all of the restrictive covenants and certain events of default
contained in the Indenture (the "Amendments"); and
WHEREAS, pursuant to Section 9.02 of the Indenture, the Company and the
Trustee may amend the Indenture (except as to certain matters not here relevant)
with the written consent of the Holders of more than 662/3% of the principal
amount of the Notes then outstanding; and
WHEREAS, in accordance with the provisions of Section 9.02 of the
Indenture, the Holders of more than 662/3% of the principal amount of the
outstanding Notes have delivered to the Trustee their written consent to the
Amendments;
NOW, THEREFORE, each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Notes:
E-5
<PAGE> 2
ARTICLE 1
Amendment of Indenture
Section 1.01. The text of Section 4.02 of the Indenture is hereby deleted
in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
Section 1.02. The text of Section 4.03 of the Indenture is hereby deleted
in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
Section 1.03. The text of Section 4.04 of the Indenture is hereby deleted
in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
Section 1.04. The text of Section 4.05 of the Indenture is hereby deleted
in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
Section 1.05. The text of Section 4.06 of the Indenture is hereby deleted
in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
Section 1.06. The text of Section 4.08 of the Indenture is hereby deleted
in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
-2-
<PAGE> 3
Section 1.07. The text of Section 4.09 of the Indenture is hereby deleted
in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
Section 1.08. The text of Section 4.18 of the Indenture is hereby deleted
in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
Section 1.09. The text of clause (3) of Section 6.01 of the Indenture is
hereby deleted in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
Section 1.10. The text of clause (6) of Section 6.01 of the Indenture is
hereby deleted in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
Section 1.11. The text of clause (7) of Section 6.01 of the Indenture is
hereby deleted in its entirety, and there is substituted therefor the following:
"[Intentionally Omitted]"
Section 1.12. All references in the Indenture (including, without
limitation, in (a) the definition of "Unrestricted Subsidiaries" in Section 1.01
of the Indenture and (b) Section 5.01 of the Indenture) to the herein
above-referenced covenants and events of default are hereby deleted.
Section 1.13. The definitions of "Change of Control," "Consolidated Net
Income," "Consolidated Operating Cash Flow," "Consolidated Operating Cash Flow
Ratio," "Investment," "Material Asset," "Net Book Value," "Non-Current Tangible
Assets," "Payment Restriction,"
-3-
<PAGE> 4
"Permitted Indebtedness,""Redeemable Stock" and "Transaction Date" in Section
1.01 of the Indenture are hereby deleted in their entirety.
ARTICLE 2
Acceptance by Trustee
Section 2.01. The Trustee hereby accepts this First Supplemental Indenture
and the modifications of the trust effected hereby, but only on the terms and
conditions set forth herein and in the Indenture. Without limiting the
generality of the foregoing, the Trustee assumes no responsibility for the
validity or adequacy of this First Supplemental Indenture.
ARTICLE 3
Miscellaneous
Section 3.01. Except as expressly modified hereby, the Indenture is in all
respects hereby ratified and confirmed, and the respective rights, limitations,
powers, duties and immunities of the parties to the Indenture and the Holders of
the Notes shall continue to be determined, exercised and enforced under the
Indenture; provided, however, that the terms and conditions of this First
Supplemental Indenture shall be and be deemed to be part of the terms and
conditions of the Indenture for any and all purposes.
Section 3.02. This First Supplemental Indenture shall not take effect and
not become operative unless and until the Trustee receives written notice from
the Company that the Company has accepted for purchase, pursuant to the Offer to
Purchase and Consent Solicitation Statement of the Company, dated February 12,
1998 (as the same may be amended, the "Statement"), all Notes validly tendered
(and not withdrawn) prior to the Tender Offer Expiration Date (as defined in the
Statement).
-4-
<PAGE> 5
Section 3.03. This First Supplemental Indenture may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original; and all such counterparts shall together constitute
but one and the same instrument. From and after the effectiveness hereof, any
reference to the Indenture shall be deemed a reference to the Indenture as
amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective seals to be hereunto affixed
and attested, all as of the date first written above.
TRANS-RESOURCES, INC.
By:/s/ Lester W. Youner
-------------------------------
(Seal)
Attest: /s/ Edward Klimerman
REGIONS BANK, as Trustee
By:/s/ Jo Ann Trapp
-------------------------------
(Seal)
Attest: /s/ Robert B. Rinehart
-5-
<PAGE> 1
================================================================================
INDENTURE
Dated as of March 16, 1998
Between
TRANS-RESOURCES, INC.
and
STATE STREET BANK AND TRUST COMPANY, as Trustee
------------------
$100,000,000
10 3/4 % Senior Notes due 2008, Series A
10 3/4% Senior Notes due 2008, Series B
================================================================================
E-6
<PAGE> 2
CROSS-REFERENCE TABLE
Trust Indenture Indenture
Act Section Section
- --------------- ---------
ss.310(a)(1)............................................. 7.10
(a)(2)............................................... 7.10
(a)(3)............................................... N.A.
(a)(4)............................................... N.A.
(a)(5)............................................... 7.08; 7.10.
(b).................................................. 7.08; 7.10; 13.02
(c).................................................. N.A.
ss. 311(a)........................................... 7.11
(b).................................................. 7.11
(c).................................................. N.A.
ss.312(a)................................................ 2.05
(b).................................................. 13.03
(c).................................................. 13.03
ss.313(a)................................................ 7.06
(b)(1)............................................... 7.06
(b)(2)............................................... 7.06
(c).................................................. 7.06; 13.02
(d).................................................. 7.06
ss.314(a)................................................ 4.11; 4.12; 13.02
(b).................................................. N.A.
(c)(1)............................................... 13.04
(c)(2)............................................... 13.04
(c)(3)............................................... N.A.
(d).................................................. N.A.
(e).................................................. 13.05
(f).................................................. N.A.
ss.315(a)................................................ 7.01(b)
(b).................................................. 7.05; 13.02
(c).................................................. 7.01(a)
(d).................................................. 7.01(c)
(e).................................................. 6.11
ss.316(a)(last sentence)................................. 2.09
(a)(1)(A)............................................ 6.05
(a)(1)(B)............................................ 6.04
(a)(2)............................................... N.A.
(b).................................................. 6.07
(c).................................................. 10.04
ss.317(a)(1)............................................. 6.08
(a)(2)............................................... 6.09
(b).................................................. 2.04
ss.318(a)................................................ 13.01
- ----------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to
be a part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act........ 18
SECTION 1.03. Rules of Construction.................................... 18
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.......................................... 19
SECTION 2.02. Execution and Authentication............................. 19
SECTION 2.03. Registrar and Paying Agent............................... 20
SECTION 2.04. Paying Agent To Hold Assets in Trust..................... 20
SECTION 2.05. Holder Lists............................................. 21
SECTION 2.06. Transfer and Exchange.................................... 21
SECTION 2.07. Replacement Securities................................... 21
SECTION 2.08. Outstanding Securities................................... 22
SECTION 2.09. Treasury Securities...................................... 22
SECTION 2.10. Temporary Securities..................................... 22
SECTION 2.11. Cancellation............................................. 22
SECTION 2.12. Defaulted Interest....................................... 23
SECTION 2.13. CUSIP Number............................................. 23
SECTION 2.14. Deposit of Moneys........................................ 23
SECTION 2.15. Book-Entry Provisions for Global Securities.............. 24
SECTION 2.16. Registration of Transfers and Exchanges.................. 24
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee....................................... 28
SECTION 3.02. Selection of Securities To Be Redeemed................... 28
SECTION 3.03. Notice of Redemption..................................... 29
SECTION 3.04. Effect of Notice of Redemption........................... 29
SECTION 3.05. Deposit of Redemption Price.............................. 29
SECTION 3.06. Securities Redeemed in Part.............................. 30
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.................................... 30
-i-
<PAGE> 4
Page
----
SECTION 4.02. Maintenance of Office or Agency.......................... 30
SECTION 4.03. Limitations on Transactions with Affiliates.............. 30
SECTION 4.04. Limitation on Additional Indebtedness.................... 31
SECTION 4.05. Disposition of Proceeds of Asset Sales................... 32
SECTION 4.06. Limitation on Restricted Payments........................ 33
SECTION 4.07. Existence................................................ 35
SECTION 4.08. Payment of Taxes and Other Claims........................ 35
SECTION 4.09. Notice of Defaults....................................... 35
SECTION 4.10. Maintenance of Properties and Insurance.................. 36
SECTION 4.11. Compliance Certificate................................... 36
SECTION 4.12. Reports to Holders....................................... 36
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.................. 37
SECTION 4.14. Change of Control........................................ 37
SECTION 4.15. Limitation on the Designation of Unrestricted
Subsidiaries........................................... 38
SECTION 4.16. Limitations on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries......... 39
SECTION 4.17. Limitation on the Sale or Issuance of Preferred
Equity Interests of Restricted Subsidiaries............ 40
SECTION 4.18. Limitation on Liens...................................... 40
SECTION 4.19. Limitation on Status as Investment Company............... 40
ARTICLE FIVE
MERGERS; SUCCESSORS
SECTION 5.01. Mergers, Sale of Assets, etc............................. 40
SECTION 5.02. Successor Substituted.................................... 41
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................................ 41
SECTION 6.02. Acceleration............................................. 42
SECTION 6.03. Other Remedies........................................... 43
SECTION 6.04. Waiver of Past Default................................... 43
SECTION 6.05. Control by Majority...................................... 44
SECTION 6.06. Limitation on Suits...................................... 44
SECTION 6.07. Rights of Holders To Receive Payment..................... 44
SECTION 6.08. Collection Suit by Trustee............................... 44
SECTION 6.09. Trustee May File Proofs of Claim......................... 45
SECTION 6.10. Priorities............................................... 45
SECTION 6.11. Undertaking for Costs.................................... 45
-ii-
<PAGE> 5
Page
----
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee........................................ 46
SECTION 7.02. Rights of Trustee........................................ 47
SECTION 7.03. Individual Rights of Trustee............................. 48
SECTION 7.04. Trustee's Disclaimer..................................... 48
SECTION 7.05. Notice of Defaults....................................... 48
SECTION 7.06. Reports by Trustee to Holders............................ 48
SECTION 7.07. Compensation and Indemnity............................... 48
SECTION 7.08. Replacement of Trustee................................... 49
SECTION 7.09. Successor Trustee by Merger, etc......................... 50
SECTION 7.10. Eligibility; Disqualification............................ 50
SECTION 7.11. Preferential Collection of Claims Against the
Company................................................ 50
ARTICLE EIGHT
[INTENTIONALLY OMITTED]
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of the Company's Obligations................. 51
SECTION 9.02. Application of Trust Money............................... 52
SECTION 9.03. Repayment to the Company................................. 52
SECTION 9.04. Reinstatement............................................ 52
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders............................. 53
SECTION 10.02. With Consent of Holders................................ 53
SECTION 10.03. Compliance with Trust Indenture Act.................... 54
SECTION 10.04. Revocation and Effect of Consents...................... 55
SECTION 10.05. Notation on or Exchange of Securities.................. 55
SECTION 10.06. Trustee To Sign Amendments, etc........................ 55
-iii-
<PAGE> 6
Page
----
ARTICLE ELEVEN
[INTENTIONALLY OMITTED]
ARTICLE TWELVE
[INTENTIONALLY OMITTED]
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls........................... 56
SECTION 13.02. Notices................................................ 56
SECTION 13.03. Communications by Holders with Other Holders........... 57
SECTION 13.04. Certificate and Opinion as to Conditions
Precedent.............................................. 57
SECTION 13.05. Statements Required in Certificate or Opinion.......... 58
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.............. 58
SECTION 13.07. Governing Law.......................................... 58
SECTION 13.08. No Recourse Against Others............................. 58
SECTION 13.09. Successors............................................. 58
SECTION 13.10. Counterpart Originals.................................. 59
SECTION 13.11. Severability........................................... 59
SECTION 13.12. No Adverse Interpretation of Other Agreements.......... 59
SECTION 13.13. Legal Holidays......................................... 59
SIGNATURES...............................................................S-1
EXHIBIT A Form of Series A Security....................................A-1
EXHIBIT B Form of Series B Security....................................B-1
EXHIBIT C Form of Legend for Global Securities.........................C-1
EXHIBIT D Form of Transfer Certificate.................................D-1
EXHIBIT E Form of Transfer Certificate for Institutional Accredited
Investors....................................................E-1
- ----------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-iv-
<PAGE> 7
INDENTURE dated as of March 16, 1998, between TRANS-RESOURCES, INC.,
a Delaware corporation (the "Company"), and STATE STREET BANK AND TRUST COMPANY,
a Massachusetts state chartered commercial bank, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed
in connection with an Acquisition from such Person or (b) existing at the time
such Person becomes a Restricted Subsidiary or is merged or consolidated with or
into the Company or any Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person, any
other Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated with or merged into the Company
or any Restricted Subsidiary or (ii) any acquisition by the Company or any
Restricted Subsidiary of the assets of any Person which constitutes
substantially all of an operating unit or line of business of such Person or
which is otherwise outside of the ordinary course of business
"Additional Interest" has the meaning provided in the Exchange
and Registration Rights Agreement.
"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"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), 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, however,
that (i) beneficial ownership of 15.0% or more of the then outstanding Equity
Interests of a Person shall be deemed to be control for purposes of compliance
with Section 4.03; and (ii) no individual, other than a director of the Company
or an officer of the Company with a policy making function, shall be deemed an
Affiliate of the Company or any of its Subsidiaries, solely by reason of such
individual's employment, position or responsibilities by or with respect to the
Company or any of its Subsidiaries.
"Affiliate Transaction" has the meaning set forth in Section 4.03.
<PAGE> 8
-2-
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means any direct or indirect sale, conveyance,
transfer, lease (that has the effect of a disposition) or other disposition
(including, without limitation, any merger, consolidation or sale-leaseback
transaction) to any Person other than the Company or a Restricted Subsidiary, in
one transaction or a series of related transactions, of (i) any Equity Interest
of any Restricted Subsidiary; (ii) any material license, franchise or other
authorization of the Company or any Restricted Subsidiary; (iii) any assets of
the Company or any Restricted Subsidiary which constitute substantially all of
an operating unit or line of business of the Company or any Restricted
Subsidiary; or (iv) any other property or asset of the Company or any Restricted
Subsidiary outside of the ordinary course of business (including the receipt of
proceeds paid on account of the loss of or damage to any property or asset and
awards of compensation for any asset taken by condemnation, eminent domain or
similar proceedings). For the purposes of this definition, the term "Asset Sale"
shall not include (a) any transaction consummated in compliance with Section
5.01 and the creation of any Lien not prohibited by Section 4.18; provided,
however, that any transaction consummated in compliance with Section 4.18
involving a sale, conveyance, assignment, transfer, lease or other disposal of
less than all of the properties or assets of the Company shall be deemed to be
an Asset Sale with respect to the properties or assets of the Company and the
Restricted Subsidiaries that are not so sold, conveyed, assigned, transferred,
leased or otherwise disposed of in such transaction; (b) sales of property or
equipment that have become worn out, obsolete or damaged or otherwise unsuitable
for use in connection with the business of the Company or any Restricted
Subsidiary; (c) any transaction consummated in compliance with Section 4.06; and
(d) sales of accounts receivable for cash at fair market value.
"Bankruptcy Law" has the meaning set forth in Section 6.01.
"Board of Directors" means, as to any Person, the board of directors
of such Person (or, if such Person is a partnership, the board of directors or
other governing body of the general partner (or, if there is more than one
general partner of such person, the general partner or general partners which
may take the applicable action pursuant to the partnership agreement of such
Person) of such Person) or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means a day that is not a Saturday, a Sunday or a day
on which banking institutions in New York, New York are not required to be open.
"Capitalized Lease Obligation" means any obligation under a lease of
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of this Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with GAAP.
"Cash Equivalents" means: (a) U.S. dollars and any other currency
that is convertible into U.S. dollars without legal restrictions and which is
utilized by the Company or any of the Restricted Subsidiaries in the ordinary
course of its business; (b) securities issued or directly and fully guaranteed
or insured by the U.S. government or any agency or instrumentality thereof
having maturities of not more than six months from the date of acquisition; (c)
certificates of deposit and time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not exceeding
six months and overnight
<PAGE> 9
-3-
bank deposits, in each case with any commercial bank having capital and surplus
in excess of $500.0 million (or the foreign currency equivalent thereof); (d)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (b) and (c) above entered into with
any financial institution meeting the qualifications specified in clause (c)
above; and (e) commercial paper rated P-1, A-1 or the equivalent thereof by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively,
and in each case maturing within six months after the date of acquisition.
"Change of Control" means the occurrence of any of the following
events (whether or not approved by the Board of Directors of the Company): (i)
any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of at least 40% of the total
voting power of the then outstanding Voting Equity Interests of the Company and
the Permitted Holders, as a group, do not own a greater percentage of the total
voting power of such Voting Equity Interests; (ii) the Company consolidates
with, or merges with or into, another Person or the Company or the Restricted
Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of all
or substantially all of the assets of the Company and the Restricted
Subsidiaries (determined on a consolidated basis) to any Person (other than the
Company), other than any such transaction where immediately after such
transaction the Person or Persons that "beneficially owned" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have "beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) immediately prior to such transaction, directly or indirectly, the then
outstanding Voting Equity Interests of the Company "beneficially own" (as so
determined), directly or indirectly, a majority of the total voting power of the
then outstanding Voting Equity Interests of the surviving or transferee Person;
or (iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
"Change of Control Offer" has the meaning set forth in Section 4.14.
"Change of Control Offer Date" has the meaning set forth in Section
4.14.
"Commodity Agreements" means agreements relating to commodity hedges
designed to protect against fluctuation in commodity prices.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Consolidated EBITDA" of any Person means, for any period, the
Consolidated Net Income of such Person for such period, minus any non-cash item
increasing such Consolidated Net Income during such period, plus the following
to the extent deducted in calculating such Consolidated Net Income: (i)
Consolidated Income Tax Expense of such Person for such period; (ii)
Consolidated Interest Expense of
<PAGE> 10
-4-
such Person for such period; (iii) depreciation expense of such Person for such
period; (iv) amortization expense of such Person for such period; and (v) all
other non-cash items reducing Consolidated Net Income of such Person for such
period (other than any non-cash item requiring an accrual or a reserve for cash
disbursements in any future period).
"Consolidated Income Tax Expense" means, with respect to any Person
for any period, the provision for Federal, state, local and foreign income taxes
payable by such Person and the Restricted Subsidiaries of such Person for such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person
for any period, without duplication, the sum of (i) the interest expense of such
Person and the Restricted Subsidiaries of such Person for such period as
determined on a consolidated basis in accordance with GAAP, including, without
limitation, (a) any amortization of debt discount, (b) the net cost under
Interest Rate Agreements (including any amortization of discounts), (c) the
interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and (e) all capitalized interest and all accrued
interest, (ii) the interest component of Capital Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person and the Restricted
Subsidiaries of such Person during such period as determined on a consolidated
basis in accordance with GAAP and (iii) dividends and distributions in respect
of Disqualified Equity Interests of such Person and the Disqualified Equity
Interests and Preferred Equity Interests of the Restricted Subsidiaries of such
Person during such period as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
consolidated net income (loss) of such Person and the Restricted Subsidiaries of
such Person; provided, however, that there shall not be included in such
Consolidated Net Income: (i) any net income (loss) of any other Person if such
person is not a Restricted Subsidiary of such Person, except that (A) subject to
the limitations contained in clause (iv) below, such Person's equity in the net
income of any such other Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such other Person during such period to such Person or a Restricted
Subsidiary of such Person as a dividend or other distribution (subject, in the
case of a dividend or other distribution to a Restricted Subsidiary of such
Person, to the limitations contained in clause (iii) below) and (B) such
Person's equity in a net loss of any such other Person (other than an
Unrestricted Subsidiary of such Person) for such period shall be included in
determining such Consolidated Net Income; (ii) any net income (loss) of any such
other person acquired by such Person or a Restricted Subsidiary of such Person
in a pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income (loss) of any Restricted Subsidiary of such
Person if such Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to such Person (other than any
restriction permitted by Section 4.16) except that (A) subject to the
limitations contained in (iv) below, such Person's equity in the net income of
any such Restricted Subsidiary of such Person for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash that could
have been distributed by such Restricted Subsidiary during such period to such
Person or another Restricted Subsidiary of such Person as a dividend (subject,
in the case of a dividend that could have been made to another Restricted
Subsidiary of such Person, to the limitation contained in this clause) and (B)
such Person's equity in a net loss of any such Restricted Subsidiary of such
Person for such period shall be included in determining such Consolidated Net
Income; (iv) any gain or loss realized upon the sale or other disposition of any
asset of such Person or the Restricted Subsidiaries (including pursuant to any
sale leaseback transaction) of such Person that is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss realized
upon the sale or other disposition of any
<PAGE> 11
-5-
Equity Interests of any other Person; (v) any extraordinary gain or loss; and
(vi) the cumulative effect of a change in accounting principles.
"Consolidated Operating Cash Flow Ratio" of any Person as of any
date of determination means the ratio of (i) the aggregate amount of
Consolidated EBITDA of such Person for the four quarter period of the most
recent four consecutive fiscal quarters ending prior to the date of such
determination for which consolidated financial statements of such Person are
available (or which would be required to be filed by such Person with the
Commission, if such Person were subject to the reporting requirements of the
Exchange Act) the "Four Quarter Period") to (ii) Consolidated Interest Expense
of such Person for such Four Quarter Period; provided, however, that (1) if such
Person or any Restricted Subsidiary of such Person has incurred any Indebtedness
since the beginning of such Four Quarter Period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Operating Cash Flow Ratio is an Incurrence of Indebtedness,
Consolidated EBITDA and Consolidated Interest Expense for such Four Quarter
Period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
Four Quarter Period, and the discharge of any other Indebtedness repaid,
repurchased or otherwise discharged during the Four Quarter Period (or
thereafter but prior to the date of determination) or to be repaid, repurchased
or otherwise discharged with the proceeds of such new Indebtedness (or otherwise
in connection with the transaction giving rise to the need to calculate the
Consolidated Operating Cash Flow Ratio) shall be given pro forma effect as if
such repayment, repurchase or discharge had occurred on the first day of such
Four Quarter Period, (2) if since the beginning of such Four Quarter Period such
Person or any Restricted Subsidiary of such Person shall have made any Asset
Sale, the Consolidated EBITDA for such Four Quarter Period shall be reduced by
an amount equal to the Consolidated EBITDA (if positive) directly attributable
to the assets that are the subject of such Asset Sale for such Four Quarter
Period or increased by an amount equal to the Consolidated EBITDA (if negative)
directly attributable thereto for such Four Quarter Period and Consolidated
Interest Expense for such Four Quarter Period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of such Person or any Restricted Subsidiary of such Person repaid,
repurchased or otherwise discharged with respect to such Person and its
continuing Restricted Subsidiaries in connection with such Asset Sale for such
Four Quarter Period (or, if the Equity Interests of any Restricted Subsidiary of
such Person are sold, the Consolidated Interest Expense for such Four Quarter
Period directly attributable to the Indebtedness of such Restricted Subsidiary
to the extent such Person and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale), (3) if since the beginning
of such Four Quarter Period such Person or any Restricted Subsidiary (by merger
or otherwise) of such Person shall have made an Investment in any Restricted
Subsidiary (or any Person that becomes a Restricted Subsidiary) of such Person
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, or made
a Revocation, Consolidated EBITDA and Consolidated Interest Expense for such
Four Quarter Period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such Four Quarter Period and (4) if
since the beginning of such Four Quarter Period any other Person (that
subsequently became a Restricted Subsidiary of such Person or was merged with or
into such Person or any Restricted Subsidiary of such Person since the beginning
of such Four Quarter Period) shall have made any Asset Sale or any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(2) or (3) above if made by such Person or a Restricted Subsidiary of such
Person during such Four Quarter Period, Consolidated EBITDA and Consolidated
Interest Expense for such Four Quarter Period shall be calculated after giving
pro forma effect thereto as if such Asset Sale, Investment or acquisition of
assets occurred on, with respect to any Investment or acquisition, the first day
of such Four Quarter Period and, with respect to any Asset Sale, the day prior
to the first day of such Four Quarter Period (the adjustments referred to in
clauses (1) through (4) are referred to as the "Pro Forma
<PAGE> 12
-6-
Adjustments"). For purposes of the Pro Forma Adjustments, whenever pro forma
effect is to be given to an acquisition of assets, the amount of income or
earnings and any cost savings relating thereto and the amount of Consolidated
Interest Expense associated with any Indebtedness Incurred in connection
therewith, the pro forma calculations shall be determined in good faith by a
responsible financial or accounting officer of the Company. If any Indebtedness
bears a floating rate interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any agreement under which Currency and Interest Rate Agreements
relating to interest are outstanding applicable to such Indebtedness if such
agreement under which such Currency and Interest Rate Agreements are outstanding
has a remaining term as at the date of determination in excess of 12 months).
"Consolidated Tangible Assets" means, as of any date of
determination, the total assets, less goodwill and other intangibles (determined
in accordance with Accounting Principles Board Opinion No. 17), shown on the
balance sheet of the Company and its Restricted Subsidiaries as of the most
recent date for which such a balance sheet is available, determined on a
consolidated basis in accordance with GAAP.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 13.02 or such other address as the Trustee may
give notice to the Company.
"Currency Agreements" means the obligations of any Person pursuant
to any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such person or any of its
subsidiaries against fluctuations in currency values.
"Custodian" has the meaning set forth in Section 6.01.
"Default" means any event that is or would be, with the passage of
time or the giving of notice or both, an Event of Default.
"Default Amount" means the principal amount of the Securities plus
accrued and unpaid interest, if any.
"Depositary" means, with respect to the Securities issued in the
form of one or more Global Securities, The Depository Trust Company or another
Person designated as Depositary by the Company, which must be a clearing agency
registered under the Exchange Act.
"Designation" has the meaning set forth in Section 4.15.
"Designation Amount" has the meaning set forth in Section 4.15.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable 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, or exchangeable into Indebtedness on or prior to
the maturity date of the Securities.
<PAGE> 13
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"Equity Interest" in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Event of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Act Report" has the meaning set forth in Section 4.12.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated as of March 16, 1998, between the Company
and the Initial Purchasers, relating to the Securities.
"Exchange Securities" means 10 3/4 Senior Notes due 2008, Series B,
to be issued in exchange for the Initial Securities pursuant to the Exchange and
Registration Rights Agreement.
"Existing Securities" means the Company's 11-7/8% Senior
Subordinated Notes due 2002.
"Expiration Date" has the meaning set forth in the definition of
"Offer to Purchase" below.
"Fair Market Value" means, with respect to any asset, the price
(after taking into account any liabilities relating to such assets) which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets shall be determined conclusively by the Board
of Directors of the Company acting in good faith, and shall be evidenced by
resolutions of the Board of Directors of the Company delivered to the Trustee.
"Final Maturity Date" means March 15, 2008.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company
that is not organized under the laws of the United States of America or any
State thereof or the District of Columbia.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Operating Cash Flow Ratio" above.
"Fully Traded Common Stock" means Equity Interests issued by any
corporation which are listed on either the New York Stock Exchange or the
American Stock Exchange or included for trading privileges in the National
Market System of the National Association of Securities Dealers Automated
Quotation System; provided, however, that (a) either such Equity Interests are
freely tradable under the Securities Act (including pursuant to Rule 145(d)(1)
thereunder) upon issuance or the holder thereof has contractual registration
rights that will permit the sale of such Equity Interests pursuant to an
effective registration statement not later than nine months after issuance to
the Company or one of its Subsidiaries and (b) such Equity Interests are also so
listed or included for trading privileges.
<PAGE> 14
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"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States of America which are
applicable at the date of determination and which are consistently applied for
all applicable periods.
"Global Securities" means one or more IAI Global Securities,
Regulation S Global Securities and 144A Global Securities.
"Government Securities" means securities that are (a) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such Government
Securities or a specific payment of principal of or interest on any such
Government Securities held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the Government Securities or the specific payment of principal of or
interest on the Government Securities evidenced by such depository receipt.
"HCL" has the meaning set forth in the definition of "Permitted
Liens" below.
"Holder" means the registered holder of any Security.
"IAI Global Security" means a permanent global security in
registered form representing the aggregate principal amount of Securities sold
to Institutional Accredited Investors.
"Incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guaranty or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Acquired Person or any of its
Subsidiaries existing at the time such Acquired Person becomes a Restricted
Subsidiary (or is merged into or consolidated with the Company or any Restricted
Subsidiary), whether or not such Indebtedness was Incurred in connection with,
as a result of, or in contemplation of, such Acquired Person becoming a
Restricted Subsidiary (or being merged into or consolidated with the Company or
any Restricted Subsidiary), shall be deemed Incurred at the time any such
Acquired Person becomes a Restricted Subsidiary or merges into or consolidates
with the Company or any Restricted Subsidiary.
"Indebtedness" means (without duplication) with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (a) every obligation of such Person for money
borrowed; (b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding (x) earnout or other similar obligations
until such time as the amount of such obligation is capable of being determined,
(y) trade accounts payable incurred in the ordinary course of business and
payable in accordance with industry practices, or
<PAGE> 15
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(z) other accrued liabilities arising in the ordinary course of business which
are not overdue or which are being contested in good faith); (e) every
Capitalized Lease Obligation of such Person; (f) every net obligation under
Currency Agreements, Commodity Agreements and Interest Rate Agreements of such
Person; (g) every obligation of the type referred to in clauses (a) through (f)
of another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor, guarantor or otherwise; and (h) any and all
deferrals, renewals, extensions and refundings of, or amendments, modifications
or supplements to, any liability of the kind described in any of the preceding
clauses (a) through (g) above. Indebtedness (a) shall never be calculated taking
into account any cash and cash equivalents held by such Person; (b) shall not
include obligations of any Person (x) arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary course of
business, provided that such obligations are extinguished within two Business
Days of their incurrence, (y) resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business and consistent
with past business practices and (z) under standby letters of credit to the
extent collateralized by cash or Cash Equivalents; (c) which provides that an
amount less than the principal amount thereof shall be due upon any declaration
of acceleration thereof shall be deemed to be incurred or outstanding in an
amount equal to the accreted value thereof at the date of determination; and (d)
shall include the liquidation preference and any mandatory redemption payment
obligations in respect of any Disqualified Equity Interests of the Company or
any Restricted Subsidiary. For purposes of determining compliance with any U.S.
dollar-denominated restriction on the Incurrence of Indebtedness denominated in
a foreign currency, the U.S. dollar-equivalent principal amount of such
Indebtedness Incurred pursuant thereto shall be calculated based on the relevant
currency exchange rate in effect on the date that such Indebtedness was Incurred
if such Indebtedness is Incurred to refinance other Indebtedness denominated in
a foreign currency, and if such refinancing would cause the applicable U.S.
dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such refinancing, such U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced. The principal amount of
any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
based on the currency exchange rate applicable to the currencies in which such
respective Indebtedness is denominated that is in effect on the date of such
refinancing.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Independent Financial Advisor" means a nationally recognized
accounting, appraisal, investment banking firm or consultant that is, in the
judgment of the Company's Board of Directors, qualified to perform the task for
which it has been engaged (i) which does not, and whose directors, officers and
employees or Affiliates do not, have a direct or indirect financial interest in
the Company and (ii) which, in the judgment of the Directors of the Company, is
otherwise independent and qualified to perform the task for which it is to be
engaged.
"Initial Securities" means the 10 3/4% Senior Notes due 2008, Series
A, of the Company.
"Initial Purchasers" means Chase Securities Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
<PAGE> 16
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"interest" means, with respect to the Securities, the sum of any
cash interest and any Additional Interest on the Securities.
"Interest Payment Date" means each semiannual interest payment date
on March 15 and September 15 of each year, commencing September 15, 1998.
"Interest Rate Agreements" means the obligations of any Person
pursuant to any interest rate swap agreement, interest rate collar agreement or
other similar agreement or arrangement designed to protect such person or any of
its Subsidiaries against fluctuations in interest rates.
"Interest Record Date" for the interest payable on any Interest
Payment Date (except a date for payment of defaulted interest) means the March 1
or September 1 (whether or not a Business Day), as the case may be, immediately
preceding such Interest Payment Date.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance, guaranty or other extension of credit or capital
contribution to (by means of transfers of cash or other property or assets to
others or payments for property or services for the account or use of others, or
otherwise), or purchase or acquisition of capital stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any other
Person. Investment also means, in any event, the obligations of any Person
pursuant to any foreign exchange contract, currency swap agreement or other
similar agreement or arrangement the value of which is based on fluctuations in
currency values, as well as the obligations of any Person pursuant to any
interest rate swap agreement, interest rate collar agreement or other similar
agreement or arrangement the value of which is based on fluctuations in interest
rates. In determining the amount of any Investment involving a transfer of any
property or asset other than cash, such property shall be valued at its fair
market value at the time of such transfer, as determined in good faith by the
Board of Directors (or comparable body) of the Person making such transfer.
"Investment Company Act" means the Investment Company Act of 1940,
as amended.
"Issue Date" means the closing date for the sale and original
issuance of Securities under this Indenture.
"Lien" means any lien, mortgage, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest).
"Net Cash Proceeds" means the aggregate proceeds in the form of cash
or Cash Equivalents received by the Company or any Restricted Subsidiary in
respect of any Asset Sale, including all cash or Cash Equivalents received upon
any sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions) and any relocation expenses
incurred as a result thereof; (b) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale; (d) amounts deemed, in good faith, appropriate by the Board of
Directors of the Company to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets which are the subject of
such Asset Sale (provided that the amount of any such reserves shall be deemed
to constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a re-
<PAGE> 17
-11-
serve); and (e) with respect to Asset Sales by Restricted Subsidiaries, the
portion of such cash payments attributable to Persons holding a minority
interest in such Restricted Subsidiary.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer to
Purchase" below.
"Offer to Purchase" means a written offer (the "Offer") sent by or
on behalf of the Company by first-class mail, postage prepaid, to each Holder at
his address appearing in the register for the Securities on the date of the
Offer offering to purchase up to the principal amount of Securities specified in
such Offer at the purchase price specified in such Offer (as determined pursuant
to this Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase,
which shall be not less than 20 Business Days nor more than 60 days after the
date of such Offer, and a settlement date (the "Purchase Date") for purchase of
Securities to occur no later than five Business Days after the Expiration Date.
The Company shall notify the Trustee at least five Business Days (or such
shorter period as is acceptable to the Trustee) prior to the mailing of the
Offer of the Company's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company. The Offer shall contain all the
information required by applicable law to be included therein. The Offer shall
also contain (or incorporate by reference) information concerning the business
of the Company and its Subsidiaries which the Company in good faith believes
will enable such Holders to make an informed decision with respect to the Offer
to Purchase (which at a minimum will include (i) the most recent annual and
quarterly financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the documents
required to be filed with the Trustee pursuant to this Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other information required by
applicable law to be included therein). The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Securities pursuant to
the Offer to Purchase. The Offer shall also state: (1) the Section of this
Indenture pursuant to which the Offer to Purchase is being made; (2) the
Expiration Date and the Purchase Date; (3) the aggregate principal amount of the
outstanding Securities offered to be purchased by the Company pursuant to the
Offer to Purchase (including, if less than 100%, the manner by which such amount
has been determined pursuant to the Section of this Indenture requiring the
Offer to Purchase) (the "Purchase Amount"); (4) the purchase price to be paid by
the Company for each $1,000 aggregate principal amount of Securities accepted
for payment (as specified pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Securities registered
in the name of such Holder and that any portion of a Security tendered must be
tendered in an integral multiple of $1,000 principal amount; (6) the place or
places where Securities are to be surrendered for tender pursuant to the Offer
to Purchase; (7) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue; (8) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date; (9) that each Holder electing to tender all or any portion of a
Security pursuant to the Offer to Purchase will be required to surrender such
Security at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Security being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the
<PAGE> 18
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Trustee duly executed by the Holder thereof or his attorney duly authorized in
writing); (10) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or the Paying Agent) receives, not later
than the close of business on the fifth Business Day next preceding the
Expiration Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security the Holder
tendered, the certificate number of the Security the Holder tendered and a
statement that such Holder is withdrawing all or a portion of his tender; (11)
that (a) if Securities in an aggregate principal amount less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase all such Securities and (b) if Securities
in an aggregate principal amount in excess of the Purchase Amount are tendered
and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase
Securities having an aggregate principal amount equal to the Purchase Amount on
a pro rata basis (with such adjustments as may be deemed appropriate so that
only Securities in denominations of $1,000 principal amount or integral
multiples thereof shall be purchased); and (12) that in the case of any Holder
whose Security is purchased only in part, the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denominations as
requested by such Holder, in an aggregate principal amount equal to and in
exchange for the unpurchased portion of the Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any Offer.
"Officer" of any Person means the Chairman of the Board, the
President, any Executive Vice President, Senior Vice President or Vice
President, the Treasurer or the Secretary or Assistant Secretary of such Person.
"Officers' Certificate" of any Person means a certificate signed on
behalf of such Person by two Officers of such Person, one of whom must be the
principal executive officer, the principal financial officer, the treasurer or
the principal accounting officer of such Person, that meets the requirements set
forth in Sections 13.04 and 13.05 of this Indenture.
"144A Global Security" means a permanent global security in
registered form representing the aggregate principal amount of Securities sold
in reliance on Rule 144A.
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel for the Company or the Trustee.
"Pari Passu Debt" means Indebtedness of the Company (other than the
Securities) that does not constitute Subordinated Indebtedness.
"Pari Passu Debt Pro Rata Share" means the amount of the applicable
Net Cash Proceeds obtained by multiplying the amount of such Net Cash Proceeds
by a fraction, (i) the numerator of which is the aggregate accreted value and/or
principal amount, as the case may be, of all Pari Passu Debt outstanding at the
time of the applicable Asset Sale with respect to which the Company is required
to use Net Cash Proceeds to repay or make an offer to purchase or repay and (ii)
the denominator of which is the sum of (a) the aggregate principal amount of all
Securities outstanding at the time of the applicable Asset Sale and (b) the
aggregate principal amount or the aggregate accreted value, as the case may be,
of all Pari Passu Debt outstanding at the time of the applicable Asset Sale with
respect to which the Company is required to use the applicable Net Cash Proceeds
to offer to repay or make an offer to purchase or repay.
<PAGE> 19
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"Participants" has the meaning set forth in Section 2.15.
"Paying Agent" has the meaning set forth in Section 2.03.
"Permitted Holder" means (i) each of Arie Genger, his estate, his
spouse and his children, (ii) each trust, a majority of whose
beneficiaries-in-interest include one or more persons named in clause (i) of
this definition and (iii) any Person controlled by one or more persons named in
clause (i) of this definition.
"Permitted Indebtedness" has the meaning set forth in Section 4.04.
"Permitted Investments" means (a) Cash Equivalents; (b) Investments
in prepaid expenses, negotiable instruments held for collection and lease,
utility and workers' compensation, performance and other similar deposits; (c)
loans and advances to employees made in the ordinary course of business not to
exceed $2.0 million in the aggregate at any one time outstanding; (d) Currency
Agreements, Commodity Agreements and Interest Rate Agreements; (e) so long as no
Default has occurred and is continuing, investments in non-cash consideration
made pursuant to and in compliance with Section 4.05; (f) so long as no Default
has occurred and is continuing, any Investment (including minority interests and
Investments in Unrestricted Subsidiaries) such that, after giving effect to such
Investment, the aggregate amount (at cost) of all outstanding Investments made
pursuant to this clause would not exceed 5% of the Company's Consolidated
Tangible Assets as of the date of the most recent consolidated balance sheet of
the Company; (g) Investments existing as of the Issue Date and any amendment,
extension, renewal or modification thereof to the extent that any such
amendment, extension, renewal or modification does not require the Company or
any Restricted Subsidiary to make any additional cash or non-cash payments or
provide additional services in connection therewith; (h) any Investment made
with the proceeds from an Investment of the type set forth in clauses (f) and
(g) above, and any Investment made with the proceeds from an Investment made
pursuant to this clause (h); (i) any Investment to the extent that the
consideration therefor consists of Qualified Equity Interests of the Company;
and (j) any Investment in non-U.S. currencies received or utilized by the
Company or a Restricted Subsidiary in the ordinary course of business.
"Permitted Liens" means (a) Liens imposed by law such as carriers',
warehousemen's and mechanics' Liens and other similar Liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due or which are being contested in good faith and by appropriate
proceedings; (b) Liens existing on the Issue Date; (c) Liens securing only the
Securities and/or the Senior Discount Notes pursuant to the terms of this
Indenture and/or the Senior Discount Notes Indenture as in effect on the Issue
Date; (d) Liens in favor of the Company; (e) 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, however, that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been made
therefor; (f) easements, reservation of rights of way, restrictions and other
similar easements, licenses, restrictions on the use of properties, or minor
imperfections of title that in the aggregate are not material in amount and do
not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of the Company and the
Restricted Subsidiaries; (g) Liens resulting from the deposit of cash or notes
in connection with contracts, tenders or expropriation proceedings, or to secure
workers' compensation, surety or appeal bonds, costs of litigation when required
by law and public and statutory obligations or obligations under franchise
arrangements entered into in the ordinary course of business; (h) Liens securing
Indebtedness consisting of Capitalized Lease Obligations, Purchase Money
Indebtedness, mortgage financings, industrial revenue bonds or other monetary
obligations, in each case incurred solely for the purpose of financing all or
any part of the purchase price or cost of construction or installation of assets
used in the business of the Company or the Re-
<PAGE> 20
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stricted Subsidiaries, or repairs, additions or improvements to such assets;
provided, however, that (i) such Liens secure Indebtedness in an amount not in
excess of the original purchase price or the original cost of any such assets or
repair, addition or improvement thereto (plus an amount equal to the reasonable
fees and expenses in connection with the incurrence of such Indebtedness), (ii)
such Liens do not extend to any other assets of the Company or the Restricted
Subsidiaries (and, in the case of repair, addition or improvements to any such
assets, such Lien extends only to the assets (and improvements thereto or
thereon) repaired, added to or improved), (iii) the Incurrence of such
Indebtedness is permitted by Section 4.04 and (iv) such Liens attach within 90
days of such purchase, construction, installation, repair, addition or
improvement; (i) Liens to secure any refinancings, renewals, extensions,
modifications or replacements (collectively, "refinancing") (or successive
refinancings), in whole or in part, of any Indebtedness (or commitments to lend)
secured by Liens referred to in the clauses above so long as such Lien does not
extend to any other property (other than improvements thereto); (j) Liens
securing letters of credit entered into in the ordinary course of business and
consistent with past business practice; (k) Liens on and pledges of the Equity
Interests of any Unrestricted Subsidiary; and (l) Liens on the Equity Interests
of Haifa Chemicals Ltd., an Israeli corporation ("HCL"); provided that at the
time of the incurrence of any such Lien, the aggregate amount of Indebtedness
secured by such Equity Interests shall not exceed the amount equal to (x) if
prior to December 31, 2001, $40.0 million or (y) if on or after December 31,
2001, the greater of (i) $40.0 million or (ii) the Consolidated EBITDA of HCL
for the four quarter period of the most recent four fiscal quarters ending prior
to the date of determination for which financial statements are available (or
which would be required to be filed by HCL with the Commission if HCL were
subject to the reporting requirements of the Exchange Act), giving effect to the
adjustments to Consolidated EBITDA referred to in clauses (2) through (4) of the
Pro Forma Adjustments.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, limited
liability limited partnership, trust, unincorporated organization or government
or any agency or political subdivision thereof.
"Physical Securities" means one or more certificated Securities in
registered form.
"Preferred Equity Interest," in any Person, means an Equity Interest
of any class or classes (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such Person, over
Equity Interests of any other class in such Person.
"principal" of a debt security means the principal of the security,
plus, when appropriate, the premium, if any, on the security.
"Private Placement Legend" means the legend initially set forth on
the Initial Securities in the form set forth on Exhibit A hereto.
"Private Senior Exchange Notes" has the meaning provided in the
Exchange and Registration Rights Agreement.
"Pro Forma Adjustments" has the meaning set forth in the definition
of "Consolidated Operating Cash Flow Ratio."
"Public Equity Offering" means, with respect to the Company, an
underwritten primary public offering of Qualified Equity Interests of the
Company pursuant to an effective registration statement filed under the
Securities Act (excluding registration statements filed on Form S-8).
<PAGE> 21
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"Public Market" means any time after (x) a Public Equity Offering
has been consummated and (y) at least 15% of the total issued and outstanding
Qualified Equity Interests of the Company has been distributed by means of an
effective registration statement under the Securities Act.
"Purchase Agreement" means the Purchase Agreement, dated as of March
11, 1998, between the Company and the Initial Purchasers.
"Purchase Amount" has the meaning set forth in the definition
of "Offer to Purchase" above.
"Purchase Date" has the meaning set forth in the definition of
"Offer to Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the Company or
any Restricted Subsidiary Incurred for the purpose of financing all or any part
of the purchase price or the cost of construction or improvement of any
property, provided that the aggregate principal amount of such Indebtedness does
not exceed the lesser of the Fair Market Value of such property or such purchase
price or cost, including any refinancing of such Indebtedness that does not
increase the aggregate principal amount (or accreted amount, if less) thereof as
of the date of refinancing.
"Purchase Price" has the meaning set forth in the definition of
"Offer to Purchase" above.
"Qualified Equity Interest" in any Person means any Equity Interest
in such Person other than any Disqualified Equity Interest.
"Qualified Institutional Buyer" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"Redemption Date" means the date fixed for redemption of the
applicable Security.
"redemption price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the applicable form of Security annexed hereto.
"refinancing" has the meaning set forth in Section 4.04.
"Registered Exchange Offer" has the meaning provided in the Exchange
and Registration Rights Agreement.
"Registrar" has the meaning set forth in Section 2.03.
"Registration" means a registered exchange offer for the Securities
by the Company or other registration of the Securities under the Securities Act
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
"Regulation S Global Security" means a global security in registered
form representing the aggregate principal amount of Securities sold pursuant to
Regulation S under the Securities Act.
"Required Filing Dates" has the meaning set forth in Section 4.12.
<PAGE> 22
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"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" has the meaning set forth in Section 4.06.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; provided, however, that the Trustee shall be entitled
to request and conclusively rely upon an Opinion of Counsel with respect to
whether any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that has
not been designated by the Board of Directors of the Company, by a resolution of
the Board of Directors of the Company delivered to the Trustee, as an
Unrestricted Subsidiary pursuant to Section 4.15. Any such designation may be
revoked by a resolution of the Board of Directors of the Company delivered to
the Trustee, subject to the provisions of such covenant.
"Revocation" has the meaning set forth in Section 4.15.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities" means, collectively, the Initial Securities, the
Private Senior Exchange Notes and the Unrestricted Securities treated as a
single class of securities, as amended or supplemented from time to time in
accordance with the terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Senior Discount Notes" means the $135,000,000 12% Senior Discount
Notes due 2008 issued under the Senior Discount Notes Indenture.
"Senior Discount Notes Indenture" means the Indenture, dated as of
March 16, 1998, between the Company and State Street Bank and Trust Company, as
trustee, relating to the Senior Discount Notes.
"Significant Restricted Subsidiary" means a Restricted Subsidiary
that is a "significant subsidiary" within the meaning of Article 1, Rule 1-02 of
Regulation S-X under the Securities Act.
"Stated Maturity," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subordinated Indebtedness" means any Indebtedness of the Company
which is expressly subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, (a) any corporation
of which the outstanding Voting Equity Interests having at least a majority of
the votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
<PAGE> 23
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"Surviving Person" means, with respect to any Person involved in or
that makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of this Indenture (except as
provided in Section 10.03) until such time as the Indenture is qualified under
the TIA, and thereafter as in effect on the date on which this Indenture is
qualified under the TIA.
"Trustee" means the party named as such in the first paragraph of
this Indenture until a successor replaces it in accordance with the provisions
of this Indenture and thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
division (or any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such trust matter is referred because of his knowledge of and familiarity
with the particular subject.
"United States Government Obligations" means direct non-callable
obligations of the United States for the payment of which the full faith and
credit of the United States is pledged.
"Unrestricted Securities" means one or more Securities that do not
and are not required to bear the Private Placement Legend in the form set forth
in Exhibit A hereto, including, without limitation, the Exchange Securities and
any Securities registered under the Securities Act pursuant to and in accordance
with the Exchange and Registration Rights Agreement.
Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to Section 4.15. Any such designation may be revoked
by a resolution of the Board of Directors of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"Unutilized Net Proceeds" has the meaning set forth in Section 4.05.
"Voting Equity Interests" means Equity Interests in a corporation or
other Person with voting power under ordinary circumstances entitling the
Holders thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
all of the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
<PAGE> 24
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SECTION 1.02. 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:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
in effect from time to time, and any other reference in this Indenture to
"generally accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
<PAGE> 25
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Initial Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of Exhibit A hereto,
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Company and the Trustee shall approve the form of the Securities and
any notation, legend or endorsement on them. Each Security shall be dated the
date of its issuance and shall show the date of its authentication. Global
Securities shall bear the legend set forth in Exhibit C hereto. The aggregate
principal amount of the Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary, as hereinafter provided.
SECTION 2.02. Execution and Authentication.
Two Officers, including no more than one signing solely as Assistant
Secretary, shall sign, or one Officer (other than as an Assistant Secretary)
shall sign and the Secretary or an Assistant Secretary (each of whom shall, in
each case, have been duly authorized by all requisite corporate actions) shall
attest to such Officer's signature, the Securities for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Securities for original
issue in an aggregate principal amount not to exceed $100,000,000, (ii) Private
Senior Exchange Notes from time to time only in exchange for a like principal
amount of Initial Securities and (iii) Unrestricted Securities from time to time
in exchange for (A) a like principal amount of Initial Securities or (B) a like
principal amount of Private Senior Exchange Notes as the Company may determine
in accordance with this Indenture, in each case upon a written order of the
Company in the form of an Officers' Certificate. Each such written order shall
specify the amount of Securities to be authenticated and the date on which the
Securities are to be authenticated, whether the Securities are to be Initial
Securities, Private Senior Exchange Notes or Unrestricted Securities and whether
the Securities are to be issued as Physical Securities or Global Securities and
such other information as the Trustee may reasonably request. The aggregate
principal amount of Securities outstanding at any time may not exceed
$100,000,000, except as provided in Sections 2.07 and 2.08.
Notwithstanding the foregoing, all Securities issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Securities may vote or consent) as one class and no series of Securities
will have the right to vote or consent as a separate class on any matter.
<PAGE> 26
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The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise provided
in the appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent shall
have the same rights as an Agent to deal with the Company and Affiliates of the
Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange (the "Registrar"), (b)
Securities may be presented or surrendered for payment (the "Paying Agent") and
(c) notices and demands in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company, upon notice to the Trustee, may appoint one
or more co-Registrars and one or more additional Paying Agents. The term "Paying
Agent" includes any additional Paying Agent. Except as provided herein, the
Company may act as Paying Agent, Registrar or co-Registrar.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fail to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Company initially appoints the Trustee as Registrar and Paying
Agent until such time as the Trustee has resigned or a successor has been
appointed.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that each Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of or interest on the Securities, and shall notify the Trustee of any
Default by the Company in making any such payment. The Company at any time may
require a Paying Agent to distribute all assets held by it to the Trustee and
account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to the Paying Agent (if
other than the Company), the Paying Agent shall have no further liability for
such assets. If the Company or any of its Affiliates acts as Paying Agent, it
shall, on or before each due date of the principal of or interest on the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
<PAGE> 27
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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
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee at least five days before each Interest Record Date and at such other
times as the Trustee may request in writing a list as of such date and in such
form as the Trustee may reasonably require of the names and addresses of
Holders, which list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations of the same
series, the Registrar or co-Registrar shall register the transfer or make the
exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made 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 payable by the transferor or transferee of such Securities (other than
any such transfer taxes or other governmental charge payable upon exchanges or
transfers pursuant to the fourth paragraph of Section 2.02 and Sections 2.10,
3.06, 4.05, 4.14, or 10.05). The Registrar or co-Registrar shall not be required
to register the transfer or exchange of any Security (i) during a period
beginning at the opening of business 15 days before the mailing of a notice of
redemption of Securities and ending at the close of business on the day of such
mailing and (ii) selected for redemption in whole or in part pursuant to Article
Three hereof, except the unredeemed portion of any Security being redeemed in
part.
Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee and any Agent shall treat the person in whose
name the Security is registered as the owner thereof for all purposes whether or
not the Security shall be overdue, and neither the Company, the Trustee nor any
Agent shall be affected by notice to the contrary. Any Holder of a beneficial
interest in a Global Security shall, by acceptance of such beneficial interest
in a Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book-entry system maintained by
the Depositary (or its agent), and that ownership of a beneficial interest in a
Global Security shall be required to be reflected in a book entry.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements for replacement of Securities
are met. If required by the Company or the Trustee, such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee and any Agent from
any loss which any of them may suffer if a Security is replaced. The Company may
charge such Holder for its reasonable out-of-pocket expenses in replacing a
Security, including reasonable fees and expenses of counsel.
<PAGE> 28
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Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date, Purchase Date or the Final Maturity Date
the Paying Agent holds money sufficient to pay all of the principal and interest
due on the Securities payable on that date, and is not prohibited from paying
such money to the Holders pursuant to the terms of this Indenture, then on and
after that date such Securities cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or any of its Affiliates shall be disregarded, except that,
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities that a Trust
Officer of the Trustee actually knows are so owned shall be disregarded.
The Company shall notify the Trustee, in writing, when the Company
or any of its Affiliates repurchases or otherwise acquires Securities and of the
aggregate principal amount of such Securities so repurchased or otherwise
acquired.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated.
Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate upon receipt of a written order
of the Company pursuant to Section 2.02 definitive Securities in exchange for
temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no
<PAGE> 29
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one else, shall cancel, and at the written direction of the Company, dispose of
and deliver evidence of such disposal of all Securities surrendered for
transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Securities to replace Securities that it has paid or
delivered to the Trustee for cancellation. If the Company shall acquire any of
the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation pursuant to this
Section 2.11.
SECTION 2.12. Defaulted Interest.
The Company shall pay interest on overdue principal from time to
time on demand at the rate of interest then borne by the Securities. The Company
shall, to the extent lawful, pay interest on overdue installments of interest
(without regard to any applicable grace periods) at the rate of interest then
borne by the Securities.
If the Company defaults in a payment of interest on the Securities,
it shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day preceding the date
fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid prior to
the expiration of the 30-day period set forth in Section 6.01(ii) shall be paid
to Holders as of the Interest Record Date for the Interest Payment Date for
which interest has not been paid.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use a "CUSIP" number and
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided, however, that any such notice may state that
no representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities. The Company shall
promptly notify the Trustee of any changes in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
Prior to 10:00 a.m. New York City time on each Interest Payment
Date, Redemption Date, Purchase Date and the Final Maturity Date, the Company
shall deposit with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date,
Redemption Date, Purchase Date or Final Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date, Redemption Date, Purchase Date or Final Maturity
Date, as the case may be.
<PAGE> 30
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SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the
name of the Depositary or the nominee of such Depositary, (ii) be delivered to
the Trustee as custodian for such Depositary and (iii) bear legends as set forth
in Exhibit C hereto.
Members of, or participants in, the Depositary ("Participants")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Security, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of the
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and Participants, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depositary and the provisions of Section 2.16; provided,
however, that Physical Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Securities if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for any Global Security and a successor Depositary is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depositary to issue Physical Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon written
instructions from the Company authenticate and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(b) of this Section 2.15 shall, except as otherwise provided by Section 2.16,
bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Securities.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical
Securities are presented to the Registrar or co-Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal principal
amount of Physical Securities of other authorized denominations,
<PAGE> 31
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the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; provided, however, that the Physical
Securities presented or surrendered for Registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing;
and
(II) in the case of Physical Securities the offer and sale of which
have not been registered under the Securities Act, such Physical
Securities shall be accompanied, in the sole discretion of the Company, by
the following additional information and documents, as applicable:
(A) if such Physical Security is being delivered to the Registrar
or co-Registrar by a Holder for Registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (substantially in the form of Exhibit D
hereto); or
(B) if such Physical Security is being transferred to a QIB in
accordance with Rule 144A, a certification to that effect
(substantially in the form of Exhibit D hereto); or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form
of Exhibit D hereto) and a transferee letter of
representation (substantially in the form of Exhibit E
hereto) and, at the option of the Company, an Opinion of
Counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the
Securities Act; or
(D) if such Physical Security is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification
to that effect (substantially in the form of Exhibit D hereto)
and, at the option of the Company, an Opinion of Counsel
reasonably satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(E) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (substantially in the form of Exhibit D
hereto) and, at the option of the Company, an Opinion of
Counsel reasonably acceptable to the Company to the
effect that such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
Interest in a Global Security. A Physical Security the offer and sale of which
has not been registered under the Securities Act may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of a
Physical Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(A) certification (substantially in the form of Exhibit D hereto)
that such Physical Security is being transferred (I) to a QIB
or (II) to an Accredited Investor and, with respect to (II),
at the option of the Company, an Opinion of Counsel reasonably
ac-
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ceptable to the Company to the effect that such transfer is in
compliance with the Securities Act; and
(B) written instructions directing the Registrar or co-Registrar
to make, or to direct the Depositary to make, an endorsement
on the applicable Global Security to reflect an increase in
the aggregate amount of the Securities represented by the
Global Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depositary to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Registrar or
co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no Global Security is then
outstanding, the Company shall, unless either of the events in the proviso to
Section 2.15(b) have occurred and are continuing, issue and the Trustee shall,
upon written instructions from the Company in accordance with Section 2.02,
authenticate such a Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor. Upon receipt by the Registrar or Co-Registrar of written instructions,
or such other instruction as is customary for the Depositary, from the
Depositary or its nominee, requesting the Registration of transfer of an
interest in a Global Security to another type of Global Security, together with
the applicable Global Securities (or, if the applicable type of Global Security
required to represent the interest as requested to be transferred is not then
outstanding, only the Global Security representing the interest being
transferred), the Registrar or Co-Registrar shall cancel such Global Securities
(or Global Security) and the Company shall issue and the Trustee shall, upon
written instructions from the Company in accordance with Section 2.02,
authenticate new Global Securities of the types so cancelled (or the type so
cancelled and applicable type required to represent the interest as requested to
be transferred) reflecting the applicable increase and decrease of the principal
amount of Securities represented by such types of Global Securities, giving
effect to such transfer. If the applicable type of Global Security required to
represent the interest as requested to be transferred is not outstanding at the
time of such request, the Company shall issue and the Trustee shall, upon
written instructions from the Company in accordance with Section 2.02,
authenticate a new Global Security of such type in principal amount equal to the
principal amount of the interest requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Security for a
Physical Security.
(i) Any Person having a beneficial interest in a Global Security may
upon request exchange such beneficial interest for a Physical Security;
provided, however, that prior to the Registration, a transferee that is a
QIB or Institutional Accredited Investor may not exchange a beneficial
interest in Global Security for a Physical Security. Upon receipt by the
Registrar or co-Registrar of written instructions, or such other form of
instructions as is customary for the Depositary, from the Depositary or
its nominee on behalf of any Person (subject to the previous sentence)
having a beneficial interest in a Global Security and upon receipt by the
Trustee of a written order or such other form of instructions as is
customary for the Depositary or the Person designated by the Depositary as
having such a beneficial interest containing registration instructions
and, in the case of any such transfer or exchange of a beneficial interest
in Securities the offer and sale of which have not been registered under
the Securities Act, the following additional information and documents:
<PAGE> 33
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(A) if such beneficial interest is being transferred in reliance
on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of
Exhibit D hereto) and, at the option of the Company, an
Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
(B) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (substantially in the form of Exhibit D
hereto) and, at the option of the Company, an Opinion of
Counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the
Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depositary and
the Registrar or co-Registrar, the aggregate principal amount of the
applicable Global Security to be reduced and, following such reduction,
the Company will execute and, upon receipt of an authentication order in
the form of an Officers' Certificate in accordance with Section 2.02, the
Trustee will authenticate and deliver to the transferee a Physical
Security in the appropriate principal amount.
(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.16(d) shall be registered in
such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar or co-Registrar in writing. The
Registrar or co-Registrar shall deliver such Physical Securities to the
Persons in whose names such Physical Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except 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.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and the
Trustee is hereby authorized to deliver Securities without the Private Placement
Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act; (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act (including pursuant to a Registration); or (iii) the
date of such transfer, exchange or replacement is two years after the later of
(x) the Issue Date and (y) the last date that the Company or any affiliate (as
defined in Rule 144 under the Securities Act) of the Company was the owner of
such Securities (or any predecessor thereto).
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
<PAGE> 34
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Each Holder of a Security agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder's Security in violation of any provision of this
Indenture and/or applicable United States federal or state securities law.
The Trustee shall have no obligation or duty to monitor, determine
or inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Participants or
beneficial owners of interest in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company wants to redeem Securities pursuant to paragraph 5 or
6 of the Securities at the applicable redemption price set forth thereon, they
shall notify the Trustee in writing of the Redemption Date and the principal
amount of Securities to be redeemed. The Company shall give such notice to the
Trustee at least 60 days before the Redemption Date (unless a shorter notice
shall be agreed to by the Trustee in writing), together with an Officers'
Certificate stating that such redemption will comply with the conditions
contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed in compliance with the requirements
of the principal national securities exchange, if any, on which the Securities
are listed or, if the Securities are not so listed, on a pro rata basis, by lot
or in such other manner as the Trustee shall deem fair and appropriate.
The Trustee may select for redemption portions of the principal
amount of Securities that have denominations equal to or larger than $1,000
principal amount. Securities and portions of them the Trustee so selects shall
be in amounts of $1,000 principal amount or integral multiples thereof.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption.
If a partial redemption is made with the net cash proceeds of a
Public Equity Offering by the Company, selection of the Securities or portions
thereof for redemption will be made by the Trustee only on a
<PAGE> 35
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pro rata basis or as nearly a pro rata basis as is practicable (subject to the
procedures of the Depository Trust Company), unless such method is otherwise
prohibited.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail to each Holder
whose Securities are to be redeemed at such Holder's registered address.
Each notice of redemption shall identify the Securities to be
redeemed (including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the Holders
is to receive payment of the redemption price upon surrender to the Paying
Agent; and
(6) if any Security is being redeemed in part only, the portion of
the principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof
will be issued.
At the Company's request, the Trustee shall give the notice of
redemption on behalf of the Company, in the Company's name and at the Company's
expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon, if any, to the Redemption Date,
but interest installments whose maturity is on or prior to such Redemption Date
shall be payable to the Holders of record at the close of business on the
relevant Interest Record Date.
SECTION 3.05. Deposit of Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date, the
Company shall deposit with the Paying Agent (or if the Company is Paying Agent,
shall, on or before the Redemption Date, segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest, if any, on all
Se-
<PAGE> 36
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curities to be redeemed on that date other than Securities or portions thereof
called for redemption on that date which have been delivered by the Company to
the Trustee for cancellation.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the Redemption Date due to the failure of
the Company to deposit with the Paying Agent money sufficient to pay the
redemption price thereof, the principal and accrued and unpaid interest, if any,
thereon shall, until paid or duly provided for, bear interest as provided in
Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate and deliver at the expense of the Company to the Holder a new
Security equal in principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the
Securities in the manner provided in the Securities and the Exchange and
Registration Rights Agreement. An installment of principal or interest shall be
considered paid on the date due if the Trustee or Paying Agent (other than the
Company or any of its Affiliates) holds on that date money designated for and
sufficient to pay the installment in full and is not prohibited from paying such
money to the Holders of the Securities pursuant to the terms of this Indenture.
The Company shall pay cash interest on overdue principal at the same
rate per annum borne by the Securities. The Company shall pay cash interest on
overdue installments of interest at the same rate per annum borne by the
Securities, to the extent lawful, as provided in Section 2.12.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of
New York, the office or agency required under Section 2.03. 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 address of the Trustee set forth in Section 13. The
Company hereby initially designates the Trustee at its address set forth in
Section 13.02 as their office or agency in The Borough of Manhattan, The City of
New York, for such purposes.
SECTION 4.03. Limitations on Transactions with Affiliates.
The Company shall not, and shall not permit, cause or suffer any
Restricted Subsidiary to, conduct any business or enter into any transaction or
series of related transactions with or for the benefit of any of its Affiliates
or any beneficial holder of 10% or more of any class of Equity Interests of the
Company
<PAGE> 37
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or any officer or director of the Company or any Restricted Subsidiary (each, an
"Affiliate Transaction"), except on terms that are fair and reasonable to the
Company or such Restricted Subsidiary, as the case may be. Each Affiliate
Transaction involving aggregate payments or other property having a Fair Market
Value in excess of $2.5 million shall be approved by the Board of Directors of
the Company, such approval to be evidenced by a resolution of such Board of
Directors stating that such Board of Directors (including a majority of the
disinterested directors) has determined that such transaction complies with the
foregoing provisions. In addition to the foregoing, with respect to any
Affiliate Transaction involving aggregate consideration in excess of $5.0
million or more, the Company must obtain a written opinion from an Independent
Financial Advisor stating that the terms of such Affiliate Transaction to the
Company or the Restricted Subsidiary, as the case may be, are fair from a
financial point of view.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions with or among the Company and/or
any of the Restricted Subsidiaries; provided, however, in any such case, no
officer, director or beneficial holder of 10% or more of any class of Equity
Interests of the Company shall beneficially own any Voting Stock of any such
Restricted Subsidiary (other than by reason of its ownership of Equity Interests
of the Company), (ii) transactions between or among Restricted Subsidiaries,
(iii) any Restricted Payment permitted under Section 4.06, (iv) directors' fees,
indemnification and similar arrangements, officers' indemnification, employee
stock option or employee benefit plans, employee salaries and bonuses,
employment agreements or legal fees paid or created in the ordinary course of
business and (v) payments pursuant to arrangements as in effect on the Issue
Date.
SECTION 4.04. Limitation on Additional Indebtedness.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, Incur, assume, issue, guarantee
or in any manner become directly or indirectly liable for or with respect to,
contingently or otherwise, the payment of any Indebtedness or issue any
Disqualified Equity Interests, except for Permitted Indebtedness, unless, after
giving pro forma effect to such Incurrence of Indebtedness or issuance of
Disqualified Equity Interests and the application of the proceeds therefrom, the
Company's Consolidated Operating Cash Flow Ratio would be greater than or equal
to 2.0 to 1.0.
The foregoing limitations will not apply to the Incurrence of any of
the following (collectively, "Permitted Indebtedness"), each of which will be
given independent effect: (a) Indebtedness under (x) the Securities and this
Indenture and (y) the Senior Discount Notes and the Senior Discount Notes
Indenture; (b) outstanding Indebtedness on the Issue Date (other than Existing
Securities purchased with the net proceeds of the Securities), and Indebtedness
which may be incurred pursuant to commitments in effect on the Issue Date;
provided, however, that Indebtedness incurred pursuant to this clause (b) shall
not exceed $280 million (plus the amount of Existing Securities which remain
unpurchased after the Issue Date) in the aggregate at any one time outstanding
(which amount shall be reduced to the extent any such Indebtedness is refinanced
pursuant to clause (f) below (it being understood that the replacement of a
lending commitment (or portion thereof) to the Company or a Restricted
Subsidiary under which (or as to the portion of which) no Indebtedness is
outstanding at the time of such replacement with another lending commitment to
the Company or such Restricted Subsidiary, respectively, shall not be considered
a "refinancing" reducing such amount of Indebtedness which may be incurred
pursuant to this clause (b)); (c) (x) Indebtedness of any Restricted Subsidiary
owed to and held by the Company or any Restricted Subsidiary and (y)
Indebtedness of the Company owed to and held by any Restricted Subsidiary;
provided, however, that the Indebtedness Incurred pursuant to this subclause (y)
is unsecured and subordinated in right of payment to the payment and performance
of the Company's obligations under this Indenture and the Securities; provided,
further, however, that an Incurrence of Indebtedness that is not permitted by
this clause (c) shall be deemed to have occurred upon (i) any sale or
<PAGE> 38
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other disposition of any Indebtedness of the Company or any Restricted
Subsidiary referred to in this clause (c) to a Person (other than the Company or
any Restricted Subsidiary) and (ii) the designation of a Restricted Subsidiary
which holds Indebtedness of the Company or any other Restricted Subsidiary as an
Unrestricted Subsidiary; (d) Interest Rate Agreements, Commodity Agreements and
Currency Agreements of the Company and the Restricted Subsidiaries; (e) Purchase
Money Indebtedness and Capitalized Lease Obligations of the Company or any
Restricted Subsidiary in an amount not to exceed $10.0 million outstanding at
any time (which amount shall be reduced to the extent any such Purchase Money
Indebtedness or Capitalized Lease Obligation is refinanced pursuant to clause
(f) below; (f) Indebtedness of the Company or a Restricted Subsidiary to the
extent representing a replacement, renewal, refinancing or extension
(collectively, a "refinancing") of outstanding Indebtedness Incurred in
compliance with the Consolidated Operating Cash Flow Ratio of the first
paragraph of this covenant or clause (a), (b), (e), (f) or (g) of this paragraph
of this covenant; provided, however, that (i) any such refinancing shall not
exceed the sum of the principal amount (or accreted amount (determined in
accordance with GAAP), if less) of the Indebtedness or Disqualified Equity
Interests being refinanced, plus the amount of accrued interest or dividends
thereon, plus the amount of any reasonably determined prepayment premium
necessary to accomplish such refinancing and such reasonable fees and expenses
incurred in connection therewith, (ii) Indebtedness representing a refinancing
of Indebtedness of the Company shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being refinanced and (iii)(A) Indebtedness of the Company may only
be refinanced with other Indebtedness or Disqualified Equity Interests of the
Company and (B) Disqualified Equity Interests of the Company may only be
refinanced with other Disqualified Equity Interests of the Company; (g)
Indebtedness not to exceed $80 million outstanding at any time (which amount
shall be reduced to the extent any such Indebtedness is refinanced pursuant to
clause (f) above) to the extent the proceeds thereof are used to fund capital
expenditures at HCL and its Subsidiaries, of which not more than $50 million
will be incurred in any calendar year; and (h) in addition to the items referred
to in clauses (a) through (g) above, Indebtedness of the Company or any
Restricted Subsidiary having an aggregate principal amount not to exceed $15.0
million outstanding at any time.
SECTION 4.05. Disposition of Proceeds of Asset Sales.
The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale, unless (a) the Company or such 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 shares or assets sold or
otherwise disposed of and (b) 75% of such consideration consists of cash, Cash
Equivalents or Fully Traded Common Stock; provided, however, that to the extent
that any Fully Traded Common Stock is received pursuant to such Asset Sale and
required to satisfy the 75% requirement of this clause (b), the Fair Market
Value of such Fully Traded Common Stock as of the date of disposition shall be
treated as Net Cash Proceeds for all purposes of this covenant. The amount of
any (i) Indebtedness of the Company or any Restricted Subsidiary that is
actually assumed by the transferee in such Asset Sale and from which the Company
and the Restricted Subsidiaries are fully released shall be deemed to be cash
for purposes of determining the percentage of cash consideration received by the
Company or the Restricted Subsidiaries (but shall not be deemed Net Cash
Proceeds for purposes of this covenant) and (ii) notes or other similar
obligations received by the Company or the Restricted Subsidiaries from such
transferee that are immediately converted, sold or exchanged by the Company or
the Restricted Subsidiaries into cash shall be deemed to be cash, in an amount
equal to the net cash proceeds realized upon such conversion, sale or exchange
for purposes of determining the percentage of cash consideration received by the
Company or the Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may
(i) apply an amount of cash equal to the Net Cash Proceeds of any Asset Sale
within 365 days (or 180 days in the case of any amount
<PAGE> 39
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represented by any Fully Traded Common Stock that has not been converted into
cash by such 180th day) of receipt thereof to repay Indebtedness of a Restricted
Subsidiary, (ii) commit in writing to acquire, construct or improve operating
properties and capital assets to be used by the Company or a Restricted
Subsidiary and so apply an amount of cash equal to such Net Cash Proceeds within
365 days (or 180 days in the case of any amount represented by any Fully Traded
Common Stock that has not been converted into cash by such 180th day) after the
receipt thereof or (iii) apply an amount of cash equal to the Net Cash Proceeds
of such Asset Sale within 365 days (or 180 days in the case of any amount
represented by any Fully Traded Common Stock that has not been converted into
cash by such 180th day) of receipt thereof to repay either (x) the Securities or
(y) Pari Passu Debt not exceeding the Pari Passu Debt Pro Rata Share; provided,
that the application of such proceeds pursuant to this clause (iii) may be
delayed such that the application is contemporaneous with the closing of an
Asset Sale Offer.
The amount of cash equal to all or part of the Net Cash Proceeds of
any Asset Sale that are not applied within 365 days (or 180 days) of such Asset
Sale (or, in the case of clause (iii) of the immediately preceding paragraph, to
be applied contemporaneously with the closing of an Asset Sale Offer) as
described in clause (i), (ii) or (iii) of the immediately preceding paragraph
shall constitute "Unutilized Net Proceeds." When the aggregate amount of
Unutilized Net Proceeds exceeds $5.0 million, the Company shall make an Offer to
Purchase outstanding Securities up to a maximum principal amount of Securities
equal to such Unutilized Net Proceeds, at a purchase price in cash equal to 100%
of the principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the Purchase Date.
To the extent that the aggregate amount of Securities tendered for
repayment pursuant to the Asset Sale Offer is less than the Net Cash Proceeds
available for such offer, such deficiency may be used for general corporate
purposes. If the aggregate amount of Securities validly tendered exceeds the Net
Cash Proceeds available for such offer, Securities to be purchased will be
selected on a pro rata basis or as nearly pro rata as practicable.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act, and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed an Event of Default or an event that with the
passing of time or giving of notice, or both, would constitute an Event of
Default.
Each Holder shall be entitled to tender all or any portion of the
Securities owned by such Holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Security tendered must be tendered in an
integral multiple of $1,000 principal amount at maturity and subject to any
proration among tendering Holders as described above.
SECTION 4.06. Limitation on Restricted Payments.
The Company shall not, and shall not permit any of the Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or any
other distribution on any Equity Interests of the Company or make any payment or
distribution to the direct or indirect holders (in their capacities as such) of
Equity Interests of the Company (other than any (x) dividend or distribution
consisting of Equity Interests of an Unrestricted Subsidiary or consisting of
property or assets of an Unrestricted Subsidiary which are dividended or
otherwise transferred to the Company contemporaneously with such property or
assets being dividended or distributed by the Company or (y) dividends,
distributions and payments made to any Restricted Subsidiary
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and dividends or distributions payable to any person solely in Qualified Equity
Interests of the Company or in options, warrants or other rights to purchase
Qualified Equity Interests of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company (other than any
such Equity Interests owned by any Restricted Subsidiary); or (iii) make any
Investment (other than Permitted Investments) in any person (other than in the
Company, any Restricted Subsidiary or a person that becomes a Restricted
Subsidiary, or is merged with or into or consolidated with the Company or a
Restricted Subsidiary (provided the Company or a Restricted Subsidiary is the
survivor), as a result of or in connection with such Investment) (any such
payment or any other action (other than any exception thereto) described in (i)
through (iii), a "Restricted Payment"), unless (a) no Default has occurred and
is continuing at the time of or immediately after giving effect to such
Restricted Payment; (b) immediately after giving effect to such Restricted
Payment, the Company would be able to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the Consolidated Operating Cash Flow
Ratio described under Section 4.04; and (c) immediately after giving effect to
such Restricted Payment, the aggregate amount of all Restricted Payments
declared or made on or after the Issue Date does not exceed an amount equal to
the sum, without duplication, of (1) 50% of cumulative Consolidated Net Income
of the Company determined for the period (taken as one period) from the
beginning of the fiscal quarter which includes the Issue Date and ending on the
last day of the most recent fiscal quarter immediately preceding the date of
such Restricted Payment for which consolidated financial information of the
Company is available (or if such cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss), plus (2) the aggregate net cash proceeds
received by the Company from contributions to its common equity capital and from
the issue and sale (other than to a Restricted Subsidiary) of its Qualified
Equity Interests after the Issue Date (excluding the net proceeds from any
issuance and sale of Qualified Equity Interests financed, directly or
indirectly, using funds borrowed from the Company or any Restricted Subsidiary
until and to the extent such borrowing is repaid), plus (3) the principal amount
(or accreted amount (determined in accordance with GAAP), if less) of any
Indebtedness of the Company or any Restricted Subsidiary incurred after the
Issue Date which has been converted into or exchanged for Qualified Equity
Interests of the Company, plus (4) in the case of the disposition or repayment
of any Investment constituting a Restricted Payment made after the Issue Date,
an amount (to the extent not included in the computation of Consolidated Net
Income) equal to the lesser of (x) the return of capital with respect to such
Investment and (y) the amount of such Investment which was treated as a
Restricted Payment, in either case, less the cost of the disposition of such
Investment and net of taxes, plus (5) so long as the Designation thereof was
treated as a Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary
after the Issue Date in accordance with Section 4.15, the Company's
proportionate interest in an amount equal to the excess of (x) the total assets
of such Subsidiary, valued on an aggregate basis at Fair Market Value, over (y)
the total liabilities of such Subsidiary, determined in accordance with GAAP
(and provided that such amount shall not in any case exceed the Designation
Amount with respect to such Restricted Subsidiary upon its Designation), minus
(6) the greater of (x) $0 and (y) the Designation Amount (measured as of the
date of Designation) with respect to any Subsidiary of the Company which has
been designated as an Unrestricted Subsidiary after the Issue Date in accordance
with Section 4.15.
The provisions of this covenant shall not prohibit (i) the payment
of any dividend or other distribution (x) within 60 days after the date of
declaration thereof, if at such date of declaration such payment would comply
with the provisions of this Indenture or (y) consisting of the net proceeds to
the Company or a Restricted Subsidiary from the disposition of the Equity
Interests of an Unrestricted Subsidiary; (ii) so long as no Default has occurred
and is continuing, the purchase, redemption, retirement or other acquisition of
any shares of Equity Interests of the Company (A) in exchange for or conversion
into or (B) out of the net cash proceeds of the substantially concurrent issue
and sale (other than to a Restricted Subsidiary of the Company) of shares of
Qualified Equity Interests of the Company or contributions to the common equity
capital of the Company; provided, however, that any such net cash proceeds and
the value of any Qualified Equity Interests
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issued in exchange for such retired Equity Interests are excluded from clause
(c)(2) of the preceding paragraph (and were not included therein at any time);
(iii) so long as no Default has occurred and is continuing, the making of a
direct or indirect Investment constituting a Restricted Payment out of the
proceeds from the issue or sale (other than to a Subsidiary) of Qualified Equity
Interests of the Company or contributions to the common equity capital of the
Company; (iv) the purchase, redemption or other acquisition, cancellation or
retirement for value of Equity Interests held by officers or employees or former
officers or employees of the Company or any Restricted Subsidiary (or their
estates or beneficiaries under their estates), upon death, disability,
retirement or termination of employment not to exceed $1.0 million in any fiscal
year; (v) so long as no Default has occurred and is continuing, dividends to TPR
Investment Associates, Inc. (or its successors(s)) in an amount not to exceed
$5.0 million in any year; provided, however, that to the extent such dividends
in any year are less than $5.0 million, the amount less than $5.0 million may be
paid in any subsequent year, but no such dividends paid in any year pursuant to
this clause (v) shall exceed $10.0 million in any year; provided, further,
however, that the aggregate amount of dividends incurred pursuant to this clause
(v) shall not exceed $20.0 million in the aggregate; and (vi) other Restricted
Payments not to exceed $5.0 million in the aggregate. In determining the amount
of Restricted Payments permissible under this covenant, amounts expended under
clauses (i) (x), (iv), (v) and (vi) of this paragraph after the Issue Date shall
(without duplication) be included as Restricted Payments. The amount of any
non-cash Restricted Payment shall be deemed to be equal to the Fair Market Value
thereof at the date of the making of such Restricted Payment.
SECTION 4.07. Existence.
Subject to Article Five, the Company shall do or shall cause to be
done all things necessary to preserve and keep in full force and effect its
existence as a corporation, partnership or other entity.
SECTION 4.08. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
Restricted Subsidiary or upon the income, profits or property of the Company or
any Restricted Subsidiary and (2) all lawful claims for labor, materials and
supplies which, in each case, if unpaid, might by law become a material
liability, or Lien upon the property, of the Company or any Restricted
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which appropriate provision has been made.
SECTION 4.09. Notice of Defaults.
(a) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or lapse of time, or
both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(b) Upon becoming aware of any Default or Event of Default, the
Company shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
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SECTION 4.10. Maintenance of Properties and Insurance.
(a) The Company shall cause all material properties owned by or
leased to it or any Restricted Subsidiary and used or useful in the conduct of
its business or the business of any Restricted Subsidiary to be maintained and
kept in normal condition, repair and working order and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 4.10 shall prevent the Company or any
Restricted Subsidiary from discontinuing the use, operation or maintenance of
any of such properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors of the Company or the
Restricted Subsidiary concerned, or of an Officer (or other agent employed by
the Company or of any Restricted Subsidiary) of the Company or such Restricted
Subsidiary having managerial responsibility for any such property, desirable in
the conduct of the business of the Company or any Restricted Subsidiary.
(b) The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against such risks
and in such amounts, and with such deductibles, retentions, self-insured amounts
and co-insurance provisions, as are customarily carried by similar businesses of
similar size, including property and casualty loss and workers' compensation
insurance.
SECTION 4.11. Compliance Certificate.
The Company shall deliver to the Trustee within 90 days after the
close of each fiscal year a certificate signed by the principal executive
officer, principal financial officer or principal accounting officer stating
that a review of the activities of the Company has been made under the
supervision of the signing officers with a view to determining whether a Default
or Event of Default has occurred and whether or not the signers know of any
Default or Event of Default by the Company that occurred during such fiscal
year. If they do know of such a Default or Event of Default, the certificate
shall describe all such Defaults or Events of Default, their status and the
action the Company is taking or proposes to take with respect thereto. The first
certificate to be delivered by the Company pursuant to this Section 4.11 shall
be for the fiscal year ending December 31, 1998.
SECTION 4.12. Reports to Holders.
Whether or not the Company is subject to Section 13(a) or 15(d) of
the Exchange Act, or any successor provisions thereto, the Company will file
with the SEC (if permitted by SEC practice and applicable law and regulations)
the annual reports, quarterly reports and other documents which the Company
would be required to file with the SEC pursuant to such Section 13(a) or 15(d)
(each, an "Exchange Act Report"), or any successor provision thereto, if the
Company were so subject, such documents to be filed with the SEC on or prior to
the respective dates (the "Required Filing Dates") by which the Company would be
required to file such documents if the Company were so subject. If, at any time
prior to the consummation of the Registered Exchange Offer when the Company is
not subject to such Section 13(a) or 15(d), the information which would be
required in an Exchange Act Report is included in a public filing of the Company
under the Securities Act at the applicable Required Filing Date, such public
filing will fulfill the filing requirement with the SEC with respect to the
applicable Exchange Act Report. The Company will also in any event (a) within 15
days after each Required Filing Date (whether or not permitted or required to be
filed with the SEC) (i) transmit (or cause to be transmitted) by mail to all
Holders, as their names and addresses appear in the register of the Securities,
without cost to such Holders, and (ii) file with the Trustee, copies of the
annual reports, quarterly
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reports and other documents which the Company is required to file with the SEC
pursuant to the preceding sentence, or, if such filing is not so permitted (or,
prior to the consummation of the Registered Exchange Offer, when the Company is
not subject to Section 13(a) or 15(d) of the Exchange Act), information and data
of a similar nature, and (b) if, notwithstanding the preceding sentence, filing
such documents by the Company with the SEC is not permitted by SEC practice or
applicable law or regulations, promptly upon written request supply copies of
such documents to any Holder. In addition, for so long as any Securities remain
outstanding, the Company 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, and, to any
beneficial holder of Securities, if not obtainable from the SEC, information of
the type that would be filed with the SEC pursuant to the foregoing provisions,
upon the request of any such Holder.
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.
The Company 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 or extension law or any
usury law or other law, which would prohibit or forgive the Company from paying
all or any portion of the principal of and/or interest, if any, on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) the Company hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not 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 had been enacted.
SECTION 4.14. Change of Control.
(a) Following the occurrence of a Change of Control, the Company
shall notify Holders of the Securities of such occurrence in the manner
prescribed by this Indenture and shall make an offer to purchase (the "Change of
Control Offer"), on a business day (the "Change of Control Offer Date") not
later than 60 days following the Change of Control Date, all Securities then
outstanding at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of purchase. Each Holder
shall be entitled to tender all or any portion of the securities owned by such
Holder pursuant to the Offer to Purchase, subject to the requirement that any
portion of a Security tendered must be tendered in an integral multiple of
$1,000 principal amounts.
(b) Notice of a Change of Control Offer shall be given to Holders of
the Securities, not less than 25 days nor more than 45 days before the date of
purchase. The Company's obligations may be satisfied if a third party makes the
Change of Control Offer in the manner, at the times and otherwise in compliance
with the requirements applicable to a Change of Control Offer made by the
Company and purchases all Securities validly tendered and not withdrawn under
such Change of Control Offer.
(c) On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) accept for payment all Securities or portions
thereof validly tendered pursuant to the Offer, (ii) deposit with the Paying
Agent or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 2.04, money sufficient to pay the Purchase Price
of all Securities or portions thereof so accepted and (iii) deliver or cause to
be delivered to the Trustee for cancellation all Securities so accepted together
with an Officers' Certificate stating the Securities or portions thereof
accepted for payment by the Company. The Paying Agent (or the Company, if so
acting) shall promptly mail or deliver to Holders of Securities so accepted,
payment in an amount equal to the Purchase Price for such Securities, and the
Trustee shall
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promptly authenticate and mail or deliver to each Holder of Securities a new
Security or Securities equal in principal amount to any unpurchased portion of
the Security surrendered as requested by the Holder. Any Security not accepted
for payment shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Offer on or as
soon as practicable after the Purchase Date.
(d) If the Company makes a Change of Control Offer, the Company
shall comply with all applicable tender offer laws and regulations, including,
to the extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act,
and any other applicable federal or state securities laws and regulations and
any applicable requirements of any securities exchange on which the Securities
are listed, and any violation of the provisions of this Indenture relating to
such Change of Control Offer occurring as a result of such compliance shall not
be deemed an Event of Default or an event that, with the passing of time or
giving of notice, or both, would constitute an Event of Default.
SECTION 4.15. Limitation on the Designation of Unrestricted Subsidiaries.
The Company may designate after the Issue Date any Subsidiary of the
Company as an "Unrestricted Subsidiary" under this Indenture (a "Designation")
only if:
(i) no Default has occurred and is continuing at the time of or
after giving effect to such Designation;
(ii) at the time of and after giving effect to such Designation, the
Company could incur $1.00 of additional Indebtedness under the
Consolidated Operating Cash Flow Ratio described under Section 4.04;
(iii) the Company would be permitted to make an Investment (other than
a Permitted Investment) at the time of such Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
Section 4.06 in an amount (the "Designation Amount") equal to the Fair
Market Value of the Company's aggregate Investment in such Subsidiary on
such date; and
(iv) such Designation would not relate to all or substantially all of
the assets of the Company and the Restricted Subsidiaries (determined on a
consolidated basis).
Notwithstanding the foregoing provisions of this covenant, the
Company shall be permitted to designate any Subsidiary which owns only Equity
Interests of Laser Industries Limited (or the securities of ESC Medical Systems
Ltd. receivable upon exchange thereof) to be an Unrestricted Subsidiary and the
Designation Amount with respect thereto shall be zero. Neither the Company nor
any Restricted Subsidiary shall at any time (x) provide credit support for,
subject any of its property or assets (other than the Equity Interests of any
Unrestricted Subsidiary) to the satisfaction of, or guaranty, any Indebtedness
of any Unrestricted Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness), (y) be directly or indirectly liable
for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or
indirectly liable for any Indebtedness which provides that the Holder thereof
may (upon notice, lapse of time or both) declare a default thereon or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity upon the occurrence of a default with respect to any Indebtedness of
any Unrestricted Subsidiary, except for any non-recourse guaranty given solely
to support the pledge by the Company or any Restricted Subsidiary of the capital
stock of any Unrestricted Subsidiary.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if: (i) no Default has occurred and is
continuing at the time of and after giving effect to such
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Revocation; (ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred; and (iii) any transaction (or series
of related transactions) between such Subsidiary and any of its Affiliates that
occurred while such Subsidiary was an Unrestricted Subsidiary would be permitted
under Section 4.03 as if such transaction (or series of related transactions)
had occurred at the time of such Revocation.
SECTION 4.16. Limitations on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise enter into or cause
to become effective any consensual encumbrance or consensual restriction of any
kind on the ability of any Restricted Subsidiary to (a) pay dividends, in cash
or otherwise, or make any other distributions on its Equity Interests or any
other interest or participation in, or measured by, its profits owned by the
Company or any Restricted Subsidiary, (b) pay any Indebtedness owed to the
Company or a Restricted Subsidiary, (c) make any Investment in the Company or
any Restricted Subsidiary or (d) transfer any of its property or assets to the
Company or to any Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (i) any agreement of the Company or
a Restricted Subsidiary existing on the Issue Date, in each case as in effect on
the Issue Date, and any amendments, restatements, renewals, replacements or
refinancings thereof (including with respect to any Indebtedness outstanding on
the Issue Date and any commitment to provide Indebtedness outstanding on the
Issue Date); provided, however, that any such amendment, restatement, renewal,
replacement or refinancing is no more restrictive in the aggregate with respect
to such encumbrances or restrictions than those contained in the agreement being
amended, restated, renewed, replaced or refinanced; (ii) applicable law; (iii)
any agreement of a Person acquired by the Company or any Restricted Subsidiary
as in effect at the time of such acquisition (except to the extent Indebtedness
was incurred by such Person in connection with, as a result of or in
contemplation of such acquisition) and any amendments, extensions, renewals,
replacements or refinancings thereof which are no more restrictive than those in
effect at the time of acquisition; provided, further, however, that such
encumbrances and restrictions are not applicable to any Restricted Subsidiary,
or the properties or assets of any Restricted Subsidiary, other than the
acquired Person; (iv) customary non-assignment provisions in leases, licenses or
similar agreements entered into in the ordinary course of business; (v) Purchase
Money Indebtedness that only imposes encumbrances and restrictions on the
property or Person acquired or on the stock or assets of a Restricted Subsidiary
which owns only the property or Person acquired; (vi) any agreement for the sale
or disposition of the Equity Interests or assets of any Restricted Subsidiary;
provided, further, however, that such encumbrances and restrictions described in
this clause (vi) are only applicable to such Restricted Subsidiary or assets, as
applicable, and any such sale or disposition is made in compliance with Section
4.05 to the extent applicable thereto; (vii) refinancing Indebtedness permitted
under clause (f) of the second paragraph of Section 4.04; provided, further,
however, that such encumbrances and restrictions contained in the agreements
governing such Indebtedness are no more restrictive in the aggregate than those
contained in the agreements governing the Indebtedness being refinanced
immediately prior to such refinancing; (viii) this Indenture; (ix) any agreement
governing Indebtedness of a Restricted Subsidiary incurred by such Restricted
Subsidiary in connection with an Acquisition or the transaction pursuant to
which it became a Restricted Subsidiary; provided, further, however, that in
calculating Consolidated Net Income for any purpose under this Indenture
(including for the purpose of determining whether such Indebtedness of such
Restricted Subsidiary can be incurred), the net income of such Restricted
Subsidiary shall be excluded from Consolidated Net Income except to the extent
such net income would be permitted to be distributed to the Company or another
Restricted Subsidiary pursuant to the terms of the agreement governing such
Indebtedness; or (x) contained in any other indenture governing debt securities
that are no more restrictive than those contained in this Indenture.
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SECTION 4.17. Limitation on the Sale or Issuance of Preferred Equity
Interests of Restricted Subsidiaries.
The Company shall not sell any Preferred Equity Interest of a
Restricted Subsidiary, and shall not cause or permit any Restricted Subsidiary
to issue any of its Preferred Equity Interests or sell any Preferred Equity
Interests of another Restricted Subsidiary (other than to the Company or to a
Wholly Owned Restricted Subsidiary), unless the Company would be permitted to
incur $1.00 of Indebtedness (other than Permitted Indebtedness) under Section
4.04.
SECTION 4.18. Limitation on Liens.
The Company shall not, directly or indirectly, Incur or suffer to
exist any Liens of any kind against or upon any of its properties or assets now
owned or hereafter acquired, or any proceeds therefrom or any income or profits
therefrom, to secure any Indebtedness unless effective provision is made
contemporaneously therewith to secure the Securities and all other amounts due
under this Indenture, equally and ratably with such Indebtedness (or, in the
event that such Indebtedness is subordinated in right of payment to the
Securities, prior to such Indebtedness) with a Lien on the same properties and
assets securing such Indebtedness for so long as such Indebtedness is secured by
such Lien, except for Permitted Liens.
SECTION 4.19. Limitation on Status as Investment Company.
The Company shall not, and shall not permit any of the Restricted
Subsidiaries or controlled Affiliates to, conduct its business in a fashion that
would cause the Company to be required to register as an "investment company"
(as that term is defined in the Investment Company Act), or otherwise become
subject to regulation under the Investment Company Act. For purposes of
establishing the Company's compliance with this provision, any exemption which
is or would become available under Section 3(c)(1) or Section 3(c)(7) of the
Investment Company Act will be disregarded.
ARTICLE FIVE
MERGERS; SUCCESSORS
SECTION 5.01. Mergers, Sale of Assets, etc.
The Company shall not consolidate with or merge with or into
(whether or not the Company is the Surviving Person) any other entity and the
Company shall not and shall not cause or permit any Restricted Subsidiary to,
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Company's and the Restricted Subsidiaries' properties
and assets (determined on a consolidated basis for the Company and the
Restricted Subsidiaries) to any entity in a single transaction or series of
related transactions, unless: (i) either (x) the Company shall be the Surviving
Person or (y) the Surviving Person (if other than the Company) shall be a
corporation organized and validly existing under the laws of the United States
of America or any State thereof or the District of Columbia, and shall, in any
such case, expressly assume by a supplemental indenture, the due and punctual
payment of the principal of, premium, if any, and interest on the Securities and
the performance and observance of every covenant of this Indenture and the
Exchange and Registration Rights Agreement to be performed or observed on the
part of the Company; (ii) immediately thereafter, no Default has occurred and is
continuing; and (iii) immediately after giving effect to any such transaction
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including the Incurrence by the Company or any Restricted Subsidiary, directly
or indirectly, of additional Indebtedness (and treating any Indebtedness not
previously an obligation of the Company or any Restricted Subsidiary in
connection with or as a result of such transaction as having been Incurred at
the time of such transaction), the Surviving Person could Incur, on a pro forma
basis after giving effect to such transaction as if it had occurred at the
beginning of the four quarter period immediately preceding such transaction for
which consolidated financial statements of the Company are available, at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under the
Consolidated Operating Cash Flow Ratio of the first paragraph of Section 4.04.
Notwithstanding the foregoing clause (iii) of the immediately
preceding paragraph, any Restricted Subsidiary may consolidate with, merge into
or transfer all or part of its properties and assets to the Company or to a
Restricted Subsidiary.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interests of which constitute all or substantially all
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all the properties and assets of the Company.
In connection with any consolidation, merger, transfer, lease,
assignment or other disposition contemplated hereby, the Company shall deliver,
or cause to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, transfer, lease, assignment or
other disposition and the supplemental indentures in respect thereof comply with
the requirements under this Indenture.
SECTION 5.02. Successor Substituted.
In the event of any transaction (other than a lease) described in
and complying with the conditions listed in Section 5.01 in which the Company is
not the Successor Company, and the Successor Company is to assume all the
Obligations of the Company under the Securities, this Indenture and the Exchange
and Registration Rights Agreement pursuant to a supplemental indenture, such
Successor Company shall succeed to, and be substituted for, and may exercise
every right and power of, the Company and the Company shall be discharged and
released from its Obligations under this Indenture and the Securities.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for purposes of
this Indenture:
(i) a default in the payment of the principal of or premium, if any,
on the Securities when due, at maturity, upon redemption or otherwise
(including pursuant to a Change of Control Offer or an Asset Sale Offer);
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(ii) a default in the payment of interest on the Securities when it
becomes due and payable and the continuance of such a default for a period
of 30 days or more;
(iii) (A) the failure to comply with the covenant described under
Section 5.01 or (B) the failure to comply with any other covenant or other
term in this Indenture (other than those specified in clause (i) or (ii))
immediately above and such default, in the case of this clause (iii),
continues for a period of 45 days after notice to the Company thereof by
the Trustee or to the Company and the Trustee by Holders of at least 25%
of the aggregate principal amount at maturity of the Securities then
outstanding;
(iv) (A) the failure to pay, following any applicable grace period,
any installment of principal due (whether at maturity or otherwise) under
one or more classes or issues of Indebtedness of the Company or any
Restricted Subsidiary in an aggregate principal amount of $5.0 million or
more or (B) the failure by the Company or any Restricted Subsidiary to
perform any other term, covenant, condition or provision of one or more
classes or issues of Indebtedness in an aggregate principal amount of the
equivalent of $5.0 million or more and, in the case of this clause (B),
such failure results in an acceleration of the maturity thereof;
(v) one or more final non-appealable judgments, orders or decrees
for the payment of money shall be entered in an amount or amounts of $5.0
million or more, either individually or in the aggregate, against the
Company or any Restricted Subsidiary or any of their respective properties
and shall not be discharged or satisfied within 45 days;
(vi) the Company or any Significant Restricted Subsidiary pursuant
to or within the meaning of any Bankruptcy Law: (a) admits in writing its
inability to pay its debts generally as they become due; (b) commences a
voluntary case or proceeding; (c) consents to the entry of an order for
relief against it in an involuntary case or proceeding; (d) consents or
acquiesces in the institution of a bankruptcy or insolvency proceeding
against it; (e) consents to the appointment of a Custodian of it or for
all or substantially all of its property; or (f) makes a general
assignment for the benefit of its creditors, or any of them takes any
action to authorize or effect any of the foregoing; or
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (a) is for relief against the Company or
any Significant Restricted Subsidiary in an involuntary case or
proceeding; (b) appoints a Custodian of the Company or any Significant
Restricted Subsidiary for all or substantially all of its property; or (c)
orders the liquidation of the Company or any Significant Restricted
Subsidiary; and in each case the order or decree remains unstayed and in
effect for 60 days; provided, however, that if the entry of such order or
decree is appealed and dismissed on appeal, then the Event of Default
hereunder by reason of the entry of such order or decree shall be deemed
to have been cured.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal, state or foreign law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other than an
Event of Default specified in clause (vi) or (vii) of Section 6.01 with respect
to the Company) occurs and is continuing, the Trustee or the Holders of at least
25% in aggregate principal amount of the outstanding Securities by notice in
writing to the Company (and to the Trustee if given by the Holders) may declare
the Default Amount on all outstanding Securities to be due and payable
immediately and, upon any such declaration, such principal (and premium, if
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any) and accrued interest, notwithstanding anything contained in this Indenture
or the Securities to the contrary, shall become immediately due and payable.
If an Event of Default specified in clause (vi) or (vii) of Section
6.01 with respect to the Company occurs and is continuing, then the Default
Amount on all outstanding Securities shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder.
After a declaration of acceleration, but before a judgment or decree
of the money due in respect of the Securities has been obtained, the Holders of
not less than a majority in aggregate principal amount of the Securities then
outstanding by written notice to the Trustee may annul an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and interest on the Securities which has become due solely by
virtue of such acceleration) have been cured or waived and if the annulment
would not conflict with any judgment or decree. No such annulment shall affect
any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder in exercising any right or remedy
maturing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, prior to the declaration
of acceleration of the Securities, the Holders of not less than a majority in
aggregate principal amount of the outstanding Securities by written notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Security as specified in clauses (i) and (ii) of Section 6.01 or a Default in
respect of any term or provision of this Indenture that may not be amended or
modified without the consent of each Holder affected as provided in Section
10.02. The Company shall deliver to the Trustee an Officers' Certificate stating
that the requisite percentage of Holders have consented to such waiver and
attaching copies of such consents. In case of any such waiver, the Company, the
Trustee and the Holders shall be restored to their former positions and rights
hereunder and under the Securities, respectively. This paragraph of this Section
6.04 shall be in lieu of ss. 316(a)(1)(B) of the TIA and such ss. 316(a)(1)(B)
of the TIA is hereby expressly excluded from this Indenture and the Securities,
as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture and the Securities, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
<PAGE> 50
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SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal
amount of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on 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 another Holder, or that
may involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. In the event the Trustee takes any action or
follows any direction pursuant to this Indenture, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against any loss or
expense caused by taking such action or following such direction. This Section
6.05 shall be in lieu of ss. 316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A)
of the TIA is hereby expressly excluded from this Indenture and the Securities,
as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
the outstanding Securities make a written request to the Trustee to pursue
a remedy as Trustee;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee reasonable indemnity satisfactory to the Trustee against any loss,
liability or expense;
(iv) 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 reasonable indemnity; and
(v) during such 60-day period, the Holders of a majority in
principal amount of the outstanding Securities do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and premium, if any or interest on
a Security, on or after the respective due dates expressed in the Security, 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 the
Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified
in Section 6.01(i) or (ii) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor on the Securities for the whole amount of principal and
accrued interest remaining unpaid, together with interest overdue on principal
and to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
<PAGE> 51
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Securities and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may 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 allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Securities), their respective creditors or their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings 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 agent and
counsel, and any other amounts due the Trustee under Section 7.07. 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 Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to the Holders 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 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 and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by
a Holder or group of Holders of more than 10% in aggregate principal amount of
the outstanding Securities, or to any suit instituted by any Holder for the
enforcement or the payment of the principal or interest on any Securities on or
after the respective due dates expressed in the Security.
<PAGE> 52
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a 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 their 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 a Default:
(1) The Trustee shall not be liable except for the performance of
such duties as are specifically set forth herein; and
(2) 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
conforming to the requirements of this Indenture; provided, however, that
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine such certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
grossly negligent action, its own grossly negligent failure to act, or its own
willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
grossly negligent in ascertaining the pertinent facts; and
(3) 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.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(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.
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SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely conclusively on 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 and/or an Opinion of Counsel, which shall conform to
the provisions of Section 13.05. The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on such certificate or
opinion.
(c) The Trustee may act through attorneys and agents of its
selection and shall not be responsible for the misconduct or negligence of any
agent or attorney (other than an agent who is an employee of the Trustee)
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or within
its rights or powers.
(e) The Trustee may consult with counsel of its selection and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) Any request or direction of the Company mentioned herein shall
be sufficiently evidenced by an Officers' Certificate and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
(h) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company, personally or by agent
or attorney.
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Trust Officer of the Trustee has actual knowledge thereof or
unless the Trustee shall have received written notice thereof at the Corporate
Trust Office of the Trustee, and such notice references the Securities and this
Indenture.
<PAGE> 54
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SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee, subject to
Section 7.10 hereof. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 7.10 and 7.11.
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 Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and the
Trustee knows of such Defaults or Events of Default, the Trustee shall mail to
each Holder notice of the Default or Event of Default within 30 days after the
occurrence thereof. Except in the case of a Default or an Event of Default in
payment of principal of or interest on any Security or a Default or Event of
Default in complying with Section 5.01, the Trustee may withhold the notice if
and so long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders. This Section 7.05
shall be in lieu of the proviso to ss. 315(b) of the TIA and such proviso to ss.
315(b) of the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA ss. 313(a), within 60 days after each May 15
beginning with the May 15 following the date of this Indenture, the Trustee
shall mail to each Holder a report dated as of such May 15 that complies with
TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b), (c) and (d).
A copy of each such report at the time of its mailing to the Holders
shall be filed with the SEC and each stock exchange, if any, on which the
Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to time agree in
writing for its services. 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 upon request for all reasonable disbursements, expenses
and advances (including fees, disbursements and expenses of its agents and
counsel) incurred or made by it in addition to the compensation for its services
except any such disbursements, expenses and advances as may be attributable to
the Trustee's gross negligence or bad faith. Such expenses shall include the
reasonable compensation, disbursements and expenses of the
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Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 9.01 hereof.
The Company shall indemnify the Trustee for, and hold it harmless
against any and all loss, damage, claims, liability or expense, including taxes
(other than franchise taxes imposed on the Trustee and taxes based upon,
measured by or determined by the income of the Trustee), arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder, except to the extent that such loss, damage, claim,
liability or expense is due to its own gross negligence or bad faith. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. However, the 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 (and may employ its own counsel) at the Company's expense; provided,
however, that the Company's reimbursement obligation with respect to counsel
employed by the Trustee will be limited to the reasonable fees and expenses of
such counsel.
The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Trustee as a result of the violation of this Indenture by the Trustee.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a Lien prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of or interest on particular
Securities or the Purchase Price or redemption price of any Securities to be
purchased pursuant to an Offer to Purchase or redeemed.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(vi) or (vii) occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute expenses
of administration under any Bankruptcy Law. The Company's obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Company's obligations pursuant to
Article Nine and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Company in
writing and may appoint a successor Trustee with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(c) a custodian or other public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
<PAGE> 56
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If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), 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 Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
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 outstanding Securities may
petition, at the expense of the Company, any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible
to act as Trustee under TIA ss.ss. 310(a)(1) and 310(a)(2). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. If the Trustee has or shall
acquire any "conflicting interest" within the meaning of TIA ss. 310(b), the
Trustee and the Company shall comply with the provisions of TIA ss. 310(b);
provided, however, that there shall be excluded from the operation of TIA ss.
310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.10, the Trustee shall resign
immediately in the manner and with the effect hereinbefore specified in this
Article Seven.
SECTION 7.11. Preferential Collection of Claims Against the Company.
The Trustee shall comply with 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.
<PAGE> 57
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ARTICLE EIGHT
[INTENTIONALLY OMITTED]
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of the Company's Obligations.
The Company may terminate its substantive obligations in respect of
the Securities by delivering all outstanding Securities to the Trustee for
cancellation and paying all sums payable by it on account of principal of and
interest on all Securities or otherwise. In addition to the foregoing, the
Company may, provided that no Default or Event of Default has occurred and is
continuing or would arise therefrom (or, with respect to a Default or Event of
Default specified in Section 6.01(vi) or (vii), occurs at any time on or prior
to the 91st calendar day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until after such 91st day)
under this Indenture), terminate its substantive obligations in respect of
Article Four (other than Sections 4.01, 4.02, 4.07, 4.09 and 4.11) and Article
Five hereof and any Event of Default specified in Section 6.01 (iii), (iv) or
(v) by (i) depositing with the Trustee, under the terms of an irrevocable trust
agreement, money or United States Government Obligations sufficient (without
reinvestment) to pay all remaining Indebtedness on the Securities, (ii)
delivering to the Trustee either an Opinion of Counsel or a ruling directed to
the Trustee from the Internal Revenue Service to the effect that the Holders
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and termination of obligations, (iii) delivering to the
Trustee an Opinion of Counsel to the effect that the Company's exercise of the
option under this Section 9.01 will not result in any of the Company, the
Trustee or the trust created by the Company's deposit of funds pursuant to this
provision becoming or being deemed to be an "investment company" under the
Investment Company Act, and (iv) delivering to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating compliance with all
conditions precedent provided for herein. In addition, the Company may, provided
that no Default or Event of Default has occurred and is continuing or would
arise therefrom (or, with respect to a Default or Event of Default specified in
Section 6.01(vi) or (vii), occurs at any time on or prior to the 91st calendar
day after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until after such 91st day) under this Indenture),
terminate its substantive obligations in respect of the Securities (including
its obligations to pay the principal of and interest on the Securities) by (i)
depositing with the Trustee, under the terms of an irrevocable trust agreement,
money or United States Government Obligations sufficient (without reinvestment)
to pay all remaining Indebtedness on the Securities, (ii) delivering to the
Trustee either a ruling directed to the Trustee from the Internal Revenue
Service to the effect that the Holders of the Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and termination of obligations or an Opinion of Counsel addressed to the Trustee
based upon such a ruling or based on a change in the applicable Federal tax law
since the date of this Indenture to such effect, (iii) delivering to the Trustee
an Opinion of Counsel to the effect that the exercise of the option under this
Section 9.01 will not result in any of the Company, the Trustee or the trust
created by the deposit of funds pursuant to this provision becoming or being
deemed to be an "investment company" under the Investment Company Act and (iv)
delivering to the Trustee an Officers' Certificate and an Opinion of Counsel
each stating compliance with all conditions precedent provided for herein.
<PAGE> 58
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Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.12, 2.13 and 4.01 (but
not with respect to termination of substantive obligations pursuant to the third
sentence of the foregoing paragraph), 4.02, 7.07, 7.08, 9.03 and 9.04 shall
survive until the Securities are no longer outstanding. Thereafter the Company's
obligations in Sections 7.07, 9.03 and 9.04 shall survive.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations specified
above.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the United States Government
Obligations deposited pursuant to this Section 9.01 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 outstanding Securities.
SECTION 9.02. Application of Trust Money.
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 9.01, and shall apply the
deposited money and the money from United States Government Obligations in
accordance with this Indenture solely to the payment of principal of and
interest on the Securities.
SECTION 9.03. Repayment to the Company.
Subject to Sections 7.07 and 9.01, the Trustee shall promptly pay to
the Company upon written request any money held by it which exceeds the amount
required to make payments under this Indenture. The Trustee shall pay to the
Company upon written request any money held by it for the payment of principal
or interest that remains unclaimed for two years; provided, however, that the
Trustee before being required to make any payment may at the expense of the
Company cause to be published once in a newspaper of general circulation in The
City of New York or mail to each Holder entitled to such money notice that such
money remains unclaimed and that, after a date specified therein which shall be
at least 30 days from the date of such publication or mailing, any unclaimed
balance of such money then remaining shall be repaid to the Company. After
payment to the Company, Holders entitled to money must look to the Company for
payment as general creditors unless an applicable abandoned property law
designates another person and all liability of the Trustee or Paying Agent with
respect to such money shall thereupon cease.
SECTION 9.04. Reinstatement.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 9.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 9.01 until
such time as the Trustee is permitted to apply all such money or United States
Government Obligations in accordance with Section 9.01; provided, however, that
if the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or United States Government Obligations held by the
Trustee.
<PAGE> 59
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ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Company, when authorized by a resolution of their respective
Boards of Directors, and the Trustee may amend or supplement this Indenture or
the Securities without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency; provided,
however, that such amendment or supplement does not adversely affect the
rights of any Holder;
(b) to effect the assumption by a successor Person of all
obligations of the Company under the Securities and this Indenture in
connection with any transaction complying with Article Five of this
Indenture;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefit or
rights to the Holders;
(f) to make any other change that does not adversely affect the
rights of any Holder under this Indenture;
(g) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(h) to secure the Securities pursuant to the requirements of Section
4.18 or otherwise;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 10.01.
SECTION 10.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a
resolution of its Boards of Directors, and the Trustee may amend or supplement
this Indenture or the Securities with the written consent of the Holders of at
least a majority in principal amount of the outstanding Securities. Subject to
Section 6.07, the Holders of a majority in principal amount of the outstanding
Securities may waive compliance by the Company with any provision of this
Indenture or the Securities. However, without the consent of each Holder
affected, an amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may not:
<PAGE> 60
-54-
(a) change the maturity of the principal of or any installment of
interest on any such Security or alter the optional redemption or
repurchase provisions of any such Security or this Indenture in a manner
adverse to the Holders of the Securities;
(b) reduce the principal amount (or premium) of any such Security;
(c) reduce the rate of or extend the time for payment of interest on
any such Security;
(d) change the place or currency of payment of principal of (or
premium) or interest on any such Security;
(e) modify any provisions of this Indenture relating to the waiver
of past defaults (other than to add sections to this Indenture or the
Securities subject thereto) or the right of the Holders of the Securities
to institute suit for the enforcement of any payment on or with respect to
any such Security in respect thereof or the modification and amendment
provisions of this Indenture and the Securities (other than to add
sections to this Indenture or the Securities which may not be amended,
supplemented or waived without the consent of each Holder affected);
(f) reduce the percentage of the principal amount at maturity of
outstanding Securities necessary for amendment to or waiver of compliance
with any provision of this Indenture or the Securities or for waiver of
any Default in respect thereof;
(g) waive a Default in the payment of the principal of, interest on,
or redemption payment with respect to, the Securities (except a rescission
of acceleration of the Securities by the Holders as provided in this
Indenture and a waiver of the payment default that resulted from such
acceleration);
(h) modify the ranking of any Security in any manner adverse to the
Holders of the Securities; or
(i) modify the provisions of any covenant (or the related
definitions) in this Indenture requiring the Company to make an Offer to
Purchase following an event or circumstance which may give rise to the
requirement to make an Offer to Purchase in a manner materially adverse to
the Holders of the Securities affected thereby otherwise than in
accordance with this Indenture.
It shall not be necessary for the consent of the Holders under this
Section 10.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 10.02
becomes effective, the Company shall mail to the Holders 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 amendment, supplement or
waiver.
SECTION 10.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
<PAGE> 61
-55-
SECTION 10.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to such Holder's Security or portion of such
Security by notice to the Trustee or the Company received before the date on
which the Trustee receives an Officers' Certificate certifying that the Holders
of the requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders of Securities entitled to consent to
any amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last sentence of the immediately preceding paragraph, those
persons who were Holders of Securities at such record date (or their duly
designated proxies), and only those persons, shall be entitled to consent to
such amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders of such Securities after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (a)
through (i) of Section 10.02. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determine, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or issue a new Security shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 10.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject to customary exceptions). The
Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
<PAGE> 62
-56-
ARTICLE ELEVEN
[INTENTIONALLY OMITTED]
ARTICLE TWELVE
[INTENTIONALLY OMITTED]
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies any TIA
provision that may be so modified, such TIA provision shall be deemed to apply
to this Indenture as so modified. If any provision of this Indenture excludes
any TIA provision that may be so excluded, such TIA provision shall be excluded
from this Indenture.
The provisions of TIA ss.ss. 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person, by facsimile and confirmed by overnight
courier, or mailed by first-class mail addressed as follows:
if to Trans-Resources, Inc.:
Nine West 57th Street, 39th Floor
New York, New York 10019
Attention: Chief Financial Officer
Facsimile: (212) 888-3708
Telephone: (212) 888-3044
<PAGE> 63
-57-
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Edward Klimerman, Esq.
Facsimile: (212) 698-7825
Telephone: (212) 698-7700
if to the Trustee:
State Street Bank and Trust Company
61 Broadway, 15th Floor
New York, New York 10006
Attention: Corporate Trust Division
Facsimile: (212) 612-3202
Telephone: (212) 612-3447
Each party by notice to the others may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to
a Holder including any notice delivered in connection with TIA ss. 310(b), TIA
ss. 313(c), TIA ss. 314(a) and TIA ss. 315(b), shall be mailed to him at his
address as set forth on the Security Register and shall be sufficiently given to
him if so mailed within the time prescribed. To the extent required by the TIA,
any notice or communication shall also be mailed to any Person described in TIA
ss. 313(c).
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. Except for
a notice to the Trustee, which is deemed given only when received, if a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and any other person shall have the
protection of TIA ss. 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take or refrain from taking any action under this Indenture after the date
hereof, the Company shall furnish to the Trustee at the request of the Trustee:
<PAGE> 64
-58-
(1) an Officers' Certificate in form and substance satisfactory to
the Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel in form and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 13.07. Governing Law.
The laws of the State of New York shall govern this Indenture and
the Securities without regard to principles of conflicts of laws.
SECTION 13.08. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Securities or 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
Security waives and releases all such liability.
SECTION 13.09. Successors.
All agreements of a party to this Indenture contained in this
Indenture shall bind such party's successors.
<PAGE> 65
-59-
SECTION 13.10. 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 13.11. Severability.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby, and a Holder shall have no claim therefor against any party hereto.
SECTION 13.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 13.13. Legal Holidays.
If a payment date is a not a Business Day at a place of payment,
payment may be made at that place on the next succeeding Business Day, and no
interest shall accrue for the intervening period.
[Signature Pages Follow]
<PAGE> 66
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
TRANS-RESOURCES, INC.
By: /s/ Lester W. Youner
----------------------------------------
Name: Lester W. Youner
Title: Vice President and Chief
Financial Officer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Angelita L. Pena
----------------------------------------
Name: Angelita L. Pena
Title: Assistant Vice President
<PAGE> 67
EXHIBIT A
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT
OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
A-1
<PAGE> 68
TRANS-RESOURCES, INC.
10 3/4% Senior Note
due March 15, 2008, Series A
CUSIP No.:[ ]
No. [ ] $[ ]
TRANS-RESOURCES, INC., a Delaware corporation (the "Company", which
term includes any successor) for value received promises to pay to [ ] or
registered assigns, the principal sum of [ ] Dollars, on March 15, 2008.
Interest Payment Dates: March 15 and September 15, commencing on
September 15, 1998.
Interest Record Dates: March 1 and September 1.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
TRANS-RESOURCES, INC.
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
Dated: March 16, 1998
A-2
<PAGE> 69
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 3/4% Senior Notes due March 15, 2008, Series
A, described in the within-mentioned Indenture.
Dated: March 16, 1998
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
-----------------------------------------
Authorized Signatory
A-3
<PAGE> 70
(REVERSE OF SECURITY)
TRANS-RESOURCES, INC.
10 3/4% Senior Note
due March 15, 2008, Series A
1. Interest.
TRANS-RESOURCES, INC., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. Cash interest on the Securities will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from March 16, 1998. The Company will pay interest semi-annually in arrears on
each Interest Payment Date, commencing September 15, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
In addition, the Company shall pay interest on overdue principal and
on overdue installments of interest (without regard to any applicable grace
periods) to the extent lawful from time to time on demand, in each case at the
rate borne by this Security.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are cancelled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (the "Trustee") will
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company may, subject to certain
exceptions, act as Paying Agent or Registrar.
A-4
<PAGE> 71
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
March 16, 1998 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. This Security is one of a duly authorized issue of Securities of
the Company designated as its 10 3/4% Senior Notes due 2008, Series A, issued
under the Indenture The aggregate principal amount of Securities which may be
issued under the Indenture is limited (except as otherwise provided in the
Indenture) to $100,000,000. The terms of the Securities 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.C. ss.ss. 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture (except as otherwise indicated in the
Indenture) until such time as the Indenture is qualified under the TIA, and
thereafter as in effect on the date on which the Indenture is qualified under
the TIA. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and holders of Securities are referred to the
Indenture and the TIA for a statement of them. The Securities are general
unsecured obligations of the Company.
5. Optional Redemption.
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after March 15, 2003, at the redemption
prices (expressed as a percentage of principal amount) set forth below, plus
accrued and unpaid interest thereon, if any, to the redemption date (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date), if redeemed during the twelve-month
period beginning on March 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2003 105.375%
2004 103.583%
2005 101.792%
2006 and thereafter 100.000%
</TABLE>
6. Optional Redemption upon Public Equity Offerings.
In addition, at any time and from time to time on or prior to March
15, 2001, the Company may, at its option, redeem up to 33-1/3% of the aggregate
principal amount of the Securities originally issued with the net cash proceeds
of one or more Public Equity Offerings by the Company after which there is a
Public Market, at a redemption price in cash equal to 110.75% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided, however, that at least 66-2/3% of the aggregate principal
amount of the Securities originally issued must remain outstanding immediately
after giving effect to each such redemption (excluding any Securities held by
the Company or any of its Affiliates). Notice of any such redemption must be
given within 60 days after the date of the closing of the relevant Public Equity
Offering of the Company.
7. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal
A-5
<PAGE> 72
to or larger than $1,000 principal amount. Securities and portions of them the
Trustee so selects shall be in amounts of $1,000 principal amount or integral
multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
8. Change of Control Offer.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall, within 60
days after the Change of Control Date, make an Offer to Purchase all Securities
then outstanding at a purchase price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Purchase Date (subject to the right of Holders of record on the relevant
Interest Record Date to receive interest due on the relevant Interest Payment
Date).
9. Limitation on Disposition of Assets.
The Company is, subject to certain conditions, obligated to make an
Offer to Purchase Securities at a purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
Purchase Date (subject to the right of Holders of record on the relevant
Interest Record Date to receive interest due on the relevant Interest Payment
Date) with the excess proceeds of certain asset dispositions.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange of Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange of any Securities or portions thereof selected for redemption, except
the unredeemed portion of any security being redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed
for two years, the Trustee and the Paying Agent will repay the funds to the
Company at its written request. After that, all liability of the Trustee and
such Paying Agent with respect to such funds shall cease.
A-6
<PAGE> 73
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture and the Securities, except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Securities may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture and the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities or comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any other change that does
not materially adversely affect the rights of any Holder of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications and
exceptions. The Company must report quarterly to the Trustee on compliance with
such limitations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received reasonable indemnity satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Securities then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities notice of certain continuing Defaults or
Events of Default if it determines that withholding notice is in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company or its Affiliates as if it were not the Trustee.
A-7
<PAGE> 74
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as
such, of the Company, shall have any liability for any obligation of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security 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).
21. 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 Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Registration Rights.
Pursuant to the Exchange and Registration Rights Agreement, the
Company will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for a 10 3/4% Senior Note due 2008, Series B, of
the Company which has been registered under the Securities Act, in like
principal amount and having terms identical in all material respects to the
Initial Securities. The Holders shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Exchange and Registration Rights Agreement.
23. Governing Law.
The laws of the State of New York shall govern the Indenture and
this Security without regard to principles of conflicts of laws.
A-8
<PAGE> 75
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
------------------- -------------------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
---------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 76
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.05 or Section 4.14 of the Indenture, check the appropriate
box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.05 or Section 4.14 of the Indenture, state the
amount: $_____________
Dated: Your Signature:
------------------------ -----------------------------
(Signed exactly as name appears
on the other side of this
Security)
Signature Guarantee:
------------------------------------------------------------
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 77
EXHIBIT B
[FORM OF SERIES B SECURITY]
TRANS-RESOURCES, INC.
10 3/4% Senior Note
due March 15, 2008, Series B
CUSIP No.:[ ]
No. [ ] $[ ]
TRANS-RESOURCES, INC., a Delaware corporation (the "Company", which
term includes any successor), for value received promises to pay to [ ] or
registered assigns, the principal sum of [ ] Dollars, on March 15, 2008.
Interest Payment Dates: March 15 and September 15, commencing on
September 15, 1998.
Interest Record Dates: March 1 and September 1.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
TRANS-RESOURCES, INC.
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
Dated: March 16, 1998
B-1
<PAGE> 78
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 3/4% Senior Notes due 2008, Series B,
described in the within-mentioned Indenture.
Dated: March 16.1998
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
-----------------------------------------
Authorized Signatory
B-2
<PAGE> 79
(REVERSE OF SECURITY)
TRANS-RESOURCES, INC.
10 3/4% Senior Note
due March 15, 2008, Series B
1. Interest.
TRANS-RESOURCES, INC., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. Cash interest on the Securities will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from March 16, 1998. The Company will pay interest semi-annually in arrears on
each Interest Payment Date, commencing September 15, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
In addition, the Company shall pay interest on overdue principal and
on overdue installments of interest (without regard to any applicable grace
periods) to the extent lawful from time to time on demand, in each case at the
rate borne by this Security.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are cancelled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (the "Trustee") will
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company may, subject to certain
exceptions, act as Paying Agent or Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
March 16, 1998 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. This Security is one of a duly authorized issue of Securities of
the
B-3
<PAGE> 80
Company designated as its 10 3/4% Senior Notes due 2008, Series B, issued under
the Indenture. The aggregate principal amount of Securities which may be issued
under the Indenture is limited (except as provided in the Indenture) to
$100,000,000. The terms of the Securities 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.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on
the date of the Indenture (except as otherwise indicated in the Indenture) until
such time as the Indenture is qualified under the TIA, and thereafter as in
effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are general unsecured obligations of
the Company.
5. Optional Redemption.
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after March 15, 2003, at the redemption
prices (expressed as a percentage of principal amount) set forth below, plus
accrued and unpaid interest thereon, if any, to the redemption date (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date), if redeemed during the twelve-month
period beginning on March 15 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 105.375%
2004 103.583%
2005 101.792%
2006 and thereafter 100.000%
</TABLE>
6. Optional Redemption upon Public Equity Offerings.
In addition, at any time and from time to time on or prior to March
15, 2001, the Company may, at its option, redeem up to 33-1/3% of the aggregate
principal amount of the Securities originally issued with the net cash proceeds
of one or more Public Equity Offerings by the Company after which there is a
Public Market, at a redemption price in cash equal to 110.75% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided, however, that at least 66-2/3% of the aggregate principal
amount of the Securities originally issued must remain outstanding immediately
after giving effect to each such redemption (excluding any Securities held by
the Company or any of its Affiliates). Notice of any such redemption must be
given within 60 days after the date of the closing of the relevant Public Equity
Offering of the Company.
7. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal
B-4
<PAGE> 81
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Security. On and after the
Redemption Date, interest will cease to accrue on Securities or portions thereof
called for redemption so long as the Company has deposited with the Paying Agent
for the Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
8. Change of Control Offer.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall, within 60
days after the Change of Control Date, make an Offer to Purchase all Securities
then outstanding at a purchase price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Purchase Date (subject to the right of Holders of record on the relevant
Interest Record Date to receive interest due on the relevant Interest Payment
Date).
9. Limitation on Disposition of Assets.
The Company is, subject to certain conditions, obligated to make an
Offer to Purchase Securities at a purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
Purchase Date (subject to the right of Holders of record on the relevant
Interest Record Date to receive interest due on the relevant Interest Payment
Date) with the excess proceeds of certain asset dispositions.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange of Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange of any Securities or portions thereof selected for redemption, except
the unredeemed portion of any security being redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed
for two years, the Trustee and the Paying Agent will repay the funds to the
Company at its written request. After that, all liability of the Trustee and
such Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture and the Securities, except for certain provisions thereof, and may be
discharged from obligations to comply with certain cove-
B-5
<PAGE> 82
nants contained in the Indenture and the Securities, in each case upon
satisfaction of certain conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Securities may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture and the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities or comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any other change that does
not materially adversely affect the rights of any Holder of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications and
exceptions. The Company must report quarterly to the Trustee on compliance with
such limitations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received reasonable indemnity satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Securities then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities notice of certain continuing Defaults or
Events of Default if it determines that withholding notice is in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company or its Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as
such, of the Company shall have any liability for any obligation of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by ac-
B-6
<PAGE> 83
cepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security 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).
21. 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 Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Governing Law.
The laws of the State of New York shall govern the Indenture and
this Security without regard to principles of conflicts of laws.
B-7
<PAGE> 84
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
------------------- -------------------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
---------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 85
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.05 or Section 4.14 of the Indenture, check the appropriate
box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.05 or Section 4.14 of the Indenture, state the
amount: $_____________
Dated: Your Signature:
------------------------ -----------------------------
(Signed exactly as name appears
on the other side of this
Security)
Signature Guarantee:
------------------------------------------------------------
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 86
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY 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) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE> 87
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 10 3/4% Senior Notes due 2008
(the "Securities") of Trans-Resources, Inc.
-------------------------------------------
This Certificate relates to $_______ principal amount of Securities
held in the form of* ___ a beneficial interest in a Global Security or* _______
Physical Securities by ______ (the "Transferor").
The Transferor:*
|_| has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
|_| has requested by written order that the Registrar exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such Indenture,
and that the transfer of the Securities does not require Registration under the
Securities Act of 1933, as amended (the "Act"), because*:
|_| Such Security is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 2.16 of the Indenture).
|_| Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
|_| Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraph (a)(1), (2), (3) or
(7) of Rule 501 under the Act) which delivers a certificate to the Trustee in
the form of Exhibit E to the Indenture.
|_| Such Security is being transferred in reliance on Rule 144 under
the Act.
D-1
<PAGE> 88
|_| Such Security is being transferred in reliance on and in
compliance with an exemption from the Registration requirements of the Act other
than Rule 144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." An Opinion of Counsel to the effect that such transfer
does not require Registration under the Securities Act accompanies this
certification.
--------------------------------
[INSERT NAME OF TRANSFEROR]
By:
----------------------------
[Authorized Signatory]
Date:
-----------------
*Check applicable box.
D-2
<PAGE> 89
EXHIBIT E
Form of Transferee Letter of Representation
State Street Bank and Trust Company
61 Broadway, 15th Floor
New York, New York 10006
Attention: Corporate Trust Division
Dear Sirs:
This certificate is delivered to request a transfer of $________
principal amount of the [ ]% Senior Notes due 2008 (the "Securities") of
Trans-Resources, Inc. (the "Company"). Upon transfer, the Securities would be
registered in the name of the new beneficial owner as follows:
Name:_________________________
Address:______________________
Taxpayer ID Number:___________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities
Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Securities
and we invest in or purchase securities similar to the Notes in the normal
course of our business. We and any accounts for which we are acting are each
able to bear the economic risk of our or its investment.
2. We understand that the Securities have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date which is two years after
the later of the date of original issue and the last date on which the Company
or any affiliate of the Company was the owner of such Securities (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act, to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB and to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales that occur outside of the United States within the meaning of
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of such
an institutional "accredited investor," in each case in a minimum principal
amount of the Securities of $250,000 or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing
E-1
<PAGE> 90
cases to any requirement of law that the disposition of our property or the
property of such investor account or accounts be at all times within our or
their control and in compliance with any applicable state securities laws. The
foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Securities
is proposed to be made pursuant to clause (e) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from the
transferee substantially in the form of this letter to the Company and the
Trustee, which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act and that it is acquiring such Securities for
investment purposes and not for distribution in violation of the Securities Act.
Each purchaser acknowledges that the Company and the Trustee reserve the right
prior to any offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Notes pursuant to clause (d), (e) or (f) above to
require the delivery of an opinion of counsel, certificates and/or other
information satisfactory to the Company and the Trustee.
Dated: TRANSFEREE:
----------------------
By:
-----------------------------------
E-2
<PAGE> 1
================================================================================
INDENTURE
Dated as of March 16, 1998
Between
TRANS-RESOURCES, INC.
and
STATE STREET BANK AND TRUST COMPANY, as Trustee
------------------
$135,000,000 Aggregate Principal Amount at Maturity
12% Senior Discount Notes due 2008, Series A
12% Senior Discount Notes due 2008, Series B
================================================================================
E-7
<PAGE> 2
CROSS-REFERENCE TABLE
Trust Indenture Indenture
Act Section Section
- --------------- ---------
ss.310(a)(1)............................................. 7.10
(a)(2)............................................... 7.10
(a)(3)............................................... N.A.
(a)(4)............................................... N.A.
(a)(5)............................................... 7.08; 7.10.
(b).................................................. 7.08; 7.10; 13.02
(c).................................................. N.A.
ss.311(a).............................................. 7.11
(b).................................................. 7.11
(c).................................................. N.A.
ss.312(a)................................................ 2.05
(b).................................................. 13.03
(c).................................................. 13.03
ss.313(a)................................................ 7.06
(b)(1)............................................... 7.06
(b)(2)............................................... 7.06
(c).................................................. 7.06; 13.02
(d).................................................. 7.06
ss. 314(a)............................................... 4.11; 4.12; 13.02
(b).................................................. N.A.
(c)(1)............................................... 13.04
(c)(2)............................................... 13.04
(c)(3)............................................... N.A.
(d).................................................. N.A.
(e).................................................. 13.05
(f).................................................. N.A.
ss.315(a)................................................ 7.01(b)
(b).................................................. 7.05; 13.02
(c).................................................. 7.01(a)
(d).................................................. 7.01(c)
(e).................................................. 6.11
ss.316(a)(last sentence)................................. 2.09
(a)(1)(A)............................................ 6.05
(a)(1)(B)............................................ 6.04
(a)(2)............................................... N.A.
(b).................................................. 6.07
(c).................................................. 10.04
ss.317(a)(1)............................................. 6.08
(a)(2)............................................... 6.09
(b).................................................. 2.04
ss.318(a)................................................ 13.01
- ----------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions..................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act...........18
SECTION 1.03. Rules of Construction.......................................19
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.............................................19
SECTION 2.02. Execution and Authentication................................20
SECTION 2.03. Registrar and Paying Agent..................................20
SECTION 2.04. Paying Agent To Hold Assets in Trust........................21
SECTION 2.05. Holder Lists................................................21
SECTION 2.06. Transfer and Exchange.......................................21
SECTION 2.07. Replacement Securities......................................22
SECTION 2.08. Outstanding Securities......................................22
SECTION 2.09. Treasury Securities.........................................23
SECTION 2.10. Temporary Securities........................................23
SECTION 2.11. Cancellation................................................23
SECTION 2.12. Defaulted Interest..........................................23
SECTION 2.13. CUSIP Number................................................24
SECTION 2.14. Deposit of Moneys...........................................24
SECTION 2.15. Book-Entry Provisions for Global Securities.................24
SECTION 2.16. Registration of Transfers and Exchanges.....................25
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee..........................................29
SECTION 3.02. Selection of Securities To Be Redeemed......................29
SECTION 3.03. Notice of Redemption........................................29
SECTION 3.04. Effect of Notice of Redemption..............................30
SECTION 3.05. Deposit of Redemption Price.................................30
SECTION 3.06. Securities Redeemed in Part.................................30
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.......................................31
SECTION 4.02. Maintenance of Office or Agency.............................31
SECTION 4.03. Limitations on Transactions with Affiliates.................31
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<PAGE> 4
SECTION 4.04. Limitation on Additional Indebtedness.......................32
SECTION 4.05. Disposition of Proceeds of Asset Sales......................33
SECTION 4.06. Limitation on Restricted Payments...........................34
SECTION 4.07. Existence...................................................36
SECTION 4.08. Payment of Taxes and Other Claims...........................36
SECTION 4.09. Notice of Defaults..........................................36
SECTION 4.10. Maintenance of Properties and Insurance.....................36
SECTION 4.11. Compliance Certificate......................................37
SECTION 4.12. Reports to Holders..........................................37
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.....................37
SECTION 4.14. Change of Control...........................................38
SECTION 4.15. Limitation on the Designation of Unrestricted Subsidiaries..39
SECTION 4.16. Limitations on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.......................39
SECTION 4.17. Limitation on the Sale or Issuance of Preferred Equity
Interests of Restricted Subsidiaries....................40
SECTION 4.18. Limitation on Liens.........................................40
SECTION 4.19. Limitation on Status as Investment Company..................41
SECTION 4.20. Calculation of Original Issue Discount......................41
ARTICLE FIVE
MERGERS; SUCCESSORS
SECTION 5.01. Mergers, Sale of Assets, etc................................41
SECTION 5.02. Successor Substituted.......................................42
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default...........................................42
SECTION 6.02. Acceleration................................................43
SECTION 6.03. Other Remedies..............................................44
SECTION 6.04. Waiver of Past Default......................................44
SECTION 6.05. Control by Majority.........................................44
SECTION 6.06. Limitation on Suits.........................................45
SECTION 6.07. Rights of Holders To Receive Payment........................45
SECTION 6.08. Collection Suit by Trustee..................................45
SECTION 6.09. Trustee May File Proofs of Claim............................45
SECTION 6.10. Priorities..................................................46
SECTION 6.11. Undertaking for Costs.......................................46
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee...........................................47
SECTION 7.02. Rights of Trustee...........................................48
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<PAGE> 5
SECTION 7.03. Individual Rights of Trustee................................49
SECTION 7.04. Trustee's Disclaimer........................................49
SECTION 7.05. Notice of Defaults..........................................49
SECTION 7.06. Reports by Trustee to Holders...............................49
SECTION 7.07. Compensation and Indemnity..................................49
SECTION 7.08. Replacement of Trustee......................................50
SECTION 7.09. Successor Trustee by Merger, etc............................51
SECTION 7.10. Eligibility; Disqualification...............................51
SECTION 7.11. Preferential Collection of Claims Against the Company.......51
ARTICLE EIGHT
[INTENTIONALLY OMITTED]
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of the Company's Obligations....................52
SECTION 9.02. Application of Trust Money..................................53
SECTION 9.03. Repayment to the Company....................................53
SECTION 9.04. Reinstatement...............................................53
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.................................54
SECTION 10.02. With Consent of Holders....................................54
SECTION 10.03. Compliance with Trust Indenture Act........................56
SECTION 10.04. Revocation and Effect of Consents..........................56
SECTION 10.05. Notation on or Exchange of Securities......................56
SECTION 10.06. Trustee To Sign Amendments, etc............................56
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ARTICLE ELEVEN
[INTENTIONALLY OMITTED]
ARTICLE TWELVE
[INTENTIONALLY OMITTED]
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls...............................57
SECTION 13.02. Notices....................................................57
SECTION 13.03. Communications by Holders with Other Holders...............58
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.........58
SECTION 13.05. Statements Required in Certificate or Opinion..............59
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar..................59
SECTION 13.07. Governing Law..............................................59
SECTION 13.08. No Recourse Against Others.................................59
SECTION 13.09. Successors.................................................59
SECTION 13.10. Counterpart Originals......................................60
SECTION 13.11. Severability...............................................60
SECTION 13.12. No Adverse Interpretation of Other Agreements..............60
SECTION 13.13. Legal Holidays.............................................60
SIGNATURES...............................................................S-1
EXHIBIT A Form of Series A Security....................................A-1
EXHIBIT B Form of Series B Security....................................B-1
EXHIBIT C Form of Legend for Global Securities.........................C-1
EXHIBIT D Form of Transfer Certificate.................................D-1
EXHIBIT E Form of Transfer Certificate for Institutional Accredited
Investors................................................E-1
- -----------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part
of this Indenture.
<PAGE> 7
INDENTURE, dated as of March 16, 1998, between TRANS-RESOURCES,
INC., a Delaware corporation (the "Company"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts state chartered commercial bank, as trustee (the
"Trustee").
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accreted Value" means as of any date (the "Specified Date"), with
respect to each $1,000 principal face amount at maturity of the Securities:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date
below:
Semi-Annual Accreted
Accrual Date Value
- ------------ -------
March 16, 1998................................................ $558.58
September 15, 1998............................................ 59l.90
March 15, 1999................................................ 627.42
September 15, 1999............................................ 665.06
March 15, 2000................................................ 704.96
September 15, 2000............................................ 747.26
March 15, 2001................................................ 792.10
September 15, 2001............................................ 839.62
March 15, 2002................................................ 890.00
September 15, 2002............................................ 943.40
March 15, 2003................................................ 1,000.00
(ii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the sum of (a) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (b) an amount equal to the
product of (x) the Accreted Value for the Semi-Annual Accrual Date
immediately following the Specified Date less the Accreted Value for the
Semi-Annual Accrual Date immediately preceding the Specified Date and (y)
a fraction, the numerator of which is the number of days actually elapsed
from the immediately preceding Semi-Annual Accrual Date to the Specified
Date, using a 360-day year of twelve 30-day months, and the denominator of
which is 180; and
(iii) if the Specified Date is on or after March 15, 2003, $1,000.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed
in connection with an Acquisition from such Person or (b) existing at the time
such Person becomes a Restricted Subsidiary or is merged or consolidated with or
into the Company or any Restricted Subsidiary.
<PAGE> 8
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"Acquired Person" means, with respect to any specified Person, any
other Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated with or merged into the Company
or any Restricted Subsidiary or (ii) any acquisition by the Company or any
Restricted Subsidiary of the assets of any Person which constitutes
substantially all of an operating unit or line of business of such Person or
which is otherwise outside of the ordinary course of business.
"Additional Interest" has the meaning provided in the Exchange and
Registration Rights Agreement.
"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"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), 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, however,
that (i) beneficial ownership of 15.0% or more of the then outstanding Equity
Interests of a Person shall be deemed to be control for purposes of compliance
with Section 4.03; and (ii) no individual, other than a director of the Company
or an officer of the Company with a policy making function, shall be deemed an
Affiliate of the Company or any of its Subsidiaries, solely by reason of such
individual's employment, position or responsibilities by or with respect to the
Company or any of its Subsidiaries.
"Affiliate Transaction" has the meaning set forth in Section 4.03.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means any direct or indirect sale, conveyance,
transfer, lease (that has the effect of a disposition) or other disposition
(including, without limitation, any merger, consolidation or sale-leaseback
transaction) to any Person other than the Company or a Restricted Subsidiary, in
one transaction or a series of related transactions, of (i) any Equity Interest
of any Restricted Subsidiary; (ii) any material license, franchise or other
authorization of the Company or any Restricted Subsidiary; (iii) any assets of
the Company or any Restricted Subsidiary which constitute substantially all of
an operating unit or line of business of the Company or any Restricted
Subsidiary; or (iv) any other property or asset of the Company or any Restricted
Subsidiary outside of the ordinary course of business (including the receipt of
proceeds paid on account of the loss of or damage to any property or asset and
awards of compensation for any asset taken by condemnation, eminent domain or
similar proceedings). For the purposes of this definition, the term "Asset Sale"
shall not include (a) any transaction consummated in compliance with Section
5.01 and the creation of any Lien not prohibited by Section 4.18; provided,
however, that any transaction consummated in compliance with Section 5.01
involving a sale, conveyance, assignment, transfer, lease or other disposal of
less than all of the properties or assets of the Company shall be deemed to be
an Asset Sale with respect to the properties or assets of the Company and the
Restricted Subsidiaries that are not so sold, conveyed, assigned, transferred,
leased or otherwise disposed of in such transaction; (b) sales of property or
equipment that have become worn out, obsolete or damaged or otherwise unsuitable
for use in connection with the business of the Company or any Restricted
<PAGE> 9
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Subsidiary; (c) any transaction consummated in compliance with Section 4.06; and
(d) sales of accounts receivable for cash at fair market value.
"Bankruptcy Law" has the meaning set forth in Section 6.01.
"Board of Directors" means, as to any Person, the board of directors
of such Person (or, if such Person is a partnership, the board of directors or
other governing body of the general partner (or, if there is more than one
general partner of such Person, the general partner or general partners which
may take the applicable action pursuant to the partnership agreement of such
Person) of such Person) or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means a day that is not a Saturday, a Sunday or a day
on which banking institutions in New York, New York are not required to be open.
"Capitalized Lease Obligation" means any obligation under a lease of
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of this Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with GAAP.
"Cash Equivalents" means (a) U.S. dollars and any other currency
that is convertible into U.S. dollars without legal restrictions and which is
utilized by the Company or any of the Restricted Subsidiaries in the ordinary
course of its business; (b) securities issued or directly and fully guaranteed
or insured by the U.S. government or any agency or instrumentality thereof
having maturities of not more than six months from the date of acquisition; (c)
certificates of deposit and 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 commercial bank
having capital and surplus in excess of $500.0 million (or the foreign currency
equivalent thereof); (d) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (b) and
(c) above entered into with any financial institution meeting the qualifications
specified in clause (c) above; and (e) commercial paper rated P-1, A-1 or the
equivalent thereof by Moody's Investors Service, Inc. or Standard & Poor's
Corporation, respectively, and in each case maturing within six months after the
date of acquisition.
"Change of Control" means the occurrence of any of the following
events (whether or not approved by the Board of Directors of the Company): (i)
any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of at least 40% of the total
voting power of the then outstanding Voting Equity Interests of the Company and
the Permitted Holders, as a group, do not own a greater percentage of the total
voting power of such Voting Equity Interests; (ii) the Company consolidates
with, or merges with or into, another Person or the Company or the Restricted
Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of all
or substantially all of the assets of the Company and the Re-
<PAGE> 10
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stricted Subsidiaries (determined on a consolidated basis) to any Person (other
than the Company), other than any such transaction where immediately after such
transaction the Person or Persons that "beneficially owned" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have "beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) immediately prior to such transaction, directly or indirectly, the then
outstanding Voting Equity Interests of the Company "beneficially own" (as so
determined), directly or indirectly, a majority of the total voting power of the
then outstanding Voting Equity Interests of the surviving or transferee Person;
or (iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
"Change of Control Offer" has the meaning set forth in Section 4.14.
"Change of Control Offer Date" has the meaning set forth in Section
4.14.
"Commodity Agreements" means agreements relating to commodity hedges
designed to protect against fluctuation in commodity prices.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Consolidated EBITDA" of any Person means, for any period, the
Consolidated Net Income of such Person for such period, minus any non-cash item
increasing such Consolidated Net Income during such period, plus the following
to the extent deducted in calculating such Consolidated Net Income: (i)
Consolidated Income Tax Expense of such Person for such period; (ii)
Consolidated Interest Expense of such Person for such period; (iii) depreciation
expense of such Person for such period; (iv) amortization expense of such Person
for such period; and (v) all other non-cash items reducing Consolidated Net
Income of such Person for such period (other than any non-cash item requiring an
accrual or a reserve for cash disbursements in any future period).
"Consolidated Income Tax Expense" means, with respect to any Person
for any period, the provision for Federal, state, local and foreign income taxes
payable by such Person and the Restricted Subsidiaries of such Person for such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person
for any period, without duplication, the sum of (i) the interest expense of such
Person and the Restricted Subsidiaries of such Person for such period as
determined on a consolidated basis in accordance with GAAP, including, without
limitation, (a) any amortization of debt discount, (b) the net cost under
Interest Rate Agreements (including any amortization of discounts), (c) the
interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and (e) all capitalized interest and all accrued
interest, (ii) the interest component of Capital Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person and the Restricted
Subsidiaries of such Person during such period as determined on a consolidated
basis in accordance with GAAP and (iii) dividends and distributions in respect
of Disqualified Equity Interests of such Person and the Disqualified Equity
Interests and
<PAGE> 11
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Preferred Equity Interests of the Restricted Subsidiaries of such Person during
such period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
consolidated net income (loss) of such Person and the Restricted Subsidiaries of
such Person; provided, however, that there shall not be included in such
Consolidated Net Income: (i) any net income (loss) of any other Person if such
person is not a Restricted Subsidiary of such Person, except that (A) subject to
the limitations contained in clause (iv) below, such Person's equity in the net
income of any such other Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such other Person during such period to such Person or a Restricted
Subsidiary of such Person as a dividend or other distribution (subject, in the
case of a dividend or other distribution to a Restricted Subsidiary of such
Person, to the limitations contained in clause (iii) below) and (B) such
Person's equity in a net loss of any such other Person (other than an
Unrestricted Subsidiary of such Person) for such period shall be included in
determining such Consolidated Net Income; (ii) any net income (loss) of any such
other person acquired by such Person or a Restricted Subsidiary of such Person
in a pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income (loss) of any Restricted Subsidiary of such
Person if such Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to such Person (other than any
restriction permitted by Section 4.16) except that (A) subject to the
limitations contained in (iv) below, such Person's equity in the net income of
any such Restricted Subsidiary of such Person for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash that could
have been distributed by such Restricted Subsidiary during such period to such
Person or another Restricted Subsidiary of such Person as a dividend (subject,
in the case of a dividend that could have been made to another Restricted
Subsidiary of such Person, to the limitation contained in this clause) and (B)
such Person's equity in a net loss of any such Restricted Subsidiary of such
Person for such period shall be included in determining such Consolidated Net
Income; (iv) any gain or loss realized upon the sale or other disposition of any
asset of such Person or the Restricted Subsidiaries (including pursuant to any
sale leaseback transaction) of such Person that is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss realized
upon the sale or other disposition of any Equity Interests of any other Person;
(v) any extraordinary gain or loss; and (vi) the cumulative effect of a change
in accounting principles.
"Consolidated Operating Cash Flow Ratio" of any Person as of any
date of determination means the ratio of (i) the aggregate amount of
Consolidated EBITDA of such Person for the four quarter period of the most
recent four consecutive fiscal quarters ending prior to the date of such
determination for which consolidated financial statements of such Person are
available (or which would be required to be filed by such Person with the
Commission, if such Person were subject to the reporting requirements of the
Exchange Act) (the "Four Quarter Period") to (ii) Consolidated Interest Expense
of such Person for such Four Quarter Period; provided, however, that (1) if such
Person or any Restricted Subsidiary of such Person has incurred any Indebtedness
since the beginning of such Four Quarter Period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Operating Cash Flow Ratio is an Incurrence of Indebtedness,
Consolidated EBITDA and Consolidated Interest Expense for such Four Quarter
Period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
Four Quarter Period, and the discharge of any other Indebtedness repaid,
repurchased or otherwise discharged during the Four Quarter Period (or
thereafter but prior to the date of determination) or to be repaid, repurchased
or otherwise discharged with the proceeds of such new Indebtedness (or otherwise
in connection with the transaction giving rise to the need to calculate the
Consolidated Operating Cash Flow Ratio) shall be given pro forma effect as if
such repayment, repurchase or discharge had occurred on the first day of such
Four Quarter Period, (2) if since the beginning of such Four
<PAGE> 12
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Quarter Period such Person or any Restricted Subsidiary of such Person shall
have made any Asset Sale, the Consolidated EBITDA for such Four Quarter Period
shall be reduced by an amount equal to the Consolidated EBITDA (if positive)
directly attributable to the assets that are the subject of such Asset Sale for
such Four Quarter Period or increased by an amount equal to the Consolidated
EBITDA (if negative) directly attributable thereto for such Four Quarter Period
and Consolidated Interest Expense for such Four Quarter Period shall be reduced
by an amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of such Person or any Restricted Subsidiary of such Person
repaid, repurchased or otherwise discharged with respect to such Person and its
continuing Restricted Subsidiaries in connection with such Asset Sale for such
Four Quarter Period (or, if the Equity Interests of any Restricted Subsidiary of
such Person are sold, the Consolidated Interest Expense for such Four Quarter
Period directly attributable to the Indebtedness of such Restricted Subsidiary
to the extent such Person and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale), (3) if since the beginning
of such Four Quarter Period such Person or any Restricted Subsidiary (by merger
or otherwise) of such Person shall have made an Investment in any Restricted
Subsidiary (or any Person that becomes a Restricted Subsidiary) of such Person
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, or made
a Revocation, Consolidated EBITDA and Consolidated Interest Expense for such
Four Quarter Period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such Four Quarter Period and (4) if
since the beginning of such Four Quarter Period any other Person (that
subsequently became a Restricted Subsidiary of such Person or was merged with or
into such Person or any Restricted Subsidiary of such Person since the beginning
of such Four Quarter Period) shall have made any Asset Sale or any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(2) or (3) above if made by such Person or a Restricted Subsidiary of such
Person during such Four Quarter Period, Consolidated EBITDA and Consolidated
Interest Expense for such Four Quarter Period shall be calculated after giving
pro forma effect thereto as if such Asset Sale, Investment or acquisition of
assets occurred on, with respect to any Investment or acquisition, the first day
of such Four Quarter Period and, with respect to any Asset Sale, the day prior
to the first day of such Four Quarter Period (the adjustments referred to in
clauses (1) through (4) are referred to as the "Pro Forma Adjustments"). For
purposes of the Pro Forma Adjustments, whenever pro forma effect is to be given
to an acquisition of assets, the amount of income or earnings and any cost
savings relating thereto and the amount of Consolidated Interest Expense,
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest expense on such
Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any agreement under which Currency and Interest Rate Agreements relating
to interest are outstanding applicable to such Indebtedness if such agreement
under which such Currency and Interest Rate Agreements are outstanding has a
remaining term as at the date of determination in excess of 12 months).
"Consolidated Tangible Assets" means, as of any date of
determination, the total assets, less goodwill and other intangibles (determined
in accordance with Accounting Principles Board Opinion No. 17), shown on the
balance sheet of the Company and its Restricted Subsidiaries as of the most
recent date for which such a balance sheet is available, determined on a
consolidated basis in accordance with GAAP.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 13.02 or such other address as the Trustee may
give notice to the Company.
<PAGE> 13
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"Currency Agreements" means the obligations of any Person pursuant
to any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such person or any of its
subsidiaries against fluctuations in currency values.
"Custodian" has the meaning set forth in Section 6.01.
"Default" means any event that is or would be, with the passage of
time or the giving of notice or both, an Event of Default.
"Default Amount" means the Accreted Value of the Securities, plus
accrued and unpaid interest, if any.
"Depositary" means, with respect to the Securities issued in the
form of one or more Global Securities, The Depository Trust Company or another
Person designated as Depositary by the Company, which must be a clearing agency
registered under the Exchange Act.
"Designation" has the meaning set forth in Section 4.15.
"Designation Amount" has the meaning set forth in Section 4.15.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable 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, or exchangeable into Indebtedness on or prior to
the maturity date of the Securities.
"Equity Interest" in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Event of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Act Report" has the meaning set forth in Section 4.12.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated as of March 16, 1998, between the Company
and the Initial Purchasers, relating to the Securities.
"Exchange Securities" means the 12% Senior Discount Notes due 2008,
Series B, to be issued in exchange for the Initial Securities pursuant to the
Exchange and Registration Rights Agreement.
<PAGE> 14
-8-
"Existing Securities" means the Company's 11-7/8% Senior
Subordinated Notes due 2002.
"Expiration Date" has the meaning set forth in the definition of
"Offer to Purchase" below.
"Fair Market Value" means, with respect to any asset, the price
(after taking into account any liabilities relating to such assets) which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets shall be determined conclusively by the Board
of Directors of the Company acting in good faith, and shall be evidenced by
resolutions of the Board of Directors of the Company delivered to the Trustee.
"Final Maturity Date" means March 15, 2008.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company
that is not organized under the laws of the United States of America or any
State thereof or the District of Columbia.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Operating Cash Flow Ratio" above.
"Fully Traded Common Stock" means Equity Interests issued by any
corporation which are listed on either the New York Stock Exchange or the
American Stock Exchange or included for trading privileges in the National
Market System of the National Association of Securities Dealers Automated
Quotation System; provided, however, that (a) either such Equity Interests are
freely tradable under the Securities Act (including pursuant to Rule 145(d)(1)
thereunder) upon issuance or the holder thereof has contractual registration
rights that will permit the sale of such Equity Interests pursuant to an
effective registration statement not later than nine months after issuance to
the Company or one of its Subsidiaries and (b) such Equity Interests are also so
listed or included for trading privileges.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States of America which are
applicable at the date of determination and which are consistently applied for
all applicable periods.
"Global Securities" means one or more IAI Global Securities,
Regulation S Global Securities and 144A Global Securities.
"Government Securities" means securities that are (a) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such Government
Securities or a specific payment of principal of or interest on any such
Government Securities held by such custodian for the account of the holder of
such depository receipt; provided, however, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Securities or the specific payment of
principal of or interest on the Government Securities evidenced by such
depository receipt.
<PAGE> 15
-9-
"HCL" has the meaning set forth in the definition of "Permitted
Liens" below.
"Holder" means the registered holder of any Security.
"IAI Global Security" means a permanent global security in
registered form representing the aggregate principal amount at maturity of
Securities sold to Institutional Accredited Investors.
"Incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guaranty or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Acquired Person or any of its
Subsidiaries existing at the time such Acquired Person becomes a Restricted
Subsidiary (or is merged into or consolidated with the Company or any Restricted
Subsidiary), whether or not such Indebtedness was Incurred in connection with,
as a result of, or in contemplation of, such Acquired Person becoming a
Restricted Subsidiary (or being merged into or consolidated with the Company or
any Restricted Subsidiary), shall be deemed Incurred at the time any such
Acquired Person becomes a Restricted Subsidiary or merges into or consolidates
with the Company or any Restricted Subsidiary.
"Indebtedness" means (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (a) every obligation of such Person for money
borrowed; (b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued, for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding (x) earnout or other similar obligations
until such time as the amount of such obligation is capable of being determined,
(y) trade accounts payable incurred in the ordinary course of business and
payable in accordance with industry practices, or (z) other accrued liabilities
arising in the ordinary course of business which are not overdue or which are
being contested in good faith); (e) every Capitalized Lease Obligation of such
Person; (f) every net obligation under Currency Agreements, Commodity Agreements
and Interest Rate Agreements of such Person; (g) every obligation of the type
referred to in clauses (a) through (f) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed
or is responsible or liable for, directly or indirectly, as obligor, guarantor
or otherwise; and (h) any and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a) through (g) above. Indebtedness
(a) shall never be calculated taking into account any cash and cash equivalents
held by such Person; (b) shall not include obligations of any Person (x) arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently drawn against insufficient funds in the
ordinary course of business, provided that such obligations are extinguished
within two Business Days of their incurrence, (y) resulting from the endorsement
of negotiable instruments for collection in the ordinary course of business and
consistent with past business practices and (z) under standby letters of credit
to the extent collateralized by cash or Cash Equivalents; (c) which provides
that an amount less than the principal amount thereof shall be due upon any
declaration of acceleration thereof shall be deemed to be incurred or
outstanding in an amount equal to the accreted value thereof at the date of
determination; and (d) shall include the liquidation preference and any
mandatory redemption payment obligations in respect of any Disqualified Equity
Interests of the Company or any Restricted Subsidiary. For purposes of
determining compliance with any U.S. dollar-denominated restriction on the
Incurrence of Indebtedness denominated in a foreign currency, the U.S.
dollar-equivalent principal amount of such Indebtedness Incurred pursuant
thereto
<PAGE> 16
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shall be calculated based on the relevant currency exchange rate in effect on
the date that such Indebtedness was Incurred if such Indebtedness is Incurred to
refinance other Indebtedness denominated in a foreign currency, and if such
refinancing would cause the applicable U.S. dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such U.S. dollar-denominated restriction shall be
deemed not to have been exceeded so long as the principal amount of such
refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. The principal amount of any Indebtedness Incurred
to refinance other Indebtedness, if Incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such refinancing.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Independent Financial Advisor" means a nationally recognized
accounting, appraisal, investment banking firm or consultant that is, in the
judgment of the Company's Board of Directors, qualified to perform the task for
which it has been engaged (i) which does not, and whose directors, officers and
employees or Affiliates do not, have a direct or indirect financial interest in
the Company and (ii) which, in the judgment of the Directors of the Company, is
otherwise independent and qualified to perform the task for which it is to be
engaged.
"Initial Securities" means the 12% Senior Discount Notes due 2008,
Series A, of the Company.
"Initial Purchasers" means Chase Securities Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"interest" means, with respect to the Securities, the sum of any
cash interest and any Additional Interest on the Securities.
"Interest Payment Date" means each semiannual interest payment date
on March 15 and September 15 of each year, commencing September 15, 2003.
"Interest Rate Agreements" means the obligations of any Person
pursuant to any interest rate swap agreement, interest rate collar agreement or
other similar agreement or arrangement designed to protect such person or any of
its Subsidiaries against fluctuations in interest rates.
"Interest Record Date" for the interest payable on any Interest
Payment Date (except a date for payment of defaulted interest) means the March 1
or September 1 (whether or not a Business Day), as the case may be, immediately
preceding such Interest Payment Date.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance, guaranty or other extension of credit or capital
contribution to (by means of transfers of cash or other property or assets to
others or payments for property or services for the account or use of others, or
otherwise), or purchase or acquisition of capital stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any other
Person. Investment also means, in any event, the obligations of any Person
pursuant to
<PAGE> 17
-11-
any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement the value of which is based on fluctuations in currency
values, as well as the obligations of any Person pursuant to any interest rate
swap agreement, interest rate collar agreement or other similar agreement or
arrangement the value of which is based on fluctuations in interest rates. In
determining the amount of any Investment involving a transfer of any property or
asset other than cash, such property shall be valued at its fair market value at
the time of such transfer, as determined in good faith by the Board of Directors
(or comparable body) of the Person making such transfer.
"Investment Company Act" means the Investment Company Act of 1940,
as amended.
"Issue Date" means the closing date for the sale and original
issuance of Securities under this Indenture.
"Lien" means any lien, mortgage, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest).
"Net Cash Proceeds" means the aggregate proceeds in the form of cash
or Cash Equivalents received by the Company or any Restricted Subsidiary in
respect of any Asset Sale, including all cash or Cash Equivalents received upon
any sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions) and any relocation expenses
incurred as a result thereof; (b) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale; (d) amounts deemed, in good faith, appropriate by the Board of
Directors of the Company to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets which are the subject of
such Asset Sale (provided that the amount of any such reserves shall be deemed
to constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a reserve); and (e)
with respect to Asset Sales by Restricted Subsidiaries, the portion of such cash
payments attributable to Persons holding a minority interest in such Restricted
Subsidiary.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer to
Purchase" below.
"Offer to Purchase" means a written offer (the "Offer") sent by or
on behalf of the Company by first-class mail, postage prepaid, to each Holder at
his address appearing in the register for the Securities on the date of the
Offer offering to purchase up to the principal amount of Securities specified in
such Offer at the purchase price specified in such Offer (as determined pursuant
to this Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase,
which shall be not less than 20 Business Days nor more than 60 days after the
date of such Offer, and a settlement date (the "Purchase Date") for purchase of
Securities to occur no later than five Business Days after the Expiration Date.
The Company shall notify the Trustee at least five Business Days (or such
shorter period as is acceptable to the Trustee) prior to the mailing of the
Offer of the Company's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company. The Offer shall contain all the
information re-
<PAGE> 18
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quired by applicable law to be included therein. The Offer shall also contain
(or incorporate by reference) information concerning the business of the Company
and its Subsidiaries which the Company in good faith believes will enable such
Holders to make an informed decision with respect to the Offer to Purchase
(which at a minimum will include (i) the most recent annual and quarterly
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the documents required to be
filed with the Trustee pursuant to this Indenture (which requirements may be
satisfied by delivery of such documents together with the Offer), (ii) a
description of material developments in the Company's business subsequent to the
date of the latest of such financial statements referred to in clause (i)
(including a description of the events requiring the Company to make the Offer
to Purchase), (iii) if applicable, appropriate pro forma financial information
concerning the Offer to Purchase and the events requiring the Company to make
the Offer to Purchase and (iv) any other information required by applicable law
to be included therein). The Offer shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Offer to
Purchase. The Offer shall also state: (1) the Section of this Indenture pursuant
to which the Offer to Purchase is being made; (2) the Expiration Date and the
Purchase Date; (3) the aggregate principal amount at maturity of the outstanding
Securities offered to be purchased by the Company pursuant to the Offer to
Purchase (including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of this Indenture requiring the Offer to
Purchase) (the "Purchase Amount"); (4) the purchase price to be paid by the
Company for each $1,000 aggregate principal amount at maturity of Securities
accepted for payment (as specified pursuant to this Indenture) (the "Purchase
Price"); (5) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal amount at
maturity; (6) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase; (7) that Accreted Value and interest
on any Security not tendered or tendered but not purchased by the Company
pursuant to the Offer to Purchase will continue to accrete and accrue, as the
case may be; (8) that on the Purchase Date the Purchase Price will become due
and payable upon each Security being accepted for payment pursuant to the Offer
to Purchase and that Accreted Value thereon shall cease to accrete and interest
thereon shall cease to accrue, as the case may be, on and after the Purchase
Date; (9) that each Holder electing to tender all or any portion of a Security
pursuant to the Offer to Purchase will be required to surrender such Security at
the place or places specified in the Offer prior to the close of business on the
Expiration Date (such Security being, if the Company or the Trustee so requires,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by the Holder thereof
or his attorney duly authorized in writing); (10) that Holders will be entitled
to withdraw all or any portion of Securities tendered if the Company (or the
Paying Agent) receives, not later than the close of business on the fifth
Business Day next preceding the Expiration Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount at maturity of the Security the Holder tendered, the certificate number
of the Security the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender; (11) that (a) if Securities in an
aggregate Accreted Value less than or equal to the Purchase Amount are duly
tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall
purchase all such Securities and (b) if Securities in an aggregate Accreted
Value in excess of the Purchase Amount are tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase Securities having an
aggregate principal amount at maturity equal to the Purchase Amount on a pro
rata basis (with such adjustments as may be deemed appropriate so that only
Securities in denominations of $1,000 principal amount at maturity or integral
multiples thereof shall be purchased); and (12) that in the case of any Holder
whose Security is purchased only in part, the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denominations as
requested by such Holder, in an aggregate principal amount at maturity equal to
and in exchange for the unpurchased portion of the Security so tendered.
<PAGE> 19
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An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any Offer.
"Officer" of any Person means the Chairman of the Board, the
President, any Executive Vice President, Senior Vice President or Vice
President, the Treasurer or the Secretary or Assistant Secretary of such Person.
"Officers' Certificate" of any Person means a certificate signed on
behalf of such Person by two Officers of such Person, one of whom must be the
principal executive officer, the principal financial officer, the treasurer or
the principal accounting officer of such Person, that meets the requirements set
forth in Sections 13.04 and 13.05 of this Indenture.
"144A Global Security" means a permanent global security in
registered form representing the aggregate principal amount at maturity of
Securities sold in reliance on Rule 144A.
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel for the Company or the Trustee.
"Pari Passu Debt" means Indebtedness of the Company (other than the
Securities) that does not constitute Subordinated Indebtedness.
"Pari Passu Debt Pro Rata Share" means the amount of the applicable
Net Cash Proceeds obtained by multiplying the amount of such Net Cash Proceeds
by a fraction, (i) the numerator of which is the aggregate accreted value and/or
principal amount, as the case may be, of all Pari Passu Debt outstanding at the
time of the applicable Asset Sale with respect to which the Company is required
to use Net Cash Proceeds to repay or make an offer to purchase or repay and (ii)
the denominator of which is the sum of (a) the aggregate Accreted Value of all
Securities outstanding at the time of the applicable Asset Sale and (b) the
aggregate principal amount or the aggregate accreted value, as the case may be,
of all Pari Passu Debt outstanding at the time of the applicable Asset Sale with
respect to which the Company is required to use the applicable Net Cash Proceeds
to offer to repay or make an offer to purchase or repay.
"Participants" has the meaning set forth in Section 2.15.
"Paying Agent" has the meaning set forth in Section 2.03.
"Permitted Holder" means (i) each of Arie Genger, his estate, his
spouse and his children, (ii) each trust, a majority of whose
beneficiaries-in-interest include one or more persons named in clause (i) of
this definition and (iii) any Person controlled by one or more persons named in
clause (i) of this definition.
"Permitted Indebtedness" has the meaning set forth in Section 4.04.
"Permitted Investments" means (a) Cash Equivalents; (b) Investments
in prepaid expenses, negotiable instruments held for collection and lease,
utility and workers' compensation, performance and other similar deposits; (c)
loans and advances to employees made in the ordinary course of business not to
exceed $2.0 million in the aggregate at any one time outstanding; (d) Currency
Agreements, Commodity Agreements and Interest Rate Agreements; (e) so long as no
Default has occurred and is continuing, investments in non-cash consideration
made pursuant to and in compliance with Section 4.05; (f) so long as no Default
has occurred and is continuing, any Investment (including minority interests and
Investments in Unrestricted Subsidi-
<PAGE> 20
-14-
aries) such that, after giving effect to such Investment, the aggregate amount
(at cost) of all outstanding Investments made pursuant to this clause would not
exceed 5% of the Company's Consolidated Tangible Assets as of the date of the
most recent consolidated balance sheet of the Company; (g) Investments existing
as of the Issue Date and any amendment, extension, renewal or modification
thereof to the extent that any such amendment, extension, renewal or
modification does not require the Company or any Restricted Subsidiary to make
any additional cash or non-cash payments or provide additional services in
connection therewith; (h) any Investment made with the proceeds from an
Investment of the type set forth in clauses (f) and (g) above, and any
Investment made with the proceeds from an Investment made pursuant to this
clause (h); (i) any Investment to the extent that the consideration therefor
consists of Qualified Equity Interests of the Company; and (j) any Investment in
non-U.S. currencies received or utilized by the Company or a Restricted
Subsidiary in the ordinary course of business.
"Permitted Liens" means (a) Liens imposed by law such as carriers',
warehousemen's and mechanics' Liens and other similar Liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due or which are being contested in good faith and by appropriate
proceedings; (b) Liens existing on the Issue Date; (c) Liens securing only the
Securities and or the Senior Notes pursuant to the terms of this Indenture
and/or the Senior Notes Indenture as in effect on the Issue Date; (d) Liens in
favor of the Company; (e) 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, however, that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (f) easements,
reservation of rights of way, restrictions and other similar easements,
licenses, restrictions on the use of properties, or minor imperfections of title
that in the aggregate are not material in amount and do not in any case
materially detract from the properties subject thereto or interfere with the
ordinary conduct of the business of the Company and the Restricted Subsidiaries;
(g) Liens resulting from the deposit of cash or notes in connection with
contracts, tenders or expropriation proceedings, or to secure workers'
compensation, surety or appeal bonds, costs of litigation when required by law
and public and statutory obligations or obligations under franchise arrangements
entered into in the ordinary course of business; (h) Liens securing Indebtedness
consisting of Capitalized Lease Obligations, Purchase Money Indebtedness,
mortgage financings, industrial revenue bonds or other monetary obligations, in
each case incurred solely for the purpose of financing all or any part of the
purchase price or cost of construction or installation of assets used in the
business of the Company or the Restricted Subsidiaries, or repairs, additions or
improvements to such assets; provided, however, that (i) such Liens secure
Indebtedness in an amount not in excess of the original purchase price or the
original cost of any such assets or repair, addition or improvement thereto
(plus an amount equal to the reasonable fees and expenses in connection with the
incurrence of such Indebtedness), (ii) such Liens do not extend to any other
assets of the Company or the Restricted Subsidiaries (and, in the case of
repair, addition or improvements to any such assets, such Lien extends only to
the assets (and improvements thereto or thereon) repaired, added to or
improved), (iii) the Incurrence of such Indebtedness is permitted by Section
4.04 and (iv) such Liens attach within 90 days of such purchase, construction,
installation, repair, addition or improvement; (i) Liens to secure any
refinancings, renewals, extensions, modifications or replacements (collectively,
"refinancing") (or successive refinancings), in whole or in part, of any
Indebtedness (or commitments to lend) secured by Liens referred to in the
clauses above so long as such Lien does not extend to any other property (other
than improvements thereto); (j) Liens securing letters of credit entered into in
the ordinary course of business and consistent with past business practice; (k)
Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary; and
(l) Liens on the Equity Interests of Haifa Chemicals Ltd., an Israeli
corporation ("HCL"); provided that at the time of the incurrence of any such
Lien, the aggregate amount of Indebtedness secured by such Equity Interests
shall not exceed the amount equal to (x) if prior to December 31, 2001, $40.0
million or (y) if on or after December 31, 2001, the greater of (i) $40.0
million or (ii) the Consolidated EBITDA of HCL for the four quarter period of
<PAGE> 21
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the most recent four fiscal quarters ending prior to the date of determination
for which financial statements are available (or which would be required to be
filed by HCL with the Commission if HCL were subject to the reporting
requirements of the Exchange Act), giving effect to the adjustments to
Consolidated EBITDA, referred to in clauses (2) through (4) of the Pro Forma
Adjustments.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, limited
liability limited partnership, trust, unincorporated organization or government
or any agency or political subdivision thereof.
"Physical Securities" means one or more certificated Securities in
registered form.
"Preferred Equity Interest" in any Person, means an Equity Interest
of any class or classes (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such Person, over
Equity Interests of any other class in such Person.
"principal" of a debt security means the principal of the security,
plus, when appropriate, the premium, if any, on the security.
"Private Placement Legend" means the legend initially set forth on
the Initial Securities in the form set forth on Exhibit A hereto.
"Private Senior Discount Exchange Notes" has the meaning provided in
the Exchange and Registration Rights Agreement.
"Pro Forma Adjustments" has the meaning set forth in the definition
of "Consolidated Operating Cash Flow Ratio".
"Public Equity Offering" means, with respect to the Company, an
underwritten primary public offering of Qualified Equity Interests of the
Company pursuant to an effective registration statement filed under the
Securities Act (excluding registration statements filed on Form S-8).
"Public Market" means any time after (x) a Public Equity Offering
has been consummated and (y) at least 15% of the total issued and outstanding
Qualified Equity Interests of the Company has been distributed by means of an
effective registration statement under the Securities Act.
"Purchase Agreement" means the Purchase Agreement, dated as of March
11, 1998, between the Company and the Initial Purchasers.
"Purchase Amount" has the meaning set forth in the definition of
"Offer to Purchase" above.
"Purchase Date" has the meaning set forth in the definition of
"Offer to Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the Company or
any Restricted Subsidiary Incurred for the purpose of financing all or any part
of the purchase price or the cost of construction or improvement of any
property, provided that the aggregate principal amount of such Indebtedness does
not exceed the lesser of the Fair Market Value of such property or such purchase
price or cost, including any refi-
<PAGE> 22
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nancing of such Indebtedness that does not increase the aggregate principal
amount (or accreted amount, if less) thereof as of the date of refinancing.
"Purchase Price" has the meaning set forth in the definition of
"Offer to Purchase" above.
"Qualified Equity Interest" in any Person means any Equity Interest
in such Person other than any Disqualified Equity Interest.
"Qualified Institutional Buyer" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"Redemption Date" means the date fixed for redemption of the
applicable Security.
"redemption price" when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the applicable form of Security annexed hereto.
"refinancing" has the meaning set forth in Section 4.04.
"Registered Exchange Offer" has the meaning provided in the Exchange
and Registration Rights Agreement.
"Registrar" has the meaning set forth in Section 2.03.
"Registration" means a registered exchange offer for the Securities
by the Company or other registration of the Securities under the Securities Act
pursuant to and in accordance with the terms of the Exchange and Registration
Rights Agreement.
"Regulation S Global Security" means a global security in registered
form representing the aggregate principal amount at maturity of Securities sold
pursuant to Regulation S under the Securities Act.
"Required Filing Dates" has the meaning set forth in Section 4.12.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" has the meaning set forth in Section 4.06.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; provided, however, that the Trustee shall be entitled
to request and conclusively rely upon an Opinion of Counsel with respect to
whether any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that has
not been designated by the Board of Directors of the Company, by a resolution of
the Board of Directors of the Company delivered to the Trustee, as an
Unrestricted Subsidiary pursuant to Section 4.15. Any such designation may be
revoked by a resolution of the Board of Directors of the Company delivered to
the Trustee, subject to the provisions of such covenant.
"Revocation" has the meaning set forth in Section 4.15.
<PAGE> 23
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"Rule 144A" means Rule 144A under the Securities Act.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities" means, collectively, the Initial Securities, the
Private Senior Discount Exchange Notes and the Unrestricted Securities treated
as a single class of securities, as amended or supplemented from time to time in
accordance with the terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Senior Notes" means the $100,000,000 10 3/4% Senior Notes due 2008
issued under the Senior Notes Indenture.
"Senior Notes Indenture" means the Indenture, dated as of March 16,
1998, between the Company and State Street Bank and Trust Company, as trustee,
relating to the Senior Notes.
"Significant Restricted Subsidiary" means a Restricted Subsidiary
that is a "significant subsidiary" within the meaning of Article 1, Rule 1-02 of
Regulation S-X under the Securities Act.
"Stated Maturity," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subordinated Indebtedness" means any Indebtedness of the Company
which is expressly subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, (a) any corporation
of which the outstanding Voting Equity Interests having at least a majority of
the votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or
that makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of this Indenture (except as
provided in Section 10.03) until such time as the Indenture is qualified under
the TIA, and thereafter as in effect on the date on which this Indenture is
qualified under the TIA.
"Trustee" means the party named as such in the first paragraph of
this Indenture until a successor replaces it in accordance with the provisions
of this Indenture and thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
division (or any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary, assistant treasurer or any other
officer or assistant officer of the Trustee customarily performing functions
similar to those performed by the persons who at that time shall be such
officers, and also means, with respect to a particular cor-
<PAGE> 24
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porate trust matter, any other officer to whom such trust matter is referred
because of his knowledge of and familiarity with the particular subject.
"United States Government Obligations" means direct non-callable
obligations of the United States for the payment of which the full faith and
credit of the United States is pledged.
"Unrestricted Securities" means one or more Securities that do not
and are not required to bear the Private Placement Legend in the form set forth
in Exhibit A hereto, including, without limitation, the Exchange Securities and
any Securities registered under the Securities Act pursuant to and in accordance
with the Exchange and Registration Rights Agreement.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to Section 4.15. Any such designation may be revoked
by a resolution of the Board of Directors of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"Unutilized Net Proceeds" has the meaning set forth in Section 4.05.
"Voting Equity Interests" means Equity Interests in a corporation or
other Person with voting power under ordinary circumstances entitling the
Holders thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying the (i) amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
all of the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
SECTION 1.02. 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:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
<PAGE> 25
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"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
in effect from time to time, and any other reference in this Indenture to
"generally accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Initial Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of Exhibit A hereto,
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Company and the Trustee shall approve the form of the Securities and
any notation, legend or endorsement on them. Each Security shall be dated the
date of its issuance and shall show the date of its authentication. Global
Securities shall bear the legend set forth in Exhibit C hereto. The aggregate
principal amount at maturity of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary, as hereinafter provided.
<PAGE> 26
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SECTION 2.02. Execution and Authentication.
Two Officers, including no more than one signing solely as Assistant
Secretary, shall sign, or one Officer (other than as an Assistant Secretary)
shall sign and the Secretary or an Assistant Secretary (each of whom shall, in
each case, have been duly authorized by all requisite corporate actions) shall
attest to such Officer's signature, the Securities for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Securities for original
issue in an aggregate principal amount at maturity not to exceed $135,000,000,
(ii) Private Senior Discount Exchange Notes from time to time only in exchange
for a like principal amount at maturity of Initial Securities and (iii)
Unrestricted Securities from time to time in exchange for (A) a like principal
amount at maturity of Initial Securities or (B) a like principal amount at
maturity of Private Senior Discount Exchange Notes, in each case upon a written
order of the Company in the form of an Officers' Certificate. Each such written
order shall specify the amount of Securities to be authenticated and the date on
which the Securities are to be authenticated, whether the Securities are to be
Initial Securities, Private Senior Discount Exchange Notes or Unrestricted
Securities and whether the Securities are to be issued as Physical Securities or
Global Securities and such other information as the Trustee may reasonably
request. The aggregate principal amount at maturity of Securities outstanding at
any time may not exceed $135,000,000, except as provided in Sections 2.07 and
2.08.
Notwithstanding the foregoing, all Securities issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Securities may vote or consent) as one class and no series of Securities
will have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise provided
in the appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent shall
have the same rights as an Agent to deal with the Company and Affiliates of the
Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 principal amount at maturity and any integral
multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange (the "Registrar"), (b)
Securities may be presented or surrendered for payment (the "Paying Agent") and
(c) notices and demands in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company, upon notice to the Trustee, may appoint one
or more co-Registrars and one or more additional Paying Agents. The term "Paying
Agent"
<PAGE> 27
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includes any additional Paying Agent. Except as provided herein, the Company may
act as Paying Agent, Registrar or co-Registrar.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fail to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Company initially appoints the Trustee as Registrar and Paying
Agent until such time as the Trustee has resigned or a successor has been
appointed.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that each Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all assets held by the Paying Agent for the payment of
Accreted Value or principal of or interest on the Securities, and shall notify
the Trustee of any Default by the Company in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent (if other than the Company), the Paying Agent shall have no further
liability for such assets. If the Company or any of its Affiliates acts as
Paying Agent, it shall, on or before each due date of the Accreted Value or
principal of or interest on the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the Accreted
Value or principal or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
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
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee at least five days before each Interest Record Date and at such other
times as the Trustee may request in writing a list as of such date and in such
form as the Trustee may reasonably require of the names and addresses of
Holders, which list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount at maturity of Securities of other authorized denominations of
the same series, the Registrar or co-Registrar shall register the transfer or
make the exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trus-
<PAGE> 28
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tee shall authenticate Securities at the Registrar's or co-Registrar's written
request. No service charge shall be made 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
payable by the transferor or transferee of such Securities (other than any such
transfer taxes or other governmental charge payable upon exchanges or transfers
pursuant to the fourth paragraph of Section 2.02 and Sections 2.10, 3.06, 4.05,
4.14, or 10.05). The Registrar or co-Registrar shall not be required to register
the transfer or exchange of any Security (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three
hereof, except the unredeemed portion of any Security being redeemed in part.
Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee and any Agent shall treat the person in whose
name the Security is registered as the owner thereof for all purposes whether or
not the Security shall be overdue, and neither the Company, the Trustee nor any
Agent shall be affected by notice to the contrary. Any Holder of a beneficial
interest in a Global Security shall, by acceptance of such beneficial interest
in a Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book-entry system maintained by
the Depositary (or its agent), and that ownership of a beneficial interest in a
Global Security shall be required to be reflected in a book entry.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements for replacement of Securities
are met. If required by the Company or the Trustee, such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee and any Agent from
any loss which any of them may suffer if a Security is replaced. The Company may
charge such Holder for its reasonable out-of-pocket expenses in replacing a
Security, including reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date, Purchase Date or the Final Maturity Date
the Paying Agent holds money sufficient to pay all of the Accreted Value or
principal and interest due on the Securities payable on that
<PAGE> 29
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date, and is not prohibited from paying such money to the Holders pursuant to
the terms of this Indenture, then on and after that date such Securities cease
to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount
at maturity of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company or any of its Affiliates shall be disregarded,
except that, for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Securities
that a Trust Officer of the Trustee actually knows are so owned shall be
disregarded.
The Company shall notify the Trustee, in writing, when the Company
or any of its Affiliates repurchases or otherwise acquires Securities and of the
aggregate principal amount at maturity of such Securities so repurchased or
otherwise acquired.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated.
Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate upon receipt of a written order
of the Company pursuant to Section 2.02 definitive Securities in exchange for
temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel, and at the written direction of the Company,
dispose of and deliver evidence of such disposal of all Securities surrendered
for transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Securities to replace Securities that it has paid or
delivered to the Trustee for cancellation. If the Company shall acquire any of
the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation pursuant to this
Section 2.11.
SECTION 2.12. Defaulted Interest.
The Company shall pay interest on overdue principal from time to
time on demand at the rate of interest then borne by the Securities. The Company
shall, to the extent lawful, pay interest on overdue installments of interest
(without regard to any applicable grace periods) at the rate of interest then
borne by the Securities.
If the Company defaults in a payment of interest on the Securities,
it shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Hold-
<PAGE> 30
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ers on a subsequent special record date, which date shall be the fifteenth day
preceding the date fixed by the Company for the payment of defaulted interest or
the next succeeding Business Day if such date is not a Business Day. At least 15
days before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid prior to
the expiration of the 30-day period set forth in Section 6.01(ii) shall be paid
to Holders as of the Interest Record Date for the Interest Payment Date for
which interest has not been paid.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use a "CUSIP" number and
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided, however, that any such notice may state that
no representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities. The Company shall
promptly notify the Trustee of any changes in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
Prior to 10:00 a.m. New York City time on each Interest Payment
Date, Redemption Date, Purchase Date and the Final Maturity Date, the Company
shall deposit with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date,
Redemption Date, Purchase Date or Final Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date, Redemption Date, Purchase Date or Final Maturity
Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the
name of the Depositary or the nominee of such Depositary, (ii) be delivered to
the Trustee as custodian for such Depositary and (iii) bear legends as set forth
in Exhibit C hereto.
Members of, or participants in, the Depositary ("Participants")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Security, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of the
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and Participants, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depositary and the provisions of Section 2.16; provided,
however, that Physical Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Securities if (i) the
Deposi-
<PAGE> 31
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tary notifies the Company that it is unwilling or unable to continue as
Depositary for any Global Security and a successor Depositary is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depositary to issue Physical Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon written
instructions from the Company authenticate and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount at maturity of Physical
Securities of authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(b) of this Section 2.15 shall, except as otherwise provided by Section 2.16,
bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Securities.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical
Securities are presented to the Registrar or co-Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal principal
amount at maturity of Physical Securities of other authorized
denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; provided, however, that the Physical
Securities presented or surrendered for Registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing;
and
(II) in the case of Physical Securities the offer and sale of which
have not been registered under the Securities Act, such Physical
Securities shall be accompanied, in the sole discretion of the Company, by
the following additional information and documents, as applicable:
(A) if such Physical Security is being delivered to the Registrar
or co-Registrar by a Holder for Registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (substantially in the form of Exhibit D
hereto); or
(B) if such Physical Security is being transferred to a QIB in
accordance with Rule 144A, a certification to that effect
(substantially in the form of Exhibit D hereto); or
<PAGE> 32
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(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification
to that effect (substantially in the form of Exhibit D hereto)
and a transferee letter of representation (substantially in
the form of Exhibit E hereto) and, at the option of the
Company, an Opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer is in compliance with
the Securities Act; or
(D) if such Physical Security is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification
to that effect (substantially in the form of Exhibit D hereto)
and, at the option of the Company, an Opinion of Counsel
reasonably satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(E) if such Physical Security is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially
in the form of Exhibit D hereto) and, at the option of the
Company, an Opinion of Counsel reasonably acceptable to the
Company to the effect that such transfer is in compliance with
the Securities Act.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
Interest in a Global Security. A Physical Security the offer and sale of which
has not been registered under the Securities Act may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of a
Physical Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(A) certification (substantially in the form of Exhibit D hereto)
that such Physical Security is being transferred (I) to a QIB
or (II) to an Accredited Investor and, with respect to (II),
at the option of the Company, an Opinion of Counsel reasonably
acceptable to the Company to the effect that such transfer is
in compliance with the Securities Act; and
(B) written instructions directing the Registrar or co-Registrar
to make, or to direct the Depositary to make, an endorsement
on the applicable Global Security to reflect an increase in
the aggregate amount of the Securities represented by the
Global Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depositary to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Registrar or
co-Registrar, the principal amount at maturity of Securities represented by the
applicable Global Security to be increased accordingly. If no Global Security is
then outstanding, the Company shall, unless either of the events in the proviso
to Section 2.15(b) have occurred and are continuing, issue and the Trustee
shall, upon written instructions from the Company in accordance with Section
2.02, authenticate such a Global Security in the appropriate principal amount at
maturity.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor. Upon
<PAGE> 33
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receipt by the Registrar or Co-Registrar of written instructions, or such other
instruction as is customary for the Depositary, from the Depositary or its
nominee, requesting the Registration of transfer of an interest in a Global
Security to another type of Global Security, together with the applicable Global
Securities (or, if the applicable type of Global Security required to represent
the interest as requested to be transferred is not then outstanding, only the
Global Security representing the interest being transferred), the Registrar or
Co-Registrar shall cancel such Global Securities (or Global Security) and the
Company shall issue and the Trustee shall, upon written instructions from the
Company in accordance with Section 2.02, authenticate new Global Securities of
the types so cancelled (or the type so cancelled and applicable type required to
represent the interest as requested to be transferred) reflecting the applicable
increase and decrease of the principal amount at maturity of Securities
represented by such types of Global Securities, giving effect to such transfer.
If the applicable type of Global Security required to represent the interest as
requested to be transferred is not outstanding at the time of such request, the
Company shall issue and the Trustee shall, upon written instructions from the
Company in accordance with Section 2.02, authenticate a new Global Security of
such type in principal amount at maturity equal to the principal amount at
maturity of the interest requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Security for a
Physical Security.
(i) Any Person having a beneficial interest in a Global Security may
upon request exchange such beneficial interest for a Physical Security;
provided, however, that prior to the Registration, a transferee that is a
QIB or Institutional Accredited Investor may not exchange a beneficial
interest in Global Security for a Physical Security. Upon receipt by the
Registrar or co-Registrar of written instructions, or such other form of
instructions as is customary for the Depositary, from the Depositary or
its nominee on behalf of any Person (subject to the previous sentence)
having a beneficial interest in a Global Security and upon receipt by the
Trustee of a written order or such other form of instructions as is
customary for the Depositary or the Person designated by the Depositary as
having such a beneficial interest containing registration instructions
and, in the case of any such transfer or exchange of a beneficial interest
in Securities the offer and sale of which have not been registered under
the Securities Act, the following additional information and documents:
(A) if such beneficial interest is being transferred in reliance
on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of
Exhibit D hereto) and, at the option of the Company, an
Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
(B) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially
in the form of Exhibit D hereto) and, at the option of the
Company, an Opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer is in compliance with
the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depositary and
the Registrar or co-Registrar, the aggregate principal amount at maturity
of the applicable Global Security to be reduced and, following such
reduction, the Company will execute and, upon receipt of an authentication
order in the form of an Officers' Certificate in accordance with Section
2.02, the Trustee will authenticate and deliver to the transferee a
Physical Security in the appropriate principal amount at maturity.
<PAGE> 34
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(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.16(d) shall be registered in
such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar or co-Registrar in writing. The
Registrar or co-Registrar shall deliver such Physical Securities to the
Persons in whose names such Physical Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except 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.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and the
Trustee is hereby authorized to deliver Securities without the Private Placement
Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act; (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act (including pursuant to a Registration); or (iii) the
date of such transfer, exchange or replacement is two years after the later of
(x) the Issue Date and (y) the last date that the Company or any affiliate (as
defined in Rule 144 under the Securities Act) of the Company was the owner of
such Securities (or any predecessor thereto).
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
Each Holder of a Security agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder's Security in violation of any provision of this
Indenture and/or applicable United States federal or state securities law.
The Trustee shall have no obligation or duty to monitor, determine
or inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Participants or
beneficial owners of interest in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
<PAGE> 35
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company wants to redeem Securities pursuant to paragraph 5 or
6 of the Securities at the applicable redemption price set forth thereon, they
shall notify the Trustee in writing of the Redemption Date and the principal
amount at maturity of Securities to be redeemed. The Company shall give such
notice to the Trustee at least 60 days before the Redemption Date (unless a
shorter notice shall be agreed to by the Trustee in writing), together with an
Officers' Certificate stating that such redemption will comply with the
conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed in compliance with the requirements
of the principal national securities exchange, if any, on which the Securities
are listed or, if the Securities are not so listed, on a pro rata basis, by lot
or in such other manner as the Trustee shall deem fair and appropriate.
The Trustee may select for redemption portions of the principal
amount at maturity of Securities that have denominations equal to or larger than
$1,000 principal amount at maturity. Securities and portions of them the Trustee
so selects shall be in amounts of $1,000 principal amount at maturity or
integral multiples thereof. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
If a partial redemption is made with the net cash proceeds of a
Public Equity Offering by the Company, selection of the Securities or portions
thereof for redemption will be made by the Trustee only on a pro rata basis or
as nearly a pro rata basis as is practicable (subject to the procedures of the
Depository Trust Company), unless such method is otherwise prohibited.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail to each Holder
whose Securities are to be redeemed at such Holder's registered address.
Each notice of redemption shall identify the Securities to be
redeemed (including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
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(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in making the redemption
payment, Accreted Value or interest on Securities called for redemption
ceases to accrete or accrue, as the case may be, on and after the
Redemption Date and the only remaining right of the Holders is to receive
payment of the redemption price upon surrender to the Paying Agent; and
(6) if any Security is being redeemed in part only, the portion of
the principal amount at maturity of such Security to be redeemed and that,
after the Redemption Date, upon surrender of such Security, a new Security
or Securities in principal amount at maturity equal to the unredeemed
portion thereof will be issued.
At the Company's request, the Trustee shall give the notice of
redemption on behalf of the Company, in the Company's name and at the Company's
expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon, if any, to the Redemption Date,
but interest installments whose maturity is on or prior to such Redemption Date
shall be payable to the Holders of record at the close of business on the
relevant Interest Record Date.
SECTION 3.05. Deposit of Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date, the
Company shall deposit with the Paying Agent (or if the Company is Paying Agent,
shall, on or before the Redemption Date, segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest, if any, on all
Securities to be redeemed on that date other than Securities or portions thereof
called for redemption on that date which have been delivered by the Company to
the Trustee for cancellation.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the Redemption Date due to the failure of
the Company to deposit with the Paying Agent money sufficient to pay the
redemption price thereof, the principal and accrued and unpaid interest, if any,
thereon shall, until paid or duly provided for, bear interest as provided in
Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate and deliver at the expense of the Company to the Holder a new
Security equal in principal amount at maturity to the unredeemed portion of the
Security surrendered.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the Accreted Value or principal of and
interest on the Securities in the manner provided in the Securities and the
Exchange and Registration Rights Agreement. An installment of Accreted Value or
principal or interest shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Company or any of its Affiliates) holds on that
date money designated for and sufficient to pay the installment in full and is
not prohibited from paying such money to the Holders of the Securities pursuant
to the terms of this Indenture.
The Company shall pay cash interest on overdue principal at the same
rate per annum borne by the Securities. The Company shall pay cash interest on
overdue installments of interest at the same rate per annum borne by the
Securities, to the extent lawful, as provided in Section 2.12.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of
New York, the office or agency required under Section 2.03. 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 address of the Trustee set forth in Section 13. The
Company hereby initially designates the Trustee at its address set forth in
Section 13.02 as their office or agency in The Borough of Manhattan, The City of
New York, for such purposes.
SECTION 4.03. Limitations on Transactions with Affiliates.
The Company shall not, and shall not permit, cause or suffer any
Restricted Subsidiary to, conduct any business or enter into any transaction or
series of related transactions with or for the benefit of any of its Affiliates
or any beneficial holder of 10% or more of any class of Equity Interests of the
Company or any officer or director of the Company or any Restricted Subsidiary
(each, an "Affiliate Transaction"), except on terms that are fair and reasonable
to the Company or such Restricted Subsidiary, as the case may be. Each Affiliate
Transaction involving aggregate payments or other property having a Fair Market
Value in excess of $2.5 million shall be approved by the Board of Directors of
the Company, such approval to be evidenced by a resolution of such Board of
Directors stating that such Board of Directors (including a majority of the
disinterested directors) has determined that such transaction complies with the
foregoing provisions. In addition to the foregoing, with respect to any
Affiliate Transaction involving aggregate consideration in excess of $5.0
million or more, the Company must obtain a written opinion from an Independent
Financial Advisor stating that the terms of such Affiliate Transaction to the
Company or the Restricted Subsidiary, as the case may be, are fair from a
financial point of view.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions with or among the Company and/or
any of the Restricted Subsidiaries; provided, however, in any such case, no
officer, director or beneficial holder of 10% or more of any class of Equity
Interests of the Company shall beneficially own any Voting Stock of any such
Restricted Subsidiary (other than by reason of
<PAGE> 38
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its ownership of Equity Interests of the Company), (ii) transactions between or
among Restricted Subsidiaries, (iii) any Restricted Payment permitted under
Section 4.06, (iv) directors' fees, indemnification and similar arrangements,
officers' indemnification, employee stock option or employee benefit plans,
employee salaries and bonuses, employment agreements or legal fees paid or
created in the ordinary course of business and (v) payments pursuant to
arrangements as in effect on the Issue Date.
SECTION 4.04. Limitation on Additional Indebtedness.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, Incur, assume, issue, guarantee
or in any manner become directly or indirectly liable for or with respect to,
contingently or otherwise, the payment of any Indebtedness or issue any
Disqualified Equity Interests, except for Permitted Indebtedness, unless, after
giving pro forma effect to such Incurrence of Indebtedness or issuance of
Disqualified Equity Interests and the application of the proceeds therefrom, the
Company's Consolidated Operating Cash Flow Ratio would be greater than or equal
to 2.0 to 1.0.
The foregoing limitations will not apply to the Incurrence of any of
the following (collectively, "Permitted Indebtedness"), each of which will be
given independent effect: (a) Indebtedness under (x) the Securities and this
Indenture and (y) the Senior Notes and the Senior Notes Indenture; (b)
outstanding Indebtedness on the Issue Date (other than Existing Securities
purchased with the net proceeds of the Securities), and Indebtedness which may
be incurred pursuant to commitments in effect on the Issue Date; provided,
however, that Indebtedness incurred pursuant to this clause (b) shall not exceed
$280 million (plus the amount of Existing Securities which remain unpurchased
after the Issue Date) in the aggregate at any one time outstanding (which amount
shall be reduced to the extent any such Indebtedness is refinanced pursuant to
clause (f) below (it being understood that the replacement of a lending
commitment (or portion thereof) to the Company or a Restricted Subsidiary under
which (or as to the portion of which) no Indebtedness is outstanding at the time
of such replacement with another lending commitment to the Company or such
Restricted Subsidiary, respectively, shall not be considered a "refinancing"
reducing such amount of Indebtedness which may be incurred pursuant to this
clause (b)); (c) (x) Indebtedness of any Restricted Subsidiary owed to and held
by the Company or any Restricted Subsidiary and (y) Indebtedness of the Company
owed to and held by any Restricted Subsidiary; provided, however, that the
Indebtedness Incurred pursuant to this subclause (y) is unsecured and
subordinated in right of payment to the payment and performance of the Company's
obligations under this Indenture and the Securities; provided, further, however,
that an Incurrence of Indebtedness that is not permitted by this clause (c)
shall be deemed to have occurred upon (i) any sale or other disposition of any
Indebtedness of the Company or any Restricted Subsidiary referred to in this
clause (c) to a Person (other than the Company or any Restricted Subsidiary) and
(ii) the designation of a Restricted Subsidiary which holds Indebtedness of the
Company or any other Restricted Subsidiary as an Unrestricted Subsidiary; (d)
Interest Rate Agreements, Commodity Agreements and Currency Agreements of the
Company and the Restricted Subsidiaries; (e) Purchase Money Indebtedness and
Capitalized Lease Obligations of the Company or any Restricted Subsidiary in an
amount not to exceed $10.0 million outstanding at any time (which amount shall
be reduced to the extent any such Purchase Money Indebtedness or Capitalized
Lease Obligation is refinanced pursuant to clause (f) below); (f) Indebtedness
of the Company or a Restricted Subsidiary to the extent representing a
replacement, renewal, refinancing or extension (collectively, a "refinancing")
of outstanding Indebtedness Incurred in compliance with the Consolidated
Operating Cash Flow Ratio of the first paragraph of this covenant or clause (a),
(b), (e), (f) or (g) of this paragraph of this covenant; provided, however, that
(i) any such refinancing shall not exceed the sum of the principal amount (or
accreted amount (determined in accordance with GAAP), if less) of the
Indebtedness or Disqualified Equity Interests being refinanced, plus the amount
of accrued interest or dividends thereon, plus the amount of any reasonably
determined prepayment premium necessary to accomplish such refinancing and such
reasonable fees and expenses incurred in connection therewith,
<PAGE> 39
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(ii) Indebtedness representing a refinancing of Indebtedness of the Company
shall have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being refinanced and (iii)
(A) Indebtedness of the Company may only be refinanced with other Indebtedness
or Disqualified Equity Interests of the Company and (B) Disqualified Equity
Interests of the Company may only be refinanced with other Disqualified Equity
Interests of the Company; (g) Indebtedness not to exceed $80 million outstanding
at any time (which amount shall be reduced to the extent any such Indebtedness
is refinanced pursuant to clause (f) above) to the extent the proceeds thereof
are used to fund capital expenditures at HCL and its Subsidiaries, of which not
more than $50 million will be incurred in any calendar year; and (h) in addition
to the items referred to in clauses (a) through (g) above, Indebtedness of the
Company or any Restricted Subsidiary having an aggregate principal amount not to
exceed $15.0 million outstanding at any time.
SECTION 4.05. Disposition of Proceeds of Asset Sales.
The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale, unless (a) the Company or such 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 shares or assets sold or
otherwise disposed of and (b) 75% of such consideration consists of cash, Cash
Equivalents or Fully Traded Common Stock; provided, however, that to the extent
that any Fully Traded Common Stock is received pursuant to such Asset Sale and
required to satisfy the 75% requirement of this clause (b), the Fair Market
Value of such Fully Traded Common Stock as of the date of disposition shall be
treated as Net Cash Proceeds for all purposes of this covenant. The amount of
any (i) Indebtedness of the Company or any Restricted Subsidiary that is
actually assumed by the transferee in such Asset Sale and from which the Company
and the Restricted Subsidiaries are fully released shall be deemed to be cash
for purposes of determining the percentage of cash consideration received by the
Company or the Restricted Subsidiaries (but shall not be deemed Net Cash
Proceeds for purposes of this covenant) and (ii) notes or other similar
obligations received by the Company or the Restricted Subsidiaries from such
transferee that are immediately converted, sold or exchanged by the Company or
the Restricted Subsidiaries into cash shall be deemed to be cash, in an amount
equal to the net cash proceeds realized upon such conversion, sale or exchange
for purposes of determining the percentage of cash consideration received by the
Company or the Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may
(i) apply an amount of cash equal to the Net Cash Proceeds of any Asset Sale
within 365 days (or 180 days in the case of any amount represented by any Fully
Traded Common Stock that has not been converted into cash by such 180th day) of
receipt thereof to repay Indebtedness of a Restricted Subsidiary, (ii) commit in
writing to acquire, construct or improve operating properties and capital assets
to be used by the Company or a Restricted Subsidiary and so apply an amount of
cash equal to such Net Cash Proceeds within 365 days (or 180 days in the case of
any amount represented by any Fully Traded Common Stock that has not been
converted into cash by such 180th day) after the receipt thereof or (iii) apply
an amount of cash equal to the Net Cash Proceeds of such Asset Sale within 365
days (or 180 days in the case of any amount represented by any Fully Traded
Common Stock that has not been converted into cash by such 180th day) of receipt
thereof to repay either (x) the Securities or (y) Pari Passu Debt not exceeding
the Pari Passu Debt Pro Rata Share; provided, that the application of such
proceeds pursuant to this clause (iii) may be delayed such that the application
is contemporaneous with the closing of an Asset Sale Offer.
The amount of cash equal to all or part of the Net Cash Proceeds of
any Asset Sale that are not applied within 365 days (or 180 days) of such Asset
Sale (or, in the case of clause (iii) of the immediately preceding paragraph, to
be applied contemporaneously with the closing of an Asset Sale Offer) as
described in clause (i), (ii) or (iii) of the immediately preceding paragraph
shall constitute "Unutilized Net Proceeds."
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When the aggregate amount of Unutilized Net Proceeds exceeds $5.0 million, the
Company shall make an Offer to Purchase outstanding Securities up to a maximum
principal amount or Accreted Value, as the case may be, of Securities equal to
such Unutilized Net Proceeds, at a purchase price in cash equal to 100% of the
principal amount or Accreted Value, as the case may be, thereof, plus accrued
and unpaid interest thereon, if any, to the Purchase Date.
To the extent that the aggregate amount of Securities tendered for
repayment pursuant to the Asset Sale Offer is less than the Net Cash Proceeds
available for such offer, such deficiency may be used for general corporate
purposes. If the aggregate amount of Securities validly tendered exceeds the Net
Cash Proceeds available for such offer, Securities to be purchased will be
selected on a pro rata basis or as nearly pro rata as practicable.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act, and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed an Event of Default or an event that with the
passing of time or giving of notice, or both, would constitute an Event of
Default.
Each Holder shall be entitled to tender all or any portion of the
Securities owned by such Holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Security tendered must be tendered in an
integral multiple of $1,000 principal amount at maturity and subject to any
proration among tendering Holders as described above.
SECTION 4.06. Limitation on Restricted Payments.
The Company shall not, and shall not permit any of the Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or any
other distribution on any Equity Interests of the Company or make any payment or
distribution to the direct or indirect holders (in their capacities as such) of
Equity Interests of the Company (other than any (x) dividend or distribution
consisting of Equity Interests of an Unrestricted Subsidiary or consisting of
property or assets of an Unrestricted Subsidiary which are dividended or
otherwise transferred to the Company contemporaneously with such property or
assets being dividended or distributed by the Company or (y) dividends,
distributions and payments made to any Restricted Subsidiary and dividends or
distributions payable to any person solely in Qualified Equity Interests of the
Company or in options, warrants or other rights to purchase Qualified Equity
Interests of the Company); (ii) purchase, redeem or otherwise acquire or retire
for value any Equity Interests of the Company (other than any such Equity
Interests owned by any Restricted Subsidiary); or (iii) make any Investment
(other than Permitted Investments) in any person (other than in the Company, any
Restricted Subsidiary or a person that becomes a Restricted Subsidiary, or is
merged with or into or consolidated with the Company or a Restricted Subsidiary
(provided the Company or a Restricted Subsidiary is the survivor), as a result
of or in connection with such Investment) (any such payment or any other action
(other than any exception thereto) described in (i) through (iii), a "Restricted
Payment"), unless (a) no Default has occurred and is continuing at the time of
or immediately after giving effect to such Restricted Payment; (b) immediately
after giving effect to such Restricted Payment, the Company would be able to
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under
the Consolidated Operating Cash Flow Ratio described under Section 4.04; and (c)
immediately after giving effect to such Restricted Payment, the aggregate amount
of all Restricted Payments declared or made on or after the Issue Date does not
exceed an amount equal to the sum, without duplication, of (1) 50% of cumulative
Consolidated Net Income of the Company determined for the period (taken as one
period) from the beginning of the fiscal quarter which includes the Issue Date
and ending on the last day of the most recent fiscal quarter immediately
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preceding the date of such Restricted Payment for which consolidated financial
information of the Company is available (or if such cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss), plus (2) the aggregate net
cash proceeds received by the Company from contributions to its common equity
capital and from the issue and sale (other than to a Restricted Subsidiary) of
its Qualified Equity Interests after the Issue Date (excluding the net proceeds
from any issuance and sale of Qualified Equity Interests financed, directly or
indirectly, using funds borrowed from the Company or any Restricted Subsidiary
until and to the extent such borrowing is repaid), plus (3) the principal amount
(or accreted amount (determined in accordance with GAAP), if less) of any
Indebtedness of the Company or any Restricted Subsidiary incurred after the
Issue Date which has been converted into or exchanged for Qualified Equity
Interests of the Company, plus (4) in the case of the disposition or repayment
of any Investment constituting a Restricted Payment made after the Issue Date,
an amount (to the extent not included in the computation of Consolidated Net
Income) equal to the lesser of (x) the return of capital with respect to such
Investment and (y) the amount of such Investment which was treated as a
Restricted Payment, in either case, less the cost of the disposition of such
Investment and net of taxes, plus (5) so long as the Designation thereof was
treated as a Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary
after the Issue Date in accordance with Section 4.15, the Company's
proportionate interest in an amount equal to the excess of (x) the total assets
of such Subsidiary, valued on an aggregate basis at Fair Market Value, over (y)
the total liabilities of such Subsidiary, determined in accordance with GAAP
(and provided that such amount shall not in any case exceed the Designation
Amount with respect to such Restricted Subsidiary upon its Designation), minus
(6) the greater of (x) $0 and (y) the Designation Amount (measured as of the
date of Designation) with respect to any Subsidiary of the Company which has
been designated as an Unrestricted Subsidiary after the Issue Date in accordance
with Section 4.15.
The provisions of this covenant shall not prohibit (i) the payment of any
dividend or other distribution (x) within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of this Indenture or (y) consisting of the net proceeds to the
Company or a Restricted Subsidiary from the disposition of the Equity Interests
of an Unrestricted Subsidiary; (ii) so long as no Default has occurred and is
continuing, the purchase, redemption, retirement or other acquisition of any
shares of Equity Interests of the Company (A) in exchange for or conversion into
or (B) out of the net cash proceeds of the substantially concurrent issue and
sale (other than to a Restricted Subsidiary of the Company) of shares of
Qualified Equity Interests of the Company or contributions to the common equity
capital of the Company; provided, however, that any such net cash proceeds and
the value of any Qualified Equity Interests issued in exchange for such retired
Equity Interests are excluded from clause (c)(2) of the preceding paragraph (and
were not included therein at any time); (iii) so long as no Default has occurred
and is continuing, the making of a direct or indirect Investment constituting a
Restricted Payment out of the proceeds from the issue or sale (other than to a
Subsidiary) of Qualified Equity Interests of the Company or contributions to the
common equity capital of the Company; (iv) the purchase; redemption or other
acquisition, cancellation or retirement for value of Equity Interests held by
officers or employees or former officers or employees of the Company or any
Restricted Subsidiary (or their estates or beneficiaries under their estates),
upon death, disability, retirement or termination of employment not to exceed
$1.0 million in any fiscal year; (v) so long as no Default has occurred and is
continuing, dividends to TPR Investment Associates, Inc. (or its successors(s))
in an amount not to exceed $5.0 million in any year; provided, however, that to
the extent such dividends in any year are less than $5.0 million, the amount
less than $5.0 million may be paid in any subsequent year, but no such dividends
paid in any year pursuant to this clause (v) shall exceed $10.0 million in any
year; provided, further, however, that the aggregate amount of dividends
incurred pursuant to this clause (v) shall not exceed $20.0 million in the
aggregate; and (vi) other Restricted Payments not to exceed $5.0 million in the
aggregate. In determining the amount of Restricted Payments permissible under
this covenant, amounts expended under clauses (i)(x), (iv), (v) and (vi) of this
paragraph after the Issue Date shall (without duplication) be included as
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Restricted Payments. The amount of any non-cash Restricted Payment shall be
deemed to be equal to the Fair Market Value thereof at the date of the making of
such Restricted Payment.
SECTION 4.07. Existence.
Subject to Article Five, the Company shall do or shall cause to be
done all things necessary to preserve and keep in full force and effect its
existence as a corporation, partnership or other entity.
SECTION 4.08. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
Restricted Subsidiary or upon the income, profits or property of the Company or
any Restricted Subsidiary and (2) all lawful claims for labor, materials and
supplies which, in each case, if unpaid, might by law become a material
liability, or Lien upon the property, of the Company or any Restricted
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which appropriate provision has been made.
SECTION 4.09. Notice of Defaults.
(a) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or lapse of time, or
both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(b) Upon becoming aware of any Default or Event of Default, the
Company shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.10. Maintenance of Properties and Insurance.
(a) The Company shall cause all material properties owned by or
leased to it or any Restricted Subsidiary and used or useful in the conduct of
its business or the business of any Restricted Subsidiary to be maintained and
kept in normal condition, repair and working order and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 4.10 shall prevent the Company or any
Restricted Subsidiary from discontinuing the use, operation or maintenance of
any of such properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors of the Company or the
Restricted Subsidiary concerned, or of an Officer (or other agent employed by
the Company or of any Restricted Subsidiary) of the Company or such Restricted
Subsidiary having managerial responsibility for any such property, desirable in
the conduct of the business of the Company or any Restricted Subsidiary.
(b) The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against such risks
and in such amounts, and with such deductibles, retentions,
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self-insured amounts and co-insurance provisions, as are customarily carried by
similar businesses of similar size, including property and casualty loss and
workers' compensation insurance.
SECTION 4.11. Compliance Certificate.
The Company shall deliver to the Trustee within 90 days after the
close of each fiscal year a certificate signed by the principal executive
officer, principal financial officer or principal accounting officer stating
that a review of the activities of the Company has been made under the
supervision of the signing officers with a view to determining whether a Default
or Event of Default has occurred and whether or not the signers know of any
Default or Event of Default by the Company that occurred during such fiscal
year. If they do know of such a Default or Event of Default, the certificate
shall describe all such Defaults or Events of Default, their status and the
action the Company is taking or proposes to take with respect thereto. The first
certificate to be delivered by the Company pursuant to this Section 4.11 shall
be for the fiscal year ending December 31, 1998.
SECTION 4.12. Reports to Holders.
Whether or not the Company is subject to Section 13(a) or 15(d) of
the Exchange Act, or any successor provisions thereto, the Company will file
with the SEC (if permitted by SEC practice and applicable law and regulations)
the annual reports, quarterly reports and other documents which the Company
would be required to file with the SEC pursuant to such Section 13(a) or 15(d)
(each, an "Exchange Act Report"), or any successor provision thereto, if the
Company were so subject, such documents to be filed with the SEC on or prior to
the respective dates (the "Required Filing Dates") by which the Company would be
required to file such documents if the Company were so subject. If, at any time
prior to the consummation of the Registered Exchange Offer when the Company is
not subject to such Section 13(a) or 15(d), the information which would be
required in an Exchange Act Report is included in a public filing of the Company
under the Securities Act at the applicable Required Filing Date, such public
filing will fulfill the filing requirement with the SEC with respect to the
applicable Exchange Act Report. The Company will also in any event (a) within 15
days after each Required Filing Date (whether or not permitted or required to be
filed with the SEC) (i) transmit (or cause to be transmitted) by mail to all
Holders, as their names and addresses appear in the register of the Securities,
without cost to such Holders, and (ii) file with the Trustee, copies of the
annual reports, quarterly reports and other documents which the Company is
required to file with the SEC pursuant to the preceding sentence, or, if such
filing is not so permitted (or, prior to the consummation of the Registered
Exchange Offer, when the Company is not subject to Section 13(a) or 15(d) of the
Exchange Act), information and data of a similar nature, and (b) if,
notwithstanding the preceding sentence, filing such documents by the Company
with the SEC is not permitted by SEC practice or applicable law or regulations,
promptly upon written request supply copies of such documents to any Holder. In
addition, for so long as any Securities remain outstanding, the Company 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, and, to any beneficial holder of
Securities, if not obtainable from the SEC, information of the type that would
be filed with the SEC pursuant to the foregoing provisions, upon the request of
any such Holder.
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.
The Company 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 or extension law or any
usury law or other law, which would prohibit or forgive the Company from paying
all or any portion of the Accreted Value or principal of and/or interest, if
any, on the Securities as contemplated herein,
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wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not 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 had been enacted.
SECTION 4.14. Change of Control.
(a) Following the occurrence of a Change of Control, the Company
shall notify Holders of the Securities of such occurrence in the manner
prescribed by this Indenture and shall make an offer to purchase (the "Change of
Control Offer"), on a business day (the "Change of Control Offer Date") not
later than 60 days following the Change of Control Date, all Securities then
outstanding at a purchase price equal to 101% of the Accreted Value thereof,
plus accrued and unpaid interest, if any, to the date of purchase. Each Holder
shall be entitled to tender all or any portion of the securities owned by such
Holder pursuant to the Offer to Purchase, subject to the requirement that any
portion of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount at maturity.
(b) Notice of a Change of Control Offer shall be given to Holders of
the Securities, not less than 25 days nor more than 45 days before the date of
purchase. The Company's obligations may be satisfied if a third party makes the
Change of Control Offer in the manner, at the times and otherwise in compliance
with the requirements applicable to a Change of Control Offer made by the
Company and purchases all Securities validly tendered and not withdrawn under
such Change of Control Offer.
(c) On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) accept for payment all Securities or portions
thereof validly tendered pursuant to the Offer, (ii) deposit with the Paying
Agent or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 2.04, money sufficient to pay the Purchase Price
of all Securities or portions thereof so accepted and (iii) deliver or cause to
be delivered to the Trustee for cancellation all Securities so accepted together
with an Officers' Certificate stating the Securities or portions thereof
accepted for payment by the Company. The Paying Agent (or the Company, if so
acting) shall promptly mail or deliver to Holders of Securities so accepted,
payment in an amount equal to the Purchase Price for such Securities, and the
Trustee shall promptly authenticate and mail or deliver to each Holder of
Securities a new Security or Securities equal in principal amount at maturity to
any unpurchased portion of the Security surrendered as requested by the Holder.
Any Security not accepted for payment shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Offer on or as soon as practicable after the Purchase Date.
(d) If the Company makes a Change of Control Offer, the Company
shall comply with all applicable tender offer laws and regulations, including,
to the extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act,
and any other applicable federal or state securities laws and regulations and
any applicable requirements of any securities exchange on which the Securities
are listed, and any violation of the provisions of this Indenture relating to
such Change of Control Offer occurring as a result of such compliance shall not
be deemed an Event of Default or an event that, with the passing of time or
giving of notice, or both, would constitute an Event of Default.
<PAGE> 45
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SECTION 4.15. Limitation on the Designation of Unrestricted Subsidiaries.
The Company may designate after the Issue Date any Subsidiary of the
Company as an "Unrestricted Subsidiary" under this Indenture (a "Designation")
only if:
(i) no Default has occurred and is continuing at the time of or
after giving effect to such Designation;
(ii) at the time of and after giving effect to such Designation, the
Company could incur $1.00 of additional Indebtedness under the
Consolidated Operating Cash Flow Ratio described under Section 4.04;
(iii) the Company would be permitted to make an Investment (other
than a Permitted Investment) at the time of such Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
Section 4.06 in an amount (the "Designation Amount") equal to the Fair
Market Value of the Company's aggregate Investment in such Subsidiary on
such date; and
(iv) such Designation would not relate to all or substantially all
of the assets of the Company and the Restricted Subsidiaries (determined
on a consolidated basis).
Notwithstanding the foregoing provisions of this covenant, the
Company shall be permitted to designate any Subsidiary which owns only Equity
Interests of Laser Industries Limited (or the securities of ESC Medical Systems
Ltd. receivable upon exchange thereof) to be an Unrestricted Subsidiary and the
Designation Amount with respect thereto shall be zero. Neither the Company nor
any Restricted Subsidiary shall at any time (x) provide credit support for,
subject any of its property or assets (other than the Equity Interests of any
Unrestricted Subsidiary) to the satisfaction of, or guaranty, any Indebtedness
of any Unrestricted Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness), (y) be directly or indirectly liable
for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or
indirectly liable for any Indebtedness which provides that the Holder thereof
may (upon notice, lapse of time or both) declare a default thereon or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity upon the occurrence of a default with respect to any Indebtedness of
any Unrestricted Subsidiary, except for any non-recourse guaranty given solely
to support the pledge by the Company or any Restricted Subsidiary of the capital
stock of any Unrestricted Subsidiary.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if: (i) no Default has occurred and is
continuing at the time of and after giving effect to such Revocation; (ii) all
Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately
following such Revocation would, if incurred at such time, have been permitted
to be incurred; and (iii) any transaction (or series of related transactions)
between such Subsidiary and any of its Affiliates that occurred while such
Subsidiary was an Unrestricted Subsidiary would be permitted under Section 4.03
as if such transaction (or series of related transactions) had occurred at the
time of such Revocation.
SECTION 4.16. Limitations on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise enter into or cause
to become effective any consensual encumbrance or consensual restriction of any
kind on the ability of any Restricted Subsidiary to (a) pay dividends, in cash
or otherwise, or make any other distributions on its Equity Interests or any
other interest or participation in, or measured by, its profits owned by the
Company or any Restricted Subsidiary, (b) pay any Indebtedness owed to the
Company
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or a Restricted Subsidiary, (c) make any Investment in the Company or any
Restricted Subsidiary or (d) transfer any of its property or assets to the
Company or to any Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (i) any agreement of the Company or
a Restricted Subsidiary existing on the Issue Date, in each case as in effect on
the Issue Date, and any amendments, restatements, renewals, replacements or
refinancings thereof (including with respect to any Indebtedness outstanding on
the Issue Date and any commitment to provide Indebtedness outstanding on the
Issue Date); provided, however, that any such amendment, restatement, renewal,
replacement or refinancing is no more restrictive in the aggregate with respect
to such encumbrances or restrictions than those contained in the agreement being
amended, restated, renewed, replaced or refinanced; (ii) applicable law; (iii)
any agreement of a Person acquired by the Company or any Restricted Subsidiary
as in effect at the time of such acquisition (except to the extent Indebtedness
was incurred by such Person in connection with, as a result of or in
contemplation of such acquisition) and any amendments, extensions, renewals,
replacements or refinancings thereof which are no more restrictive than those in
effect at the time of acquisition; provided, further, however, that such
encumbrances and restrictions are not applicable to any Restricted Subsidiary,
or the properties or assets of any Restricted Subsidiary, other than the
acquired Person; (iv) customary non-assignment provisions in leases, licenses or
similar agreements entered into in the ordinary course of business; (v) Purchase
Money Indebtedness that only imposes encumbrances and restrictions on the
property or Person acquired or on the stock or assets of a Restricted Subsidiary
which owns only the property or Person acquired; (vi) any agreement for the sale
or disposition of the Equity Interests or assets of any Restricted Subsidiary;
provided, further, however, that such encumbrances and restrictions described in
this clause (vi) are only applicable to such Restricted Subsidiary or assets, as
applicable, and any such sale or disposition is made in compliance with Section
4.05 to the extent applicable thereto; (vii) refinancing Indebtedness permitted
under clause (f) of the second paragraph of Section 4.04; provided, further,
however, that such encumbrances and restrictions contained in the agreements
governing such Indebtedness are no more restrictive in the aggregate than those
contained in the agreements governing the Indebtedness being refinanced
immediately prior to such refinancing; (viii) this Indenture; (ix) any agreement
governing Indebtedness of a Restricted Subsidiary incurred by such Restricted
Subsidiary in connection with an Acquisition or the transaction pursuant to
which it became a Restricted Subsidiary; provided, further, however, that in
calculating Consolidated Net Income for any purpose under this Indenture
(including for the purpose of determining whether such Indebtedness of such
Restricted Subsidiary can be incurred), the net income of such Restricted
Subsidiary shall be excluded from Consolidated Net Income except to the extent
such net income would be permitted to be distributed to the Company or another
Restricted Subsidiary pursuant to the terms of the agreement governing such
Indebtedness; or (x) contained in any other indenture governing debt securities
that are no more restrictive than those contained in this Indenture.
SECTION 4.17. Limitation on the Sale or Issuance of Preferred Equity Interests
of Restricted Subsidiaries.
The Company shall not sell any Preferred Equity Interest of a
Restricted Subsidiary, and shall not cause or permit any Restricted Subsidiary
to issue any of its Preferred Equity Interests or sell any Preferred Equity
Interests of another Restricted Subsidiary (other than to the Company or to a
Wholly Owned Restricted Subsidiary), unless the Company would be permitted to
incur $1.00 of Indebtedness (other than Permitted Indebtedness) under Section
4.04.
SECTION 4.18. Limitation on Liens.
The Company shall not, directly or indirectly, Incur or suffer to
exist any Liens of any kind against or upon any of its properties or assets now
owned or hereafter acquired, or any proceeds therefrom or any income or profits
therefrom, to secure any Indebtedness unless effective provision is made
contemporane-
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ously therewith to secure the Securities and all other amounts due under this
Indenture, equally and ratably with such Indebtedness (or, in the event that
such Indebtedness is subordinated in right of payment to the Securities, prior
to such Indebtedness) with a Lien on the same properties and assets securing
such Indebtedness for so long as such Indebtedness is secured by such Lien,
except for Permitted Liens.
SECTION 4.19. Limitation on Status as Investment Company.
The Company shall not, and shall not permit any of the Restricted
Subsidiaries or controlled Affiliates to, conduct its business in a fashion that
would cause the Company to be required to register as an "investment company"
(as that term is defined in the Investment Company Act), or otherwise become
subject to regulation under the Investment Company Act. For purposes of
establishing the Company's compliance with this provision, any exemption which
is or would become available under Section 3(c)(1) or Section 3(c)(7) of the
Investment Company Act will be disregarded.
SECTION 4.20. Calculation of Original Issue Discount.
The Company shall file with the Trustee promptly at the end of each
calendar year (i) a written notice specifying the amount of original issue
discount (including daily rates and accrual periods) accrued on outstanding
Securities as of the end of such year and (ii) such other specific information
relating to such original issue discount as may then be relevant under the
Internal Revenue Code of 1986, as amended from time to time.
ARTICLE FIVE
MERGERS; SUCCESSORS
SECTION 5.01. Mergers, Sale of Assets, etc.
The Company shall not consolidate with or merge with or into
(whether or not the Company is the Surviving Person) any other entity and the
Company shall not and shall not cause or permit any Restricted Subsidiary to,
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Company's and the Restricted Subsidiaries' properties
and assets (determined on a consolidated basis for the Company and the
Restricted Subsidiaries) to any entity in a single transaction or series of
related transactions, unless: (i) either (x) the Company shall be the Surviving
Person or (y) the Surviving Person (if other than the Company) shall be a
corporation organized and validly existing under the laws of the United States
of America or any State thereof or the District of Columbia, and shall, in any
such case, expressly assume by a supplemental indenture, the due and punctual
payment of the principal of, premium, if any, and interest on the Securities and
the performance and observance of every covenant of this Indenture and the
Exchange and Registration Rights Agreement to be performed or observed on the
part of the Company; (ii) immediately thereafter, no Default has occurred and is
continuing; and (iii) immediately after giving effect to any such transaction
including the Incurrence by the Company or any Restricted Subsidiary, directly
or indirectly, of additional Indebtedness (and treating any Indebtedness not
previously an obligation of the Company or any Restricted Subsidiary in
connection with or as a result of such transaction as having been Incurred at
the time of such transaction), the Surviving Person could Incur, on a pro forma
basis after giving effect to such transaction as if it had occurred at the
beginning of the four quarter period immediately preceding such transaction for
which consolidated financial statements of the Company are available, at least
$1.00 of additional Indebtedness (other
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than Permitted Indebtedness) under the Consolidated Operating Cash Flow Ratio of
the first paragraph of Section 4.04.
Notwithstanding the foregoing clause (iii) of the immediately
preceding paragraph, any Restricted Subsidiary may consolidate with, merge into
or transfer all or part of its properties and assets to the Company or to a
Restricted Subsidiary.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interests of which constitute all or substantially all
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all the properties and assets of the Company.
In connection with any consolidation, merger, transfer, lease,
assignment or other disposition contemplated hereby, the Company shall deliver,
or cause to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, transfer, lease, assignment or
other disposition and the supplemental indentures in respect thereof comply with
the requirements under this Indenture.
SECTION 5.02. Successor Substituted.
In the event of any transaction (other than a lease) described in
and complying with the conditions listed in Section 5.01 in which the Company is
not the Successor Company and the Successor Company is to assume all the
Obligations of the Company under the Securities, this Indenture and the Exchange
and Registration Rights Agreement pursuant to a supplemental indenture, such
Successor Company shall succeed to, and be substituted for, and may exercise
every right and power of, the Company and the Company shall be discharged and
released from its Obligations under this Indenture and the Securities.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for purposes of
this Indenture:
(i) a default in the payment of the Accreted Value or principal, as
the case may be, of or premium, if any, on the Securities when due, at
maturity, upon redemption or otherwise (including pursuant to a Change of
Control Offer or an Asset Sale Offer);
(ii) a default in the payment of interest on the Securities when it
becomes due and payable and the continuance of such a default for a period
of 30 days or more;
(iii) (A) the failure to comply with the covenant described under
Section 5.01 or (B) the failure to comply with any other covenant or other
term in this Indenture (other than those specified in clause (i) or (ii))
immediately above and such default, in the case of this clause (iii),
continues for a period of 45 days after notice to the Company thereof by
the Trustee or to the Company and the
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Trustee by Holders of at least 25% of the aggregate principal amount at
maturity of the Securities then outstanding;
(iv) (A) the failure to pay, following any applicable grace period,
any installment of principal due (whether at maturity or otherwise) under
one or more classes or issues of Indebtedness of the Company or any
Restricted Subsidiary in an aggregate principal amount of $5.0 million or
more or (B) the failure by the Company or any Restricted Subsidiary to
perform any other term, covenant, condition or provision of one or more
classes or issues of Indebtedness in an aggregate principal amount of the
equivalent of $5.0 million or more and, in the case of this clause (B),
such failure results in an acceleration of the maturity thereof;
(v) one or more final non-appealable judgments, orders or decrees
for the payment of money shall be entered in an amount or amounts of $5.0
million or more, either individually or in the aggregate, against the
Company or any Restricted Subsidiary or any of their respective properties
and shall not be discharged or satisfied within 45 days;
(vi) the Company or any Significant Restricted Subsidiary pursuant
to or within the meaning of any Bankruptcy Law: (a) admits in writing its
inability to pay its debts generally as they become due; (b) commences a
voluntary case or proceeding; (c) consents to the entry of an order for
relief against it in an involuntary case or proceeding; (d) consents or
acquiesces in the institution of a bankruptcy or insolvency proceeding
against it; (e) consents to the appointment of a Custodian of it or for
all or substantially all of its property; or (f) makes a general
assignment for the benefit of its creditors, or any of them takes any
action to authorize or effect any of the foregoing; or
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (a) is for relief against the Company or
any Significant Restricted Subsidiary in an involuntary case or
proceeding; (b) appoints a Custodian of the Company or any Significant
Restricted Subsidiary for all or substantially all of its property; or (c)
orders the liquidation of the Company or any Significant Restricted
Subsidiary; and in each case the order or decree remains unstayed and in
effect for 60 days; provided, however, that if the entry of such order or
decree is appealed and dismissed on appeal, then the Event of Default
hereunder by reason of the entry of such order or decree shall be deemed
to have been cured.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal, state or foreign law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other than an
Event of Default specified in clause (vi) or (vii) of Section 6.01 with respect
to the Company) occurs and is continuing, the Trustee or the Holders of at least
25% in aggregate principal amount at maturity of the outstanding Securities by
notice in writing to the Company (and to the Trustee if given by the Holders)
may declare the Default Amount on all outstanding Securities to be due and
payable immediately and, upon any such declaration, such Accreted Value or
principal (and premium, if any) and accrued interest, if any, notwithstanding
anything contained in this Indenture or the Securities to the contrary, shall
become immediately due and payable.
If an Event of Default specified in clause (vi) and (vii) of Section
6.01 with respect to the Company occurs and is continuing, then the Default
Amount on all outstanding Securities shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder.
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After a declaration of acceleration, but before a judgment or decree
of the money due in respect of the Securities has been obtained, the Holders of
not less than a majority in aggregate principal amount at maturity of the
Securities then outstanding by written notice to the Trustee may annul an
acceleration and its consequences if all existing Events of Default (other than
the nonpayment of Accreted Value or principal of and interest, if any, on the
Securities which has become due solely by virtue of such acceleration) have been
cured or waived and if the annulment would not conflict with any judgment or
decree. No such annulment shall affect any subsequent Default or impair any
right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of Accreted Value or principal of or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder in exercising any right or remedy
maturing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, prior to the declaration
of acceleration of the Securities, the Holders of not less than a majority in
aggregate principal amount at maturity of the outstanding Securities by written
notice to the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of Accreted Value or principal of
or interest on any Security as specified in clauses (i) and (ii) of Section 6.01
or a Default in respect of any term or provision of this Indenture that may not
be amended or modified without the consent of each Holder affected as provided
in Section 10.02. The Company shall deliver to the Trustee an Officers'
Certificate stating that the requisite percentage of Holders have consented to
such waiver and attaching copies of such consents. In case of any such waiver,
the Company, the Trustee and the Holders shall be restored to their former
positions and rights hereunder and under the Securities, respectively. This
paragraph of this Section 6.04 shall be in lieu of ss. 316(a)(1)(B) of the TIA
and such ss. 316(a)(1)(B) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture and the Securities, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal
amount at maturity of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on 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 another Holder, or
that may involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such
<PAGE> 51
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direction. In the event the Trustee takes any action or follows any direction
pursuant to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against any loss or expense caused by
taking such action or following such direction. This Section 6.05 shall be in
lieu of ss. 316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A) of the TIA is
hereby expressly excluded from this Indenture and the Securities, as permitted
by the TIA.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount at
maturity of the outstanding Securities make a written request to the
Trustee to pursue a remedy as Trustee;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee reasonable indemnity satisfactory to the Trustee against any loss,
liability or expense;
(iv) 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 reasonable indemnity; and
(v) during such 60-day period, the Holders of a majority in
principal amount at maturity of the outstanding Securities do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of Accreted Value or principal of and premium, if
any, or interest on a Security, on or after the respective due dates expressed
in the Security, 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 the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of Accreted Value or principal or
interest specified in Section 6.01(i) or (ii) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for the whole amount
of Accreted Value or principal and accrued interest remaining unpaid, together
with interest overdue on Accreted Value or principal and to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the rate per annum borne by the Securities and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may 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 allowed in
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any judicial proceedings relative to the Company (or any other obligor upon the
Securities), their respective creditors or their respective property and shall
be entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings 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 agent and counsel, and any other
amounts due the Trustee under Section 7.07. 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 Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
Accreted Value or principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for Accreted Value or principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to the Holders 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 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 and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by
a Holder or group of Holders of more than 10% in aggregate principal amount at
maturity of the outstanding Securities, or to any suit instituted by any Holder
for the enforcement or the payment of the Accreted Value or principal or
interest on any Securities on or after the respective due dates expressed in the
Security.
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a 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 their 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 a Default:
(1) The Trustee shall not be liable except for the performance of
such duties as are specifically set forth herein; and
(2) 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
conforming to the requirements of this Indenture; provided, however, that
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine such certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
grossly negligent action, its own grossly negligent failure to act, or its own
grossly willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
grossly negligent in ascertaining the pertinent facts; and
(3) 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.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(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.
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SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely conclusively on 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 and/or an Opinion of Counsel, which shall conform to
the provisions of Section 13.05. The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on such certificate or
opinion.
(c) The Trustee may act through attorneys and agents of its
selection and shall not be responsible for the misconduct or negligence of any
agent or attorney (other than an agent who is an employee of the Trustee)
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or within
its rights or powers.
(e) The Trustee may consult with counsel of its selection and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) Any request or direction of the Company mentioned herein shall
be sufficiently evidenced by an Officers' Certificate and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
(h) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company, personally or by agent
or attorney.
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Trust Officer of the Trustee has actual knowledge thereof or
unless the Trustee shall have received written notice thereof at the Corporate
Trust Office of the Trustee, and such notice references the Securities and this
Indenture.
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SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee, subject to
Section 7.10 hereof. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 7.10 and 7.11.
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 Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and the
Trustee knows of such Defaults or Events of Default, the Trustee shall mail to
each Holder notice of the Default or Event of Default within 30 days after the
occurrence thereof. Except in the case of a Default or an Event of Default in
payment of Accreted Value or principal of or interest on any Security or a
Default or Event of Default in complying with Section 5.01, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interest of the Holders.
This Section 7.05 shall be in lieu of the proviso to ss. 315(b) of the TIA and
such proviso to ss. 315(b) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA ss. 313(a), within 60 days after each May 15
beginning with the May 15 following the date of this Indenture, the Trustee
shall mail to each Holder a report dated as of such May 15 that complies with
TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b), (c) and (d).
A copy of each such report at the time of its mailing to the Holders
shall be filed with the SEC and each stock exchange, if any, on which the
Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to time agree in
writing for its services. 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 upon request for all reasonable disbursements, expenses
and advances (including fees, disbursements and expenses of its agents and
counsel) incurred or made by it in addition to the compensation for its services
except any such disbursements, expenses and advances as may be attributable to
the Trustee's gross negligence or bad faith. Such expenses shall include the
reasonable compensation, disbursements and expenses of the
<PAGE> 56
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Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 9.01 hereof.
The Company shall indemnify the Trustee for, and hold it harmless
against any and all loss, damage, claims, liability or expense, including taxes
(other than franchise taxes imposed on the Trustee and taxes based upon,
measured by or determined by the income of the Trustee), arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder, except to the extent that such loss, damage, claim,
liability or expense is due to its own gross negligence or bad faith. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. However, the 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 (and may employ its own counsel) at the Company's expense; provided,
however, that the Company's reimbursement obligation with respect to counsel
employed by the Trustee will be limited to the reasonable fees and expenses of
such counsel.
The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Trustee as a result of the violation of this Indenture by the Trustee.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a Lien prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of or interest on particular
Securities or the Purchase Price or redemption price of any Securities to be
purchased pursuant to an Offer to Purchase or redeemed.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(vi) or (vii) occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute expenses
of administration under any Bankruptcy Law. The Company's obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Company's obligations pursuant to
Article Nine and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Company in
writing and may appoint a successor Trustee with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(c) a custodian or other public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), 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 at maturity of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
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 at maturity of the outstanding
Securities may petition, at the expense of the Company, any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible
to act as Trustee under TIA ss.ss. 310(a)(1) and 310(a)(2). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. If the Trustee has or shall
acquire any "conflicting interest" within the meaning of TIA ss. 310(b), the
Trustee and the Company shall comply with the provisions of TIA ss. 310(b);
provided, however, that there shall be excluded from the operation of TIA ss.
310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.10, the Trustee shall resign
immediately in the manner and with the effect hereinbefore specified in this
Article Seven.
SECTION 7.11. Preferential Collection of Claims Against the Company.
The Trustee shall comply with 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.
<PAGE> 58
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ARTICLE EIGHT
[INTENTIONALLY OMITTED]
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of the Company's Obligations.
The Company may terminate its substantive obligations in respect of
the Securities by delivering all outstanding Securities to the Trustee for
cancellation and paying all sums payable by it on account of principal of and
interest on all Securities or otherwise. In addition to the foregoing, the
Company may, provided that no Default or Event of Default has occurred and is
continuing or would arise therefrom (or, with respect to a Default or Event of
Default specified in Section 6.01(vi) or (vii), occurs at any time on or prior
to the 91st calendar day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until after such 91st day)
under this Indenture), terminate its substantive obligations in respect of
Article Four (other than Sections 4.01, 4.02, 4.07, 4.09 and 4.11) and Article
Five hereof and any Event of Default specified in Section 6.01 (iii), (iv) or
(v) by (i) depositing with the Trustee, under the terms of an irrevocable trust
agreement, money or United States Government Obligations sufficient (without
reinvestment) to pay all remaining Indebtedness on the Securities, (ii)
delivering to the Trustee either an Opinion of Counsel or a ruling directed to
the Trustee from the Internal Revenue Service to the effect that the Holders
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and termination of obligations, (iii) delivering to the
Trustee an Opinion of Counsel to the effect that the Company's exercise of the
option under this Section 9.01 will not result in any of the Company, the
Trustee or the trust created by the Company's deposit of funds pursuant to this
provision becoming or being deemed to be an "investment company" under the
Investment Company Act, and (iv) delivering to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating compliance with all
conditions precedent provided for herein. In addition, the Company may, provided
that no Default or Event of Default has occurred and is continuing or would
arise therefrom (or, with respect to a Default or Event of Default specified in
Section 6.01(vi) or (vii), occurs at any time on or prior to the 91st calendar
day after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until after such 91st day) under this Indenture),
terminate its substantive obligations in respect of the Securities (including
its obligations to pay the principal of and interest on the Securities) by (i)
depositing with the Trustee, under the terms of an irrevocable trust agreement,
money or United States Government Obligations sufficient (without reinvestment)
to pay all remaining Indebtedness on the Securities, (ii) delivering to the
Trustee either a ruling directed to the Trustee from the Internal Revenue
Service to the effect that the Holders of the Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and termination of obligations or an Opinion of Counsel addressed to the Trustee
based upon such a ruling or based on a change in the applicable Federal tax law
since the date of this Indenture to such effect, (iii) delivering to the Trustee
an Opinion of Counsel to the effect that the exercise of the option under this
Section 9.01 will not result in any of the Company, the Trustee or the trust
created by the deposit of funds pursuant to this provision becoming or being
deemed to be an "investment company" under the Investment Company Act and (iv)
delivering to the Trustee an Officers' Certificate and an Opinion of Counsel
each stating compliance with all conditions precedent provided for herein.
<PAGE> 59
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Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.12, 2.13 and 4.01 (but
not with respect to termination of substantive obligations pursuant to the third
sentence of the foregoing paragraph), 4.02, 7.07, 7.08, 9.03 and 9.04 shall
survive until the Securities are no longer outstanding. Thereafter the Company's
obligations in Sections 7.07, 9.03 and 9.04 shall survive.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations specified
above.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the United States Government
Obligations deposited pursuant to this Section 9.01 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 outstanding Securities.
SECTION 9.02. Application of Trust Money.
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 9.01, and shall apply the
deposited money and the money from United States Government Obligations in
accordance with this Indenture solely to the payment of principal of and
interest on the Securities.
SECTION 9.03. Repayment to the Company.
Subject to Sections 7.07 and 9.01, the Trustee shall promptly pay to
the Company upon written request any money held by it which exceeds the amount
required to make payments under this Indenture. The Trustee shall pay to the
Company upon written request any money held by it for the payment of principal
or interest that remains unclaimed for two years; provided, however, that the
Trustee before being required to make any payment may at the expense of the
Company cause to be published once in a newspaper of general circulation in The
City of New York or mail to each Holder entitled to such money notice that such
money remains unclaimed and that, after a date specified therein which shall be
at least 30 days from the date of such publication or mailing, any unclaimed
balance of such money then remaining shall be repaid to the Company. After
payment to the Company, Holders entitled to money must look to the Company for
payment as general creditors unless an applicable abandoned property law
designates another person and all liability of the Trustee or Paying Agent with
respect to such money shall thereupon cease.
SECTION 9.04. Reinstatement.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 9.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 9.01 until
such time as the Trustee is permitted to apply all such money or United States
Government Obligations in accordance with Section 9.01; provided, however, that
if the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or United States Government Obligations held by the
Trustee.
<PAGE> 60
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ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Company, when authorized by a resolution of their respective
Boards of Directors, and the Trustee may amend or supplement this Indenture or
the Securities without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency; provided,
however, that such amendment or supplement does not adversely affect the
rights of any Holder;
(b) to effect the assumption by a successor Person of all
obligations of the Company under the Securities and this Indenture in
connection with any transaction complying with Article Five of this
Indenture;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefit or
rights to the Holders;
(f) to make any other change that does not adversely affect the
rights of any Holder under this Indenture;
(g) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(h) to secure the Securities pursuant to the requirements of Section
4.18 or otherwise; or
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 10.01.
SECTION 10.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a
resolution of its Boards of Directors, and the Trustee may amend or supplement
this Indenture or the Securities with the written consent of the Holders of at
least a majority in principal amount at maturity of the outstanding Securities.
Subject to Section 6.07, the Holders of a majority in principal amount at
maturity of the outstanding Securities may waive compliance by the Company with
any provision of this Indenture or the Securities. However, without the consent
of each Holder affected, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
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(a) change the maturity of the principal of or any installment of
interest on any such Security or alter the optional redemption or
repurchase provisions of any such Security or this Indenture in a manner
adverse to the Holders of the Securities;
(b) reduce the principal amount at maturity or Accreted Value of (or
premium) of any such Security;
(c) reduce the rate of or extend the time for payment of interest on
any such Security;
(d) change the place or currency of payment of principal of (or
premium) or interest on any such Security;
(e) modify any provisions of this Indenture relating to the waiver
of past defaults (other than to add sections to this Indenture or the
Securities subject thereto) or the right of the Holders of the Securities
to institute suit for the enforcement of any payment on or with respect to
any such Security in respect thereof or the modification and amendment
provisions of this Indenture and the Securities (other than to add
sections to this Indenture or the Securities which may not be amended,
supplemented or waived without the consent of each Holder affected);
(f) reduce the percentage of the principal amount at maturity of
outstanding Securities necessary for amendment to or waiver of compliance
with any provision of this Indenture or the Securities or for waiver of
any Default in respect thereof;
(g) waive a Default in the payment of the principal or Accreted
Value of, interest on, or redemption payment with respect to, the
Securities (except a rescission of acceleration of the Securities by the
Holders as provided in this Indenture and a waiver of the payment default
that resulted from such acceleration);
(h) modify the ranking of any Security in any manner adverse to the
Holders of the Securities; or
(i) modify the provisions of any covenant (or the related
definitions) in this Indenture requiring the Company to make an Offer to
Purchase following an event or circumstance which may give rise to the
requirement to make an Offer to Purchase in a manner materially adverse to
the Holders of the Securities affected thereby otherwise than in
accordance with this Indenture.
It shall not be necessary for the consent of the Holders under this
Section 10.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 10.02
becomes effective, the Company shall mail to the Holders 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 amendment, supplement or
waiver.
<PAGE> 62
-56-
SECTION 10.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 10.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to such Holder's Security or portion of such
Security by notice to the Trustee or the Company received before the date on
which the Trustee receives an Officers' Certificate certifying that the Holders
of the requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders of Securities entitled to consent to
any amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last sentence of the immediately preceding paragraph, those
persons who were Holders of Securities at such record date (or their duly
designated proxies), and only those persons, shall be entitled to consent to
such amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders of such Securities after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (a)
through (i) of Section 10.02. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determine, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or issue a new Security shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 10.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject to customary exceptions). The
Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
<PAGE> 63
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ARTICLE ELEVEN
[INTENTIONALLY OMITTED]
ARTICLE TWELVE
[INTENTIONALLY OMITTED]
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies any TIA
provision that may be so modified, such TIA provision shall be deemed to apply
to this Indenture as so modified. If any provision of this Indenture excludes
any TIA provision that may be so excluded, such TIA provision shall be excluded
from this Indenture.
The provisions of TIA ss.ss. 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person, by facsimile and confirmed by overnight
courier, or mailed by first-class mail addressed as follows:
if to Trans-Resources, Inc.:
Nine West 57th Street, 39th Floor
New York, New York 10019
Attention: Chief Financial Officer
Facsimile: (212) 888-3708
Telephone: (212) 888-3044
<PAGE> 64
-58-
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Edward Klimerman, Esq.
Facsimile: (212) 698-7825
Telephone: (212) 698-7700
if to the Trustee:
State Street Bank and Trust Company
61 Broadway, 15th Floor
New York, New York 10006
Attention: Corporate Trust Division
Facsimile: (212) 612-3202
Telephone: (212) 612-3447
Each party by notice to the others may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to
a Holder including any notice delivered in connection with TIA ss. 310(b), TIA
ss. 313(c), TIA ss. 314(a) and TIA ss. 315(b), shall be mailed to him at his
address as set forth on the Security Register and shall be sufficiently given to
him if so mailed within the time prescribed. To the extent required by the TIA,
any notice or communication shall also be mailed to any Person described in TIA
ss. 313(c).
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. Except for
a notice to the Trustee, which is deemed given only when received, if a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and any other person shall have the
protection of TIA ss. 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take or refrain from taking any action under this Indenture after the date
hereof, the Company shall furnish to the Trustee at the request of the Trustee:
<PAGE> 65
-59-
(1) an Officers' Certificate in form and substance satisfactory to
the Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel in form and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 13.07. Governing Law.
The laws of the State of New York shall govern this Indenture and
the Securities without regard to principles of conflicts of laws.
SECTION 13.08. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Securities or 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
Security waives and releases all such liability.
SECTION 13.09. Successors.
All agreements of a party to this Indenture contained in this
Indenture shall bind such party's successors.
<PAGE> 66
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SECTION 13.10. 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 13.11. Severability.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby, and a Holder shall have no claim therefor against any party hereto.
SECTION 13.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 13.13. Legal Holidays.
If a payment date is a not a Business Day at a place of payment,
payment may be made at that place on the next succeeding Business Day, and no
interest shall accrue for the intervening period.
[Signature Pages Follow]
<PAGE> 67
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
TRANS-RESOURCES, INC.
By: /s/ Lester W. Youner
---------------------------------
Name: Lester W. Youner
Title: Vice President and
Chief Financial Officer
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/ Angelita L. Pena
---------------------------------
Name: Angelita L. Pena
Title: Assistant Vice President
S-1
<PAGE> 68
EXHIBIT A
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT
OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
A-1
<PAGE> 69
THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT
FOR PURPOSES OF SECTION 1271 et seq. OF THE INTERNAL
REVENUE CODE. FOR EACH $1,000 PRINCIPAL AMOUNT AT
MATURITY OF THIS SECURITY, THE ISSUE PRICE IS $558.58
THE ISSUE DATE OF THIS SECURITY IS MARCH 16, 1998
AND THE YIELD TO MATURITY IS 12%.
TRANS-RESOURCES, INC.
12% Senior Discount Note
due March 15, 2008, Series A
CUSIP No.:[ ]
No. [ ] $[ ]
TRANS-RESOURCES, INC., a Delaware corporation (the "Company", which
term includes any successor), for value received promises to pay to [ ] or
registered assigns, the principal sum of [ ] Dollars, on March 15, 2008.
Interest Payment Dates: March 15 and September 15, commencing on
September 15, 2003.
Interest Record Dates: March 1 and September 1.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
A-2
<PAGE> 70
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
TRANS-RESOURCES, INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Dated: March 16, 1998
A-3
<PAGE> 71
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 12% Senior Discount Notes due March 15, 2008,
Series A, described in the within-mentioned Indenture.
Dated: March 16, 1998
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
---------------------------------
Authorized Signatory
A-4
<PAGE> 72
(REVERSE OF SECURITY)
TRANS-RESOURCES, INC.
12% Senior Discount Note
due March 15, 2008, Series A
1. Interest.
TRANS-RESOURCES, INC., a Delaware corporation (the "Company"),
promises to pay cash interest on each Interest Payment Date on the principal
amount at maturity of this Security at the rate per annum shown above. Cash
interest on this Security will accrete and compound semi-annually until March
15, 2003. Thereafter, cash interest will accrue at a rate of 12% per annum and
will be payable semi-annually in arrears on each Interest Payment Date. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
In addition, the Company shall pay interest on overdue Accreted
Value or principal and on overdue installments of interest (without regard to
any applicable grace periods) to the extent lawful from time to time on demand,
in each case at the rate borne by this Security.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are cancelled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to a
Paying Agent to collect Accreted Value or principal payments. The Company shall
pay Accreted Value or principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay Accreted Value or principal
and interest by wire transfer of Federal funds (provided that the Paying Agent
shall have received wire instructions on or prior to the relevant Interest
Record Date), or interest by check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a Holder
at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (the "Trustee") will
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company may, subject to certain
exceptions, act as paying Agent or Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
March 16, 1998 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. This Security is one of a duly authorized issue of Securities of
the Company designated as its 12% Senior Discount Notes due 2008, Series A,
issued under the Indenture. The aggregate principal amount at maturity of
Securities which may be issued under the Indenture is limited (except as
otherwise provided in the Indenture) to $135,000,000. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939,
A-5
<PAGE> 73
as amended (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date
of the Indenture (except as otherwise indicated in the Indenture) until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and holders of Securities are referred to the Indenture and the TIA for a
statement of them. The Securities are general unsecured obligations of the
Company.
5. Optional Redemption.
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after March 15, 2003, at the redemption
prices (expressed as a percentage of principal amount at maturity) set forth
below, plus accrued and unpaid interest thereon, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the twelve-month period beginning on March 15 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
------------------- ----------
<S> <C>
2003 106.000%
2004 104.000%
2005 102.000%
2006 and thereafter 100.000%
</TABLE>
6. Optional Redemption upon Public Equity Offerings.
In addition, at any time and from time to time on or prior to March
15, 2001, the Company may, at its option, redeem up to 33-1/3% of the aggregate
principal amount at maturity of the Securities originally issued with the net
cash proceeds of one or more Public Equity Offerings by the Company after which
there is a Public Market, at a redemption price in cash equal to 112% of the
Accreted Value thereof on the date of redemption; provided, however, that at
least 66-2/3% of the aggregate principal amount at maturity of the Securities
originally issued must remain outstanding immediately after giving effect to
each such redemption (excluding any Securities held by the Company or any of its
Affiliates). Notice of any such redemption must be given within 60 days after
the date of the closing of the relevant Public Equity Offering of the Company.
7. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount at maturity.
Securities and portions of them the Trustee so selects shall be in amounts of
$1,000 principal amount at maturity or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount at maturity thereof to be redeemed. A new Security in a
principal amount at maturity equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Security. On and after the Redemption Date, Accreted Value or interest will
cease to accrete or accrue, as the case may be, on Securities or portions
thereof called for redemption so long as the Company has deposited with the
Paying Agent for the Securities funds in satisfaction of the redemption price
pursuant to the Indenture and the Paying Agent is not prohibited from paying
such funds to the Holders pursuant to the terms of the Indenture.
A-6
<PAGE> 74
8. Change of Control Offer.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall, within 60
days after the Change of Control Date, make an Offer to Purchase all Securities
then outstanding at a purchase price in cash equal to 101% of the Accreted Value
thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date
(subject to the right of Holders of record on the relevant Interest Record Date
to receive interest due on the relevant Interest Payment Date).
9. Limitation on Disposition of Assets.
The Company is, subject to certain conditions, obligated to make an
Offer to Purchase Securities at a purchase price equal to 100% of the Accreted
Value thereof, plus accrued and unpaid interest thereon, if any, to the Purchase
Date (subject to the right of Holders of record on the relevant Interest Record
Date to receive interest due on the relevant Interest Payment Date) with the
excess proceeds of certain asset dispositions.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 principal amount at maturity and integral multiples of
$1,000 principal amount at maturity. A Holder shall register the transfer of or
exchange of Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange of any Securities or
portions thereof selected for redemption, except the unredeemed portion of any
security being redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. Unclaimed Funds.
If funds for the payment of Accreted Value or principal or interest
remain unclaimed for two years, the Trustee and the Paying Agent will repay the
funds to the Company at its written request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture and the Securities, except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Securities may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount at maturity of the Securities then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount at maturity of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may amend or
A-7
<PAGE> 75
supplement the Indenture and the Securities to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not materially adversely
affect the rights of any Holder of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications and
exceptions. The Company must report quarterly to the Trustee on compliance with
such limitations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of Securities
then outstanding may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the Indenture. Holders
of Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received reasonable indemnity satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount at maturity of the Securities then
outstanding to direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Securities notice of certain continuing
Defaults or Events of Default if it determines that withholding notice is in
their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company or its Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as
such, of the Company shall have any liability for any obligation of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint ten-
A-8
<PAGE> 76
ants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
21. 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 Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Registration Rights.
Pursuant to the Exchange and Registration Rights Agreement, the
Company will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for a 12% Senior Discount Note due 2008, Series
B, of the Company which has been registered under the Securities Act, in like
principal amount at maturity and having terms identical in all material respects
to the Initial Securities. The Holders shall be entitled to receive certain
additional interest payments in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Exchange and Registration Rights Agreement.
23. Governing Law.
The laws of the State of New York shall govern the Indenture and
this Security without regard to principles of conflicts of laws.
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<PAGE> 77
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint_________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:________________ Signed:________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 78
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.05 or Section 4.14 of the Indenture, check the appropriate
box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.05 or Section 4.14 of the Indenture, state the
amount: $_____________
Dated: Your Signature:
---------------- --------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
-----------------------------------------------------
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 79
EXHIBIT B
[FORM OF SERIES B SECURITY]
THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT
FOR PURPOSES OF SECTION 1271 et seq. OF THE INTERNAL
REVENUE CODE. FOR EACH $1,000 PRINCIPAL AMOUNT AT
MATURITY OF THIS SECURITY, THE ISSUE PRICE IS $558.58
THE ISSUE DATE OF THIS SECURITY IS MARCH 16, 1998
AND THE YIELD TO MATURITY IS 12%.
TRANS-RESOURCES, INC.
12% Senior Discount Note
due March 15, 2008, Series B
CUSIP No.:[ ]
No. [ ] $[ ]
TRANS-RESOURCES, INC., a Delaware corporation (the "Company", which
term includes any successor), for value received promises to pay to [ ] or
registered assigns, the principal sum of [ ] Dollars, on March 15, 2008.
Interest Payment Dates: March 15 and September 15, commencing on
September 15, 2003.
Interest Record Dates: March 1 and September 1.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
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<PAGE> 80
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
TRANS-RESOURCES, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
Dated: March 16, 1998
B-2
<PAGE> 81
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 12% Senior Discount Notes due March 15, 2008,
Series B, described in the within-mentioned Indenture.
Dated: March 16, 1998
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
------------------------------
Authorized Signatory
B-3
<PAGE> 82
(REVERSE OF SECURITY)
TRANS-RESOURCES, INC.
12% Senior Discount Note
due March 15, 2008, Series B
1. Interest.
TRANS-RESOURCES, INC., a Delaware corporation (the "Company"),
promises to pay cash interest on each Interest Payment Date on the principal
amount at maturity of this Security at the rate per annum shown above. Cash
interest on this Security will accrete and compound semi-annually until March
15, 2003. Thereafter, cash interest will accrue at a rate of 12% per annum and
will be payable semi-annually in arrears on each Interest Payment Date. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
In addition, the Company shall pay interest on overdue Accreted
Value or principal and on overdue installments of interest (without regard to
any applicable grace periods) to the extent lawful from time to time on demand,
in each case at the rate borne by this Security.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are cancelled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to a
Paying Agent to collect Accreted Value or principal payments. The Company shall
pay Accreted Value or principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay Accreted Value or principal
and interest by wire transfer of Federal funds (provided that the Paying Agent
shall have received wire instructions on or prior to the relevant Interest
Record Date), or interest by check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a Holder
at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (the "Trustee") will
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company may, subject to certain
exceptions, act as Paying Agent or Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
March 16, 1998 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. This Security is one of a duly authorized issue of Securities of
the Company designated as its 12% Senior Discount Notes due 2008, Series B,
issued under the Indenture. The aggregate principal amount at maturity of
Securities which may be issued under the Indenture is limited (except as
otherwise provided in the Indenture) to $135,000,000. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939,
B-4
<PAGE> 83
as amended (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date
of the Indenture (except as otherwise indicated in the Indenture) until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the Indenture is qualified under the TIA. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and holders of Securities are referred to the Indenture and the TIA for a
statement of them. The Securities are general unsecured obligations of the
Company.
5. Optional Redemption.
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after March 15, 2003, at the redemption
prices (expressed as a percentage of principal amount at maturity) set forth
below, plus accrued and unpaid interest thereon, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the twelve-month period beginning on March 15 of the years indicated below:
Redemption
Year Price
------------------- ----------
2003 106.000%
2004 104.000%
2005 102.000%
2006 and thereafter 100.000%
6. Optional Redemption upon Public Equity Offerings.
In addition, at any time and from time to time on or prior to March
15, 2001, the Company may, at its option, redeem up to 33-1/3% of the aggregate
principal amount at maturity of the Securities originally issued with the net
cash proceeds of one or more Public Equity Offerings by the Company after which
there is a Public Market, at a redemption price in cash equal to 112% of the
Accreted Value thereof on the date of redemption; provided, however, that at
least 66-2/3% of the aggregate principal amount at maturity of the Securities
originally issued must remain outstanding immediately after giving effect to
each such redemption (excluding any Securities held by the Company or any of its
Affiliates). Notice of any such redemption must be given within 60 days after
the date of the closing of the relevant Public Equity Offering of the Company.
7. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount at maturity.
Securities and portions of them the Trustee so selects shall be in amounts of
$1,000 principal amount at maturity or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount at maturity thereof to be redeemed. A new Security in a
principal amount at maturity equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Security. On and after the Redemption Date, Accreted Value or interest will
cease to accrete or accrue, as the case may be, on Securities or portions
thereof called for redemption so long as the Company has deposited with the
Paying Agent for the Securities funds in satisfaction of the redemption price
pursuant to the Indenture and the Paying Agent is not prohibited from paying
such funds to the Holders pursuant to the terms of the Indenture.
B-5
<PAGE> 84
8. Change of Control Offer.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall, within 60
days after the Change of Control Date, make an Offer to Purchase all Securities
then outstanding at a purchase price in cash equal to 101% of the Accreted Value
thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date
(subject to the right of Holders of record on the relevant Interest Record Date
to receive interest due on the relevant Interest Payment Date).
9. Limitation on Disposition of Assets.
The Company is, subject to certain conditions, obligated to make an
Offer to Purchase Securities at a purchase price equal to 100% of the Accreted
Value thereof, plus accrued and unpaid interest thereon, if any, to the Purchase
Date (subject to the right of Holders of record on the relevant Interest Record
Date to receive interest due on the relevant Interest Payment Date) with the
excess proceeds of certain asset dispositions.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 principal amount at maturity and integral multiples of
$1,000 principal amount at maturity. A Holder shall register the transfer of or
exchange of Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange of any Securities or
portions thereof selected for redemption, except the unredeemed portion of any
security being redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. Unclaimed Funds.
If funds for the payment of Accreted Value or principal or interest
remain unclaimed for two years, the Trustee and the Paying Agent will repay the
funds to the Company at its written request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture and the Securities, except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Securities may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount at maturity of the Securities then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount at maturity of
B-6
<PAGE> 85
the Securities then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture and the Securities to,
among other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Securities in addition to or in place of certificated Securities
or comply with any requirements of the SEC in connection with the qualification
of the Indenture under the TIA, or make any other change that does not
materially adversely affect the rights of any Holder of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications and
exceptions. The Company must report quarterly to the Trustee on compliance with
such limitations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of Securities
then outstanding may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the Indenture. Holders
of Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received reasonable indemnity satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount at maturity of the Securities then
outstanding to direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Securities notice of certain continuing
Defaults or Events of Default if it determines that withholding notice is in
their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company or its Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as
such, of the Company shall have any liability for any obligation of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint ten-
B-7
<PAGE> 86
ants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
21. 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 Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Governing Law.
The laws of the State of New York shall govern the Indenture and
this Security without regard to principles of conflicts of laws.
B-8
<PAGE> 87
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint_________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:________________ Signed:________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 88
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.05 or Section 4.14 of the Indenture, check the appropriate
box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.05 or Section 4.14 of the Indenture, state the
amount: $_____________
Dated: Your Signature:
--------------- --------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
--------------------------------------------------------
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 89
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY 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) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE> 90
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 12% Senior Discount Notes due 2008
(the "Securities") of Trans-Resources, Inc.
This Certificate relates to $_______ principal amount at maturity of
Securities held in the form of* ___ a beneficial interest in a Global Security
or* _______ Physical Securities by ______ (the "Transferor").
The Transferor:*
|_| has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
|_| has requested by written order that the Registrar exchange or
register the transfer of a Physical Security or Physical Securities.
|_| In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such Indenture,
and that the transfer of the Securities does not require Registration under the
Securities Act of 1933, as amended (the "Act"), because*:
|_| Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture).
|_| Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
|_| Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Act) which delivers a certificate to the Trustee in the form of
Exhibit E to the Indenture.
|_| Such Security is being transferred in reliance on Rule 144 under the
Act.
|_| Such Security is being transferred in reliance on and in compliance
with an exemption from the Registration requirements of the Act other than Rule
144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." An Opinion of Counsel to the effect that such transfer
does not require Registration under the Securities Act accompanies this
certification.
D-1
<PAGE> 91
--------------------------------
[INSERT NAME OF TRANSFEROR]
By:
------------------------
[Authorized Signatory]
Date:
----------------------------
*Check applicable box.
D-2
<PAGE> 92
EXHIBIT E
Form of Transferee Letter of Representation
State Street Bank and Trust Company
61 Broadway, 15th Floor
New York, New York 10006
Attention: Corporate Trust Division
Dear Sirs:
This certificate is delivered to request a transfer of $________
principal amount at maturity of the 12% Senior Discount Notes due 2008 (the
"Securities") of Trans-Resources, Inc. (the "Company"). Upon transfer, the
Securities would be registered in the name of the new beneficial owner as
follows:
Name:
----------------------------------------
Address:
-------------------------------------
Taxpayer ID Number:
--------------------------
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities
Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount at
maturity of the Securities, and we are acquiring the Securities not with a view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act. We have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risk of our
investment in the Securities and we invest in or purchase securities similar to
the Notes in the normal course of our business. We and any accounts for which we
are acting are each able to bear the economic risk of our or its investment.
2. We understand that the Securities have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date which is two years after
the later of the date of original issue and the last date on which the Company
or any affiliate of the Company was the owner of such Securities (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act, to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB and to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales that occur outside of the United States within the meaning of
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of such
an institutional "accredited investor," in each case in a minimum principal
amount of the Securities of $250,000 or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the disposition of
our property or the property of such investor account or
E-1
<PAGE> 93
accounts be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter to
the Company and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring
such Securities for investment purposes and not for distribution in violation of
the Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Notes pursuant to clause (d), (e) or (f)
above to require the delivery of an opinion of counsel, certificates and/or
other information satisfactory to the Company and the Trustee.
Dated: TRANSFEREE:
---------------------- -------------------------
By:
-------------------------
E-2
<PAGE> 1
TRANS-RESOURCES, INC.
$100,000,000
10 3/4% Senior Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
March 16, 1998
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Trans-Resources, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Chase Securities Inc. ("CSI") and Donaldson,
Lufkin & Jenrette Securities Corporation (together with CSI, the "Initial
Purchasers"), upon the terms and subject to the conditions set forth in a
purchase agreement dated March 11, 1998 (the "Purchase Agreement") between the
Company and the Initial Purchasers, relating to the sale by the Company to the
Initial Purchasers of $100,000,000 aggregate principal amount of its 10 3/4%
Senior Notes due 2008 (the "Senior Notes"). Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Purchase
Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchasers thereunder, the Company agrees with the Initial Purchasers,
for the benefit of the holders (including the Initial Purchasers) of the Senior
Notes, the Senior Exchange Notes (as defined herein) and the Private Senior
Exchange Notes (as defined herein) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall (i) prepare and, not
later than 60 days following the date of original issuance of the Senior Notes
(the "Issue Date"), file with the Commission a registration statement (the
"Exchange Offer Registration Statement") on Form S-1 or Form S-4, if the use of
such forms is then available, with respect to a proposed offer to the Holders of
the Senior Notes (the "Registered Exchange Offer") to issue and deliver to such
Holders, in exchange for the Senior Notes, a like aggregate principal amount of
debt securities of the Company (the "Senior Exchange Notes") that are identical
in all material respects to the Senior Notes, except for the transfer
restrictions relating to the
E-8
<PAGE> 2
-2-
Senior Notes, (ii) use its reasonable best efforts to cause the Exchange Offer
Registration Statement to become effective under the Securities Act no later
than 150 days after the Issue Date and the Registered Exchange Offer to be
consummated no later than 180 days after the Issue Date and (iii) keep the
Exchange Offer Registration Statement effective for not less than 20 business
days (or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders (such period being
called the "Exchange Offer Registration Period"). The Senior Exchange Notes will
be issued under the Senior Notes Indenture or an indenture (the "Senior Exchange
Notes Indenture") between the Company and the Senior Notes Trustee or such other
bank or trust company that is reasonably satisfactory to the Initial Purchasers,
as trustee (the "Senior Exchange Notes Trustee"), such indenture to be identical
in all material respects to the Senior Notes Indenture, except for the transfer
restrictions relating to the Senior Notes (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Senior Notes for Senior Exchange Notes (assuming that such Holder (a)
is not an affiliate of the Company or an Exchanging Dealer (as defined herein)
not complying with the requirements of the next sentence, (b) is not an Initial
Purchaser holding Senior Notes that have, or that are reasonably likely to have,
the status of an unsold allotment in an initial distribution, (c) acquires the
Senior Exchange Notes in the ordinary course of such Holder's business and (d)
has no arrangements or understandings with any person to participate in the
distribution of the Senior Exchange Notes) and to trade such Senior Exchange
Notes from and after their receipt without any limitations or restrictions under
the Securities Act and without material restrictions under the securities laws
of the several states of the United States. The Company, the Initial Purchasers
and each Exchanging Dealer acknowledge that, pursuant to current interpretations
by the Commission's staff of Section 5 of the Securities Act, each Holder that
is a broker-dealer electing to exchange Senior Notes, acquired for its own
account as a result of market-making activities or other trading activities, for
Senior Exchange Notes (an "Exchanging Dealer"), is required to deliver a
prospectus containing substantially the information set forth in Annex A hereto
on the cover, in Annex B hereto in the "Exchange Offer Procedures" and the
"Purpose of the Exchange Offer" sections of such prospectus and in Annex C
hereto in the "Plan of Distribution" section of such prospectus in connection
with a sale of any such Senior Exchange Notes received by such Exchanging Dealer
pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Senior Notes acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any
<PAGE> 3
-3-
such Holder, simultaneously with the delivery of the Senior Exchange Notes in
the Registered Exchange Offer, issue and deliver to any such Holder, in exchange
for the Senior Notes held by such Holder (the "Private Exchange"), a like
aggregate principal amount of debt securities of the Company (the "Private
Senior Exchange Notes") that are identical in all material respects to the
Senior Exchange Notes, except for the transfer restrictions relating to such
Private Senior Exchange Notes. The Private Senior Exchange Notes will be issued
under the same indenture as the Senior Exchange Notes, and the Company shall use
its reasonable best efforts to cause the Private Senior Exchange Notes to bear
the same CUSIP number as the Senior Exchange Notes.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 20
business days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Senior Notes at any time
prior to the close of business, New York City time, on the last business
day on which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Senior Notes tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Senior Notes Trustee for cancellation all Senior
Notes so accepted for exchange; and
(c) cause the Senior Notes Trustee or the Senior Exchange Notes
Trustee, as the case may be, promptly to authenticate and deliver to each
Holder, Senior Ex-
<PAGE> 4
-4-
change Notes or Private Senior Exchange Notes, as the case may be, equal
in principal amount to the Senior Notes of such Holder so accepted for
exchange.
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Senior Exchange Notes; provided, however, that (i) in the
case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer, such period shall be the lesser of 180 days
and the date on which all Exchanging Dealers have sold all Senior Exchange Notes
held by them and (ii) the Company shall make such prospectus and any amendment
or supplement thereto available to any broker-dealer for use in connection with
any resale of any Senior Exchange Notes for a period of not less than 180 days
after the consummation of the Registered Exchange Offer.
The Senior Notes Indenture or the Senior Exchange Notes Indenture,
as the case may be, shall provide that the Senior Notes, the Senior Exchange
Notes and the Private Senior Exchange Notes shall vote and consent together on
all matters as one class and that none of the Senior Notes, the Senior Exchange
Notes or the Private Senior Exchange Notes will have the right to vote or
consent as a separate class on any matter.
Interest on each Senior Exchange Note and Private Senior Exchange
Note issued pursuant to the Registered Exchange Offer and in the Private
Exchange will accrue in the manner provided in the Senior Notes Indenture.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Senior Exchange Notes received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understandings with any person to participate in the
distribution of the Senior Notes or the Senior Exchange Notes within the meaning
of the Securities Act and (iii) such Holder is not an affiliate of the Company
or, if it is such an affiliate, such Holder will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain 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 and
(iii) any pro-
<PAGE> 5
-5-
spectus forming part of any Exchange Offer Registration Statement, and any
supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit 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.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Senior Notes validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Senior Exchange Notes within 180 days after
the Issue Date, or (iii) any Initial Purchaser so requests with respect to
Senior Notes or Private Senior Exchange Notes not eligible to be exchanged for
Senior Exchange Notes in the Registered Exchange Offer and held by it following
the consummation of the Registered Exchange Offer, or (iv) any applicable law or
interpretations do not permit any Holder to participate in the Registered
Exchange Offer, or (v) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Senior Exchange Notes in exchange for
Senior Notes (other than due solely to the status of a Holder (other than an
Initial Purchaser) as an affiliate of the Company within the meaning of the
Securities Act, and other than any state securities law restrictions which,
individually or in the aggregate, do not materially adversely affect the ability
of any such Holder to resell the securities held by such Holder), or (vi) the
Company so elects, then the following provisions shall apply:
(a) The Company shall use its reasonable best efforts to file a
shelf registration statement (a "Shelf Registration Statement" and, together
with any Exchange Offer Registration Statement, a "Registration Statement")
prior to the later of (a) 60 days after the Issue Date or (b) 30 days after the
obligation to file the Shelf Registration Statement arises. The Company shall
thereafter use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective on an appropriate form under the Securities
Act, relating to the offer and sale of the Transfer Restricted Senior Notes (as
defined below) by the holders thereof from time to time, in accordance with the
methods of distribution set forth in such Shelf Registration Statement, prior to
the later of (a) 150 days after the Issue Date or (b) 120 days after the
obligation to file such Shelf Registration Statement arises.
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer Restricted
Senior Notes for a period ending on the earlier of (i) two years from the Issue
Date or such shorter period that will terminate when all the Transfer Restricted
Senior Notes covered by the Shelf Registration Statement have been sold pursuant
thereto and (ii) the date on which the Senior Notes become eligible for resale
without volume restrictions pursuant to Rule 144 under the Securities Act (in
any such case,
<PAGE> 6
-6-
such period being called the "Shelf Registration Period"). The Company shall be
deemed not to have used its reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Transfer Restricted Senior
Notes covered thereby not being able to offer and sell such Transfer Restricted
Senior Notes during that period, unless such action is required by applicable
law; provided, however, that the foregoing shall not apply to actions taken by
the Company in good faith and for valid business reasons (not including
avoidance of their obligations hereunder), including, without limitation, the
acquisition or divestiture of assets, so long as the Company within 60 days
thereafter complies with the requirements of Section 4(j) hereof. Any such
period during which the Company fails to keep the registration statement
effective and usable for offers and sales of Senior Notes and Senior Exchange
Notes is referred to as a "Suspension Period." A Suspension Period shall
commence on and include the date that the Company gives notice to the Holders to
the effect that, in the reasonable judgment of the Company, the use of the Shelf
Registration Statement would materially interfere with a valid business purpose
of the Company and that the Shelf Registration Statement is no longer effective
or the prospectus included therein is no longer usable for offers and sales of
Senior Notes and Senior Exchange Notes and shall end on the date when each
Holder of Senior Notes and Senior Exchange Notes covered by such registration
statement either receives the copies of the supplemented or amended prospectus
contemplated by Section 4(j) hereof or is advised in writing by the Company that
use of the prospectus may be resumed. If one or more Suspension Periods occur,
the two year time period referenced above shall be extended by the number of
days included in each such Suspension Period; provided, however, that the
aggregate number of days of any Suspension Periods shall not exceed 60 days in
any calendar year.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included therein
in reliance upon or in conformity with written information furnished to the
Company by or on behalf of any Holder specifically for use therein (the
"Holders' Information")) does not contain 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 and (iii) any prospectus forming part
of any Shelf Registration Statement, and any supplement to such prospectus (in
either case, other than with respect to Holders' Information), does not include
an untrue statement of a material fact or omit 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.
<PAGE> 7
-7-
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Transfer Restricted Senior Notes will suffer damages if the Company fails to
fulfill its obligations under Section 1 or Section 2, as applicable, and that it
would not be feasible to ascertain the extent of such damages. Accordingly, if
(i) the Registration Statement is not filed with the Commission within 60 days
after the Issue Date or, in the event that a Shelf Registration Statement is
required, such Shelf Registration Statement is not filed on or prior to the
later of (a) 60 days after the Issue Date or (b) 30 days after the obligation to
file a Shelf Registration Statement arises, (ii) the Exchange Offer Registration
Statement (if applicable) is not declared effective within 150 days after the
Issue Date or, in the event that a Shelf Registration Statement is required,
such Shelf Registration Statement is not declared effective on or prior to the
later of (a) 150 days after the Issue Date or (b) 120 days after the obligation
to file a Shelf Registration Statement arises, (iii) the Registered Exchange
Offer (if applicable) is not consummated on or prior to 180 days after the Issue
Date, or (iv) the Shelf Registration Statement is filed and declared effective
prior to the later of (a) 150 days after the Issue Date or (b) 120 days after
the obligation to file a Shelf Registration Statement arises, but shall
thereafter cease to be effective (at any time that the Company is obligated to
maintain the effectiveness thereof) without being succeeded within 15 days by an
additional Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
will be obligated to pay liquidated damages to each Holder of Transfer
Restricted Senior Notes, during the period of one or more such Registration
Defaults, in an amount equal to $0.192 per week per $1,000 principal amount of
Transfer Restricted Senior Notes held by such Holder until (a) the applicable
Registration Statement is filed, (b) the Exchange Offer Registration Statement
is declared effective and the Registered Exchange Offer is consummated, (c) the
Shelf Registration Statement is declared effective or (d) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of all
Registration Defaults, the accrual of liquidated damages will cease. As used
herein, the term "Transfer Restricted Senior Notes" means (i) each Senior Note
until the date on which such Senior Note has been exchanged for a freely
transferable Senior Exchange Note in the Registered Notes Offer, (ii) each
Senior Note or Private Senior Exchange Note until the date on which it has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) each Senior Note or Private
Senior Exchange Note until the date on which it is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act. Notwithstanding anything to the contrary in
this Section 3(a), the Company shall not be required to pay liquidated damages
to a Holder of Transfer Restricted Senior Notes if such Holder failed to comply
with its obligations to make the representations set forth in the second to last
paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n). Liquidated damages shall not
accrue during any Suspension Period permitted pursuant to Section 2(b) above.
<PAGE> 8
-8-
(b) The Company shall notify the Senior Notes Trustee and the Paying
Agent under the Senior Notes Indenture immediately upon the happening of each
and every Registration Default. The Company shall pay the liquidated damages due
on the Transfer Restricted Senior Notes by depositing with the Paying Agent
(which may not be the Company for these purposes), in trust, for the benefit of
the Holders thereof, prior to 10:00 a.m., New York City time, on the next
interest payment date specified by the Senior Notes Indenture and the Senior
Notes, sums sufficient to pay the liquidated damages then due. The liquidated
damages due shall be payable on each interest payment date specified by the
Senior Notes Indenture and the Senior Notes to the record holder entitled to
receive the interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the date of the
applicable Registration Default.
(c) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Senior Notes by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior
to the filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and shall use its reasonable best efforts to reflect in each
such document, when so filed with the Commission, such comments as any Initial
Purchaser may reasonably propose; (ii) include the information set forth in
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section, include the
information set forth in Annex C hereto in the "Plan of Distribution" section of
the prospectus forming a part of the Exchange Offer Registration Statement, and
include the information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; and (iii) if requested by
any Initial Purchaser, include the information required by Items 507 or 508 of
Regulation S-K, as applicable, in the prospectus forming a part of the Exchange
Offer Registration Statement.
(b) The Company shall advise each Initial Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such person,
confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
<PAGE> 9
-9-
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Company, the Senior
Exchange Notes or the Private Senior Exchange Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do not
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(c) The Company will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Senior Notes included within the coverage of any Shelf Registration Statement,
without charge, at least one conformed copy of such Shelf Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules and, if any such Holder so requests in writing, all exhibits thereto
(including those, incorporated by reference, if any).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Senior Notes included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of such prospectus
or any amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Senior Notes in connection with the offer and sale of the
Transfer Restricted Senior Notes covered by such prospectus or any amendment or
supplement thereto.
<PAGE> 10
-10-
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge, at
least one conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if any Initial Purchaser or Exchanging Dealer or any such Holder so
requests in writing, all exhibits thereto (including those incorporated by
reference, if any).
(g) The Company will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the Exchange
Offer Registration Statement or the Shelf Registration Statement and any
amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or
other persons may reasonably request; and the Company consents to the use of
such prospectus or any amendment or supplement thereto by any such Initial
Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company will use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Senior Notes, Senior Exchange Notes or Private
Senior Exchange Notes included therein and their respective counsel in
connection with the registration or qualification of, such Senior Notes, Senior
Exchange Notes or Private Senior Exchange Notes for offer and sale under the
securities or blue sky laws of such jurisdictions as any such Holder reasonably
requests in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the Senior
Notes, Senior Exchange Notes or Private Senior Exchange Notes covered by such
Registration Statement; provided, however, that the Company will 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 or to taxation in any such jurisdiction where it is not then so subject.
(i) The Company will cooperate with the Holders of Senior Notes,
Senior Exchange Notes or Private Senior Exchange Notes to facilitate the timely
preparation and delivery of certificates representing Senior Notes, Senior
Exchange Notes or Private Senior Exchange Notes to be sold pursuant to any
Registration Statement free of any restrictive legends and in such denominations
and registered in such names as the Holders thereof may request in writing prior
to sales of Senior Notes, Senior Exchange Notes or Private Senior Exchange Notes
pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company required to maintain an effective
Registration Statement, the Company will promptly prepare and file with the
Commission a post-effective amendment
<PAGE> 11
-11-
to the Registration Statement or a supplement to the related prospectus or file
any other required document so that, as thereafter delivered to purchasers of
the Senior Notes, Senior Exchange Notes or Private Senior Exchange Notes from a
Holder, the prospectus will not include an untrue statement of a material fact
or omit 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.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Senior Notes, the
Senior Exchange Notes and the Private Senior Exchange Notes, as the case may be,
and provide the applicable trustee with certificates for the Senior Notes, the
Senior Exchange Notes or the Private Senior Exchange Notes, as the case may be,
in a form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and
regulations of the Commission and the Company will make generally available to
its security holders as soon as practicable after the effective date of the
applicable Registration Statement an earning statement satisfying the provisions
of Section 11(a) of the Securities Act; provided, however, that in no event
shall such earning statement be delivered later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning with the
first month of the Company's first fiscal quarter commencing after the effective
date of the applicable Registration Statement, which statement shall cover such
12-month period.
(m) The Company will cause the Senior Notes Indenture or the Senior
Exchange Notes Indenture, as the case may be, to be qualified under the Trust
Indenture Act as required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Senior Notes to be registered pursuant to any Shelf Registration Statement to
furnish to the Company such information concerning the Holder and the
distribution of such Transfer Restricted Senior Notes as the Company may from
time to time reasonably require for inclusion in such Shelf Registration
Statement, and the Company may exclude from such registration the Transfer
Restricted Senior Notes of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Senior Notes to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Senior Notes that, upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (v), such Holder
will discontinue disposition of such Transfer Restricted Senior Notes until such
Holder's receipt of copies of the supplemental or amended prospectus
contemplated by Section 4(j) or until advised in writing (the "Advice") by the
<PAGE> 12
-12-
Company that the use of the applicable prospectus may be resumed. If the Company
shall give any notice under Section 4(b)(ii) through (v) during the period that
the Company is required to maintain an effective Registration Statement (the
"Effectiveness Period"), such Effectiveness Period shall be extended by the
number of days during such period from and including the date of the giving of
such notice to and including the date when each seller of Transfer Restricted
Senior Notes covered by such Registration Statement shall have received (x) the
copies of the supplemental or amended prospectus contemplated by Section 4(j)
(if an amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if such Shelf Registration
includes at least $20.0 million aggregate principal amount at maturity of
securities, if requested by a majority of the aggregate principal amount of
Senior Notes, Senior Exchange Notes and Private Senior Exchange Notes included
in the Shelf Registration Statement, an underwriting agreement in customary
form) and take all such other action, if any, as Holders of a majority in
aggregate principal amount of the Senior Notes, Senior Exchange Notes and
Private Senior Exchange Notes being sold or the managing underwriters (if any)
shall reasonably request in order to facilitate any disposition of Senior Notes,
Senior Exchange Notes or Private Senior Exchange Notes pursuant to such Shelf
Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and Special
Counsel (as defined below) acting for, Holders of a majority in aggregate
principal amount of the Senior Notes, Senior Exchange Notes and Private Senior
Exchange Notes being sold and any underwriter participating in any disposition
of Senior Notes, Senior Exchange Notes or Private Senior Exchange Notes pursuant
to such Shelf Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its subsidiaries
and (ii) use its reasonable best efforts to have its officers, directors,
employees, accountants and counsel supply all relevant information reasonably
requested by such representative, Special Counsel or any such underwriter (an
"Inspector") in connection with such Shelf Registration Statement.
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in aggregate principal amount of
the Senior Notes, Senior Exchange Notes and Private Senior Exchange Notes being
sold, their Special Counsel or the managing underwriters, if any, in connection
with such Shelf Registration Statement, use their reasonable best efforts to
cause (i) their counsel to deliver an opinion relating to the Shelf Registration
Statement and the Senior Notes, Senior Exchange Notes or Private Senior Exchange
Notes, as applicable, in customary form, (ii) their officers to execute and
deliver all customary documents and certificates requested by Holders of a
majority in aggregate princi-
<PAGE> 13
-13-
pal amount of the Senior Notes, Senior Exchange Notes and Private Senior
Exchange Notes being sold, their Special Counsel or the managing underwriters,
if any, and (iii) their independent public accountants to provide a comfort
letter or letters in customary form, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
5. Registration Expenses. Subject to Section 9, the Company will
bear all expenses incurred in connection with the performance of its obligations
under Sections 1, 2, 3 and 4 and the Company will reimburse the Initial
Purchasers and the Holders for the reasonable fees and disbursements of one firm
of attorneys chosen by the Holders of a majority in aggregate principal amount
of the Senior Notes, the Senior Exchange Notes and the Private Senior Exchange
Notes to be sold pursuant to the Registration Statements (the "Special Counsel")
acting for the Initial Purchasers or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company shall indemnify and hold harmless each Holder
(including, without limitation, any such Initial Purchaser or Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6 and Section 7 as a Holder) from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Senior Notes, Senior
Exchange Notes or Private Senior Exchange Notes), to which that Holder may
become subject, whether commenced or threatened, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in any such Registration Statement or any
prospectus forming part thereof or in any amendment or supplement thereto or
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
shall reimburse each Holder promptly upon demand for any legal or other expenses
reasonably incurred by that Holder in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Holders' Information; provided,
further, however, that
<PAGE> 14
-14-
with respect to any such untrue statement in or omission from any related
preliminary prospectus, the indemnity agreement contained in this Section 6(a)
shall not inure to the benefit of any Holder from whom the person asserting any
such loss, claim, damage, liability or action received Senior Notes, Senior
Exchange Notes or Private Senior Exchange Notes to the extent that such loss,
claim, damage, liability or action of or with respect to such Holder results
from the fact that both (A) a copy of the final prospectus was not sent or given
to such person at or prior to the written confirmation of the sale of such
Senior Notes, Senior Exchange Notes or Private Senior Exchange Notes to such
person and (B) the untrue statement in or omission from the related preliminary
prospectus was corrected in the final prospectus unless, in either case, such
failure to deliver the final prospectus was a result of non-compliance by the
Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder,
severally and not jointly, shall indemnify and hold harmless the Company, its
affiliates, its officers, directors, employees, representatives and agents, and
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6(b) and Section 7 as the Company), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company may become subject, whether commenced or threatened, under
the Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Senior Notes, Senior
Exchange Notes or Private Senior Exchange Notes pursuant to such Shelf
Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that ac-
<PAGE> 15
-15-
tion; provided, however, that the failure to notify the indemnifying party shall
not relieve it from any liability which it may have under this Section 6 except
to the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; provided, further, however,
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 6. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than the reasonable costs of investigation;
provided, however, that an indemnified party shall have the right to employ its
own counsel in any such action, but the fees, expenses and other charges of such
counsel for the indemnified party will be at the expense of such indemnified
party unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party has
reasonably concluded (based upon advice of counsel to the indemnified party)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based upon advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel reasonably satisfactory to
the indemnified party to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threat-
<PAGE> 16
-16-
ened proceeding in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company from the offering and sale of the Senior Notes
, on the one hand, and a Holder with respect to the sale by such Holder of
Senior Notes, Senior Exchange Notes or Private Senior Exchange Notes, on the
other, or (ii) if the allocation provided by clause (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 (i) above but also the relative fault of
the Company on the one hand and such Holder on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and a Holder on the other with respect to such offering and such sale shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Senior Notes (before deducting expenses) received by or on behalf of the
Company as set forth in the table on the cover of the Offering Memorandum, on
the one hand, bear to the total proceeds received by such Holder with respect to
its sale of Senior Notes, Senior Exchange Notes or Private Senior Exchange
Notes, on the other. The relative fault 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 the
Company or information supplied by the Company on the one hand or to any
Holders' Information supplied by such Holder on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 7 were to be determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 7 shall be deemed to include, for purposes of this Section
7, any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 7, an
indemnifying party that is a Holder of Senior Notes, Senior Exchange Notes or
Private Senior Exchange Notes shall not be required to contribute any amount in
excess of the amount by which the total price at which the Senior Notes, Senior
Exchange Notes or Private Senior Exchange Notes
<PAGE> 17
-17-
sold by such indemnifying party to any purchaser exceeds the amount of any
damages which such indemnifying party has otherwise paid or become liable to pay
by reason of any 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 Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. Rules 144 and 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it shall, upon the written request of any Holder
of Transfer Restricted Senior Notes, provide other information so long as
necessary to permit sales of such Holder's securities pursuant to Rules 144 and
144A. The Company covenants that it will take such further reasonable action as
any Holder of Transfer Restricted Senior Notes may reasonably request, all to
the extent required from time to time to enable such Holder to sell Transfer
Restricted Senior Notes without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Upon the written request of
any Holder of Transfer Restricted Senior Notes, the Company shall deliver to
such Holder a written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be
deemed to require the Company to register any of its securities pursuant to the
Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Senior Notes covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Senior
Notes included in such offering, subject to the consent of the Company (which
shall not be unreasonably withheld or delayed), and such Holders shall be
responsible for all underwriting commissions and discounts in connection
therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Senior
Notes on the basis reasonably provided in any underwriting arrangements approved
by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Senior Notes, Senior Exchange Notes and Private Senior
Exchange Notes, taken as a single class. Notwith-
<PAGE> 18
-18-
standing the foregoing, a waiver or consent to depart from the provisions hereof
with respect to a matter that relates exclusively to the rights of Holders whose
Senior Notes, Senior Exchange Notes or Private Senior Exchange Notes are being
sold pursuant to a Registration Statement and that does not directly or
indirectly materially affect the rights of other Holders may be given by Holders
of a majority in aggregate principal amount of the Senior Notes, Senior Exchange
Notes and Private Senior Exchange Notes being sold by such Holders pursuant to
such Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Senior Notes Indenture,
with a copy in like manner to Chase Securities Inc. and Donaldson, Lufkin
& Jenrette Securities Corporation;
(2) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors and Assigns. This Agreement shall be binding upon the
Company and their successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) 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.
(e) Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act
<PAGE> 19
-19-
and (c) except where otherwise expressly provided, the term "affiliate" has the
meaning set forth in Rule 405 under the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by the Company or by any
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Company of their obligations under Sections 1 or 2
hereof for which liquidated damages have been paid pursuant to Section 3
hereof), will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agree that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. The Company represents, warrants and
agrees that (i) it has not entered into, and shall not, on or after the date of
this Agreement, enter into, any agreement that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof, (ii) it has not previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Transfer Restricted Senior Notes, it
shall not grant to any person the right to request the Company to register any
debt securities of the Company under the Securities Act unless the rights so
granted are not in conflict or inconsistent with the provisions of this
Agreement.
(j) No Piggyback on Registrations. Neither the Company, any of its
security holders (other than the holders of Transfer Restricted Senior Notes in
such capacity and the holders of Transfer Restricted Senior Discount Notes in
such capacity (as defined in the Senior Discount Notes Exchange and Registration
Rights Agreement)) shall have the right to include any securities of the Company
in any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Senior Notes and the Transfer Restricted Senior Discount Notes.
<PAGE> 20
-20-
(k) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
<PAGE> 21
S-1
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchasers.
Very truly yours,
TRANS-RESOURCES, INC.
By: Lester W. Youner
---------------------------
Name: Lester W. Youner
Title: Vice President and
Chief Financial Officer
Accepted:
CHASE SECURITIES INC.
By: /s/ Daniel P. Tredwell
---------------------------
Authorized Signatory
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ David Faris
---------------------------
Authorized Signatory
<PAGE> 22
ANNEX A
Each broker-dealer that receives Senior Exchange Notes for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Senior Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Senior Exchange Notes received in
exchange for Senior Notes where such Senior Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE> 23
ANNEX B
Each broker-dealer that receives Senior Exchange Notes for its own
account in exchange for Senior Notes, where such Senior 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 Senior Exchange Notes. See "Plan of Distribution."
<PAGE> 24
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Senior Exchange Notes for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Senior Exchange
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Senior Exchange
Notes received in exchange for Senior Notes where such Senior Notes were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that, for a period of 180 days after the Expiration Date,
it will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until ,
1998, all dealers effecting transactions in the Senior Exchange Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Senior
Exchange Notes by broker-dealers. Senior Exchange Notes received by
broker-dealers for their own account pursuant to the Registered 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 Senior Exchange Notes or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at 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 Senior Exchange Notes. Any
broker-dealer that resells Senior Exchange Notes that were received by it for
its own account pursuant to the Registered Exchange Offer and any broker or
dealer that participates in a distribution of such Senior Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Senior Exchange 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.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Senior Notes) other than commissions or conces-
<PAGE> 25
sions of any broker-dealers and will indemnify the Holders of the Senior Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
<PAGE> 26
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Senior
Exchange Notes. If the undersigned is a broker-dealer that will receive Senior
Exchange Notes for its own account in exchange for Senior Notes that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Senior Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 1
TRANS-RESOURCES, INC.
$135,000,000 Aggregate Principal Amount at Maturity
12% Senior Discount Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
March 16, 1998
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Trans-Resources, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Chase Securities Inc. ("CSI") and Donaldson,
Lufkin & Jenrette Securities Corporation (together with CSI, the "Initial
Purchasers"), upon the terms and subject to the conditions set forth in a
purchase agreement dated March 11, 1998 (the "Purchase Agreement") between the
Company and the Initial Purchasers, relating to the sale by the Company to the
Initial Purchasers of $135,000,000 aggregate principal amount at maturity of its
12% Senior Discount Notes due 2008 (the "Senior Discount Notes"). Capitalized
terms used but not defined herein shall have the meanings given to such terms in
the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchasers thereunder, the Company agrees with the Initial Purchasers,
for the benefit of the holders (including the Initial Purchasers) of the Senior
Discount Notes, the Senior Discount Exchange Notes (as defined herein) and the
Private Senior Discount Exchange Notes (as defined herein) (collectively, the
"Holders"), as follows:
1. Registered Exchange Offer. The Company shall (i) prepare and, not
later than 60 days following the date of original issuance of the Senior
Discount Notes (the "Issue Date"), file with the Commission a registration
statement (the "Exchange Offer Registration Statement") on Form S-1 or Form S-4,
if the use of such forms is then available, with
E-9
<PAGE> 2
-2-
respect to a proposed offer to the Holders of the Senior Discount Notes (the
"Registered Exchange Offer") to issue and deliver to such Holders, in exchange
for the Senior Discount Notes, a like aggregate principal amount of debt
securities of the Company that are identical in all material respects to the
Senior Discount Notes, except for the transfer restrictions relating to the
Senior Discount Notes, (ii) use its reasonable best efforts to cause the
Exchange Offer Registration Statement to become effective under the Securities
Act no later than 150 days after the Issue Date and the Registered Exchange
Offer to be consummated no later than 180 days after the Issue Date and (iii)
keep the Exchange Offer Registration Statement effective for not less than 20
business days (or longer, if required by applicable law) after the date on which
notice of the Registered Exchange Offer is mailed to the Holders (such period
being called the "Exchange Offer Registration Period"). The Senior Discount
Exchange Notes will be issued under the Senior Discount Notes Indenture or an
indenture (the "Senior Discount Exchange Notes Indenture") between the Company
and the Senior Discount Notes Trustee or such other bank or trust company that
is reasonably satisfactory to the Initial Purchasers, as trustee (the "Senior
Discount Exchange Notes Trustee"), such indenture to be identical in all
material respects to the Senior Discount Notes Indenture, except for the
transfer restrictions relating to the Senior Discount Notes (as described
above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Senior Discount Notes for Senior Discount Exchange Notes (assuming that
such Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as
defined herein) not complying with the requirements of the next sentence, (b) is
not an Initial Purchaser holding Senior Discount Notes that have, or that are
reasonably likely to have, the status of an unsold allotment in an initial
distribution, (c) acquires the Senior Discount Exchange Notes in the ordinary
course of such Holder's business and (d) has no arrangements or understandings
with any person to participate in the distribution of the Senior Discount
Exchange Notes) and to trade such Senior Discount Exchange Notes from and after
their receipt without any limitations or restrictions under the Securities Act
and without material restrictions under the securities laws of the several
states of the United States. The Company, the Initial Purchasers and each
Exchanging Dealer acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Senior Discount Notes, acquired for its own
account as a result of market-making activities or other trading activities, for
Senior Discount Exchange Notes (an "Exchanging Dealer"), is required to deliver
a prospectus containing substantially the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" and
the "Purpose of the Exchange Offer" sections of such prospectus and in Annex C
hereto in the "Plan of Distribution" section of such prospectus in connection
with a sale of any such Senior Discount Exchange Notes received by such
Exchanging Dealer pursuant to the Registered Exchange Offer.
<PAGE> 3
-3-
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Senior Discount Notes acquired by it that have, or that are
reasonably likely to be determined to have, the status of an unsold allotment in
an initial distribution, or any Holder is not entitled to participate in the
Registered Exchange Offer, the Company shall, upon the request of any such
Holder, simultaneously with the delivery of the Senior Discount Exchange Notes
in the Registered Exchange Offer, issue and deliver to any such Holder, in
exchange for the Senior Discount Notes held by such Holder (the "Private
Exchange"), a like aggregate principal amount of debt securities of the Company
that are identical in all material respects to the Senior Discount Exchange
Notes (the "Private Senior Discount Exchange Notes"), except for the transfer
restrictions relating to such Private Senior Discount Exchange Notes. The
Private Senior Discount Exchange Notes will be issued under the same indenture
as the Senior Discount Exchange Notes, and the Company shall use its reasonable
best efforts to cause the Private Senior Discount Exchange Notes to bear the
same CUSIP number as the Senior Discount Exchange Notes.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 20
business days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Senior Discount Notes at any
time prior to the close of business, New York City time, on the last
business day on which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Senior Discount Notes tendered and not
validly withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
<PAGE> 4
-4-
(b) deliver to the Senior Discount Notes Trustee for cancellation
all Senior Discount Notes so accepted for exchange; and
(c) cause the Senior Discount Notes Trustee or the Senior Discount
Exchange Notes Trustee, as the case may be, promptly to authenticate and
deliver to each Holder, Senior Discount Exchange Notes or Private Senior
Exchange Notes, as the case may be, equal in principal amount to the
Senior Discount Notes of such Holder so accepted for exchange.
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Senior Discount Exchange Notes; provided, however, that
(i) in the case where such prospectus and any amendment or supplement thereto
must be delivered by an Exchanging Dealer, such period shall be the lesser of
180 days and the date on which all Exchanging Dealers have sold all Senior
Discount Exchange Notes held by them and (ii) the Company shall make such
prospectus and any amendment or supplement thereto available to any
broker-dealer for use in connection with any resale of any Senior Discount
Exchange Notes for a period of not less than 180 days after the consummation of
the Registered Exchange Offer.
The Senior Discount Notes Indenture or the Senior Discount Exchange
Notes Indenture, as the case may be, shall provide that the Senior Discount
Notes, the Senior Discount Exchange Notes and the Private Senior Discount
Exchange Notes shall vote and consent together on all matters as one class and
that none of the Senior Discount Notes, the Senior Discount Exchange Notes or
the Private Senior Discount Exchange Notes will have the right to vote or
consent as a separate class on any matter.
Interest on each Senior Discount Exchange Note and Private Senior
Discount Exchange Note issued pursuant to the Registered Exchange Offer and in
the Private Exchange will accrete in the manner provided in the Senior Discount
Notes Indenture.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Senior Discount Exchange Notes received by
such Holder will be acquired in the ordinary course of business, (ii) such
Holder will have no arrangements or understandings with any person to
participate in the distribution of the Senior Discount Notes or the Senior
Discount Exchange Notes within the meaning of the Securities Act and (iii) such
Holder is not an affiliate of the Company or, if it is such an affiliate, such
Holder will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable.
<PAGE> 5
-5-
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain 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 and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit 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.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Senior Discount Notes validly tendered pursuant to the
Registered Exchange Offer are not exchanged for Senior Discount Exchange Notes
within 180 days after the Issue Date, or (iii) any Initial Purchaser so requests
with respect to Senior Discount Notes or Private Senior Discount Exchange Notes
not eligible to be exchanged for Senior Discount Exchange Notes in the
Registered Exchange Offer and held by it following the consummation of the
Registered Exchange Offer, or (iv) any applicable law or interpretations do not
permit any Holder to participate in the Registered Exchange Offer, or (v) any
Holder that participates in the Registered Exchange Offer does not receive
freely transferable Senior Discount Exchange Notes in exchange for Senior
Discount Notes (other than due solely to the status of a Holder (other than an
Initial Purchaser) as an affiliate of the Company within the meaning of the
Securities Act, and other than any state securities law restrictions which,
individually or in the aggregate, do not materially adversely affect the ability
of any such Holder to resell the securities held by such Holder), or (vi) the
Company so elects, then the following provisions shall apply:
(a) The Company shall use its reasonable best efforts to file a
shelf registration statement (a "Shelf Registration Statement" and, together
with any Exchange Offer Registration Statement, a "Registration Statement")
prior to the later of (a) 60 days after the Issue Date or (b) 30 days after the
obligation to file the Shelf Registration Statement arises. The Company shall
thereafter use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective on an appropriate form under the Securities
Act, relating to the offer and sale of the Transfer Restricted Senior Discount
Notes (as defined below) by the holders thereof from time to time, in accordance
with the methods of distribution set forth in such Shelf Registration Statement,
prior to the later of (a) 150 days after the Issue Date or (b) 120 days after
the obligation to file such Shelf Registration Statement arises.
<PAGE> 6
-6-
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer Restricted
Senior Discount Notes for a period ending on the earlier of (i) two years from
the Issue Date or such shorter period that will terminate when all the Transfer
Restricted Senior Notes covered by the Shelf Registration Statement have been
sold pursuant thereto and (ii) the date on which the Senior Discount Notes
become eligible for resale without volume restrictions pursuant to Rule 144
under the Securities Act (in any such case, such period being called the "Shelf
Registration Period"). The Company shall be deemed not to have used its
reasonable best efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that would result
in Holders of Transfer Restricted Senior Discount Notes covered thereby not
being able to offer and sell such Transfer Restricted Senior Discount Notes
during that period, unless such action is required by applicable law; provided,
however, that the foregoing shall not apply to actions taken by the Company in
good faith and for valid business reasons (not including avoidance of their
obligations hereunder), including, without limitation, the acquisition or
divestiture of assets, so long as the Company within 60 days thereafter complies
with the requirements of Section 4(j) hereof. Any such period during which the
Company fails to keep the registration statement effective and usable for offers
and sales of Senior Discount Notes and Senior Discount Exchange Notes is
referred to as a "Suspension Period." A Suspension Period shall commence on and
include the date that the Company gives notice to the Holders to the effect
that, in the reasonable judgment of the Company, the use of the Shelf
Registration Statement would materially interfere with a valid business purpose
of the Company and that the Shelf Registration Statement is no longer effective
or the prospectus included therein is no longer usable for offers and sales of
Senior Discount Notes and Senior Discount Exchange Notes and shall end on the
date when each Holder of Senior Discount Notes and Senior Discount Exchange
Notes covered by such registration statement either receives the copies of the
supplemented or amended prospectus contemplated by Section 4(j) hereof or is
advised in writing by the Company that use of the prospectus may be resumed. If
one or more Suspension Periods occur, the two year time period referenced above
shall be extended by the number of days included in each such Suspension Period;
provided, however, that the aggregate number of days of any Suspension Periods
shall not exceed 60 days in any calendar year.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included therein
in reliance upon or in conformity with written information furnished to the
Company by or on behalf of any Holder specifically for use therein (the
"Holders' In-
<PAGE> 7
-7-
formation")) does not contain 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 and (iii) any prospectus forming part of any
Shelf Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not include an
untrue statement of a material fact or omit 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.
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Transfer Restricted Senior Discount Notes will suffer damages if the Company
fails to fulfill its obligations under Section 1 or Section 2, as applicable,
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, if (i) the Registration Statement is not filed with the Commission
within 60 days after the Issue Date or, in the event that a Shelf Registration
Statement is required, such Shelf Registration Statement is not filed on or
prior to the later of (a) 60 days after the Issue Date or (b) 30 days after the
obligation to file a Shelf Registration Statement arises, (ii) the Exchange
Offer Registration Statement (if applicable) is not declared effective within
150 days after the Issue Date or, in the event that a Shelf Registration
Statement is required, such Shelf Registration Statement is not declared
effective on or prior to the later of (a) 150 days after the Issue Date or (b)
120 days after the obligation to file a Shelf Registration Statement arises,
(iii) the Registered Exchange Offer (if applicable) is not consummated on or
prior to 180 days after the Issue Date, or (iv) the Shelf Registration Statement
is filed and declared effective prior to the later of (a) 150 days after the
Issue Date or (b) 120 days after the obligation to file a Shelf Registration
Statement arises, but shall thereafter cease to be effective (at any time that
the Company is obligated to maintain the effectiveness thereof) without being
succeeded within 15 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company will be obligated to pay liquidated damages
on the Accreted Value of the Senior Discount Notes to each Holder of Transfer
Restricted Senior Discount Notes, during the period of one or more such
Registration Defaults, in an amount equal to $0.192 per week per $1,000
principal amount of Transfer Restricted Senior Discount Notes held by such
Holder until (a) the applicable Registration Statement is filed, (b) the
Exchange Offer Registration Statement is declared effective and the Registered
Exchange Offer is consummated, (c) the Shelf Registration Statement is declared
effective or (d) the Shelf Registration Statement again becomes effective, as
the case may be. Following the cure of all Registration Defaults, the accrual of
liquidated damages will cease. As used herein, the term "Transfer Restricted
Senior Discount Notes" means (i) each Senior Discount Note until the date on
which such Senior Discount Note has been exchanged for a freely transferable
Senior Discount Exchange Note in the Registered Notes Offer, (ii) each Senior
Discount Note or Private Senior Discount Exchange Note until the date on which
it has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement
<PAGE> 8
-8-
or (iii) each Senior Discount Note or Private Senior Discount Exchange Note
until the date on which it is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act. Notwithstanding anything to the contrary in this Section 3(a),
the Company shall not be required to pay liquidated damages to a Holder of
Transfer Restricted Senior Discount Notes if such Holder failed to comply with
its obligations to make the representations set forth in the second to last
paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n). Liquidated damages shall not
accrue during any Suspension Period permitted pursuant to Section 2(b) above.
(b) The Company shall notify the Senior Discount Notes Trustee and
the Paying Agent under the Senior Discount Notes Indenture immediately upon the
happening of each and every Registration Default. The Company shall pay the
liquidated damages due on the Transfer Restricted Senior Discount Notes by
depositing with the Paying Agent (which may not be the Company for these
purposes), in trust, for the benefit of the Holders thereof, prior to 10:00
a.m., New York City time, on the next interest payment date specified by the
Senior Discount Notes Indenture and the Senior Discount Notes, sums sufficient
to pay the liquidated damages then due. The liquidated damages due shall be
payable on each interest payment date specified by the Senior Discount Notes
Indenture and the Senior Discount Notes to the record holder entitled to receive
the interest payment to be made on such date. Each obligation to pay liquidated
damages shall be deemed to accrue from and including the date of the applicable
Registration Default.
(c) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Senior Discount Notes by reason of the failure of (i) the Shelf
Registration Statement or the Exchange Offer Registration Statement to be filed,
(ii) the Shelf Registration Statement to remain effective or (iii) the Exchange
Offer Registration Statement to be declared effective and the Registered
Exchange Offer to be consummated, in each case to the extent required by this
Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior
to the filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and shall use its reasonable best efforts to reflect in each
such document, when so filed with the Commission, such comments as any Initial
Purchaser may reasonably propose; (ii) include the information set forth in
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section, include the
information set
<PAGE> 9
-9-
forth in Annex C hereto in the "Plan of Distribution" section of the prospectus
forming a part of the Exchange Offer Registration Statement, and include the
information set forth in Annex D hereto in the Letter of Transmittal delivered
pursuant to the Registered Exchange Offer; and (iii) if requested by any Initial
Purchaser, include the information required by Items 507 or 508 of Regulation
S-K, as applicable, in the prospectus forming a part of the Exchange Offer
Registration Statement.
(b) The Company shall advise each Initial Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such person,
confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Company, the Senior
Discount Exchange Notes or the Private Senior Discount Exchange Notes for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do not
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(c) The Company will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Senior Discount Notes included within the coverage of any Shelf Registration
Statement, without charge, at least one conformed copy of such Shelf
Registration Statement and any
<PAGE> 10
-10-
post-effective amendment thereto, including financial statements and schedules
and, if any such Holder so requests in writing, all exhibits thereto (including
those, incorporated by reference, if any).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Senior Discount Notes included
within the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included in
such Shelf Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and the Company consents to the use of such
prospectus or any amendment or supplement thereto by each of the selling Holders
of Transfer Restricted Senior Discount Notes in connection with the offer and
sale of the Transfer Restricted Senior Discount Notes covered by such prospectus
or any amendment or supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge, at
least one conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if any Initial Purchaser or Exchanging Dealer or any such Holder so
requests in writing, all exhibits thereto (including those incorporated by
reference, if any).
(g) The Company will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the Exchange
Offer Registration Statement or the Shelf Registration Statement and any
amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or
other persons may reasonably request; and the Company consents to the use of
such prospectus or any amendment or supplement thereto by any such Initial
Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company will use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Senior Discount Notes, Senior Discount Exchange
Notes or Private Senior Discount Exchange Notes included therein and their
respective counsel in connection with the registration or qualification of, such
Senior Discount Notes, Senior Discount Exchange Notes or Private Senior Discount
Exchange Notes for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holder reasonably requests in writing and do any and
all other acts or things necessary or advisable to enable the offer and sale in
such jurisdictions of the Senior Discount Notes, Senior Discount Exchange Notes
or Private Senior Discount Exchange Notes covered by such Registration
Statement; provided, however, that the Company
<PAGE> 11
-11-
will 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 or to taxation in any such jurisdiction where it
is not then so subject.
(i) The Company will cooperate with the Holders of Senior Discount
Notes, Senior Discount Exchange Notes or Private Senior Discount Exchange Notes
to facilitate the timely preparation and delivery of certificates representing
Senior Discount Notes, Senior Discount Exchange Notes or Private Senior Discount
Exchange Notes to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
the Holders thereof may request in writing prior to sales of Senior Discount
Notes, Senior Discount Exchange Notes or Private Senior Discount Exchange Notes
pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company required to maintain an effective
Registration Statement, the Company will promptly prepare and file with the
Commission a post-effective amendment to the Registration Statement or a
supplement to the related prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Senior Discount Notes, Senior
Discount Exchange Notes or Private Senior Discount Exchange Notes from a Holder,
the prospectus will not include an untrue statement of a material fact or omit
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.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Senior Discount
Notes, the Senior Discount Exchange Notes and the Private Senior Discount
Exchange Notes, as the case may be, and provide the applicable trustee with
certificates for the Senior Discount Notes, the Senior Discount Exchange Notes
or the Private Senior Discount Exchange Notes, as the case may be, in a form
eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and
regulations of the Commission and the Company will make generally available to
its security holders as soon as practicable after the effective date of the
applicable Registration Statement an earning statement satisfying the provisions
of Section 11(a) of the Securities Act; provided, however, that in no event
shall such earning statement be delivered later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning with the
first month of the Company's first fiscal quarter commencing after the effective
date of the applicable Registration Statement, which statement shall cover such
12-month period.
<PAGE> 12
-12-
(m) The Company will cause the Senior Discount Notes Indenture or
the Senior Discount Exchange Notes Indenture, as the case may be, to be
qualified under the Trust Indenture Act as required by applicable law in a
timely manner.
(n) The Company may require each Holder of Transfer Restricted
Senior Discount Notes to be registered pursuant to any Shelf Registration
Statement to furnish to the Company such information concerning the Holder and
the distribution of such Transfer Restricted Senior Discount Notes as the
Company may from time to time reasonably require for inclusion in such Shelf
Registration Statement, and the Company may exclude from such registration the
Transfer Restricted Senior Discount Notes of any Holder that fails to furnish
such information within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Senior Discount Notes to be registered pursuant thereto
agrees by acquisition of such Transfer Restricted Senior Discount Notes that,
upon receipt of any notice from the Company pursuant to Section 4(b)(ii) through
(v), such Holder will discontinue disposition of such Transfer Restricted Senior
Discount Notes until such Holder's receipt of copies of the supplemental or
amended prospectus contemplated by Section 4(j) or until advised in writing (the
"Advice") by the Company that the use of the applicable prospectus may be
resumed. If the Company shall give any notice under Section 4(b)(ii) through (v)
during the period that the Company is required to maintain an effective
Registration Statement (the "Effectiveness Period"), such Effectiveness Period
shall be extended by the number of days during such period from and including
the date of the giving of such notice to and including the date when each seller
of Transfer Restricted Senior Discount Notes covered by such Registration
Statement shall have received (x) the copies of the supplemental or amended
prospectus contemplated by Section 4(j) (if an amended or supplemental
prospectus is required) or (y) the Advice (if no amended or supplemental
prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if such Shelf Registration
includes at least $20.0 million aggregate principal amount at maturity of
securities, if requested by a majority of the aggregate principal amount of
Senior Discount Notes, Senior Discount Exchange Notes and Private Senior
Discount Exchange Notes included in the Shelf Registration Statement, an
underwriting agreement in customary form) and take all such other action, if
any, as Holders of a majority in aggregate principal amount of the Senior
Discount Notes, Senior Discount Exchange Notes and Private Senior Discount
Exchange Notes being sold or the managing underwriters (if any) shall reasonably
request in order to facilitate any disposition of Senior Discount Notes, Senior
Discount Exchange Notes or Private Senior Discount Exchange Notes pursuant to
such Shelf Registration Statement.
<PAGE> 13
-13-
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and Special
Counsel (as defined below) acting for, Holders of a majority in aggregate
principal amount of the Senior Discount Notes, Senior Discount Exchange Notes
and Private Senior Discount Exchange Notes being sold and any underwriter
participating in any disposition of Senior Discount Notes, Senior Discount
Exchange Notes or Private Senior Discount Exchange Notes pursuant to such Shelf
Registration Statement, all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries and (ii)
use its reasonable best efforts to have its officers, directors, employees,
accountants and counsel supply all relevant information reasonably requested by
such representative, Special Counsel or any such underwriter (an "Inspector") in
connection with such Shelf Registration Statement.
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in aggregate principal amount of
the Senior Discount Notes, Senior Discount Exchange Notes and Private Senior
Discount Exchange Notes being sold, their Special Counsel or the managing
underwriters, if any, in connection with such Shelf Registration Statement, use
their reasonable best efforts to cause (i) their counsel to deliver an opinion
relating to the Shelf Registration Statement and the Senior Discount Notes,
Senior Discount Exchange Notes or Private Senior Discount Exchange Notes, as
applicable, in customary form, (ii) their officers to execute and deliver all
customary documents and certificates requested by Holders of a majority in
aggregate principal amount of the Senior Discount Notes, Senior Discount
Exchange Notes and Private Senior Discount Exchange Notes being sold, their
Special Counsel or the managing underwriters, if any, and (iii) their
independent public accountants to provide a comfort letter or letters in
customary form, subject to receipt of appropriate documentation as contemplated,
and only if permitted, by Statement of Auditing Standards No. 72.
5. Registration Expenses. Subject to Section 9, the Company will
bear all expenses incurred in connection with the performance of its obligations
under Sections 1, 2, 3 and 4 and the Company will reimburse the Initial
Purchasers and the Holders for the reasonable fees and disbursements of one firm
of attorneys chosen by the Holders of a majority in aggregate principal amount
of the Senior Discount Notes, the Senior Discount Exchange Notes and the Private
Senior Discount Exchange Notes to be sold pursuant to the Registration
Statements (the "Special Counsel") acting for the Initial Purchasers or Holders
in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company shall indemnify and hold harmless each Holder
(including, without limitation, any such Initial Purchaser or Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
<PAGE> 14
-14-
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6 and Section 7 as a Holder) from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Senior Discount Notes,
Senior Discount Exchange Notes or Private Senior Discount Exchange Notes), to
which that Holder may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and shall reimburse each Holder promptly upon demand for
any legal or other expenses reasonably incurred by that Holder in connection
with investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, an untrue statement
or alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Holders' Information;
provided, further, however, that with respect to any such untrue statement in or
omission from any related preliminary prospectus, the indemnity agreement
contained in this Section 6(a) shall not inure to the benefit of any Holder from
whom the person asserting any such loss, claim, damage, liability or action
received Senior Discount Notes, Senior Discount Exchange Notes or Private Senior
Discount Exchange Notes to the extent that such loss, claim, damage, liability
or action of or with respect to such Holder results from the fact that both (A)
a copy of the final prospectus was not sent or given to such person at or prior
to the written confirmation of the sale of such Senior Discount Notes, Senior
Discount Exchange Notes or Private Senior Discount Exchange Notes to such person
and (B) the untrue statement in or omission from the related preliminary
prospectus was corrected in the final prospectus unless, in either case, such
failure to deliver the final prospectus was a result of non-compliance by the
Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder,
severally and not jointly, shall indemnify and hold harmless the Company, its
affiliates, its officers, directors, employees, representatives and agents, and
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6(b) and Section 7 as the Company), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Com-
<PAGE> 15
-15-
pany may become subject, whether commenced or threatened, under the Securities
Act, the Exchange Act, any other federal or state statutory law or regulation,
at common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with any Holders' Information furnished to the Company by
such Holder, and shall reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that no such Holder shall be liable
for any indemnity claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale of Senior Discount Notes, Senior Discount
Exchange Notes or Private Senior Discount Exchange Notes pursuant to such Shelf
Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; provided, further, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party,
<PAGE> 16
-16-
(2) the indemnified party has reasonably concluded (based upon advice of counsel
to the indemnified party) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based upon advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company from the offering and sale of the Senior
Discount Notes, on the one hand, and a Holder with respect to the sale by such
Holder of Senior Discount Notes, Senior Discount Exchange Notes or Private
Senior Discount Exchange Notes, on the other, or (ii) if the allocation provided
by clause (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 (i)
above but also the relative fault of the Company on the one hand and such Holder
on the other with respect to the statements or omissions that resulted in such
loss,
<PAGE> 17
-17-
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and a Holder on the other with respect to such offering and such
sale shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Senior Discount Notes (before deducting expenses) received
by or on behalf of the Company as set forth in the table on the cover of the
Offering Memorandum, on the one hand, bear to the total proceeds received by
such Holder with respect to its sale of Senior Discount Notes, Senior Discount
Exchange Notes or Private Senior Discount Exchange Notes, on the other. The
relative fault 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 the Company or information
supplied by the Company on the one hand or to any Holders' Information supplied
by such Holder on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 7 were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 7
shall be deemed to include, for purposes of this Section 7, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 7, an indemnifying party that is
a Holder of Senior Discount Notes, Senior Discount Exchange Notes or Private
Senior Discount Exchange Notes shall not be required to contribute any amount in
excess of the amount by which the total price at which the Senior Discount
Notes, Senior Discount Exchange Notes or Private Senior Discount Exchange Notes
sold by such indemnifying party to any purchaser exceeds the amount of any
damages which such indemnifying party has otherwise paid or become liable to pay
by reason of any 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 Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. Rules 144 and 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it shall, upon the written request of any Holder
of Transfer Restricted Senior Discount Notes, provide other information so long
as necessary to permit sales of such Holder's securities pursuant to Rules 144
and 144A. The Company covenants that it will take such further reasonable action
as any Holder of Transfer Restricted Senior Discount Notes may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Transfer Restricted Senior Discount Notes without registration under the
Securities Act within the limitation of the exemp-
<PAGE> 18
-18-
tions provided by Rules 144 and 144A (including, without limitation, the
requirements of Rule 144A(d)(4)). Upon the written request of any Holder of
Transfer Restricted Senior Discount Notes, the Company shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Senior Discount Notes covered by any Shelf Registration Statement are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate principal amount of such Transfer Restricted
Senior Discount Notes included in such offering, subject to the consent of the
Company (which shall not be unreasonably withheld or delayed), and such Holders
shall be responsible for all underwriting commissions and discounts in
connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Senior
Discount Notes on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Senior Discount Notes, Senior Discount Exchange Notes
and Private Senior Discount Exchange Notes, taken as a single class.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders whose Senior Discount Notes, Senior Discount Exchange Notes or Private
Senior Discount Exchange Notes are being sold pursuant to a Registration
Statement and that does not directly or indirectly materially affect the rights
of other Holders may be given by Holders of a majority in aggregate principal
amount of the Senior Discount Notes, Senior Discount Exchange Notes and Private
Senior Discount Exchange Notes being sold by such Holders pursuant to such
Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
<PAGE> 19
-19-
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Senior Discount Notes
Indenture, with a copy in like manner to Chase Securities Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation;
(2) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors and Assigns. This Agreement shall be binding upon the
Company and their successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) 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.
(e) Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by the Company or by any
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Company of their obligations under Sections 1 or 2
hereof for which liquidated damages have been paid pursuant to
<PAGE> 20
-20-
Section 3 hereof), will be entitled to specific performance of its rights under
this Agreement. The Company and each Holder agree that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement and hereby further agree that, in the
event of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. The Company represents, warrants and
agrees that (i) it has not entered into, and shall not, on or after the date of
this Agreement, enter into, any agreement that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof, (ii) it has not previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Transfer Restricted Senior Discount
Notes, it shall not grant to any person the right to request the Company to
register any debt securities of the Company under the Securities Act unless the
rights so granted are not in conflict or inconsistent with the provisions of
this Agreement.
(j) No Piggyback on Registrations. Neither the Company, any of its
security holders (other than the holders of Transfer Restricted Senior Discount
Notes in such capacity and the holders of Transfer Restricted Senior Notes in
such capacity (as defined in the Senior Notes Exchange and Registration Rights
Agreement)) shall have the right to include any securities of the Company in any
Shelf Registration or Registered Exchange Offer other than Transfer Restricted
Senior Discount Notes and Transfer Restricted Senior Notes.
(k) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
<PAGE> 21
S-1
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchasers.
Very truly yours,
TRANS-RESOURCES, INC.
By: /s/ Lester W. Youner
---------------------------
Name: Lester W. Youner
Title: Vice President and
Chief Financial Officer
Accepted:
CHASE SECURITIES INC.
By: /s/ Daniel P. Tredwell
---------------------------
Authorized Signatory
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ David Faris
---------------------------
Authorized Signatory
<PAGE> 22
ANNEX A
Each broker-dealer that receives Senior Discount Exchange Notes for
its own account pursuant to the Registered Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Senior
Discount Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Senior Discount Exchange
Notes received in exchange for Senior Discount Notes where such Senior Discount
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date (as defined herein), it will make
this Prospectus available to any broker-dealer for usein connection with any
such resale. See "Plan of Distribution."
<PAGE> 23
ANNEX B
Each broker-dealer that receives Senior Discount Exchange Notes for
its own account in exchange for Senior Discount Notes, where such Senior
Discount 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 Senior Discount Exchange Notes.
See "Plan of Distribution."
<PAGE> 24
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Senior Discount Exchange Notes for
its own account pursuant to the Registered Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Senior
Discount Exchange Notes. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales of
Senior Discount Exchange Notes received in exchange for Senior Discount Notes
where such Senior Discount Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 1998, all dealers effecting
transactions in the Senior Discount Exchange Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of Senior
Discount Exchange Notes by broker-dealers. Senior Discount Exchange Notes
received by broker-dealers for their own account pursuant to the Registered
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 Senior Discount Exchange Notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or at 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 Senior Discount Exchange Notes. Any
broker-dealer that resells Senior Discount Exchange Notes that were received by
it for its own account pursuant to the Registered Exchange Offer and any broker
or dealer that participates in a distribution of such Senior Discount Exchange
Notes may be deemed to be an "underwriter" within the meaning of the Securities
Act and any profit on any such resale of Senior Discount Exchange 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.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the ex-
<PAGE> 25
penses of one counsel for the Holders of the Senior Discount Notes) other than
commissions or concessions of any broker-dealers and will indemnify the Holders
of the Senior Discount Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
<PAGE> 26
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Senior
Discount Exchange Notes. If the undersigned is a broker-dealer that will receive
Senior Discount Exchange Notes for its own account in exchange for Senior
Discount Notes that were acquired as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such Senior Discount Exchange Notes; however, by
so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
<PAGE> 1
CONFORMED COPY
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT NO. 1 dated as of February 26, 1998 ("Amendment No. 1") to the
Credit Agreement dated as of November 3, 1995, as amended and restated as of
July 31, 1997 (as further amended from time to time, the "Credit Agreement"),
among CEDAR CHEMICAL CORPORATION, a Delaware corporation (with its successors,
the "Company"), the lenders listed on the signature pages thereto (together with
their successors, the "Lenders") and THE CHASE MANHATTAN BANK, as administrative
agent (with its successors in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the parties hereto have heretofore entered into the Credit
Agreement; and
WHEREAS, the Company has asked the Lenders (i) to consent to the
termination of the Parent Guaranty dated as of November 3, 1995 of
Trans-Resources, Inc. in favor of the Administrative Agent, (ii) to amend the
amortization schedule applicable to the Tranche A Term Loans, (iii) to reduce
the percentage of Excess Cash Flow (as defined in the Credit Agreement) required
to be applied to the prepayment of loans under the Credit Agreement, (iv) to
amend the covenant restricting dividend payments, (v) to amend the Fixed Charge
Coverage Ratio covenant and (vi) to amend the covenant restricting the amount of
capital expenditures, and, subject to the terms and conditions set forth herein,
the Lenders are willing to do so;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit Agreement has the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall from and after the date hereof refer to
the Credit Agreement as amended hereby.
SECTION 2. Amendment of Section 3.02(b)(i)(F) of the Credit Agreement.
Section 3.02(b)(i)(F) of the Credit Agreement is amended by replacing "75%" with
"50%".
SECTION 3. Amendment of Article 8 of the Credit Agreement. Article 8 of
the Credit Agreement is amended by adding the following new Section 8.16
immediately after Section 8.15:
E-10
<PAGE> 2
8.16 Year 2000 Issue. Any reprogramming and related testing required
to permit the proper functioning of the Company's computer systems (or of
computer systems of others used by or interfacing with those of the
Company) in and following the year 2000 will be completed prior to July 1,
1999, and the cost to the Company of such reprogramming and testing will
not result in a Default or a Material Adverse Effect. Except for such
reprogramming referred to in the preceding sentence as may be necessary,
the computer and management information systems of the Company and its
Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, adequate for the conduct of
its business.
SECTION 4. Amendment of Section 9.12(i) of the Credit Agreement. Clause
(i) of Section 9.12 of the Credit Agreement is amended by adding, immediately
after the text "minus Capital Expenditures", the following parenthetical:
(other than Capital Expenditures incurred during fiscal year 1998 in
respect of the MAP/MKP Project in an aggregate amount not to exceed the
sum of $6,500,000 plus the amount of related capitalized interest expense)
SECTION 5. Amendment of Section 9.16(x) of the Credit Agreement. Section
9.16(x) of the Credit Agreement is amended by replacing "25%" with "50%".
SECTION 6. Amendment of Section 9.19(ii) of the Credit Agreement. Clause
(ii) of Section 9.19 of the Credit Agreement is amended by replacing the text
immediately prior to the provisos in such clause with the following text: "for
the fiscal year 1997, $3,000,000, and for the fiscal year 1998, $9,500,000;".
SECTION 7. Amendment of Schedule III to the Credit Agreement. Schedule III
to the Credit Agreement is amended by (i) replacing the amount of each Tranche A
Term Loan Installment set forth in such schedule opposite each Quarterly Date,
other than the Quarterly Date falling in October 2001, with "$0.00", and (ii)
replacing the amount of the Tranche A Term Loan Installment set forth in such
schedule opposite the Quarterly Date falling in October 2001 with
"$5,832,161.75".
SECTION 8. Termination of Parent Guaranty. Each of the Lenders hereby
consents to the termination and discharge of the Parent Guaranty and authorizes
the Administrative Agent to execute and deliver the Termination of Parent
Guaranty substantially in the form of Exhibit A hereto and any and all other
documents and agreements necessary or desirable to effect the foregoing
termination.
SECTION 9. Governing Law. This Amendment No. 1 shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 10. Counterparts; Effectiveness. This Amendment No. 1 may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment No. 1
<PAGE> 3
shall become effective on the date (the "Amendment No. 1 Effective Date") on
which all of the following conditions precedent shall have been fulfilled to the
satisfaction of the Administrative Agent:
(a) Counterparts. The Administrative Agent shall have received counterparts
of this Amendment No. 1 executed and delivered by or on behalf of each of the
parties hereto (or, in the case of any Lender as to which the Administrative
Agent shall not have received such a counterpart, the Administrative Agent shall
have received evidence satisfactory to it of the execution and delivery by such
Lender of a counterpart hereof).
(b) Fees and Expenses. The Company shall have paid to the Administrative
Agent, for the account of each Lender, a fee equal to .125% of the sum of the
aggregate principal amount of such Lender's Tranche A Term Loans, Tranche B Term
Loans and Working Capital Commitments, in each case outstanding under the Credit
Agreement immediately prior to the Amendment No. 1 Effective Date; and shall
have in addition paid to the Administrative Agent all amounts payable under
Section 12.03 of the Credit Agreement on or before the Amendment No. 1 Effective
Date.
(c) Other Documents. The Administrative Agent shall have received such
other documents relating to the transactions contemplated hereby as the
Administrative Agent may reasonably request.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be duly executed by their respective authorized officers as of the day
and year first above written.
CEDAR CHEMICAL CORPORATION
By: /s/ John C. Bumpers
-----------------------------------
Title: Executive Vice President
THE CHASE MANHATTAN BANK
By: /s/ Robert T. Sacks
-----------------------------------
Title: Managing Director
BANK LEUMI TRUST COMPANY OF NEW YORK
By: /s/ Gloria Bucher
-----------------------------------
Title: First Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Stephen E. Lockhart
-----------------------------------
Title: Senior Relationship Manager
FIRST AMERICAN NATIONAL BANK
By: /s/ William R. Stutts
-----------------------------------
Title: Senior Vice President
FBS AG CREDIT, INC.
By: /s/ Alan V. Schuler
-----------------------------------
Title: Vice President
ERSTE BANK AG DER SPARKASSEN
By: /s/ Anca Trifan
-----------------------------------
Title: Vice President
<PAGE> 5
By: /s/ John Runnion
-----------------------------------
Title: First Vice President
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: /s/ Anthony R. Clemente
-----------------------------------
Title: Authorized Signatory
PILGRIM PRIME RATE TRUST
By: /s/ Michael J. Bacevich
-----------------------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
-----------------------------------
Title: Senior Vice President & Director
INDOSUEZ CAPITAL FUNDING II, LIMITED
By: Indosuez Capital as Portfolio Advisor
By: /s/ Francoise Berthelot
-----------------------------------
Title: Vice President
<PAGE> 6
EXHIBIT A
Termination of Parent Guaranty
Reference is made to the Parent Guaranty dated as of November 3, 1995 (the
"Parent Guaranty") of Trans-Resources, Inc., a Delaware corporation, in favor of
The Chase Manhattan Bank, as administrative agent (the "Administrative Agent")
under the Credit Agreement dated as of November 3, 1995 and amended and restated
as of July 31, 1997 (the "Credit Agreement") among Cedar Chemical Corporation, a
Delaware corporation, certain lenders party thereto and the Administrative
Agent. Terms defined in the Parent Guaranty and not otherwise defined herein
have, as used herein, the respective meanings provided for therein.
The Administrative Agent and the Parent Guarantor hereby agree that all
obligations of the Parent Guarantor under the Parent Guaranty are hereby
discharged entirely as of the date set forth below, and the Parent Guaranty is,
as of such date, hereby terminated and no longer in force or effect.
Agreed, as of this 26th of February, 1998:
THE CHASE MANHATTAN BANK
By: /s/ Robert T. Sacks
------------------------------
Title: Managing Director
Acknowledged and agreed:
TRANS-RESOURCES, INC.
By: /s/ Lester Youner
------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 10.1
POTASH SALES AGREEMENT
Made and entered into as of the 1st day of January, 1990
by and between
DEAD SEA WORKS LIMITED
and
HAIFA CHEMICALS LIMITED
E-11
<PAGE> 2
POTASH SALES AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of January,
1990 by and between DEAD SEA WORKS LIMITED, of Potash House, Beer Sheva 84100,
Israel ("Seller"), and HAIFA CHEMICALS LIMITED, of P.O. Box 1809, Haifa
("Buyer");
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase and receive potash from Seller; and
WHEREAS, Seller desires to sell and deliver potash to Buyer;
NOW, THEREFORE, in consideration of these premises and the mutual
promises set forth herein, the parties hereby agree as follows:
ARTICLE I - DEFINITIONS
As used herein:
1.1 "Ton" shall mean - 1,000 (one thousand) Kgs.
1.2 "Product" shall mean - Potash as set forth in Exhibit "A" attached
hereto.
1.3 "Contract Year" shall mean - January 1st through December 31st.
1.4 "Contract Year Quota" shall mean - quantities of Product to be sold and
delivered by Seller and purchased and received by Buyer in each
Contract Year as set forth in sub-articles 3.1 and 3.2 below.
1.5 "Delivery Location" shall mean - Tzefa Plain.
1.6 "K(2)O" shall mean - the potassium content of the Product expressed as
the mono oxide of potassium.
1.7 "Quarter" shall mean a period of three calendar months as follows:
January 1st through March 31st, April 1st through June 30th, July 1st
through September 30th, October 1st through December 31st.
1.8 "Basic Delivered Price" shall mean the basic delivered price calculated
in accordance with the provisions of article 5.1 below.
1.9 "Expanded Facility" shall mean a 50,000 Tons manufacturing facility for
Potassium Nitrate to be constructed at Buyer's premises in Haifa.
<PAGE> 3
1.10 "The Expanded Facility Effective Date" (or "EFED") shall mean the date
indicated in Buyer's advice to Seller to be given pursuant to
sub-article 3.2 below as the date on which Buyer shall begin to require
additional quantities due to the completion of the Expanded Facility.
1.11 "Specifications" shall mean - the specifications set forth in Exhibit
"A".
1.12 "Israeli Market Product" shall mean - the quantity of Product used by
Buyer for the manufacture of Potassium Nitrate and other products, if
any, not exported by Buyer from Israel.
ARTICLE II - TERM
2.1 The term of this Agreement shall be from 1st January 1990 through 31st
December 1999.
2.2 This Agreement may only be renewed by a written instrument signed by
both parties hereto setting out the price, the duration of the renewed
term and all other terms and conditions which shall apply during any
renewed term.
ARTICLE III - QUANTITY
3.1 Seller shall sell and deliver and Buyer shall purchase and receive
during each Contract Year 180,000 Tons of Product +/-15% Buyer's
option.
3.2 Buyer has advised Seller that upon completion of the Expanded Facility
Buyer's annual requirement for Product shall gradually increase up to
40,000 Tons +/-15% per Contract Year. Buyer shall advise Seller in
writing from time to time the dates on which it shall commence to
consume additional tonnage as part of the said 40,000 Tons at least 3
months prior to each such date, setting forth in such advice the
additional quantity required, ALWAYS PROVIDED that the aggregate
additional amount shall not exceed 40,000 Tons (+/-15%) per Contract
Year.
The quantity set forth in each such advice shall be added to the
applicable Contract Year Quota. If the date on which Buyer's advice
shall become effective shall not fall within the first month of the
applicable Contract Year then the quantity added to that Contract Year
Quota shall be determined on a pro rata basis.
3.3 Should Buyer request additional tonnage in excess of the quantities set
forth in 3.1 and/or 3.2 above, Seller will use reasonable efforts to
supply the same, but Seller shall have no obligation to supply such
additional tonnage.
3.4 Without prejudice to the provisions of sub-articles 3.1, 3.2 and 3.3 -
Buyer shall advise Seller at least 3 (three) months prior to the
commencement of each Contract Year the
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<PAGE> 4
estimated quantity of Product to be delivered and received during each
Quarter of the applicable Contract Year. Quantities in respect of each
Quarter may be adjusted by Buyer not later than 30 (thirty) days prior
to the commencement of the applicable Quarter.
3.5 In each calendar month of each Contract Year, Buyer will take delivery
of not less than 5% (five percent) and not more than 10% (ten percent)
of that total Contract Year Quota.
3.6 In the event that Buyer will take delivery of less than the said 5%
during any calendar month (hereinafter - "the Minimum Monthly
Quantity") for any reason whatsoever, except Seller's default, Seller
will be entitled, without prejudice to any rights afforded it hereunder
and under the law, to reduce that Contract Year Quota, by amounts not
exceeding in the aggregate the difference between the Minimum Monthly
Quantity and the aggregate quantity actually received by Buyer during
that calendar month.
3.7 Buyer shall not use the Product purchased hereunder for the purpose of
(a) resale of same; or (b) for the purpose of manufacturing in any way
or manner, selling or otherwise dealing with technical grade Potash or
SOP.
ARTICLE IV - DELIVERY, TITLE, RISK & SHIPMENT
4.1 Product shall be delivered to Buyer fob railway cars at Tzefa Plain. If
no railway cars shall be available Product shall be delivered fob
Buyer's trucks at Tzefa Plain.
4.2 Risk of loss and damage to the Product shall pass to Buyer as Product
is progressively loaded upon trucks or railway cars, as the case may
be, at the Delivery Location.
ARTICLE V - PRICE
5.1 The Basic Delivered Price for each Ton of Product during any Quarter
shall be:
BP = WAF - FC
Where:
BP = Basic Delivered Price;
WAF = weighted average of the fob Israeli port price received by
Seller for non-granulated potash exported from Israel during
the immediately preceding Quarter.
FC = Variable costs per Ton from FOB cars Tzefa Plain to fob
vessel in the port of Ashdod.
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5.2 In addition to the Basic Delivered Price Buyer shall pay Seller an
amount equal to the amount of export premiums and benefits (such as,
including but without limitation, Bituach Shaar or any other similar or
substitute programmes) of whatsoever kind or nature which would have
been paid to Seller or to which Seller would have been entitled had
Product sold to Buyer hereunder been exported by Seller during the
preceding Quarter;
5.3 In addition to the amounts referred to in 5.1 & 5.2 above, Buyer shall
pay Seller a premium of U.S.$ 4.25 per Ton of Product sold and
delivered to Buyer.
ARTICLE VI - DISCOUNTS
6.1 For the purposes of this article VI the following expressions shall
have the meaning assigned to them hereunder:
- "Expanded Facility" - as defined above.
- "Extra Discount Period" shall mean the period during which
Buyer shall be entitled to an additional discount of 5% (five
percent) as set forth in article 6.3 below, which period shall
begin on the EFED and shall terminate upon the occurrence of
the earlier of:
(a) 3 (three) years after the EFED but not later than
31.12.1995; or
(b) after Buyer shall have received the discount referred
to in 6.3 below - for and in respect of a total
quantity of 80,000 Tons.
- "Excess Quantity" - in respect of each month during the Extra
Discount Period Product sold and delivered to Buyer in the
relevant Contract Year in excess of 200,000 Tons divided by 12
(and a pro rata quantity in respect of part of a month).
6.2 During the life of this Agreement, Buyer shall receive a discount of 3%
(three percent) on the Basic Delivered Price and on the amounts
referred to in sub-article 5.2 above, on all Product, sold and
delivered to it by Seller.
6.3 In addition to the discount referred to in sub-article 6.2 above, Buyer
shall be entitled to receive a discount of 5% (five percent) on the
Basic Delivered Price and on the amounts referred to in sub-article 5.2
above for and in respect of Excess Quantity only sold and delivered
during any calendar month falling within the Extra Discount Period.
6.4 For the avoidance of doubt it is hereby clarified that amounts or
payments pursuant to the provisions of sub-article 5.3 above shall not
be deemed or considered as part of the price for the purpose of
calculating the discounts referred to in sub-articles 6.2 and 6.3
above.
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<PAGE> 6
6.5 Notwithstanding anything to the contrary herein contained it is agreed
that in the event that the granting of the discounts referred to in
sub-articles 6.2 or 6.3 above shall result in a delivered price payable
to Seller of less than the Minimum Price (as defined below), then the
discounts shall be adjusted so that the delivered price shall not be
less than the Minimum Price. For the purposes hereof the Minimum Price
shall mean - cost of production plus all other expenses incurred by
Seller up to and including the Delivery Location, as reflected in the
audited financial statements of Seller.
ARTICLE VII - TERMS OF PAYMENT
7.1 Seller shall invoice Buyer, at the end of each calendar month or as
soon as practicable thereafter, for Product delivered during that
calendar month. Premiums and all other payments (if any) due to Seller
pursuant to the provisions of this Agreement as well as all discounts
due to Buyer (if any) shall be reflected in each monthly invoice.
7.2 Payments in full for Product delivered shall be made by Buyer within 60
(sixty) days from the end of the calendar month in which that Product
was delivered.
7.3 Overdue amounts shall carry interest at the then current Libor Rate
(taking into consideration amount and time involved) + 2% from date on
which payment is due pursuant to the provisions hereof until actual
payment. The above is in addition to all rights and remedies which
Seller may have in case of default by Buyer.
7.4 Invoices shall be in U.S.$ and all payments (including interest) shall
be made in said currency unless otherwise agreed upon by the parties
hereto.
In the event that it will not be permitted to effect payments in U.S.$
then the currency used for payments shall be Israeli and the amount of
New Israeli Shekels payable shall be determined in accordance with (i)
with respect to sales of Israeli Market Product - the representative
rate of exchange (as published by the Bank of Israel) published
immediately before actual payment is made; and (ii) with respect to all
other sales of Product the then prevailing rate of exchange for the
conversion by Seller of U.S.$ (being proceeds of export sales) into
Israeli Shekels excluding any premiums which Seller is entitled to
receive from Buyer under any other provision hereof.
In the event that the representative rate of exchange shall not be
published by the Bank of Israel then a substituting rate shall be used,
which shall resemble the principles reflected in the determination of
the representative rate of exchange.
ARTICLE VIII - WARRANTY
8.1 Seller warrants that Product delivered hereunder shall materially
conform to the Specifications.
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<PAGE> 7
THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED
AND SELLER EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES INCLUDING, BUT
WITHOUT LIMITATION, THAT PRODUCT WILL BE FIT FOR BUYER'S PARTICULAR USE
OR PURPOSE.
Unless Seller receives written notice otherwise within 15 (fifteen)
days after delivery of the Product to Buyer, the Product will be deemed
to conform to Specifications.
ARTICLE IX - LIABILITY AND CLAIMS
9.1 Seller shall not be liable for special, consequential or coincidental
damages arising out of non-delivery, use, inability to use or any other
cause whatsoever, whether in contract, tort or otherwise.
9.2 Without prejudice to the provisions of sub-articles 9.1 above and 9.4
below, in no event shall any claim made by Buyer for non-delivery of
the Product, shortage of weight, deficiency in analysis or for any
other reason whatsoever be greater than the purchase price of that
portion of the Product in respect of which such claim is made.
The amount referred to above constitutes the maximum amount that may be
claimed by Buyer in respect of damages not excluded from Seller's
liability under the provisions of sub-article 9.1 above and shall not
be interpreted so as to impose an obligation upon Seller to indemnify,
compensate or otherwise pay Buyer the above amount.
9.3 All claims shall be supported by appropriate documentary evidence and
must be made in writing, within 15 (fifteen) days after delivery of
Product to Buyer. Failure to give written notice of claim within the
specified time shall constitute a waiver by Buyer of all claims in
respect of such Product.
9.4 In the event that Product shall not conform to the Specifications, the
following shall apply:
9.4.1 If Product delivered shall contain more than 1000 PPM
insolubles in water, Buyer shall have the option to either
reject such Product (in accordance with the provisions
hereinbelow stipulated), or take delivery of same but not pay
in respect thereof the premium of U.S.$ 4.25 referred to in
sub-article 5.3 above.
9.4.2 If Product delivered shall have less than 60% (sixty percent)
K2O a pro rata rebate will be allowed in case of undertest
(calculated on the basis of 60% K2O).
9.4.3 If Product delivered shall materially not conform to
Specifications (other than specifications referred to in 9.4.1
and 9.4.2 above) Buyer shall be entitled to reject such
Product in accordance with the provisions hereinbelow
stipulated.
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<PAGE> 8
9.5 Buyer's right to reject Product as above set forth shall only apply to
Product which shall not have been contaminated or impaired subsequent
to delivery thereof to Buyer and Buyer shall be entitled to exercise
same if, and only if, a claim in respect thereof shall have been made
in accordance with the provisions of sub-article 9.3 above within the
time therein stipulated.
9.6 In the event of rejection of Product as above mentioned, the following
shall apply:
9.6.1 Buyer shall ship such Product and it shall be promptly
unloaded at either Ashdod or Delivery Location, as will be
determined by Seller. All costs of loading (if any) at Buyer's
plant in Haifa, shipment therefrom to the relevant location
and unloading of Product rejected as aforesaid, will be borne
by Seller.
9.6.2 Seller shall replace the rejected Product by delivering to
Buyer an equivalent quantity. Seller shall not be required to
pay for rejected and returned Products in accordance with the
provisions of this article 9. All costs of loading replacing
Product at the Delivery Location and shipping it therefrom to
Buyer's plant in Haifa will be borne by Seller.
9.6.3 Buyer shall not be entitled to receive and Seller shall not be
required to pay Buyer compensation, indemnification or other
payments or expenses of whatsoever kind or nature with regard
to rejected Product, the rejection of Product or as a
consequence thereof or otherwise, except that if Seller shall
have received payment for Product which has been rejected
pursuant to the terms hereof and has not replaced same as in
9.6.2 set forth, Seller shall apply any amount so received as
credit for future purchases of Product hereunder.
9.7 The parties recognize the importance to Buyer that a certain soot level
in Product sold and delivered to Buyer hereunder be established and
maintained. The parties differ, on the date of signature hereof as to
the existence of an adequate method to be utilized for the
determination of such level and therefore the parties shall act in
accordance with the following provisions:
9.7.1 The parties shall jointly attempt to establish a mutually
acceptable method to be applied and utilized in determining
the soot level in the Product (hereinafter - "the Adequate
Method").
9.7.2 In the absence of agreement between the parties until the 31st
day of December 1990 as to the Adequate Method, the parties or
either of them shall petition the President of the Weizman
Institute in Rehovot to appoint a team of experts in order to
determine the Adequate Method.
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<PAGE> 9
The number of experts who shall be so appointed shall be at
the discretion of the appointor and each party hereto shall be
entitled to appoint one representative to such a team who is
well conversed in the field of chemistry. The parties'
representatives in such a team shall serve as observes with
the right to voice their opinions, receive information and
discuss any and all matters with the members of the team but
they shall have no vote, if votes shall be taken in the
determination of the Adequate Method. The decision of the team
shall be binding upon the parties. The costs involved in the
work and determination of the said team of experts shall be
borne and paid for by Seller and Buyer in equal portions.
9.7.3 Seller has taken and shall take a sample, at its plant in
Sdom, from each Shipment of Product (as defined in 14.2.1
below) during the period commencing on 16th. November, 1989
and terminating on the 30th. June, 1990 and shall retain the
same until the determination of the ASL (as defined below) in
accordance with the provisions hereof. Upon the establishment
of the Adequate Method all samples taken during the said
period shall be analysed by utilizing the Adequate Method in
order to determine the soot level in each sample (hereinafter
- "the Analysed Samples").
The average level of soot in all of the Analysed Samples
(except as stipulated in 9.7.6.2 below) (which average shall
be determined by adding up all the units by which soot level
shall be measured, found in all the Analysed Samples and
dividing the result by the number of the Analysed Samples)
multiplied by 1.6 (one point six), shall constitute the
maximum permitted level of soot in Product to be delivered to
Buyer hereunder (hereinafter - "the Allowed Soot Level" or
"ASL"), as of the application of the Adequate Method and
thereafter. (The period commencing on the 1st day of January
1990 and terminating upon the actual application of the
Adequate Method shall hereinafter be referred to as - "the
Interim Period").
9.7.4 As of the time on which the ASL shall have been established
and applied and thereafter the ASL shall constitute an
integral part of Section A of Exhibit "A" and Product
delivered to Buyer with a higher soot content than the ASL
shall, mutatis mutandis, be governed by the provisions
applicable to Product having more than 1000 PPM insolubles in
water.
9.7.5 Soot level in Product supplied to Buyer during the Interim
Period shall be the same as or substantially similar to the
soot level in Product supplied to Buyer during 1989
(hereinafter - "the Previous Soot Level" or "PSL"). Failure on
part of Seller to supply Product with a soot level equal to or
less than the PSL shall entitle Buyer to the sole and only
remedy of returning Product with a soot level in excess of the
PSL subject to the following:
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<PAGE> 10
9.7.5.1 Buyer shall advise Seller (by telephone followed by a
facsimile message) immediately upon detection by
Buyer of Product allegedly having excessive soot
level which Buyer intends to return to Seller and in
no event later than 30 hours after delivery thereof
to Buyer and not later than 2 p.m. on any working
day. Such advice shall specify the quantity involved
and all relevant details leading to Buyer's decision
to return the Product.
9.7.5.2 Upon receipt of such advice, Seller shall be entitled
to send a representative to the location of the
allegedly contaminated Product within 6 (six) hours
of the time of receipt of such advice in order to:
(a) visually inspect same; and (b) take a sample
therefrom.
9.7.5.3 No Product shall be returned before Seller's
representative has inspected the allegedly
contaminated Product or failed to do so within the
stipulated time.
9.7.6 If Product allegedly having an excessive soot level shall be
returned to Seller during the Interim Period in accordance
with the terms hereof:
9.7.6.1 Seller shall (subject to 9.7.7 below) pay 50% of the
costs of its return (i.e., 50% of shipment cost from
Buyer's facility in Haifa to the place of return
which shall be any one or more of the following
places, Seller's option: Ashdod or Tzefa).
9.7.6.2 Samples taken from returned shipments shall not be
included in the Analysed Samples and shall not be
used for the purpose of determining the ASL.
9.7.7 Notwithstanding 9.7.6 Seller shall not be required to pay the
costs referred to in 9.7.6 above in respect of any returned
shipment if the sample therefrom shall have been found to
contain by using the Adequate Method, a soot level equal to or
less than the ASL.
9.7.8 If Product shall be returned to Seller for having or allegedly
having excessive soot content therein in accordance with the
terms hereof, Seller shall deliver to Buyer at the Delivery
Location replacing Product (for which Buyer shall not be
required to pay Seller if it paid seller the amount due for
the returned Product) having acceptable soot level to Buyer,
and the provisions of sub-articles 9.6.1 and 9.6.2 shall not
apply to any returned or replacing Product.
9.7.9 For the avoidance of doubt it is hereby clarified that during
the Interim Period, no deduction of whatsoever kind from the
price payable to Seller hereunder shall be
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<PAGE> 11
made if Product delivered to Buyer shall contain, or allegedly
contain, excessive soot level.
9.8 Buyer shall not delay or withhold payments in respect of Product
delivered notwithstanding any claim which has been or could have been
made by Buyer except for payments in respect of Product rejected and
returned by Buyer pursuant to the provisions of sub-article 9.6 above,
but said exception shall not apply to Product returned, for having or
allegedly having excessive soot level, during the Interim Period.
ARTICLE X - TAXES
10.1 Value Added Tax due or payable with regard to the sale and purchase of
the Product hereunder shall be borne and paid by Buyer.
10.2 If any tax (other than tax on the overall net income of Seller),
charge, fee, levy or duty shall be imposed or increased upon the sale
or purchase of the Product at any time after the date of signature
hereof, the amount thereof shall be borne and paid by Buyer.
ARTICLE XI - FORCE MAJEURE
11.1 Each of the parties hereto shall be relieved of its obligations
hereunder if and to the extent that it is prevented from performing the
same by any cause beyond its reasonable control, including, without in
any way limiting the generality of the foregoing, acts of God, war, the
elements, explosion, fire, riots, strike, lock-out or other differences
with workmen (neither party shall be required to settle any labor
dispute against its own best judgement), shortage of utility, facility,
material or labour, breakdown, accident or compliance with or other
action taken to carry out the intent or purpose of any law or
regulation.
The party so affected shall promptly notify the other of the existence
of such cause, of its expected duration, and of the estimated effect
thereof (to the extent known) on its ability to perform its obligations
hereunder.
Each party so affected shall promptly notify the other party when such
cause ceases to affect its ability to perform its obligations
hereunder.
ARTICLE XII - ALLOCATION
12.1 In the event of Seller's inability, for any of the causes set forth in
Article 11.1 above, to supply the total demand of Seller's customers
(anywhere in the world) for the Product, Seller shall have the right to
allocate its available supply among Seller's customers on a fair and
equitable basis, and the relevant Contract Year Quota shall be adjusted
accordingly.
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ARTICLE XIII - DEFAULT BY OR INSOLVENCY OF BUYER
13.1 If Buyer fails to pay any amount due or payable to Seller hereunder
within the stipulated time, Seller may, in addition to any other rights
it may have, suspend shipment and delivery of Product until such
default is made good.
In the event that such suspension shall result in Buyer receiving,
during any calendar month, less than the Minimum Monthly Quantity (as
defined in sub-article 3.6 above) the provisions of sub-article 3.6
shall apply.
Waiver by Seller of any default by Buyer hereunder shall not be deemed
as a waiver of any default thereafter occurring.
13.2 Non payment within the times herein set for payment and a breach of or
non-compliance with any of the provisions of sub-article 3.1, 3.2, 3.7,
7.2, 9.8 and 15.1 shall be deemed as a fundamental breach of this
Agreement.
13.3 If Buyer 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, Seller may forthwith terminate
this Agreement without further liability to Buyer but such termination
shall be without prejudice to the rights of the parties with respect to
Product therefore delivered to Buyer.
ARTICLE XIV - WEIGHT AND ANALYSIS
14.1 The weight of the Product delivered hereunder shall be determined by
weighing on officially certified scales designated by Seller and the
cost of weighing shall be for the account of Seller.
Such weighing shall be binding on both parties hereto and shall serve
as a basis for billing Buyer hereunder.
14.2 14.2.1 Seller shall, at its plant in Sdom, take a sample from each
Shipment of Product and shall analyse the same in accordance
with the analysis method then used by Seller.
"Shipment of Product" shall mean - total quantity of Product
in Sdom shipped to Buyer on any calendar day.
Each sample taken shall be divided into three portions. One
portion shall be analysed by Seller as herein provided. One
portion shall be made available to Buyer and shall be shipped
to Buyer at Buyer's account, once a week. One portion shall be
retained by Seller for a period of not less than 30 (thirty)
days.
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<PAGE> 13
14.2.2 Seller shall telefax to Buyer daily copies of the analysis
results.
14.2.3 Until such time that the analysis method referred to in 14.2.5
below shall be applied (if at all), Seller's analysis results
referred to above shall be binding on the parties hereto.
14.2.4 Buyer shall be entitled to analyse samples of Product taken
from Seller as provided in 14.2.1 above.
14.2.5 If Buyer's analysis result shall indicate that Product
delivered contains more than 1000 PPM insolubles in water and
Buyer's and Seller's respective analysis results referred to
above shall differ by more than 10% with regard to the PPM
insolubles in water content in the Product, or shall
substantially differ with regard to other Specifications that
materially affects Buyer (except the K2O content in Product),
then Buyer shall be entitled to request that samples shall be
analysed in a way to be agreed upon between the parties.
14.2.6 If the parties shall fail to agree as to the analysis method,
the matter shall be referred to an individual to be appointed
by both parties who is well conversed with the chemical issues
involved.
In the absence of agreement between the parties as to whom
that individual should be, he shall be appointed at the joint
request of the parties by the then head of the chemistry
department of the Ben Gurion University in Beer-Sheva.
14.2.7 The decision of the individual appointed shall be final and
binding upon the parties.
14.2.8 Buyer shall have the right to take samples at the Delivery
Location. If Buyer shall analyse samples taken at the Delivery
Location and shall continuously receive results regarding the
PPM insolubles in water content which substantially differ
from Seller's analysis results in a way which materially
affects Buyer then, at the request of Buyer, Seller and Buyer
shall hold discussions, exchange views and carry on such
agreed tests and experiments with a view of finding out the
reason for such substantially different results.
ARTICLE XV - RIGHT OF SET-OFF
15.1 Buyer shall not be entitled to set-off, or otherwise deduct any sums
from any amount which may be due or payable to Seller hereunder or
otherwise.
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ARTICLE XVI - WAIVER OF DEFAULT
16.1 Any failure by either party at any time, or from time to time, to
enforce or require the strict keeping and performance of any
performance of any term or condition of this Agreement shall not
constitute a waiver by such party of any subsequent breach of such term
or condition, or of the right of such party to avail itself of such
remedies as it may have for any such subsequent breach.
ARTICLE XVII - ASSIGNMENT
17.1 This Agreement or any right or obligation thereunder shall not be
assignable in whole or in part by either party without the prior
written consent of the other party, except that Seller may assign its
right to receive payments hereunder.
Any assignment without such prior written consent (if consent is
required) shall be deemed void ab initio.
ARTICLE XVIII - ENTIRE AGREEMENT AND HEADINGS
18.1 This Agreement constitutes the entire agreement between the parties
hereto with reference to the subject matter hereof, and all proposals,
negotiations, representations, if any, made prior and with reference
hereto are merged herein. No past conduct or custom of trade previously
applied in the parties' past business between themselves shall at any
time affect the interpretation of this Agreement.
No terms or conditions, other than those stated herein, and no
agreement or understanding in any way modifying the terms and
conditions stated herein, shall be binding on either party unless made
in writing and signed by both parties.
18.2 The headings herein are for the sake of convenience only and shall not
be relied upon in the interpretation or construction of this Agreement.
ARTICLE XIX - CPA'S CERTIFICATES
19.1 At the request of Buyer, Seller shall deliver to Buyer, as soon as
practicable after termination of each Contract Year a letter from
Seller's CPA certifying that pricing of Product sold and delivered to
Buyer turning that Contract Year conform to the applicable provisions
of the Agreement.
19.2 At the request of Seller, Buyer shall deliver to Seller, as soon as
practicable after termination of each Contract Year a letter from
Buyer's CPA certifying that quantity of Israeli Market Product declared
by Buyer in respect of that Contract Year conform to the applicable
provision of the Agreement.
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<PAGE> 15
ARTICLE XX - STAMP DUTIES
20.1 Stamp duties in respect of this Agreement shall be borne and paid for
by Buyer.
ARTICLE XIX - NOTICES
21.1 All notices and other communications hereunder shall be in writing and
shall be addressed to the parties at their respective above mentioned
address.
21.2 Either party may change the address or official to which notices shall
be given by notice to the other party as herein provided.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed.
/s/ /s/ Amiad Cohen
- ------------------------------------- ------------------------------
DEAD SEA WORKS LTD. HAIFA CHEMICALS LTD.
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<PAGE> 1
EXHIBIT 10.13
SPLIT DOLLAR AGREEMENT AND COLLATERAL ASSIGNMENT
AGREEMENT made as of December 31, 1996, by and between
TRANS-RESOURCES, INC. a Delaware Corporation having its principal office at 9
West 57th Street, New York, New York 10019 (the "Corporation"), and MARTIN
KAPLITT, now residing at 271-32E Grand Central Parkway, Floral Park, New York
11005, and LAWRENCE M. SMALL now residing at 2804 Woodland Drive N.W.,
Washington, D.C. 20008, as Trustees of the Arie Genger 1995 Life Insurance Trust
u/a/d 11/21/1995 (the "Trustees").
WHEREAS, the Trustees desire to insure the lives of Arie
Genger, who is the Chairman and Chief Executive Officer of the Corporation (the
"Executive") and his wife, Dalia Genger, for the benefit and protection of the
Executive's family, under policies issued by The Equitable Life Insurance
Company (the "Insurance Company");
WHEREAS, the Corporation, on behalf of the Executive, desires
to help the Trustees provide insurance by contributing a portion of the premiums
due on the policies on the Executive's life under a so-called "Split Dollar"
arrangement; and
WHEREAS, the Trustees will be the owner of the insurance
policies acquired pursuant to the terms of this Agreement and the policies will
be collaterally assigned to the Corporation as security for the repayment of the
amounts which the Corporation will pay as premiums due on the policies.
NOW, THEREFORE, in consideration of the mutual covenants
contained in this Agreement, it is agreed between the parties to this Agreement
as follows:
ARTICLE 1
APPLICATION FOR INSURANCE
The Trustees have applied to the Insurance Company and the
Insurance Company has issued to the Trustees as owners thereof policies on the
Executive's and his spouse's joint lives in the total face amount of $25,000,000
(the "Policies"). The policy numbers, face amount and plan of insurance
contained in the Policies are recorded on Schedule A attached hereto and the
parties hereto agree that the Policies are held subject to the terms of this
Agreement.
E-12
<PAGE> 2
ARTICLE 2
OWNERSHIP OF INSURANCE
The Trustees are and shall continue to be the owners of the
Policies and may exercise all rights of ownership with respect to the Policies,
except as to the limited security rights in the Policies specifically granted to
the Corporation herein. The rights reserved to the Trustees include specifically
the right to change the beneficiary of the Policies, the right to surrender the
Policies, the right to assign the Policies or revoke an assignment, and the
right to pledge the policies for a loan or to obtain a loan from the Insurance
Company against the surrender value of the Policies.
ARTICLE 3
PREMIUMS
When used in this agreement the words "the Premiums" shall
mean and refer to the annual planned premiums shown on Schedule A attached
hereto, or such other annual amounts as the parties hereto may from time to time
agree in writing to pay to the Insurance Company with respect to the Insurance
Policies, provided, however, that in no event shall the Premiums be less than
the smallest annual payment necessary to keep all of the Insurance Policies in
full force and effect.
ARTICLE 4
PAYMENT OF PREMIUMS ON Policies
A. The Corporation shall pay either directly to the Insurance
Company or by making the necessary funds therefor available to the Trustees the
Premiums when due less the amounts due from the Trustees pursuant to the
provisions of Section B of this Article 4. The Premiums may be paid under any
payment method acceptable to the Corporation and the Insurance Company.
B. The Trustees shall pay that portion of each annual premium
equal to the cost (calculated by application of the lower of the Internal
Revenue Service's U.S. Life Table 38 rate or the Insurance Company's annual term
insurance rates on the lives of the Executive and his said spouse while they are
both alive, and by application of the lower of the Internal Revenue Service's
U.S. Life Table 58 rate or the Insurance Company's annual term insurance rate on
the life of the survivor of the Executive and his said spouse after the death of
the first of them to die) of the insurance which the beneficiary or
beneficiaries named by the Trustees would be entitled to receive if the survivor
of the
-2-
<PAGE> 3
Executive and his said spouse died during that policy year (before any reduction
for repayments to be made to the Company pursuant to this Agreement).
ARTICLE 5
TRUSTEES' OBLIGATION TO CORPORATION
The Trustees must repay to the Corporation the aggregate
amount paid by the Corporation, under Section A of ARTICLE 4 of this Agreement,
as premiums on the Policies (such amount being hereinafter referred to as the
"Net Payment Amount"). This repayment must be made in accordance with ARTICLES 7
and 10 of this Agreement.
ARTICLE 6
ASSIGNMENT OF POLICIES
The Trustees hereby collaterally assign all their rights,
title and interest in the Policies to the Corporation as security for repayment
of the Net Payment Amount. Such collateral assignment shall not be altered or
changed without the written consent of the Corporation.
ARTICLE 7
DEATH CLAIMS
A. When the survivor of the Executive and his said spouse
dies, the Corporation shall be entitled to receive a portion of the death
benefits provided under the Policies. The amount to which the Corporation shall
be entitled shall be the Net Payment Amount less any repayments made by the
Trustees to the Corporation prior to the death of the survivor of the Executive
and his said spouse. The receipt of this amount by the Corporation shall
constitute satisfaction of the Trustees's obligation under ARTICLE 5 of this
Agreement.
B. When the survivor of the Executive and his said spouse
dies, the beneficiary or beneficiaries named by the Trustees (or by their
assignee) shall be entitled to receive the amount of the death benefits provided
under the Policies in excess of the amount payable to the Corporation under
paragraph A of this ARTICLE 7. This amount shall be paid under the settlement
option elected by the Trustees (or by their assignee).
C. If any interest is due upon the death proceeds under the
terms of the Insurance Policies, the Corporation and the beneficiary or
beneficiaries named by the Trustees (or their assignee)
-3-
<PAGE> 4
shall share such interest in the same proportions as their respective shares of
the death proceeds (as defined in Sections A and B of this Article) bear to the
total death proceeds excluding such interest.
D. If, upon the death of the survivor of the Executive and his
said spouse, there is a refund of unearned premiums under the provisions of the
Insurance Policies, then any such refund shall be divided between the
Corporation and the beneficiary or beneficiaries named by the Trustees (or their
assignee) in the same proportion as the respective shares of the last premium
payment made by the Corporation and the Trustees, respectively, shall bear to
the total of the most recent annual planned premiums.
ARTICLE 8
DIVISION OF THE NET CASH SURRENDER
VALUE OF THE INSURANCE POLICIES
If the Insurance Policies are surrendered, the Corporation
shall thereupon be entitled to receive the Net Payment Amount less any
repayments made by the Trustees to the Corporation prior to such surrender, and
the Trustees, or their assigns, shall be entitled to receive any balance of such
cash surrender value. To the extent that the cash surrender value is not
sufficient to pay in full the Net Payment Amount less any repayments made by the
Trustees to the Corporation prior to such surrender, the Trustees shall be
liable to the Corporation for the amount of such insufficiency.
ARTICLE 9
TERMINATION OF AGREEMENT
This Agreement shall terminate when any of the following
events occur:
(a) cessation of the business of the Corporation as
presently conducted;
(b) termination of the Arie Genger 1995 Insurance Trust;
(c) bankruptcy, receivership or dissolution of the
Corporation;
(d) upon the election of the aggrieved party, if either
the Corporation or the Trustees fail for any reason
to make payment of any portion of the premium due on
the Policies as required by ARTICLE 4 of this
-4-
<PAGE> 5
Agreement, provided that any election to terminate
this Agreement under this subparagraph must be made
within ninety (90) days after the failure to make the
required payment occurs; or
(e) full repayment by the Trustees of the Net Payment
Amount provided that upon receipt of such repayment
the Corporation releases the collateral assignment of
the Policies made by the Trustees pursuant to ARTICLE
6 of this Agreement.
ARTICLE 10
DISPOSITION OF Policies ON
TERMINATION OF AGREEMENT
If this Agreement is terminated under paragraph (a), (b), (c)
or (d) of ARTICLE 8 of this Agreement, the Trustees shall have one hundred
twenty (120) days in which to repay to the Corporation the Net Payment Amount
less any repayments made by the Trustees to the Corporation prior to the
termination of this Agreement. Upon receipt of such amount, the Corporation
shall release the collateral assignment of the Policies. If the Trustees do not
repay such amount within this one hundred twenty (120) day period, the
Corporation may enforce its rights against the Trustees under this Agreement in
any way it sees fit.
ARTICLE 11
INSURANCE COMPANY NOT A PARTY
The Insurance Company:
(a) shall not be deemed to be a party to this
Agreement for any purpose nor in any way
responsible for its validity;
(b) shall not be obligated to inquire as to the
distribution of any monies payable or paid
by it under the Policies; and
(c) shall be fully discharged from any and all
liability under the terms of any policies
issued by it, which is subject to the terms
of this Agreement, upon payment or other
performance of its obligations in accordance
with the terms of such policy.
-5-
<PAGE> 6
ARTICLE 12
PLAN ADMINISTRATION
Lester W. Youner, Chief Financial Officer of the Corporation,
is hereby designated the plan administrator until his resignation or removal by
the Board of Directors, and as such he shall be responsible for the management,
control and administration of the Split Dollar plan as established herein.
Lester W. Youner may allocate to others certain aspects of the management and
operation responsibilities of the plan including the employment of advisors and
the delegation of any ministerial duties to qualified individuals.
ARTICLE 13
ASSIGNMENT BY CORPORATION
The Corporation is prohibited from assigning its interest in
the Policies to anyone other than the Trustees or their nominee.
ARTICLE 14
AMENDMENT OF AGREEMENT
This Agreement shall not be modified or amended except by a
written agreement signed by the Corporation and the Trustees. This Agreement
shall supercede and take the place of the Split Dollar Agreement and Collateral
Assignment between the parties hereto dated as of December 5, 1996. This
Agreement shall be binding upon the successors and assigns of each party hereto.
ARTICLE 15
GOVERNING LAW
This Agreement shall be deemed a contract made under the laws
of, executed and delivered in the State of New York, and for all purposes shall
be construed and interpreted in accordance with
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<PAGE> 7
the laws of such State without reference to conflicts of laws principles.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
/s/ Martin Kaplitt
----------------------------------------
MARTIN KAPLITT, as a Trustee of the
Arie Genger 1995 Life Insurance
Trust
/s/ Lawrence M. Small
----------------------------------------
LAWRENCE M. SMALL, as a Trustee of
the Arie Genger 1995 Life Insurance
Trust
TRANS-RESOURCES, INC.
By: /s/ Lester W. Youner
------------------------------------
Lester W. Youner, Chief
Financial Officer
-7-
<PAGE> 8
This Split Dollar Agreement and Collateral Assignment relating to the Policies
was recorded by The Equitable on ____________, 1997.
THE EQUITABLE
By:_____________________________________
Name:
Title:
-8-
<PAGE> 9
SCHEDULE A
INSURANCE POLICIES ON THE JOINT
LIVES OF ARIE AND DALIA GENGER
<TABLE>
<CAPTION>
Annual
The Equitable Planned
Policy Number Type of Policy Face Amount Premium
------------- -------------- ----------- -------
<S> <C> <C> <C>
Survivorship
46207953 Variable Life $7,500,000 $86,550
Survivorship $7,500,000 $86,550
46208269 Variable Life
46254462 Survivorship $5,000,000 $57,700
Variable Life
47201858 Survivorship $5,000,000 $57,700
Variable Life
</TABLE>
-9-
<PAGE> 1
EXHIBIT 10.14
STATE OF ISRAEL
THE ISRAEL LANDS ADMINISTRATION
File # A60158572
Account No. 976225128
C a p i t a l i z e d
LEASE CONTRACT
(Low Rise Construction, or Industry, or Commerce, or Tourism)
Drawn up and signed in ........ on ......... .., ....
on March 6, 1995
BETWEEN
The Israel Lands Administration, which manages the lands of the State of Israel,
the Development Authority, the Keren Kayemet LeIsrael (hereinafter: the Lessor),
whose address for the purpose of this Contract is: 1, Ben Zvi Street, Beer Sheba
84893; as the first party;
A N D
Haifa Chemicals South Ltd., corporate number 511010589 (hereinafter: the
Lessee), whose address for the purposes of this Contract is: POB 1809, Haifa; as
the second party;
P r e a m b l e
Forming an integral part of the terms of the lease enclosed herewith and
constituting jointly the entire Lease Contract.
WHEREAS The State of Israel / The Development Authority is the owner
of the land specified hereinbelow in this Preamble
(hereinafter: the Plot);
WHEREAS The Plot comprises one or more buildings (hereinafter: the
Buildings) which were constructed prior to the date of entry
of this Lease Contract into effect;
WHEREAS Inasmuch as the construction of the Buildings has not been
completed to an extent allowing their full-scale occupation
and/or
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<PAGE> 2
use for the purpose of the Lease, the Lessee undertakes to
complete the construction of the Buildings so as to make them
fit for the purpose of the use not later than the end of one
year from the day of signing this Contract by the
Administration; the Lessee acknowledges that this obligation
constitutes a fundamental condition of this Contract;
WHEREAS The Lessor has agreed to lease the Plot to the Lessee together
with everything permanently attached thereto and build thereon
(hereinafter: the Attachments) (the Plot together with the
Attachments being referred to hereinbelow as the Premises);
this on the condition precedent that the obligations assumed
by the Lessee - whether on the basis of a development contract
with the Lessor or pursuant to any other agreement with the
Lessor - shall have been complied with in full during the
period prior to the date of entry of this Lease Contract into
effect;
WHEREAS The parties agree that, strictly for the purpose of
convenience, the Lessee shall sign a copy of this Lease
Contract, whereupon the Lessor shall incur no obligation
whatsoever pending compliance by the Lessee with all of its
aforementioned obligations. The parties agree in advance that
the Lease Contract shall only enter into effect after the
Lessor shall have signed it as well, and this on the condition
that the Lessee shall have complied with all of its
aforementioned obligations toward the Lessor. Pending the
signing of the Lease Contract by the Lessor, the parties shall
not be bound by its conditions and the signature of the Lessee
alone on the Lease Contract shall not impart upon the Lessee
any rights whatsoever pursuant to the Lease Contract. The date
of signing the Lease Contract by the Lessor shall be deemed as
the date of entry hereof into effect.
WHEREAS The Administration has, on the day of inception of the Lease
Period, delivered possession of the Premises to the Lessee or
to the previous holder of the lease right to the Premises
prior to the Lessee, and the Lessor shall be under no
obligation to evict any occupants present on the Premises or
to bear the expenses for their eviction;
WHEREAS The Lessee hereby declares that there is no impediment to the
Lessee entering into this contractual commitment with the
Lessor pursuant to the provisions of clause 19(A)(3) of this
Contract, and the Lessee acknowledges that this represents a
condition precedent and a fundamental condition for the
Lessor's consent to enter into this contractual commitment
with the Lessee;
<PAGE> 3
WHEREAS Pursuant to the provisions of the treaty between the State of
Israel and the Jewish National Fund [Keren Kayemet Le-Israel]
(hereinafter: the Fund, as published in the Official Gazette
(Yalkut Hapirsumim) No. 1456, p. 1597, the management of the
land owned by the Fund, including the lease thereof and the
issuance of consents to the transfer of the lease rights
thereto, or the refusal to grant such consents, shall be done
by the Lessor in accordance with the Memorandum and Articles
of Association of the Fund; and the Lessee hereby acknowledges
that if the Plot or part thereof is or shall at any time be
owned by the Fund, it shall be subject to the provisions of
the said treaty and that this provision constitutes a
condition precedent and a fundamental condition on the basis
of which the Lessor is prepared to enter into this contractual
commitment with the Lessee;
WHEREAS If the purpose of the Lease is industry or crafts or tourism,
the following additional conditions of this Preamble shall
apply to the Lease under this Contract:
A. If the purpose of the Lease is industry or crafts and
the Lessee shall have applied for the Lessor's
consent to a change of the category of the industry
or crafts with regard to those established in the
Purpose of the Lease, the Lessor may make its consent
conditional, among other things, on a change of the
duration of the Lease in accordance with resolutions
adopted by the Lessor from time to time, and also on
receipt of the recommendation from the Ministry of
Industry and Commerce for the requested change in the
category of the industry or crafts and also for the
recommended duration of lease for this purpose.
B. If the purpose of the Lease is industry or crafts or
tourism then in addition and subject to all the other
conditions stated in clauses 9 and 14 hereinbelow,
the Lessee shall enclose with its application for the
introduction any of the alterations referred to in
clause 9 or for the transfer of rights under the
Contract as provided in clause 14, as the case may
be, an appropriate and valid recommendation from the
Ministry of Industry and Commerce or from the
Ministry of Tourism, as the case may be. The Lessor
shall not give its consent to any such application by
the Lessee unless the Lessee shall have submitted
such valid recommendation.
C. The terms "Ministry of Industry and Commerce" and
Ministry of Tourism" shall comprise any other
government agency in charge of matters of the
category of the "Purpose of the Lease", everything as
decided by the board of the
<PAGE> 4
Israel Lands Administration or according to rulings
made by the Lessor as necessitated from time to time
under the circumstances of the case.
WHEREAS The meaning of the terms used in this Contract shall be as
defined hereinbelow in this Preamble, unless the context
necessitates a different interpretation in accordance with the
Contract:
The Plot
The plot indicated in the chart enclosed herewith as an
integral part of this Contract, its particulars being as
follows:
Location: Arad; Area: 1,259,673 sq.m. (appr.)
Registered block 100113 parcels: 2 (part)
Registered block 100116 parcels: 1 (part)
Registered block 100117 parcels: 1 (part)
Lease Period
Forty-nine years starting from the transaction approval date,
i.e. January 02, 1994.
Transaction Approval Date
The day of approval of the transaction contemplated herein by
the Management of the Lessor.
<PAGE> 5
Purpose of the Lease
Industry and crafts
Construction Capacity
..... % per floor, on .... floors, or a total of ....... %
representing a built up area of 755744.0 sq.m.
Rent
The annual rent for the entire Lease Period, payable to the
Lessor in advance, capitalized by the procedure applied by the
Lessor (hereinafter: Capitalized Rent).
The Capitalized Rent deposited, if at all, with the Lessor
prior to the signing of this Lease Contract, shall be deemed
as payment of the Capitalized Rent.
Basic Plot Value
Nis 1,733,770.27 (one million seven hundred thirty three
thousand seven hundred and seventy NIS % 27 agorot) as of the
Transaction Approval Date;
Established in accordance with the destination and the use
ratio according to Urban Outline Plan 23/100/02/10.
Basic Index
The consumer price index last known as of the Transaction
Approval Date.
Destination
Industrial zone.
WHEREAS If the Lessee consists of more than a single person or
corporation, the undertakings of the persons or corporations
constituting the Lessee shall be deemed to be made jointly and
severally, whereas their rights pursuant to this Contract
shall be exercized individually;
WHEREAS The following special conditions shall apply in addition to
the conditions of the Lease Contract which follows:
The construction percentages according to the urban outline
plan (enterprise area) shall be 40% main areas and 20% utility
areas, or a total of 60%; the height of Administration and
Personnel Services shall be three floors.
It is stipulated that the construction works whose completion
is required as a condition precedent to the signing of the
Lease Contract shall amount to the construction of 20,270
sq.m. only.
<PAGE> 6
In view of the purpose of the enterprise and the intended use
thereof, the entrance to the enterprise shall be adjusted as
stated in clause 16 of the Development Contract with the Plant
Manager or his representative.
The liability of the entrepreneur for the payment of damages
to the Administration as stated in clause 12 of the Lease
Contract shall be conditional upon the Administration having
notified the Entrepreneur of any demand and/or claim filed
against the entrepreneur within the scope of liability of the
entrepreneur, with the further provision that the entrepreneur
shall be enabled to defend itself at its own expense together
with, or on behalf of, the Administration, everything at the
discretion of the Administration.
IN WITNESS THEREOF THE PARTIES HAVE SET THEIR HAND ON THIS DEVELOPMENT CONTRACT
AS PROVIDED IN THE PREAMBLE AND PURSUANT TO THE LEASE CONTRACT HEREINBELOW:
Signature of the parties: The Administration The Lessee
Initials:
The value of the Land is composed of the sum of NIS 1,287,624.33 for the plant
area and the sum of NIS 446,146 for the ponds.
<PAGE> 7
CONDITIONS OF THE LEASE
1. Preamble and Enclosed Documents
The Preamble to and the documents enclosed with this Contract
constitute an integral part hereof.
2. Obligation to Grant and Accept the Lease
The Lessor hereby undertakes to grant the Lease of the Premises to the
Lessee, and the Lessee hereby undertakes to accept the Lease of the
Premises from the Lessor.
It is agreed between the parties that pending the registration of the
lease right at the Land Registry, the Lessor has granted to the Lessee
the right to use the Premises and all the provisions of this Contract
with regard to the lease and the terms thereof shall apply, mutatis
mutandis, to the aforementioned right of use and that use fees shall be
payable at the rate of the rent referred to hereinbelow.
3. Lease Period
The Lease Period shall be as stated in the Preamble to the Contract.
4. Purpose and Destination of the Lease
The Premises are hereby leased to the Lessee strictly for the purpose
and destination specified in the Preamble to this Contract, and the
Lessee may not use the Premises or any part thereof for any other
purpose or destination without the express prior written consent of the
Lessor.
5. Capacity of Construction
The allowed capacity of construction under this Contract is as stated
in the Preamble hereto.
6. Acceptance of Possession of the Premises
The Lessor confirms that it has accepted possession of the Premises at
the time and subject to the condition stated to this effect in the
Preamble to this Contract.
7. Rent
The Lessee undertakes to pay rent to the Lessor according to the
respective provisions of the Preamble to this Contract.
8. Reassessment
A. Subject to the provisions of paragraph (B) hereinbelow, the
Lessor may demand annual rent based on a reassessment of the
Plot by the State Valuer, irrespective of any appreciation of
the Plot as a result of development works done thereon by or
at the expense of the Lessee, in any one of the following
cases:
(1) In the event of the Lessee having applied for the
Lessor consent to a transfer of the Lessee's rights
hereunder as stipulated in clause 14 hereinbelow;
<PAGE> 8
(2) In the event of the Lessor having granted its consent
to a Lessee's application for introducing any of the
alterations referred to in clause 9 hereinbelow.
B. In the event of the Lessee, prior to the date of the Lessor's
consent in response to any of the Lessee's applications
referred to in the foregoing paragraph (A), having paid a
capitalized rent as defined in the Preamble to the Contract,
the annual rent shall not be increased as provided in this
clause.
C. In the event of the Lessor having demanded a raise of the rent
as stated hereinabove, the Lessor shall notify the Lessee by
registered letter. The Lessee shall be entitled to appeal
against the raise within 30 days from receipt of the Lessor's
notice before the State Valuer, and the ruling of the latter
shall be final.
D. The annual rent as increased pursuant to the reassessment
shall be payable by the Lessee to the Lessor starting from the
date of the Lessor's consent, within 15 days from the day of
notice by the Lessor. The increased annual rent shall be
subject to the provisions with regard to annual rent as stated
in the Preamble to the Contract, mutatis mutandis.
9. Change of Destination, Construction Capacity, Additional Construction,
Split
A. The Lessee undertakes to seek the Lessor's prior written
consent for the performance of any of the following
alterations:
(1) Change of destination or exercise of change of
destination of the Plot, from the one defined in the
Preamble to any other destination.
(2) Increase of the construction capacity specified in
the Preamble, or additional construction over the
construction capacity specified in the Preamble, or
alteration of the Buildings or additions built on
them or additional buildings erected on the Plot or
additions on them.
(3) Division of the Plot into a number of subplots where
every subplot constitutes an independent plot fit for
separate use.
The Lessee shall enclose the application with plans
and documents relevant to the alteration applied for
by the Lessee.
B. The Lessee shall not make the alteration applied for by the
Lessee before obtaining the Lessor's prior written consent,
nor shall the Lessee seek any permit for the sought alteration
from the competent authorities before obtaining the Lessor's
consent to this effect. On obtaining the Lessor's
<PAGE> 9
consent, the Lessee shall only carry out the alteration after
obtaining the approval of the competent authorities.
C. The Lessor may refuse to grant its consent to the alteration
sought by the Lessee, or make its consent conditional upon the
payment of a sum of money in consideration of a change of the
value of the Plot as a result of the sought alteration, as
determined by the State Valuer or according to the practice of
the Lessor at the time, and also upon such other requirements
as may be practiced by the Lessor.
10. Registration of the Lease
A. The registration of the lease right in the name of the Lessee
pursuant to the provisions of this Contract and all the
operations necessary for this purpose shall be done by the
Lessee at its own expense.
The Lessor shall as necessary sign all the documents required
for the registration of the lease right as provided above;
this, however, on the condition that the Lessee shall have
complied with all its obligations under this Contract.
B. The Lessee shall, inter alia, prepare the documents and maps
necessary for the said registration, including those necessary
for the purpose of registration and/or renewal of the
registration of the Plot, its distribution, separation, the
surveying expenses and parcellation maps, and also the files
at the Land Registry Office; the Lessee shall bear all the
payments and expenses involved in the said registration,
including the payment of stamp tax and other taxes without any
exception.
C. The Lessee undertakes to prepare and complete all the
operations necessary for the registration of the Premises as a
condominium (or condominiums) pursuant to the Land Law, 1969,
inasmuch as these operations shall not have been completed in
the period prior to the signing of this Contract; the Lessee
further undertakes to do at its own expense everything
necessary for this purpose, including the preparation of
sketches, registration orders, regulations, etc., everything
as necessary.
The Administration shall be entitled to notify the Lessee in
advance and in writing of its intent to carry out the
aforementioned operations or any part of them for and at the
expense of the Lessee, and the Lessee undertakes to refund to
the Administration every expense incurred by the
Administration for the performance of the said operations,
according to an invoice to be submitted to the Lessee, within
30 days from the date of submission thereof.
<PAGE> 10
D. The Lessee undertakes to provide the Lessor with certificates
of the payment of all taxes, municipal rates, levies and other
compulsory payments applicable to the Premises, as well as any
other document necessary for the registration of the lease as
provided hereinabove.
E. In the event of the Lessee, notwithstanding the foregoing
provisions and despite the Lessor's demand, having failed to
register the lease, the Administration may carry out all the
operations involved in the said registration at the expense of
the Lessee, and the Lessee undertakes to refund to the Lessor
all of the expenses incurred by the Lessor within 30 days of
submission of an invoice to this effect.
11. Changes of the Plot Borders and Definitive Determination of the Plot
Area
A. The Lessee acknowledges that the area and borders of the Plot
are not final and that they may be changed as a result of
changes in the planning pursuant to the Planning and
Construction Law, 1965, land arrangements, etc.
B. The Lessee acknowledges that surveying operations for the
purpose of registration may lead to the conclusion that the
Plot area is smaller or larger than the one on the basis of
which the value of the Plot was determined.
C. In the event of the changes referred to in the foregoing
paragraph (A) having led to an increase or decrease of the
Plot area and/or if the Plot borders are changed or if it
shall have become evident as stated in the foregoing paragraph
(B) that the Plot area is smaller or larger than the one on
the basis of which the basic Plot value was established, the
Lessee shall:
(1) Accept any change of the borders and/or area of the
Plot as resulting from the changes referred to in the
foregoing paragraph (A);
(2) Accept any determination with regard to the Plot area
as established as a result of the surveying for the
purpose of registration as stated in the foregoing
paragraph (B);
(3) Regard the Plot in its new borders and area as the
subject of the present lease and accept possession
thereof.
<PAGE> 11
D. In the event of change in the value of the Plot as a result of
the changes referred to in the foregoing paragraphs (A) and/or
(B), the Rent shall be revised in accordance with the
definitive area as estimated by the State Valuer as of the
date of determination of the basic Plot area, and each of the
parties shall pay only pay to the other party the differences
resulting from such revision, plus linkage differentials from
the date of determination of the basic Plot area to the date
of actual payment of the said differentials.
12. Use of the Premises and Liability of the Lessee
The Lessee undertakes to maintain the Premises in a good and proper
state as an owner taking care of his property, and to make at its own
expense all the repairs necessary for maintaining the Premises in the
said state. For the entire duration of the Lease Period, the Lessee
alone shall be responsible for compliance with the provisions of any
law in connection with the maintenance and use of the Premises and also
in connection with the construction works on the Plot; the Lessee shall
comply with every obligation pursuant to every law applicable at
present or in future to the Lessor with regard to the Premises,
everything at the expense of the Lessee; the Lessee shall not be
entitled to demand any refund of such expenses from the Lessor.
The Lessee alone shall be liable toward the Lessor and toward any third
party for any property damage and bodily injury to any person,
including the Lessee, and also for the payment of damages imposed as a
result of or in connection with operations and/or omissions on the
Premises or in connection with the maintenance and use of the Premises,
so that the Lessor shall bear no liability whatsoever in connection
therewith.
13. Taxes and Compulsory Payments
Starting from the commencement of the Lease Period or the day of
acceptance of possession of the Premises, whichever occurs first, the
Lessee alone shall pay all the taxes, municipal rates and other
compulsory payments to the state and municipal authorities, including
betterment tax, as applicable to the owners and/or possessors of the
Premises, as well as all the fees and development expenses applicable
at present or in future to the Premises, including the expenses related
to the connection of electric power, water and sewerage fees, water
supply arrangements, installation of sewerage, canalization, the
construction of roads and sidewalks, sanitary installations and
operations, etc.
The Lessee undertakes to pay value added tax as provided by law as
applicable to all of the payments imposed on the Lessee under this
Contract, in accordance with the rate of the said tax as applicable at
the time of payment.
<PAGE> 12
14. Transfer of Rights
A. Rights Transfer is Subject to Consent
The Lessee may not transfer its right under this Contract
except with the Lessor's prior written consent.
The following definitions shall apply in this clause:
Rights Transfer
Any one of the following, whether for a consideration or not,
entirely or in part, and in any manner whatsoever:
(1) The grant, transfer, assignment or waiver of rights
conferred by this Contract;
(2) Sublease of the Premises or any degree of such
sublease, renting of the Premises by way of
subletting or renting the lease at any degree
whatsoever, everything for a length of time that
necessitates under law the registration of the lease
in the Register kept as provided by law, including
rental whereby the rental becomes protected by the
Tenant Protection Law (Combined Version), 1972, or
any other law that may supersede it (hereinafter:
sublease);
(3) Delivery of possession or use of the Premises for the
period stated in paragraph (2) hereinabove
(hereinafter: delivery of possession);
(4) With regard to a corporate lessee, any corporate act
on the Premises as a result of which at least 10% of
the nominal value of the paid up share capital or
issued share capital of the Lessee, whichever is less
(hereinafter: the Capital Rights), or 10% of the
voting power in the Lessee (hereinafter: the Voting
Rights), or 10% of the right to appoint directors in
the Lessee (hereinafter: the Appointment Rights).
Corporate acts in the Lessee involving separately the
transfer of less than 10% of the aforementioned
rights and occurring within a period of two years
shall be regarded for the purposes of this clause as
having been committed at once on the date of the last
corporate act among them.
The following definitions shall apply in this clause
14:
Corporation
As defined in the Land Betterment Tax Law, 1963
(hereinafter: LBTL), as amended from time to time,
including an unregistered corporation or partnership.
Corporate Act
As defined in the LBTL as amended from time to time,
including a corporate act involving a corporation
that holds a corporate right in
<PAGE> 13
the Lessee, and also including any change in a
partnership, whether the latter is registered or not,
occurring as a result of the inclusion of a person in
it or the departure of a person from it, or any
change in a corporation whose capital is not in form
of shares, occurring as a result of such inclusion or
departure, also including any change in the
proportionate holding of a partner in the capital of
the partnership or corporation as aforesaid.
Corporate Right
As defined in the LBTL, as amended from time to time.
Holder, Holding
According to the definition of "holding" in the
Securities Law, 1968, as amended from time to time;
the terms under the definition of "holding" in the
aforementioned law shall be interpreted according to
their interpretations as amended from time to time in
the said law.
(5) Mortgage and/or Charge of the Premises and/or the
Rights Pursuant to this Contract
The Lessor shall not give its consent to any mortgage
and/or charge as aforesaid unless the Lessee and the
owner of the security interest shall have undertaken
toward the Lessor, prior to any such consent, that in
any case of exercise of the mortgage or security
interest or charge or as a result of the
implementation of a court ruling or other document
exercisable as a court ruling or as a result of sale
by the Execution Office or by any other authority
under law - the Lessor shall collect the consent fees
due under this Contract. However, the Lessor's
consent to the very act of the mortgage or charge
shall not be made conditional upon any payment
whatsoever.
Any transfer of rights as indicated above without the
Lessor's consent or without payment of consent fees
as provided above shall constitute a fundamental
breach of the Contract, and the Lessor shall be
entitled to terminate the Contract as a result
thereof.
(6) Any other act that is not referred to hereinabove and
involves the effective transfer of rights hereunder,
whether for a consideration or not, in a total or
partial manner and in any form whatsoever.
<PAGE> 14
B. Conditions for Consent
(1) The Lessor may impose the following conditions for
granting its consent to a rights transfer in
connection with this Contract, in addition to the
other conditions the Lessor is entitled to apply
under this Contract, everything pursuant to
resolutions passed by the Israel Lands Administration
Board or according to any law.
A. The Lessee shall have complied with all the
conditions of this Lease Contract;
B. The Lessee and the transferee shall sign and
submit such documents as shall be required
by the Lessor in connection with the
transfer and shall comply with all the
conditions imposed by this Contract in
connection with the grant of consent,
including an obligation on the part of the
transferee to comply with all the conditions
of this Lease Contract.
(2) In the event of the Lessee having obtained any
exemption or discount, whether partial or total, with
regard to the payment of the Rent, or having paid a
reduced Rent, and these or any of them having been
made conditional on compliance with conditions
imposed for this purpose, the Lessor's consent to the
rights transfer shall be conditional on compliance
with the conditions established for the grant of such
exemption or discount or reduced payment, including
compliance with all the implications thereof.
(3) The Lessor's consent to a sublease or to a delivery
of possession, if granted, shall not release or
exempt the Lessee from any obligation imposed on the
Lessee hereunder, and the Lessee and transferee shall
be jointly and severally liable for compliance with
all of the Lessee's obligations under this Contract.
(4) The Lessor may demand details and statements on the
following matters from the Lessee and the proposed
transferee of the rights (hereinafter: the
Transferee):
A. The nature of the rights being transferred
and the date on which the Lessee and the
Transferee intend to carry out the
contemplated transfer;
B. The name, address, and identity number of
the Transferee;
<PAGE> 15
C. In the case of a corporate Transferee:
(1) Name, address, corporate number as
entered at the office of the
Companies Registrar; the names of
the shareholders, their holdings in
the share capital, voting power and
appointment power, and the names of
the directors.
(2) Details as stated in the foregoing
paragraph (B) with regard to avery
shareholder and director of the
corporation.
(3) In the event of a corporate
shareholder or director in the
Transferee corporation, details on
the corporation as stated
hereinabove in this paragraph (C),
and details on every one of the
shareholders and directors of the
corporation as stated in the
foregoing paragraph (B).
D. The amount payable by the Transferee to the
Lessee for the rights.
The Lessor may demand further information and documents in
connection with the Transferee from the Lessee and the
Transferee.
C. Denial of Consent in Certain Cases
The Lessor may deny its consent to the rights transfer to a
person defined as a foreign national according to clause
19(A)(3) hereinbelow, or to a person who does not meet the
requirements of any condition precedent or fundamental
condition stated in the Preamble to this Contract.
D. Consent Fees
Without derogating from the provisions of this clause 14 and
subject to the provisions of paragraph (E) hereinbelow, the
Lessor may make its consent to a rights transfer conditional
upon the payment of consent fees. The following provisions
shall apply in this respect pending any amending resolution by
the Israel Lands Administration Board:
(1) In the cases referred to in the foregoing paragraphs
(A)(1), (A)(5) and (A)(6), the consent fees shall
amount to one third of the difference between the
value of the Plot at the time of grant of the
Lessor's consent to the rights transfer and the value
at the time of acquisition of the lease rights by the
Lessee, in the status as at the time of acceptance of
delivery of the Plot, disregarding the development
works and expenses incurred for the Plot, according
to an estimation made by the State Valuer
(hereinafter: the Consent
<PAGE> 16
Fees), less a proportion of the Plot value as stated
in the Preamble to this Contract.
(2) In the cases referred to in the foregoing paragraph
(A)(4), the Consent Fee was calculated in accordance
with the foregoing paragraph (1) and the amount
payable shall be determined according to the
proportion between the rights to capital and/or the
voting rights and/or the appointment rights being
transferred on the one hand and the totality of the
respective rights in the corporate Lessee on the
other hand; however, in case of transfer of control
the consent fee shall be payable in full.
In this paragraph, the term "control" shall be
defined as the direct or indirect holding by a
physical or corporate person of 50% or more of the
nominal value of the paid up share capital or the
issued share capital of the lessee, whichever is
less, or one half or more of the voting power in the
lessee, or the right to appoint one half or more of
the directors in the lessee.
(3) In the cases mentioned in the foregoing paragraphs
(A)(2) and (A)(3), the Consent Fee shall be set at
the rate established from time to time by the Lessor
for such cases.
E. Rights Transfer Without Consent Fee
The Lessor shall not make its consent to the rights transfer
conditional upon the payment of any sum of money in the event
of the Lessor having, prior to the date of consent, paid
capitalized consent fees as defined in the Preamble and all
the other amounts payable to the Lessor hereunder and
according to law, on the further condition that the Lessee
shall have paid all the state and municipal taxes and other
compulsory payments due by the Lessee hereunder and according
to law for the entire period until the date of consent.
F. Acquisition of Rights by the Lessor
In the event of the Lessee desiring to transfer its rights as
defined in the foregoingparagraphs (A)(1), (A)(5), or (A)(6),
the Lessor shall be entitled, though under no obligation
whatsoever, within thirty days from the date of receipt of the
details referred to in the foregoing paragraph (B)(4), and if
the Lessor shall have demanded further information and
documents as stipulated above, within thirty days from the
date of such demand, to notify the Lessee by registered mail
of its desire to recover possession of and all rights to the
Premises, noting that it agrees to pay to the Lessee the
amount offered by the Transferee. Following the said
notification by the Lessor, the Lessee shall not be allowed to
transfer its rights to the Premises to any person other than
the Lessor.
<PAGE> 17
The Lessor shall not exercise its right to recover possession
of the Premises as provided in this paragraph when the
Transferee is a spouse, descendant, parent, sibling, or
inheritor of the Lessee.
The Lessor may enter a caveat at the Land Registry in
connection with its aforementioned right.
G. Fundamental Breach
The breach of any of the provisions stated in this clause 14
shall constitute a fundamental breach of this Contract, in the
case of which the Lessor may terminate this Contract.
15. Natural Resources, Antiquities, Materials, Trees
The Lessee hereby acknowledges that all natural resources such as
petroleum, gas, water springs, coal and metal ores, marble and stone
deposits, sand, gravel and all other deposits, as well as antiquities
and antiquity sites, materials and trees located on the land of the
Premises shall belong to the Lessor and/or the State and that they are
not included in the Premises and that the terms of the Lease pursuant
to this Contract shall not apply to them. The Lessee shall enable the
Lessor to extract or otherwise exploit the natural resources,
antiquities, materials and trees in accordance with the applicable laws
and on the basis of this Contract.
The Lessee shall make no excavations on the Plot in excess of what is
needed for attaining the purpose of the Lease.
The Lessee may not sell any materials or timber removed from the Plot,
as these constitute the property of the Lessor and/or the State, except
with the Lessor's written consent, and the Lessor may make its consent
conditional upon a payment for the materials or timber.
16. Observation of the Sabbath and Jewish Holidays
The Lessee and all persons on its behalf shall abstain from any
construction or trade on the Premises on the Sabbath and or Jewish
holidays.
The following definitions shall apply in this clause:
Trade
The conduct of a business and any manual work carried out regularly by
the Lessee or by any other person for a consideration and in a public
manner.
Construction
Any work related to construction works carried out by the Lessee or by
a third party for a consideration and in a public manner.
The prohibition imposed in this clause shall not apply to cases in
which the Lessee is permitted to engage in trade and construction by a
competent authority according to law, as long as the permit remains
valid.
<PAGE> 18
17. Transfer of Contract Rights by the Lessor
The Lessor is entitled to transfer its rights hereunder without having
to seek the Lessee's consent to this effect, and the Lessee undertakes,
in case of such transfer, to comply with all of its obligations
hereunder toward the transferee.
18. Right of Entry to the Premises
In addition to the provisions of any law, the Lessor or any person
authorized by the Lessor to this effect shall be entitled to enter the
Premises at all reasonable times for examining the use of the Premises
with reference to the provisions of this Contract and for laying pipes
for water, canalization, sewerage and gas, also for the installation of
electric or telephone poles, electrical or telephone cables through,
inside or over the Premises, and/or also for any other comparable
purposes.
The Lessee shall enable the Lessor and any person on the Lessor's
behalf to enter the Premises and carry out the inspections and works
necessary for the foregoing purposes. The Lessor undertakes to
indemnify the Lessee for any damage caused to the Lessee as a result of
the execution of such inspections or works.
19. Remedies for Breach of Contract
Without derogating from the right to other remedies under law and
pursuant to this Contract in the event of breach hereof, the parties
agree that any one of the breaches mentioned in paragraph (A)
hereinbelow shall constitute a fundamental breach hereof as a result of
which the Lessor shall be entitled to terminate the Contract by a
notice sent by registered mail to the Lessee:
A. (1) Breach of any of the provisions of clauses 9 and 14.
(2) In the event of the Lessee having made or caused a
change in the purpose or destination of the Lease or
having used the Premises in a manner inconsistent
with them, except with the Lessor's prior written
consent.
(3) In the event of the Lessee or the party for which the
Lessee is operating being a foreign citizen.
In this paragraph, the term "foreign citizen" shall
be defined as a person who is not:
A. An Israeli citizen;
B. A new immigrant ["oleh"] in the sense of the
Law of Return, 1950, who has not submitted a
declaration pursuant to section 2 of the
Citizenship Law, 1952;
C. Entitled to have a new immigrant visa or a
new immigrant certificate pursuant to the
Law of Return, 1950; having obtained instead
a temporary stay visa and permit as a
<PAGE> 19
potential new immigrant pursuant to the
Entry to Israel Law, 1952;
D. A corporation controlled by an individual
who is one of those mentioned in the
foregoing paragraphs (A) - (C), or by more
than a single such individual.
The term "control" in this paragraph shall
mean the direct or indirect holding, by any
single person or corporation or by more than
a single person or corporation, of 50% or
more of the nominal value of the issued
share capital of the corporation or one half
or more of the voting power in the
corporation or of the direct or indirect
right to appoint one half or more of the
number of directors in the corporation.
The provisions of this paragraph (3) shall not apply
in the event of the Lessee having obtained a prior
written approval by the Board Chairman of the Israel
Lands Administration.
(4) In the event of breach of any of the conditions
precedent and basic conditions stated in the Preamble
hereto.
B. The Lessee shall proceed as follows in the event of
termination of this Contract by the Lessor:
(1) The Lessee shall vacate the Premises forthwith.
(2) The Lessee shall return the Premises to the Lessor in
a state free from any object and person and also free
from any charge, lien, or other third-party right.
(3) The Lessee shall immediately resort to all the
operations necessary for cancelling the registration
of the lease right entered pursuant to clause 10,
including the payment of all taxes, fees and other
expenses without exception, involved therewith; the
Lessee shall, for securing the compliance with this
obligation, sign upon the execution of this Contract
or at such other time as the Lessor shall determine,
everything at the discretion of the Lessor and on the
Lessor's demand, an irrevocable notarized power of
attorney in the name of the Lessor.
In the event of the Lessee having failed to comply
with its obligations pursuant to this paragraph, the
Lessor shall be entitled to carry out all of the
foregoing operations at the expense of the Lessee and
to collect all of the expenses incurred therewith
from the Lessor, including interest and linkage
differentials as stipulated in clause 22 hereinbelow,
for the period from the date of the expense till the
date of actual payment.
<PAGE> 20
(4) The Lessee shall pay to the Lessor for all damage and
losses incurred and to be incurred by the Lessor as a
result of the breach and termination of the Contract,
including damage and loss resulting from the leasing
of the Premises to a third party, without prejudice
to the provisions of clause 20 hereinbelow.
C. (1) In the event of termination of this Contract by the
Lessor, except in the case of termination for a
breach referred to in paragraph (A)(3) above, and
after the Lessee shall have complied with its
obligations pursuant to the foregoing paragraph (B),
the Lessor shall offer the Premises by way of tender
and shall pay to the Lessee certain amounts for the
proportional part of the Lessee's rights to the Plot
and the attachments as determined by the State Valuer
(hereinafter: the refunds); however, if the amounts
obtained through the tender are less than the
refunds, the Lessor shall only pay the amounts
established in the tender to the Lessee.
(2) In the event of the Lessor not having offered the
Premises by way of tender as stated hereinabove
within three months from the day on which the Lessee
shall have complied with its obligations pursuant to
the foregoing paragraph (B), the Lessor shall pay the
refunds to the Lessee on expiry of the aforementioned
period of three months.
(3) The payment of the refunds shall be effected after
deduction of all the sums payable by the Lessee to
the Lessor under this Contract and also after
deduction of a sum equal to the consent fee the
Lessee would have been bound to pay to the Lessor
pursuant to clause 14 if the Lessee's rights were
transferred to a third person with the Lessor's
consent.
(4) In the event of the Premises having been offered by
way of tender and no bid responsive to the terms of
the tender having been obtained, the Lessor shall
offer the Premises under another tender within four
months from the deadline for receipt of bids under
the preceding tender. This procedure shall be
repeated until the receipt of responsive bids.
D. Without prejudice to the foregoing, the Lessor may at its sole
discretion proceed in one of the following ways in the event
of breach of any of the provisions of the foregoing clause 9
by the Lessee:
(1) Cause a cancellation of the alteration made by the
Lessee without the Lessor's consent and/or demolish
everything built on the Plot without authorization
from the Lessor, immediately on learning of the
breach, in which case the Lessor shall be under no
obligation to
<PAGE> 21
obtain the Lessor's consent. The Lessor shall not be
obligated to clear the debris from the Premises.
(2) Charge the Lessee with usage fees as applied by the
Lessor to this effect and/or with a full payment for
the change in the value of the Plot resulting from
the execution of the alterations introduced by the
Lessee, everything as established by the State
Valuer.
E. The provisions of the foregoing paragraphs (B) and (C) of this
clause shall also apply, mutatis mutandis, upon the
termination of this Contract on expiry of the Lease Period or
on expiry of the additional Lease Period as the case may be,
unless the Lease Period or the additional Lease Period is
extended further.
20. Liquidated Damages
A. In the event of termination of this Contract, the Lessor may
deduct from any amounts owed by the Lessor to the Lessee,
liquidated damages at the rate of 5% of the Basic Plot Value
as defined in the Preamble, plus linkage differentials between
the Basic Index and the Consumer Price Index last known as of
the date of the deduction (hereinafter:
liquidated damages).
B. Notwithstanding the content of the foregoing paragraph (A), in
the case of termination of this Contract as a result of the
breach referred to in clause 19(A)(3), the Lessor shall
forfeit all the amounts paid by the Lessee defined in clause
19(A)(3); furthermore, the provisions of paragraph 19(C)
hereinabove shall not apply to the Lessor, everything as
liquidated damages for the particular case.
The Lessee shall, on the condition that it shall have complied
with all the provisions of the foregoing clause 19(B), be
entitled to apply to a committee to be appointed for this
purpose by the Israel Lands Authority Board, which shall be
entitled, if satisfied that the Lessee has acted in good
faith, to reduce the forfeited amounts down to the liquidated
damages according to the foregoing paragraph (A) only and/or
determine the amounts to be refunded to the Lessee pursuant to
the foregoing clause 19(C). The ruling by the committee shall
be final.
The provisions of this clause shall apply also if other
provisions of any law are applied.
C. In the case of the liquidated damages being in excess of the
amount owed by the Lessee pursuant to the foregoing paragraphs
(A) or (B), the Lessee shall pay the balance immediately after
the termination of the Contract.
<PAGE> 22
21. Extension of the Lease
A. Subject to the provisions of paragraphs (B) through (D)
hereinbelow, the Lessee is entitled to an extension of the
Lease Period by an additional period of forty-nine (49) years
on the condition that the Lessee shall have notified the
Lessor to this effect within the last 12 months preceding the
expiry of the Lease Period. The conditions of the lease during
the additional Lease Period shall be as applied at the time by
the Lessor with regard to the lease of land comparable to the
Premises in the area of the Premises and for the same purpose,
taking into account that the Lessee shall have paid for the
construction of the Buildings.
B. The Lease Period shall be extended strictly by one additional
lease period, and the Lessor shall be under no obligation to
extend the lease period any further; and if this Lease
Contract refers to an additional lease period the Lessor shall
be under no obligation to grant a further extension of the
lease period covered by this Contract.
C. In the event of change of destination of the land containing
the Premises, the Lessor shall be under no obligation to
extend the lease period.
D. Any extension of the Lease Period shall be subject to
compliance with all of the following conditions:
(1) The Lessee shall have complied with all the
provisions of this Contract;
(2) Not later than the expiry of the Lease Period, the
Lessee shall have signed a new lease contract
containing the terms of the new lease as provided
hereinabove.
22. General Conditions
A. The Tenant Protection Law (combined version), 1972, or any law
that may supersede it or be added to it, shall not apply to
this Contract; it is declared hereby that the Lessee has not
paid to the Lessor any key money in any form whatsoever for
this Contract, and that the payments under this Contract and
the entire investment by the Lessee in the Plot shall not be
deemed as payment of key money.
B. No waiver, allowance, acceptance of payment, abstention from
resorting to any action, delay or grant of extension by one of
the parties shall be regarded as waiver of the rights of such
party, nor shall they serve as impediment to any claim, unless
the said party shall have waived its rights expressly and in
writing.
<PAGE> 23
C. Amendments, modifications, additions, deletions, waivers or
extensions affecting the terms of this Contract (hereinafter:
modifications), or discounts granted by the Lessor, shall only
be valid if made in writing with the signature and seal of the
Lessor.
Amendments and erasures on the body of the Contract or on any
of the documents enclosed herewith or to be signed pursuant to
this Contract shall only be valid if provided at the margin
with the full signatures of the parties, subject to the
presence of the signature and seal of the Lessor.
D. The Lessee undertakes to pay to the Lessor linkage
differentials and interest as applied by the Lessor as of the
date payment with regard to arrears in the payment of any
amount due by the Lessee to the Lessor pursuant to this
Contract, for the period from the date of maturity hereunder
to the date of actual settlement of the debt, without
prejudice to the Lessor's rights pursuant to this Contract and
the provisions of any law.
In case of arrears as aforesaid, any payment on account of the
debt shall be credited in the following sequence: collection
expenses, interest, linkage differentials, principal.
E. The Lessee undertakes to indemnify the Lessor and keep it
harmless with regard to any amount the Lessor may be compelled
to pay to any person as damages for which the Lessee is liable
hereunder and in law.
F. Amounts payable between the parties may be offset mutually. In
the event of one of the parties having paid a sum due by the
other party under this Contract, the other party shall refund
the sum within 14 days from the date of demand from the payor.
G. All the expenses related to the preparation of this Contract
and the registration of the lease hereunder at the Land
Registry, including stamp tax and value added tax hereunder,
shall be payable by the Lessee alone.
H. The headings of the clauses of this Contract are intended
strictly for convenience and shall not serve for any
interpretation hereof.
I. The addresses of the parties shall be as stated in the initial
part hereof. Any notice sent hereunder by registered mail at
one of the above addresses shall be deemed to have reached its
destination five days after the date of mailing.
<PAGE> 24
IN WITNESS THEREOF THE PARTIES HAVE SET THEIR HAND:
The Lessor The Lessee
1. Name Haifa Chemicals South Ltd. 1. Name The Israel Lands
Administration
Position .................... Position ....................
Signature /s/Amiad Cohen Signature /s/A. Kron
2. Name Haifa Chemicals South Ltd. 1. Name The Israel Lands
Administration
Position .................... Position ....................
Signature /s/David Sima Signature /s/Elian Sinai
Certification
I, the undersigned, do hereby certify that I have identified the aforementioned
Lessee according to identification documents presented to me and that the Lessee
has signed this contract in my presence.
Name: Arie Gotal position Advocate Signature /s/ Arie Gotal
<PAGE> 1
EXHIBIT 10.15
This Agreement made and entered into on this 24th day of
April, 1995, By and Between DEAD SEA WORKS LTD., of Potash House, Beer Sheva
84100, Israel ("Seller"), and HAIFA CHEMICALS SOUTH LTD., of P.O. Box 1809,
Haifa, Israel, ("Buyer");
W I T N E S S E T H
WHEREAS Buyer and Seller have, on lst January, 1990, entered
into an agreement for the sale of Product (as defined below) for use by Buyer at
its manufacturing facility in Haifa (hereinafter, the "Haifa Agreement"); and
WHEREAS Buyer and Seller desire to enter into an additional
agreement for the sale of Product, for use by Buyer at the Rotem Facility (as
defined below), all in accordance with and subject to the terms and conditions
set out below;
NOW, THEREFORE, THE PARTIES HERETO HAVE AGREED AS FOLLOWS:
1. DEFINITIONS
As used herein.
1.1 "Ton" shall mean - 1,000 (one thousand) Kgs.
1.2 "Product" shall mean - Potash as set forth in Exhibit
"A" attached hereto.
1.3 "Contract Year" shall mean - January 1st through
December 31st.
1.4 "Contract Year Quota" shall mean - quantities of
Product to be sold and delivered by Seller and
purchased and received by Buyer in each Contract Year
as set forth in sub-articles 3.1 and 3.2 below.
1.5 "Delivery Location" shall mean - Tzefa Plain.
1.6 "K(2)O" shall mean - the potassium content of the
Product expressed as the [mono oxide] of potassium.
1.7 "Quarter" shall mean - a period of three calendar
months as follows: January 1st through March 31st,
April 1st through June 30th, July 1st through
September 30th, October 1st through December 31st.
E-14
<PAGE> 2
1.8 "Basic Delivered Price" shall mean - the basic
delivered price calculated in accordance with the
provisions of Article 5.1 below.
1.9 "Rotem Facility" shall mean - a facility for
manufacturing Potassium Nitrate, to be constructed by
Buyer at the Rotem Plain, having a manufacturing
capacity of 100,000 +/- 15% Tons of Potassium
Nitrate.
1.10 "The Effective Date" shall mean - 19th September,
1994.
1.11 "Specifications" shall mean - the specifications set
forth in Exhibit "A".
1.12 "Israeli Market Product" shall mean - the quantity of
Product used by Buyer for the manufacture of
Potassium Nitrate and other products, if any, not
exported by Buyer from Israel.
1.13 "Allowed Soot Level" (or "ASL" shall mean - the
maximum permitted level of soot in Product to be
delivered to Buyer hereunder, i.e. 125 (one hundred
and twenty-five) PPM, as determined by the Adequate
Method (as defined in the Haifa Agreement), set out
in Exhibit A attached hereto.
1.14 "Day" shall mean - 24 hours commencing on 00:01
hours.
2. TERM
2.1 This Agreement shall come into effect on the date of
signature thereof by both parties, and shall be
effective through 31st December, 2005.
2.2 This Agreement may only be renewed by a written
instrument signed by both parties hereto setting out
the price, the duration of the renewed term and all
other terms and conditions which shall apply during
any renewed term.
3. QUANTITY
3.1 3.1.1 Seller shall sell and deliver and Buyer
shall purchase and receive during each
Contract Year commencing on the Effective
Date, quantities of Product as set out in
sub-article 3.2 below.
3.1.2 It is agreed that the quantity of Product
set out in sub-article 3.2.1 below shall be
supplied from Seller's Hot Crystallization
plant.
- 2 -
<PAGE> 3
3.2 3.2.1 Buyer has advised Seller that as of lst
January, 1995, Buyer's annual requirement
for Product shall be 80,000 +/- 15% Tons per
Contract Year.
3.2.2 (a) Notwithstanding the provision of
sub-article 3.2.1 above, during the
contract Year Commencing on 1st
January, 1995 and terminating on
31st December, 1995, Buyer shall be
entitled to reduce the
aforementioned quantity of
80,000+/- 15% Tons by 220+/-15%
tons for each Day during which
manufacturing operations in the
Rotem Facility shall temporarily
stop as a direct result of
running-in problems. Provided that
Buyer shall notify Seller in
writing immediately upon the
occurrence of such stopping of
manufacturing operations (including
the estimated time until the
resuming of manufacturing
operations), and immediately upon
the resuming of manufacturing
operations.
For the sake of good order, it is
stated that Buyer's right under
this sub-article 3.2.2(a) shall not
prejudice Buyer's obligation, inter
alia, under sub-article 3.4 below.
(b) Buyer has advised Seller that it
shall purchase and receive during
each of the months November and
December 1994, a quantity of up to
7,000 Tons of Product. This
quantity shall be in addition to
the Contract Year Quota applicable
to the Contract Year commencing on
1st January, 1995.
3.3 Should Buyer request additional tonnage in excess of
the quantity set forth in 3.2.1 above, Seller will
use reasonable efforts to supply the same, but Seller
shall have no obligation to supply such additional
tonnage.
3.4 Without prejudice to the provisions of sub-articles
3.1, 3.2 and 3.3, Buyer has advised Seller that the
estimated quantity of Product to be delivered and
received during each Quarter of the Contract Year
commencing on 1st January, 1995 shall be 20,000 Tons
+/- 15%.
With respect to the Contract Years following 1995,
Buyer shall advise Seller at least 3 (three ) months
prior to the commencement of each Contract Year the
estimated quantity of Product to be delivered and
received during each Quarter of the applicable
contract year. Quantities in respect of each Quarter
may be adjusted by Buyer not later than 30 (thirty)
Days prior to the commencement of the applicable
Quarter.
- 3 -
<PAGE> 4
3.5 In each calendar month of each Contract Year, Buyer
will take delivery of not less than 5% (five percent)
and not more than 10% (ten percent) of that total
Contract Year quota.
3.6 In the event that Buyer will take delivery of less
than the said 5% during any calendar month
(hereinafter - "the Minimum Monthly Quantity") for
any reason whatsoever, except Seller's default,
Seller will be entitled, without prejudice to any
rights afforded it hereunder and under the law, to
reduce that Contract Year Quota, by amounts not
exceeding in the aggregate the difference between the
Minimum Monthly Quantity and the aggregate quantity
actually received by Buyer during that calendar
month.
3.7 Buyer shall not use the Product purchased hereunder
for the purpose of (a) resale of same; or (b) for the
purpose of manufacturing in any way or manner,
selling or otherwise dealing with technical grade
Potash or SOP.
4. DELIVERY, TITLE RISK & SHIPMENT
4.1 Product shall be delivered to Buyer for Buyer's
trucks at Tzefa Plain.
4.2 Risk of loss and damage to the Product shall pass to
Buyer as Product is progressively loaded upon trucks
at the Delivery Location.
5. PRICE
5.1 The Basic Delivered Price for each Ton of Product
during any Quarter shall be:
BP = WAF - FC
Where:
BP = Basic Delivered Price;
WAF = Weighted average of the fob Israeli port
price received by Seller for non-granulated
potash exported from Israel during the
immediately preceding Quarter;
FC = Variable costs per Ton from fob cars Tzefa
Plain to fob vessel in the port of Ashdod.
5.2 In addition to the Basic Delivered Price buyer shall
pay Seller an amount equal to the amount of export
premiums and benefits (such as, including
- 4 -
<PAGE> 5
but without limitation, Bituach Shaar or any other
similar or substitute programmes) of whatsoever kind
or nature which would have been paid to Seller or to
which Seller would have been entitled had Product
sold to Buyer hereunder been exported by Seller
during the preceding Quarter.
5.3 5.3.1 In addition to the amounts referred to in
5.1 and 5.2 above, Buyer shall pay Seller a
premium of U.S. $ 4.25 per Ton of Product
sold and delivered to Buyer.
5.3.2 The sum of U.S. $ 4.25 referred to above
shall be adjusted in accordance with the
rate in which the New Index shall increase
or decrease over or below, as the case may
be, the Basic Index. The aforementioned
adjustment shall be effected on the 1st of
January of each Contract Year.
For the purposes hereof -
Index shall mean - the United States
Consumer Price Index For All Urban
Consumers, published by the Bureau of Labor
Statistics of the U.S. Department of Labor.
New Index shall mean - the Index last known
at the time when each payment shall be
effected;
Basic Index shall mean - the Index last
known on 1st September, 1994, i.e. 447.5
points.
6. DISCOUNTS
6.1 For the purposes of this article 6, "Extra Discount
Period" shall mean - the period during which Buyer
shall be entitled to an additional discount as set
forth in article 6.3 below, which period shall begin
on the Effective Date and shall terminate after Buyer
shall have received the discount referred to in 6.3
below - for and in respect of a total quantity of the
first 400,000 Tons of Product sold to Buyer hereunder
following the Effective Date.
6.2 Following the Effective Date and during the life of
this Agreement, Buyer shall receive a discount of 3%
(three percent) on the Basic Delivered Price and on
the amounts referred to in sub-article 5.2 above, on
all Product sold and delivered to it by Seller.
6.3 In addition to the discount referred to in
sub-article 6.2 above, Buyer shall be entitled to
receive a discount only for and in respect of Product
sold and
- 5 -
<PAGE> 6
delivered to Buyer during the Extra Discount Period
at the rate of U.S. $ 4.25 per Ton of Product sold
and delivered to Buyer, said sum to be adjusted in
accordance with the provisions of sub-article 5.3.2
above.
6.4 For the avoidance of doubt, it is hereby clarified
that amounts or payments pursuant to the provisions
of sub-article 5.3 above shall not be deemed or
considered as part of the price for the purpose of
calculating the discount referred to in sub-article
6.2 above.
6.5 Notwithstanding anything to the contrary herein
contained, it is agreed that in the event that the
granting of the discounts referred to in sub-article
6.2 or 6.3 above shall result in a delivered price
payable to Seller of less than the Minimum Price (as
defined below), then the discounts shall be adjusted
so that the delivered price shall not be less than
the Minimum Price.
For the purposes hereof the "Minimum Price" shall
mean - cost of production plus all other expenses
incurred by Seller up to and including the Delivery
Location, as reflected in the audited financial
statements of Seller.
7. TERMS OF PAYMENT
7.1 Seller shall invoice Buyer, at the end of each
calendar month or as soon as practicable thereafter,
for Product delivered during that calendar month.
Premiums and all other payments (if any) due to
Seller pursuant to the provisions of this Agreement
as well as all discounts due to Buyer (if any) shall
be reflected in each monthly invoice;
7.2 Payments in full for Product delivered shall be made
by Buyer within 60 (sixty) Days from the end of the
calendar month in which that Product was delivered.
7.3 Overdue amounts shall carry interest at the then
current LIBOR Rate (taking into consideration amount
and time involved) + 2% from date on which payment is
due pursuant to the provisions hereof until actual
payment. The above is in addition to all rights and
remedies which Seller may have in case of default by
Buyer.
7.4 Invoices shall be in U.S.$ and all payments
(including interest) shall be made in said currency
unless otherwise agreed upon by the parties hereto.
In the event that it will not be permitted to effect
payments in U.S.$ then the currency used for payments
shall be Israeli and the amount of New
- 6 -
<PAGE> 7
Israeli Shekels payable shall be determined in
accordance with (i) with respect to sales of Israeli
Market Product - the representative rate of exchange
(as published by the Bank of Israel) published
immediately before actual payment is made; and (ii)
with respect to all other sales of Product the then
prevailing rate of exchange for the conversion by
Seller of U.S.$ (being proceeds to export sales) into
Israeli Shekels excluding any premiums which Seller
is entitled to receive from Buyer under any other
provisions hereof.
In the event that the representative rate of exchange
shall not be published by the Bank of Israel then a
substituting rate shall be used, which shall resemble
the principles reflected in the determination of the
representative rate of exchange.
8. WARRANTY
8.1 Seller warrants that Product delivered hereunder
shall materially conform to the Specifications.
THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESSED OR IMPLIED AND SELLER EXPRESSLY DISCLAIMS
ALL OTHER WARRANTIES INCLUDING, BUT WITHOUT
LIMITATION, THAT PRODUCT WILL BE FIT FOR BUYER'S
PARTICULAR USE OR PURPOSE.
Unless Seller receives written notice otherwise
within 15 (fifteen) Days after delivery of the
Product to Buyer, the Product shall be deemed to
conform to Specifications.
9. LIABILITY & CLAIMS
9.1 Seller shall not be liable for special, consequential
or coincidental damages arising out of non-delivery,
use, inability to use or any other cause whatsoever,
whether in contract, tort or otherwise.
9.2 Without prejudice to the provisions of sub-articles
9.1 above and 9.4 below, in no event shall any claim
made by Buyer for non-delivery of the Product,
shortage of weight, deficiency in analysis or for any
other reason whatsoever be greater than the purchase
price of that portion of the product in respect of
which such claim is made.
The amount referred to above constitutes the maximum
amount that may be claimed by Buyer in respect of
damages not excluded from Seller's
- 7 -
<PAGE> 8
liability under the provisions of sub-article 9.1
above and shall not be interpreted so as to impose an
obligation upon Seller to indemnify, compensate or
otherwise pay Buyer the above amount.
9.3 All claims shall be supported by appropriate
documentary evidence and must be made in writing,
within 15 (fifteen) Days after delivery of Product to
Buyer. Failure to give written notice of claim within
the specified time shall constitute a waiver by Buyer
of all claims in respect of such Product.
9.4 In the event that Product shall not conform to the
Specifications, the following shall apply:
9.4.1 If Product delivered shall (a) contain more
than 1,000 PPM insolubles in water; and/or
(b) contain soot at a higher level than the
Allowed Soot Level, Buyer shall have the
option to either reject such Product (in
accordance with the provisions hereinbelow
stipulated), or take delivery of same but
not pay in respect thereof the premium
referred to in sub-article 5.3 above (as
shall be adjusted in accordance with the
provisions of sub-article 5.3.2 above) if
Product is sold not within the Extra
Discount Period; in the event that Product
referred to in (a) or (b) above shall be
sold within the Extra Discount Period, as
the case may be, Buyer shall have the option
to either reject such Product (in accordance
with the provisions hereinbelow stipulated),
or take delivery of same and receive a
discount (in addition to the discounts
referred to in sub- articles 6.2 and 6.3
above) at the rate of U.S.$ 4.25 per Ton of
such Product, said sum to be adjusted in
accordance with the provisions of
sub-article 5.3.2 above.
9.4.2 If Product delivered shall have less than
60% (sixty percent) K2O a pro rata rebate
will be allowed in case of undertest
(calculated on the basis of 60% K2O).
9.4.3 If Product delivered shall materially not
conform to Specifications (other than
specifications referred to in 9.4.1 and
9.4.2 above) Buyer shall be entitled to
reject such Product in accordance with the
provisions hereinbelow stipulated.
9.5 Buyer's right to reject Product as above set forth
shall only apply to Product which shall not have been
contaminated or impaired subsequent to delivery
thereof to Buyer and Buyer shall be entitled to
exercise same if, and only if, a claim in respect
thereof shall have been made in accordance
- 8 -
<PAGE> 9
with the provisions of sub-article 9.3 above within
the time therein stipulated.
9.6 In the event of rejection of Product as above
mentioned, the following shall apply:
9.6.1 Buyer shall ship such Product and it shall
be promptly unloaded at the Delivery
Location. All costs of loading (if any) at
the Rotem Facility, shipment therefrom the
Delivery Location and unloading of Product
rejected as aforesaid, will be borne by
Seller.
9.6.2 Seller shall replace the rejected Product by
delivering to Buyer an equivalent quantity.
Buyer shall not be required to pay for
rejected and returned Products in accordance
with the provisions of this article 9. All
costs of loading replacing Product at the
Delivery Location and shipping it therefrom
to the Rotem Facility will be borne by
Seller.
9.6.3 Buyer shall not be entitled to receive and
Seller shall not be required to pay Buyer
compensation, indemnification or other
payments or expenses of whatsoever kind or
nature with regard to rejected Product, the
rejection of Product or as a consequence
thereof or otherwise, except that if Seller
shall have received payment for Product
which has been rejected pursuant to the
terms hereof and has not replaced same as in
9.6.2 set forth, Seller shall apply any
amount so received as credit for future
purchases of Product hereunder.
9.7 Buyer shall not delay or withhold payments in respect
of Product delivered notwithstanding any claim which
has been or could have been made by Buyer except for
payments in respect of Product rejected and returned
by Buyer pursuant to the provisions of sub-article
9.6 above.
10. TAXES
10.1 Value Added Tax due or payable with regard to the
sale and purchase of the Product hereunder shall be
borne and paid by Buyer.
10.2 If any tax (other than tax on the overall net income
of Seller), charge, fee, levy or duty shall be
imposed or increased upon the sale or purchase of the
Product at any time after the date of signature
hereof, the amount thereof shall be borne and paid by
Buyer.
- 9 -
<PAGE> 10
11. FORCE MAJEURE
11.1 Each of the parties hereto shall be relieved of its
obligations hereunder if and to the extent that it is
prevented from performing the same by any cause
beyond its reasonable control, including, without in
any way limiting the generality of the foregoing,
acts of God, war, the elements, explosion, fire,
riots, strike, lock-out or other differences with
workmen (neither party shall be required to settle
any labour dispute against its own best judgment),
shortage of utility, facility, material or labour,
breakdown, accident or compliance with or other
action taken to carry out the intent or purpose of
any law or regulation.
The party so affected shall promptly notify the other
of the existence of such cause, of its expected
duration, and of the estimated effect thereof (to the
extent known) on its ability to perform its
obligations hereunder.
Each party so affected shall promptly notify the
other party when such cause ceases to affect its
ability to perform its obligations hereunder.
12. ALLOCATION
12.1 In the event of Seller's inability, for any of the
causes set forth in Article 11.1 above, to supply the
total demand of Seller's customers (anywhere in the
world) for the Product, Seller shall have the right
to allocate its available supply among Seller's
customers on a fair and equitable basis, and the
relevant Contract Year Quota shall be adjusted
accordingly.
13. DEFAULT BY OR INSOLVENCY OF BUYER
13.1 If Buyer fails to pay any amount due or payable to
Seller hereunder within the stipulated time, Seller
may, in addition to any other rights it may have,
suspend shipment and delivery of Product until such
default is made good.
In the event that such suspension shall result in
Buyer receiving, during any calendar month, less than
the Minimum Monthly Quantity (as defined in
sub-article 3.6 above) the provisions of sub-article
3.6 shall apply.
Waiver by Seller of any default by Buyer hereunder
shall not be deemed as a waiver of any default
thereafter occurring.
13.2 Non payment within the times herein set for payment
and a breach of or non-compliance with any of the
provisions of sub-article 3.1, 3.2, 3.7, 7.2, 9.7 and
15.1 shall be deemed as a fundamental breach of this
Agreement.
- 10 -
<PAGE> 11
13.3 If Buyer 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 field by it or against it,
or if it makes an assignment for the benefit of
creditors or takes advantage of any insolvency
statute, Seller may forthwith terminate this
Agreement without further liability to Buyer but such
termination shall be without prejudice to the rights
of the parties with respect to Product therefore
delivered to Buyer.
14. WEIGHT AND ANALYSIS
14.1 The weight of the Product delivered hereunder shall
be determined by weighing on officially certified
scales designated by Seller and the cost of weighing
shall be for the account of Seller.
Such weighing shall be binding on both parties hereto
and shall serve as a basis for billing Buyer
hereunder.
14.2 14.2.1 Seller shall, at its plant in Sdom, take a
sample from each Shipment of Product and
shall analyse the same in accordance with
the analysis method then used by Seller.
"Shipment of Product" shall mean - total
quantity of Product in Sdom shipped to Buyer
on any Day.
Each sample taken shall be divided into
three portions. One portion shall be
analysed by Seller as herein provided. One
portion shall be made available to Buyer and
shall be shipped to the Rotem Facility at
Buyer's account, once a week. One portion
shall be retained by Seller for a period of
not less than 30 (thirty) Days.
14.2.2 Seller shall telefax to Buyer (at the Rotem
Facility) daily copies of the analysis
results.
14.2.3 Until such time that the analysis method
referred to in 14.2.5 below shall be applied
(if at all), Seller's analysis results
referred to above shall be binding on the
parties hereto.
14.2.4 Buyer shall be entitled to analyse samples
of Product taken from Seller as provided in
14.2.1 above.
14.2.5 If Buyer's analysis result shall indicate
the Product delivered contains more than
1,000 PPM insolubles in water and Buyer's
and
- 11 -
<PAGE> 12
Seller's respective analysis results
referred to above shall differ by more than
10% with regard to the PPM insolubles in
water content in the Product, or shall
substantially differ with regard to other
Specifications that materially affects Buyer
(except the K2O content in Product; and
except the levels of soot content in Product
- said level to be determined in accordance
with the Adequate Method referred to in
sub-article 1.13 above), then Buyer shall be
entitled to request that samples shall be
analysed in a way to be agreed upon between
the parties.
14.2.6 If the parties shall fail to agree as to the
analysis method, the matter shall be
referred to an individual to be appointed by
both parties who is well conversed with the
chemical issues involved.
In the absence of agreement between the
parties as to whom that individual should
be, he shall be appointed at the joint
request of the parties by the then head of
the chemistry department of the Ben Gurion
University in Beer-Sheva.
14.2.7 The decision of the individual appointed
shall be final and binding upon the parties.
14.2.8 Buyer shall have the right to take samples
at the Delivery Location.
If Buyer shall analyse samples taken at the
Delivery Location and shall continuously
receive results regarding the PPM insolubles
in water content which substantially differ
from Seller's analysis results in a way
which materially affects Buyer then, at the
request of Buyer, Seller and Buyer shall
hold discussions, exchange views and carry
on such agreed tests and experiments with a
view of finding out the reason for such
substantially different results.
15. RIGHT OF SET-OFF
15.1 Buyer shall not be entitled to set-off, or otherwise
deduct any sums from any amount which may be due or
payable to Seller hereunder or otherwise.
16. WAIVER OF DEFAULT
16.1 Any failure by either party at any time, or time to
time, to enforce or require the strict keeping and
performance of any term or condition of this
Agreement shall not constitute a waiver by such party
of any subsequent
- 12 -
<PAGE> 13
breach of such term or condition, or of the right of
such party to avail itself of such remedies as it may
have for any such subsequent breach.
17. ASSIGNMENT
17.1 This Agreement or any right or obligation thereunder
shall not be assignable in whole or in part by either
party without the prior written consent of the other
party, except that Seller may assign its right to
receive payments hereunder.
Any assignment without such prior written consent (if
consent is required) shall be deemed void ab initio.
18. ENTIRE AGREEMENT AND HEADINGS
18.1 This Agreement constitutes the entire agreement
between the parties hereto with reference to the
subject matter hereof, and all proposals,
negotiations, representations, if any, made prior and
with reference hereto are merged herein. No past
conduct or custom of trade previously applied in the
parties' past business between themselves shall at
any time affect the interpretation of this Agreement.
No terms or conditions, other than those stated
herein, and no agreement or understanding in any way
modifying the terms and conditions stated herein,
shall be binding on either party unless made in
writing and signed by both parties.
18.2 The headings herein are for the sake of convenience
only and shall not be relied upon in the
interpretation or construction of this Agreement.
19. CPA'S CERTIFICATES
19.1 At the request of Buyer, Seller shall deliver to
Buyer, as soon as practicable after termination of
each Contract Year a letter from Seller's CPA
certifying that pricing of Product sold and delivered
to Buyer during the Contract Year conform to the
applicable provisions of the Agreement.
19.2 At the request of Seller, Buyer shall deliver to
Seller, as soon as practicable after termination of
each Contract Year a letter from Buyer's CPA
certifying the quantity of Israeli Market Product
declared by Buyer in respect of that Contract Year
conform to the applicable provision of the Agreement.
- 13 -
<PAGE> 14
20. STAMP DUTIES
20.1 Stamp duties in respect of this Agreement shall be
borne and paid for by Buyer.
21. NOTICES
21.1 All notices and other communications hereunder shall
be in writing and shall be addressed to the parties
at their respective above mentioned address.
21.2 Either party may change the address or official to
which notices shall be given by notice to the other
party as herein provided.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed.
/s/ /s/ Amiad Cohen
- ------------------------------- ------------------------------------
Dead Sea Works Ltd. Haifa Chemicals South Ltd.
- 14 -
<PAGE> 1
EXHIBIT 21
The following table sets forth certain information, as of March 20,
1998, with respect to the subsidiaries of the Company, other than certain
subsidiaries which, if considered in the aggregate as a single subsidiary, would
not constitute a significant subsidiary.
<TABLE>
<CAPTION>
Percentage of
voting securities State or other
owned by its jurisdiction in
immediate parent which incorporated
---------------- ------------------
<S> <C> <C>
Subsidiaries of the Company:
Haifa Chemicals Ltd. 100%(1) Israel
Haifa Chemicals South, Ltd. 100% Israel
Hi-Chem (UK) Ltd. 100% United Kingdom
Hi-Chem S.A 100% Belgium
Hi-Chem Holdings B.V 100% Netherlands
Fertilizantes Quimicos, S.A 100% Spain
Hi-Agri S.R.L 100%(2) Italy
Haifa Quimica De Mexico 80% Mexico
Duclos International S.A 100% France
EDP, Inc. 100% Delaware
Na-Churs Plant Food Company 100% Delaware
Nine West Corporation 100% Delaware
Cedar Chemical Corporation 100% Delaware
NMPC, Inc. 100% New Mexico
Vicksburg Chemical Company 100% Delaware
</TABLE>
- --------------
(1) Including approximately 7% owned by Trans-Resources (Israel) Ltd.
(2) Including approximately 5% owned by Haifa Chemicals South, Ltd.
E - 15
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned officers and directors of
Trans-Resources, Inc., a Delaware corporation (the "Company"), does hereby
constitute and appoint Arie Genger and Lester W. Youner, and each of them, as
the undersigned's true and lawful attorney-in-fact, with full power to each of
them to act without the other, to execute in the name and on behalf of the
undersigned, individually and in the capacity stated below, the Annual Report on
Form 10-K of the Company for the fiscal year ended December 31, 1997 and any and
all amendments thereto, which amendments may make such changes in such Form 10-K
as either such attorney-in-fact may deem appropriate.
Each of the undersigned does further hereby ratify and confirm
all that either said attorney-in-fact may do or cause to be done pursuant to the
power granted hereby.
Dated: March 27, 1998
/s/ Arie Genger
---------------------------------------------
Arie Genger
Director,
Chairman of the Board and
Chief Executive Officer
(principal executive officer)
/s/ Lester W. Youner
---------------------------------------------
Lester W. Youner
Vice President,
Treasurer and
Chief Financial Officer and Secretary
(principal financial and
accounting officer)
/s/ Thomas G. Hardy
---------------------------------------------
Thomas G. Hardy
Director
/s/ Martin A. Coleman
---------------------------------------------
Martin A. Coleman
Director
/s/ Sash A. Spencer
---------------------------------------------
Sash A. Spencer
Director
E-16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
TRANS-RESOURCES, INC.
Financial Data Schedule
Article 5 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 19,757
<SECURITIES> 0
<RECEIVABLES> 82,551
<ALLOWANCES> 0
<INVENTORY> 60,126
<CURRENT-ASSETS> 212,134
<PP&E> 336,475
<DEPRECIATION> 128,988
<TOTAL-ASSETS> 462,016
<CURRENT-LIABILITIES> 138,537
<BONDS> 269,014
0
7,960
<COMMON> 0
<OTHER-SE> 15,647
<TOTAL-LIABILITY-AND-EQUITY> 462,016
<SALES> 376,531
<TOTAL-REVENUES> 376,531
<CGS> 305,588
<TOTAL-COSTS> 305,588
<OTHER-EXPENSES> 42,622
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,475
<INCOME-PRETAX> 4,396
<INCOME-TAX> 2,952
<INCOME-CONTINUING> 1,444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,444
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
