<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
NOTE EXCHANGE OFFER
ON
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
IMPERIAL HOLLY CORPORATION
AND OTHER REGISTRANTS
(SEE TABLE OF OTHER REGISTRANTS BELOW)
(Exact Name of Registrant as specified in its charter)
<TABLE>
<C> <C> <C>
TEXAS 2062 74-0704500
(State or other jurisdiction of Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) (Classification Code Number) Identification No.)
</TABLE>
ONE IMPERIAL SQUARE, SUITE 200
8016 HIGHWAY 90-A
SUGAR LAND, TEXAS 77478
(281) 491-9181
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------------
WILLIAM F. SCHWER
MANAGING DIRECTOR AND GENERAL COUNSEL
ONE IMPERIAL SQUARE, SUITE 200
8016 HIGHWAY 90-A
SUGAR LAND, TEXAS 77478
(281) 491-9181
(Name, Address, Including Zip Code and Telephone Number, Including Area Code, of
Agent for Service for All Registrants)
------------------------
Copies to:
ROBERT V. JEWELL, ESQ.
DAN A. FLECKMAN, ESQ.
ANDREWS & KURTH L.L.P.
600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77002
(713) 220-4200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PRICE PER UNIT(1) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 3/4% Senior Subordinated Notes due
2007, Series A......................... $250,000,000 $102.50 $256,250,000 $75,594
- ---------------------------------------------------------------------------------------------------------------------------------
Subsidiary Guarantees of 9 3/4% Senior
Subordinated Notes due 2007, Series
A...................................... $250,000,000 None(3) None(3) None(3)
=================================================================================================================================
</TABLE>
(1) Based on average of the bid price of $102.25 and ask price of $102.75 per
$100.00 principal amount of the Old Notes at the close of business on
January 23, 1998.
(2) Calculated pursuant to Rule 457(f) under the Securities Act of 1933 as the
market value of the securities to be cancelled in the exchange.
(3) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the Subsidiary Guarantees.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
TABLE OF OTHER REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF PRIMARY STANDARD
EXACT NAME OF REGISTRANT INCORPORATION OR INDUSTRIAL CLASSIFICATION I.R.S. EMPLOYER
AS SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBER IDENTIFICATION NUMBER
--------------------------- ---------------- ------------------------- ---------------------
<S> <C> <C> <C>
Savannah Foods & Industries, Inc. Delaware 2060 58-1089367
Biomass Corporation Delaware 2096 58-1352153
Dixie Crystals Brands, Inc. Delaware 2096 59-2042699
Dixie Crystals Foodservice, Inc. Delaware 2096 (Applied For)
King Packaging Company, Inc. Georgia 5098 58-1111816
Food Carrier, Inc. Georgia 4200 58-1217108
Michigan Sugar Company Michigan 2063 38-0830870
Great Lakes Sugar Company Ohio 2063 34-1470741
Savannah Foods Industrial, Inc. Delaware 2062 58-2181649
Phoenix Packing Corporation Delaware 2096 58-1871380
Savannah Sugar Refining Corporation Georgia 4200 58-1779614
Savannah Investment Company Delaware 2062 58-1697589
Holly Northwest Company Nevada 2063 84-1307934
Holly Sugar Corporation New York 2063 84-0228800
Fort Bend Utilities Company Texas 4931 74-0629715
Imperial Sweetener Distributors, Inc. Texas 4212 74-1993077
Limestone Products Company Delaware 1498 13-3366165
Crown Express, Inc. Texas 4212 76-0218213
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 26, 1998
PROSPECTUS
IMPERIAL HOLLY CORPORATION
OFFER TO EXCHANGE
$1,000 PRINCIPAL AMOUNT OF 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
FOR EACH $1,000 PRINCIPAL AMOUNT OF OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
($250,000,000 IN AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
---------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
---------------------
Imperial Holly Corporation, a Texas corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal, to exchange $1,000
principal amount of its 9 3/4% Senior Subordinated Notes Due 2007, Series A (the
"Exchange Notes"), in a transaction registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement (as
defined herein) of which this Prospectus constitutes a part, for each $1,000
principal amount of the outstanding 9 3/4% Senior Subordinated Notes due 2007
(the "Old Notes"), of which $250,000,000 aggregate principal amount is
outstanding (the "Exchange Offer"). The Exchange Notes and the Old Notes are
sometimes referred to herein collectively as the "Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the date
the Exchange Offer expires, which will be , 1998 unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Offer is not conditioned upon any minimum principal amount of Old Notes
being tendered for exchange. However, the Exchange Offer is subject to certain
conditions that may be waived by the Company and to the terms and provisions of
the Registration Rights Agreement (as defined herein). See "The Exchange Offer."
Old Notes may be tendered only in denominations of $1,000 and integral multiples
thereof. The Company has agreed to pay the expenses of the Exchange Offer. There
will be no cash proceeds to the Company from the Exchange Offer. See "Use of
Proceeds."
The Exchange Notes will be obligations of the Company entitled to the
benefits of the indenture relating to the Notes (the "Indenture"). The form and
terms of the Exchange Notes are identical in all material respects to the form
and terms of the Old Notes, except that (i) the offering of the Exchange Notes
has been registered under the Securities Act, (ii) the Exchange Notes will not
be subject to transfer restrictions and (iii) the Exchange Notes will not be
entitled to registration or other rights under the Registration Rights Agreement
(as defined herein) including the provision in the Registration Rights Agreement
for payment of Liquidated Damages (as defined in the Registration Rights
Agreement) upon failure by the Company to consummate the Exchange Offer or the
occurrence of certain other events. Following the Exchange Offer, any holders of
Old Notes will continue to be subject to the existing restrictions on transfer
thereof and, as a general matter, the Company will not have any further
obligation to such holders to provide for registration under the Securities Act
of transfers of the Old Notes held by them. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered and tendered but unaccepted Old Notes could be adversely affected.
See "Risk Factors" and "The Exchange Offer -- Purpose and Effect of the Exchange
Offer."
(continued on next page)
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1998.
<PAGE> 4
The Old Notes were sold by the Company on December 22, 1997, to Lehman
Brothers, BNY Capital Markets, Inc. and Nesbitt Burns Securities Inc. (the
"Initial Purchasers") in transactions not registered under the Securities Act in
reliance upon the exemption provided in Section 4(2) of the Securities Act (the
"Offering"). The Initial Purchasers placed the Old Notes with qualified
institutional buyers (as defined in Rule 144A under the Securities Act)
("Qualified Institutional Buyers" or "QIBs"), each of whom agreed to comply with
certain transfer restrictions and other restrictions. Accordingly, the Old Notes
may not be reoffered, resold or otherwise transferred in the United States
unless such transaction is registered under the Securities Act or an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered hereby in order to satisfy the obligations
of the Company under a registration rights agreement among the Company and the
Initial Purchasers relating to the Old Notes (the "Registration Rights
Agreement").
The Exchange Notes will bear interest at a rate of 9 3/4% per annum,
payable semi-annually on June 15 and December 15 of each year, commencing June
15, 1998. Holders of Exchange Notes of record on June 1, 1998, will receive on
June 15, 1998, an interest payment in an amount equal to (x) the accrued
interest on such Exchange Notes from the date of issuance thereof to June 15,
1998, plus (y) the accrued interest on the previously held Old Notes from the
date of issuance of such Old Notes (December 22, 1997) to the date of exchange
thereof. Interest will not be paid on Old Notes that are accepted for exchange.
The Notes mature on December 15, 2007.
The Old Notes were initially represented by three global Old Notes (the
"Old Global Notes") in registered form, registered in the name of Cede & Co., as
nominee for The Depository Trust Company ("DTC" or the "Depositary"), as
depositary. The Exchange Notes exchanged for Old Notes represented by the Old
Global Notes will be initially represented by two global Exchange Notes (the
"Exchange Global Notes") in registered form, registered in the name of the
Depositary. See "Book-Entry; Delivery and Form." References herein to "Global
Notes" shall be references to the Old Global Notes and the Exchange Global
Notes.
Based on an interpretation of the Securities Act by the staff of the
Securities and Exchange Commission (the "SEC"), Exchange Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by a holder thereof (other than (i) a
broker-dealer who purchased such Old Notes directly from the Company for resale
pursuant to Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an "affiliate" (within the meaning of Rule 405 of the
Securities Act) of the Company), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the holder
is acquiring the Exchange Notes in its ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Old Notes
wishing to accept the Exchange Offer must represent to the Company that such
conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must agree that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of one year after
the Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
The Exchange Notes will be a new issue of securities for which there
currently is no market. Although one of the Initial Purchasers has informed the
Company that it currently intends to make a market in the Exchange Notes, it is
not obligated to do so, and any such market making may be discontinued at any
time without notice. As the Old Notes were issued and the Exchange Notes are
being issued to a limited number of institutions who typically hold similar
securities for investment, the Company does not expect that an active public
market for the Exchange Notes will develop. Accordingly, there can be no
assurance as to the
ii
<PAGE> 5
development, liquidity or maintenance of any market for the Exchange Notes on
any securities exchange or for quotation through the Nasdaq Stock Market. See
"Risk Factors."
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT
FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH
FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR
A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
iii
<PAGE> 6
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial statements (including the notes thereto)
appearing elsewhere in this Prospectus. Prospective investors should carefully
consider the matters discussed under the caption "Risk Factors." As used in this
Prospectus, the terms "Imperial Holly" and "Savannah Foods" refer to Imperial
Holly Corporation and Savannah Foods & Industries, Inc., respectively, as each
company existed prior to the consummation of the Transactions (as defined
herein) and the term the "Company" refers to Imperial Holly Corporation and its
subsidiaries (including Savannah Foods and its subsidiaries) following the
consummation of the Transactions.
This Prospectus contains certain forward-looking statements with respect to
the business of the Company and the industry in which it operates. These
forward-looking statements are subject to certain risks and uncertainties which
may cause actual results to differ significantly from such forward-looking
statements. See "Disclosure Regarding Forward-Looking Statements" and "Risk
Factors."
THE COMPANY
OVERVIEW
The Company is the largest, most geographically diverse and most balanced
producer and marketer of refined sugar in the United States. The Company's pro
forma sales for the 12 months ended September 30, 1996 represented approximately
33% of the total refined sugar market in the United States, and the Company
controls approximately 37% of all domestic sugarcane refining capacity and 30%
of all domestic sugar beet processing capacity. The Company refines raw cane
sugar at four refineries located in Texas, Georgia, Florida and Louisiana and
produces beet sugar at 12 beet factories located in California, Wyoming,
Montana, Texas and Michigan. During the 12 months ended September 30, 1997, the
Company sold approximately 61 million cwt. ("hundred weights" equal to one
hundred pounds) of refined sugar.
The Company offers one of the broadest product lines in the industry and
sells to a wide range of customers, including (i) retail grocers, (ii)
foodservice companies, which include restaurants, schools and other
institutions, and (iii) industrial customers, which are principally food
manufacturers. The Company's sugar products include granulated, powdered, liquid
and brown sugars sold in a variety of packaging options (one-pound boxes to
100-pound bags, individual packets and in bulk) under various brands
(Imperial(R), Holly(R), Spreckels(R), Dixie Crystals(R), Evercane(R) and
Pioneer(R)) or private market labels. Complementary non-sugar products marketed
by the Company include salt, pepper, non-nutritive sweeteners, non-dairy
creamers and plastic cutlery. In addition, the Company produces selected
specialty sugar products including Savannah Gold(TM) (a premium-priced,
free-flowing brown sugar), Imbrocon(TM) (a liquid flavoring) and specialty
sugars used in confections and icings. For the 12 months ended September 30,
1997, the Company had pro forma revenues of approximately $2.0 billion and pro
forma EBITDA (as defined herein) of approximately $142 million.
Imperial Holly was incorporated in 1924 as Imperial Sugar Company, and is
the successor to a cane sugar plantation and milling operation begun in Sugar
Land, Texas in the early 1800's that began producing granulated sugar in 1843.
In December 1997, the Company completed its acquisition of Savannah Foods,
pursuant to a merger of Savannah Foods with a wholly owned subsidiary of the
Company, for an aggregate consideration of approximately $582 million,
consisting of 70% cash and 30% shares of the Company's common stock, no par
value ("Company Common Stock"). See "-- The Transactions." Savannah Foods was
incorporated in Delaware in 1969 as the successor to the Savannah Sugar Refining
Corporation, which was originally incorporated in New York in 1916.
The Company's principal executive offices are located at One Imperial
Square, Suite 200, 8016 Highway 90-A, Sugar Land, Texas 77478, and its telephone
number is (281) 491-9181.
INDUSTRY
There are two methods for producing refined sugar: (i) processing sugar
beets and (ii) processing and refining sugarcane, each of which possesses
distinct operating characteristics. During the crop year ended September 1996,
total United States refined sugar sales consisted of approximately 57% cane
sugar and 43%
1
<PAGE> 7
beet sugar. The profitability of cane sugar and beet sugar operations is
impacted by government programs designed to support the price of domestic crops
of sugar beets and sugarcane. These programs affect cane sugar and beet sugar
operations differently. See "Business -- Sugar Legislation and Other Market
Factors."
Domestic demand for refined sugar has increased each year since 1986, and
the average rate of growth over the past five years has been 1.5%. The trend in
the food manufacturing industry toward production of "low fat" products has
increased industrial demand for sugar as many food manufacturers add sugar to
enhance flavor and texture as fat is removed. At the current market level, a
1.5% increase in domestic demand translates into the sale of an additional
150,000 tons of refined sugar per year, or the annual production capacity of an
average-sized sugar beet factory. In addition, the domestic sugar industry has
seen marked consolidation in the past five years. Since the crop year ended
September 1992, the number of domestic sugar marketers has dropped from 13 to 8,
and five beet factories and two cane refineries have been closed (although total
production capacity has increased by 5.4 million cwt.). During the same period,
the market share of the three largest marketers of refined sugar increased from
55% to the current figure of 74%. The Company believes that this significant
consolidation among producers and marketers coupled with moderate growth in
demand presents an attractive business environment in which to implement its
business strategies. See "Business -- Industry."
COMPETITIVE STRENGTHS
The Company believes that the following factors contribute to the Company's
position as a national market leader and provide a foundation for the Company's
business strategy:
LARGEST PRODUCER AND MARKETER OF REFINED SUGAR. The Company is the largest
producer and marketer of refined sugar in the country, with pro forma revenues
for the 12 months ended September 30, 1997 of $2.0 billion, accounting for
approximately 33% of total United States refined sugar sales in such period. The
Company believes that it sells sugar products to more major industrial customers
and national grocery chains than any of its competitors, giving it unmatched
national market penetration. By taking advantage of the efficiencies provided by
a national network of production and distribution facilities, the Company
believes that it is able to offer customers superior service in a timely manner.
The Company's breadth of market penetration also enabled it to avoid dependency
on any single customer for more than 3% of total sales during the 12 months
ended September 30, 1997.
GEOGRAPHIC DIVERSITY. The Company is the most geographically diverse
refined sugar producer in the United States. This geographic diversity minimizes
the impact of adverse conditions at any one facility (e.g., reduced acreage
availability, unfavorable weather and disease), smoothes production cycles and
creates opportunities to optimize processing schedules and provide more reliable
and efficient sourcing and distribution of refined sugar products for customers
in all domestic market areas.
BALANCED OPERATIONS. The Company is the most balanced producer and marketer
of refined sugar in the United States. While most refined sugar marketers are
heavily weighted toward either beet sugar or cane sugar, the Company's current
refined sugar production capacity consists of approximately 60% cane sugar and
40% beet sugar. The Company believes that this balanced mix of production
capacity should serve to (i) reduce the volatility in the Company's operating
results and (ii) reduce the Company's exposure to any changes in federal trade
and agricultural policy.
COMPLETE PRODUCT LINE. The Company has one of the broadest product lines in
the sugar industry. In addition to its flagship consumer sugar brands, which the
Company offers in a variety of packaging options ranging from one pound boxes to
25-pound bags, the Company also markets a complete line of specialty sugar
products. In addition, the Company markets complementary non-sugar products
including salt, pepper, nondairy creamers, non-nutritive sweeteners and plastic
cutlery. Savannah Foods has emerged as a leader in serving the higher margin
foodservice sector, growing its foodservice sales at an annual rate of 10% over
the past ten fiscal years. With the foodservice industry continuing to be the
fastest growing segment of the United States food and beverage industry, the
Company's goal is to provide attractive "one stop shopping" alternatives for
foodservice customers.
2
<PAGE> 8
DOMINANT BRANDS IN REGIONAL MARKETS. The Company enjoys the benefit of
highly recognized consumer brand labels, which command premium prices and
provide higher margins than the Company's unbranded products. According to data
compiled by a leading grocery industry market research firm, the Company's
Imperial(R) and Holly(R) brands command a combined, estimated 93% market share
for branded refined sugar grocery sales in the principal metropolitan markets in
Texas. In addition, the Company's Dixie Crystals(R) brand possesses an estimated
81% market share for branded refined sugar grocery sales in the region comprised
of Georgia, Florida, North Carolina, South Carolina and eastern Tennessee. Sales
of branded sugar constitute approximately 30% of total retail sales of refined
sugar nationally.
ABILITY TO INTEGRATE ACQUISITIONS. Over the past ten years, Imperial Holly
has consummated two significant acquisitions and successfully integrated the
operations of such companies. In 1988, Imperial Holly (then known as Imperial
Sugar Company) acquired Holly Sugar Corporation ("Holly"), a large beet sugar
producer, for approximately $100 million. At the time of its acquisition,
Holly's revenues were approximately 160% of Imperial Sugar Company's revenues.
In 1996, Imperial Holly acquired Spreckels Sugar Company ("Spreckels"), a beet
sugar producer with operations in California, for approximately $35 million.
EXPERIENCED MANAGEMENT TEAM AND SIGNIFICANT OWNERSHIP BY MANAGEMENT AND
DIRECTORS. The Company benefits from a strong and experienced management team at
both the corporate and operating levels. The members of the Company's senior
management have extensive experience in the sugar industry and at consumer
products companies, such as Procter & Gamble Company and PepsiCo Inc. In
addition, the Company has retained certain key members of the management of
Savannah Foods after the Transactions. The Company's executive officers and
directors in the aggregate beneficially own approximately 26% of the Company
Common Stock.
BUSINESS STRATEGY
The Company's strategic objective is to capitalize on the opportunities
afforded by its position as the national market leader in the production,
marketing and distribution of refined sugar products and to fully realize the
significant synergy and cost saving opportunities created by the Transactions by
pursuing the following strategies:
ACHIEVE OPERATING EFFICIENCIES. The Company believes that combining
Imperial Holly's operations with those of Savannah Foods will allow the Company
to (i) reduce administrative costs, (ii) reduce freight and distribution costs
through more efficient sourcing of customer orders, (iii) reduce costs by
refocusing selling, marketing and promotional activities, (iv) reduce operating
costs by optimizing the operating schedules of the combined production
facilities and (v) reduce costs of procuring operating supplies and packaging
materials. The Company anticipates that it will begin to realize such cost
savings in its current fiscal year, with the full impact, which the Company
estimates could approximate $40 million annually, being achieved in the fiscal
year ended September 30, 1999. Independent of the acquisition of Savannah Foods,
the Company also anticipates that it will complete the expansion of certain of
its production facilities in the current fiscal year resulting in an additional
reduction in per unit operating costs.
INTEGRATE AND CROSS-SELL PRODUCT LINES. The combination of Imperial Holly
and Savannah Foods' product lines and sales and marketing efforts will be
complementary with minimal overlap, as each company has focused its marketing
efforts in different geographic regions. The Company plans to integrate sales
and production functions with the goal of increasing sales and reducing costs.
The Company believes that this can be achieved by optimizing product sourcing
decisions for similar product lines, cross selling specialty product lines to
all customers and cross selling similar product lines to major customers with
multi-plant needs.
EXPAND SALES OF "VALUE-ADDED" PRODUCTS. The Company plans to expand its
production and marketing of higher margin, "value-added" products. Value-added
products, such as branded and specialty sugars and all of the Company's
non-sugar items, constituted approximately 18.3% of pro forma sales for the 12
months ended September 30, 1997. The Company believes there are opportunities to
extend brand penetration into other geographic areas and to leverage these brand
names to include new product introductions. In addition, management of the
Company believes there are significant opportunities to build on Savannah Foods'
strong
3
<PAGE> 9
position in the foodservice business and increase higher margin, foodservice
sales in Imperial Holly's primary market areas.
BUILD ON SUCCESSFUL RELATIONSHIPS WITH CUSTOMERS. The Company believes it
can build on Imperial Holly and Savannah Foods' historically strong customer
relationships and its position as the largest, most diversified sugar producer
to become the preferred national supplier for major national retail, foodservice
and industrial customers. The Company's geographically diverse production
facilities and national network of distribution centers will give the Company
the unique ability to distribute refined sugar to locations anywhere in the
country on a timely and efficient basis year-round.
ENHANCE RELATIONSHIPS WITH SUPPLIERS. The Company believes that Imperial
Holly and Savannah Foods' good relationships with raw cane sugar suppliers and
sugar beet growers will allow it to develop more efficient sources of supply.
Imperial Holly has forged close relationships with its beet growers. The Company
intends to continue to enhance these relationships by providing technical and
agronomic assistance and offering improved varieties of sugar beet seed in an
effort to increase the profitability of its sugar beet growers. The Company
believes that it can strengthen its relationships with sugar beet growers to
increase acreage available to Savannah Foods' sugar beet factories, resulting in
increased production and enhanced profitability for these facilities. As a cane
sugar refiner, the Company also plans to actively pursue partnering arrangements
with raw cane sugar suppliers as it does with its sugar beet growers.
THE TRANSACTIONS
THE TENDER OFFER. On October 16, 1997, the IHK Merger Sub Corporation, a
wholly owned subsidiary of Imperial Holly ("IHK Sub"), completed a tender offer
(the "Tender Offer") for 50.1% of the outstanding shares of common stock of
Savannah Foods ("Savannah Common Stock") at a price of $20.25 per share in cash.
The Tender Offer was made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated September 12, 1997, by and among Imperial Holly, IHK
Sub and Savannah Foods.
THE MERGER. On December 22, 1997, the Company completed its acquisition of
Savannah Foods by means of the merger (the "Merger") of IHK Sub with and into
Savannah Foods with Savannah Foods surviving as a wholly owned subsidiary of the
Company. In the Merger, 30% of the outstanding shares of Savannah Common Stock
were each converted into the right to receive $20.25 of Company Common Stock
(based upon a value of $13.25 per share of Company Common Stock) and 19.9% of
the outstanding shares of Savannah Common Stock were each converted into the
right to receive $20.25 in cash. The remaining 50.1% of the outstanding shares
of Savannah Common Stock held by IHK Sub as a result of the Tender Offer were
canceled in the Merger. The Tender Offer, the Merger, the H. Kempner Trust
Financing (as defined herein) and the Debt Tender Offer (as defined herein) are
referred to herein as the "Transactions." See "-- The Financing" and
"Description of the Transactions."
THE FINANCING
The Tender Offer was financed through a secured credit facility (the
"Tender Credit Facility") in the amount of $505 million provided by Lehman
Commercial Paper Inc. ("LCPI"), an affiliate of Lehman Brothers. Upon
consummation of the Merger, the Tender Credit Facility was amended and restated
as the "Senior Credit Facility."
The Senior Credit Facility was entered into in connection with the closing
of the Merger and the Offering. The Senior Credit Facility is comprised of term
loan facilities aggregating $255 million and a $200 million revolving credit
facility. The proceeds of the Senior Credit Facility, together with the proceeds
of the Offering and the H. Kempner Trust Financing, provided the financing to
repay the Tender Facility, to fund the cash consideration paid in the Merger, to
pay certain fees and expenses related to the Transactions and the Debt Financing
and to provide financing for future working capital and other general corporate
purposes. The Senior Credit Facility is guaranteed by substantially all of the
Company's direct and indirect subsidiaries and is secured by substantially all
of the assets of the Company and each of the Guarantors. The Senior Credit
Facility and the Offering are referred to herein as the "Debt Financing." See
"Description of Indebtedness."
4
<PAGE> 10
SUMMARY OF TERMS OF EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $250,000,000 aggregate
principal amount of Exchange Notes for up to an equal aggregate principal amount
of Old Notes. The Exchange Notes will be obligations of the Company entitled to
the benefits of the Indenture. The form and terms of the Exchange Notes are
identical in all material respects to the form and terms of the Old Notes,
except that (i) the offering of the Exchange Notes has been registered under the
Securities Act, (ii) the Exchange Notes will not be subject to transfer
restrictions and (iii) the Exchange Notes will not be entitled to registration
or other rights under the Registration Rights Agreement including the provision
in the Registration Rights Agreement for payment of Liquidated Damages upon
failure by the Company to consummate the Exchange Offer or the occurrence of
certain other events. See "Description of the Notes." Capitalized terms followed
by the parenthetical "(as defined)" and not defined herein will have the
meanings given them in the Indenture.
Registration Rights
Agreement................ The Old Notes were sold by the Company on December
22, 1997 to the Initial Purchasers pursuant to a
Purchase Agreement, dated December 17, 1997 (the
"Purchase Agreement"). Pursuant to the Purchase
Agreement, the Company and the Initial Purchasers
entered into the Registration Rights Agreement
which, among other things, grants the holders of
the Old Notes certain exchange and registration
rights. The Exchange Offer is intended to satisfy
certain obligations of the Company under the
Registration Rights Agreement.
The Exchange Offer......... $1,000 principal amount of Exchange Notes will be
issued in exchange for each $1,000 principal amount
of Old Notes validly tendered and accepted pursuant
to the Exchange Offer. As of the date hereof,
$250,000,000 in aggregate principal amount of Old
Notes are outstanding. The Company will issue the
Exchange Notes to tendering holders of Old Notes
promptly following the Expiration Date. The terms
of the Exchange Notes are identical in all material
respects to the Old Notes except for certain
transfer restrictions and registration rights
relating to the Old Notes.
No federal or state regulatory requirements must be
complied with or approval obtained in connection
with the Exchange Offer, other than the
registration requirements under the Securities Act.
Resale..................... Based on existing interpretations of the Securities
Act by the staff of the SEC set forth in several
no-action letters to third parties, and subject to
the immediately following sentence, the Company
believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) a
broker-dealer who purchased such Old Notes directly
from the Company for resale pursuant to Rule 144A
or any other available exemption under the
Securities Act or (ii) a person that is an
"affiliate" (within the meaning of Rule 405 of the
Securities Act) of the Company), without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that the
holder is acquiring the Exchange Notes in its
ordinary course of business and is not
participating, and has no arrangement or
understanding with any person to participate, in
the distribution of the Exchange Notes. However,
any purchaser of Notes who is an affiliate of the
Company or who intends to participate in the
Exchange Offer for the purpose of distributing the
Exchange Notes, or any broker-dealer who purchased
the Old Notes from the Company to resell pursuant
to Rule 144A or any other available exemption under
the Securities Act, (i) will not be able to rely on
the interpretations by the staff of the SEC set
forth in the
5
<PAGE> 11
above-mentioned no-action letters, (ii) will not be
able to tender its Old Notes in the Exchange Offer
and (iii) must comply with the registration and
prospectus delivery requirements of the Securities
Act in connection with any sale or transfer of the
Notes unless such sale or transfer is made pursuant
to an exemption from such requirements. The Company
does not intend to seek its own no-action letter
and there is no assurance that the staff of the SEC
would make a similar determination with respect to
the Exchange Notes as it has in such no-action
letters to third parties. See "The Exchange
Offer -- Purpose and Effect of the Exchange Offer"
and "Plan of Distribution." Each broker-dealer that
receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter
of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a
result of market-making activities or other trading
activities. The Company has agreed that, for a
period of one year after the Expiration Date, it
will make this Prospectus available to any
broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
Expiration Date............ 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended. See "The Exchange Offer -- Expiration
Date; Extensions; Amendments."
Accrued Interest on the
Exchange Notes and the
Old Notes................ The Exchange Notes will bear interest at a rate of
9 3/4% per annum, payable semiannually on June 15
and December 15 of each year, commencing June 15,
1998. Holders of Exchange Notes of record on June
1, 1998, will receive on June 15, 1998, an interest
payment in an amount equal to (i) the accrued
interest on such Exchange Notes from the date of
issuance thereof to June 15, 1998, plus (ii) the
accrued interest on the previously held Old Notes
from the date of issuance of such Old Notes
(December 22, 1997) to the date of exchange thereof
Interest will not be paid on Old Notes that are
accepted for exchange. The Notes mature on December
15, 2007.
Conditions to the Exchange
Offer.................... The Company may terminate the Exchange Offer if it
determines that its ability to proceed with the
Exchange Offer could be materially impaired due to
the occurrence of certain conditions. The Company
does not expect any of such conditions to occur,
although there can be no assurance that such
conditions will not occur. Holders of Old Notes
will have certain rights under the Registration
Rights Agreement should the Company fail to
consummate the Exchange Offer. See "The Exchange
Offer -- Conditions to the Exchange Offer" and
"Description of the Notes -- Registration Rights;
Liquidated Damages."
6
<PAGE> 12
Procedures for Tendering
Old Notes................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Old Notes to be exchanged and any other
required documentation, to The Bank of New York, as
Exchange Agent, at the address set forth herein and
therein or effect a tender of Old Notes pursuant to
the procedures for book-entry transfer as provided
for herein and therein. By executing the Letter of
Transmittal, each holder will represent to the
Company that, among other things, the Exchange
Notes acquired pursuant to the Exchange Offer are
being acquired in the ordinary course of business
of the person receiving such Exchange Notes,
whether or not such person is the holder, that
neither the holder nor any such other person has
any arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes and that neither the holder nor any such
other person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. See
"The Exchange Offer -- Procedures for Tendering."
Following consummation of the Exchange Offer,
holders of Old Notes not tendered as a general
matter will not have any further registration
rights, and the Old Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for the
Old Notes could be adversely affected. See "Risk
Factors -- Absence of Public Market for the Notes"
and "-- Consequences of Exchange and Failure to
Exchange" and "The Exchange Offer -- Consequences
of Failure to Exchange."
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender in the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on his behalf. If such
beneficial owner wishes to tender on his own
behalf, such beneficial owner must, prior to
completing and executing the Letter of Transmittal
and delivering his Old Notes, either (a) make
appropriate arrangements to register ownership of
the Old Notes in such holder's name or (b) obtain a
properly completed bond power from the registered
holder or endorsed certificates representing the
Old Notes to be tendered. The transfer of record
ownership may take considerable time, and
completion of such transfer prior to the Expiration
Date may not be possible. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available, or who cannot deliver their Old Notes
(or complete the procedure for book-entry transfer)
and deliver a properly completed Letter of
Transmittal and any other documents required by the
Letter of Transmittal to the Exchange Agent prior
to the Expiration Date may tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery
Procedures."
7
<PAGE> 13
Withdrawal Rights.......... Tenders of Old Notes may be withdrawn at any time
prior to the Expiration Date by furnishing a
written or facsimile transmission notice of
withdrawal to the Exchange Agent containing the
information set forth in "The Exchange
Offer -- Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of Exchange
Notes.................... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and
described more fully in "The Exchange
Offer -- Termination"), the Company will accept for
exchange any and all Old Notes that are properly
tendered in the Exchange Offer prior to the
Expiration Date. See "The Exchange
Offer -- Procedures for Tendering." The Exchange
Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
Exchange Agent............. The Bank of New York, the Trustee under the
Indenture, is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange
Offer. The mailing address of the Exchange Agent is
The Bank of New York, P. O. Box 11248, Church
Street Station, New York, NY 10286-1248. The
overnight courier and hand delivery address for the
Exchange Agent is The Bank of New York, Tender and
Exchange Department, 101 Barclay Street, Receive &
Deliver Window, New York, NY 10286. For assistance
and request for additional copies of this
Prospectus, the Letter of Transmittal or the Notice
of Guaranteed Delivery, the telephone number for
the Exchange Agent is (212) 507-9357, and the
facsimile number for the Exchange Agent is (212)
815-6213. All communications should be directed to
the attention of .
Effect on Holders of Old
Notes.................... Holders of Old Notes who do not tender their Old
Notes in the Exchange Offer will continue to hold
their Old Notes and will be entitled to all the
rights and limitations applicable thereto under the
Indenture. All untendered, and tendered but
unaccepted, Old Notes will continue to be subject
to the restrictions on transfer provided for in the
Old Notes and the Indenture. To the extent that Old
Notes are tendered and accepted in the Exchange
Offer, the trading market, if any, for the Old
Notes could be adversely affected. See "Risk
Factors -- Consequences of Exchange and Failure to
Exchange."
See "The Exchange Offer" for more detailed information concerning the terms of
the Exchange Offer.
8
<PAGE> 14
SUMMARY OF TERMS OF EXCHANGE NOTES
Securities Offered......... $250,000,000 principal amount of 9 3/4% Senior
Subordinated Notes due 2007, Series A.
Maturity Date.............. December 15, 2007.
Interest Payment Dates..... Interest on the Notes will be payable semiannually
in arrears on June 15 and December 15 of each year,
commencing June 15, 1998.
Mandatory Redemption....... The Company is not required to make mandatory
redemption or sinking fund payments with respect to
the Exchange Notes.
Optional Redemption........ The Exchange Notes are redeemable at the option of
the Company, in whole or in part, at any time on or
after December 15, 2002 at the redemption prices
set forth herein plus accrued and unpaid interest,
if any, thereon to the date of redemption. In
addition, at any time before December 15, 2000, the
Company may, in its discretion, redeem up to 35% of
the original aggregate principal amount of the
Exchange Notes at a redemption price of 109.75% of
the principal amount thereof, plus accrued and
unpaid interest, if any, thereon to the date of
redemption, with the net proceeds of one or more
Equity Offerings; provided that at least 65% of the
original aggregate principal amount of the Notes
remains outstanding immediately after each such
redemption. See "Description of Notes -- Optional
Redemption."
Change of Control.......... Upon the occurrence of a Change of Control, the
holders of the Exchange Notes will have the right
to require the Company to repurchase their Notes,
in whole or in part, at a price equal to 101% of
the aggregate principal amount thereof, plus
accrued and unpaid interest thereon to the date of
repurchase. See "Description of Notes -- Optional
Redemption" and "Description of Notes -- Repurchase
at the Option of Holders -- Change of Control."
Ranking.................... The Exchange Notes are general unsecured
obligations of the Company subordinate in right of
payment to all existing and future Senior Debt of
the Company. At September 30, 1997, the Company and
its Subsidiaries had $554.7 million of pro forma
Senior Debt outstanding (excluding an additional
$191.3 million available under the revolving credit
portion of the Senior Credit Facility). See
"Capitalization" and "Description of
Notes -- Subordination."
Subsidiary Guarantees...... The Company's payment obligations under the
Exchange Notes will be, and the Old Notes remaining
outstanding after the Exchange Offer will continue
to be, jointly and severally guaranteed on a senior
subordinated basis by the Guarantors. The
Subsidiary Guarantees are subordinated in right of
payment to all existing and future Senior Debt of
the Guarantors, including the Guarantors'
guarantees of the Company's obligations under the
Senior Credit Facility. See "Description of
Notes -- Subsidiary Guarantees."
Certain Covenants.......... The Indenture pursuant to which the Exchange Notes
will be, and the Old Notes were, issued contains
certain covenants that, among other things, limit
the ability of the Company and its Restricted
Subsidiaries (as defined) to: (i) incur additional
Indebtedness (as defined) and issue preferred
stock; (ii) pay dividends or make certain other
restricted payments; (iii) enter into transactions
with affiliates; (iv) make certain
9
<PAGE> 15
asset dispositions; (v) in the case of the Company,
merge or consolidate with, or transfer
substantially all of its assets to another Person
(as defined herein); (vi) encumber assets under
certain circumstances; (vii) restrict dividends and
other payments from Restricted Subsidiaries; (viii)
issue Capital Stock (as defined) of wholly-owned
subsidiaries; or (ix) engage in certain business
activities. See "Description of Notes -- Certain
Covenants." In addition, under certain
circumstances, the Company will be required to
offer to repurchase the Exchange Notes at a price
equal to 100% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any,
thereon to the date of repurchase, with the
proceeds of certain Asset Sales (as defined
herein). See "Description of Notes -- Repurchase at
the Option of Holders -- Asset Sales."
Transfer Restrictions...... For restrictions on transfer of the Exchange Notes,
see "The Exchange Offer -- Resale of New Notes."
RISK FACTORS
An investment in the Exchange Notes involves certain risks that a potential
investor should carefully evaluate prior to making such an investment. See "Risk
Factors."
10
<PAGE> 16
UNAUDITED SUMMARY PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following Unaudited Summary Pro Forma Combined Condensed Financial Data
give effect to the Transactions using the purchase method of accounting for
Imperial Holly's acquisition of Savannah Foods after giving effect to the pro
forma reclassifications and adjustments described in the notes accompanying the
Pro Forma Financial Statements. The Unaudited Summary Pro Forma Combined
Condensed Financial Data is intended for informational purposes only and is not
necessarily indicative of the future financial position or results of operations
of the Company had the Transactions described above occurred on the indicated
dates or been in effect for the periods presented. The Unaudited Summary Pro
Forma Combined Condensed Financial Data should be read in conjunction with, and
is qualified in its entirety by, the Pro Forma Financial Statements and the
historical consolidated financial statements of Imperial Holly and Savannah
Foods, including in each case, the related notes thereto, included elsewhere in
or incorporated by reference in this Prospectus, and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
TWELVE
FISCAL YEAR SIX MONTHS MONTHS
ENDED ENDED SEPTEMBER 30, ENDED
MARCH 31, --------------------- SEPTEMBER 30,
1997 1996 1997 1997
----------- -------- ---------- -------------
(IN THOUSANDS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Net sales.................................... $1,923,324 $985,074 $1,018,911 $1,957,161
Cost of sales................................ 1,682,208 866,393 880,460 1,696,275
Selling, general and administrative.......... 113,977 56,173 61,379 119,183
Depreciation and amortization................ 47,156 24,618 22,883 45,421
Impairment of long-lived assets.............. 10,280 10,280 -- --
Cost of workforce reduction.................. 723 723 -- --
---------- -------- ---------- ----------
Operating income............................. $ 68,980 $ 26,887 $ 54,189 $ 96,282
========== ======== ========== ==========
OTHER DATA:
EBITDA(2).................................... $ 126,416 $ 61,785 $ 77,072 $ 141,703
Interest expense............................. 56,916 29,327 26,066 53,655
Capital expenditures......................... 19,445 9,629 28,039 37,855
Ratio of earnings to fixed charges(3)........ 1.2x -- 2.1x 1.8x
Ratio of EBITDA to interest expense.......... 2.2x 2.1x 3.0x 2.6x
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
BALANCE SHEET DATA:
Cash and marketable securities.............................. $ 79,914
Total assets................................................ 1,252,861
Total debt, including current maturities.................... 554,670
Shareholders' equity........................................ 355,570
</TABLE>
- ---------------
(1) The Unaudited Summary Pro Forma Combined Condensed Financial Data do not
give any effect to the cost savings and revenue enhancements which the
Company expects will result from integrating the operations of Imperial
Holly and Savannah Foods after the Merger. The full annual impact of such
cost savings and revenue enhancements, which the Company estimates could
approximate $40 million annually, is expected to be achieved in the fiscal
year ending September 30, 1999.
(2) EBITDA is defined as operating income before depreciation and amortization,
and impairment of long-lived assets charge. EBITDA does not represent cash
flows as defined by generally accepted accounting principles and does not
necessarily indicate that cash flows are sufficient to fund all of a
company's cash needs. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to incur and service debt.
However, EBITDA should not be considered in isolation or as a substitute for
net income or cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity. EBITDA as defined in this Offering Memorandum may differ from
EBITDA as defined in other similar offerings, and therefore may not be
comparable.
(3) For purposes of this computation, earnings consist of income before taxes
plus fixed charges. Income before taxes is stated after deducting
amortization of goodwill, depreciation and other non-cash charges. Fixed
charges consist of interest on indebtedness plus interest on capital leases.
Earnings before taxes and fixed charges for the six months ended September
30, 1996 were insufficient to cover fixed charges by $1.8 million.
11
<PAGE> 17
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Prospectus contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including, without limitation,
statements that include the words "anticipates," "believes," "could,"
"estimates," "expects," "intends," "may," "plans," "predicts," "projects,"
"should," and similar expressions and statements relating to anticipated
synergies and cost savings following the Merger, the Company's strategic plans,
capital expenditures, industry trends and prospects and the Company's financial
position. Such forward-looking statements involve known and unknown risks,
assumptions, uncertainties and other factors that may cause actual results,
performance or achievements of the Company to differ materially from those
expressed or implied by such forward-looking statements. Although the Company
believes that its plans, intentions and expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
plans, intentions or expectations will be achieved. Important factors that could
cause actual results to differ materially from the Company's expectations
("Cautionary Statements") are set forth under the captions "Prospectus Summary,"
"Risk Factors," "Pro Forma Financial Statements," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," and
elsewhere in this Prospectus. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements.
RISK FACTORS
Holders of Old Notes should carefully consider the risk factors set forth
below, as well as the other information appearing in this Prospectus, before
tendering any Old Notes for exchange into Exchange Notes. Certain matters set
forth below also apply to the Old Notes and will continue to apply to any Old
Notes remaining outstanding after the Exchange Offer.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE
In connection with the Transactions, the Company incurred significant
indebtedness. Concurrently with the consummation of the Merger, the Company
issued the Old Notes and entered into the Senior Credit Facility. As of
September 30, 1997, the Company's pro forma consolidated indebtedness, including
capitalized leases, would have been $554.7 million (including the Notes, but
excluding an additional $191.3 million available under the revolving credit
portion of the Senior Credit Facility). The Company's pro forma debt to total
capital at September 30, 1997 would have been 60.9%, and the ratio of earnings
to fixed charges for the 12 months ended September 30, 1997 would have been
1.8x. The increased indebtedness and higher debt to total capital ratio of the
Company after the consummation of the Transactions in comparison to that of
either Imperial Holly or Savannah Foods on a historical basis has reduced the
flexibility of the Company to respond to changing business and economic
conditions, and could limit capital expenditures and acquisitions by the
Company.
A substantial portion of the indebtedness incurred by the Company bears
interest at variable rates. The Company has entered into certain interest rate
protection agreements to limit its exposure to increases in such interest rates
with respect to an aggregate of $180 million of indebtedness and may enter into
additional interest rate protection agreements. Such agreements, however, will
not entirely eliminate such exposure. Any increase in the interest rate on the
Company's indebtedness will reduce funds available to the Company for its
operations and future business opportunities and will exacerbate the
consequences of the Company's leveraged capital structure.
The Company's high degree of leverage may have important consequences
including the following: (i) the ability of the Company to obtain additional
financing for acquisitions, working capital, capital expenditures or other
purposes, if necessary, may be impaired or such financing may not be on terms
favorable to the Company; (ii) a substantial portion of the Company's cash flow
will be used to make debt service payments, which will reduce the funds that
would otherwise be available to the Company for its operations and future
business opportunities; (iii) a substantial decrease in operating cash flow or
an increase in expenses of
12
<PAGE> 18
the Company could make it difficult for the Company to meet its debt service
requirements and force it to modify its operations; (iv) the Company's high
degree of leverage may make it more vulnerable to a downturn in its business or
the economy generally; and (v) dividends to stockholders are restricted under
the Senior Credit Facility and the Indenture. See "Description of Indebtedness"
and "Description of the Notes -- Certain Covenants."
In addition, the Company's ability to make scheduled payments of principal
of, or to pay the interest or Liquidated Damages, if any, on, or to refinance,
its indebtedness (including the Notes), or to fund planned capital expenditures,
will depend upon its future performance, which, in turn, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond its control. Based upon current levels of operations, the Company
believes that its cash flow from operations, amounts available under the Senior
Credit Facility and available cash will be adequate to meet its anticipated
future requirements for working capital, capital expenditures and scheduled
payments of principal and interest on its indebtedness, including the Notes.
There can be no assurance, however, that the Company's business will generate
cash flow at or above anticipated levels or that the Company will be able to
borrow funds under the Senior Credit Facility in an amount sufficient to enable
the Company to service its indebtedness, including the Notes, or make
anticipated capital expenditures. If the Company is unable to generate
sufficient cash flow from operations or to borrow sufficient funds in the future
to service its debt, it may be required to sell assets, reduce capital
expenditures, refinance all or a portion of its existing debt (including the
Notes) or obtain additional financing. There can be no assurance that any such
financing could be obtained, particularly in view of the Company's high level of
debt, the restrictions on the Company's ability to incur debt under the Senior
Credit Facility and the Indenture, and the fact that substantially all of the
Company's assets will be pledged to secure obligations under the Senior Credit
Facility.
SUBORDINATION AND RANKING OF THE NOTES AND SUBSIDIARY GUARANTEES
The Notes and Subsidiary Guarantees will be general unsecured obligations
of the Company and the Guarantors, respectively, subordinate in right of payment
to all existing and future Senior Debt of the Company and the Guarantors,
including all indebtedness under the Senior Credit Facility. The Senior Credit
Facility is secured by liens upon substantially all assets of the Company and
the Guarantors. By reason of such subordination, in the event of an insolvency,
liquidation, reorganization, dissolution or other winding-up of the Company or
any Guarantor, the Senior Debt of such Person must be paid in full before the
principal of, and premium, if any, interest and Liquidated Damages, if any, on
the Notes may be paid. In the event of a bankruptcy, liquidation or
reorganization of the Company or any Guarantor, Holders of the Notes will
participate ratably with all holders of subordinated indebtedness of the Company
or any Guarantor that is deemed to be of the same class as the Notes, based upon
the respective amounts owed to each holder or creditor, in the remaining assets
of the Company or any Guarantor. If any of the foregoing events should occur,
there can be no assurance that there would be sufficient assets to pay amounts
due on the Notes. In addition, the Indenture provides that no payment with
respect to the Notes may be made in the event of a payment default with respect
to Senior Debt under certain circumstances and the holders of Designated Senior
Debt (as defined) will be entitled to block payments with respect to the Notes
in the event of a nonpayment default on Designated Senior Debt. At September 30,
1997, on a pro forma basis after giving effect to the Transactions, the Company
and the Guarantors would have had approximately $554.7 million of Senior Debt
outstanding (exclusive of an additional $191.3 million available under the
revolving credit portion of the Senior Credit Facility, which, if drawn, would
constitute Senior Debt). The Indenture permits the Company to incur additional
indebtedness under certain conditions. See "Capitalization," "Description of
Indebtedness -- Senior Credit Facility" and "Description of the Notes -- Certain
Covenants."
FRAUDULENT CONVEYANCE CONSIDERATIONS
In the event the Company or a Guarantor is the subject of a bankruptcy
proceeding or a suit on behalf of creditors, the incurrence of indebtedness
(such as the Notes or the Subsidiary Guarantees) in connection with the
Transactions may be subject to review under federal or state fraudulent transfer
laws. Under such laws, if a court in a lawsuit by a creditor or a representative
of creditors of the Company or a Guarantor, such as a
13
<PAGE> 19
trustee in bankruptcy of the Company or a Guarantor as debtor-in-possession,
were to find that at the time of, or after giving effect to, the incurrence of
such indebtedness and the application of its proceeds, the Company or a
Guarantor (i) was insolvent or rendered insolvent thereby, (ii) was engaged in a
business or transaction for which its remaining assets constituted an
unreasonably small amount of capital, (iii) intended to incur, or believed that
it would incur, debts beyond its ability to pay as they matured or (iv) intended
to hinder, delay or defraud creditors and, in the case of clauses (i), (ii) and
(iii), that such Person did not receive reasonably equivalent value or fair
consideration for the incurrence of such indebtedness, such court could void the
Company's obligations under the Notes or a Guarantor's obligations under its
Subsidiary Guarantee, subordinate the Notes or the Subsidiary Guarantees to
other indebtedness of the Company or such Guarantor, recover payments on the
Notes or the Subsidiary Guarantees or take other action detrimental to the
Holders of the Notes. In addition, if a court were to find that the Company or a
Guarantor came within any of clauses (i) through (iv) above, such Person or its
creditors or the trustee in bankruptcy could seek to void the grant of security
interests to the lenders under the Senior Credit Facility. This would result in
an event of default with respect to indebtedness incurred under such facility
which, under the terms of such indebtedness (subject to applicable law), would
allow the lenders to terminate their obligations thereunder and to accelerate
repayment of such indebtedness. In addition, the payment of interest and
principal by the Company pursuant to the Notes or the payment of amounts by a
Guarantor pursuant to a Subsidiary Guarantee could be voided and required to be
returned to the person making such payment, or to a fund for the benefit of the
creditors of the Company or such Guarantor, as the case may be.
The measure of insolvency for purposes of the foregoing varies depending
upon the law of the jurisdiction being applied. Generally, however, a company
would be considered insolvent for purposes of the foregoing if: (i) the sum of
such company's debts including contingent liabilities is greater than all such
company's assets at a fair valuation; (ii) the present fair saleable value of
such company's assets is less than the amount that will be required to pay its
probable liability on its existing debts as they become absolute and matured;
(iii) such company has incurred obligations beyond its ability to pay as such
obligations become due or (iv) such company has unreasonably small capital for
its business. As a condition to consummation of each of the Tender Credit
Facility, the Senior Credit Facility and the Offering, the Company received a
solvency opinion delivered by Murray, Devine & Co. Such solvency opinion would
not be binding on a court, and there can be no assurance that a court would not
determine that the Company and the Guarantors were insolvent at the time of or
after giving effect to the Transactions. On the basis of historical financial
information, recent operating history as discussed in "Pro Forma Financial
Statements," "Selected Historical Consolidated Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other factors, each of the Company and each Guarantor believes
that, after giving effect to the indebtedness incurred in connection with the
Transactions, it will not be insolvent, will not have unreasonably small capital
for the business in which it is engaged and will not incur debts beyond its
ability to pay such debts as they mature. There can be no assurance, however, as
to what standard a court would apply in making such determinations or that a
court would agree with the Company's or such Guarantor's conclusions.
RESTRICTIVE DEBT COVENANTS
The Indenture contains covenants that will restrict, among other things,
the ability of the Company to incur additional indebtedness, pay dividends or
make certain other Restricted Payments (as defined therein), enter into
transactions with affiliates, make certain asset dispositions, merge or
consolidate with, or transfer substantially all of its assets to another Person,
encumber assets under certain circumstances, restrict dividends and other
payments from Restricted Subsidiaries, issue Capital Stock (as defined) of
Restricted Subsidiaries, engage in certain business activities, or engage in
certain change of control transactions. In addition, the Senior Credit Facility
contains other and more restrictive covenants and will prohibit the Company from
prepaying certain of its indebtedness, including the Notes. Under the Senior
Credit Facility, the Company will also be required to maintain specified
financial covenants, including maximum capital expenditures, a maximum ratio of
total debt to EBITDA and senior debt to EBITDA, a minimum interest coverage
ratio and a minimum fixed charge coverage ratio (each as defined in the Senior
Credit Facility). The failure by the Company to maintain such financial
covenants or to comply with the restrictions contained in
14
<PAGE> 20
the Senior Credit Facility or the Indenture could result in a default
thereunder, which in turn could cause such indebtedness (and by reason of
cross-default provisions, other indebtedness) to become immediately due and
payable. The Company's ability to comply with such covenants can be affected by
many events beyond its control and no assurance can be given that the Company's
future operating results will be sufficient to enable compliance with such
covenants, or in the event of a default, to remedy such default. See
"Description of Indebtedness -- Senior Credit Facility" and "Description of the
Notes -- Certain Covenants."
INTEGRATION OF OPERATIONS
While Savannah Foods has continued to operate as a wholly owned subsidiary
of the Company after the consummation of the Merger, the success of the Merger
nevertheless will depend in part on the ability of management of the Company to
consolidate the operations of Savannah Foods and Imperial Holly and to integrate
departments, systems and procedures. The integration of the operations of
Savannah Foods and Imperial Holly may require substantial attention of
management. The Company anticipates that it will begin to realize cost savings
in its current fiscal year, with the full impact, which the Company estimates
could approximate $40 million annually, being achieved in the fiscal year ended
September 30, 1999; however, no assurance can be given that such cost savings
will be realized in such amount. Any inability of the Company to integrate the
operations of the two companies in a timely and efficient manner would adversely
affect the Company's ability to realize its planned synergies and cost savings.
MARKET RISK AND GOVERNMENT REGULATION
The Company's results of operations are substantially affected by market
factors, principally domestic prices for refined sugar and raw cane sugar and
the quality and quantity of sugar beets available to the Company. These market
factors are influenced by a variety of external forces that the Company is
unable to predict or control, including the number of domestic acres contracted
to grow sugar beets, prices of competing crops, weather conditions and United
States farm and trade policy. Certain segments of the beet sugar industry in the
recent past have expanded sugar beet acreage at rates exceeding the rate of
growth in the demand for refined sugar, which along with large crop yields, put
downward pressure on refined sugar prices. Although smaller sugar beet crops in
the fall of 1995 and 1996 caused an increase in refined sugar prices, a larger
crop in the fall of 1997 has recently caused a decrease in refined sugar prices.
The domestic refined sugar industry is also subject to substantial influence by
legislative and regulatory actions.
Current federal legislation limits the importation of raw cane sugar,
affecting the supply and the cost of raw cane sugar available to the Company's
cane sugar refineries. In the cane sugar industry, refiners purchase raw sugar
at prices which are regulated by United States government policy to support
sugarcane farmers, and which do not fluctuate in tandem with refined sugar
selling prices. Consequently, when competitive pressures reduce refined sugar
prices, the margins of cane sugar refiners are affected more adversely than
those of beet sugar producers. See "-- Industry Competition" and
"Business -- Sugar Legislation and Other Market Factors."
A significant portion of the Company's industrial sales are made under
fixed price, forward sales contracts, most of which commence each year on
October 1 and extend for up to one year. As a result, changes in the Company's
realized sales prices tend to lag market price changes. To mitigate its exposure
to future price changes, the Company enters into forward purchase contracts for
raw cane sugar and utilizes futures contracts and other pricing techniques.
Sugar beets are purchased under participatory contracts which provide for a
percentage sharing of the net selling price realized on refined beet sugar sales
between the Company and the grower. Use of participatory contracts also reduces
the Company's exposure to refined sugar price risk.
SUGAR BEET CROP AND STORAGE RISKS
The Company's beet sugar operations are dependent upon the quantity,
quality and proximity of sugar beets available to its factories. Sugar beet
acreage varies depending on factors such as prices anticipated by growers for
sugar beets versus alternative crops, prior crop quality, productivity,
availability of irrigation and
15
<PAGE> 21
weather conditions. During the crop years ended September 1995 through September
1997, the Company's sugar beet acreage under contract declined. Although such
acreage under contract has recently increased, there can be no assurance that
the Company's sugar beet acreage under contract will not again decline in the
future. In addition, the quantity of refined sugar subsequently produced from
the sugar beet crop may be materially affected by the acreage harvested,
disease, insects and unfavorable weather conditions during the growing,
harvesting, processing and storage seasons.
Once harvested, sugar beets are purchased by the Company and, in some
locations, stored in piles until processed. Under some of the Company's
contracts, the beet growers continue to share the risk of deterioration of the
stored sugar beets with the Company. However, more frequently, the Company
contractually accepts most of the risk with respect to stored sugar beets.
Management believes that the geographic diversity of its growing areas reduces
the risk that adverse conditions will occur company-wide; however, there can be
no assurance that the Company's results of operations will not be adversely
affected in future years by such risks.
RAW SUGAR SUPPLY
The United States Sugar Corporation ("U.S. Sugar"), a supplier of raw sugar
which supplies approximately 14% of the Company's supply of raw cane sugar, has
notified Savannah Foods that it intends to terminate its supply contract with
Savannah Foods effective October 31, 2001. In addition, in March 1997, U.S.
Sugar began construction of a refinery in Florida with an annual capacity of
approximately 10 million cwt. The Company expects that adequate supplies of raw
cane sugar from other sources will be available upon the expiration of such
contract. No assurance can be given, however, that such supplies will be
available. The amount of raw sugar available from offshore supplies to all
United States cane sugar refiners including the Company is directly dependent
upon quotas set by the United States Department of Agriculture (the "USDA"). See
"-- Market Risk and Government Regulation."
DEMAND FOR REFINED SUGAR
Although demand for refined sugar has increased each year since 1986, and
the average rate of growth over the past five years has been 1.5%, the Company
is not able to predict future rates of growth. Demand for refined sugar in the
future could be adversely affected by numerous factors, including the impact of
changes in the availability, development or potential use of various types of
sweeteners or future changes in consumer sweetener preferences or in population
size.
The decline in demand for refined sugar products attributable to the
replacement of refined sugar by high fructose corn syrup ("HFCS") and
non-nutritive sweeteners in the beverage market stabilized a decade ago. The
Company generally does not consider HFCS a significant competitive threat, as
refined sugar and HFCS support different markets. HFCS is a liquid sweetener and
generally does not compete in the dry sugar market. However a number of other
consumer food products use both refined sugar and HFCS as production
ingredients. In certain applications, refined sugar also competes with
non-nutritive and low calorie sweeteners, principally aspartame and, to a lesser
extent, saccharin and acesulfam-k. The level of per capita sucrose consumption
in the United States has increased in recent years; the Company believes that
future increases or decreases in sucrose consumption will be dependent upon
technological improvements, changes in population, geographic shifts in
population and changes in consumer sweetener preferences.
INDUSTRY COMPETITION
The Company competes with other cane sugar refiners and beet sugar
processors and, in certain product applications, with producers of other
nutritive and non-nutritive sweeteners. Selling price and the ability to supply
the buyer's quality and quantity requirements in a timely fashion are important
competitive factors. Certain competing beet sugar processors have expanded their
production capacity in the recent past. The additional sugar marketed as a
result of this expansion has served to reduce sugar market prices at times
during this period.
16
<PAGE> 22
ENVIRONMENTAL MATTERS
The Company's operations are governed by various federal, state and local
environmental regulations. These regulations impose effluent and emission
limitations and requirements regarding management of water resources, air
resources, toxic substances, solid waste and emergency planning. Additional
testing requirements and more stringent permit limitations have resulted in
increased environmental costs, and the Company expects that the cost of
compliance will continue to increase. The Company's management does not believe
that such costs of compliance will have a material adverse impact on the
Company's capital resources or its operating results or financial condition.
POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER
In the event of a Change of Control (as defined), if the Company does not
exercise its right to purchase the Notes, each Holder will have the right to
require the Company to repurchase all or any portion of its Notes then
outstanding at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of purchase. See "Description of the Notes -- Repurchase at the Option of
Holders -- Change of Control."
The events that constitute a Change of Control under the Indenture may also
be events of default under the Senior Credit Facility or other senior
indebtedness of the Company and the Restricted Subsidiaries. Such events may
prohibit the Company from repurchasing the Notes, permit the lenders under such
debt instruments to accelerate the debt and, if the debt is not paid, to enforce
security interests on, or commence litigation that could ultimately result in a
sale of, substantially all the assets of the Company. If the Company is unable
to repay all of such indebtedness or is unable to obtain any necessary consents,
then the Company will be unable to offer to repurchase the Notes and such
failure will constitute an Event of Default under the Indenture. There can be no
assurance that the Company will have sufficient funds available at the time of
any Change of Control to make any debt payment (including repurchases of the
Notes) as described above. See "Description of Indebtedness."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Old Notes are currently owned by a relatively small number of
beneficial owners. The Old Notes have not been registered under the Securities
Act or any state securities laws and, unless so registered and to the extent not
exchanged for the Exchange Notes, may not be offered or sold except pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. Any Old
Notes tendered and exchanged in the Exchange Offer will reduce the aggregate
principal amount of Old Notes outstanding. Following the consummation of the
Exchange Offer, holders who did not tender their Old Notes generally will not
have any further registration rights under the Registration Rights Agreement,
and such Old Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Old Notes could be
adversely affected. The Old Notes are currently eligible for sale pursuant to
Rule 144A through The Portal Market of the National Association of Securities
Dealers, Inc. ("Portal"). Because the Company anticipates that most holders will
elect to exchange their Old Notes for Exchange Notes due to the restrictions on
the resale of Old Notes under the Securities Act, the Company anticipates that
the liquidity of the market for any Old Notes remaining after the consummation
of the Exchange Offer may be substantially limited.
The Exchange Notes will constitute a new issue of securities for which
there is currently no active trading market. If the Exchange Notes are traded
after their initial issuance, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for similar
securities and other factors including general economic conditions and the
current financial condition, results of operations and business prospects of the
Company. Although the Exchange Notes will generally be permitted to be resold or
otherwise transferred by non-affiliates of the Company without compliance with
the registration and prospectus delivery requirements of the Securities Act, the
Company does not intend to apply for a listing or quotation of the Exchange
Notes on any securities exchange or stock market. One of the Initial Purchasers
have informed the Company that it currently intends to make a market in the
Exchange Notes. However, such
17
<PAGE> 23
Initial Purchaser is not obligated to do so, and any such market-making may be
discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed under the Exchange Act.
Accordingly, there can be no assurance as to the development, liquidity or
maintenance of any market for the Exchange Notes (or in the case of
non-tendering holders of Old Notes, the trading market for the Old Notes
following the Exchange Offer). If no trading market develops or is maintained
for the Exchange Notes, holders may experience difficulty in reselling the
Exchange Notes or may be unable to sell them.
The liquidity of, and trading market for, the Old Notes or the Exchange
Notes also may be adversely affected by general declines in the market for
similar securities. Such a decline may adversely affect such liquidity and
trading markets independent of the financial performance of, and prospects for,
the Company.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. In addition, upon the
consummation of the Exchange Offer holders of Old Notes which remain outstanding
will not be entitled to any rights to have such Old Notes registered under the
Securities Act or to any similar rights under the Registration Rights Agreement,
subject to certain exceptions. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, or
tendered but unaccepted, Old Notes could be adversely affected.
18
<PAGE> 24
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on December 22, 1997, to the Initial
Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold all of the Old Notes to Qualified Institutional Buyers (as
defined in Rule 144A), each of whom agreed to comply with certain transfer
restrictions and other conditions. As a condition to the purchase of the Old
Notes by the Initial Purchasers, the Company entered into the Registration
Rights Agreement with the Initial Purchasers, which requires, among other
things, that promptly following the issuance and sale of the Old Notes, the
Company file with the SEC the Registration Statement with respect to the
Exchange Notes, use its best efforts to cause the Registration Statement to
become effective under the Securities Act and, upon the effectiveness of the
Registration Statement, offer to the holders of the Old Notes the opportunity to
exchange their Old Notes for a like principal amount of Exchange Notes, which
will be issued without a restrictive legend and may be reoffered and resold by
the holder without restrictions or limitations under the Securities Act subject
to certain exceptions described below. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The term "holder" with respect to the Exchange Offer
means any person in whose name Old Notes are registered on the Company's books
or any other person who has obtained a properly completed bond power from the
registered holder or any person whose Old Notes are held of record by the
Depositary who desires to deliver such Old Notes by book-entry transfer of the
Depositary.
Based on existing interpretations of the Securities Act by the staff of the
SEC set forth in several no-action letters to third parties, and subject to the
immediately following sentence, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof (other than (i) a
broker-dealer who purchased such Old Notes directly from the Company for resale
pursuant to Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an "affiliate" (within the meaning of Rule 405 of the
Securities Act) of the Company), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the holder
is acquiring the Exchange Notes in its ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. However, any purchaser
of Old Notes who is an affiliate of the Company or who intends to participate in
the Exchange Offer for the purpose of distributing the Exchange Notes, or any
broker-dealer who purchased the Old Notes from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act, (i) will
not be able to rely on the interpretations by the staff of the SEC set forth in
such no-action letters, (ii) will not be able to tender its Old Notes in the
Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Old Notes unless such sale or transfer is made pursuant to an
exemption from such requirements. Accordingly, any holder who tenders in the
Exchange Offer with the intention to participate, or for the purpose of
participating, in a distribution of the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. See "Plan of Distribution."
As a result of the filing and effectiveness of the Registration Statement
of which this Prospectus is a part, the Company will not be required to pay an
increased interest rate on the Old Notes. Following the consummation of the
Exchange Offer, holders of Old Notes not tendered will not have any further
registration rights except in certain limited circumstances requiring the filing
of a Shelf Registration Statement (as defined), and the Old Notes will continue
to be subject to certain restrictions on transfer. See "Description of the
Notes -- Registration Rights; Liquidated Damages." Accordingly, the liquidity of
the market for the Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept all Old Notes properly
tendered and not withdrawn prior to 5:00 p.m. New York City
19
<PAGE> 25
time, on the Expiration Date. After authentication of the Exchange Notes by the
Trustee or an authenticating agent, the Company will issue and deliver $1,000
principal amount of Exchange Notes in exchange for each $1,000 principal amount
of outstanding Old Notes accepted in the Exchange Offer. Holders may tender some
or all of their Old Notes pursuant to the Exchange Offer in denominations of
$1,000 and integral multiples thereof.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to represent that (i) it is not an
affiliate of the Company, (ii) any Exchange Notes to be received by it were
acquired in the ordinary course of its business and (iii) it has no arrangement
or understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
The form and terms of the Exchange Notes are identical in all material
respects to the form and terms of the Old Notes, except that (i) the offering of
the Exchange Notes has been registered under the Securities Act, (ii) the
Exchange Notes will not be subject to transfer restrictions and (iii) the
holders of the Exchange Notes will not be entitled to registration or other
rights under the Registration Rights Agreement including the provision for
payment of Liquidated Damages upon failure by the Company to consummate the
Exchange Offer or the occurrence of certain other events. The Exchange Notes
will evidence the same debt as the Old Notes. The Exchange Notes will be issued
under and entitled to the benefits of the Indenture.
As of the date of this Prospectus, $250,000,000 aggregate principal amount
of the Old Notes is outstanding. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes to be issued and transferable in
book-entry form through the facilities of the Depositary, acting as depositary.
The Exchange Notes will also be issuable and transferable in book-entry form
through the Depositary.
This Prospectus, together with the accompanying Letter of Transmittal, is
initially being sent to all registered holders of the Old Notes as of the close
of business on , 1998. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act, and
the rules and regulations of the SEC thereunder, including Rule 14e-1, to the
extent applicable. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered, and holders of the Old
Notes do not have any appraisal or dissenters' rights under the Texas Business
Corporation Act or under the Indenture in connection with the Exchange Offer.
The Company shall be deemed to have accepted validly tendered Old Notes when, as
and if the Company has given oral or written notice thereof to the Exchange
Agent. See "-- Exchange Agent." The Exchange Agent will act as agent for the
tendering holders for the purpose of receiving Exchange Notes from the Company
and delivering Exchange Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, at the
Company's cost, to the tendering holder thereof as promptly as practicable after
the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Solicitation of Tenders; Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
MOREOVER, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF
OLD NOTES MUST MAKE THEIR OWN DECISION
20
<PAGE> 26
WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE
AMOUNT OF OLD NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF
TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN
FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date to which the Exchange Offer is extended. The Company may extend the
Exchange Offer at any time and from time to time by giving oral or written
notice to the Exchange Agent and by timely public announcement.
The Company expressly reserves the right, in its sole discretion (i) to
delay acceptance of any Old Notes, to extend the Exchange Offer or to terminate
the Exchange Offer and to refuse to accept Old Notes not previously accepted, if
any of the conditions set forth herein under "-- Conditions of the Exchange
Offer" shall have occurred and shall not have been waived by the Company (if
permitted to be waived by the Company), by giving oral or written notice of such
delay, extension or termination to the Exchange Agent and (ii) to amend the
terms of the Exchange Offer in any manner. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof by the Company to the registered holders of
the Old Notes. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of such
amendment and the Company will extend the Exchange Offer to the extent required
by law.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advise or
otherwise communicate any such public announcement, other than by making a
timely release thereof to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate of 9 3/4% per annum,
payable semi-annually on June 15 and December 15 of each year, commencing June
15, 1998. Holders of Exchange Notes of record on June 1, 1998, will receive on
June 15, 1998, an interest payment in an amount equal to (i) the accrued
interest on such Exchange Notes from the date of issuance thereof to June 15,
1998, plus (ii) the accrued interest on the previously held Old Notes from the
date of issuance of such Old Notes (December 22, 1997) to the date of exchange
thereof. Interest will not be paid on Old Notes that are accepted for exchange.
The Notes mature on December 15, 2007.
PROCEDURES FOR TENDERING
Each holder of Old Notes wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such facsimile, together with
the Old Notes to be exchanged and any other required documentation, to The Bank
of New York, as Exchange Agent, at the address set forth herein and in the
Letter of Transmittal or effect a tender of Old Notes pursuant to the procedures
for book-entry transfer as provided for herein and therein. By executing the
Letter of Transmittal, each holder will represent to the Company, that, among
other things, the Exchange Notes acquired pursuant to the Exchange Offer are
being acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has any arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate,"as defined in
Rule 405 under the Securities Act, of the Company.
21
<PAGE> 27
Any financial institution that is a participant in the Depositary's
Book-entry Transfer Facility system may make book-entry delivery of the Old
Notes by causing the Depositary to transfer such Old Notes into the Exchange
Agent's account in accordance with the Depositary's procedure for such transfer.
Although delivery of Old Notes may be effected through book-entry transfer into
the Exchange Agent's account at the Depositary, the Letter of Transmittal (or
facsimile thereof), with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at its address set forth herein under "-- Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF DOCUMENTS
TO THE DEPOSITARY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE EXCHANGE AGENT. See "-- Book Entry Transfer."
Only a holder may tender its Old Notes in the Exchange Offer. To tender in
the Exchange Offer, a holder must complete, sign and date the Letter of
Transmittal or a facsimile thereof, have the signatures thereof guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver such Letter
of Transmittal or such facsimile, together with the Old Notes (unless such
tender is being effected pursuant to the procedure for book-entry transfer) and
any other required documents, to the Exchange Agent for receipt, prior to 5:00
p.m., New York City time, on the Expiration Date.
The Tender by a holder will constitute an agreement between such holder,
the Company and the Exchange Agent in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal. If less than
all of the Old Notes are tendered, a tendering holder should fill in the amount
of Old Notes being tendered in the appropriate box on the Letter of Transmittal.
The entire amount of Old Notes delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
THE LETTER OF TRANSMITTAL WILL INCLUDE REPRESENTATIONS TO THE COMPANY THAT,
AMONG OTHER THINGS, (1) THE EXCHANGE NOTES ACQUIRED PURSUANT TO THE EXCHANGE
OFFER ARE BEING ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE PERSON
RECEIVING SUCH EXCHANGE NOTES (WHETHER OR NOT SUCH PERSON IS THE HOLDER), (2)
NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON IS ENGAGED IN, INTENDS TO ENGAGE IN
OR HAS ANY ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN THE
DISTRIBUTION OF SUCH EXCHANGE NOTES, (3) NEITHER THE HOLDER NOR ANY SUCH OTHER
PERSON IS AN "AFFILIATE" (AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT), OF
THE COMPANY AND (4) IF THE TENDERING HOLDER IS A BROKER OR DEALER (AS DEFINED IN
THE EXCHANGE ACT) (A) IT ACQUIRED THE OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT
OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND (B) IT HAS NOT
ENTERED INTO ANY ARRANGEMENT OR UNDERSTANDING WITH THE COMPANY OR ANY
"AFFILIATE" THEREOF TO DISTRIBUTE THE EXCHANGE NOTES TO BE RECEIVED IN THE
EXCHANGE OFFER. IN THE CASE OF A BROKER-DEALER THAT RECEIVES EXCHANGE NOTES FOR
ITS OWN ACCOUNT IN EXCHANGE FOR OLD NOTES WHICH WERE ACQUIRED BY IT AS A RESULT
OF MARKET-MAKING OR OTHER TRADING ACTIVITIES, THE LETTER OF TRANSMITTAL WILL
ALSO INCLUDE AN ACKNOWLEDGMENT THAT THE BROKER-DEALER WILL DELIVER A COPY OF
THIS PROSPECTUS IN CONNECTION WITH THE RESALE BY IT OF EXCHANGE NOTES RECEIVED
PURSUANT TO THE EXCHANGE OFFER; HOWEVER, BY SO ACKNOWLEDGING AND BY DELIVERING A
PROSPECTUS, SUCH HOLDER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER"
WITHIN THE MEANING OF THE SECURITIES ACT. SEE "PLAN OF DISTRIBUTION."
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
ALSO REQUEST THAT THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES EFFECT SUCH TENDER FOR HOLDERS, IN EACH CASE AS SET FORTH
HEREIN AND IN THE LETTER OF TRANSMITTAL.
Any beneficial owner whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering
22
<PAGE> 28
his Old Notes, either make appropriate arrangements to register ownership of the
Old Notes in such owner's name or obtain a properly completed bond power from
the registered holder. The transfer of record ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution"), unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered holder who has
not completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" of the Letter of Transmittal or (ii) for the account of
an Eligible Institution. If the Letter of Transmittal is signed by a person
other than the registered holder listed therein, such Old Notes must be endorsed
or accompanied by appropriate bond powers which authorize such person to tender
the Old Notes on behalf of the registered holder, in either case signed as the
name of the registered holder or holders appears on the Old Notes. If the Letter
of Transmittal or any Old Notes or bond powers are signed or endorsed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
person should so indicate when signing, and unless waived by the Company.
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding, The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive irregularities or conditions of tender as
to particular Old Notes. The Company's interpretation of the terms, and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of Old Notes, nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that the Company determines are not properly tendered or
the tender of which is otherwise rejected by the Company, and as to which the
defects or irregularities have not been cured or waived by the Company, will be
returned by the Exchange Agent to the tendering holder unless otherwise provided
in the Letter of Transmittal, as soon as practicable following the Expiration
Date.
In addition, the Company reserves the right in its sole discretion (i) to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date, or, as set forth under "-- Conditions of the Exchange
Offer," terminate the Exchange Offer and (ii) to the extent permitted by
applicable law, to purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
may differ from the terms of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at the DTC (the "Book-Entry Transfer Facility") for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing such
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account with respect to the Old Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. ALTHOUGH DELIVERY OF OLD NOTES
MAY BE EFFECTED THROUGH BOOK-ENTRY TRANSFER INTO THE EXCHANGE AGENT'S ACCOUNT AT
THE BOOK-ENTRY TRANSFER FACILITY, AN APPROPRIATE LETTER OF TRANSMITTAL PROPERLY
COMPLETED AND DULY EXECUTED WITH ANY REQUIRED SIGNATURE GUARANTEE AND ALL OTHER
23
<PAGE> 29
REQUIRED DOCUMENTS MUST IN EACH CASE BE TRANSMITTED TO AND RECEIVED OR CONFIRMED
BY THE EXCHANGE AGENT AT ITS ADDRESS SET FORTH BELOW ON OR PRIOR TO THE
EXPIRATION DATE, OR, IF THE GUARANTEED DELIVERY PROCEDURES DESCRIBED BELOW ARE
COMPLIED WITH, WITHIN THE TIME PERIOD PROVIDED UNDER SUCH PROCEDURES. DELIVERY
OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer on
a timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmittal, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of such holder's Old Notes and the principal amount of such Old
Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within three New York Stock Exchange ("NYSE") trading
days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing the Old Notes to be
tendered in proper form for transfer (or confirmation of a book-entry
transfer into the Exchange Agent's account at the Depositary of Old Notes
delivered electronically) and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate (s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at the Depositary of
Old Notes delivered electronically) and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three NYSE
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any
such notice of withdrawal must (i) specify the name of the person having
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Old Notes or, in the case of Old Notes transferred by book-entry
transfer, the name and number of the account at the Depositary to be credited),
(iii) be signed by the Depositor in the same manner as the original signature on
the Letter of Transmittal, by which such Old Notes were tendered (including any
required signature guarantee) or be accompanied by documents of transfer
sufficient to permit the Trustee with respect to the Old Notes to register the
transfer of such Old Notes into the name of the Depositor withdrawing the tender
and (iv specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer, and no Exchange Notes will be
issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes that have been tendered but are not accepted for
exchange will be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer.
24
<PAGE> 30
Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or to exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes if, in the Company's judgment, any of the
following conditions has occurred or exists or has not been satisfied: (i) that
the Exchange Offer, or the making of any exchange by a holder, violates
applicable law or any applicable interpretation of the staff of the SEC, (ii)
that any action or proceeding shall have been instituted or threatened in any
court or by or before any governmental agency or body with respect to the
Exchange Offer, (iii) that there has been adopted or enacted any law, statute,
rule or regulation that can reasonably be expected to impair the ability of the
Company to proceed with the Exchange Offer, (iv) that there has been declared by
United States federal or Texas or New York state authorities a banking
moratorium; or (v) that trading on the American Stock Exchange or the New York
Stock Exchange or generally in the United States over-the-counter market has
been suspended by order of the SEC or any other governmental agency, in each of
clauses (i) through (iv) which, in the Company's judgment, would reasonably be
expected to impair the ability of the Company to proceed with the Exchange
Offer.
If the Company determines that it may terminate the Exchange Offer for any
of the reasons set forth above, the Company may (i) refuse to accept any Old
Notes and return any Old Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Old Notes tendered prior to the
Expiration Date of the Exchange Offer, subject to the rights of such holders of
tendered Old Notes to withdraw their tendered Old Notes or (iii) waive such
termination event with respect to the Exchange Offer and accept all properly
tendered Old Notes that have not been withdrawn. If such waiver constitutes a
material change in the Exchange Offer, the Company will disclose such change by
means of a supplement to this Prospectus that will be distributed to each
registered holder, and the Company will extend the Exchange Offer for a period
of five to ten business days, depending upon the significance of the waiver and
the manner of disclosure to the registered holders, if the Exchange Offer would
otherwise expire during such period.
EXCHANGE AGENT
The Bank of New York, the Trustee under the Indenture, has been appointed
as Exchange Agent for the Exchange Offer. In such capacity, the Exchange Agent
has no fiduciary duties and will be acting solely on the basis of directions of
the Company. Requests for assistance and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent addressed as follows:
The Bank of New York, Exchange Agent
<TABLE>
<C> <C> <C>
By Mail: Facsimile Transmission By Hand or Overnight
(for Eligible Institutions Courier:
The Bank of New York Only)
Tender and Exchange (212) 815-6213 The Bank of New York
Department Tender and Exchange
P.O. Box 11248 For Information Telephone: Department
Church Street Station 101 Barclay Street
New York, NY 10286-1248 (212) 507-9357 Receive & Deliver Window
New York, NY 10286
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
25
<PAGE> 31
SOLICITATION OF TENDERS; FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation pursuant to the Exchange Offer
is being made by mail. Additional solicitations may be made by officers and
regular employees of the Company and its affiliates in person, by telegraph,
telephone or telecopier.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company will, however,
pay the Exchange Agent reasonable and customary fees for its services, reimburse
the Exchange Agent for its reasonable out-of-pocket costs and expenses in
connection therewith and indemnify the Exchange Agent for all losses and claims
incurred by it as a result of the Exchange Offer. The Company may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus,
the Letter of Transmittal and related documents to the beneficial owners of the
Old Notes and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees and printing costs, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed by the Company directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, as reflected in the Company's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company as a result of the consummation of the Exchange Offer.
The expenses of the Exchange Offer will be amortized by the Company over the
term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Old Notes
are urged to consult their financial and tax advisors in making their own
decisions as to what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of the Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to all
the rights, and subject to the limitations applicable thereto, under the
Indenture and the Registration Rights Agreement, except for any such rights
under the Registration Rights Agreement that by their terms terminate or cease
to have further effect as a result of the malting of this Exchange Offer. See
"Description of the Notes." All untendered Old Notes will continue to be subject
to the restrictions on transfer set forth in the Indenture. The Old Notes may
not be offered, resold, pledged or otherwise transferred, prior to the date that
is two years after the later of December 22, 1997 and the last date on which the
Company or any "affiliate" (within the meaning of Rule 144 of the Securities
Act) of the Company was the owner of such Old Note except (i) to the Company,
(ii) pursuant to a registration statement which has been declared effective
under the Securities Act, (iii) to Qualified Institutional Buyers in reliance
upon the exemption from the registration requirements of the Securities Act
provided by Rule 144A, (iv) in a transaction occurring outside the United States
to a foreign
26
<PAGE> 32
person, which transaction meets the requirements of Rule 904 under the
Securities Act, (i) in transactions complying with the provisions of Regulation
S under the Securities Act or (vi) in accordance with another exemption from the
registration requirements under the Securities Act (and based upon an opinion of
counsel if the Company so requests), and, in each case, in accordance with any
applicable securities laws of any State of the United States or any other
applicable jurisdiction. To the extent that Old Notes are tendered and accepted
in the Exchange Offer, the liquidity of the trading market for untendered Old
Notes could be adversely affected.
The Company may in the future seek to acquire untendered Old Notes in the
open market or through privately negotiated transactions, through subsequent
exchange offers or otherwise. The Company intends to make any such acquisitions
of Old Notes in accordance with the applicable requirements of the Exchange Act
and the rules and regulations of the SEC thereunder, including Rule 14e-1, to
the extent applicable. The Company has no present plan to acquire any Old Notes
that are not tendered in the Exchange Offer or to file a registration statement
to permit resales of any Old Notes that are not tendered in the Exchange Offer.
27
<PAGE> 33
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange Old
Notes in like principal amount. The form and terms of the Exchange Notes are
identical in all material respects to the form and terms of the Old Notes,
except that (i) the offering of the Exchange Notes has been registered under the
Securities Act, (i) the Exchange Notes will not be subject to transfer
restrictions and (iii) the holders of the Exchange Notes will not be entitled to
registration or other rights under the Registration Rights Agreement including
the payment of Liquidated Damages upon failure by the Company to consummate the
Exchange Offer or the occurrence of certain other events. The Old Notes
surrendered in exchange for Exchange Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the Exchange Notes will not result
in a change in the indebtedness of the Company.
CAPITALIZATION
The following table sets forth the consolidated unaudited capitalization of
the Company as of September 30, 1997 on a pro forma basis adjusted to give
effect to the Transactions and the Debt Financing. This table should be read in
conjunction with the Company's consolidated financial statements and notes
thereto, the pro forma financial statements and notes thereto, "Selected
Historical Consolidated Financial Information" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
or incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA AS OF
SEPTEMBER 30,
1997
-------------------------
(IN THOUSANDS OF DOLLARS)
<S> <C>
Cash and marketable securities.............................. $ 79,914
===========
Total debt, including current maturities:
Senior Credit Facility:
Term loans............................................. $255,000
Revolving loans (1).................................... 8,640
Notes offered hereby...................................... 250,000
Other debt (2)............................................ 41,030
-----------
Total debt........................................ 554,670
-----------
Total stockholders' equity (3).............................. 355,570
-----------
Total capitalization........................................ $910,240
===========
</TABLE>
- ---------------
(1) The maximum amount available for the revolving credit portion of the Senior
Credit Facility is $200 million.
(2) Includes $22.5 million in indebtedness outstanding under Savannah Foods'
industrial revenue bonds, $5.8 million in indebtedness outstanding under
Existing Notes not purchased in the Debt Tender Offer and $12.7 million in
other existing indebtedness of Savannah Foods and Imperial Holly.
(3) As adjusted to reflect the issuance of shares of Company Common Stock in the
Merger and the H. Kempner Trust Financing.
28
<PAGE> 34
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to Transactions using the purchase method of accounting for Imperial
Holly's acquisition of Savannah Foods after giving effect to the pro forma
reclassifications and adjustments described in the accompanying notes. These
unaudited pro forma combined condensed financial statements have been prepared
from, and should be read in conjunction with, the historical consolidated
financial statements and notes thereto of Imperial Holly and of Savannah Foods,
which are included in or incorporated by reference in this Prospectus.
The Unaudited Pro Forma Combined Condensed Balance Sheet gives effect to
the Transactions and the Debt Financing as if each had occurred on September 30,
1997. The Unaudited Pro Forma Combined Condensed Statements of Earnings for the
year ended March 31, 1997 and the six months ended September 30, 1997 and 1996
give effect to the Transactions and the Debt Financing as if each had occurred
at the beginning of the earliest period presented. Savannah Foods' results of
operations, which are reported on a fiscal year ending on the Sunday closest to
September 30, have been adjusted to a March 31 year end. The estimates of the
fair value of Savannah Foods' assets and liabilities are based on valuations
that are preliminary. Such valuations will be updated to the effective date of
the Merger and may change from the amounts shown herein; however, the Company
does not expect such changes to be material. The unaudited pro forma combined
condensed financial statements are intended for informational purposes and are
not necessarily indicative of the future financial position or future results of
the combined companies or of the financial position or the results of operations
that would have actually occurred had the Merger been in effect as of the date
or for the periods presented. The Unaudited Pro Forma Combined Condensed
Statements of Earnings do not reflect any benefits from cost savings or revenue
enhancements that are anticipated to result from the integration of operations
of Imperial Holly and Savannah Foods. Such cost savings and revenue enhancements
are discussed in Note 8 to the Unaudited Pro Forma Combined Condensed Statements
of Earnings.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
HISTORICAL
------------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................... $ 752,595 $1,170,729 $ -- $ 1,923,324
Cost of sales........................... 651,677 1,031,475 (944)(1) 1,682,208
Selling, general & administrative
expense............................... 57,722 56,255 -- 113,977
Depreciation & amortization............. 14,773 25,771 9,328(2) 47,156
(2,716)(3)
Impairment of long-lived assets......... -- 10,280 -- 10,280
Cost of workforce reduction............. -- ....... 723 -- 723
---------- ---------- -------- -----------
Operating income.............. 28,423 46,225 (5,668) 68,980
Interest expense........................ 12,430 9,572 34,914(5) 56,916
Other (income) expense.................. (1,695) 285 -- (1,410)
---------- ---------- -------- -----------
Income before income taxes.............. 17,688 36,368 (40,582) 13,474
Income tax provision.................... 6,170 12,948 (11,684)(6) 7,434
---------- ---------- -------- -----------
Income before extraordinary item........ $ 11,518 $ 23,420 $(28,898) $ 6,040
========== ========== ======== ===========
Average shares outstanding.............. 12,576,489
Shares sold to H. Kempner Trust......... 377,358(7)
Shares issued in the Merger............. 12,029,962(7)
-----------
Pro forma average shares outstanding.... 24,983,809
===========
Pro forma earnings per share............ $ 0.24
===========
</TABLE>
29
<PAGE> 35
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
----------- ----------- -------------- --------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................... $406,682 $612,229 $ -- $ 1,018,911
Cost of sales........................... 348,869 531,899 (308)(1) 880,460
Selling, general and administrative
expense............................... 30,668 30,711 -- 61,379
Depreciation & amortization............. 6,786 11,329 4,664(2) 22,883
104(3)
Merger related costs.................... 13,394 (13,394)(4) --
-------- -------- -------- -----------
Operating income........................ 20,359 24,896 8,934 54,189
Interest expense........................ 5,301 2,968 17,797(5) 26,066
Other (income) expense.................. (735) (294) -- (1,029)
-------- -------- -------- -----------
Income before income taxes.............. 15,793 22,222 (8,863) 29,152
Income tax provision.................... 5,842 8,118 (1,618)(6) 12,342
-------- -------- -------- -----------
Income before extraordinary item........ $ 9,951 $ 14,104 $ (7,245) $ 16,810
======== ======== ======== ===========
Average shares outstanding.............. 14,247,193
Shares sold to H. Kempner Trust......... 377,358(7)
Shares issued in the Merger............. 12,029,962(7)
===========
Pro forma average shares outstanding.... 26,654,513
===========
Pro forma earnings per share............ $ 0.63
===========
</TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
----------- ----------- -------------- --------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................... $393,955 $591,119 $ -- $ 985,074
Cost of sales........................... 341,157 525,872 (636)(1) 866,393
Selling, general and administrative
expense............................... 29,057 27,116 -- 56,173
Depreciation & amortization............. 7,293 13,665 4,664(2) 24,618
(1,004)(3)
Impairment of long-lived assets......... 10,280 -- 10,280
Cost of workforce reduction............. 723 -- 723
-------- -------- -------- -----------
Operating income........................ 16,448 13,463 (3,024) 26,887
Interest expense........................ 6,337 5,690 17,300(5) 29,327
Other (income) expense.................. (1,046) 400 -- (646)
-------- -------- -------- -----------
Income before income taxes.............. 11,157 7,373 (20,324) (1,794)
Income tax provision.................... 4,080 1,930 (5,854)(6) 156
-------- -------- -------- -----------
Income before extraordinary item........ $ 7,077 $ 5,443 $(14,470) $ (1,950)
======== ======== ======== ===========
Average shares outstanding.............. 11,009,476
Shares sold to H. Kempner Trust......... 377,358(7)
Shares issued in the Merger............. 12,029,962(7)
===========
Pro forma average shares outstanding.... 23,416,796
===========
Pro forma earnings per share............ $ (0.08)
===========
</TABLE>
30
<PAGE> 36
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1997 AND THE SIX MONTHS ENDED SEPTEMBER 30, 1997
AND 1996
(1) Represents the adjustment of pension and other employee benefit costs due to
elimination of the amortization of deferred gains and losses on a purchase
accounting basis.
(2) Represents the amortization of goodwill and brand related intangibles over
40 years and debt issuance costs related to the Debt Financing over the
terms of the respective loans.
(3) Represents the adjustment in depreciation due to the step-up of Savannah
Foods' property, plant and equipment to fair value. Pro forma depreciation
is calculated on the straight-line method over estimated useful lives of
eight to 37 years for real property improvements and five to ten years for
machinery and equipment.
(4) Represents elimination of the charge for costs related to the Merger
recognized in the Savannah Foods historical financial results.
(5) Represents additional interest under the Debt Financing. The weighted
average annual interest rate on the Debt Financing is assumed to be 8.53%,
8.58% and 8.51% for the year ended March 31, 1997 and the six months ended
September 30, 1997 and 1996, respectively. A 0.125% increase or decrease in
the assumed weighted average interest rate would change pro forma interest
expense for the year ended March 31, 1997 and the six months ended September
30, 1997 and 1996 by $650,000, $329,000 and $321,000, respectively.
(6) Represents the tax effect of the adjustments above, excluding amortization
of goodwill and brand related intangibles, based on the statutory rate in
effect for the periods shown.
(7) Represents the additional shares issued in the Merger and the H. Kempner
Trust Financing.
31
<PAGE> 37
(8) The Unaudited Pro Forma Combined Condensed Statements of Earnings do not
give any effect to the cost savings and revenue enhancements which the
Company expects will result from integrating the operations of the companies
after the Merger. Management expects to begin to realize such cost savings
and revenue enhancements in the fiscal year ending September 30, 1998. The
full annual impact of such cost savings and revenue enhancements is expected
to be achieved in the fiscal year ending September 30, 1999, and is
preliminarily estimated to include the following (in millions of dollars):
<TABLE>
<S> <C>
Reduction of administrative costs resulting from elimination
of duplicate functions.................................... $13.5
Reduction of freight and distribution costs resulting from
more efficient sourcing of customer orders................ 7.0
Reductions in costs resulting from refocused selling,
marketing and promotion activities........................ 7.5
Reduction of costs resulting from optimizing the operating
schedules of the combined production facilities........... 5.0
Reduction of costs of procuring operating and packaging
supplies of the combined production facilities............ 7.0
-----
Total....................................................... $40.0
=====
</TABLE>
Additionally, the Company believes, based upon preliminary analysis, that there
are potential opportunities to achieve improved operating results by expanding
the distribution of higher value added products to each of Imperial Holly and
Savannah Foods' respective markets, to expand sugar beet acreage supplying
Savannah Foods' sugar beet processing plants and to achieve reductions in
working capital by negotiating new arrangements with suppliers.
32
<PAGE> 38
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL
--------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
-------- -------- ----------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Cash...................................... $ 9,354 $ 14,677 $ -- $ 24,031
Marketable securities..................... 55,883 -- -- 55,883
Accounts receivable....................... 62,158 68,635 -- 130,793
Inventories............................... 127,375 90,908 9,949(1) 228,232
Manufacturing costs prior to production... 22,357 -- 16,747(2) 39,104
Prepaid expenses.......................... 5,448 6,175 -- 11,623
-------- -------- --------- ----------
Total current assets............ 282,575 180,395 26,696 489,666
Notes receivable & other investments...... 13,250 -- -- 13,250
Property, plant & equipment -- net........ 154,309 179,993 73,000(3) 407,302
Intangible assets......................... -- -- 302,954(4) 302,954
Investment in Savannah Foods.............. 3,123 -- (3,123)(11) --
Other assets.............................. 4,642 38,683 (3,636)(5) 39,689
-------- -------- --------- ----------
Total assets.................... $457,899 $399,071 $ 395,891 $1,252,861
======== ======== ========= ==========
Accounts payable.......................... $ 53,923 $ 55,756 $ -- $ 109,679
Short-term borrowings..................... 43,091 -- (43,091)(7) --
Current maturities of long-term debt...... 1,173 7,824 5,600(7) 14,597
Other current liabilities................. 54,525 23,644 -- 78,169
-------- -------- --------- ----------
Total current liabilities....... 152,712 87,224 (37,491) 202,445
Long-term debt............................ 81,304 26,100 432,669(7) 540,073
Deferred taxes and other credits.......... 30,924 69,058 33,086(6) 154,773
21,705(8)
Common stock.............................. 83,707 17,365 164,397(9) 271,485
23,381(10)
(17,365)(11)
Additional paid in capital................ -- 43,639 (43,639)(11) --
Retained earnings......................... 90,870 221,949 (221,949)(11) 89,084
(1,786)(7)
Treasury stock............................ -- (15,849) 15,849(11) --
Benefit Trust............................. -- (46,875) 46,875(11) (23,381)
(23,381)(10)
Other equity.............................. 18,382 (3,540) 3,540(11) 18,382
-------- -------- --------- ----------
Total stockholders' equity...... 192,959 216,689 (54,078) 355,570
-------- -------- --------- ----------
Total liabilities and equity.... $457,899 $399,071 $ 395,891 $1,252,861
======== ======== ========= ==========
</TABLE>
33
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
(1) Represents the adjustment of Savannah Foods' finished goods
inventories to net realizable value, less an allowance for a normal
profit margin, and of raw material inventories to replacement cost.
(2) Represents an adjustment to conform Savannah Foods' accounting policy
for certain manufacturing costs incurred between processing periods
which are necessary to prepare the factory for the next processing
campaign, to that of Imperial Holly's.
(3) Represents the adjustment to fair value of Savannah Foods' property,
plant and equipment as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Land.............................................. $10,000
Real property improvements........................ 39,000
Machinery and equipment........................... 24,000
-------
Total................................... $73,000
=======
</TABLE>
(4) Represents intangible assets including an estimate of the excess
purchase price over the book value of Savannah Foods' net assets
acquired ("goodwill"), brand related intangibles and debt acquisition
cost.
(5) Represents the adjustment of other assets to fair value.
(6) Represents the adjustment to fair value of pension and other employee
benefit plan liabilities.
(7) Represents the adjustment to reflect the borrowings under the Debt
Financing to finance the cash consideration paid in the Transactions
and pay related fees and expenses. (The cash consideration paid in the
Tender Offer, the amount required to purchase the Existing Notes in
the Debt Tender Offer and certain of such fees and expenses were
originally financed with borrowings under the Tender Credit Facility,
which amounts were repaid under the Debt Financing.)
(8) Represents the net deferred tax effect of various adjustments to the
Unaudited Pro Forma Combined Condensed Balance Sheet.
(9) Represents the issuance of Company Common Stock to Savannah Foods
stockholders in the Merger, and sale of Company Common Stock in the H.
Kempner Trust Financing, the proceeds of which were used to reduce the
borrowing requirements.
(10) Represents the effect of transactions with the Benefit Trust as a
result of the Tender Offer, the Merger and the use of the cash
consideration to repay the Benefit Trust Note and purchase additional
shares of Company Common Stock.
(11) Represents the elimination of Savannah Foods' historical equity and
Imperial Holly's costs of the Transactions capitalized at September
30, 1997.
34
<PAGE> 40
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth certain selected historical consolidated
financial information for Savannah Foods and Imperial Holly and are based upon
the respective historical financial statements of each company included in or
incorporated by reference in this Prospectus.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA FOR IMPERIAL HOLLY CORPORATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30, (1)
-------------------------------------------------------- --------------------
1993 1994 1995 1996 1997(1) 1996 1997(2)
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................... $647,825 $655,498 $586,925 $616,450 $752,595 $393,955 $406,682
Cost of sales....................... 563,063 585,707 520,996 550,782 651,677 341,157 348,869
Selling, general and administration
expense........................... 59,072 58,072 54,591 53,193 57,722 29,057 30,668
Depreciation & amortization......... 15,251 15,360 13,429 12,681 14,773 7,293 6,786
Restructuring charges............... 3,300 925 -- 2,225 -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)............. 7,139 (4,566) (2,091) (2,431) 28,423 16,448 20,359
Interest expense.................... 10,824 10,906 11,426 11,207 12,430 6,337 5,301
Other income........................ 3,411 4,195 4,868 8,562 1,695 1,046 735
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes
and extraordinary item............ (274) (11,277) (8,649) (5,076) 17,688 11,157 15,793
Provision (credit) for income
taxes............................. (397) (3,312) (3,284) (1,858) 6,170 4,080 5,842
Extraordinary item(3)............... (3,509) -- -- 604 -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................... $ (3,386) $ (7,965) $ (5,365) $ (2,614) $ 11,518 $ 7,077 $ 9,951
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA.............................. $ 22,390 $ 10,794 $ 11,338 $ 10,250 $ 43,196 $ 23,741 $ 27,145
Capital expenditures................ 12,111 8,423 7,850 8,890 12,322 5,345 15,214
Ratio of earnings to fixed
charges(4)........................ 1.0x -- -- -- 2.4x 2.8x 4.0x
Ratio of EBITDA to interest
expense........................... 2.1x 1.0x 1.0x .9x 3.5x 3.7x 5.1x
BALANCE SHEET DATA:
Cash and marketable securities...... $ 31,553 $ 28,889 $ 36,765 $ 39,303 $ 56,682 $ 48,869 $ 65,237
Working capital(5).................. 121,661 132,677 111,583 74,270 140,711 131,975 109,429
Total assets........................ 398,202 393,660 374,124 325,319 449,933 450,983 457,619
Long-term debt...................... 108,181 100,044 100,010 89,800 90,619 90,947 81,304
Stockholders' equity................ 122,462 114,737 109,977 111,043 176,956 169,993 192,959
</TABLE>
- ---------------
(1) The results of Spreckels, which was acquired in a purchase transaction, are
included in Imperial Holly's consolidated results commencing April 19, 1996.
(2) In October 1997, Imperial Holly changed its fiscal year end to September 30.
(3) In fiscal 1993, Imperial Holly paid a make-whole premium in connection with
the prepayment of a series of senior notes. In fiscal 1996, Imperial Holly
purchased and retired a portion of a series of senior notes at a price below
book value.
(4) Imperial Holly's earnings before income taxes, extraordinary item and fixed
charges for its fiscal years ended March 31, 1994, 1995 and 1996 were
insufficient to cover fixed charges by $11.3 million, $8.6 million and $5.1
million, respectively.
(5) Excludes cash, marketable securities, short-term debt and current maturities
of long-term debt.
35
<PAGE> 41
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA FOR SAVANNAH FOODS & INDUSTRIES,
INC.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------------------
JANUARY 3, OCTOBER 3, OCTOBER 2, OCTOBER 1, SEPTEMBER 29, SEPTEMBER 28,
1993 1993(1) 1994 1995 1996 1997
---------- ---------- ---------- ---------- ------------- -------------
(IN THOUSANDS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.......................... $1,138,114 $ 818,116 $1,074,367 $1,098,544 $1,146,332 $1,191,839
Cost of sales...................... 1,008,658 743,731 969,621 1,002,679 1,028,218 1,037,502
Selling, general and
administrative................... 56,608 43,184 53,392 55,866 54,667 59,850
Depreciation & amortization........ 23,705 19,362 28,972 28,314 27,994 23,435
Impairment of long-lived assets.... -- -- -- -- 10,280 --
Other costs(2)..................... -- -- 2,950 4,284 3,374 13,394
---------- ---------- ---------- ---------- ---------- ----------
Operating income................... 49,143 11,839 19,432 7,401 21,799 57,658
Interest expense................... 10,526 10,226 13,380 14,847 12,355 6,850
Other income (expense)............. 2,351 1,528 2,554 1,368 237 409
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before change in
accounting principle, income
taxes and extraordinary item..... 40,968 3,141 8,606 (6,078) 9,681 51,217
Provision (credit) for income
taxes............................ 13,628 1,155 2,863 (2,585) 2,738 19,136
Extraordinary item, net of
tax(3)........................... -- -- -- -- (971) (376)
Cumulative effect of change in
accounting principle(4).......... (18,170) 600 -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss).................. $ 9,170 $ 2,586 $ 5,743 $ (3,493) $ 5,972 $ 31,705
========== ========== ========== ========== ========== ==========
OTHER DATA:
EBITDA............................. $ 72,848 $ 31,201 $ 48,404 $ 35,715 $ 60,073 $ 81,093
Capital expenditures............... 45,301 35,354 22,218 16,303 7,916 15,664
Ratio of earnings to fixed
charges(5)....................... 4.9x 1.3x 1.6x -- 1.8x 8.5x
Ratio of EBITDA to interest
expense.......................... 6.9x 3.1x 3.6x 2.4x 4.9x 11.8x
BALANCE SHEET DATA:
Cash and marketable securities..... $ 7,979 $ 7,481 $ 28,436 $ 11,574 $ 15,300 $ 14,677
Working capital(6)................. 161,092 136,470 86,947 100,088 88,976 86,318
Total assets....................... 635,755 567,852 486,127 476,507 398,261 399,071
Long-term debt..................... 126,464 142,078 140,224 106,864 59,754 26,100
Stockholders' equity............... 210,620 194,714 188,174 169,649 173,727 216,689
</TABLE>
- ---------------
(1) During the fiscal period ended October 3, 1993, Savannah Foods changed its
year end from the Sunday closest to December 31 to the Sunday closest to
September 30. As a result, the fiscal period ended October 3, 1993
represents a 39-week period.
(2) Other costs include $13,394,000 of Merger related costs in fiscal 1997.
(3) Savannah Foods reported extraordinary items related to penalties incurred on
the prepayment of long-term debt during the fiscal years ended September 29,
1996 and September 28, 1997.
(4) Savannah Foods adopted Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions during
the fiscal year ended January 3, 1993, and adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, during the fiscal
period ended October 3, 1993.
(5) Savannah Foods' earnings before income taxes, extraordinary item and fixed
charges for its fiscal year ended October 1, 1995 were insufficient to cover
fixed charges by $6.1 million.
(6) Excludes cash, marketable securities, short-term debt and current maturities
of long-term debt.
36
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is the largest, most geographically diverse and most balanced
producer and marketer of refined sugar in the United States, refining raw cane
sugar at four refineries located in Texas, Georgia, Florida and Louisiana and
producing beet sugar at 12 beet factories located in California, Wyoming,
Montana, Texas and Michigan. The Company also offers one of the broadest product
lines in the industry and sells to a wide range of customers including (i)
retail grocers, (ii) foodservice companies, which include restaurants, schools
and other institutions, and (iii) industrial customers, which are principally
food manufacturers.
INDUSTRY ENVIRONMENT. The Company's results of operations are substantially
dependent on market factors, including domestic prices for refined sugar and raw
cane sugar. These market factors are influenced by a variety of external forces,
including the number of domestic acres contracted to grow sugar beets, prices of
competing crops, weather conditions and United States farm and trade policy,
that the Company is unable to predict. Certain segments of the beet sugar
industry in the recent past have expanded sugar beet acreage at rates exceeding
the rate of growth in the demand for refined sugar, which, along with large crop
yields, exerted downward pressure on refined sugar prices. Smaller sugar beet
crops in the fall of 1995 and 1996 caused an increase in refined sugar prices. A
larger crop in the fall of 1997 has caused a decrease in market prices. The
domestic sugar industry is subject to substantial influence by legislative and
regulatory actions. The current federal legislation limits the importation of
raw cane sugar, affecting the supply and cost of raw material available to the
Company's cane sugar operations. See "Risk Factors," "Business -- Sugar
Legislation and Other Market Factors" and "-- Competition."
Weather conditions during the growing, harvesting, processing and storage
seasons, the availability of acreage to contract for sugar beets, as well as the
effects of diseases and insects, may materially affect the quality and quantity
of sugar beets available for purchase by the Company as well as the unit costs
of raw materials and processing. See "Business -- Raw Material and Processing
Requirements."
Sales of refined sugar are moderately seasonal, normally increasing during
the summer months because of increased demand of various food manufacturers,
including fruit and vegetable packers; shipments of specialty products (brown
and powdered sugar) increase in the fourth calendar quarter due to holiday
baking needs. Although the refining of cane sugar is not seasonal, the
production of beet sugar is a seasonal activity. Each of the Company's beet
sugar factories operates during sugar-making campaigns, which generally total
120 days to 180 days in length each year, depending upon the supply of sugar
beets available to the factory. Because of the geographical diversity of its
manufacturing facilities, the Company is generally able to produce beet sugar
year-round. While the seasonal production of beet sugar requires the Company to
store significant refined sugar inventory at each factory, the geographical
diversity and staggered periods of production aid in distribution and enable the
Company's total investment in inventories to be reduced. Additionally, these
factors reduce the likelihood that adverse weather conditions will affect all
the Company's productive areas simultaneously.
COMBINED FUTURE OPERATIONS. As a result of the completion of the
Transactions, Imperial Holly's consolidated operating results will in the future
include Savannah Foods, resulting in substantial increases in sales and costs,
including the impact of interest on the higher level of indebtedness and
increases in depreciation and amortization.
HISTORICAL RESULTS OF OPERATIONS -- IMPERIAL HOLLY
SIX MONTHS ENDED SEPTEMBER 30, 1997 VERSUS 1996
Net Sales. Net sales increased $12.7 million or 3.2% in the six months
ended September 30, 1997 compared to the six months ended September 30, 1996,
primarily as a result of higher refined sugar prices. Price increases resulted
from smaller sugar beet crops in the fall of 1995 and 1996; a larger crop in the
fall of 1997 has caused a decrease in the market prices for refined sugar. A
significant portion of Imperial Holly's
37
<PAGE> 43
industrial sales are made under fixed price, forward sales contracts, most of
which commence October 1 and extend for up to one year. As a result, changes in
Imperial Holly's realized sales prices for industrial sales tend to lag market
price changes. Industrial sales contracts for the period beginning in October
1997 were written at lower prices than the prior contract year. To mitigate its
exposure to future price changes, Imperial Holly enters into forward purchase
contracts for raw cane sugar and utilizes a participating sugar beet purchase
contract described below. Sugar sales volumes increased modestly during the six
months, principally due to higher beet sugar sales.
Cost of Sales. Cost of sales increased $7.7 million or 2.3% which, coupled
with the increase in sales, resulted in the gross margin before depreciation
improving to 14.2% of sales from 13.4%. Unit sugar gross margins improved as
reductions in raw sugar costs and improved beet sugar operations more than
offset higher sugar beet costs resulting from higher selling prices and higher
cane sugar refining costs. Imperial Holly purchases sugar beets under
participatory contracts that provide for a percentage sharing with the grower of
the net selling price realized on refined beet sugar sales. Use of this type of
contract reduces Imperial Holly's exposure to inventory price risk. The increase
in sales prices during the six month period resulted in an increase in the cost
of sugar beets under the participatory purchase contracts, mitigating the
improvement in gross margin. As discussed in Note 1 to Imperial Holly's
Consolidated Financial Statements, Imperial Holly utilizes LIFO inventory method
for sugar inventories. During the six months ended September 30, 1997, Imperial
Holly liquidated beginning inventory layers at costs below current year levels,
reducing cost of sales approximately $0.7 million.
In recent years Imperial Holly has experienced reductions in the
availability of acreage planted in sugar beets supplying its Hereford, Texas,
Torrington, Wyoming and Northern California factories, resulting in reduced
throughput and corresponding increases in unit manufacturing costs. Sugar beet
acreage supplying each of these factories is expected to increase in fiscal
1998, although acreage is expected to remain below Imperial Holly's targeted
levels. Imperial Holly has processed raw cane sugar at some of these factories,
which increases throughput and lowers unit fixed manufacturing costs.
Selling, General and Administrative. Selling, general and administrative
expenses increased $1.6 million or 5.5% during the six month period as increases
in warehousing and advertising costs more than offset a reduction in general and
administrative costs, principally resulting from closure of Spreckels'
Pleasanton, California office.
Interest Expense. Interest expense declined $1.0 million during the six
month period as reduced long and short-term borrowings more than offset higher
short-term interest rates. In April 1997, Imperial Holly purchased and retired
$8.3 million of its senior notes due 1999. Strong operating cash flow allowed
for the reduction in average short-term borrowings by approximately $19.0
million during the period.
Other. Realized gains on marketable securities decreased $383,000; net
unrealized gains that have not been recognized in Imperial Holly's results of
operations increased $8.3 million to $28.3 million during the six months ended
September 30, 1997. Imperial Holly's effective income tax rate was 37% for the
six months ended September 30, 1997, which is higher than the statutory federal
rate primarily due to state income taxes.
YEAR ENDED MARCH 31, 1997 VERSUS 1996
Net Sales. Net sales increased $136.1 million or 22.1% in fiscal 1997 as a
result of almost equal contributions from higher sugar sales prices and volumes,
as well as higher beet pulp sales prices. Sugar sales prices increased as a
result of smaller than usual sugar beet crops in the fall of 1995 and 1996.
Increases in cane sugar sales volumes and the additional volumes attributable to
the Spreckels acquisition more than offset lower sales by Imperial Holly's beet
sugar operations resulting from lower refined sugar inventories in the first
half of the fiscal year. Beet pulp prices began increasing late in fiscal 1996
as a result of higher feed grain prices and returned to more normal levels in
the latter part of fiscal 1997.
Cost of Sales. Cost of sales increased $100.9 million or 18.3% and gross
margin before depreciation improved to 13.4% of sales in fiscal 1997 from 10.6%
in fiscal 1996. Unit sugar sales margins improved as reductions in cane sugar
unit manufacturing costs resulting from increased volumes and reductions in raw
cane
38
<PAGE> 44
sugar costs offset higher energy costs and higher beet sugar manufacturing costs
owing to reduced throughput at three of Imperial Holly's beet sugar factories.
Additionally, winter flooding disrupted rail service in Northern California
requiring the diversion of harvested beets in Oregon and Washington to Imperial
Holly's Sidney, Montana factory. The delays in processing these beets, as well
as the Sidney beets, affected beet quality and impacted processing, reducing
sugar recovery and increasing costs several million dollars. The increase in
sales prices for beet sugar resulted in an increase in the cost of sugar beets
under the participatory purchase contracts described above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $4.5 million resulting from increases in
volume related selling and distribution costs and incentive compensation as well
as increases in administrative costs associated with Spreckels' Pleasanton,
California office, which was closed in Imperial Holly's second fiscal quarter.
Interest Expense -- Net. Interest expense -- net, increased primarily due
to higher average short-term borrowings. Other income -- net includes losses on
asset dispositions of approximately $700,000 in 1997 and gains of $400,000 in
1996.
Other. Realized gains on marketable securities decreased $5.0 million in
fiscal 1997; net unrealized gains that have not been recognized in Imperial
Holly's results of operations increased $6.2 million and are detailed in Note 3
to Imperial Holly's Consolidated Financial Statements. The components of income
tax expense and its relationship to statutory rates are detailed in Note 7 to
Imperial Holly's Consolidated Financial Statements.
YEAR ENDED MARCH 31, 1996 VERSUS 1995
Net Sales. Net sales increased $29.5 million or 5.0% in fiscal 1996
resulting from increases in both sugar sales volumes and average sales prices.
Average sales prices of refined sugar increased modestly during fiscal 1996.
Spot prices began strengthening in the second half of the fiscal year as a
result of the smaller domestic sugar beet crop. By-product sales revenues were
virtually unchanged as lower volumes offset the impact of higher prices. Beet
pulp prices began rising significantly late in the fiscal year as a result of
higher feed grain prices.
Cost of Sales. Cost of sales increased $29.8 million or 5.7% as a result of
both higher sales volumes and increases in unit costs. Raw cane sugar costs
increased significantly during the fiscal year, particularly during the first
six months, due to a tight raw sugar market. Average beet sugar manufacturing
costs increased slightly as the reduced throughput from the smaller fall sugar
beet crop offset cost reductions achieved in the spring processing campaigns. As
discussed in Note 1 to Imperial Holly's Consolidated Financial Statements,
Imperial Holly liquidated beginning LIFO inventory layers at costs below current
year cost, and charged such beginning amounts to cost of sales.
Selling, General and Administrative. Selling, general and administrative
costs declined $1.4 million or 2.6% as increases in volume related selling and
distribution costs were more than offset by reductions in general and
administrative expenses as well as research and development costs. During the
third fiscal quarter, Imperial Holly commenced a cost reduction program in the
sales, administrative and manufacturing overhead areas and recorded a charge to
earnings of $475,000 for the cost of a work force reduction. Additionally,
Imperial Holly recorded a $1,750,000 charge in the fourth quarter related to the
closure of the Hamilton City, California factory.
Interest Expense. Interest expense for fiscal 1996 was lower than fiscal
1995 as lower balances of both short-term and long-term borrowings were
partially offset by higher short-term interest rates and a lower earnings credit
from the interest rate swap described in Note 6 to Imperial Holly's Consolidated
Financial Statements. The interest rate swap, which was entered into effectively
to convert a portion of Imperial Holly's fixed rate debt to a floating rate
basis and has provided positive cash flow for each period during its term,
expired in October 1996.
Other. Realized gains on marketable securities increased $3.7 million
during fiscal 1996; unrealized gains and losses, which have not been recognized
in Imperial Holly's results of operations, but are shown, net of tax, as a
component of shareholders' equity, are detailed in Note 3 to Imperial Holly's
Consolidated Financial
39
<PAGE> 45
Statements. The components of income tax expense and its relationship to
statutory rates are detailed in Note 7 to Imperial Holly's Consolidated
Financial Statements. The extraordinary item is discussed in Note 6 to Imperial
Holly's Consolidated Financial Statements.
HISTORICAL RESULTS OF OPERATIONS -- SAVANNAH FOODS
YEAR ENDED SEPTEMBER 28, 1997 VERSUS SEPTEMBER 29, 1996
Savannah Foods' net income for fiscal 1997 was $31,705,000, on sales of
$1,191,839,000, compared to net income of $5,972,000, on sales of $1,146,332,000
for fiscal 1996. Fiscal 1997 net income includes an after-tax extraordinary
charge of $376,000, for prepayment penalties incurred on Savannah Foods' senior
notes. Fiscal 1996 includes a similar after-tax extraordinary charge of
$971,000.
Income from operations for fiscal 1997 and fiscal 1996 includes four
transactions that affect comparability between the two years. In the fourth
quarter of fiscal 1997, Savannah Foods recorded $13,394,000 of costs related to
the Merger, and in fiscal 1996 Savannah Foods recorded three significant
transactions. First, in 1996, Savannah Foods sold its plane, resulting in a gain
of $2,289,000. Second, in 1996, Savannah Foods recognized a $3,800,000 loss on
the sale of the property, plant and equipment and certain other assets of
Raceland Sugars, Inc. ("Raceland"), its raw sugar mill subsidiary. Third,
Savannah Foods recorded a non-cash charge of $10,280,000 in 1996 for the
impairment of long-lived assets located at its Fremont, Ohio beet sugar
manufacturing facility.
Excluding the impairment of long-lived assets and other costs, income from
operations for fiscal 1997 was $71,052,000 or double the comparable amount in
fiscal 1996 of $35,453,000.
Income from operations for fiscal 1997 improved significantly from fiscal
1996 due to increased operating profits in the cane sugar division. Volumes and
margins for cane refiners were favorably impacted by the reduction of national
beet sugar production. At approximately 4,050,000 tons, domestic production from
the 1996 beet crop was up slightly from the 1995 beet crop, which was down about
600,000 tons, or 13%, from the 1994 beet crop's record production. Over the same
two years, domestic consumption of sugar increased by about 300,000 tons. With
less beet sugar on the market and with increased consumption, cane sugar volumes
expanded to meet the overall demand for refined sugar. Refined sugar selling
prices rose as a result of the tightened supply. Also, average raw sugar costs
were lower than in fiscal 1996. Reduced raw sugar costs and increased selling
prices resulted in higher operating profit margins for fiscal 1997 compared to
fiscal 1996.
Savannah Foods' beet sugar division was only modestly profitable in fiscal
1997, and profits were slightly lower than in fiscal 1996. Higher selling prices
in fiscal 1997 offset lower volumes resulting from a reduction in contracted
acres harvested.
Selling, general and administrative expense for fiscal 1997 was up
$5,183,000, or 9%, from fiscal 1996. This increase was primarily due to an
incentive compensation program that links employee compensation to Savannah
Foods' earnings and to an increase in advertising expense.
Depreciation and amortization expense for fiscal 1997 was down $4,559,000,
or 16%, from fiscal 1996, due to asset sales and write-downs in fiscal 1996 and
a reduction in depreciation related to the Savannah Foods' Colonial Sugars
Refinery, which was purchased in 1986.
Interest expense for fiscal 1997 was down $5,505,000, or 45%, from fiscal
1996. Average short-term borrowings were down about $33,000,000 for the year due
to higher net income and a lower investment in inventories. Average long-term
debt was down about $45,000,000 compared to last year.
YEAR ENDED SEPTEMBER 29, 1996 VERSUS OCTOBER 1, 1995
Savannah Foods' net income for fiscal 1996 was $5,972,000 on sales of
$1,146,332,000, compared to a net loss ($3,493,000) on sales of $1,098,544,000
for fiscal 1995. Fiscal 1996 net income includes an after-tax extraordinary
charge of $971,000 for the prepayment of long-term debt. Domestic sugar sales
volumes increased 5% over fiscal 1995, but overall sugar sales volume was flat
as export volume decreased significantly from fiscal 1995. Domestic sugar sales
prices increased 4% and average raw sugar costs decreased 2%.
40
<PAGE> 46
Fiscal 1996 income from operations includes three significant transactions
that affect the comparability between fiscal 1996 and fiscal 1995. First, in the
first quarter of 1996, Savannah Foods sold its plane resulting in a gain of
$2,289,000. Second, in the second quarter of fiscal 1996, Savannah Foods sold
the property, plant and equipment and certain other assets of Raceland for
$12,500,000 cash and recognized a loss on the sale of $3,800,000. After
liquidation of the inventories and other working capital accounts, Savannah
Foods received net proceeds of approximately $15,000,000 on the sale of
Raceland. Third, in accordance with Statement of Financial Accounting Standards
No. 121 -- Accounting for the Impairment of Long-lived Assets and for Assets to
be Disposed Of, Savannah Foods recorded a non-cash charge in the fourth quarter
of fiscal 1996 of $10,280,000 ($6,476,000 net of tax) for the impairment of
long-lived assets located at Savannah Foods' Fremont, Ohio beet sugar
manufacturing facility.
Fiscal 1996 income from operations before the impairment of long-lived
assets and other costs was $35,453,000, up $23,768,000 from fiscal 1995. The
large increase resulted from smaller domestic beet sugar production of 3.9
million tons in fiscal 1996 compared to 4.5 million tons in fiscal 1995. This
reduction improved refined sugar selling prices and, therefore, Savannah Foods'
profitability. Additionally, average raw sugar costs have decreased from fiscal
1995 which has also increased profitability.
Savannah Foods' cane sugar divisions experienced significant domestic
volume and margin increases over fiscal 1995 as the reduced domestic sugar beet
crop and increased sugar consumption provided more sales opportunities from cane
refiners.
Savannah Foods' beet sugar division benefited from the higher refined sales
prices, but reported much lower operating profit due to significantly reduced
sugar production. The sugar beet crop was smaller and of lesser quality due to
poor growing conditions and an insect infestation.
Selling, general and administrative expenses decreased $1,199,000 in fiscal
1996 from fiscal 1995 despite a $1,177,000 increase in advertising costs related
to Savannah Foods' new products.
Interest expense decreased compared to fiscal 1995 as a result of lower
long-term debt levels throughout the year resulting from the prepayment of
Savannah Foods' senior notes.
LIQUIDITY AND CAPITAL RESOURCES
Following completion of the Transactions and closing of the Senior Credit
Facility and the Offering, the Company had pro forma indebtedness as of
September 30, 1997 of approximately $554.7 million (including the Notes, but
excluding an additional $191.3 million available under the revolving credit
portion of the Senior Credit Facility). The Company's primary capital
requirements are expected to include debt service, capital expenditures and
working capital. The primary sources of capital are expected to be cash flow
from operations and borrowings under the Senior Credit Facility. Based upon
current and anticipated future operations and anticipated future cost savings,
the Company believes that capital resources will be adequate to meet anticipated
future capital requirements. There can be no assurance, however, that the
Company's business will generate sufficient cash flow that, together with the
other sources of capital, will enable the Company to service its indebtedness or
make anticipated capital expenditures. If the Company is unable to generate
sufficient cash flow from operations or to borrow sufficient funds in the future
to service its debt, it may be required to sell assets, reduce capital
expenditures, refinance all or a portion of its existing indebtedness, or obtain
additional financing. See "Risk Factors -- Substantial Leverage and Debt
Service."
The Senior Credit Facility and the Notes will, and other debt instruments
of the Company may, pose various restrictions and covenants on the Company that
could potentially limit the Company's ability to respond to market conditions,
to provide for unanticipated capital investments, to raise additional debt or
equity capital or to take advantage of business opportunities. See "Description
of Indebtedness" and "Description of the Notes."
The Senior Credit Facility will incur interest at variable rates. The
Company has entered into interest rate swap arrangements to limit its exposure
to future increases in interest rates with respect to an aggregate of $180
million of indebtedness incurred under the Senior Credit Facility, and may enter
into additional arrangements in the future.
41
<PAGE> 47
The Company's capital expenditures for fiscal 1998 are expected to be
approximately $58 million, including $26 million to complete an expansion and
modernization program at certain of its production facilities. Capital
expenditures for fiscal 1999 are estimated to be $40 million.
The Company expects to continue to pay its regular quarterly dividends of
$0.03 per share.
42
<PAGE> 48
BUSINESS
GENERAL
The Company is the largest, most geographically diverse and most balanced
producer and marketer of refined sugar in the United States. The Company's pro
forma sales for the 12 months ended September 30, 1996 represented approximately
33% of the total refined sugar market in the United States, and the Company
controls approximately 37% of all domestic sugarcane refining capacity and 30%
of all domestic sugar beet processing capacity. The Company refines raw cane
sugar at four refineries located in Texas, Georgia, Florida and Louisiana and
produces beet sugar at 12 beet factories located in California, Wyoming,
Montana, Texas and Michigan. During the 12 months ended September 30, 1997, the
Company sold approximately 61 million cwt. of refined sugar.
The Company offers one of the broadest product lines in the industry and
sells to a wide range of customers, including (i) retail grocers, (ii)
foodservice companies, which include restaurants, schools and other
institutions, and (iii) industrial customers, which are principally food
manufacturers. The Company's sugar products include granulated, powdered,
liquid, liquid blends and brown sugars sold in a variety of packaging options
(one pound boxes to 100-pound bags, individual packets and in bulk) under
various brands (Imperial(R), Holly(R), Spreckels(R), Dixie Crystals(R),
Evercane(R) and Pioneer(R)) or private market labels. Complementary non-sugar
products marketed by the Company include salt, pepper, non-nutritive sweeteners,
non-dairy creamers and plastic cutlery. In addition, the Company produces
selected specialty sugar products including Savannah Gold(TM) (a premium-priced,
free-flowing brown sugar), Imbrocon(TM) (a liquid flavoring) and specialty
sugars used in confections and icings. For the 12 months ended September 30,
1997, the Company had pro forma revenues of approximately $2.0 billion and pro
forma EBITDA of approximately $142 million.
INDUSTRY OVERVIEW
There are two methods for producing refined sugar: (i) processing sugar
beets and (ii) processing and refining sugarcane, each of which possesses
distinct operating characteristics. During the crop year ended September 1996,
total refined sugar sales in the United States consisted of approximately 57%
cane sugar and 43% beet sugar. The profitability of cane sugar and beet sugar
operations is impacted by government programs designed to support the price of
domestic crops of sugar beets and sugarcane. These programs affect cane sugar
and beet sugar operations differently. See "-- Sugar Legislation and Other
Market Factors."
CANE SUGAR PRODUCTION PROCESS. Sugarcane takes 9 to 18 months to mature
and, as a consequence, is grown in tropical and semi-tropical climates. Primary
growing areas in the United States include Louisiana, Florida, Texas and Hawaii.
The harvesting of sugarcane generally begins in October or November. Once
harvested, sugarcane is transported to raw cane sugar mills.
Sugarcane is highly perishable and must be processed by raw cane mills into
raw cane sugar quickly to avoid deterioration in the quality of the sucrose. The
raw cane sugar which is produced in this process is approximately 98% sucrose
and may be stored for long periods and transported over long distances without
impacting its quality. In addition to the raw sugar produced domestically, raw
sugar is also imported from various foreign sources. The amount of such imports
is currently limited by United States government programs.
Cane sugar refineries, such as the Company's four refineries, purify raw
sugar to produce refined sugar. Operating results of cane sugar refineries are
driven primarily by the spread between raw sugar and refined sugar prices. See
"-- Sugar Legislation and Other Market Factors."
BEET SUGAR PRODUCTION PROCESS. Sugar beets can flourish wherever a
five-month growing season is possible. In the United States, sugar beets are
grown in the Red River Valley area of Minnesota and in North Dakota, Idaho,
California, Colorado, Nebraska, Michigan, Washington, Texas, Oregon and New
Mexico. Harvest periods depend on the growing area, but are generally in the
early fall, except in California where spring and summer harvests also occur.
Once harvested, the beets are transported to beet factories.
43
<PAGE> 49
Sugar beets are highly perishable and must be processed into refined sugar
quickly after harvest to avoid deterioration. Beets may be stored in piles
awaiting processing where temperatures are sufficiently cool. Sugar beets are
converted to refined sugar through a single continuous process at beet
factories. Beet factories are located near the areas in which beets are grown in
order to reduce freight costs and the risk of deterioration. The Company's
staggered harvest seasons with respect to the sugar beet acreage supplying the
Company's 12 sugar beet production facilities allows it to produce beet sugar
year round even though the production campaign at any single facility generally
lasts no more than 180 days. Operating results are driven primarily by the
quantity and quality of sugar beets dedicated to the factory and the net sales
prices received for the refined beet sugar. The beet processor shares a portion
of the net sales price with growers through various participation or recovery
contracts or cooperative arrangements. See "-- Raw Material and Processing
Requirements -- Sugar Beet Purchases."
GOVERNMENT REGULATION. Federal government programs have existed to support
the price of domestic crops of sugar beets and sugarcane almost continually
since 1934. The regulatory framework that currently affects the domestic sugar
industry includes the Federal Agricultural Improvement and Reform Act of 1996
(the "Farm Bill"), which provides for loans on sugar inventories to first
processors (i.e., raw sugar mills and beet processors) and implements a tariff
rate quota which limits the amount of raw and refined sugar that can be imported
into the United States. The North American Free Trade Agreement ("NAFTA"), which
limits the amount of sugar that can be imported to and exported from Mexico, has
had, to date, a lesser impact on the United States sugar market.
In the crop year ended September 1997, the USDA implemented a program of
increasing the tariff rate quota in known quantities at three known dates based
on the level of the projected ending stocks-to-use ratio. There was previously
no target for the ending stocks-to-use ratio and the USDA could increase or
decrease the quota at will. The Company believes that this administration of the
tariff rate quota for foreign sugar has caused the market to be less volatile,
and as a result, has helped to reduce fluctuations in profitability of the
Company's cane sugar operations. The USDA's targeted ending stocks-to-use ratio
has historically correlated to a raw sugar price of approximately $22.50 per
cwt., substantially lower than the $25 per cwt. that was experienced in July
1995. The USDA is continuing this management strategy for the crop year ending
September 1998. See "-- Sugar Legislation and Other Market Factors."
DOMESTIC DEMAND. The Company considers its primary competition to be other
cane sugar refiners and beet sugar processors. Selling price and the ability to
supply the buyer's quality and quantity requirements in a timely fashion are
important competitive factors.
The decline in demand for refined sugar products attributable to the
replacement of refined sugar by HFCS and non-nutritive sweeteners in the
beverage market was completed a decade ago. The Company does not currently
consider HFCS a significant competitive threat, as refined sugar and HFCS
support different markets. HFCS is primarily a liquid sweetener and generally
does not compete in the dry sugar market.
Domestic demand for refined sugar has increased each year since 1986, and
the average rate of growth over the last five years has been 1.5%. The trend in
the food manufacturing industry toward production of "low fat" products has
increased industrial demand for sugar, as food manufacturers add sugar to
enhance flavor and texture as fat is removed. At the current market level, a
1.5% increase in domestic demand translates into the sale of an additional
150,000 tons of refined sugar per year, or the annual production capacity of an
average-sized sugar beet factory.
DOMESTIC SUPPLY. Reduced demand in the early 1980's was absorbed
principally by capacity reductions in the cane sugar refining sector.
Approximately 33% of domestic cane sugar refining capacity was eliminated
between 1981 and 1988 and cane sugar refining capacity has remained relatively
flat since 1988. Growth in refined sugar demand during the last decade has been
largely satisfied through increased beet sugar production. In recent years,
there have been a number of expansions to existing beet sugar factories to allow
for increased acreage dedications. The Company believes that the rate of growth
of beet sugar production has slowed as most of the beet factory expansions that
are economic under current conditions have been completed. The Company believes
that further expansion of existing beet factories requires that beets be
44
<PAGE> 50
transported over greater distances, which is often uneconomical. Accordingly,
construction of new factory sites would be required for further expansion.
DOMESTIC REFINED SUGAR PRICES. Given the existing domestic supply and
demand balance, the increasing role of beet production and the current status of
government regulation, the price of refined sugar in the United States in recent
years has been driven primarily by the amount of beet sugar supply. Good crop
years have led to relatively soft refined sugar prices and weak crop years have
led to relatively strong refined sugar prices. The following chart sets forth
the total supply of beet sugar available for the previous seven years and as
estimated for 1997, and the price per cwt. of refined sugar for such periods:
[GRAPH]
Source: USDA.
COMPETITIVE STRENGTHS
The Company believes that the following factors contribute to the Company's
position as a national market leader and provide a foundation for the Company's
business strategy:
LARGEST PRODUCER AND MARKETER OF REFINED SUGAR. The Company is the largest
producer and marketer of refined sugar in the country, with pro forma revenues
for the 12 months ended September 30, 1997 of $2.0 billion, accounting for
approximately 33% of total United States refined sugar sales in such period. The
Company believes that it sells sugar products to more major industrial customers
and national grocery chains than any of its competitors, giving it unmatched
national market penetration. By taking advantage of the efficiencies provided by
a national network of production and distribution facilities, the Company
believes that it is able to offer customers superior service in a timely manner.
The Company's breadth of market penetration also enabled it to avoid dependency
on any single customer for more than 3% of total sales during the 12 months
ended September 30, 1997.
GEOGRAPHIC DIVERSITY. The Company is the most geographically diverse
refined sugar producer in the United States. This geographic diversity minimizes
the impact of adverse conditions at any one facility (e.g., reduced acreage
availability, unfavorable weather and disease), smoothes production cycles and
creates opportunities to optimize processing schedules and provide more reliable
and efficient sourcing and distribution of refined sugar products for customers
in all domestic market areas.
BALANCED OPERATIONS. The Company is the most balanced producer and marketer
of refined sugar in the United States, with refined sugar production capacity
consisting of approximately 60% cane sugar and 40% beet sugar. The Company
believes that this balanced mix of production capacity should serve to (i)
reduce the
45
<PAGE> 51
volatility in the Company's operating results and (ii) reduce the Company's
exposure to any changes in federal trade and agricultural policy.
COMPLETE PRODUCT LINE. The Company has one of the broadest product lines in
the sugar industry. In addition to its flagship consumer sugar brands, which the
Company offers in a variety of packaging options ranging from one pound boxes to
25-pound bags, the Company also markets a complete line of specialty sugar
products. In addition, the Company markets complementary non-sugar products,
including salt, pepper, nondairy creamers, non-nutritive sweeteners and plastic
cutlery. Savannah Foods has emerged as a leader in serving the foodservice
sector, growing its foodservice sales at an annual rate of 10% over the past ten
fiscal years. With the foodservice industry continuing to be the fastest growing
segment of the United States food and beverage industry, the Company's goal is
to provide attractive "one stop shopping" alternatives for foodservice
customers.
DOMINANT BRANDS IN REGIONAL MARKETS. The Company enjoys the benefit of
highly recognized consumer brand labels, which command premium prices and
provide higher margins than the Company's unbranded products. According to data
compiled by a leading grocery industry market research firm, the Company's
Imperial(R) and Holly(R) brands command a combined, estimated 93% market share
for branded refined sugar grocery sales in the principal metropolitan markets in
Texas. In addition, the Company's Dixie Crystals(R) brand possesses an estimated
81% market share for branded refined sugar grocery sales in the region comprised
of Georgia, Florida, North Carolina, South Carolina and eastern Tennessee. Sales
of branded sugar constitute approximately 30% of total retail sales of refined
sugar nationally.
ABILITY TO INTEGRATE ACQUISITIONS. Over the past ten years, Imperial Holly
has consummated two significant acquisitions and successfully integrated the
operations of such companies. In 1988, Imperial Holly (then known as Imperial
Sugar Company) acquired Holly for approximately $100 million. At the time of its
acquisition, Holly's revenues were approximately 160% of Imperial Sugar
Company's revenues. In 1996, Imperial Holly acquired Spreckels for approximately
$35 million.
EXPERIENCED MANAGEMENT TEAM AND SIGNIFICANT OWNERSHIP BY MANAGEMENT AND
DIRECTORS. The Company benefits from a strong and experienced management team at
both the corporate and operating levels. The members of the Company's senior
management have extensive experience in the sugar industry and at consumer
products companies, such as Procter & Gamble Company and PepsiCo Inc. In
addition, the Company has retained certain key members of the management of
Savannah Foods after the Transactions. The Company's executive officers and
directors in the aggregate beneficially own approximately 26% of the Company
Common Stock.
BUSINESS STRATEGY
The Company's strategic objective is to capitalize on the opportunities
afforded by its position as the national market leader in the production,
marketing and distribution of refined sugar products and to fully realize the
significant synergy and cost saving opportunities created by the Transactions by
pursuing the following strategies:
ACHIEVE OPERATING EFFICIENCIES. The Company believes that combining
Imperial Holly's operations with those of Savannah Foods will allow the Company
to (i) reduce administrative costs, (ii) reduce freight and distribution costs
through more efficient sourcing of customer orders, (iii) reduce costs by
refocusing selling, marketing and promotional activities, (iv) reduce operating
costs by optimizing the operating schedules of the combined production
facilities and (v) reduce costs of procuring operating supplies and packaging
materials. The Company anticipates that it will begin to realize such cost
savings in its current fiscal year, with the full impact, which the Company
estimates could approximate $40 million annually, being achieved in the fiscal
year ended September 30, 1999. Independent of the acquisition of Savannah Foods,
the Company also anticipates that it will complete the expansion of certain of
its production facilities in the current fiscal year resulting in an additional
reduction in per unit operating costs.
INTEGRATE AND CROSS-SELL PRODUCT LINES. The combination of Imperial Holly
and Savannah Foods' product lines and sales and marketing efforts will be
complementary with minimal overlap, as each company
46
<PAGE> 52
has focused its marketing efforts in different geographic regions. The Company
plans to integrate sales and production functions with the goal of increasing
sales and reducing costs. The Company believes that this can be achieved by
optimizing product sourcing decisions for similar product lines, cross selling
specialty product lines to all customers and cross selling similar product lines
to major customers with multi-plant needs.
EXPAND SALES OF "VALUE-ADDED" PRODUCTS. The Company plans to expand its
production and marketing of higher margin, "value-added" products. Value-added
products, such as branded and specialty sugars and all of the Company's
non-sugar items, constituted approximately 18.3% of pro forma total sales for
the 12 months ended September 1997. The Company believes there are opportunities
to extend brand penetration into other geographic areas and to leverage these
brand names to include new product introductions. In addition, management of the
Company believes there are significant opportunities to build on Savannah Foods'
strong position in the foodservice business and increase higher margin,
foodservice sales in Imperial Holly's primary market areas.
BUILD ON SUCCESSFUL RELATIONSHIPS WITH CUSTOMERS. The Company believes it
can build on Imperial Holly and Savannah Foods' historically strong customer
relationships and its position as the largest, most diversified sugar producer
to become the preferred national supplier for major national retail, foodservice
and industrial customers. The Company's geographically diverse production
facilities and national network of distribution centers will give the Company
the unique ability to distribute refined sugar to locations anywhere in the
country on a timely and efficient basis year-round.
ENHANCE RELATIONSHIPS WITH SUPPLIERS. The Company believes that Imperial
Holly and Savannah Foods' good relationships with raw cane sugar suppliers and
sugar beet growers will allow it to develop more efficient sources of supply.
Imperial Holly has forged close relationships with its beet growers. The Company
intends to continue to enhance these relationships by providing technical and
agronomic assistance and offering improved varieties of sugar beet seed in an
effort to increase the profitability of its sugar beet growers. The Company
believes that it can strengthen its relationships with sugar beet growers to
increase acreage available to Savannah Foods' sugar beet factories, resulting in
increased production and enhanced profitability for these facilities. As a cane
sugar refiner, the Company also plans to actively pursue partnering arrangements
with raw cane sugar suppliers as it does with its sugar beet growers.
PRODUCTS AND SALES
REFINED SUGAR AND SPECIALTY PRODUCTS. The Company's principal product line
is refined sugar, which accounted for approximately 94% of the Company's pro
forma consolidated net sales for the twelve months ended September 30, 1997. The
Company has the most balanced combination of cane and beet sugar sales in the
industry, with cane sugar constituting approximately 72% and beet sugar
constituting 28% of the Company's pro forma refined sugar sales for the 12
months ended September 30, 1997. The Company markets its refined sugar products
to retail/grocery, foodservice and industrial customers by direct sales and
through brokers or wholesalers. For the twelve months ended September 30, 1997,
the Company's pro forma sales to grocery (retail) and foodservice customers
accounted for 36% of total sales, and pro forma sales to industrial customers
accounted for 58% of total sales.
GROCERY SALES. The Company produces and sells granulated white, brown and
powdered sugar to grocery customers in packages ranging from one-pound boxes to
25-pound bags. Retail packages are marketed under the trade names Imperial(R),
Dixie Crystals(R), Holly(R), Spreckels(R), Pioneer(R) and Evercane(R), and are
also sold under retailers' private labels. Private label packaged sugar, which
represents a significant percentage of the Company's grocery sales, is generally
sold at prices lower than those received for branded sugar. The Company plans to
capitalize on its well-known brands to increase sales of higher-margin branded
products as a percentage of total grocery sales.
FOODSERVICE SALES (INCLUDING SALES OF NON-SUGAR PRODUCTS). The Company
produces and sells over 30 different products to foodservice customers, ranging
from 50-pound sugar bags to individual packets of sugar, salt, pepper, non-dairy
creamer and plastic cutlery. The Company believes that the foodservice sector is
one of the most \rapidly growing segments of the domestic food industry.
Savannah Food's foodservice sales have grown at an average annual rate of 10%
over the past 10 years. The Company believes it can utilize Savannah
47
<PAGE> 53
Foods' success in the foodservice industry to increase foodservice sales in the
markets historically served by Imperial Holly.
INDUSTRIAL SALES. The Company produces and sells refined sugar, molasses
and other ingredients to industrial customers, principally food manufacturers,
in bulk, packaged or liquid form. Food manufacturers principally purchase sugar
for use in the preparation of confections, baked products, frozen desserts,
canned goods and various other food products. The majority of the Company's
industrial sales are made to customers under fixed price contracts with terms of
one year or less. Although industrial sales provide lower margins than grocery
or foodservice sales, the Company believes that an opportunity exists to improve
profit contributions from this sector by offering major national customers a
single source of supply for distribution to multiple locations across the
country.
SPECIALTY PRODUCT SALES. The Company produces and sells specialty sugar
products to grocery, foodservice and industrial customers. Specialty sugar
products include Savannah Gold(TM), a premium-priced free flowing brown sugar
marketed primarily to industrial customers, Imbrocon(TM), a liquid flavoring
also marketed to industrial customers, edible molasses, syrups and specialty
sugars used in confections and icings. The Company also markets artificial
sweeteners including Sweet Thing(R), a saccharin-based sweetener, and Sweet
Thing II(R), an aspartame-based sweetener.
SALES AND MARKETING. The Company's products are sold directly by the
Company's sales force and through independent brokers. The Company maintains
sales offices in the following locations: at its corporate headquarters in Sugar
Land, Texas; Chicago, Illinois; Tracy, California; Denver, Colorado; Mobile,
Alabama; Saginaw, Michigan; and Savannah, Georgia. The Company considers its
marketing and promotional activities important to its overall sales effort. The
Company advertises its brand names in both print and broadcast media and
distributes various promotional materials, including discount coupons and
compilations of recipes.
Using a value model utilized by many of the leading consumer goods
companies, Imperial Holly has worked to improve the consumer value of its
brands. By keeping its brands priced competitively versus private labels, and
advertising the brands' unique points of difference, Imperial Holly has been
able to increase its branded business over the last 12 months without major
promotional expenditures.
Imperial Holly has also been successful in streamlining its grocery
promotional/trade allowances and marketing programs. This effort has enabled a
reduction of total marketing costs while improving efficiency of the marketing
program and increasing brand sales.
In all business segments the Company intends to use a customer
profitability model similar to the one developed by and utilized by Imperial
Holly. Through use of the model, the Company is able to track any given
customer's profit impact to the Company. This customer profitability model
enables the Company to direct its marketing efforts and resources toward those
customers which have the highest profit potential and to work closely with its
customers whose profit contribution is less than optimal. No customer accounted
for more than 3% of the Company's pro forma sales for the 12 months ended
September 30, 1997.
SEASONALITY. Sales of refined sugar are moderately seasonable, normally
increasing during the summer months because of increased demand of various food
manufacturers, including fruit and vegetable packers; shipments of specialty
products (brown and powdered sugar) increase in the fourth calendar quarter due
to holiday baking needs. Although the refining of cane sugar is not seasonal,
the production of beet sugar is a seasonal activity. Each of the Company's beet
sugar factories operates during sugar-making campaigns, which generally total
120 days to 180 days in length each year, depending upon the supply of sugar
beets available to the factory. Because of the geographical diversity of its
manufacturing facilities, the Company is generally able to produce beet sugar
year-round. While the seasonal production of sugar beets requires the Company to
store significant refined sugar inventory at each factory, the geographic
diversity and staggered periods of production enable the Company's total
investment in inventories to be reduced. Additionally, these factors reduce the
likelihood that adverse weather conditions will affect all the Company's
productive areas simultaneously, and aid in distribution.
BY-PRODUCTS. The Company sells by-products from its beet sugar processing
as livestock feeds to dairymen, livestock feeders and livestock feed processors.
Such by-products include beet pulp and molasses. The major portion of the beet
pulp and molasses produced from sugar beet operations is sold during and
48
<PAGE> 54
shortly after the sugar-making campaigns. By-products from beet sugar processing
are marketed in the United States, Europe and Japan.
Both the domestic and export markets are highly competitive because of the
availability and pricing of by-products of other sugar beet processors and corn
wet millers, as well as other livestock feeds and grains. The market price of
the Company's by-products relative to the price of competitive feeds and grains
is the principal competitive determinant. Among other factors, the weather and
seasonal abundance of such feeds and grains may affect the market price of
by-products. The Company's by-products pro forma sales for the 12 months ended
September 30, 1997 were $74.6 million or 4% of total pro forma sales for such
period.
BEET SEED. The Company develops, produces and markets commercial seed to
beet growers under contract to the Company as well as growers under contract to
grow for other beet sugar processors. The Company's beet seed sales program is
conducted primarily in Sheridan, Wyoming and Tracy, California.
The Company has entered into an agreement with D. J. van der Have B.V., a
Netherlands beet seed company ("VDH"), granting VDH access to the Company's
proprietary beet seed breeding material for varietal seed development in
exchange for the exclusive marketing rights to VDH's beet seed in certain
markets in the United States, Canada and Mexico. The Company has also
participated in a similar joint venture with Societe Europeenne de Semences,
N.V., S.A., a Belgian beet seed company ("SES"), to develop improved beet seed
varieties. VDH and SES recently agreed to merge their interests to form ADVANTA
SEEDS ("ADVANTA"). ADVANTA plans to introduce novel and improved varietal
genetic material into the beet seed industry, which the Company believes may
lead to advances in crop yield, sugar content of the beets, resistance to
disease and certain plant processing benefits.
The Company is also active in sugar beet disease control. The Company's
growing areas have varying levels of diseases that affect sugar beet quality and
quantity as well as the cost of processing. The Company has a sugar beet plant
pathology disease control research laboratory in Tracy, California that develops
and implements disease control strategies for all of the Company's sugar beet
growing areas. The Company communicates information about agricultural practices
to growers through its computerized agriculture information systems and printed
material, including its magazine Sugar Beet Update, published semiannually. The
Company believes that these activities strengthen its relationship with its
growers, which, in turn, leads to increased acreage available to the Company and
enhanced production and profitability at its facilities.
INULIN. In 1995, the Company and Cooperatie Cosun U.A., a Netherlands sugar
processor ("Cosun"), have formed Imperial-Suiker Unie, L.L.C. ("ISU"), a 50-50
joint venture to introduce and market inulin in North America. Inulin is a
natural carbohydrate with multifunctional properties with potential both as a
nutritional additive and as a functional food ingredient. Inulin is extracted
from chicory roots by a process similar to sugar extraction from sugar beets.
ISU has the exclusive right to market inulin and inulin-based products produced
by Cosun in Canada, Mexico and the United States. The Company has also entered
into various agreements to provide certain marketing and administrative services
to the joint venture. Inulin is in the early stages of market development,
although some commercial sales have occurred.
MANUFACTURING FACILITIES
The Company operates four cane sugar refineries and 12 sugar beet
factories. Each facility is served by adequate transportation and is maintained
in good operating condition. The facilities operate continuously when in
operation. The following table shows the location and capacity of each of the
Company's refineries and processing plants:
<TABLE>
<CAPTION>
APPROXIMATE DAILY
MELTING CAPACITY
CANE SUGAR REFINERIES (POUNDS OF RAW SUGAR)
--------------------- ---------------------
<S> <C>
Sugar Land, Texas........................................... 4,000,000
Port Wentworth, Georgia..................................... 6,300,000
Gramercy, Louisiana......................................... 4,200,000
Clewiston, Florida.......................................... 1,700,000
----------
Total............................................. 16,200,000
==========
</TABLE>
49
<PAGE> 55
<TABLE>
<CAPTION>
APPROXIMATE DAILY
SLICING CAPACITY
BEET SUGAR FACTORIES (TONS OF SUGAR BEETS)
-------------------- ---------------------
<S> <C>
Brawley, California......................................... 8,200
Mendota, California......................................... 4,200
Tracy, California........................................... 5,000
Woodland, California........................................ 4,000
Sidney, Montana............................................. 5,700
Hereford, Texas............................................. 7,700
Torrington, Wyoming......................................... 5,700
Worland, Wyoming............................................ 3,600
Caro, Michigan.............................................. 4,000
Carrollton, Michigan........................................ 3,400
Sebewaing, Michigan......................................... 6,000
Croswell, Michigan.......................................... 4,000
-------
Total............................................. 61,500
=======
</TABLE>
The Company also has a 43% limited partnership interest in a partnership
that owns the site of a former beet sugar production facility in Moses Lake,
Washington. The partnership is constructing a beet processing facility on the
1,400 acre site that is scheduled for commissioning in 1998.
RAW MATERIAL AND PROCESSING REQUIREMENTS
RAW CANE SUGAR. The Company purchases raw cane sugar from both domestic and
foreign sources of supply located in Louisiana, Florida and 44 foreign
countries. The availability of foreign raw cane sugar is determined by the
import quota level designated by applicable regulation. See "-- Industry
Overview" and "-- Sugar Legislation and Other Market Factors." The Company has
not experienced difficulties in the past in contracting sufficient quantities of
raw sugar to supply its refineries.
Raw sugar purchase contracts can provide for the delivery of a single cargo
or for multiple cargoes over a specified period or a specified percentage of the
seller's production over one or more crop years. Contract terms may provide for
fixed prices but generally provide for prices based on the futures market during
a specified period of time. The contracts provide for a premium if the quality
of the raw sugar is above a specified grade or a discount if the quality is
below a specified grade. Contracts generally provide that the seller pays
freight, insurance charges and other costs of shipping.
The Company contracts to purchase raw cane sugar substantially in advance
of the time it delivers the refined sugar produced from that purchase. The
majority of the Company's industrial sales are under fixed price contracts; in
order to minimize price risk in raw and refined sugar commitments, the Company
generally matches refined sugar sales contracted for future delivery with the
purchase or pricing of raw sugar. The Company uses the raw sugar futures market
as a hedging and purchasing mechanism, as management deems appropriate.
The Company possesses approximately 350,000 short tons of aggregate raw
sugar storage capacity, including 215,000 short tons of storage capacity at its
Port Wentworth, Georgia refinery. At Port Wentworth, the Company has the
capability to segregate its raw sugar inventory, which allows the Company to
store bonded sugar for re-export. This capability facilitates the Company's
participation in the re-export market. The Company has been active in such
market and will continue to be active in the future when pricing and market
conditions are favorable.
The Company supplements its beet sugar production by refining raw cane
sugar at certain of its sugar beet processing facilities.
SUGAR BEET PURCHASES. The Company purchases sugar beets from over 2,400
independent growers, which supply the Company's factories with approximately
310,000 acres of beets. The sugar beets are purchased under contracts negotiated
with associations representing growers. The Company contracts for acreage prior
to
50
<PAGE> 56
the planting season based on estimated demand, marketing strategy, processing
capacity and historical crop yields. The type of contract used in the western
United States provides for payments to the grower based on the sugar content of
the sugar beets delivered by each grower and the net selling price of refined
beet sugar during the specified contract year. The type of contract used in
Michigan provides for growers to share in the revenues generated by sales of
pulp and molasses, as well as sales of refined sugar. Most grower contracts
provide for a premium to the growers for delivering beets of superior quality.
The net selling price is the gross sales price less certain marketing costs,
including packaging costs, brokerage, freight expense and amortization costs for
certain facilities used in connection with marketing. Use of this type of
participating contract reduces the Company's exposure to inventory price risks
on its sugar beet purchases. See "-- Sugar Legislation and Other Market
Factors."
Acreage contracted at each factory location may vary from year to year on
the basis of anticipated refined sugar prices, prior crop quality, productivity,
weather conditions, availability of irrigation water, prices anticipated by
growers for alternate crops and competition with other beet sugar processors.
The Company expects modest growth in acreage in fiscal 1998. See "Risk
Factors -- Sugar Beet Crop and Storage Risks."
ENERGY. The primary fuel used by the Company is natural gas, although
certain of the Company's factories use significant amounts of coal. The Company
generates a substantial portion of the electricity used at its refineries and
factories. Fuel oil can be used by the Company at certain locations both as an
alternative energy source when the price is more attractive and as a backup to
natural gas in the event of curtailment of gas deliveries. Natural gas and coal
supplies are typically purchased under contracts for terms of one year or more,
which do not contain minimum quantity requirements.
Pricing of natural gas contracts is generally fixed for the term or indexed
to a spot market index. The Company has also utilized financial tools such as
swaps and caps to stabilize the price for gas purchases under indexed contracts.
Coal is available in abundant supply domestically and the Company is able to
purchase coal competitively.
The Company owns a royalty interest in a coal seam methane gas project in
the Black Warrior Basin of Alabama as an additional indirect hedge against
future natural gas price increases.
OTHER RAW MATERIALS. Foundry coke and limestone are used in the beet sugar
extraction process. The Company generally purchases coke under contracts with
one to three year terms and utilizes rail transportation to deliver the coke to
factories. Domestic coke supplies may become tighter due to environmental
restrictions; the Company has the option of converting existing coke-fired
equipment to natural gas should the availability and economics of coke so
dictate. The Company owns a 50% share of a limestone quarry in Warren, Montana
that supplies the Sidney, Montana and Worland, Wyoming factories with their
annual limestone requirements. A subsidiary of the Company operates a limestone
quarry in Cool, California that supplies the Company's Northern California beet
processing factories with limestone. These quarries do not normally supply the
Company's other factories because of high freight costs. Limestone required in
the other factory operations is generally purchased from independent sources
under contracts with one to five-year terms.
RESEARCH
The Company operates research and development centers in Sugar Land, Texas
and Savannah, Georgia where it conducts research relating to manufacturing
process technology, factory operations, food science and new product
development. In Savannah, the Company operates a "pilot plant" in connection
with its research and development activities where it has developed sugar
products co-crystallized with other flavors such as honey. The Company has begun
to market the co-crystallized specialty products produced at the pilot plant to
certain customers.
COMPETITION
The Company competes with other cane sugar refiners and beet sugar
processors and, in certain product applications, with producers of other
nutritive and non-nutritive sweeteners. Selling price and the ability to supply
the buyer's quality and quantity requirements in a timely fashion are important
competitive factors.
51
<PAGE> 57
Certain competing beet sugar processors have expanded their production capacity
significantly over the past five years. The additional sugar marketed as a
result of this expansion has acted to reduce refined sugar prices at times
during this period. To a lesser extent, refined sugar also competes with
non-nutritive or low-calorie sweeteners, principally aspartame and, to lesser
extents, saccharin and acesulfam-k.
SUGAR LEGISLATION AND OTHER MARKET FACTORS
The Company's business and results of operations are substantially affected
by market factors, principally the domestic prices for refined sugar and raw
cane sugar, and the quality and quantity of sugar beets available to the
Company. These market factors are influenced by a variety of forces, including
the number of domestic acres contracted to grow sugar beets, prices of competing
crops, weather conditions and United States farm and trade policies.
The principal legislation currently supporting the price of domestic crops
of sugar beets and sugarcane is the Farm Bill, which became effective July 1,
1996 and extended the sugar price support program for sugarcane and sugar beets
until June 30, 2003.
CCC LOANS. Pursuant to the Farm Bill, the Commodity Credit Corporation
("CCC") is obligated annually to make loans available to domestic first
processors of sugar on existing sugar inventories from the current crop year
production at 18.0 cents per pound of raw cane sugar and 22.9 cents per pound of
refined beet sugar (subject to a limited right of reduction by the USDA). CCC
loans under the Farm Bill are recourse loans unless the tariff rate quota for
import sugar is set at a level in excess of 1.5 million short tons raw value
("STRV"). If the tariff rate quota exceeds 1.5 million STRV, CCC loans will
become non-recourse and processors will be obligated to pay participating
growers a predetermined minimum support price. CCC loans mature September 30 of
each year and in no event more than nine months after the month in which the
loan was made. Under the Farm Bill, processors may forfeit sugar to the USDA; if
the tariff rate quota is below 1.5 million STRV and the collateral for the loan
is inadequate to cover the loan amount, the USDA may proceed against the
processor for the difference between the loan amount and the proceeds from the
sale of the forfeited sugar. Additionally, a processor will be penalized
approximately 1 cent per pound for each pound of sugar forfeited. Although the
Company does not currently utilize this program, it has in the past and may do
so again in the future.
TARIFF RATE QUOTA. Under the Farm Bill, the USDA utilizes the import quota
and the forfeiture penalty to affect sugar price supports and prevent
forfeitures under the CCC loan program. The USDA annually implements a tariff
rate quota for foreign sugar, which has the effect of limiting the total
available supply of sugar in the United States. The tariff rate quota controls
the supply of raw sugar by setting a punitive tariff on all sugar imported for
domestic consumption that exceeds the determined permitted imported quantity and
is designed to make the importation of the over-quota sugar uneconomical. To the
extent a processor sells refined sugar for export from the United States, it is
entitled to import an equivalent quantity of non-quota eligible foreign raw
sugar. The tariff rate quota for sugar to be allowed entry into the United
States during the year ended September 30, 1997 was 2.3 million STRV; for the
year ended September 30, 1998 the tariff rate quota is expected to be 2.0
million STRV. The USDA currently determines the quota by targeting an ending
stocks-to-use ratio. A portion of the quota will be made available immediately
with separate allocations made available periodically depending on domestic
production of raw cane sugar and refined beet sugar. The Company believes that
the implementation of the tariff-rate quota for foreign sugar under the Farm
Bill has caused the market for raw cane sugar to be less volatile, and as a
result has helped to reduce fluctuations in profitability of the Company's cane
sugar operations.
NAFTA. NAFTA contains provisions that allow for Mexico to increase its
sugar exports to the United States if Mexico is projected to produce a net
surplus of sugar. The terms of NAFTA restrict Mexico's exports, which may be in
the form of raw or refined sugar, to the United States to no more than 25,000
STRV annually until the year 2000. Mexico's exports to the United States will be
further increased in the event Mexico produces a sugar surplus for two
consecutive years prior to the year 2000 or at any time thereafter. The
Company's management believes that increased importation of raw cane sugar from
Mexico would benefit the Company because the proximity of its Sugar Land, Texas
refinery to Mexico would allow the Company to
52
<PAGE> 58
import raw cane sugar more cheaply than its competition. However, if imports are
in the form of refined cane sugar, the domestic refined sugar market may be
adversely affected.
EMPLOYEES
In November 1997, the Company employed approximately 3,500 year-round
employees. In addition, the Company employed 3,200 seasonal employees over the
course of the crop year ended September 1997. While the Company's Port
Wentworth, Georgia and Clewiston, Florida refineries use non-union labor, the
Company has entered into collective bargaining agreements with union
representatives with respect to the employees at all of the Company's other
refineries and processing plants. The Company believes its employee and union
relationships are good.
ENVIRONMENTAL REGULATION
The Company's operations are governed by various federal, state and local
environmental regulations. These regulations impose effluent and emission
limitations, and requirements regarding management of water resources, air
resources, toxic substances, solid waste and emergency planning. The Company has
obtained or is making application for the permits required under these
regulations.
Waste water odor control is being addressed at the Company's facilities in
Tracy, Mendota and Woodland, California. The soil and ground water at the
Company's Mendota, California facility have high concentrations of salts. The
Company has developed a prevention plan to install a clay cap on the areas of
concern and to treat the affected ground water. This plan will be accomplished
over a 20 to 30-year period with an expected annual cost ranging from $40,000 to
$120,000. The Company has recorded a liability for the estimated costs of this
project. The Company's Torrington, Wyoming facility has made significant
operational modifications in order to meet more restrictive state solid waste
and groundwater regulations.
Ongoing compliance with environmental statutes and regulations has not had,
and the Company does not anticipate that it will in the future have, a material
adverse effect on the Company's competitive position since its competitors are
subject to similar regulation. Additional capital expenditures will be required
to comply with future environmental protection standards, although the amount of
any further expenditures cannot be accurately estimated. Management does not
believe that compliance will have a materially adverse impact on the Company's
capital resources or its operating results or financial condition.
PROPERTIES
The Company owns each of its cane sugar refineries and sugar beet
processing plants and its corporate headquarters in Sugar Land, Texas. The
Company generally leases office space and contracts for throughput and storage
at warehouses and distribution stations. The Company owns additional acreage at
its factories and refineries which is used primarily for settling ponds and as
buffers from nearby communities or is leased as farm or pasture land. See
"-- Manufacturing Facilities" and "-- Raw Material and Processing
Requirements -- Other Raw Materials."
LEGAL PROCEEDINGS
The Company is a party to litigation and claims which are normal in the
course of its operations; while the results of such litigation and claims cannot
be predicted with certainty, the Company believes the final outcome of such
matters will not have a materially adverse effect on its results of operations
or consolidated financial position.
53
<PAGE> 59
BOARD OF DIRECTORS AND MANAGEMENT
The directors and senior officers of the Company following the consummation
of the Transactions, and their respective ages, are as set forth in the table
below.
<TABLE>
<CAPTION>
NAME AGE* POSITIONS
---- ---- ---------
<S> <C> <C>
James C. Kempner....................... 58 President, Chief Executive Officer, Chief
Financial Officer and Director
Peter C. Carrothers.................... 58 Managing Director
Douglas W. Ehrenkranz.................. 40 Managing Director
Roger W. Hill.......................... 58 Managing Director and President and Chief
Executive Officer of Holly
John A. Richmond....................... 51 Managing Director
William F. Schwer...................... 50 Managing Director, Secretary and General
Counsel
William W. Sprague III................. 41 President and Chief Executive Officer of
Savannah Foods and Director
John D. Curtin, Jr. ................... 65 Director
David J. Dilger........................ 41 Director
E. O. Gaylord.......................... 66 Director
Gerald Grinstein....................... 65 Director
Ann O. Hamilton........................ 61 Director
Robert L. Harrison..................... 58 Director
Harris L. Kempner, Jr.................. 57 Director
I. H. Kempner, III..................... 65 Director
H. E. Lentz............................ 52 Director
Kevin C. O'Sullivan.................... 55 Director
Fayez Sarofim.......................... 69 Director
Daniel K. Thorne....................... 46 Director
</TABLE>
- ---------------
* As of December 31, 1997.
Except as set forth below, the senior officers have held their present
offices for at least the past five years. Positions, unless specified otherwise,
are with the Company.
Mr. James C. Kempner has been a director since 1988 and has been President
and Chief Executive Officer from 1993 to present. Mr. Kempner is also Chief
Financial Officer, a position he has held since he joined the Company in 1988.
In 1994, Mr. Kempner was elected President of Imperial Sugar Company, a division
of the Company, a position he had previously held. From 1988 to 1993, Mr.
Kempner served as Executive Vice President. Mr. Kempner is also a director of
Bouygues Offshore S.A.
Mr. Carrothers became a Managing Director in October 1995 and had been
Senior Vice President -- Operations since March 1995. Mr. Carrothers joined the
Company as Senior Vice President -- Logistics in May 1994. From 1990 until
joining the Company, he was Vice President -- Logistics of PepsiCo Foods
International and had served in various other capacities with Frito Lay, Inc., a
subsidiary of PepsiCo, since 1973.
Mr. Ehrenkranz became a Managing Director in April 1997 and had been Vice
President -- Sales & Marketing since September 1995. Prior thereto, Mr.
Ehrenkranz had been Director of Sales, Planning & Marketing -- Development since
joining the Company in April 1995. Prior to joining the Company, Mr. Ehrenkranz
was Marketing Manager with PepsiCo's Taco Bell subsidiary from 1993 to 1994 and
served in various positions at Procter & Gamble from 1979. His last position at
Procter & Gamble before joining PepsiCo was Category Sales Manager for Folgers
Coffee.
54
<PAGE> 60
Mr. Hill was named a Managing Director in October 1995 and had been
Executive Vice President since 1988. Mr. Hill also has been President and Chief
Executive Officer of Holly since 1988. Mr. Hill joined Holly in 1963 and served
in various capacities, including Vice President -- Agriculture and Executive
Vice President. Mr. Hill served as a director of the Company from 1988 until his
resignation from the Board of Directors in December 1997.
Mr. Richmond became a Managing Director in April 1997 and was named Vice
President -- Operations in October 1995. Mr. Richmond has been Senior Vice
President and General Manager, Beet Sugar Operations, of Holly since 1993. Mr.
Richmond was Senior Vice President and General Manager -- Eastern Division of
Holly from June 1992 to 1993; Vice President and General Manager -- Eastern
Division of Holly from December 1991 to June 1992; Vice President and Operations
Manager -- Eastern Division from September 1990 to December 1991; Vice
President, Technical Services and Assistant Operations Manager -- Eastern
Division from July 1989 to September 1990; and Vice President, Technical
Services from December 1982 to July 1989. Mr. Richmond joined Holly in 1973.
Mr. Schwer became a Managing Director in October 1995 and was named Senior
Vice President, Secretary and General Counsel of the Company in 1993. Mr. Schwer
had been Vice President, Secretary and General Counsel since 1989. He joined
Holly as Assistant General Counsel in 1988.
Mr. Sprague was elected as a director in December 1997 pursuant to the
Merger Agreement. Mr. Sprague has been President and Chief Executive Officer of
Savannah Foods since 1995. He served as President and Chief Operating Officer
from 1993 to 1995. Mr. Sprague began his career with Savannah Foods in 1983 and
has held various positions since then.
Mr. Curtin has been a director since 1993. Mr. Curtin has been Chairman and
Chief Executive Officer of Aearo Corporation, a worldwide manufacturer and
supplier of personal protection equipment, from May 1994 to present and was
Executive Vice President and a director of Cabot Corporation, a specialty
chemicals and materials company and manufacturer of carbon black, from 1989 to
1994. Mr. Curtin is a Trustee of Eastern Enterprises, Inc.
Mr. Dilger has been a director since October 1996. Mr. Dilger has been
Chief Executive Officer of Greencore Group plc, an Irish sugarbeet processing
company, since 1995 and was Chief Operating Officer of Greencore Group plc from
1991 to 1995. He has been a director of Greencore since January 1992.
Mr. Gaylord, a director since 1978, has been the President and a director
of Gaylord & Company, Inc., a venture capital business, since 1988. Since
January 1993, he has been Chairman of EOTT Energy Corporation, an oil trading
and transportation company. Mr. Gaylord is also a director of Seneca Foods
Corporation, Essex International, Kinder Morgan Energy Partners, L.P. and The
Federal Reserve Bank of Dallas, Houston Branch.
Mr. Grinstein has been a director since October 1996. He has been a
director of Delta Air Lines, Inc. since 1987 and has served as Chairman of the
Board of Directors since August 1997. He served as Chairman and Chief Executive
Officer of Burlington Northern Inc., a diversified transportation and railroad
company, from 1990 until September 1995 and served as Chairman until his
retirement on December 31, 1995. Mr. Grinstein is also a director of Browning
Ferris Industries, Inc., Pecar, Inc. and Sundstrand Corporation.
Mrs. Hamilton, a director since 1974, was with the World Bank in
Washington, D.C. from 1970 until her retirement in 1995. Mrs. Hamilton was
Senior Adviser to the Vice President of South Asia Region, in 1995. She was
Director of the Bangladesh, Bhutan & Nepal Department from 1993 to 1994, and
Director of the Population & Human Resources Department from 1987 to 1992.
Mr. Harrison was elected as a director in December 1997 pursuant to the
terms of the Merger Agreement. He served as a director of Savannah Foods from
1990 until October 1997. Mr. Harrison has been President of Stevens Shipping &
Terminal Co. in Savannah, Georgia for more than five years.
Mr. Harris L. Kempner, Jr., a director of the Company since 1966, has been
President of Kempner Capital Management, Inc., an investment advisory firm,
since 1982 and a trustee of the H. Kempner Trust Association since 1967. He
served as Chairman of the Board of United States National Bank from 1988 to
55
<PAGE> 61
1993 when he became Chairman Emeritus. Mr. Kempner is a director of TNP
Enterprises, Inc. and American Indemnity Financial Corporation and an advisory
director of Cullen/Frost Bankers, Inc.
Mr. I. H. Kempner, III has been Chairman of the Board of Directors since
1971 and was first elected a director in 1967. He became Chairman of the
Executive Committee in 1978. Mr. Kempner joined the Company in 1964 and served
in various executive capacities prior to his election as Chairman of the Board.
Mr. Kempner is Chairman of the Board of Directors of the Houston Branch of the
Federal Reserve Bank of Dallas.
Mr. Lentz has been a director since 1993. Mr. Lentz has been a Managing
Director of Lehman Brothers Inc., an investment banking firm, since 1993. Prior
thereto, Mr. Lentz served Vice Chairman of Wasserstein Perella & Co. from 1988
to 1993 and as Managing Director of Shearson Lehman Hutton, Inc. from 1984 to
1988. Mr. Lentz serves as a director of the Rowan Companies, Inc.
Mr. O'Sullivan has been a director since October 1996. Mr. O'Sullivan is
Chief Financial Officer of Greencore Group plc, an Irish sugarbeet processing
company. He has been a director of Greencore since January 1992. Prior thereto,
Mr. O'Sullivan was Group Finance Director of Hillsdown Holdings plc, having
previously held senior financial positions with other major UK companies.
Mr. Sarofim, a director since 1991, is President and Chairman of the Board
of Fayez Sarofim & Co., an investment advisory firm he founded in 1958. Mr.
Sarofim is currently a director of Allegheny Teledyne Corporation, Argonaut
Group, Unitrin, Inc. and the Exor Group, S.A.
Mr. Thorne was elected a director in 1988. For more than the past five
years, Mr. Thorne has been the President of Star Lake Cattle Company and Star
Lake Properties, Inc., which are engaged in cattle and timber operations, and
Eagle Island Citrus Corporation, a citrus production operation. Mr. Thorne is
also President of Star Lake Capital, a venture capital firm.
Mr. I. H. Kempner, III and Mr. James C. Kempner are brothers and are first
cousins of Mr. Harris L. Kempner, Jr. In addition, Mrs. Hamilton, Mr. Harris L.
Kempner, Jr., Mr. I. H. Kempner, III, Mr. James C. Kempner, Mr. Lynch and Mr.
Thorne are each descendants of H. Kempner, a Galveston entrepreneur who died in
1894.
56
<PAGE> 62
EXECUTIVE COMPENSATION
The following table and narrative sets forth the compensation of the chief
executive officer and the other four most highly compensated executive officers
during the twelve-month period ending September 30, 1997 (collectively, the
"named officers") for services rendered in all capacities. In October 1997, the
Company changed its fiscal year end from March 31 to September 30. Accordingly,
compensation reported in the following table is for the twelve-month period
ended September 30, 1997 ("1997T"), as well as the fiscal years ended March 31,
1997 and 1996. As a result, compensation for the six-month period ended March
31, 1997 has been included in both the 1997T amounts and the fiscal year ended
March 31, 1997 amounts. Consequently, bonus payments pursuant to the Company's
Performance Incentive Plan for the fiscal year ended March 31, 1997, which were
paid in May 1997, have been double counted by inclusion in both the 1997T
amounts and the fiscal 1997 amounts.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------- -------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
NAME AND FISCAL COMPEN- STOCK OPTIONS/SARS
PRINCIPAL POSITION PERIOD SALARY BONUS(1) SATION(2) AWARD(4) (NUMBER)(5)
------------------ ------ -------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
James C. Kempner................. 1997T $377,016 $647,251 $ (3) $242,046 0
President, Chief Executive
Officer 1997 354,024 316,701 (3) $242,046 0
and Chief Financial Officer 1996 354,024 0 57,043 0 0
Roger W. Hill.................... 1997T 284,448 281,123 (3) 150,045 0
Managing Director and
President, 1997 284,448 128,947 (3) 150,045 0
Holly Sugar Corporation 1996 284,448 0 58,140 0 0
Peter C. Carrothers.............. 1997T 198,408 423,100 (3) 155,316 0
Managing Director 1997 166,800 230,700 (3) 155,316 0
1996 166,800 8,340 28,051 0 20,000
William F. Schwer................ 1997T 202,512 412,242 (3) 155,316 0
Managing Director, Secretary 1997 175,008 222,492 (3) 155,316 0
and General Counsel 1996 175,008 8,750 24,954 0 28,000
John A. Richmond................. 1997T 168,504 296,500 (3) 109,893 0
Managing Director 1997 158,750 165,500 (3) 108,893 0
1996 134,600 0 25,319 0 8,000
</TABLE>
- ---------------
(1) Bonuses paid were pursuant to the Company's Performance Incentive Plan and
include, in the twelve-month period ended September 30, 1997, a relocation
bonus of $28,945 for Mr. Hill and include in fiscal year ending March 31,
1997, such relocation bonus of $28,945 for Mr. Hill and a relocation bonus
of $15,500 for Mr. Richmond. Annual bonus payments for the fiscal year ended
March 31, 1997, paid in May 1997 and included in both 1997T and fiscal 1997
bonus amounts, were $316,701 for Mr. Kempner, $128,947 for Mr. Hill,
$230,700 for Mr. Carrothers, $222,492 for Mr. Schwer and $150,000 for Mr.
Richmond.
(2) Amounts are primarily payments under the Company's vacation policy and for
taxes due on perquisites. Monetary service awards, which are earned on every
fifth anniversary of employment, are also included when paid. Mr. James C.
Kempner's fiscal year 1996 compensation included $8,361 payment for taxes
due on perquisites, a $8,370 automobile allowance, a $23,465 disability
insurance policy premium and $13,525 for a bargain vehicle purchase. Mr.
Hill's fiscal 1996 other annual compensation included $10,940 in vacation
pay, a $5,325 payment for taxes due on perquisites, a $23,355 disability
insurance premium and $13,525 for a bargain vehicle purchase. Mr.
Carrothers' fiscal year 1996 other annual compensation included a $7,500
automobile allowance and a moving allowance of $11,142. Mr. Schwer's fiscal
year 1996 other annual compensation included $2,019 in vacation pay, a
$3,196 payment for taxes on perquisites, a $2,753 automobile allowance and
$13,525 for a bargain vehicle purchase. Mr. Richmond's fiscal 1996 other
compensation included $3,882 in vacation pay, a $1,794 payment for taxes on
perquisites, a $4,780 automobile allowance and $13,525 for a bargain vehicle
purchase.
57
<PAGE> 63
(3) Amount is less than $50,000 or 10% of the sum of salary and bonus.
(4) On May 1, 1997, 86,811 shares of Restricted Stock valued at $911,516 were
issued to six executive officers including the named officers. Dividends, if
declared, are payable on restricted stock. The grant is included in both
1997T and the fiscal year ended March 31, 1997.
(5) No options granted include SARs.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS IN CONNECTION WITH THE TENDER OFFER AND THE MERGER
BOARD OF DIRECTORS; MANAGEMENT. On October 24, 1997, upon the consummation
of the Tender Offer and pursuant to the Merger Agreement, a majority of the
Savannah Foods directors resigned as directors, and members of the senior
management of Imperial Holly were elected to the Board of Directors of Savannah
Foods to replace such resigning directors. Upon consummation of the Merger, the
remaining original Savannah Foods directors (except for Mr. Sprague) resigned.
In addition, Messrs. Sprague and Harrison, who served on Savannah Foods' Board
of Directors prior to the Transactions, were elected as directors of the Company
prior to the consummation of the Merger.
EMPLOYMENT AND RELATED AGREEMENTS. In connection with the Merger, the
Company entered into a new employment agreement with William W. Sprague III, the
President and Chief Executive Officer of Savannah Foods, providing for a 5-year
term beginning on the date of the consummation of the Merger. Pursuant to the
employment agreement, Mr. Sprague will continue as the President of Savannah
Foods and was elected as a director of the Company in December 1997. In addition
to his base salary, which will continue at no less than $430,000 per year (his
previous salary), Mr. Sprague will be entitled to participate in the annual
bonus program, which provides him with a maximum bonus opportunity equal to 75%
of his base salary, and to certain other benefits. In addition, the Company
intends to enter into agreements with certain other members of Savannah Foods'
management providing for certain payments in the event of changes of control.
EQUITY FINANCING. Imperial Holly sold 377,358 shares of Company Common
Stock to the H. Kempner Trust Association concurrently with the consummation of
the Merger for an aggregate consideration of $5 million, at a purchase price
equal to $13.25 per share, the per share price of Company Common Stock used to
determine the stock consideration in the Merger.
ADVISORY AND OTHER FEES. Lehman Brothers, an Initial Purchaser of the
Notes, has provided investment banking and other services to the Company in the
past and has acted as financial advisor to the Company in connection with the
Transactions, for which it has received customary fees in connection therewith.
LCPI acted as an arranger for the Company and the banks that are parties to the
Tender Credit Facility and the Senior Credit Facility (the "Credit Facilities")
in connection with the Credit Facilities and received customary fees in
connection therewith. LCPI and its respective affiliates are Agents under the
Credit Facilities. The net proceeds of the Offering were used to repay
indebtedness under the Tender Credit Facility.
Additionally, in 1991, the Company entered into an interest rate swap with
Lehman Brothers which continued until October 1996. Mr. Lentz, who was elected a
director of the Company in December 1993, became a Managing Director of Lehman
Brothers in March 1993. In 1996, Mr. Lentz became a member of the Executive
Compensation Committee of the Company's Board of Directors.
OTHER RELATIONSHIPS
Fayez Sarofim & Co. acts as an investment advisor to the Company and
certain employee benefit plans maintained by the Company. During the
twelve-month period ended September 30, 1997, Fayez Sarofim & Co. received
approximately $379,000 for such services. Fayez Sarofim, a director, is Chairman
of the Board, President and owner of a majority of the outstanding capital stock
of Fayez Sarofim & Co.
In 1989, the Company became one of the limited partners of ChartCo
Terminal, L.P. ("ChartCo") upon the formation thereof and made a capital
contribution of $1,000,000 to ChartCo. A company owned by Mr. Gaylord is the
general partner of ChartCo, which owns an interest in a fuel oil terminal in
Houston, Texas. The percentage interests of the partners in ChartCo are in
proportion to their respective capital contributions.
58
<PAGE> 64
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding ownership of
Company Common Stock, as of December 31, 1997 by: (i) each person who is known
by the Company to own beneficially on a pro forma basis more than five percent
of Company Common Stock; (ii) each of the Company's directors; (iii) each of the
Company's senior officers; and (iv) all directors and executive officers of the
Company as a group. Except as otherwise indicated, the Company believes that the
beneficial owners of the Company Common Stock listed below have sole investment
and voting power with respect to such shares, subject to community property
laws.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
----------------------
NUMBER PERCENTAGE
NAME OF SHARES OF CLASS
---- --------- ----------
<S> <C> <C>
Peter C. Carrothers(1)(2)(3)................................ 40,443 * %
John D. Curtin, Jr.(1)...................................... 8,142 *
David J. Dilger(4).......................................... 3,800,000 14.1
Douglas W. Ehrenkranz(1)(2)................................. 13,169 *
Edward O. Gaylord........................................... 20,000 *
Greencore Group plc......................................... 3,800,000 14.1
St. Stephen's Green House
Earlsfort Terrace
Dublin 2, Ireland
Gerald Grinstein............................................ 2,466 *
Ann O. Hamilton(6).......................................... 237,796 *
Robert L. Harrison(7)(3).................................... 1,769 *
Roger W. Hill(1)(2)(3)...................................... 70,830 *
Harris L. Kempner, Jr.(8)(9)................................ 834,302 3.1
I. H. Kempner, III(1)(5)(8)(10)............................. 1,107,037 4.1
P.O. Box 25
Sugar Land, Texas 77487-0025
James C. Kempner(1)(2)(3)(8)(11)............................ 930,450 3.4
H. E. Lentz................................................. 19,142 *
Kevin C. O'Sullivan(4)...................................... 3,800,000 14.1
John A. Richmond(1)(2)...................................... 31,656 *
Fayez Sarofim............................................... 681,142 2.5
William F. Schwer(1)(2)..................................... 47,008 *
William W. Sprague III(7)(3)................................ 7,358 *
Daniel K. Thorne(5)(12)..................................... 695,718 2.6
United States National Bank(13)............................. 1,937,456 7.2
P.O. Box 179
Galveston, Texas 77553
Harris K. Weston(8)(14)..................................... 1,724,921 6.4
Dinsmore & Stohl
1900 Chemed Center
255 East 5th Street
Cincinnati, Ohio 45202
All directors and executive officers as a group (23
persons)(1)(2)............................................ 7,040,010 26.1%
</TABLE>
59
<PAGE> 65
- ---------------
* Percentage of shares of Company Common Stock beneficially owned does not
exceed 1% of the class.
(1) Includes shares subject to stock options exercisable within 60 days as
follows: I. H. Kempner, III, 92,925 shares; Peter C. Carrothers, 21,250
shares; John D. Curtain, Jr., 750 shares; Douglas W. Ehrenkranz, 3,750
shares; Roger W. Hill, 46,975 shares; James C. Kempner, 82,975 shares;
William F. Schwer, 28,750 shares; John A. Richmond, 13,450 shares and all
directors and executive officers as a group, 315,650 shares.
(2) Includes restricted shares as follows: Mr. Carrothers, 14,792; Mr.
Ehrenkranz, 9,419; Mr. Hill, 14,290; Mr. James C. Kempner, 23,052; Mr.
Richmond, 10,466; Mr. Schwer, 14,792 and all executive officers as a group,
86,811 shares.
(3) Includes shares of Company Common Stock issued in the Merger in exchange
for shares of Savannah Common Stock and held by Mr. Sprague and his spouse
and children and in certain employee benefit plans.
(4) Includes shares held by Greencore Group plc, of which Mr. Dilger is the
Chief Executive Officer and a director and Mr. O'Sullivan is the Chief
Financial Officer and a director. Messrs. Dilger and O'Sullivan disclaim
beneficial ownership of such shares.
(5) Includes 134,187 shares of Company Common Stock owned by the Harris and
Eliza Kempner Fund, a charitable foundation, as to which Mr. I. H. Kempner,
III and Mr. Thorne share voting power and investment power as co-trustees
along with other trustees.
(6) Includes 49,072 shares of Company Common Stock owned by a testamentary
trust as to which Mrs. Hamilton is successor trustee and has voting and
investment power.
(7) Messrs. Sprague and Harrison were elected directors in December 1997.
(8) Includes 709,721 shares of Company Common Stock owned by H. Kempner Trust
Association, over which I. H. Kempner, III, James C. Kempner, Harris L.
Kempner, Jr. and Harris K. Weston share voting power and investment power
as co-trustees with one other co-trustee.
(9) Includes 6,420 shares of Company Common Stock held by Mr. Kempner's wife,
as to which he shares voting and investment power. Mr. Kempner disclaims
beneficial ownership as to such shares.
(10) Includes 4,443 shares of Company Common Stock held by Mr. Kempner's wife,
as to which Mr. Kempner disclaims beneficial ownership.
(11) Includes 6,750 shares of Company Common Stock owned by a trust of which Mr.
Kempner is a beneficiary.
(12) Includes 327,142 shares of Company Common Stock owned by a testamentary
trust as to which Mr. Thorne is the sole beneficiary and a co-trustee. Also
includes 166,947 shares owned by the Alan Pryce-Jones Trust, of which Mr.
Thorne is a co-trustee and 18,722 shares owned by the Daniel K. Thorne
Foundation of which Mr. Thorne is President. Also includes 875 shares owned
by his wife of which Mr. Thorne disclaims beneficial ownership.
(13) Consists of 1,937,906 shares of Company Common Stock that United States
National Bank holds as trustee of various trusts for descendants of H.
Kempner, but not including any shares that are held in nominee form for
others. United States National Bank has sole voting power over 1,937,456
shares. The information given is based on a Statement on Form 4 filed by
the stockholder with the Commission and other information furnished by the
stockholder.
(14) Includes 2,700 shares of Company Common Stock held by Mr. Weston's wife and
46,800 shares of Company Common Stock held by Mr. Weston's daughters. Mr.
Weston disclaims beneficial ownership as to such shares. Also includes
106,200 shares of Company Common Stock owned by Mr. Weston as trustee for
two trusts for the benefit of Mr. Weston's daughters and 396,000 shares of
Company Common Stock owned by Mr. Weston as trustee of three charitable
annuity lead trusts, as to all of which shares Mr. Weston disclaims
beneficial ownership.
60
<PAGE> 66
DESCRIPTION OF THE TRANSACTIONS
THE TENDER OFFER
On October 16, 1997, pursuant to the Merger Agreement, IHK Sub, a wholly
owned subsidiary of Imperial Holly, completed the Tender Offer. On October 24,
1997, after the appropriate proration procedures had been completed, IHK Sub
purchased 14,397,836 shares of Savannah Common Stock, representing 50.1% of the
issued and outstanding shares of Savannah Common Stock, for $20.25 per share in
cash.
THE MERGER
On December 22, 1997, the Company consummated the Merger. Pursuant to the
Merger Agreement, upon consummation of the Merger, each outstanding share of
Savannah Common Stock (other than shares of Savannah Common Stock owned by
Imperial Holly and its affiliates, which include shares purchased in the Tender
Offer, and shares of Savannah Common Stock held by Savannah Foods stockholders
exercising dissenters' rights of appraisal under Delaware law) was converted
into the right to receive, subject to stockholder elections and proration,
either (i) $20.25 of Company Common Stock (based upon a value of $13.25 per
share of Company Common Stock) or (ii) $20.25 in cash. In the Merger, 30% of the
outstanding shares of Savannah Common Stock was converted into the right to
receive Company Common Stock, and 19.9% of the outstanding shares of Savannah
Common Stock was converted into the right to receive $20.25 in cash. The
remaining 50.1% of the outstanding shares of Savannah Common Stock purchased by
IHK Sub in the Tender Offer was canceled.
DEBT TENDER OFFER
In October 1997, the Company completed a successful tender offer and
consent solicitation (the "Debt Tender Offer") for Imperial Holly's 8 3/8%
Senior Notes due 1989 (the "Existing Notes") and borrowed $78.1 million to fund
the Debt Tender Offer and premiums related thereto.
H. KEMPNER TRUST FINANCING
Concurrently with consummation of the Merger, Imperial Holly completed the
H. Kempner Trust Financing. See "Certain Relationships and Related
Transactions -- Equity Financing."
DESCRIPTION OF INDEBTEDNESS
In order to (i) finance the cash consideration to be paid to Savannah Foods
stockholders in the Transactions, (ii) refinance certain indebtedness of
Imperial Holly and Savannah Foods and purchase the Existing Notes tendered in
the Debt Tender Offer, (iii) pay fees and expenses related to the Offer and the
Merger and (iv) provide working capital to Imperial Holly, Imperial Holly
replaced its and Savannah Foods' previous credit facilities with the credit
facilities described below.
TENDER CREDIT FACILITY
In order to finance the Tender Offer and to repay approximately $140
million of indebtedness of Imperial Holly and certain related expenses and to
provide for Imperial Holly's working capital needs pending the closing of the
Merger, Imperial Holly entered into the Tender Credit Facility in an amount of
up to $505 million. The Tender Credit Facility was comprised of a $295 million
term loan facility (of which $292 million was drawn to fund the Tender Offer)
and a $210 million revolving credit facility (of which approximately $146
million was outstanding on November 30, 1997). The Tender Credit Facility was
guaranteed by substantially all of Imperial Holly's direct and indirect
subsidiaries (other than Savannah Foods and its subsidiaries), and was secured
by substantially all the assets of Imperial Holly and each of such guarantors.
61
<PAGE> 67
SENIOR CREDIT FACILITY
In connection with the consummation of the Merger, the Tender Credit
Facility was amended and restated as the "Senior Credit Facility." The Company
entered into the Senior Credit Facility with a group of financial institutions
for which Lehman Brothers acted as arranger and LCPI acted as syndication agent.
The following is a summary of the material terms and conditions of the Senior
Credit Facility and is subject to the detailed provisions of the Senior Credit
Facility and the various related documents entered into in connection therewith.
LOANS; INTEREST RATES. The Senior Credit Facility is comprised of senior
credit facilities of up to $455 million consisting of term loan facilities
aggregating not more than $255 million (the "Term Loans") and a $200 million
revolving credit facility (the "Revolver"). The proceeds of the Senior Credit
Facility, together with the proceeds of this Offering and the H. Kempner Trust
Financing, provided the financing to repay the amounts owing under the Tender
Credit Facility, to provide a portion of the cash consideration payable upon
consummation of the Merger and certain expenses related to the Merger, and to
provide financing for future working capital and other general corporate
purposes.
The Term Loans were made on the date of the closing of the Merger, and
consist of two tranches. The two tranches, Tranche A in the aggregate principal
amount of $150 million and Tranche B in the aggregate principal amount of $105
million, will fully amortize over a period of six and eight years, respectively.
The Revolver will be available on a revolving basis during the period commencing
on the date of the closing of the Merger and ending on the date that is five
years after the date of the closing of the Merger. The Revolver and the Term
Loans will bear interest, at Imperial Holly's election, at either the Base Rate
plus a margin ranging from 0.25% to 1.00% or the Eurodollar Rate plus a margin
ranging from 1.25% to 2.00%.
REPAYMENT. The principal amounts of the Tranche A Loans and the Tranche B
Loans are repayable in quarterly installments during their respective terms in
the following approximate aggregate annual amounts:
<TABLE>
<CAPTION>
TRANCHE A LOANS TRANCHE B LOANS
--------------- ---------------
YEAR AMOUNT YEAR AMOUNT
- ---- ----------- ---- -----------
<S> <C> <C> <C>
1.......................... $ 5,500,000 1........................... $ 100,000
2.......................... 7,000,000 2........................... 100,000
3.......................... 7,000,000 3........................... 100,000
4.......................... 9,000,000 4........................... 100,000
5.......................... 84,000,000 5........................... 100,000
6.......................... 37,500,000 6........................... 100,000
7........................... 52,200,000
8........................... 52,200,000
</TABLE>
Revolving loans may be borrowed, repaid and reborrowed from time to time
until five years after the closing of the Senior Credit Facility, subject to
certain customary conditions on the date of any such borrowing.
SECURITY. The obligations under the Senior Credit Facility and the related
documents are secured by a first priority lien upon substantially all of the
real and personal property of the Company and its subsidiaries and a pledge of
all of the capital stock of the Company's subsidiaries (provided that no lien
will be granted on the assets of foreign subsidiaries and no capital stock of
foreign subsidiaries will be pledged to the extent that the granting of such
lien or the making of such pledge would result in materially adverse United
States federal income tax consequences to the Company or would violate
applicable law).
GUARANTEES. The obligations of the Company under the Senior Credit Facility
are expected to be guaranteed by substantially all of the Company's subsidiaries
(provided that no guarantee by a foreign subsidiary shall be made if such
guarantee would result in materially adverse United States federal income tax
consequences to the Company or would violate applicable law).
62
<PAGE> 68
PREPAYMENTS. The Company will be required to make prepayments, with
customary exceptions, on loans under the Senior Credit Facility in an amount
equal to 100% of the net proceeds of the incurrence of certain indebtedness,
100% of the net proceeds of the sale of equity securities, 100% of the net
proceeds received by the Company and its subsidiaries (other than certain net
proceeds reinvested in the business of the Company or its subsidiaries) from the
disposition of any assets, including proceeds from the sale of stock of any of
the Company's subsidiaries and 75% of excess cash flow.
CONDITIONS AND COVENANTS. The obligations of the lenders under the Senior
Credit Facility are subject to the satisfaction of certain conditions precedent
customary in similar credit facilities or otherwise appropriate under the
circumstances. The Company and each of its subsidiaries will be subject to
certain negative covenants contained in the Senior Credit Facility, including
without limitation covenants that restrict, subject to specified exceptions: (i)
the incurrence of additional indebtedness and other obligations and the granting
of additional liens; (ii) mergers, acquisitions, investments and acquisitions
and dispositions of assets; (iii) investments, loans and advances; (iv)
dividends, stock repurchases and redemptions; (v) prepayment or repurchase of
other indebtedness and amendments to certain agreements governing indebtedness,
including the Indenture and the Notes; (vi) engaging in transactions with
affiliates; (vii) capital expenditures; (viii) sales and leasebacks; (ix)
changes in fiscal periods; (x) changes of lines of business; and (xi) entering
into agreements which prohibit the creation of liens or limit the Company's
subsidiaries' ability to pay dividends. The Senior Credit Facility also contains
customary affirmative covenants, including compliance with environmental laws,
maintenance of corporate existence and rights, maintenance of insurance,
property and interest rate protection, financial reporting, inspection of
property, books and records, and the pledge of additional collateral and
guarantees from new Subsidiaries. In addition, the Senior Credit Facility
requires the Company to maintain compliance with certain specified financial
covenants including maximum capital expenditures, a maximum ratio of total debt
to EBITDA and senior debt to EBITDA, a minimum interest coverage ratio and a
minimum fixed charge coverage ratio. Certain of these financial, negative and
affirmative covenants are more restrictive than those set forth in the
Indenture.
EVENTS OF DEFAULT. The Senior Credit Facility includes events of default
that are typical for senior credit facilities and appropriate in the context of
the Transactions, including, without limitation, nonpayment of principal,
interest, fees or reimbursement obligations with respect to letters of credit,
violation of covenants, inaccuracy of representations and warranties in any
material respect, cross default to certain other indebtedness and agreements,
bankruptcy and insolvency events, material judgments and liabilities, defaults
or judgments under ERISA and change of control. The occurrence of any of such
events of default could result in acceleration of the Company's obligations
under the Senior Credit Facility and foreclosure on the collateral securing such
obligations, which could have material adverse results to holders of the Notes.
SAVANNAH FOODS INDUSTRIAL REVENUE BONDS
Savannah Foods has six tax-advantaged industrial revenue bond issuances
("IRBs") in the aggregate amount of $22.5 million. The IRBs were issued to fund
capital improvements in Savannah Foods' facilities located in Croswell,
Sebewaing, Caro and Carrollton, Michigan, Visalia, California and Hendry County,
Florida. Each of the IRBs is secured by a lien on the project equipment at such
facilities. Savannah Foods is a party to two of such issuances and has
guaranteed the other four issuances. The IRBs bear interest at variable rates
which generally range from 71% to 75% of LIBOR. However, Savannah Foods has
entered into hedging agreements which provided an effective interest rate of
6.48% for the fiscal year ended September 28, 1997. The effective interest rate
under such agreements for the 1998 fiscal year is 5.17%. The IRBs mature at
varying dates beginning with a $4.5 million issuance at September 1, 2000 and
ending with a $1.5 million issuance at March 1, 2017. The IRBs are secured by
letters of credit in the face amount of such bonds plus interest for up to 120
days.
63
<PAGE> 69
DESCRIPTION OF THE NOTES
The Exchange Notes will be issued, and the Old Notes were issued, pursuant
to an Indenture (the "Indenture") among the Company, the Guarantors and The Bank
of New York, as trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are subject
to all such terms, and Holders of Notes are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The following summary of the
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. Copies of the proposed form of Indenture and
Registration Rights Agreement are available as set forth below under
"-- Additional Information." The definitions of certain terms used in the
following summary are set forth below under "-- Certain Definitions." For
purposes of this summary, the term "Company" refers only to the Company and not
to any of its Subsidiaries.
GENERAL
The Exchange Notes will be issued solely in exchange for an equal principal
amount of Old Notes pursuant to the Exchange Offer. The form and terms of the
Exchange Notes will be identical in all material respects to the form and terms
of the old Notes except that the offering of the Exchange Notes has been
registered under the Securities Act, and the Exchange Notes will therefore not
be subject to transfer restrictions, registration rights and certain provisions
relating to the payment of Liquidated Damages under certain circumstances. See
"-- Registration Rights; Liquidated Damages." The Notes are subject to the terms
stated in the Indenture, a copy of which has been filed as an exhibit to the
Registration Statement, and holders of the Notes are referred thereto for a
statement of those terms.
The Old Notes and the Exchange Notes will constitute a single series of
debt securities under the Indenture. If the Exchange Offer is consummated,
holders of Old Notes who do not exchange their Old Notes for Exchange Notes will
vote together with holders of the Exchange Notes for all relevant purposes under
the Indenture. In that regard, the Indenture requires that certain actions by
the holders thereunder (including following an Event of Default) must be taken,
and certain rights must be exercised, by specified minimum percentages of the
aggregate principal amount of the outstanding securities issued under the
Indenture. In determining whether holders of the requisite percentage in
principal amount have given any notice, consent or waiver or taken any other
action permitted under the Indenture, any Old Notes that remain outstanding
after the Exchange Offer will be aggregated with the Exchange Notes, and the
holders of such Old Notes and the Exchange Notes will vote together as a single
series for all such purposes. Accordingly, all references herein to specified
percentages in aggregate principal amount of the outstanding Notes shall be
deemed to mean, at any time after the Exchange Offer is consummated, such
percentages in aggregate principal amount of the Old Notes and the Exchange
Notes then outstanding.
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all current and future Senior Debt,
including Indebtedness under the Senior Credit Facility. Borrowings under the
Senior Credit Facility will be secured by substantially all of the Company's
assets, including the Capital Stock of substantially all of the Company's
existing and future Subsidiaries, and will be guaranteed by substantially all
such Subsidiaries, which guarantees will be secured by substantially all of such
Subsidiaries' assets. The Notes will be guaranteed by all of the Company's
existing and future Subsidiaries that guarantee any Indebtedness of the Company.
The guarantees of the Notes terminate under certain circumstances. See
"-- Subsidiary Guarantees." The Notes will rank pari passu in right of payment
with all other senior subordinated Indebtedness of the Company issued in the
future, if any, and senior in the right of payment to all subordinated
Indebtedness of the Company issued in the future, if any. As of September 30,
1997, on a pro forma basis giving effect to the Transactions, the Company and
its Restricted Subsidiaries would have had approximately $304.7 million of
Senior Debt (exclusive of an additional $191.3 million available under the
revolving credit portion of the Senior Credit Facility, which, if drawn, would
be Senior Debt). The Indenture will limit, subject to certain financial tests
and exceptions, the amount of additional Indebtedness, including Senior Debt,
that the Company and its Restricted Subsidiaries may incur. See "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock."
64
<PAGE> 70
As of the date of this Prospectus, all of the Company's Subsidiaries were
Restricted Subsidiaries, except for Holly Finance Company, which was an
Unrestricted Subsidiary. Under certain circumstances, the Company will be able
to designate other current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to any of the restrictive
covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $350 million,
$250 million of which will be issued in the Offering, and will mature on
December 15, 2007. Additional amounts may be issued after the date of the
Indenture in one or more series from time to time subject to the limitations set
forth under the caption "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock" and restrictions contained in the Senior Credit
Facility and any other agreement to which the Company is a party at the time of
such issuance. The Company has agreed not to offer, issue or sell any notes,
bonds or other amounts under the Indenture other than the Notes offered hereby
and the Exchange Notes for a period of 180 days from the date of the Indenture
without the prior written consent of Lehman Brothers. Interest on the Notes will
accrue at the rate of 9 3/4% per annum and will be payable semi-annually in
arrears on June 15 and December 15, commencing on June 15, 1998, to Holders of
record on the immediately preceding June 1 and December 1. Interest on the Notes
will accrue from the most recent date to which interest and Liquidated Damages,
if any, has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest and
Liquidated Damages, if any, on the Notes will be payable at the office or agency
of the Company maintained for such purpose within the City and State of New York
or, at the option of the Company, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders of the Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments with respect to Notes the Holders of which have given wire transfer
instructions to the Company will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by the Company, the Company's office or agency in New
York will be the office of the Trustee maintained for such purpose. The Notes
will be issued in denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes will be subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full, in cash or Cash
Equivalents, of all Senior Debt, whether outstanding on the date of the
Indenture or thereafter incurred, assumed or guaranteed.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full, in cash or Cash Equivalents, of all Obligations due in respect
of such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt (whether or not
an allowable claim)) before the Holders of Notes will be entitled to receive any
payment with respect to the Notes, and until all Obligations with respect to
Senior Debt are paid in full, in cash or Cash Equivalents, any distribution to
which the Holders of Notes would be entitled shall be made to the holders of
Senior Debt (except that Holders of Notes may receive and retain (i) Permitted
Junior Securities, (ii) payments made from the trust described under "-- Legal
Defeasance and Covenant Defeasance"; provided that at the time of its creation
such trust does not violate the Senior Credit Facility and (iii) payments from
the trust described under "-- Special Redemption.")
The Company also may not make any payment upon or in respect of the Notes
(except (i) in Permitted Junior Securities, (ii) from the trust described under
"-- Legal Defeasance and Covenant Defeasance"; provided that at the time of its
creation such trust does not violate the Senior Credit Facility or (iii) from
the trust described under "Special Redemption") if (i) a default in the payment
of the principal of, premium, if
65
<PAGE> 71
any, or interest on Designated Senior Debt occurs and is continuing beyond any
applicable period of grace (a "Payment Default") or (ii) any other default
occurs and is continuing with respect to Designated Senior Debt that permits
holders of the Designated Senior Debt as to which such default relates to
accelerate its maturity (a "Nonpayment Default") and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company or the
Representative of the holders of any Designated Senior Debt. Payments on the
Notes may and shall be resumed (a) in the case of a Payment Default, upon the
date on which such default is cured or waived and (b) in case of a Nonpayment
Default, the earlier of the date on which such Nonpayment Default is cured or
waived or 179 days after the date on which the applicable Payment Blockage
Notice is received, unless the maturity of any Designated Senior Debt has been
accelerated. No new period of payment blockage may be commenced unless and until
(i) 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of principal, premium,
if any, and interest and Liquidated Damages, if any, on the Notes that have come
due have been paid in full in cash. No Nonpayment Default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been cured or waived for a period of not less than 90
days.
The Indenture will further require that the Company promptly notify holders
of Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. On a pro forma basis,
after giving effect to the Transactions, there would have been approximately
$304.7 million of Senior Debt outstanding at September 30, 1997 (exclusive of an
additional $191.3 million available under the revolving credit portion of the
Senior Credit Facility, which, if drawn, would be Senior Debt). The Indenture
will limit, subject to certain financial tests, the amount of additional
Indebtedness, including Senior Debt, that the Company and its Restricted
Subsidiaries can incur. See "-- Certain Covenants -- Incurrence of Indebtedness
and Issuance of Preferred Stock."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes will be jointly and
severally guaranteed on a senior subordinated basis by the Guarantors. Any
Subsidiary of the Company that guarantees any Indebtedness of the Company shall
be required to execute Subsidiary Guarantees and become a Guarantor under the
Indenture. The Subsidiary Guarantee of each Guarantor will be subordinated to
the prior payment in full of all Senior Debt of such Guarantor (of which an
aggregate amount of $35.1 million (excluding guarantees of Senior Debt) was
outstanding on a pro forma basis after giving effect to the Transactions as of
September 30, 1997 for all Guarantors), and the amounts for which the Guarantors
will be liable under the guarantees issued from time to time with respect to
Senior Debt of the Company to the same extent as the Obligations of the Company
with respect to the Notes are subordinated to Senior Debt of the Company. The
obligations of each Guarantor under its Subsidiary Guarantee will be limited to
the maximum amount the Guarantors are permitted to guarantee under applicable
law without creating a "fraudulent conveyance." See "Risk Factors -- Fraudulent
Conveyance Considerations."
The Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes and the Indenture; (ii) immediately after giving effect
to such transaction, no Default or Event of Default exists; (iii) such
Guarantor, or any Person formed by or surviving any such consolidation or
merger, would have Consolidated Net Worth (immediately after giving effect to
such transaction) equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction; and (iv) except in the case of
the merger of a Guarantor with or into another Guarantor or the Company, the
Company would be permitted by virtue of the Company's pro forma Fixed Charge
Coverage Ratio, immediately after giving effect to such transaction, to incur at
least $1.00 of additional Indebtedness pursuant
66
<PAGE> 72
to the Fixed Charge Coverage Ratio test set forth in the covenant described
above under the caption "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock."
Notwithstanding the foregoing paragraph, (i) any Guarantor may consolidate
with, merge into or transfer all or a part of its properties and assets to the
Company or any other Guarantor and (ii) any Guarantor may merge with a Wholly
Owned Subsidiary of the Company that has no significant assets or liabilities
and was incorporated solely for purpose of reincorporating such Guarantor in
another State of the United States; provided that such merged entity continues
to be a Guarantor.
The Indenture will provide that upon (i) the release by the lenders under
all Indebtedness of the Company of all Indebtedness of the Company of all
guarantees of a Guarantor and all Liens on the property and assets of such
Guarantor relating to such Indebtedness, or (ii) a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor in compliance with the Indenture to any entity that is not the Company
or a Subsidiary, then such Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of the
capital stock of such Guarantor), or the Person acquiring the property (in the
event of such a sale or other disposition of all of the assets of such
Guarantor), will be released and relieved of any obligations under its
Subsidiary Guarantee; provided, however, that any such termination shall occur
only to the extent that all obligations of such Guarantor under such
Indebtedness and all of its guarantees of, and under all of its pledges of
assets or other security interests which secure, Indebtedness of the Company
shall also terminate upon such release, sale or transfer and, in the event of
any sale or other disposition, that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See "-- Repurchase at the Option of Holders -- Asset Sales."
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to December
15, 2002. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on December 15, of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002............................................... 104.875%
2003............................................... 103.250
2004............................................... 101.625
2005 and thereafter................................ 100.000%
</TABLE>
Notwithstanding the foregoing, at any time before December 15, 2000, the
Company may on any one or more occasions redeem up to an aggregate of 35% of the
principal amount of Notes outstanding at a redemption price of 109.75% of the
principal amount thereof, plus accrued and unpaid interest, if any, and
Liquidated Damages, if any, thereon, to the redemption date, with the net cash
proceeds of any Equity Offering; provided that at least 65% of the aggregate
principal amount of Notes outstanding on the date of the Indenture remain
outstanding immediately after each occurrence of such redemption; and provided,
further, that each such redemption shall occur within 60 days of the date of the
closing of such Equity Offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may
67
<PAGE> 73
not be conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest and
Liquidated Damages, if any, cease to accrue on Notes or portions of them called
for redemption.
SPECIAL REDEMPTION
On February 2, 1998 (the "Special Redemption Date"), the Notes will be
subject to mandatory redemption at a redemption price equal to 101% of the
principal amount of the Notes, plus accrued interest to the date of redemption
(the "Special Redemption Price"), if the Merger is not consummated prior to the
Special Redemption Date. The Company will also have the option to redeem the
Notes at any time on or prior to the Special Redemption Date if the Merger has
not been consummated and the Merger Agreement has been terminated on or prior to
such time at a redemption price equal to 101% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption.
Pursuant to the Indenture, if the Merger is not consummated on the date of
the Indenture, the Company will deposit with the Trustee, in trust, the net
proceeds from the sale of the Notes, together with such other amount as, when
added to such net proceeds, equals (the "Trust Amount") $252.5 million plus an
amount equal to the interest thereon at the rate of 9 3/4% per annum to the
Special Redemption Date. All amounts so deposited with the Trustee
(collectively, the "Trust Funds") will be pledged to and held by the Trustee
pursuant to the Indenture as security for the Notes. The Indenture will provide
that if, prior to the Special Redemption Date, the Company delivers to the
Trustee the required certificates and other documents, then the Trustee will
release the Trust Funds to the Company for application to the payment of the
Special Redemption Price. Following the release of the Trust Funds, the Notes
will be unsecured obligations of the Company.
Pending release of the Trust Funds as provided in the Indenture, the Trust
Funds will be invested in Cash Equivalents having a maturity no later than the
Special Redemption Date and otherwise in accordance with applicable law as
directed by the Company and any investment proceeds thereon to the extent Trust
Funds exceed the Trust Amount will be available to the Company. If the Notes are
redeemed on or prior to the Special Redemption Date, the Notes will be redeemed
with the Trust Funds and any portion of the Trust Funds not required to be used
for such redemption will be returned to the Company.
MANDATORY REDEMPTION
Except as set forth above under "-- Special Redemption" or below under
"-- Repurchase at the Option of Holders," the Company is not required to make
mandatory redemption or sinking fund payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each Holder
of Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date
of purchase (the "Change of Control Payment"). Within ten days following any
Change of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Indenture and described in such notice. The Company will comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
68
<PAGE> 74
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Indenture will provide
that, prior to complying with the provisions of this covenant, but in any event
within 90 days following a Change of Control, the Company will either repay all
outstanding Senior Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of Notes
required by this covenant. The Company will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction. The definition of Change of Control includes a phrase
relating to the sale, lease, transfer, conveyance or other disposition of "all
or substantially all" of the assets of the Company. There is little case law
interpreting the phrase "all or substantially all" in the context of an
indenture. Because there is no precise established definition of this phrase,
the ability of a holder of Notes to require the Company to repurchase such Notes
as a result of a sale, lease, exchange or other transfer of all or substantially
all of the Company's assets to a Person or a Group may be uncertain.
The Senior Credit Facility will limit the ability of the Company to
purchase any Notes and will also provide that certain change of control events
with respect to the Company would constitute a default thereunder. Any future
Senior Credit Facilities or other agreements relating to Senior Debt to which
the Company becomes a party may contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when the Company is prohibited
from purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the Senior Credit Facility. In such circumstances, the subordination provisions
in the Indenture would likely restrict payments to the Holders of Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
ASSET SALES. The Indenture will provide that the Company will not, and will
not permit any of its Restricted Subsidiaries to, engage in an Asset Sale unless
(i) 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 (which shall be determined in good faith by the Company's Board of
Directors) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 75% of the consideration therefor (other than the
consideration received in the disposition of the real property, improvements and
equipment associated with Holly Sugar Corporation's non-operating facilities at
Hamilton City, California and Santa Barbara, California) received by the Company
or such Restricted Subsidiary is in the form of cash or Cash Equivalents;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary of the Company (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Subsidiary
69
<PAGE> 75
Guarantee) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision and provided, further, that any Asset Sale
pursuant to a condemnation, appropriation or other similar taking, including by
deed in lieu of condemnation, or pursuant to the foreclosure or other
enforcement of a Permitted Lien or exercise by the related lienholder of rights
with respect thereto, including by deed or assignment in lieu of foreclosure
shall not be required to satisfy the conditions set forth in clauses (i) and
(ii) of this paragraph.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Restricted Subsidiary, as the case may be, may apply such
Net Proceeds, at its option, (a) to permanently repay Senior Debt (and to
correspondingly permanently reduce the commitments with respect thereto in the
case of revolving borrowings), (b) to acquire a controlling interest in another
business or all or substantially all of the assets of a business, engaged in a
Permitted Business, or (c) to acquire other long term assets to be used in a
Permitted Business, provided that the Company or such Restricted Subsidiary will
have complied with clause (b) or (c) if, within 270 days of such Asset Sale, the
Company or such Restricted Subsidiary shall have commenced and not completed or
abandoned an investment in compliance with clause (b) or (c) and such Investment
is substantially completed within 90 days after the first anniversary of such
Asset Sale. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce Indebtedness under any Credit Facility or otherwise
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10 million, the
Company shall be required to make an offer to all Holders of Notes and other
Indebtedness that ranks by its terms pari passu in right of payment with the
Notes and the terms of which contain substantially similar requirements with
respect to the application of net proceeds from asset sales as are contained in
the Indenture (an "Asset Sale Offer") to purchase on a pro rata basis the
maximum principal amount of the Notes, that is an integral multiple of $1,000,
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes and other such Indebtedness tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company) or to the direct or indirect holders of the Company's or any of its
Restricted Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for
value (including without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company (other
than any such Equity Interests owned by a Wholly Owned Subsidiary of the
Company); (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes, except a payment of interest or principal at Stated
Maturity; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through
70
<PAGE> 76
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock";
and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company or any of its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii),(iv), (v), (vii), (viii) or (ix) of the
next succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
immediately following the date of the Indenture to the end of the Company's
most recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale, in either case, since the date of the
Indenture of (A) Equity Interests of the Company (other than Disqualified
Stock), or (B) Disqualified Stock or debt securities of the Company that
have been converted into such Equity Interests (other than Equity Interests
(or Disqualified Stock or convertible or exchangeable debt securities) sold
to a Restricted Subsidiary of the Company and other than Disqualified Stock
or debt securities that have been converted or exchanged into Disqualified
Stock), plus (iii) in case any Unrestricted Subsidiary has been
redesignated a Restricted Subsidiary pursuant to the terms of the Indenture
or has been merged, consolidated or amalgamated with or into, or transfers
or conveys assets to or is liquidated into, the Company or a Restricted
Subsidiary and provided that no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, the
lesser of (A) the book value (determined in accordance with GAAP) at the
date of such redesignation, combination or transfer of the aggregate
Investments made by the Company and its Restricted Subsidiaries in such
Unrestricted Subsidiary (or of the assets transferred or conveyed, as
applicable) and (B) the fair market value of such Investment in such
Unrestricted Subsidiary at the time of such redesignation, combination or
transfer (or of the assets transferred or conveyed, as applicable), in each
case as determined in good faith by the Board of Directors of the Company,
whose determination shall be conclusive and evidenced by a resolution of
such Board and, in each case, after deducting any Indebtedness associated
with the Unrestricted Subsidiary so designated or combined or with the
assets so transferred or conveyed, plus (iv) to the extent not already
included in Consolidated Net Income for such period, without duplication,
any Restricted Investment that was made after the date of the Indenture is
sold for cash or otherwise liquidated or repaid for cash, the lesser of (A)
the cash return of capital with respect to such Restricted Investment (less
the cost of disposition, if any) and (B) the initial amount of such
Restricted Investment, plus (v) $10 million.
The foregoing provisions shall not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Indebtedness which is subordinated to the Notes or Equity
Interests of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of Indebtedness which is
subordinated to the Notes with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend or
71
<PAGE> 77
distribution by a Restricted Subsidiary of the Company to the holders of its
common Equity Interests on a pro rata basis; (v) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Company
or any Restricted Subsidiary of the Company held by any employee or director of
the Company (or any of its Subsidiaries), or any former employee or director of
the Company (or any of its Subsidiaries) issued pursuant to any management
equity plan or stock option plan or any other management or employee benefit
plan, agreement or trust; provided, however, that the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests pursuant to
this clause (v) shall not exceed $1 million in any twelve-month period; (vi)
other Restricted Payments not to exceed $10 million in the aggregate; (vii)
repurchases of Equity Interests deemed to occur upon the cashless exercise of
stock options; (viii) payments in accordance with the terms of the Merger
Agreement; and (ix) reasonable and customary directors' fees to the members of
the Company's Board of Directors, provided that such fees are consistent with
past practice, provided, further, that, with respect to clauses (ii), (iii),
(v), (vi), (vii), (viii) and (ix) above, no Default or Event of Default shall
have occurred and be continuing immediately after such transaction.
In determining whether any Restricted Payment is permitted by the foregoing
covenant, the Company may allocate or reallocate all or any portion of such
Restricted Payment among the clauses (i) through (ix) of the preceding paragraph
or among such clauses and the first paragraph of this covenant including clauses
(a), (b) and (c), provided that at the time of such allocation or reallocation,
all such Restricted Payments, or allocated portions thereof, would be permitted
under the various provisions of the foregoing covenant.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (as determined by the Board of Directors of the Company and as
evidenced by a resolution of the Board of Directors of the Company set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) or securities proposed to be transferred or issued by
the Company or such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment, such determination to be based upon an opinion or appraisal
by an Independent Financial Advisor if the fair market value of any Restricted
Payment is greater than $10 million. Not later than (i) the end of any calendar
quarter in which any Restricted Payment is made or (ii) the making of a
Restricted Payment which, when added to the sum of all previous Restricted
Payments made in a calendar quarter, would cause the aggregate of all Restricted
Payments made in such quarter to exceed $5 million, the Company shall deliver to
the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this covenant were computed, which calculations may be based upon the Company's
latest available financial statements.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if (i) immediately after giving effect to such
designation, the Company is able to incur at least $1.00 of additional
Indebtedness under the first paragraph of the covenant described above under the
caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock", (ii) immediately before and immediately after giving effect to
such designation, no Default or Event of Default shall have occurred and be
continuing and (iii) the Company certifies that such designation complies with
this covenant. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
For purposes of making the determination as to whether such designation
would cause a Default or Event of Default, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
greatest of (i) the net book value (determined in accordance with GAAP) of such
Investments at the time of such designation, (ii) the fair market value of such
Investments at the time of such designation and (iii) the original fair market
value of such Investments at the time they were made. Such designation will only
be permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
72
<PAGE> 78
Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred as of such date.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Indenture
will provide that the Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur")any
Indebtedness (including Acquired Debt) and that the Company shall not issue any
Disqualified Stock and shall not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company or any
Guarantor may incur Indebtedness (including Acquired Debt) or the Company may
issue shares of Disqualified Stock if the Company's Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.25 to 1, during the period from the date of
the Indenture until the second anniversary of the date of the Indenture, and,
thereafter, 2.50 to 1, in each case, determined on a pro forma basis (including
a pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant shall not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes and the Subsidiary Guarantees;
(ii) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness and letters of credit pursuant to the Senior Credit Facility
(with letters of credit being deemed to have a principal amount equal to
the maximum potential liability of the Company or its Restricted
Subsidiaries thereunder) in an aggregate principal amount not to exceed
$455 million, less the sum of (A) the aggregate amount of all proceeds of
Assets Sales that have been applied since the date of the Indenture to
permanently reduce the outstanding amount of such Indebtedness pursuant to
the covenant described above under the caption "-- Repurchase at the Option
of Holders -- Asset Sales"; plus (B) Indebtedness incurred and outstanding
pursuant to clause (ix) below;
(iii) the incurrence by the Company or any of its Restricted
Subsidiaries of Existing Indebtedness;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund, Indebtedness that was permitted by the Indenture to be
incurred;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (i) if the
Company or any Guarantor is the obligor on such Indebtedness, such
Indebtedness is expressly subordinate to the payment in full of all
Obligations with respect to the Notes and (ii) (A) any subsequent issuance
or transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Restricted Subsidiary and (B)
any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Restricted Subsidiary shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each
73
<PAGE> 79
case incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Restricted
Subsidiary, in an aggregate principal amount, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace
Indebtedness incurred pursuant to this clause (vi), not to exceed $20
million at any time outstanding;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of obligations in the ordinary course of business under (A)
trade letters of credit which are to be repaid in full not more than one
year after the date on which such Indebtedness is originally incurred to
finance the purchase of goods by the Company or a Restricted Subsidiary of
the Company; (B) standby letters of credit issued for the purpose of
supporting (1) workers' compensation liabilities of the Company or any of
its Restricted Subsidiaries, or (2) performance, payment, deposit or surety
obligations of the Company or any of its Restricted Subsidiaries; and (C)
bid, advance payment and performance bonds and surety bonds of the Company
and its Restricted Subsidiaries, and refinancings thereof;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Financial Hedging Obligations that are incurred for the
purpose of fixing or hedging interest rate risk (including with respect to
any floating rate Indebtedness that is permitted by the terms of the
Indenture to be outstanding; and) and Commodity Hedging Obligations in
connection with the conduct of their respective businesses and not for
speculative purposes and otherwise consistent with past practices;
(ix) the incurrence by the Company or any Restricted Subsidiary of CCC
Loans in an aggregate principal amount outstanding not to exceed the lesser
of (A) $200 million and (B) the undrawn portion of the revolving credit
facility and unused letter of credit facility available under the Senior
Credit Facility which would be permitted to be incurred pursuant to clause
(ii) above;
(x) Indebtedness arising from agreements of the Company or any of its
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred in connection with the
disposition of any business, assets or a Restricted Subsidiary of the
Company, other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or a Restricted
Subsidiary of the Company for the purposes of financing such acquisition;
provided, however, that (A) such Indebtedness is not reflected on the
balance sheet of the Company or any of its Restricted Subsidiaries
(contingent obligations referred to in a footnote to financial statements
and not otherwise reflected on the balance sheet will not be deemed to be
reflected on such balance sheet for purposes of this clause (A)) and (B)
the maximum assumable liability in respect of all such Indebtedness shall
at no time exceed the gross proceeds including noncash proceeds (the fair
market value of such noncash proceeds being measured at the time received
and without giving effect to any subsequent changes in value) actually
received by the Company and its Restricted Subsidiaries in connection with
such disposition;
(xi) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this covenant;
provided, that the Guarantee of any Indebtedness of a Restricted Subsidiary
of the Company that is not or is no longer a Guarantor shall be deemed a
Restricted Investment at the time of such guarantee or at the time such
Restricted Subsidiary's Guarantor status terminates in an amount equal to
the maximum principal amount so guaranteed, for so long as, and to the
extent that, such guarantee remains outstanding;
(xii) the issuance by a Restricted Subsidiary of the Company of
preferred stock to the Company or to any of its Restricted Subsidiaries;
provided, however, that any subsequent event or issuance or transfer of any
Equity Interests that results in the owner of such preferred stock ceasing
to be the Company or any of its Restricted Subsidiaries or any subsequent
transfer of such preferred stock to a Person, other than the Company or one
of its Restricted Subsidiaries, shall be deemed to be an issuance of
preferred stock by such Subsidiary that was not permitted by this clause
(xii); and
74
<PAGE> 80
(xiii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any
other clause of this paragraph) in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding not to exceed $25
million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (ix) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness shall be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest, the accretion of accreted
value and the payment of interest in the form of additional Indebtedness will
not be deemed to be an incurrence of Indebtedness for purposes of this covenant.
LIENS. The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise
cause or suffer to exist or become effective any Lien of any kind securing
Indebtedness or trade payables (other than Permitted Liens) upon any of their
property or assets, now owned or hereafter acquired, unless all payments due
under the Indenture and the Notes are secured on an equal and ratable basis with
the obligations so secured until such time as such obligations are no longer
secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The
Indenture will provide that the Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company or the Company to (i)(x) pay
dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (y) pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)
make loans or advances to the Company or any of its Restricted Subsidiaries or
(iii) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) the Indenture, the Notes, Existing Indebtedness and
the Senior Credit Facility as in effect on the date of the Indenture, (b)
applicable law, (c) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except with respect to Indebtedness
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person or such Person's subsidiaries, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (d) restrictions of the nature described in clause (iii) above by
reason of customary non-assignment provisions in contracts, agreements, and
leases entered into in the ordinary course of business and consistent with past
practices, (e) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (f) any restriction with respect to a
Restricted Subsidiary imposed pursuant to an agreement entered into for the sale
or disposition of all or substantially all of the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or disposition, (g)
agreements relating to secured Indebtedness otherwise permitted to be incurred
pursuant to the covenants described under the Indebtedness otherwise permitted
to be incurred pursuant to the covenants described under the "-- Incurrence of
Indebtedness and Issuance of Preferred Stock" and
"-- Liens" that limit the right of the debtor to dispose of assets securing such
Indebtedness and (h) Permitted Refinancing Indebtedness in respect of
Indebtedness referred to in clause (a), (c) and (e) of this paragraph, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Indenture will provide that
the Company will not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving
75
<PAGE> 81
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately before and
after such transaction no Default or Event of Default shall have occurred; and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Subsidiary, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of covenant described above under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock."
ADDITIONAL SUBSIDIARY GUARANTEES. The Indenture will provide that if any
Subsidiary of the Company guarantees any Indebtedness of the Company, then such
Subsidiary shall (i) execute a supplemental indenture in form and substance
satisfactory to the Trustee providing that such Subsidiary shall become a
Guarantor under the Indenture and (ii) deliver an opinion of counsel to the
effect, inter alia, that such supplemental indenture has been duly authorized
and executed by such Subsidiary.
TRANSACTIONS WITH AFFILIATES. The Indenture will provide that the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, make any payment to, or sell, lease, transfer or otherwise dispose
of any properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, any Affiliate of any
such Person (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1 million, a resolution of its
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above, (b) with respect to any
Affiliate Transaction or series of related Affiliate Transaction involving
aggregate consideration in excess of $5 million, a resolution of its Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of its Board of
Directors, and (c) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$10 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an Independent Financial
Advisor; provided that none of the following shall be deemed to be Affiliate
Transactions: (1) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary, as the case
may be, (2) transactions between or among the Company and/or its Restricted
Subsidiaries, (3) Restricted Payments that are permitted by the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments",
(4) fees and compensation paid to members of the Board of Directors of the
Company and of its Restricted Subsidiaries in their capacity as such, to the
extent such fees and compensation are reasonable and customary, (5) advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business and consistent with past
practices, (6) maintenance in the ordinary course of business of customary
benefit programs or arrangements for employees, officers or directors, including
vacation plans, health and life insurance plans, deferred compensation plans and
retirement or savings plans and similar plans; (7) payments in accordance with
the terms of the Merger Agreement; and (8) fees and compensation paid to, and
indemnity provided on behalf of, officers, directors or
76
<PAGE> 82
employees of the Company or any of its Restricted Subsidiaries, as determined by
the Board of Directors of the Company or of any such Restricted Subsidiary, to
the extent such fees and compensation are reasonable and customary as determined
by the Board of Directors of the Company or such Restricted Subsidiary.
NO SENIOR SUBORDINATED DEBT. The Indenture will provide that,
notwithstanding any other provision thereof, (i) the Company will not incur,
create, issue, assume, guarantee or otherwise become liable directly or
indirectly for any Indebtedness (including Acquired Debt) that is expressly
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes and (ii) no Guarantor will incur,
create, issue, assume, guarantee or otherwise become liable for any Indebtedness
(including Acquired Debt) that is expressly subordinate or junior in right of
payment to any Senior Debt of a Guarantor and senior in any respect in right of
payment to the Subsidiary Guarantees, it being understood that Indebtedness will
not be considered senior to other Indebtedness solely by reason of being
secured.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF SUBSIDIARIES. The
Indenture will provide that the Company (i) will not, and will not permit any
Restricted Subsidiary of the Company to, transfer, convey, sell or otherwise
dispose of any Capital Stock of any Restricted Subsidiary of the Company to any
Person (other than the Company or a Wholly Owned Subsidiary of the Company),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Capital Stock of such Restricted Subsidiary and (b) the net proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant described above under the caption "-- Repurchase at
the Option of Holders -- Asset Sales," and (ii) shall not permit any Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary of
the Company.
BUSINESS ACTIVITIES. The Indenture will provide that the Company will not,
and the Company will not permit any of its Restricted Subsidiaries to, directly
or indirectly, engage in any line of business other than a Permitted Business,
except to such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT. The Indenture will provide that the Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture, the Subsidiary Guarantees or the Notes unless such consideration is
offered to be paid or is paid to all Holders of the Notes that consent, waive or
agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
REPORTS. The Indenture will provide that whether or not the Company is
required by the rules and regulations of the Commission, so long as any Notes
are outstanding, the Company will furnish to each of the Holders of Notes (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such financial information, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
any consolidated Subsidiaries and, with respect to the annual information only,
reports thereon by the Company's independent public accountants (which shall be
firm(s) of established national reputation) and (ii) all information that would
be required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. All such information and reports shall be
delivered to the Holders of Notes on or prior to the dates on which such filings
would have been required to be made had the Company been subject to the rules
and regulations of the Commission. In addition, whether or not required by the
rules and regulations of the Commission, the Company shall file a copy of all
such information and reports with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as any Notes remain outstanding, they will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
77
<PAGE> 83
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes, (ii) default in payment when due
of the principal of or premium, if any, on the Notes; (iii) failure by the
Company or any of its Restricted Subsidiaries to comply with the provisions
described under the captions "-- Certain Covenants -- Restricted Payments,"
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock," "-- Certain Covenants -- Merger, Consolidation or Sale of Assets,"
"-- Special Redemption," "-- Repurchase at the Option of Holders -- Asset
Sales," "Repurchase at the Option of Holders -- Change of Control,"; (iv)
failure by the Company or any of its Restricted Subsidiaries for 60 days after
notice to comply with any of its other agreements in the Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the date
of the Indenture, which default (a) is caused by a failure to pay principal of
or premium, if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates without duplication $10 million or more and such
default shall not have been cured or acceleration rescinded within five business
days after such occurrences; (vi) failure by the Company or any of its
Restricted Subsidiaries to pay final judgments aggregating in excess of $5
million (excluding amounts covered by insurance), which judgments are not paid,
discharged or stayed for a period of 60 days; (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Restricted Subsidiaries;
and (viii) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Subsidiary Guarantee (other than by reason of the termination of the
Indenture or the release of any such Subsidiary Guarantee in accordance with the
Indenture).
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest or Liquidated Damages) if it determines that withholding
notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest and Liquidated Damages, if any, on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
78
<PAGE> 84
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or the Guarantors, as such, shall have any liability for any obligations of the
Company under the Notes, the Subsidiary Guarantees or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such Notes when such payments are due from
the trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages,
if any, on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Notes are being defeased to maturity or to a particular redemption date; (ii) in
the case of Legal Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than
the Indenture) to which the Company or any of its Restricted Subsidiaries is a
party or by which the Company or any of its Restricted Subsidiaries is bound;
(vi) the Company must have delivered to the Trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
79
<PAGE> 85
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
Notes over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and (viii)
the Company must deliver to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder, when (a) either (i) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has heretofore been
deposited in trust and thereafter repaid to the Company) have been delivered to
the Trustee for cancellation; or (ii) all such Notes not theretofore delivered
to such Trustee for cancellation have become due and payable by reason of the
making of a notice of redemption or otherwise or will become due and payable
within one year and the Company has irrevocably deposited or caused to be
deposited with such Trustee as trust funds in trust solely for the benefit of
the Holders, cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient without consideration
of any reinvestment of interest, to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Trustee for cancellation for
principal, premium, if any, and accrued interest to the date of maturity or
redemption; (b) no Default or Event of Default with respect to the Indenture or
the Notes shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company is a party or by which the Company is bound; (c) the Company
has paid or caused to be paid all sums payable by it under the Indenture; and
(d) the Company has delivered irrevocable instructions to the Trustee under the
Indenture to apply the deposited money toward the payment of such Notes at
maturity or the redemption date, as the case may be. In addition, the Company
must deliver an Officers' Certificate and an opinion of counsel to the Trustee
stating that all conditions precedent to satisfaction and discharge have been
satisfied.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture,
the Notes or the Subsidiary Guarantees may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Notes), and any
existing default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders"), (iii) reduce the
80
<PAGE> 86
rate of or change the time for payment of interest or Liquidated Damages on any
Note, (iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest or Liquidated Damages, if any, on the Notes (except
a rescission of acceleration of the Notes by the Holders of at least a majority
in aggregate principal amount of the Notes and a waiver of the payment default
that resulted from such acceleration), (v) make any Note payable in money other
than that stated in the Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of or premium, if any, or interest or
Liquidated Damages, if any, on the Notes, (vii) waive a redemption payment with
respect to any Note (other than a payment required by one of the covenants
described above under the caption "-- Repurchase at the Option of Holders") or
(viii) make any change in the foregoing amendment and waiver provisions. In
addition, any amendment to certain provisions of the Indenture which relate to
subordination will require the consent of the Holders of at least 75% in
aggregate principal amount of the Notes then outstanding if such amendment would
adversely affect the rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture, the Notes or
the Subsidiary Guarantees to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder, or
to comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act or to allow any
Guarantor to guarantee the Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the
Indenture without charge by writing to Imperial Holly Corporation, One Imperial
Square, Suite 200, 8016 Highway 90-A, Sugar Land, Texas 77478, Attention:
Corporate Secretary.
BOOK-ENTRY, DELIVERY AND FORM
The Old Notes held by Qualified Institutional Buyers are represented by one
or more global notes in registered, global form without interest coupons
(collectively, the "Rule 144A Global Note"). The Rule 144A Global Note initially
will be deposited upon issuance with the Trustee as custodian for the
Depositary, in New York, New York, and registered in the name of the Depositary
or its nominee, in each case for credit to an account of a direct or indirect
participant as described below.
The Old Notes sold in offshore transactions in reliance on Regulation S
under the Securities Act initially will be represented by one or more temporary
global notes in registered, global form without interest coupons
81
<PAGE> 87
(collectively, the "Regulation S Temporary Global Note"). The Regulation S
Temporary Global Note will be registered in the name of a nominee of the
Depositary for credit to the subscribers' respective accounts at the Euroclear
System ("Euroclear") and Cedel Bank, S.A. ("CEDEL"). Beneficial interests in the
Regulation S Temporary Global Note may be held only through Euroclear or CEDEL.
Within a reasonable time period after the expiration of the period of 40
days commencing on the latest of the commencement of the Offering and the
original date of the Indenture of the Old Notes (such period through and
including such 40th day, the "Restricted Period"), the Regulation S Temporary
Global Note will be exchanged for one or more permanent global notes
(collectively, the "Regulation S Permanent Global Note" and, together with the
Regulation S Temporary Global Note, the "Regulation S Global Note" (the
Regulation S Global Note and the Rule 144A Global Note collectively being the
"Global Old Notes")) upon delivery to the Depositary of certification of
compliance with the transfer restrictions applicable to the Old Notes pursuant
to Regulation S as provided in the Indenture. During the Restricted Period,
beneficial interests in the Regulation S Temporary Global Note may be held only
through Euroclear or CEDEL (as indirect participants in the Depository). See
"-- Depositary Procedures -- Exchanges between Regulation S Notes and the Rule
144A Global Note." Beneficial interests in the Rule 144A Global Note may not be
exchanged for beneficial interests in the Regulation S Global Note at any time
except in the limited circumstances described below. See "-- Depositary
Procedures -- Exchanges between Regulation S Notes and the Rule 144A Global
Note."
The Rule 144A Global Note (including beneficial interests in the Rule 144A
Global Notes) will be subject to certain restrictions on transfer and will bear
a restrictive legend as described under "Notice to Investors." In addition,
transfer of beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of the Depositary and its direct or indirect
participants (including, if applicable, those of Euroclear and CEDEL), which may
change from time to time.
The Exchange Notes also will be issued in the form of one or more Global
Notes (the "Global Exchange Notes" and, together with the Global Old Notes, the
"Global Notes"). The Global Exchange Notes will be deposited on the original
date of issuance of the Exchange Notes with, or on behalf of, DTC and registered
in the name of Cede & Co., as nominee of DTC.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of the Depositary or to a successor of
the Depositary or its nominee. Beneficial interests in the Global Notes may not
be exchanged for Notes in certificated form except in the limited circumstances
described below. See "-- Depositary Procedures -- Exchange of Book-Entry Notes
for Certificated Notes."
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITARY PROCEDURES
The Depositary has advised the Company that the Depositary is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to the Depositary's system is also available to other entities such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only through
the Participants or Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of the Depositary are recorded on the records of the Participants and
Indirect Participants.
The Depositary has also advised the Company that pursuant to procedures
established by it, (i) upon deposit of the Global Notes, the Depositary will
credit the accounts of Participants designated by the Initial Purchasers with
portions of the principal amount of Global Notes and (ii) ownership of such
interests in the Global Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records
82
<PAGE> 88
maintained by the Depositary (with respect to Participants) or by Participants
and the Indirect Participants (with respect to other owners of beneficial
interests in the Global Notes).
Investors in the Rule 144A Global Note may hold their interests therein
directly through the Depositary, if they are Participants in such system, or
indirectly through organizations (including Euroclear and CEDEL) that are
Participants in such system. Investors in the Regulation S Global Note must
initially hold their interests therein through Euroclear or CEDEL, if they are
Participants in such systems, or indirectly through organizations that are
Participants in such systems. After the expiration of the Restricted Period (but
not earlier), investors may also hold interests in the Regulation S Global Note
through organizations other than Euroclear and CEDEL that are Participants in
the Depositary system. Euroclear and CEDEL will hold interests in the Regulation
S Global Note on behalf of their Participants through customers' securities
accounts in their respective names on the books of their respective
depositories, which are Morgan Guaranty Trust Company of New York, Brussels
office, as operator of Euroclear, and Citibank, N.A. as operator of CEDEL. The
depositories, in turn, will hold such interests in the Regulations S Global Note
in customers' securities accounts in the depositories' names on the books of the
Depositary. All interests in a Global Note, including those held through
Euroclear or CEDEL, may be subject to the procedures and requirements of the
Depositary. Those interests held by Euroclear or CEDEL may also be subject to
the procedures and requirements of such system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interest in a Global Note to such persons may be limited to
that extent. Because the Depositary can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having a beneficial interest in a Global Note to pledge such
interest to persons or entities that do not participate in the Depositary
system, or otherwise take actions in respect of such interests, may be affected
by the lack of physical certificate evidencing such interest. For certain other
restrictions on the transferability of the Notes, see "-- Exchange of Book-Entry
Notes for Certificated Notes" and "-- Exchanges between Regulation S Notes and
the Rule 144A Global Note."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS, OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal and premium and Liquidated Damages, if
any, and interest on a Global Note registered in the name of the Depositary or
its nominee will be payable by the Trustee to the Depositary or its nominee in
its capacity as the registered Holder under the Indenture. Under the terms of
the Indenture, the Company and the Trustee will treat the persons in whose names
the Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company, the Trustee nor any agent of the
Company or the Trustee has or will have any responsibility or liability for (i)
any aspect of the Depositary's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Notes, or for maintaining, supervising or
reviewing any of the Depositary's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes or (ii) any other matter relating to the actions and practices of
the Depositary or any of its Participants or Indirect Participants.
The Depositary has advised the Company that its current practices, upon
receipt of any payment in respect of securities such as the Notes (including
principal and interest and Liquidated Damages, if any), is to credit the
accounts of the relevant Participants with the payment on the payment date, in
amounts proportionate to their respective holdings in principal amount of
beneficial interests in the relevant security such as the Global Notes as shown
on the records of the Depositary. Payments by Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practices and will not be the responsibility of the
Depositary, the Trustee or the Company. Neither the Company nor the Trustee will
be liable for any delay by the Depositary or its Participants in identifying the
beneficial owners of the Notes, and the Company and the Trustee may conclusively
rely on and will be
83
<PAGE> 89
protected in relying on instructions from the Depositary or its nominee as the
registered owner of the Notes for all purposes.
Except for trades involving only Euroclear and CEDEL Participants,
interests in the Global Notes will trade in the Depositary's Same-Day Funds
Settlement System and secondary market trading activity in such interests will,
therefore, settle in immediately available funds, subject in all cases to the
rules and procedures of the Depositary and its Participants.
Transfers between Participants in the Depositary will be effective in
accordance with the Depositary's procedures, and will be settled in same-day
funds. Transfers between Participants in Euroclear and CEDEL will be effected in
the ordinary way in accordance with their respective rules and operating
procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between Participants in the
Depositary, on the one hand, and Euroclear or CEDEL Participants, on the other
hand, will be effected through the Depositary in accordance with the
depository's rules on behalf of Euroclear or CEDEL, as the case may be, by its
respective depository; however, such cross-market transactions will require
delivery of instructions to Euroclear or CEDEL, as the case may be, by the
counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
CEDEL, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depository to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Note in the Depositary, and making or receiving payment in
accordance with normal procedures for same-day fund settlement applicable to the
Depositary. Euroclear Participants and CEDEL Participants may not deliver
instructions directly to the depositories for Euroclear or CEDEL.
Due to time zone differences, the securities accounts of a Euroclear or
CEDEL Participant purchasing an interest in a Global Note from a Participant in
the Depositary will be credited, and any such crediting will be reported to the
relevant Euroclear or CEDEL Participant, during the securities settlement
processing day (which must be a business day for Euroclear or CEDEL) immediately
following the settlement date of the Depositary. Cash received in Euroclear or
CEDEL as a result of sales of interests in a Global Note by or through a
Euroclear or CEDEL Participant to a Participant in the Depositary will be
received with value on the settlement date of the Depositary but will be
available in the relevant Euroclear or CEDEL cash account only as of the
business day for Euroclear or CEDEL following the Depositary's settlement date.
The Depositary has advised the Company that it will take any action
permitted to be taken by a Holder of Notes only at the direction of one or more
Participants to whose account the Depositary interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Notes as to which such Participant or Participants has or have given
direction. However, if there is an Event of Default under the Notes, the
Depositary reserves the right to exchange Global Notes for legend Notes in
certificated form, and to distribute such Notes to its Participants.
The information in this section concerning the Depositary, Euroclear and
CEDEL and their book-entry systems has been obtained from sources that the
Company believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although the Depositary, Euroclear and CEDEL have agreed to the foregoing
procedures to facilitate transfers of interests in the Regulation S Global Note
and in the Rule 144A Global Note among Participants in the Depositary, Euroclear
and CEDEL, they are under no obligation to perform or to continue to perform
such procedures, and such procedures may be discontinued at any time. None of
the Company, the Initial Purchasers or the Trustee will have any responsibility
for the performance by the Depositary, Euroclear or CEDEL or their respective
Participants or Indirect Participants of their respective obligations under the
rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES. A Global Note is
exchangeable for definitive Notes in registered certificated form if (i) the
Depositary (A) notifies the Company that it is unwilling or unable to continue
as depository for the Global Note and the Company thereupon fails to appoint a
successor depository or (B) has ceased to be a clearing agency registered under
the Exchange Act or (ii) the Company,
84
<PAGE> 90
at its option, notifies the Trustee in writing that it elects to cause issuance
of the Notes in certificated form. In addition, beneficial interests in a Global
Note may be exchanged for certificated Notes upon request but only upon at least
20 days prior written notice given to the Trustee by or on behalf of the
Depositary in accordance with customary procedures. In all cases, certificated
Notes delivered in exchange for any Global Note or beneficial interest therein
will be registered in names, and issued in any approved denominations, requested
by or on behalf of the Depositary (in accordance with its customary procedures)
and will bear, in the case of the Rule 144A Global Note, the restrictive legend
referred to in "Notice to Investors" and, in the case of the Regulation S Global
Note, the legend set forth in bold type on the cover of this Offering
Memorandum, in each case, unless the Company determines otherwise in compliance
with applicable law.
\EXCHANGES BETWEEN REGULATION S NOTES AND THE RULE 144A GLOBAL NOTE. Prior to
the expiration of the Restricted Period, a beneficial interest in a Regulation S
Global Note may not be transferred to a U.S. person. Thereafter, such transfers
will be permitted on the terms specified in the Indenture.
Beneficial interests in Rule 144A Global Notes may be transferred to a
person who takes delivery in the form of an interest in Regulation S Global
Notes, whether before or after the expiration of the Restricted Period, only if
the transferor first delivers to the Trustee a written certificate to the effect
that such transfer is being made in accordance with Rule 903 or 904 of
Regulation S and that, if such transfer occurs prior to the expiration of the
Restricted Period, the interest transferred will be held immediately thereafter
through Euroclear and CEDEL.
Any beneficial interest in one of the Old Global Notes that is transferred
to a person who takes delivery in the form of an interest in another Old Global
Note will, upon transfer, cease to be an interest in such Old Global Note and
become an interest in such other Old Global Note, and accordingly, will
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Old Global Note for as long as
it remains such an interest.
Transfers involving an exchange of a beneficial interest in the Regulation
S Global Note for a beneficial interest in the Rule 144A Global Note or vice
versa will be effected by the Depositary by means of an instruction originated
by the Trustee through the Depositary/Deposit Withdraw at Custodian system.
Accordingly, in connection with such transfer, appropriate adjustments will be
made to reflect a decrease in the principal amount of the Regulation S Global
Note and a corresponding increase in the principal amount of the Rule 144A
Global Note or vice versa, as applicable.
CERTIFICATED NOTES. Subject to certain conditions, any person having a
beneficial interest in the Global Note may, upon request to the Trustee,
exchange such beneficial interest for Notes in the form of certificated Notes.
Upon any such issuance, the Trustee is required to register such certificated
Notes in the name of, and cause the same to be delivered to, such person or
persons (or the nominee of any thereof). All such certificated Old Notes would
be subject to the legend requirements described herein under "Notice to
Investors." In addition, if (i) the Company notifies the Trustee in writing that
the Depositary is no longer willing or able to act as a depository and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Notes in the form of certificated Notes under the Indenture,
then, upon surrender by the Global Note Holder of its Global Note, Notes in such
form will be issued to each person that the Global Note Holder and the
Depositary identify as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME DAY SETTLEMENT AND PAYMENT. The Indenture will require that payments
in respect of the Notes represented by the Global Note (including principal,
premium, if any, interest and Liquidated Damages, if any) be made by wire
transfer of immediately available funds to the accounts specified by the Global
Note Holder. With respect to certificated Notes, the Company will make all
payments of principal, premium, if any, interest and Liquidated Damages, if any,
by wire transfer of immediately available funds to the accounts
85
<PAGE> 91
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such Holder's registered address. The Company expects that
secondary trading in the certificated Notes will also be settled in immediately
available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Guarantors and the Initial Purchasers will enter into the
Registration Rights Agreement on or prior to the Closing Date. Pursuant to the
Registration Rights Agreement, the Company will agree to file with the
Commission the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to the Exchange Notes. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company will
offer pursuant to the Exchange Offer to the Holders of Transfer Restricted
Securities who are able to make certain representations the opportunity to
exchange their Transfer Restricted Securities for Exchange Notes. If (i) the
Company is not required to file the Exchange Offer Registration Statement or
permitted to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any Holder of Transfer
Restricted Securities notifies the Company within 20 business days following
consummation of the Exchange Offer that (A) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) it may not
resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales or
(C) that it is a broker-dealer and owns Notes acquired directly from the Company
or an affiliate of the Company, the Company will file with the Commission a
Shelf Registration Statement to cover resales of the Notes by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. The Company will use its
best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Note until (i) the date
on which such Note has been exchanged by a person other than a broker-dealer for
a Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of a Note for a Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iv) the date on which
such Note is distributed to the public pursuant to Rule 144 under the Securities
Act.
The Registration Rights Agreement will provide that (i) the Company will
file an Exchange Offer Registration Statement with the Commission on or prior to
60 days after the Closing Date, (ii) the Company will use its best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 120 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue
on or prior to 30 business days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, Exchange Notes
in exchange for all Notes tendered prior thereto in the Exchange Offer and (iv)
if obligated to file the Shelf Registration Statement, the Company will use its
best efforts to file the Shelf Registration Statement with the Commission on or
prior to 60 days after such filing obligation arises (and in any event within
120 days after the Closing Date) and to cause the Shelf Registration to be
declared effective by the Commission on or prior to 60 days after the date upon
which the Company is obligated to make such filing. If (a) the Company fails to
file any of the Registration Statements required by the Registration Rights
Agreement on or before the date specified for such filing, (b) any of such
Registration Statements is not declared effective by the Commission on or prior
to the date specified for such effectiveness (the "Effectiveness Target Date"),
or (c) the Company fails to consummate the Exchange Offer within 30 business
days of the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement, or (d) the Shelf Registration Statement or the Exchange
Offer Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then the Company will pay Liquidated Damages to each Holder of Notes, with
respect to the first 90-day period immediately
86
<PAGE> 92
following the occurrence of such Registration Default in an amount equal to
$0.05 per week per $1,000 principal amount of Notes held by such Holder. The
amount of the Liquidated Damages will increase by an additional $0.05 per week
per $1,000 principal amount of Notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages of $0.50 per week per $1,000 principal amount of Notes.
All accrued Liquidated Damages will be paid by the Company on each Damages
Payment Date to the Global Note Holder by wire transfer of immediately available
funds or by federal funds check and to Holders of Certificated Securities by
wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"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 that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business consistent with past
practices (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the covenants described above
under the captions "-- Repurchase at the Option of Holders -- Change of Control"
and "-- Certain Covenants -- Merger, Consolidation, or Sale of Assets" and not
by the provisions of the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales"), and (ii) the issue or
sale by the Company or any of its Restricted Subsidiaries of Equity Interests of
any of the Company's Restricted Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $2 million or (b) for Net Proceeds in
excess of $2 million. Notwithstanding the foregoing: (i) a transfer of assets by
the Company to a Restricted Subsidiary of the Company or by a Restricted
Subsidiary of the Company to the Company or to a Restricted Subsidiary of the
Company, (ii) an issuance or sale of Equity Interests by a Restricted Subsidiary
of the Company to the Company or to another Restricted Subsidiary of the
Company, (iii) (A) a Permitted Investment or (B) a Restricted Payment that is
permitted by the covenant described above under the caption " -- Restricted
Payments" and (iv) the sale or other disposition of any portion of the
Marketable Securities Portfolio that is reinvested in the Marketable Securities
Portfolio within three days after the consummation of such sale or disposition,
will not be deemed to be Asset Sales.
87
<PAGE> 93
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participation, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and Eurodollar
time deposits with maturities of not more than one year from the date of
acquisition, bankers' acceptances with maturities of not more than one year from
the date of acquisition and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of $500.0 million
and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above and (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Rating Group with maturities of not more than
one year from the date of acquisition.
"CCC LOANS" means loans made to the Company and its Restricted Subsidiaries
to finance their acquisition of sugar under loan programs extended by the
Commodity Credit Corporation for which recourse is limited to the acquired
sugar.
"CHANGE OF CONTROL" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group") together with any Affiliates thereof (whether or
not otherwise in compliance with the provisions of the Indenture) unless
immediately following such sale, lease, exchange or other transfer in compliance
with the Indenture such assets are owned, directly or indirectly, by the Company
or a Wholly Owned Subsidiary of the Company; (ii) the approval by the holders of
Capital Stock of the Company of any plan or proposal for the liquidation or
dissolution of the Company (whether or not otherwise in compliance with the
provisions of the Indenture); (iii) the acquisition in one or more transactions,
of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of Voting Securities of the Company by any Person or Group that either (A)
beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, at least 50% of the Company's then outstanding voting
securities entitled to vote on a regular basis for the board of directors of the
Company, or (B) otherwise has the ability to elect, directly or indirectly, a
majority of the members of the Company's board of directors, including, without
limitation, by the acquisition of revocable proxies for the election of
directors; or (iv) the first day on which a majority of the members of the
Company's board of directors are not Continuing Directors. Notwithstanding
clause (iii) above, the acquisition in one or more transactions, of beneficial
ownership of up to 65% of the Company's then outstanding Voting Securities by a
Person or Group consisting of the Permitted Holders shall not constitute a
Change of Control (unless directly or indirectly (x) such acquisition has a
reasonable likelihood or a purpose of causing such Voting Securities to be or
(y) following such acquisition, such Voting Securities are (A) held of record by
less than 300 persons or (B) neither listed on any national securities exchange
nor authorized to be quoted on an inter-dealer quotation system of any
registered national securities association
"COMMODITY HEDGING OBLIGATIONS" means, with respect to any Person, the net
payment Obligations of such Person under agreements or arrangements designed to
protect such Person against fluctuations in the price of (i) natural gas,
heating fuels, electricity and other sources of energy or power used in the
Company's
88
<PAGE> 94
sugar refining or processing operations or (ii) refined or raw sugar, in either
case in connection with the conduct of its business and not for speculative
purposes and consistent with past practices.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary, unusual or non-recurring expenses or losses
(including, whether or not otherwise includable as a separate item in the
statement of Consolidated Net Income for such period, losses on sales of assets
outside of the ordinary course of business) plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Restricted Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized (including, without limitation, amortization of
debt issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such depreciation and
amortization were deducted in computing such Consolidated Net Income, minus (v)
non-cash items increasing such Consolidated Net Income for such period, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash charges of, a
Restricted Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in same
proportion) that the Net Income of such Restricted Subsidiary was included in
calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
(for such period, on a consolidated basis, determined in accordance with GAAP);
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary,
(ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the
89
<PAGE> 95
acquisition of such business) subsequent to the date of the Indenture in the
book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (y) all investments as of such date in unconsolidated
Restricted Subsidiaries and in Persons that are not Restricted Subsidiaries
(except, in each case, Permitted Investments), and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such date, all of
the foregoing determined in accordance with GAAP.
"CONSOLIDATED TANGIBLE ASSETS" means, with respect to any Person as of any
date, the amount which, in accordance with GAAP, would be set forth under the
caption "Total Assets" (or any like caption) on a consolidated balance sheet of
such Person and its Restricted Subsidiaries, less all intangible assets,
including, without limitation, goodwill, organization costs, patents,
trademarks, copyrights, franchises and research and development costs.
"CONTINUING DIRECTOR" means, as of any date of determination, any member of
the Company's board of directors who (i) was a member of the Company's board of
directors on the date of the Indenture or (ii) was nominated for election or
elected to such board of directors with the approval of a majority of the
Continuing Directors who were members of such board of directors at the time of
such nomination or election.
"CREDIT FACILITY" means, with respect to the Company or any Restricted
Subsidiary, one or more debt facilities (including, without limitation, the
Senior Credit Facility) or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, other borrowings
(including term loans), receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"DATE OF THE INDENTURE" means the date on which the Notes of the first
series of Notes issued under the Indenture are first issued and delivered.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice (or both) would be an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the
Senior Credit Facility and (ii) any other Senior Debt permitted hereunder the
principal amount of which is $25 million or more and that has been designated by
the Company as "Designated Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature, except to the extent that such Capital Stock is solely
redeemable with, or solely exchangeable for, any Capital Stock of such Person
that is not Disqualified Stock.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means any primary offering of the Voting Stock (other
than Disqualified Stock) of the Company; provided, however, that the proceeds
net of any underwriting discount and commission and other expenses to the
Company from any such offering shall be at least $25 million.
"EXCHANGE NOTES" means notes registered under the Securities Act that are
issued under the Indenture in exchange for the Notes pursuant to the Exchange
Offer.
"EXISTING INDEBTEDNESS" means up to $41,310,000 in aggregate principal
amount of Indebtedness of the Company and its Restricted Subsidiaries (other
than Indebtedness under the Senior Credit Facility and the Notes) in existence
on the date of the Indenture, until such amounts are repaid.
"FINANCIAL HEDGING OBLIGATIONS" means, with respect to any Person, the net
payment Obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in
90
<PAGE> 96
interest rates or currency exchange rates in connection with the conduct of its
business and not for speculative purposes and consistent with past practices.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), (ii) the consolidated
interest of such Person and its Restricted Subsidiaries that was capitalized
during such period, (iii) any interest expense on Indebtedness of another Person
that is guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted Subsidiaries
(whether or not such guarantee or Lien is called upon) and (iv) the product of
(a) all dividend payments, whether or not in cash, on any series of preferred
stock of such Person or any of its Restricted Subsidiaries, other than dividend
payments on Equity Interests payable solely in Equity Interests of the Company
(other than Disqualified Stock), times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings under any
Credit Facility) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, (ii) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the statements and pronouncements of
the Financial Accounting Standards Board and such other statements by such other
entities as have been approved by a significant segment of the accounting
profession, which are applicable at the date of determination.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof or pledging assets to secure), of
all or any part of any Indebtedness.
"GUARANTORS" means (i) each of (a) Biomass Corporation; (b) Dixie Crystals
Brands, Inc.; (c) Dixie Crystals Foodservice, Inc.; (d) King Packaging Company,
Inc.; (e) Food Carrier, Inc.; (f) Michigan Sugar
91
<PAGE> 97
Company; (g) Great Lakes Sugar Company; (h) Savannah Foods Industrial, Inc.; (i)
Phoenix Packaging Corporation; (j) Savannah Investment Company; (k) Savannah
Sugar Refining Corporation; (l) Holly Sugar Corporation; (m) Imperial Sweetener
Distributors, Inc.; (n) Fort Bend Utilities Company; (o) Limestone Products
Company; (p) Holly Northwest Company; (q) Crown Express Inc.; and (r) Savannah
Foods & Industries, Inc., (ii) each of the Company's Restricted Subsidiaries
which becomes a guarantor of the Notes pursuant to the covenant described above
under "-- Certain Covenants -- Additional Subsidiary Guarantees" and (iii) each
of the Company's Restricted Subsidiaries executing a supplemental indenture in
which such Restricted Subsidiary agrees to be bound by the terms of the
Indenture; provided that any Person constituting a Guarantor as described above
shall cease to constitute a Guarantor when its respective Subsidiary Guarantee
is released in accordance with the terms thereof.
"HEDGING OBLIGATIONS" means, with respect to any Person, collectively, the
Commodity Hedging Obligations of such Person and the Financial Hedging
Obligations of such Person.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Financial Hedging Obligations
or Commodity Hedging Obligations, except any such balance that constitutes an
accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all Indebtedness of others secured by a Lien on any asset of
such Person (whether or not such Indebtedness is assumed by such Person) and, to
the extent not otherwise included, the guarantee by such Person of any
Indebtedness of any other Person, and any liability, whether or not contingent,
whether or not it appears on the balance sheet of such Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness that does not require current payments of
interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized accounting,
appraisal or investment banking firm that is, in the reasonable judgment of the
Board of Directors, qualified to perform the task for which such firm has been
engaged hereunder and disinterested and independent with respect to the Company
and its Affiliates; provided, that providing accounting, appraisal or investment
banking services to the Company or any of its Affiliates or having an employee,
officer or other representative serving as a member of the Board of Directors of
the Company or any of its Affiliates will not disqualify any firm from being an
Independent Financial Advisor.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other Obligations),
advances or capital contributions (excluding commission, travel and
entertainment, moving, and similar advances to officers and employees made in
the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. If the Company or any of its Restricted
Subsidiaries sells or otherwise disposes of any Equity Interests of any direct
or indirect Restricted Subsidiary of the Company such that, after giving effect
to any such sale or disposition, such Person is no longer a direct or indirect
Subsidiary of the Company, the Company, or such Restricted Subsidiary, as the
case may be, shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Equity Interests of
such Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the fourth paragraph of the covenant described above under the
caption "-- Certain Covenants -- Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of or
92
<PAGE> 98
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"MARKETABLE SECURITIES" means publicly traded debt and equity securities of
a type consistent with those held in the Marketable Securities Portfolio on the
date of the Indenture.
"MARKETABLE SECURITIES PORTFOLIO" means publicly traded debt and equity
securities maintained in the portfolio of the Company and its Restricted
Subsidiaries, having an aggregate fair market value on the date of the Indenture
not to exceed $60 million.
"MERGER AGREEMENT" means the Agreement and Plan of Merger, dated as of
September 12, 1997, among Imperial Holly Corporation, IHK Merger Sub Corporation
and Savannah Foods & Industries, Inc.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds or Cash Equivalents
received by the Company or any of its Restricted Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting, investment banking and brokers fees, and sales and
underwriting commissions) and any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements),
amounts required to be applied to the repayment of Indebtedness (other than
Indebtedness under any Credit Facility) secured by a Lien on the asset or assets
that were the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries, (a) provides any guarantee or
credit support of any kind (including any undertaking, guarantee, indemnity,
agreement or instrument that would constitute Indebtedness) or (b) is directly
or indirectly liable (as a guarantor or otherwise), (ii) the incurrence of which
will not result in any recourse against any of the assets of the Company or its
Restricted Subsidiaries, and (iii) no default with respect to which (including
any rights that the holders thereof may have to take enforcement action against
an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness of the Company or any of its Restricted
Subsidiaries to declare pursuant to the express terms governing such
Indebtedness a default on such other Indebtedness or cause the payment thereof
to be accelerated or payable prior to its stated maturity.
"OBLIGATIONS" means any principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or its Restricted Subsidiaries whether or
not a claim for post-filing interest is allowed in such proceeding), penalties,
fees, charges, expenses, indemnifications, reimbursement obligations, damages
(including Liquidated Damages), guarantees (including the Subsidiary Guarantees)
and other liabilities or amounts payable under the documentation governing any
Indebtedness or in respect thereof.
"PERMITTED BUSINESS" means the lines of business conducted by the Company
on the date hereof and businesses reasonably related or incidental thereto or
which is a reasonable extension thereof.
"PERMITTED HOLDERS" means the descendants of H. Kempner, a Galveston
entrepreneur who died in 1894, or trusts controlled by or for the benefit of the
descendants of H. Kempner.
93
<PAGE> 99
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents or
deposit accounts maintained in the ordinary course of business consistent with
past practices; (c) any Investment by the Company or any Restricted Subsidiary
of the Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company; (d) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales"; (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) any Investment received in settlement of
debts, claims or disputes owed to the Company or any Restricted Subsidiary of
the Company that arose out of transactions in the ordinary course of business;
(g) any Investment received in connection with or as a result of a bankruptcy,
workout or reorganization of any Person; (h) advances and extensions of credit
in the nature of accounts receivable arising from the sale or lease of goods or
services or the licensing of property in the ordinary course of business; (i)
other Investments by the Company or any Restricted Subsidiary of the Company in
any Person having an aggregate fair market value (measured as of the date each
such Investment is made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (i) (net of returns of capital, dividends and interest paid on
Investments and sales, liquidations and redemptions of Investments), not to
exceed $10 million; (j) Investments in the form of intercompany Indebtedness or
Guarantees of Indebtedness of a Restricted Subsidiary of the Company permitted
under clauses (v) and (xi) of the covenant described under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock;" (k) Investments arising in connection with Financial Hedging Obligations
or Commodity Hedging Obligations that are incurred in the ordinary course of
business for the purpose of fixing or hedging currency, commodity or interest
rate risk (including with respect to any floating rate Indebtedness that is
permitted by the terms of the Indenture to be outstanding) in connection with
the conduct of the business of the Company and its Subsidiaries and not for
speculative purposes and consistent with past practices; (1) any Investment in
the Marketable Securities Portfolio existing as of the date of the Indenture and
future purchases of and reinvestment in Marketable Securities from the proceeds
(net of taxes, commissions and other costs and expenses) of dividends and
interest and other distributions from and in respect of the Marketable
Securities Portfolio and sales and other transfers of Marketable Securities in
the Marketable Securities Portfolio; and (m) any Investments by the Company or
any Restricted Subsidiary of the Company in Unrestricted Subsidiaries or
Permitted Joint Ventures made after the date of the Indenture having an
aggregate fair market value, when taken together with all other Investments made
pursuant to this clause (m) (net of returns of capital, dividends and interest
paid on Investments and sales, liquidations and redemptions of Investments) not
exceeding in the aggregate 5% of the Consolidated Tangible Assets of the Company
as of the last day of the most recent full fiscal quarter ending immediately
prior to the date of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value.)
"PERMITTED JOINT VENTURE" means any corporation, limited liability company,
joint venture, partnership or other business entity designated by the Board of
Directors, and until designation by the Board of Directors to the contrary, (i)
which is engaged in a Permitted Business and (ii) of which 50% or less of the
Capital Stock with voting power under ordinary circumstances to elect directors
(or Persons having similar or corresponding powers and responsibilities) is at
the time owned (beneficially, directly or indirectly) by the Company and its
Restricted Subsidiaries. Any such designation or designation to the contrary
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"PERMITTED JUNIOR SECURITIES" means (i) Equity Interests in the Company or
any Guarantor which, to the extent received by any Holder in connection with any
bankruptcy, reorganization, insolvency or similar proceeding in which any Equity
Interests are also exchanged for or distributed in respect of Senior Debt, are
either common equity securities or are subordinated to all such Equity Interests
so exchanged or distributed to
94
<PAGE> 100
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to the Indenture, and (ii) debt securities
that are subordinated to all Senior Debt (and any debt securities issued in
exchange for Senior Debt) to substantially the same extent as, or to a greater
extent than, the Notes are subordinated to Senior Debt pursuant to the
Indenture.
"PERMITTED LIENS" means (i) Liens on assets of the Company or its
Restricted Subsidiaries that secure Senior Debt permitted by the terms of the
Indenture to be incurred; (ii) Liens in favor of the Company or any Guarantor;
(iii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Company or any Restricted Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company; (iv) Liens on
property existing at the time of acquisition thereof by the Company or any
Restricted Subsidiary of the Company, provided that such Liens were in existence
prior to the contemplation of such acquisition; (v) Liens existing on the date
of the Indenture and any extensions or renewals thereof, provided that such
extension or renewal of such Liens does not extend to or cover any other
property or assets of the Company or any Restricted Subsidiary; (vi) statutory
Liens (other than any Lien imposed by ERISA) or landlords and carriers',
warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business; (vii) Liens for taxes,
assessments, government charges or claims not yet due and payable or which are
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if a reserve or other appropriate provisions, if any,
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security; (ix) Liens created or deposits made to secure the performance
of tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (x) easements,
rights-of-way, restrictions and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any
Restricted Subsidiary incurred in the ordinary course of business; (xi) any
attachment or judgment Lien, unless the judgment it secures shall not, within 60
days after the entry thereof, have been discharged or execution thereof stayed
pending appeal, or shall not have been discharged within 60 days after the
expiration of any such stay; (xii) any other Liens imposed by operation of law
which do not materially affect the Company's or any Guarantor's ability to
perform its obligations under the Notes, the Subsidiary Guarantees and the
Indenture; (xiii) rights of banks to set off deposits against debts owed to said
bank; (xiv) Liens upon specific items of inventory or other goods and proceeds
of the Company or its Restricted Subsidiaries securing the Company's or any
Restricted Subsidiary's obligations in respect of bankers' acceptances issued or
created for the account of any such Person to facilitate the purchase, shipment
or storage of such inventory or other goods; (xv) Liens securing reimbursement
obligations with respect to letters of credit which encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof entered into in the ordinary course of business consistent with past
practices; (xvi) Liens securing Indebtedness that is pari passu in right of
payment with the Notes, provided that the Notes are equally and ratably secured;
(xvii) Liens to secure any Permitted Refinancing Indebtedness incurred to
refinance any Indebtedness secured by any Lien referred to in the foregoing
clauses (i), (iii), (iv), (v) and (xvi), provided, however, that such new Lien
shall be limited to all or part of the same property that secured the original
Lien (provided that such Liens may extend to after-acquired property, including
any assets or Capital Stock of any subsequently formed or acquired Subsidiary,
if such original Lien included such property or assets as collateral), (xviii)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (vi) of the second paragraph of the covenant described above under the
caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness,
together with any additions and accessions thereto and replacements,
substitutions and proceeds (including insurance proceeds) thereof; (xix) Liens
in favor of customs and revenue authorities to secure payment of customs duties
in connection with the importation of goods in the ordinary course of business
and other similar Liens arising in the ordinary course of business, (xx) leases
or subleases granted to third Persons in ordinary course of business consistent
with past practices not interfering with the ordinary course of business of the
Company or its Restricted
95
<PAGE> 101
Subsidiaries; (xxi) deposits made in the ordinary course of business to secure
liability to insurance carriers, and Liens on the proceeds of insurance granted
to insurance carriers solely to secure the payment of financed premiums; (xxii)
Liens in favor of a trustee under any indenture securing amounts due to the
trustee in connection with its services under such indenture; (xxiii) Liens
under licensing agreements for use of intellectual property entered into in the
ordinary course of business; (xxiv) Liens incurred in the ordinary course of
business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $10 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Restricted Subsidiary and (xxv) any attachment or
judgment Lien not constituting an Event of Default under clause (vi) of the
first paragraph of the section described under the caption "-- Events of Default
and Remedies."
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued and unpaid interest on, the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or a Restricted Subsidiary who is
the obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, limited liability company,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"REGULATION S" means Regulation S promulgated under the Securities Act.
"REPRESENTATIVE" means the administrative agent under the Senior Credit
Facility or its successor thereunder or any other agent or representative on
behalf of the holders of Designated Senior Debt.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referenced
Person that is not an Unrestricted Subsidiary; provided that, on the date of the
Indenture, all Subsidiaries of the Company (other than Holly Finance Company)
shall be Restricted Subsidiaries of the Company.
"RULE 144A" means Rule 144A promulgated under the Securities Act.
"SENIOR CREDIT FACILITY" means that certain Senior Credit Facility, dated
as of December 22, 1997, by and among the Company, Lehman Brothers, as Arranger,
Lehman Brothers Commercial Paper Inc., (as Syndication Agent), and Harris Trust
and Savings Bank (as Administrative Agent and Collateral Agent) providing for up
to $255 million of term loan borrowings and $200 million of revolving credit
borrowings and letters of credit in each case, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith and in each case as amended, modified, renewed, restated,
refunded, replaced or refinanced from time to time and any agreement (and
related documents) governing Indebtedness incurred to refund or refinance credit
extensions and commitments then outstanding or permitted to be outstanding under
such Senior Credit Facility or a successor Credit Facility, whether by the
96
<PAGE> 102
same or any other lender or group of lenders. The Company shall promptly notify
the Trustee of any other lender or group of lenders. The Company shall promptly
notify the Trustee of any such refunding or refinancing of the existing Senior
Credit Facility.
"SENIOR DEBT" means (i) indebtedness of the Company or any Guarantor for
money borrowed and all obligations, whether direct or indirect, under
guarantees, letters of credit, foreign currency or interest rate swaps, foreign
exchange contracts, caps, collars, options, hedges or other agreements or
arrangements designed to protect against fluctuations in currency values or
interest rates, other extensions of credit, expenses, fees, reimbursements,
indemnities and all other amounts (including interest at the contract rate
accruing on or after the filing of any petition in bankruptcy or reorganization
relating to the Company or any Guarantor whether or not a claim for post-filing
interest is allowed in such proceeding) owed by the Company or any Guarantor
under, or with respect to, the Senior Credit Facility or any other Credit
Facility, (ii) the principal of and premium, if any, and accrued and unpaid
interest, whether existing on the date hereof or hereafter incurred, in respect
of (A) indebtedness of the Company or any Guarantor for money borrowed, (B)
guarantees by the Company or any Guarantor of indebtedness for money borrowed by
any other person, (C) indebtedness evidenced by notes, debentures, bonds, or
other instruments of indebtedness for the payment of which the Company or any
Guarantor is responsible or liable, by guarantees or otherwise, (D) obligations
of the Company or any Guarantor for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (E)
obligations of the Company or any Guarantor under any agreement to lease, or any
lease of, any real or personal property which, in accordance with GAAP, is
classified on the Company's or any Guarantor's consolidated balance sheet as a
liability, and (F) obligations of the Company or any Guarantor under interest
rate swaps, caps, collars, options and similar arrangements and commodity or
foreign currency hedges and (iii) modifications, renewals, extensions,
replacements, refinancings and refundings of any such indebtedness, obligations
or guarantees, unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is expressly provided that such
indebtedness, obligations or guarantees, or such modifications, renewals,
extensions, replacements, refinancings or refundings thereof, are not superior
in right of payment to the Notes; provided that Senior Debt will not be deemed
to include (a) any obligation of the Company or any Guarantor to any Subsidiary
or other Affiliate, (b) any liability for federal, state, local or other taxes
owed or owing by the Company or any Guarantor, (c) any accounts payable or other
liability to trade creditors, (d) any Indebtedness, guarantee or obligation of
the Company or any Guarantor which is expressly subordinate or junior by its
terms in right of payment to any other Indebtedness, guarantee or obligation of
the Company or any Guarantor, (e) that portion of any Indebtedness incurred in
violation of the covenant described above under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock" (other
than Indebtedness incurred under a Credit Facility if prior to the incurrence
thereof or, in the case of contingent obligations such as letters of credit
pursuant to which such Indebtedness is incurred, prior to the issuance thereof
or agreement to extend credit in respect thereof, the Company has certified to
the lenders under such Credit Facility that the such incurrence or extension of
credit does not violate such covenant) or (f) Indebtedness of the Company or any
Guarantor which is classified as non-recourse in accordance with GAAP or any
unsecured claim arising in respect thereof by reason of the application of
section 1111(b)(1) of the Bankruptcy Code.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person and (ii) any partnership (a) the sole general partner
97
<PAGE> 103
or the managing general partner of which is such Person or an entity described
in clause (i) and related to such Person or (b) the only general partners of
which are such Person or of one or more entities described in clause (i) and
related to such Person (or any combination thereof).
"SUBSIDIARY GUARANTEE" means the guarantee of the Notes by each of the
Guarantors pursuant to Article 11 of the Indenture and in the form of guarantee
endorsed on the form of Note attached as Exhibit A to the Indenture and any
additional guarantee of the Notes to be executed by any Restricted Subsidiary of
the Company pursuant to the covenant described above under the caption
"-- Certain Covenants -- Additional Subsidiary Guarantees."
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary of the Company) that is
designated by the Board of Directors as an Unrestricted Subsidiary and (ii) each
of its Subsidiaries at the time of designation and thereafter, (a) have no
Indebtedness other than Non-Recourse Indebtedness; (b) are not party to any
agreement, contract, arrangement or understanding with the Company or any
Restricted Subsidiary of the Company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained, in light of all
the circumstances, at the time from Persons who are not Affiliates of the
Company; (c) are Persons with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Persons' financial condition or to cause such Persons to achieve any specified
levels of operating results; (d) have not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries and (e) do not own any Capital Stock of or own or
hold any Lien on any property of, the Company or any Restricted Subsidiary of
the Company.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary, 100% of the outstanding
Capital Stock and other Equity Interests of which is directly or indirectly
owned by the Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following sets forth a summary of the material anticipated federal
income tax consequences expected to result to holders from the Exchange Offer
and from the purchase, ownership and disposition of the Exchange Notes. The tax
consequences of these transactions are uncertain. The discussion of the federal
income tax consequences set forth below is based upon the Internal Revenue Code
of 1986, as amended (the "Code"), and judicial decisions and administrative
interpretations thereunder, as of the date hereof, and such authorities may be
repealed, revoked, modified or otherwise interpreted or applied so as to result
in federal income tax consequences different from those discussed below. There
can be no assurance that the Internal Revenue Service (the "IRS") will not
challenge one or more of the tax consequences described herein, and the Company
has not obtained, nor does it intend to obtain, a ruling from the IRS or an
opinion of counsel with respect to the United States federal income tax
consequences of acquiring or holding Exchange Notes. As used herein, United
States Holders means (i) citizens or residents (within the meaning of Section
7701(b) of the Code) of the United States, (ii) corporations, partnerships or
other entities created in or under the laws of the United States or any
political subdivision thereof, (iii) estates, the income of which is subject to
United States federal income taxation regardless of its source, and (iv) in
general, trusts subject to
98
<PAGE> 104
the primary supervision of a court within the United States and the control of a
United States person as described in Section 7701(a)(30) of the Code.
This discussion does not purport to deal with all aspects of United States
federal income taxation that may be relevant to a particular Holder in light of
the Holder's circumstances (for example, persons subject to the alternative
minimum tax provisions of the Code). Also, it is not intended to be wholly
applicable to all categories of investors, some of which (such as dealers in
securities, banks, insurance companies, tax-exempt organizations, and persons
holding Exchange Notes as part of a hedging or conversion transaction or
straddle or persons deemed to sell Exchange Notes under the constructive sale
provisions of the Code) may be subject to special rules. The discussion below is
premised upon the assumption that the Exchange Notes and Old Notes constitute
indebtedness for U.S. federal income tax purposes, and that the Old Notes and
Exchange Notes are held (or would be held if acquired) as capital assets within
the meaning of Section 1221 of the Code. This summary does not discuss the tax
considerations applicable to subsequent purchasers. The discussion also does not
discuss any aspect of state, local or foreign law, nor federal estate and gift
tax law.
EXCHANGE OF NOTES
The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer
should not be a taxable exchange for United States federal income tax purposes.
Accordingly, a holder should have the same adjusted issue price, adjusted basis
and holding period in the Exchange Notes as it had in the Old Notes immediately
before the exchange.
STATED INTEREST
The Exchange Notes will be issued without original issue discount. Stated
interest on the Old Notes and Existing Notes will be includable in the holder's
income under such holder's method of accounting.
BOND PREMIUM
Generally, if the Exchange Notes are purchased, or if the Old Notes were
purchased, for an amount in excess of the amount payable at the maturity date
(or a call date, if appropriate) of the Exchange Notes, such excess will
constitute amortizable bond premium that the holder may elect to amortize under
the constant interest method over the period from the date of acquisition to the
date of maturity (or until an earlier call date). If bond premium is amortized,
the amount required to be included in the holder's income each year with respect
to interest on the Note will be reduced by the amount of amortizable bond
premium allocable to such year. An election to amortize bond premium is
available only if the Exchange Notes are held as capital assets. This election
is revocable only with the consent of the IRS and applies to all obligations
owned or subsequently acquired by the holder. To the extent the excess is
deducted as amortizable bond premium, the holder's adjusted tax basis in the
Exchange Notes will be reduced.
MARKET DISCOUNT ON THE EXCHANGE NOTES
To the extent a holder had market discount with respect to an Old Note, the
holder generally will have market discount with respect to an Exchange Note. Any
principal payment or gain realized by a holder on disposition or retirement of
an Exchange Note will be treated as ordinary income to the extent that there is
accrued market discount on the Exchange Note. Unless a holder elects to accrue
under a constant-interest method, accrued market discount is the total market
discount multiplied by a fraction, the numerator of which is the number of days
the holder has held the obligation and the denominator of which is the number of
days from the date the holder acquired the obligation under its maturity. A
holder may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry an Exchange Note purchased with market discount. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includable in income. If the holder elects to
include market discount in income currently as it accrues on all market discount
instruments acquired by the holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
99
<PAGE> 105
SALE, EXCHANGE OR RETIREMENT OF THE EXCHANGE NOTES
Upon the sale, exchange or retirement of an Exchange Note, the holder
generally will recognize gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (which does not include any amount
attributable to accrued but unpaid interest) and the holder's adjusted tax basis
in the Exchange Note. A holder's adjusted tax basis in an Exchange Note will
generally equal the holder's adjusted basis for the Old Note exchanged therefor
increased by any market discount previously included in income by such holder
with respect to such Exchange Note and decreased by any payments received
thereon that are not qualified stated interest and the amount of any amortizable
bond premium applied to reduce interest on the Exchange Note.
Gain or loss realized on the sale, exchange or retirement of an Exchange
Note will be capital (subject to the market discount rules, discussed above),
and will be long-term if at the time of sale, exchange or retirement the
Exchange Note has been held or deemed held for more than one year. On August 5,
1997, legislation was enacted which, among other things, reduces to 20% the
maximum rate of tax on long-term capital gains on most capital assets held by an
individual for more than 18 months, and under which gain on most capital assets
held by an individual more than one year and up to 18 months is subject to tax
at a maximum rate of 28%. Holders are urged to consult their tax advisor with
respects to the effects of legislation. The deductibility of capital losses is
subject to limitations.
100
<PAGE> 106
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and disposition
of Notes by an initial beneficial owner of Notes that, for United States federal
income tax purposes, is not a "United States person" (a "Non-United States
Holder"). This discussion is based upon the United States federal tax law now in
effect, which is subject to change, possibly retroactively. For purposes of this
discussion, a "United States person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in the
United States or under the laws of the United States or of any political
subdivision thereof, an estate whose income is includible in gross income for
United States federal income tax purposes regardless of its source or a trust,
(A) for taxable years beginning after December 31, 1996 (or ending after August
20, 1996, if the trustee has made an applicable election) if a U.S. court is
able to exercise primary supervision over the administration of the trust and
one or more U.S. persons have the authority to control all substantial decisions
of the trust or (B) for taxable years not described in clause (A), if the income
of the trust is includible in gross income for United States federal income tax
purposes regardless of its source. The tax treatment of the Holders of the Notes
may vary depending upon their particular situations. U.S. persons acquiring the
Notes are subject to different rules than those discussed below. In addition,
certain other holders (including insurance companies, tax exempt organizations,
financial institutions and broker-dealers) may be subject to special rules not
discussed below.
INTEREST
Interest paid by the Company to a Non-United States Holder will not be
subject to United States federal income or withholding tax if such interest is
not effectively connected with the conduct of a trade or business within the
United States by such Non-United States Holder and such Non-United States
Holder: (i) does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company; (ii) is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code; and (iii) certifies, under penalties of
perjury, that such holder is not a United States person and provides such
holder's name and address.
GAIN ON DISPOSITION
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale, redemption or other disposition
of a Note unless: (i) the gain is effectively connected with the conduct of a
trade or business within the United States by the Non-United States Holder; or
(ii) in the case of a Non-United States Holder who is a nonresident alien
individual and holds the Note as a capital asset, such holder is present in the
United States for 183 or more days in the taxable year and certain other
requirements are met.
FEDERAL ESTATE TAXES
If interest on the Notes is exempt from withholding of United States
federal income tax under the rules described above, the Notes will not be
included in the estate of a deceased Non-United States Holder for United States
federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will, where required, report to the Holders of Notes and the
Internal Revenue Service the amount of any interest paid on the Notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments.
In the case of payments of interest to Non-United States Holders, temporary
Treasury regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the requisite certification, as described above, has been received or an
exemption has otherwise been established; provided that neither the Company nor
its payment agent has
101
<PAGE> 107
actual knowledge that the Holder is a United States person or that the
conditions of any other exemption are not in fact satisfied. Under temporary
Treasury regulations, these information reporting and backup withholding
requirements will apply, however, to the gross proceeds paid to a Non-United
States Holder on the disposition of the Notes by or through a United States
office of a United States or foreign broker, unless the Holder certifies to the
broker under penalties of perjury as to its name, address and status as a
foreign person or the Holder otherwise establishes an exemption. Information
reporting requirements, but not backup withholding, will also apply to a payment
of the proceeds of a disposition of the Notes by or through a foreign office of
a United States broker or foreign brokers with certain types of relationships to
the United States unless such broker has documentary evidence in its file that
the Holder of the Notes is not a United States person, and such broker has no
actual knowledge to the contrary, or the Holder establishes an exception.
Neither information reporting nor backup withholding generally will apply to a
payment of the proceeds of a disposition of the Notes by or through a foreign
office of a foreign broker not subject to the preceding sentence.
Recently, the Treasury Department has issued proposed regulations regarding
the withholding and information reporting rules discussed above. In general, the
proposed regulations do not alter the substantive withholding and information
reporting requirements but unify current certification procedures and forms and
clarify reliance standards. If finalized in their current form, the proposed
regulations would generally be effective for payments made after December 31,
1997, subject to certain transition rules.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the IRS.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES FOR
UNITED STATES AND NON-UNITED STATES HOLDERS IS FOR GENERAL INFORMATION ONLY AND
IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF THE OLD NOTES AND EACH
PROSPECTIVE HOLDER AND, SUBSEQUENT TO THE EXCHANGE OFFER, EACH HOLDER, OF
EXCHANGE NOTES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE
TAX CONSEQUENCES TO SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF
THE EXCHANGE NOTES INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that it will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transaction,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or 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 Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
such person 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.
102
<PAGE> 108
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer, other than commissions or concessions
of any broker-dealer, and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes will be passed
upon for the Company by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Imperial Holly at September 30,
1997 and at March 31, 1997 and 1996 and for the six-month transition period
ended September 30, 1997 and for each of the three years in the period ended
March 31, 1997, included in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and are included in reliance upon the report of such Firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Savannah Foods included in this
Prospectus have been audited by Price Waterhouse LLP, independent accountants
and Arthur Andersen LLP, independent accountants, to the extent and for the
periods indicated in their reports herein.
AVAILABLE INFORMATION
The Company has filed with the SEC a registration statement (the
"Registration Statement") under the Securities Act on Form S-4 with respect to
the Exchange Notes offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved. The Registration Statement and
any amendments thereto, including exhibits filed or incorporated by reference as
a part thereof, are available for inspection and copying at the SEC's offices as
described below.
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith files periodic reports, proxy statements and other
information with the SEC. Reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and
at the regional offices of the SEC located at 7 World Trade Center, 13th Floor,
New York, New York 10048 and Suite 1400, Northwestern Atrium Center, 14th Floor,
500 West Madison Street, Chicago, Illinois 60661. Copies of such material may
also be obtained at prescribed rates by writing to the SEC, Public Reference
Section, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and
such information may also be inspected at the offices of the American Stock
Exchange, 86 Trinity Place Broad Street, New York, New York 10006. The SEC
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
Such reports, proxy and information statements and other information may be
found on the SEC's Web site address, http://www.sec.gov.
103
<PAGE> 109
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference the following documents
previously filed by the Company pursuant to the Exchange Act:
(a) Transition Report of Imperial Holly on Form 10-K for the
transition period ended September 30, 1997;
(b) Current Report of Imperial Holly on Form 8-K dated October 17,
1997, as amended on Form 8-K/A on December 8, 1997; and
(c) Current Report of the Company on Form 8-K dated December 22, 1997,
as amended on Form 8-K/A dated January 13, 1998.
All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to termination of the offering made hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
ANY PERSON RECEIVING A COPY OF THIS PROSPECTUS MAY OBTAIN WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, A COPY OF ANY OF THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN, EXCEPT FOR THE EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS).
REQUESTS SHOULD BE ADDRESSED TO CORPORATE SECRETARY, IMPERIAL HOLLY CORPORATION,
ONE IMPERIAL SQUARE, SUITE 200, 8016 HIGHWAY 90-A, SUGAR LAND, TEXAS 77478.
104
<PAGE> 110
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements of Imperial Holly
Corporation and Subsidiaries
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of September 30, 1997 and
March 31, 1997 and 1996................................ F-3
Consolidated Statements of Income for the Six Months Ended
September 30, 1997 and 1996 and the Years Ended March
31, 1997, 1996 and 1995................................ F-4
Consolidated Statements of Changes in Shareholders' Equity
for the Six Months Ended September 30, 1997, and the
Years Ended March 31, 1997, March 31, 1996 and March
31, 1995............................................... F-5
Consolidated Statements of Cash Flow for the Six Months
Ended September 30, 1997 and 1996 and the Years Ended
March 31, 1997, 1996 and 1995.......................... F-6
Notes to Consolidated Financial Statements................ F-7
Consolidated Financial Statements of Savannah Foods &
Industries, Inc.
Report of Independent Public Accountants.................. F-19
Report of Independent Accountants......................... F-20
Consolidated Balance Sheets as of September 28, 1997 and
September 29, 1996..................................... F-21
Consolidated Statements of Operations for the Fiscal Years
Ended September 28, 1997, September 29, 1996 and
October 1, 1995........................................ F-22
Consolidated Statements of Changes in Stockholders' Equity
for the Fiscal Years Ended September 28, 1997,
September 29, 1996 and October 1, 1995................. F-23
Consolidated Statements of Cash Flows for the Fiscal Years
Ended September 28, 1997, September 29, 1996 and
October 1, 1995........................................ F-24
Notes to Consolidated Financial Statements................ F-25
</TABLE>
F-1
<PAGE> 111
INDEPENDENT AUDITORS' REPORT
Imperial Holly Corporation:
We have audited the accompanying consolidated financial statements of
Imperial Holly Corporation and subsidiaries (the "Company") at September 30,
1997 and March 31, 1997 and 1996 and the related consolidated statements of
income, cash flows and changes in shareholders' equity for the six month
transition period ended September 30, 1997 and for each of the three years in
the period ended March 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Imperial Holly Corporation and
subsidiaries at September 30, 1997 and March 31, 1997 and 1996, and the results
of their operations and their cash flows for the six-month transition period
ended September 30, 1997 and for each of the three years in the period ended
March 31, 1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
November 21, 1997
F-2
<PAGE> 112
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, --------------------
1997 1997 1996
------------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and temporary investments......................... $ 9,354 $ 7,719 $ 1,930
Marketable securities.................................. 55,883 48,963 37,373
Accounts receivable -- trade........................... 62,158 52,157 37,251
Income tax receivable.................................. -- 3,400 1,485
Inventories:
Finished products................................... 92,815 119,206 61,702
Raw and in-process materials........................ 17,623 12,428 15,929
Supplies............................................ 16,937 16,392 12,124
Manufacturing costs prior to production................ 22,357 20,888 12,476
Prepaid expenses....................................... 5,448 3,994 3,260
-------- -------- --------
Total current assets........................... 282,575 285,147 183,530
NOTES RECEIVABLE......................................... 1,285 1,168 1,195
OTHER INVESTMENTS........................................ 14,646 11,949 6,702
PROPERTY, PLANT AND EQUIPMENT -- Net..................... 154,751 146,402 124,103
OTHER ASSETS............................................. 4,362 5,267 9,789
-------- -------- --------
TOTAL.......................................... $457,619 $449,933 $325,319
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade.............................. $ 53,923 $ 42,492 $ 37,937
Short-term borrowings.................................. 43,091 62,470 31,839
Current maturities of long-term debt................... 1,173 1,017 8
Deferred income taxes -- net........................... 24,327 16,256 8,248
Other current liabilities.............................. 29,659 29,006 23,772
-------- -------- --------
Total current liabilities...................... 152,173 151,241 101,804
-------- -------- --------
LONG-TERM DEBT -- Net of current maturities.............. 81,304 90,619 89,800
DEFERRED INCOME TAXES -- Net............................. 21,236 21,453 21,320
DEFERRED EMPLOYEE BENEFITS AND OTHER CREDITS............. 9,947 9,664 1,352
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY:
Preferred stock, without par value, issuable in series;
5,000,000 shares authorized, none issued............ -- -- --
Common stock, without par value; 50,000,000 shares
authorized.......................................... 83,707 82,620 32,276
Retained earnings...................................... 90,870 81,347 69,829
Unrealized securities gains -- net of income taxes..... 18,382 12,989 8,938
-------- -------- --------
Total shareholders' equity..................... 192,959 176,956 111,043
-------- -------- --------
TOTAL.......................................... $457,619 $449,933 $325,319
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 113
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
------------------------- ---------------------------------------
1997 1996 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
NET SALES............................ $ 406,682 $ 393,955 $ 752,595 $ 616,450 $ 586,925
----------- ----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales...................... 348,869 341,157 651,677 550,782 520,996
Selling, general and
administrative................... 30,668 29,057 57,722 53,193 54,591
Depreciation and amortization...... 6,786 7,293 14,773 12,681 13,429
Restructuring charges (Note 11).... -- -- -- 2,225 --
----------- ----------- ----------- ----------- -----------
Total....................... 386,323 377,507 724,172 618,881 589,016
----------- ----------- ----------- ----------- -----------
OPERATING INCOME (LOSS).............. 20,359 16,448 28,423 (2,431) (2,091)
INTEREST EXPENSE -- Net.............. (5,301) (6,337) (12,430) (11,207) (11,426)
REALIZED SECURITIES GAINS -- Net..... 11 394 426 5,389 1,649
OTHER INCOME -- Net.................. 724 652 1,269 3,173 3,219
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM................. 15,793 11,157 17,688 (5,076) (8,649)
PROVISION (CREDIT) FOR INCOME
TAXES.............................. 5,842 4,080 6,170 (1,858) (3,284)
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM............................... 9,951 7,077 11,518 (3,218) (5,365)
EXTRAORDINARY ITEM -- Net of tax of
$325 (Note 6)...................... -- -- -- 604 --
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS).................... $ 9,951 $ 7,077 $ 11,518 $ (2,614) $ (5,365)
=========== =========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE OF COMMON
STOCK:
Income (loss) before extraordinary
item............................. $ 0.70 $ 0.64 $ 0.92 $ (0.31) $ (0.52)
Extraordinary item -- Net.......... -- -- -- 0.06 --
----------- ----------- ----------- ----------- -----------
Net income (loss).................. $ 0.70 $ 0.64 $ 0.92 $ (0.25) $ (0.52)
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING........................ 14,247,193 11,009,476 12,576,489 10,300,487 10,266,229
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 114
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK UNREALIZED PENSION
-------------------- RETAINED SECURITIES LIABILITY
SHARES AMOUNT EARNINGS GAINS ADJUSTMENT TOTAL
---------- ------- -------- ---------- ---------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1994............. 10,252,959 $31,780 $79,862 $ 3,804 $(709) $114,737
Net loss......................... -- -- (5,365) -- -- (5,365)
Cash dividend ($.16 per share)... -- -- (1,643) -- -- (1,643)
Exercise of stock options........ 7,582 66 -- -- -- 66
Employee stock purchase plan..... 22,904 200 -- -- -- 200
Change in unrealized securities
gains -- net................... -- -- -- 1,831 -- 1,831
Pension liability adjustment..... -- -- -- -- 151 151
---------- ------- ------- ------- ----- --------
BALANCE, MARCH 31, 1995............ 10,283,445 32,046 72,854 5,635 (558) 109,977
Net loss......................... -- -- (2,614) -- -- (2,614)
Cash dividends ($.04 per
share)......................... -- -- (411) -- -- (411)
Exercise of stock options........ 11,445 85 -- -- -- 85
Employee stock purchase plan..... 17,617 145 -- -- -- 145
Change in unrealized securities
gains -- net................... -- -- -- 3,303 -- 3,303
Pension liability adjustment..... -- -- -- -- 558 558
---------- ------- ------- ------- ----- --------
BALANCE, MARCH 31, 1996............ 10,312,507 32,276 69,829 8,938 0 111,043
Net income....................... -- -- 11,518 -- -- 11,518
Exercise of stock options........ 14,411 147 -- -- -- 147
Employee stock purchase plan..... 9,517 115 -- -- -- 115
Nonemployee director compensation
plan........................... 21,760 301 -- -- -- 301
Private placement of common
stock.......................... 3,800,000 49,781 -- -- -- 49,781
Change in unrealized securities
gains -- net................... -- -- -- 4,051 -- 4,051
---------- ------- ------- ------- ----- --------
BALANCE, MARCH 31, 1997............ 14,158,195 82,620 81,347 12,989 0 176,956
Net income....................... -- -- 9,951 -- -- 9,951
Cash dividend ($0.03 per
share)......................... -- -- (428) -- -- (428)
Exercise of stock options........ 8,547 53 -- -- -- 53
Employee stock purchase and
compensation plans............. 92,373 733 -- -- -- 733
Nonemployee director compensation
plan........................... 24,660 301 -- -- -- 301
Change in unrealized securities
gains -- net................... -- -- -- 5,393 -- 5,393
---------- ------- ------- ------- ----- --------
BALANCE, SEPTEMBER 30, 1997........ 14,283,775 $83,707 $90,870 $18,382 $ 0 $192,959
========== ======= ======= ======= ===== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 115
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
---------------------- -------------------------------
1997 1996 1997 1996 1995
-------- ----------- -------- --------- --------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).................... $ 9,951 $ 7,077 $ 11,518 $ (2,614) $ (5,365)
Adjustments for noncash and
nonoperating items:
Extraordinary item -- net......... -- -- -- (604) --
Depreciation...................... 6,786 7,293 14,773 12,681 13,429
Deferred income tax provision..... 5,155 3,633 5,760 (1,737) (3,294)
Other............................. 369 185 1,164 (5,203) (2,021)
Working capital changes (excluding
working capital acquired in the
Spreckels acquisition):
Receivables....................... (6,601) (19,725) (10,172) (502) 5,380
Inventory......................... 20,651 (2,373) (22,564) 45,408 8,914
Deferred and prepaid costs........ (2,923) (546) (1,105) 627 1,814
Accounts payable.................. 11,431 (6,536) (6,997) (6,819) 989
Other liabilities................. 1,011 2,054 (1,285) (3,361) 2,358
-------- -------- -------- --------- --------
Operating cash flow.................. 45,830 (8,938) (8,908) 37,876 22,204
-------- -------- -------- --------- --------
INVESTING ACTIVITIES:
Acquisition of Spreckels............. -- (36,175) (36,287) -- --
Capital expenditures................. (15,214) (5,345) (12,322) (8,890) (7,850)
Investment in marketable
securities........................ (5,395) (3,908) (7,044) (6,537) (6,675)
Proceeds from sale or maturity of
marketable securities............. 6,798 1,612 2,139 14,974 4,344
Proceeds from sale of fixed assets... 205 35 109 1,478 5,915
Other investments.................... (3,007) -- (2,872) (741) 245
Other................................ 350 (857) 4,207 864 131
-------- -------- -------- --------- --------
Investing cash flow.................. (16,263) (44,638) (52,070) 1,148 (3,890)
-------- -------- -------- --------- --------
FINANCING ACTIVITIES:
Private placement of common stock.... -- 49,781 49,781 -- --
Short-term borrowings:
Bank borrowings -- net............ 34,391 48,322 4,180 (5,431) (15,721)
CCC borrowings -- advances........ -- 35,079 93,014 153,143 76,307
CCC borrowings -- repayments...... (53,770) (74,960) (79,125) (176,965) (76,280)
Repayment of long-term debt.......... (9,159) (806) (1,595) (9,324) (67)
Dividends paid....................... (428) -- -- (411) (1,643)
Stock option proceeds and other...... 1,034 372 512 208 221
-------- -------- -------- --------- --------
Financing cash flow.................. (27,932) 57,788 66,767 (38,780) (17,183)
-------- -------- -------- --------- --------
INCREASE IN CASH AND TEMPORARY
INVESTMENTS.......................... 1,635 4,212 5,789 244 1,131
CASH AND TEMPORARY INVESTMENTS,
BEGINNING OF YEAR.................... 7,719 1,930 1,930 1,686 555
-------- -------- -------- --------- --------
CASH AND TEMPORARY INVESTMENTS, END OF
YEAR................................. $ 9,354 $ 6,142 $ 7,719 $ 1,930 $ 1,686
======== ======== ======== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 116
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, MARCH 31, 1997, 1996 AND 1995
1. ACCOUNTING POLICIES
The Company -- The consolidated financial statements include the accounts
of Imperial Holly Corporation and its majority owned subsidiaries (the
"Company"). All significant intercompany balances and transactions have been
eliminated. The Company operates in one domestic business segment -- the
production and sale of refined sugar and related products. The Company is
significantly affected by market factors, including domestic prices for refined
sugar and raw cane sugar. These market factors are influenced by a variety of
external forces, including the number of domestic acres contracted to grow sugar
cane and sugarbeets, prices of competing crops, weather conditions and United
States farm and trade policy. Federal legislation and regulations provide for
mechanisms designed to support the price of domestic sugar crops, principally
the limitations on importation of raw cane sugar for domestic consumption. In
addition, agricultural conditions in the Company's growing areas may materially
affect the quality and quantity of sugar beets available for purchase as well as
the unit costs of raw materials and processing.
A significant portion of the Company's industrial sales are made under
fixed price, forward sales contracts, most of which commence October 1 and
extend for up to one year. The Company contracts to purchase raw cane sugar
substantially in advance of the time it delivers the refined sugar produced from
the purchase. To mitigate its exposure to future price changes, the Company
attempts to match refined sugar sales contracted for future delivery with the
purchase or pricing of raw cane sugar when feasible. Additionally, the Company
utilizes a participatory sugar beet purchase contract, described below, which
relates the cost of sugarbeets to the net selling price realized on refined beet
sugar sales.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires estimates and assumptions
that affect the reported amounts as well as certain disclosures. The Company's
financial statements include amounts that are based on management's best
estimates and judgments. Actual results could differ from those estimates.
Change in Fiscal Year -- In October 1997, the Company changed its fiscal
year end from March 31 to September 30. As used herein, the terms fiscal 1997,
fiscal 1996 and fiscal 1995 refer to the twelve months ended March 31, 1997,
1996 and 1995, respectively.
Cash and Temporary Investments -- Temporary investments consist of
short-term, highly liquid investments with maturities of 90 days or less at the
time of purchase.
Marketable Securities -- All of the Company's marketable securities are
classified as "available for sale", and accordingly, are reflected in the
Consolidated Balance Sheet at fair market value, with the aggregate unrealized
gain, net of related deferred tax liability, included as a component of
shareholders' equity. Cost for determining gains and losses on sales of
marketable securities is determined on the FIFO method.
Inventories -- Inventories are stated at the lower of cost or market. Cost
of sugar is determined under the last-in first-out ("LIFO") method. All other
costs are determined under the first-in first-out ("FIFO") method.
If only the FIFO cost method had been used, inventories would have been
higher by $18.9 million at September 30, 1997, $19.2 million at March 31, 1997
and $12.9 million at March 31, 1996. Reductions in inventory quantities in the
six month period ended September 30, 1997 and fiscal 1996 and 1995 resulted in
liquidations of LIFO inventory layers carried at costs prevailing in prior
years. The effect of these liquidations was to increase net income by about
$468,000 ($0.03 per share) in the six month period ended September 30, 1997,
$1,385,000 ($0.13 per share) in fiscal 1996 and decrease net income by about
$114,000 ($0.01 per share) in fiscal 1995.
Sugarbeets Purchased -- Payments to growers for sugarbeets are based in
part upon the Company's average net return for sugar sold (as defined in the
participating contracts with growers) during the grower
F-7
<PAGE> 117
contract years, some of which extend beyond the fiscal year end. The contracts
provide for the sharing of the net selling price (gross sales price less certain
marketing costs, including packaging costs, brokerage, freight expense and
amortization of costs for certain facilities used in connection with marketing)
with growers. Cost of sales includes an accrual for estimated additional amounts
to be paid to growers based on the average net return realized to date for sugar
sold in each of the contract years through the end of the fiscal year. The final
cost of sugarbeets cannot be determined until the end of the contract year for
each growing area.
Manufacturing Costs Prior to Production -- Certain manufacturing costs
incurred between processing periods which are necessary to prepare the factory
for the next processing campaign are deferred and allocated to the cost of sugar
produced in the subsequent campaign.
Property and Depreciation -- Property is stated at cost and includes
expenditures for renewals and improvements and capitalized interest. Maintenance
and repairs are charged to current operations. When property is retired or
otherwise disposed of, the cost and related accumulated depreciation are removed
from the respective accounts, and any gain or loss on disposition is included in
income.
Depreciation is provided principally on the straight-line or
sum-of-the-years' digits methods over the estimated service lives of the assets.
Fair Value of Financial Instruments -- The fair value of financial
instruments is estimated based upon market trading information, where available.
Absent published market values for an instrument, management estimates fair
values based upon quotations from broker/dealers or interest rate information
for similar instruments. The carrying amount of cash and temporary investments,
accounts receivable, accounts payable, short-term borrowings and other current
liabilities approximates fair value because of the short maturity and/or
frequent repricing of those instruments.
Federal Income Taxes -- Federal income tax expense includes the current tax
obligation and the change in deferred income tax liability for the period.
Deferred income taxes result from temporary differences between financial and
tax bases of certain assets and liabilities.
Earnings Per Share -- The computation of earnings per share is based on the
weighted average number of shares outstanding. Shares of common stock issuable
under stock options have not been included in the computation of earnings per
share as their effect would be insignificant.
Pending Accounting Pronouncements -- In March 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" (SFAS No. 128"). This new standard requires dual
presentation of basic and diluted earnings per share ("EPS") on the face of the
earnings statement and requires a reconciliation of the numerators and
denominators of basic and diluted EPS calculations. This statement will be
effective for both interim and annual periods ending after December 15, 1997.
The Company's current EPS calculation conforms to basic EPS. Diluted EPS as
defined by SFAS No. 128 is not expected to be materially different from basic
EPS.
Recently, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", and
Statement of Financial Accounting Standards No. 131, "Disclosures About Segments
of an Enterprise and Related Information". These statements, which are effective
for the Company's fiscal year ending September 30, 1999, establish additional
disclosure requirements but do not affect the measurement of results of
operation. Management is evaluating what, if any, additional disclosures may be
required when these statements are implemented.
2. ACQUISITIONS
On September 12, 1997, the Company entered into an Agreement and Plan of
Merger with Savannah Foods and Industries, Inc., a Georgia based producer and
marketer of sugar and related products ("Savannah Foods"), wherein it agreed to
acquire Savannah Foods in a two step transaction. The Company completed the
first step on October 17, 1997, when it accepted for payment pursuant to a
tender offer shares representing 50.1% of Savannah Foods outstanding common
stock for aggregate consideration of $292 million cash (the "Equity Tender"). In
the second step, expected to be completed in December 1997, Savannah Foods will
be
F-8
<PAGE> 118
merged with a subsidiary of the Company (the "Merger"); Savannah Foods will
survive the Merger as a wholly-owned subsidiary of the Company. In consideration
for the Merger, Savannah Foods stockholders will receive $78.6 million cash and
9.2 million to 12.0 million shares of the Company's common stock, depending on
the market value of the Company's common stock prior to the Merger.
To finance the Equity Tender, finance a tender offer for the Company's
8 3/8% Senior Notes due 1999 (The "Debt Tender") and replace the Company's
existing credit facilities, the Company obtained a credit facility, (the "Tender
Credit Facility") from an affiliate of Lehman Brothers, Inc. ("Lehman"),
consisting of a $292 million term loan and a $210 million revolving credit
facility. The Tender Credit Facility is secured by substantially all of the
Company's assets and matures on the earlier of the date of the Merger or January
15, 1998. The Company has a financing commitment letter from Lehman to provide
funds for the cash portion of the Merger and to refinance the Tender Credit
Facility under one of two options: a) senior secured term loans aggregating $255
million, a $200 million senior secured revolving credit facility and $250
million senior subordinated notes offering; or b) $505 million senior secured
term loans and a $200 million senior secured revolving credit facility. The
financing provided by Lehman is expected to contain various restrictions and
covenants that may limit the Company's ability to incur additional debt, make
capital expenditures or pay dividends.
The acquisition will be accounted for as a purchase and Savannah Foods'
results of operations will be included in the Company's consolidated financial
statements commencing October 17, 1997. Purchased intangibles, which include
brand related intangibles and the excess of purchase price over the book value
of net assets acquired ("goodwill"), are estimated to total $288 million and
will be amortized over 40 years. Unaudited, summarized pro forma operating
results as if the acquisition and related financing transactions had occurred on
April 1, 1996, and assuming the maximum number of shares of the Company's common
stock had been issued, are as follows (in thousands of dollars, except per share
amounts):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED TWELVE MONTHS
SEPTEMBER 30, ENDED
1997 MARCH 31, 1997
------------- --------------
<S> <C> <C>
Net sales.............................................. $1,018,911 $1,923,324
Operating income....................................... 54,189 68,980
Income before extraordinary item....................... 17,158 6,736
Income before extraordinary item per share
of common stock...................................... $ 0.64 $ 0.27
</TABLE>
On April 19, 1996, the Company acquired all of the outstanding capital
stock of Spreckels Sugar Company, Inc. and Limestone Products Company, Inc.
(collectively "Spreckels"), a California based beet sugar processor for $35.3
million. The acquisition was accounted for as a purchase and Spreckels' results
of operations are included in these consolidated financial statements commencing
April 19, 1996.
3. INVESTMENTS
Marketable securities consisted of the following (in thousands of dollars):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------------
GROSS UNREALIZED
FAIR HOLDING
AMORTIZED MARKET ----------------
COST VALUE GAINS LOSSES
--------- ------- ------- ------
<S> <C> <C> <C> <C>
US Government securities due 1997 through
1998......................................... $ 7,646 $ 7,643 $ 8 $ (11)
Common stocks.................................. 19,957 48,240 28,283 --
------- ------- ------- ------
Total................................ $27,603 $55,883 $28,291 $ (11)
======= ======= ======= ======
</TABLE>
F-9
<PAGE> 119
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------------
GROSS UNREALIZED
FAIR HOLDING
AMORTIZED MARKET ----------------
COST VALUE GAINS LOSSES
--------- ------- ------- ------
<S> <C> <C> <C> <C>
US Government securities....................... $ 9,226 $ 9,222 $ 8 $ (12)
Common stocks.................................. 19,755 39,741 20,085 (99)
------- ------- ------- ------
Total................................ $28,981 $48,963 $20,093 $ (111)
======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------------
GROSS UNREALIZED
FAIR HOLDING
AMORTIZED MARKET ----------------
COST VALUE GAINS LOSSES
--------- ------- ------- ------
<S> <C> <C> <C> <C>
US Government securities....................... $ 4,881 $ 4,937 $ 56 $ --
Common stocks.................................. 18,740 32,436 13,696 --
------- ------- ------- ------
Total................................ $23,621 $37,373 $13,752 $ --
======= ======= ======= ======
</TABLE>
Realized securities gains are reported net of realized losses of $28,000,
$2,000, and $106,000 in fiscal years 1997, 1996 and 1995, respectively. There
were no realized securities losses during the six months ended September 30,
1997. Marketable securities with a market value of $13.5 million at September
30, 1997 were pledged to secure certain insurance and other obligations.
Other investments include the Company's royalty interest in a coal seam
methane gas project, which is accounted for at amortized cost and its investment
in a limited partnership which is constructing a beet sugar factory in
Washington state which is accounted for on the equity method.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at September 30, 1997 consisted of the
following (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 3L,
SEPTEMBER 30, --------------------
1997 1997 1996
------------- -------- --------
<S> <C> <C> <C>
Land............................................. $ 20,167 $ 19,949 $ 13,682
Buildings, machinery and equipment............... 273,536 271,002 251,949
Construction in progress......................... 14,572 5,440 2,094
-------- -------- --------
Total.................................. 308,275 296,391 267,725
Less accumulated depreciation.................... 153,524 149,989 143,622
-------- -------- --------
Property, Plant and Equipment -- Net............. $154,751 $146,402 $124,103
======== ======== ========
</TABLE>
5. SHORT-TERM BORROWINGS
At September 30, 1997, the Company had working capital financing available
from domestic banks under a $110,000,000 unsecured revolving credit line which
provided for interest on advances at floating or negotiated rates and required
commitment fees. The Company also has short-term borrowing facilities available
from banks on an uncommitted basis aggregating $55,000,000 at September 30,
1997; interest on these borrowings was on a negotiated rate basis. These credit
facilities were replaced in October 1997 by the Tender Credit Facility discussed
in Note 2.
Additionally, in the past the Company has borrowed short-term from the
Commodity Credit Corporation ("CCC") under the USDA's price support loan
program. CCC borrowings are secured by refined beet sugar inventory and are
recourse or nonrecourse to the Company depending upon certain regulatory
conditions.
F-10
<PAGE> 120
Outstanding borrowings were as follows (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 3L,
SEPTEMBER 30, ------------------
1997 1997 1996
------------- ------- -------
<S> <C> <C> <C>
Commodity Credit Corporation....................... $ -- $53,770 $27,319
Bank working capital financing..................... 43,091 8,700 4,520
------- ------- -------
Total.................................... $43,091 $62,470 $31,839
======= ======= =======
Weighted Average Interest Rate..................... 6.89% 6.70% 5.36%
======= ======= =======
</TABLE>
6. LONG-TERM DEBT
Long-term debt was as follows (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, ------------------
1997 1997 1996
------------- ------- -------
<S> <C> <C> <C>
8 3/8% senior notes................................ $81,172 $89,468 $89,800
Other, principally equipment capital leases........ 1,305 2,168 8
------- ------- -------
Total long-term debt............................... 82,477 91,636 89,808
Less current maturities............................ 1,173 1,017 8
------- ------- -------
Long-term debt, net................................ $81,304 $90,619 $89,800
======= ======= =======
</TABLE>
The Company's 8 3/8% Senior Notes due 1999 do not require principal
payments prior to maturity. In connection with the Debt Tender discussed in Note
2, Senior Notes with a principal amount of $75,371,000 were purchased in October
1997, and the indenture relating to the Senior Notes was amended to, among other
things, remove restrictions on the Company's ability to create liens on certain
properties. The Company will report as an extraordinary item for the quarter
ending December 31, 1997 a loss of $1,967,000 on such purchase. In fiscal 1996,
the Company purchased and retired a portion of the Senior Notes for amounts less
than book value, and the Company reported such difference, net of tax, as an
extraordinary item.
The Company had an interest rate swap agreement which expired in October
1996; income (loss) on such swap was ($3,000) in fiscal 1997, $289,000 in fiscal
1996, and $643,000 in fiscal 1995 and is reported in interest expense-net.
Cash paid for interest on short and long-term debt was $6,987,787 for the
six month period ended September 30, 1997, $11,949,000, $12,228,000, and
$11,463,000 for the fiscal years ended March 31, 1997, 1996 and 1995
respectively. Interest capitalized as part of the cost of constructing assets
was $272,000 for the six months ended September 30, 1997. Such amount was not
significant in fiscal 1997, 1996 or 1995.
7. INCOME TAXES
The components of the consolidated income tax provision (credit), including
amounts reported as an extraordinary item, were as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, -----------------------------
1997 1997 1996 1995
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Federal:
Current............................... $ -- $ 20 $ 109 $ (36)
Tax benefit of operating loss
carryforward....................... 1,551 (1,762) (1,452) (1,636)
Deferred.............................. 3,604 7,522 (285) (1,658)
State................................... 687 390 95 46
------ ------- ------- -------
Total................................. $5,842 $ 6,170 $(1,533) $(3,284)
====== ======= ======= =======
</TABLE>
F-11
<PAGE> 121
The tax effects of temporary differences which give rise to the Company's
deferred tax assets and liabilities were as follows (in thousands of dollars):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------
ASSETS LIABILITIES TOTAL
------- ----------- --------
<S> <C> <C> <C>
Current:
Marketable securities valuation differences............... $ -- $ (9,899) $ (9,899)
Inventory valuation differences, principally purchase
accounting............................................. -- (12,230) (12,230)
Manufacturing costs prior to production deducted
currently.............................................. -- (10,168) (10,168)
Accruals not currently deductible......................... 2,272 -- 2,272
Alternate minimum tax differences......................... 903 -- 903
Operating loss carryforward (expiring in 2010, 2011 and
2012).................................................. 3,332 -- 3,332
Other..................................................... 1,463 -- 1,463
------- -------- --------
Total current..................................... 7,970 (32,297) (24,327)
------- -------- --------
Noncurrent:
Depreciation differences, including purchase accounting... -- (22,329) (22,329)
Pension cost differences.................................. 480 -- 480
Accruals not currently deductible......................... 1,052 -- 1,052
Other..................................................... 694 (1,133) (439)
------- -------- --------
Total noncurrent.................................. 2,226 (23,462) (21,236)
------- -------- --------
Total............................................. $10,196 $(55,759) $(45,563)
======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------------------------------------
1997 1996
-------------------------------- ------------------------------------
ASSETS LIABILITIES TOTAL ASSETS LIABILITIES TOTAL
------- ----------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Current:
Marketable securities
valuation differences..... -- $ (6,994) $ (6,994) -- $ (4,813) $ (4,813)
Inventory valuation
differences, principally
purchase accounting....... -- (12,324) (12,324) -- (6,320) (6,320)
Manufacturing costs prior to
production deducted
currently................. -- (7,311) (7,311) -- (4,366) (4,366)
Accruals not currently
deductible................ $ 2,446 -- 2,446 $2,081 -- 2,081
Alternate minimum tax
differences............... 903 -- 903 903 -- 903
Operating loss
carryforward.............. 5,919 -- 5,919 3,172 -- 3,172
Other........................ 1,105 -- 1,105 1,135 (40) 1,095
------- -------- -------- ------ -------- --------
Total current........ 10,373 (26,629) (16,256) 7,291 (15,539) (8,248)
------- -------- -------- ------ -------- --------
Noncurrent:
Depreciation differences,
including purchase
accounting................ -- (22,160) (22,160) -- (18,443) (18,443)
Pension cost differences..... 1,153 -- 1,153 -- (1,711) (1,711)
Accruals not currently
deductible................ 658 -- 658 154 -- 154
Other........................ -- (1,104) (1,104) -- (1,320) (1,320)
------- -------- -------- ------ -------- --------
Total noncurrent..... 1,811 (23,264) (21,453) 154 (21,474) (21,320)
------- -------- -------- ------ -------- --------
Total................ $12,184 $(49,893) $(37,709) $7,445 $(37,013) $(29,568)
======= ======== ======== ====== ======== ========
</TABLE>
F-12
<PAGE> 122
The consolidated income tax provision is different from the amount which
would be provided by applying the statutory federal income tax rate of 35% to
the Company's income before taxes. The reasons for the differences from the
statutory rate are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, --------------------------
1997 1997 1996 1995
------------- ------ ------- -------
<S> <C> <C> <C> <C>
Income taxes computed at the statutory
federal rate.............................. $5,527 $6,191 $(1,451) $(3,027)
Nontaxable interest and dividends........... (121) (217) (251) (299)
State income taxes........................ 447 253 62 30
Foreign sales corporation................. (30) (60) (59) (68)
Other..................................... 19 3 166 80
------ ------ ------- -------
Total.................................. $5,842 $6,170 $(1,533) $(3,284)
====== ====== ======= =======
</TABLE>
Income taxes paid were $1,937,000 in the six months ended September 30,
1997 and $2,300,000 in fiscal 1997 and $213,000 in fiscal 1996; income tax
refunds received were $3,778,000 in 1995.
8. EMPLOYEE BENEFITS
Retirement Plans -- Substantially all of the Company's nonseasonal
employees are covered by retirement plans. Certain unionized employees are
covered by an industry-wide plan, and other employees are covered by
Company-sponsored defined benefit plans. Under the Company-sponsored defined
benefit plans, retirement benefits are primarily a function of years of service
and the employee's compensation for a defined period of employment. The Company
funds pension costs at an actuarially determined amount based on normal cost and
the amortization of prior service costs, gains, and losses over the remaining
service periods. Additionally, the Company provides a supplemental
non-qualified, unfunded pension plan for certain officers whose benefits under
the qualified plan are limited by federal tax law. The Company provides a
non-qualified retirement plan for non-employee directors, which provides
benefits based upon years of service as a director and the retainer in effect at
the date of a director's retirement.
The aggregate net periodic pension cost for these plans included the
following components (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, -------------------------------
1997 1997 1996 1995
------------- -------- -------- -------
<S> <C> <C> <C> <C>
Company-sponsored plans:
Service cost for benefits earned
during the period................. $ 1,359 $ 2,756 $ 2,089 $ 2,128
Interest cost on projected benefit
obligation........................ 2,927 5,883 2,653 2,348
Actual return on plan assets......... (20,145) (15,675) (10,141) (4,439)
Net amortization and deferral........ 16,839 10,355 8,377 3,254
-------- -------- -------- -------
Net periodic pension cost -- Company-
sponsored plans................... 980 3,319 2,978 3,291
Industry-wide plan for certain
unionized employees............... 212 432 438 459
-------- -------- -------- -------
Total pension cost........... $ 1,192 $ 3,751 $ 3,416 $ 3,750
======== ======== ======== =======
</TABLE>
F-13
<PAGE> 123
The funded status of the Company-sponsored plans was as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------
PLANS FOR WHICH PLANS FOR WHICH
ACCUMULATED ASSETS EXCEED
BENEFITS ACCUMULATED
EXCEED ASSETS BENEFITS
--------------- ---------------
<S> <C> <C>
Actuarial present value of projected benefit
obligations:
Accumulated benefit obligations:
Vested............................................ $1,666 $ 65,352
Nonvested......................................... 19 5,071
------ --------
Total accumulated benefit obligations........ 1,685 70,423
Effect of projected future salary increases............ 341 10,430
------ --------
Projected benefit obligations........................ 2,026 80,853
Plan assets at fair value (primarily listed stocks and
bonds)............................................... -- 104,153
------ --------
Projected benefit obligations over (under) plan
assets............................................... 2,026 (23,300)
Prior service cost of plan amendments.................. (893) (3,136)
Unrecognized net gains (losses):
Arising at transition date........................... (518) 176
Arising subsequent to transition date................ 154 30,165
Adjustment for additional liability.................... 916 --
------ --------
Accrued pension cost................................... $1,685 $ 3,905
====== ========
Assumptions used:
Current discount rate for plan liabilities........... 7.5% 7.5%
Projected annual rate of increase in compensation
levels............................................ 5.0% 5.0%
Assumed long-term return on plan assets.............. 8.0% 8.0%
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------------------------
1997 1996
--------------------------------- ---------------------------------
PLANS FOR WHICH PLANS FOR WHICH PLANS FOR WHICH PLANS FOR WHICH
ACCUMULATED ASSETS EXCEED ACCUMULATED ASSETS EXCEED
BENEFITS ACCUMULATED BENEFITS ACCUMULATED
EXCEED ASSETS BENEFITS EXCEED ASSETS BENEFITS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Actuarial present value of projected
benefit obligations:
Accumulated benefit obligations:
Vested................................. $27,039 $37,458 $ 9,055 $17,832
Nonvested.............................. 1,210 1,049 668 433
------- ------- ------- -------
Total accumulated benefit
obligations..................... 28,249 38,507 9,723 18,265
Effect of projected future salary
increases................................ 1,219 8,279 715 8,434
------- ------- ------- -------
Projected benefit obligations............ 29,468 46,786 10,438 26,699
Plan assets at fair value (primarily listed
stocks and bonds)........................ 25,649 60,850 6,889 31,888
------- ------- ------- -------
Projected benefit obligations over (under)
plan assets.............................. 3,819 (14,064) 3,549 (5,189)
Prior service cost of plan amendments...... (2,651) (1,628) (2,118) 22
Unrecognized net gains (losses):
Arising at transition date............... (675) 215 (989) 293
Arising subsequent to transition date.... 2,793 16,902 (175) 3,108
Adjustment for additional liability........ 1,671 -- 2,567 --
------- ------- ------- -------
Accrued (prepaid) pension cost............. $ 4,957 $ 1,425 $ 2,834 $(1,766)
======= ======= ======= =======
Assumptions used:
Current discount rate for plan
liabilities............................ 8.0% 8.0% 7.5% 7.5%
Projected annual rate of increase in
compensation levels.................... 5.0% 5.0% 5.5% 5.5%
Assumed long-term return on plan
assets................................. 8.0% 8.0% 8.0% 8.0%
</TABLE>
F-14
<PAGE> 124
401(k) Plans -- Substantially all of the Company's nonbargaining unit
employees may elect to defer up to 15% of their annual compensation in the
Company's 401(k) Tax Deferred Savings Plan. The Company may make discretionary
matching contributions of up to 38% of the first $2,500 contributed by an
employee. The Company also provides 401(k) plans for certain bargaining unit
groups which allow participating employees to defer up to 15% of their annual
compensation. The amounts charged to expense for these plans were not
significant.
Employee Stock Purchase Plan -- In July 1993, the shareholders approved an
amended and restated employee stock purchase plan and reserved 1,000,000 shares
of common stock. The plan provides substantially all year-round employees the
option to purchase shares of common stock either through open market purchases
at market value or directly from the Company at 85% of market value. The amounts
charged to compensation expense for the discount on shares purchased under the
latter alternative were not significant.
9. SHAREHOLDERS' EQUITY
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123") in fiscal 1997. As
permitted by Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation" ("SFAS No. 123"), the Company measures
compensation cost using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
The Company's reported net income and earnings per share would have been
reduced had compensation cost for the Company's stock-based compensation plans
been determined using the fair value method of accounting as set forth in SFAS
No. 123. For purposes of estimating the fair value disclosures below, the fair
value of each stock option has been estimated on the grant date with a
Black-Scholes option-pricing model using the following weighted-average
assumptions: expected volatility of 38%; risk-free interest rate of 7.06%; and
expected lives of 10 years. The effects of using the fair value method of
accounting on net income and earnings per share are indicated in the pro forma
amounts below:
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDING MARCH 31,
ENDED ----------------------
9/30/97 1997 1996
---------- -------- --------
<S> <C> <C> <C> <C>
Income (loss) before
extraordinary item As reported.................. $9,951 $11,518 $(3,218)
Pro forma.................... 9,839 11,351 (3,260)
Net income (loss) As reported.................. $9,951 $11,518 $(2,614)
Pro forma.................... 9,839 11,351 (2,656)
Earnings Per Share:
Income (loss) before
extraordinary item As reported.................. $ 0.70 $ 0.92 $ (0.31)
Pro forma 0.69 0.90 (0.32)
Net income As reported.................. $ 0.70 $ 0.92 $ (0.25)
Pro forma.................... 0.69 0.90 (0.26)
</TABLE>
Shareholder Rights Plan -- In 1989, the Board of Directors declared a
dividend of one Right for each outstanding share of the Company's common stock.
Certain terms of the rights were amended in January 1995. Each of the Rights,
which are currently attached to the common stock, entitle the holder to purchase
two three-hundredths of a share of a new series of Junior Participating
Preferred Stock (95,225 in total as of September 30, 1997) at a price of $60
(subject to adjustment). The Rights are not exercisable until the earlier of ten
days after the public announcement that a person or group has acquired 15% or
more (25% or more for persons who were 10% shareholders on January 27, 1995) of
the Company's outstanding common stock (an "Acquiring Person") or ten business
days after the commencement of a tender offer to acquire such an interest. Under
certain circumstances, the Rights, other than the Rights held by the Acquiring
Person, will become exercisable for common stock of the Company (or an acquirer)
with a market value equal to two
F-15
<PAGE> 125
times the exercise price of the Right. The Rights are redeemable, at 2/3 cents
per Right, at any time prior to a person becoming an Acquiring Person. The
Rights expire on September 25, 1999.
Stock Sale -- On August 29, 1996, the Company completed the private
placement of 3,800,000 shares of the Company's common stock to Greencore Group
plc ("Greencore"), an Irish sugar and agricultural products company, for net
proceeds of $49.8 million. In July, the Board of Directors took action under the
Shareholder Rights Plan to increase the ownership percentage that would trigger
the plan with respect to Greencore to 30% during the term of the Investor
Agreement between Greencore and the Company (not more than 5 years). Thereafter,
the trigger level would be increased to 35%, until such time as Greencore's
investment falls below 15%, at which time the trigger level becomes 15%. During
the term of the Investor Agreement, Greencore will have the right to designate
two nominees for election as directors of the Company, and will be required to
vote for the director nominees recommended by the Board of Directors. During the
term of the Investor Agreement, Greencore is also subject to restrictions
relative to certain actions regarding the Company.
Stock Incentive Plan -- The shareholders have approved the Imperial Holly
Corporation Stock Incentive Plan, and have reserved for issuance 1,062,500
shares of common stock. The Board of Directors has proposed an amendment to be
voted upon at the 1998 Annual Meeting of Shareholders, which would increase the
number of shares reserved under the Plan by 2,500,000. The plan provides for the
granting of incentive awards in the form of stock options, stock appreciation
rights (SARs), restricted stock, performance units and performance shares at the
discretion of the Executive Compensation Committee of the Board of Directors.
Stock options have an exercise price equal to the fair market value of the
shares of common stock at date of grant, become exercisable in annual increments
for up to five years commencing one year after date of grant, and expire not
more than ten years from date of grant.
Stock option activity in the plan was as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1997
-------------------------
WEIGHTED-
AVERAGE
EXERCISE PRICE
OPTIONS PER SHARE
------- --------------
<S> <C> <C>
Beginning Balance........................................... 614,327 $10.39
Granted..................................................... 9,000 11.33
Expired..................................................... (30,800) 12.84
Exercised................................................... (9,632) 6.99
-------
Balance, September 30....................................... 582,895 $10.33
=======
Exercisable as of September 30.............................. 367,020 $10.31
=======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------
1997 1996 1995
------------------------ ------------------------ ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE PRICE EXERCISE PRICE EXERCISE PRICE
OPTIONS PER SHARE OPTIONS PER SHARE OPTIONS PER SHARE
------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance...... 528,589 $10.03 510,733 $10.67 494,815 $10.68
Granted................ 141,700 12.90 94,000 7.84 24,500 9.18
Expired................ (41,551) 15.22 (66,199) 12.33 (1,000) 8.69
Exercised.............. (14,411) 7.97 (9,945) 6.67 (7,582) 6.74
------- ------- -------
Balance, March 31...... 614,327 $10.39 528,589 $10.03 510,733 $10.67
======= ======= =======
Exercisable as of March
31................... 364,964 $10.23 330,964 $11.05 331,609 $11.58
======= ======= =======
</TABLE>
F-16
<PAGE> 126
Options outstanding at September 30, 1997 consisted of the following:
<TABLE>
<CAPTION>
EXERCISABLE OPTIONS
----------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
RANGE OF EXERCISE NUMBER OF EXERCISE PRICE REMAINING NUMBER OF EXERCISE PRICE
PRICES PER SHARE OPTIONS PER SHARE CONTRACTUAL LIFE OPTIONS PER SHARE
----------------- --------- ---------------- ---------------- --------- ----------------
<C> <C> <C> <C> <C> <C>
$6.44-$8.87 356,370 $ 7.87 5.4 years 238,745 $ 7.72
$9.75-$12.25 21,000 10.79 8.5 years 5,250 10.11
$13.19-$16.83 205,525 14.55 6.2 years 123,025 15.35
</TABLE>
Certain stock options listed above were granted with SARs. The SARs provide
that, in lieu of the exercise of options, the optionee may receive cash or
shares of stock with a fair market value equal to the amount by which the fair
market value on exercise date of the stock subject to the option exceeds the
option price. No SARs have been exercised and, at September 30, 1997, options
outstanding with SARs attached totaled 49,795 shares, all of which were
exercisable.
Nonemployee Director Stock Option Plan -- The shareholders have approved
the Nonemployee Director Stock Option Plan and have reserved 30,000 shares of
common stock for issuance. The plan provides for the automatic granting to each
nonemployee director of options to purchase 1,500 shares of common stock at a
price equal to 50% of the fair market value at date of grant. The options become
exercisable upon the completion of three years of service as a director, and
expire over a two year period from the date first exercisable. Stock option
activity in the plan was as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, ---------------------------------------------------------------
1997 1997 1996 1995
------------------- ------------------- ------------------- -------------------
PRICE PRICE PRICE PRICE
OPTIONS PER SHARE OPTIONS PER SHARE OPTIONS PER SHARE OPTIONS PER SHARE
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance.... 4,500 $6.53 3,000 $5.88 5,250 $6.93 6,000 $7.17
Granted.............. -- -- 1,500 7.84 -- --
Expired.............. -- -- -- (750) 8.84 (750) 8.84
Exercised............ (2,250) 5.50 -- (1,500) 8.09 --
------ ----- ------ -----
Balance, March 31.... 2,250 $7.56 4,500 $6.53 3,000 5.88 5,250 $6.93
====== ===== ====== =====
Exercisable as of
March 31........... 750 $7.00 3,000 $5.88 -- 2,250 $8.34
====== ===== ====== =====
</TABLE>
Options outstanding at September 30, 1997 have a range of exercise prices
of $4.75 to $7.84, and weighted-average remaining contractual life of 2.0 years.
Nonemployee Director Compensation Plan -- In fiscal 1997, the shareholders
approved the Nonemployee Director Compensation Plan which provides for the
annual award of common stock to directors in lieu of their cash retainer. In the
six months ended September 30, 1997 and in fiscal 1997, 21,760 shares of common
stock each were awarded pursuant to this plan.
10. COMMITMENTS AND CONTINGENCIES
The Company is party to litigation and claims which are normal in the
course of its operations; while the results of such litigation and claims cannot
be predicted with certainty, the Company believes the final outcome of such
matters will not have a materially adverse effect on its results of operations
or consolidated financial position.
The Company has $4.6 million of standby letters of credit issued by banks
to secure certain insurance obligations.
The Company has a contingent commitment to advance additional amounts to a
limited partnership which is constructing a beet sugar factory in Washington
state of up to $1.7 million, depending upon final construction costs.
F-17
<PAGE> 127
The Company leases certain facilities and equipment under cancelable and
noncancelable operating leases. Total rental expenses for all operating leases
amounted to $3,571,000 for the six month period ended September 30, 1997, and
$5,788,000, $4,343,000, and $3,519,000 in fiscal 1997, 1996 and 1995,
respectively.
The aggregate future minimum lease commitments under noncancelable
operating leases at September 30, 1997 are summarized as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING OPERATING
SEPTEMBER 30, LEASES
- ------------------ ---------
<S> <C> <C>
1998................................................................... $3,124
1999................................................................... 2,360
2000................................................................... 1,638
2001................................................................... 1,190
2002................................................................... 751
After 2002............................................................. 660
</TABLE>
The aggregate future minimum amount to be received under sub-leases was
$3,113,000 at September 30, 1997.
11. SUPPLEMENTARY INCOME STATEMENT INFORMATION
In fiscal 1996 the Company recorded a charge of $1,750,000 related to the
announced closure of its Hamilton City California beet processing facility in
early fiscal 1997, including $650,000 related to the layoff of approximately 68
employees. Through September 30, 1997, substantially all of such amount had been
paid. Additionally, in fiscal 1996, the Company recorded a charge of $475,000
related to costs in connection with a work force reduction. By March 31, 1997
substantially all of that amount had been incurred in connection with the
termination of 47 individuals.
Other income -- net includes interest and dividends totaling $1,184,000 for
the six months ended September 30, 1997, and $1,792,000, $1,820,000, and
$1,456,000 for fiscal 1997, 1996 and 1995, respectively. Amounts charged to
expense for research and development were $824,000 for the six months ended
September 30, 1997, and $1,445,000, $1,670,000, and $2,084,000 for fiscal 1997,
1996 and 1995, respectively.
12. PARENT COMPANY (ONLY) INFORMATION
Condensed financial information for Imperial Holly Corporation (Parent
Company Only) was as follows (in thousands of dollars):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, ------------------------------
INCOME STATEMENT DATA 1997 1997 1996 1995
--------------------- ------------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales......................................... $153,139 $308,896 $251,278 $238,236
Operating income(loss)............................ 3,366 11,817 (8,710) (7,714)
Equity in the undistributed earnings of
subsidiaries.................................... 8,324 3,726 (698) (1,014)
Income (loss) before extraordinary items.......... 9,951 11,518 (3,218) (5,365)
</TABLE>
<TABLE>
<CAPTION>
AS OF
-----------------------------------
MARCH 31,
SEPTEMBER 30, -------------------
BALANCE SHEET DATA 1997 1997 1996
------------------ ------------- -------- --------
<S> <C> <C> <C>
Current assets.............................................. $ 92,205 $ 85,691 $ 73,471
Property, plant and equipment, net.......................... 34,272 29,338 25,758
Investment in and advances to subsidiaries, at equity....... 212,813 185,598 118,562
Total assets................................................ 352,078 310,922 226,880
Current liabilities......................................... 63,960 33,724 19,991
Long-term debt, net......................................... 81,172 89,468 89,800
Shareholders' equity........................................ 192,959 176,956 111,043
</TABLE>
F-18
<PAGE> 128
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Savannah Foods & Industries, Inc.
We have audited the accompanying consolidated balance sheet of Savannah
Foods & Industries, Inc. and Subsidiaries as of September 28, 1997, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Savannah Foods & Industries,
Inc. and Subsidiaries as of September 28, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
November 17, 1997
F-19
<PAGE> 129
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Savannah Foods & Industries, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Savannah Foods & Industries, Inc. and its subsidiaries at September 29, 1996,
and the results of their operations and their cash flows for each of the two
fiscal years then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits 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. We have not audited the consolidated financial statements of Savannah
Foods & Industries, Inc. for any period subsequent to September 29, 1996.
PRICE WATERHOUSE LLP
Atlanta, Georgia
November 18, 1996
F-20
<PAGE> 130
SAVANNAH FOODS & INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 14,677 $ 15,300
Accounts receivable....................................... 68,635 76,109
Inventories (net of LIFO reserve of $9,949 in 1997 and
$8,018 in 1996) (Note 4)............................... 90,908 83,929
Other current assets...................................... 6,175 5,214
-------- --------
Total current assets.............................. 180,395 180,552
Property, plant and equipment (Note 5)...................... 179,993 186,546
Other assets................................................ 38,683 31,163
-------- --------
$399,071 $398,261
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings (Note 6)............................ $ -- $ 7,500
Current portion of long-term debt (Note 6)................ 7,824 2,170
Trade accounts payable.................................... 55,756 52,701
Other liabilities and accrued expenses.................... 23,644 23,575
-------- --------
Total current liabilities......................... 87,224 85,946
-------- --------
Long-term debt (Note 6)..................................... 26,100 59,754
-------- --------
Deferred employee benefits.................................. 69,058 78,834
-------- --------
Stockholders' equity (Note 11):
Common stock $.25 par value; $.55 stated value; 64,000,000
shares authorized; 31,306,800 shares issued............ 17,365 17,365
Capital in excess of stated value......................... 43,639 31,764
Retained earnings......................................... 221,949 193,524
Treasury stock, at cost (2,568,604 shares)................ (15,849) (15,849)
Minimum pension liability adjustment...................... -- (14,038)
Stock held by benefit trust, at market (2,500,000
shares)................................................ (46,875) (35,000)
Other..................................................... (3,540) (4,039)
-------- --------
Total stockholders' equity........................ 216,689 173,727
-------- --------
Commitments and contingencies (Note 12)..................... -- --
-------- --------
$399,071 $398,261
======== ========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
F-21
<PAGE> 131
SAVANNAH FOODS & INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
------------- ------------- -----------
<S> <C> <C> <C>
Net sales......................................... $ 1,191,839 $ 1,146,332 $ 1,098,544
----------- ----------- -----------
Operating expenses:
Cost of sales and operating expenses............ 1,037,502 1,028,218 1,002,679
Selling, general and administrative expenses.... 59,850 54,667 55,866
Depreciation and amortization................... 23,435 27,994 28,314
Impairment of long-lived assets (Note 3)........ -- 10,280 --
Other costs (Notes 2, 13)....................... 13,394 3,374 4,284
----------- ----------- -----------
1,134,181 1,124,533 1,091,143
----------- ----------- -----------
Income from operations............................ 57,658 21,799 7,401
----------- ----------- -----------
Other income and (expenses):
Interest and other investment income............ 874 847 1,258
Interest expense................................ (6,850) (12,355) (14,847)
Other (expense) income.......................... (465) (610) 110
----------- ----------- -----------
(6,441) (12,118) (13,479)
----------- ----------- -----------
Income (loss) before income taxes and
extraordinary item.............................. 51,217 9,681 (6,078)
Provision for (benefit from) income taxes (Note
7).............................................. 19,136 2,738 (2,585)
----------- ----------- -----------
Income (loss) before extraordinary item........... 32,081 6,943 (3,493)
Extraordinary item, net of tax (Note 6)........... (376) (971) --
----------- ----------- -----------
Net income (loss)................................. $ 31,705 $ 5,972 $ (3,493)
=========== =========== ===========
Per share:
Income (loss) before extraordinary item......... $ 1.22 $ 0.27 $ (0.13)
Extraordinary item (Note 6)..................... (0.01) (0.04) --
----------- ----------- -----------
Net income (loss)............................... $ 1.21 $ 0.23 $ (0.13)
=========== =========== ===========
Dividends....................................... $ 0.125 $ 0.10 $ 0.32
=========== =========== ===========
Weighted average shares outstanding............... 26,238,196 26,238,196 26,238,196
=========== =========== ===========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
F-22
<PAGE> 132
SAVANNAH FOODS & INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL IN MINIMUM
EXCESS OF PENSION STOCK HELD
COMMON STATED RETAINED TREASURY LIABILITY BY BENEFIT
STOCK VALUE EARNINGS STOCK ADJUSTMENT TRUST OTHER TOTAL
------- ---------- -------- -------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 2, 1994........ $17,365 $12,190 $202,065 $(31,275) $ (8,210) $ -- $(3,961) $188,174
Net loss........................ (3,493) (3,493)
Cash dividends declared......... (8,396) (8,396)
Increase in minimum pension
liability adjustment.......... (6,632) (6,632)
Increase in cumulative
translation adjustment........ (425) (425)
Decrease in note receivable from
employee stock ownership
plan.......................... 421 421
------- ------- -------- -------- -------- -------- ------- --------
Balance at October 1, 1995........ 17,365 12,190 190,176 (31,275) (14,842) -- (3,965) 169,649
Net income...................... 5,972 5,972
Cash dividends declared......... (2,624) (2,624)
Decrease in minimum pension
liability adjustment.......... 804 804
Establish benefit trust with
treasury stock (Note 11)...... 11,449 15,426 (26,875) --
Increase in fair market value of
stock held by benefit trust
(Note 11)..................... 8,125 (8,125) --
Increase in cumulative
translation adjustment........ (74) (74)
------- ------- -------- -------- -------- -------- ------- --------
Balance at September 29, 1996..... 17,365 31,764 193,524 (15,849) (14,038) (35,000) (4,039) 173,727
Net income...................... 31,705 31,705
Cash dividends declared......... (3,280) (3,280)
Increase in fair market value of
stock held by benefit trust
(Note 11)..................... 11,875 (11,875) --
Decrease in minimum pension
liability adjustment.......... 14,038 14,038
Decrease in cumulative
translation adjustment........ 499 499
------- ------- -------- -------- -------- -------- ------- --------
Balance at September 28, 1997..... $17,365 $43,639 $221,949 $(15,849) $ -- $(46,875) $(3,540) $216,689
======= ======= ======== ======== ======== ======== ======= ========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
F-23
<PAGE> 133
SAVANNAH FOODS & INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
------------- ------------- ----------
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss).................................... $ 31,705 $ 5,972 $ (3,493)
Adjustments to reconcile net income (loss) to net
cash provided by operations --
Depreciation and amortization..................... 23,435 27,994 28,314
Impairment of long-lived assets (Note 3).......... -- 10,280 --
Extraordinary item, net of tax, related to
financing activities............................ 376 971 --
Provision for deferred income taxes............... 9,410 (5,173) (207)
Net loss on disposal of assets.................... 110 2,595 674
Decreases (increases) in working capital --
Accounts receivable............................. 7,474 (9,118) 8,785
Inventories..................................... (6,979) 20,565 (17,781)
Other current assets............................ (3,985) 7,924 (6,952)
Trade accounts payable.......................... 3,055 (10,558) 6,306
Other liabilities and accrued expenses.......... (904) 1,110 (777)
Funding of deferred employee benefits in excess of
expense accrual................................. (11,241) -- --
Other............................................. 892 (2,713) 1,122
-------- -------- --------
Cash provided by operations............................ 53,348 49,849 15,991
-------- -------- --------
Cash flows from investing activities:
Additions to property, plant and equipment........... (15,664) (7,916) (16,303)
Proceeds from sale of property, plant and
equipment......................................... 960 2,538 784
Sale of investments.................................. -- 13,869 3,615
Business sales and (acquisitions).................... -- 12,500 (7,050)
Use of escrowed industrial revenue bond funds for
additions to property, plant and equipment........ -- 3,253 --
Other................................................ -- (182) (2,182)
-------- -------- --------
Cash (used for) provided by investing activities....... (14,704) 24,062 (21,136)
-------- -------- --------
Cash flows from financing activities:
(Decrease) increase in short-term borrowings......... (7,500) (14,800) 22,300
Payments of long-term debt........................... (28,000) (51,240) (28,703)
Debt prepayment charge, net of tax................... (376) (971) --
Liquidation of unused industrial revenue bond escrow
balances.......................................... -- -- 5,742
Dividends paid....................................... (3,280) (3,280) (11,282)
Other................................................ (111) 106 226
-------- -------- --------
Cash used for financing activities..................... (39,267) (70,185) (11,717)
-------- -------- --------
Cash flows for year.................................... (623) 3,726 (16,862)
Cash and cash equivalents, beginning of year........... 15,300 11,574 28,436
-------- -------- --------
Cash and cash equivalents, end of year................. $ 14,677 $ 15,300 $ 11,574
======== ======== ========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
F-24
<PAGE> 134
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of operations -- The Company is engaged in the production, marketing
and distribution of food products, primarily refined sugar. The Company produces
a complete line of bulk and liquid sugars, packaged sugar, sugar envelopes and
sugar products, including edible molasses and liquid animal feeds. The Company
also packages and distributes other products such as custom made plastic cutlery
meal kits, salt, pepper, artificial sweetener, non-dairy creamer and certain
other products which complement its sugar business. Industrial and grocery
markets served by the Company are the southeastern, midwestern and eastern parts
of the United States, as well as Louisiana and Texas. Products for the
foodservice market are distributed throughout the United States. The Company has
one primary business segment -- Sugar Products.
Fiscal year -- The Company's fiscal year ends on the Sunday closest to
September 30. Fiscal 1997, 1996 and 1995 each included 52 weeks.
Principles of consolidation -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. Business
entities in which the Company owns 50% or less are accounted for using the
equity method.
Cash and cash equivalents -- Cash and cash equivalents include all
investments purchased with an original maturity of 90 days or less which have
virtually no risk of loss of the principal value of the investment.
Inventories -- Inventories are valued at the lower of cost or market. Cost
is determined by the last-in, first-out (LIFO) method for sugar, packaging
materials, and certain other items. Costs for maintenance parts and other
non-sugar products are determined using the first-in, first-out (FIFO) and
moving average methods.
Futures transactions and interest rate swaps -- The Company uses futures
contracts to manage its inventory and fuel positions, both to set pricing and to
reduce the Company's exposure to price fluctuations. It also uses interest rate
hedges to fix interest rates on current and anticipated borrowings to reduce
exposure to interest rate fluctuations. Under existing accounting literature,
these activities are accounted for as hedging activities.
To qualify as a hedge the item to be hedged must expose the Company to
inventory pricing or interest rate risk and the related contract must reduce
that exposure and be designated by the Company as a hedge. To hedge expected
transactions, the significant characteristics and expected terms of such
transactions must be identified and it must be probable that the transaction
will occur.
Gains and losses on futures contracts, including gains and losses upon
termination of the contract, are matched to inventory purchases and are included
in the carrying value of inventory and charged or credited to cost of sales as
such inventory is sold or used in production.
The net cash paid or received on interest rate hedges is included in
interest expense. Gains or losses on the termination of hedges are deferred and
recognized in interest over the period covered by the interest rate hedge.
If derivative transactions do not meet the criteria for hedges, the Company
recognizes unrealized gains or losses as they occur. If a hedged transaction no
longer exists or a hedged anticipated transaction is deemed no longer probable
to occur, cumulative gains and losses on the hedge are recognized immediately in
income and subsequent changes in fair market value of the derivative transaction
are recognized in the period the change occurs.
Amortization of intangibles -- The Company has intangible assets included
in "Other assets" aggregating $7,637,000 and $9,529,000 at September 28, 1997
and September 29, 1996, respectively. Goodwill of $4,974,000 at September 28,
1997, and $5,378,000 at September 29, 1996, is being amortized over fifteen
years on a straight-line basis, and other intangible assets are being amortized
over five years on a straight-line
F-25
<PAGE> 135
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
basis. Amortization expense was $2,288,000, $2,341,000 and $2,169,000 for fiscal
1997, 1996 and 1995, respectively.
When factors indicate that goodwill should be evaluated for impairment, the
Company uses an estimate of the related operation's discounted cash flows over
the remaining life of goodwill in measuring whether or not the goodwill is
recoverable.
Property, plant and equipment -- Property, plant and equipment is valued at
cost, less accumulated depreciation and amortization. For financial reporting
purposes, depreciation is computed on the straight-line method over the
estimated useful lives of the assets. In general, buildings are depreciated over
20 years, machinery and equipment over 3 to 15 years and leasehold improvements
over 10 years.
Accrued expenses related to beet operations -- The Company's beet
processing plants are generally operated from October through February and then,
from March through September, are repaired for the next processing cycle. As
sugar is processed from October through February, the Company accrues estimated
repair costs and other costs to be incurred in March through September and
includes such costs in inventory and, as the sugar is sold, in cost of sales. In
contrast, certain other sugarbeet processors capitalize such costs and include
them as prepaid expenses related to the next processing cycle.
Fair value of financial instruments -- For cash, cash equivalents, accounts
receivable, trade accounts payable, other liabilities and accrued expenses and
short-term borrowings, the carrying amounts approximate fair value because of
the short maturities of these instruments.
Revenue recognition -- The Company recognizes revenue as product is
shipped.
Stock options -- The Company measures stock-based compensation expense
using the intrinsic value approach of Accounting Principles Board Opinion No.
25. Pro forma disclosures required by Statement of Financial Accounting
Standards No. 123 -- Accounting for Stock-Based Compensation are included in
Note 10.
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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassifications -- Certain prior year amounts have been reclassified to
conform to the current year presentation.
NOTE 2 -- PENDING MERGER OF THE COMPANY:
On September 12, 1997, the Company entered into the Merger Agreement
providing for the acquisition of the Company by Imperial Holly. Imperial Holly
is a sugar refiner and beet processor headquartered in Sugar Land, Texas.
Pursuant to the Merger Agreement, a wholly-owned subsidiary of Imperial Holly
("IHK Sub") initiated a cash tender offer on September 18, 1997 for 50.1% of the
Company's outstanding Common Stock at a price of $20.25 per share. The tender
offer was closed on October 16, 1997, resulting, on October 24, 1997, in the
funding of the acquisition of 14,397,836 shares, or 50.1%, of the Company's
Common Stock and a change in control of the Company. Pursuant to the Merger
Agreement, IHK Sub will be merged with and into the Company, with the Company
surviving as a wholly-owned subsidiary of Imperial Holly (the "Merger"). Upon
consummation of the Merger, the remaining shares of Company Common Stock will be
exchanged for cash and common stock of Imperial Holly so that the aggregate
number of shares of the Company's Common Stock to be converted into Imperial
Holly common stock will be equal to 30% of all outstanding shares of the
Company's Common Stock prior to the time of the cash tender offer. The Merger is
expected to close in December 1997.
F-26
<PAGE> 136
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prior to entering into the Merger Agreement with Imperial Holly, the
Company, on July 14, 1997, entered into a merger agreement with Flo-Sun
Incorporated ("Flo-Sun"), a Florida based raw sugar producer and refiner. On
August 25, 1997, Imperial Holly submitted a proposal to acquire the Company, and
after negotiations between the Company and the two parties, the Company's Board
of Directors approved the Merger Agreement with Imperial Holly. In accordance
with the Flo-Sun merger agreement, the Company paid Flo-Sun a $5,000,000
termination fee and reimbursed Flo-Sun $3,000,000 for expenses in connection
with the proposed merger. This $8,000,000 along with the Company's legal fees
and other expenses related to the proposed Flo-Sun merger comprise the majority
of the $13,394,000 of merger expenses summarized in Note 13.
NOTE 3 -- IMPAIRMENT LOSS:
In the fourth quarter of fiscal 1996, the Company recorded a non-cash
impairment loss of $10,280,000 ($6,476,000, or $.25 per share, net of tax)
related to a write-down of the property, plant and equipment of the Company's
Fremont, Ohio beet sugar facility. A decision was made in 1996 not to run the
Fremont facility during fiscal 1997 due to the lack of a viable supply of
sugarbeets and beet molasses. As a result, the projected future cash flows from
this facility are less than the carrying value of the assets; therefore, an
impairment loss has been recognized. The impaired assets include buildings and
machinery and equipment used to manufacture, ship, and store refined sugar and
its by-products. These assets were written down to their fair value based on the
salvage value of the assets. The recognition of this impairment was in
accordance with the provisions of Statement of Financial Accounting Standards
No. 121 -- Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of and is not materially different than the amount that
would have been recognized under the Company's previous policies. As of
September 28, 1997 the Company does not plan on operating the Fremont facility
during fiscal 1998.
NOTE 4 -- INVENTORIES:
A summary of inventories by method of pricing and class is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Last-in, first-out.......................................... $55,713 $35,311
First-in, first-out......................................... 7,501 9,682
Moving average.............................................. 27,694 29,462
Specific identification..................................... -- 9,474
------- -------
$90,908 $83,929
======= =======
Raw materials and work-in-process........................... $30,720 $17,693
Packaging materials, parts and supplies..................... 16,912 20,713
Finished goods.............................................. 43,276 36,049
Payments related to future inventory purchases.............. -- 9,474
------- -------
$90,908 $83,929
======= =======
</TABLE>
The replacement cost of inventories exceeded reported cost by approximately
$10,246,000 at September 28, 1997 and $8,233,000 at September 29, 1996.
F-27
<PAGE> 137
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Land...................................................... $ 7,769 $ 7,498
Buildings................................................. 93,081 89,194
Machinery and equipment................................... 314,482 305,717
Leasehold improvements.................................... 1,202 1,201
Projects-in-process....................................... 9,833 3,119
--------- ---------
426,367 406,729
Less --
Accumulated depreciation and amortization............... (246,374) (220,183)
--------- ---------
$ 179,993 $ 186,546
========= =========
</TABLE>
Repairs and maintenance expense was $26,460,000, $31,699,000 and
$35,241,000 for fiscal 1997, 1996 and 1995, respectively.
NOTE 6 -- LONG-TERM DEBT, CREDIT ARRANGEMENTS AND LEASES:
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Senior Notes -- Series A at 8.35% of $19,941 and Series B
at 7.15% of $5,059...................................... $ -- $25,000
Notes payable to banks related to the ESOP................ 9,815 9,815
Industrial revenue bonds.................................. 22,500 22,500
Other long-term debt...................................... 1,609 4,609
------- -------
33,924 61,924
Less -- Current portion................................... (7,824) (2,170)
------- -------
$26,100 $59,754
======= =======
</TABLE>
The Company elected to prepay $25,000,000 of the Senior Notes in 1997. The
Company incurred $376,000 (net of $236,000 income tax benefits), or $.01 per
share, of related prepayment penalties which are reflected as an extraordinary
item in the Consolidated Statement of Operations. The Company prepaid
$35,000,000 of the Senior Notes in 1996 and incurred $971,000 (net of $570,000
income tax benefits), or $.04 per share, of related prepayment penalties.
At September 28, 1997, the Company had $9,815,000 in notes payable related
to the Employee Stock Ownership Plan (ESOP) and $22,500,000 of industrial
revenue bonds. These notes and bonds carry tax-advantaged variable rates of
interest equal to approximately 5.59% in 1997. The ESOP loans are payable as
follows: $6,215,000 in fiscal 1998 and $3,600,000 payable in fiscal 1999 through
fiscal 2001. The $22,500,000 industrial revenue bonds are payable as follows:
$4,500,000 in 2000; $4,500,000 in 2001; $6,000,000 in $1,000,000 annual
installments in 2002 through 2007; $3,500,000 in 2004; $2,500,000 in $500,000
installments from 2001 through 2005; and $1,500,000 due in 2017. These bonds are
secured by financing statements on project-related equipment, the cost of which
approximates the bond amounts.
F-28
<PAGE> 138
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On April 1, 1996, the Company entered into a $120,000,000 revolving credit
facility which expires on January 1, 2000, and automatically extends by one year
on each anniversary date of the agreement. On October 16, 1997, the Company
reduced the amount of this revolving credit facility from $120,000,000 to
$60,000,000 and amended the expiration date to a date not later than January 31,
1998. In general, this facility enables the Company to borrow funds at LIBOR
plus 1/2% to 3/4%, depending upon achievement of specified financial targets.
The Company pays an annualized facility fee of 1/10% and an annualized fee of
1/10% of the unused portion of the facility. As of September 28, 1997 the
Company was in compliance with all of its debt covenants.
Short-term borrowings, including borrowings under the Company's revolving
credit facilities which were for temporary working capital needs, are summarized
as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
------------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Daily average outstanding borrowings.............. $ 5,789 $39,004 $31,373
Daily weighted average interest rate.............. 5.79% 5.66% 6.29%
Maximum borrowings................................ $45,000 $71,980 $68,500
Amount outstanding at year-end.................... $ -- $ 7,500 $22,300
</TABLE>
The Company uses interest rate exchange agreements, more commonly called
interest rate swaps, to manage its interest rate exposure. Swaps were entered
into to fix the interest rate on variable debt at rates which the Company
considered attractive at the time the agreements were consummated. When the
Company entered into these agreements, it compared its anticipated interest
costs to other long-term borrowing sources such as private placements and other
fixed rate borrowing options. The notional amounts of swaps outstanding at
September 28, 1997 and September 29, 1996 were $30,000,000. The fixed rates of
interest for swaps outstanding during fiscal 1997 and 1996 were 8.83% and 8.66%,
respectively. These swaps expire from December 1997 to February 1998. The
effective fixed rate of swapped debt instruments during fiscal 1997 and 1996 was
7.53% and 7.76%, respectively. Accordingly, the Company has realized its desired
objectives in the use of these financing instruments. If the Company had
canceled these agreements as of September 28, 1997, it would have been required
to pay the counter-parties to the agreements an aggregate amount of $188,047.
The Company has also entered into forward swap agreements for periods
ranging from 1998 to 2004 which fix the rate on the following debt: $20,000,000
in 1998-1999, $30,000,000 in 2000, $50,000,000 in 2001, $90,000,000 in 2002 and
$80,000,000 in 2003-2004. The Company entered into these agreements to fix the
rate on variable rated debt intended to be borrowed during this time period. The
swaps require the Company to pay fixed rates ranging from 6.5% to 7.0% against
90 day LIBOR. These transactions were entered into to protect the Company
against interest rate increases and to fix future interest rates at rates the
Company considers attractive. If the Company had canceled these agreements as of
September 28, 1997, it would have been required to pay an aggregate amount of
$187,794.
Interest expense was $6,850,000 in fiscal 1997, $12,355,000 in fiscal 1996,
and $14,847,000 in fiscal 1995. Cash payments of interest were $6,138,000 in
fiscal 1997, $12,945,000 in fiscal 1996, and $13,620,000 in fiscal 1995.
Annual maturities of long-term debt each year for the next five fiscal
years are $7,824,000 in 1998, $500,000 in 1999, $5,000,000 in 2000, $7,600,000
in 2001, $1,500,000 in 2002, and $11,500,000 in subsequent years through 2017.
Lease expense related to operating leases aggregated $2,098,000,
$2,081,000, and $1,552,000 in fiscal 1997, 1996 and 1995, respectively. Lease
commitments on operating leases exceeding one year for fiscal 1998, 1999, 2000,
2001 and 2002 are $1,255,000, $1,156,000, $1,124,000, $504,000 and $504,000,
respectively.
F-29
<PAGE> 139
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- INCOME TAXES:
Pre-tax income for all years presented was taxed exclusively in the United
States. The provision for (benefit from) income taxes is comprised of the
following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
------------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current federal.................................. $ 7,990 $ 6,092 $(1,515)
Current state.................................... 1,500 1,249 (863)
Deferred federal................................. 8,564 (4,357) (271)
Deferred state................................... 846 (816) 64
------- ------- -------
Provision for (benefit from) income taxes........ $18,900 $ 2,168 $(2,585)
======= ======= =======
Tax effect of change in:
Minimum pension liability adjustment........... $ 8,607 $ 507 $(4,716)
Cumulative translation adjustment.............. 306 (45) (261)
------- ------- -------
$ 8,913 $ 462 $(4,977)
======= ======= =======
</TABLE>
Cash payments for income taxes amounted to $19,837,000, $537,000 and
$6,637,000 for fiscal 1997, 1996 and 1995, respectively.
Deferred income tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Loss on impairment of long-lived assets................... $ 3,906 $ 3,906
Depreciation.............................................. (23,916) (21,658)
Other postretirement benefits............................. 12,928 12,565
Accrued pension liability................................. (5,407) 8,796
Deferred compensation..................................... 8,968 7,743
Tax benefit purchases..................................... -- (1,143)
Other non-current......................................... 3,133 4,009
-------- --------
Total net non-current (liability) asset................... (388) 14,218
-------- --------
Other accrued expenses.................................... 885 2,288
Inventory................................................. (2,078) (243)
Other current............................................. 609 980
-------- --------
Total net current (liability) asset....................... (584) 3,025
-------- --------
Net deferred (liability) asset............................ $ ( 972) $ 17,243
======== ========
</TABLE>
F-30
<PAGE> 140
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation between the provision for (benefit from) income taxes and
the amount computed by applying the U. S. federal income tax rate to income
before income taxes and extraordinary item is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
------------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expenses (benefit)..... $17,712 $3,292 $(2,127)
Increases (reductions) in taxes resulting from:
State income taxes, net of federal income tax
benefit................................... 1,524 224 280
Tax-free income earned....................... (756) (221) (120)
Tax rate benefit of NOL carryback............ -- (600) --
Merger costs................................. 177 -- --
Other........................................ 479 43 (618)
------- ------ -------
19,136 2,738 (2,585)
Extraordinary item............................. (236) (570) --
------- ------ -------
Provision for (benefit from) income taxes...... $18,900 $2,168 $(2,585)
======= ====== =======
</TABLE>
NOTE 8 -- PENSION PLANS:
Substantially all employees and retirees of the Company are covered by
noncontributory defined benefit pension plans. The Company also provides
supplemental pension benefits to certain retired employees. The supplemental
pension benefits are determined annually by the Board of Directors.
The Company's largest defined benefit plan provides employees a retirement
benefit based on a percentage of their final three year average pay. Effective
July 1, 1996, this percentage of final pay was modified, and provisions to
reduce pension benefits for early retirement were incorporated into this plan.
These modifications, along with some other minor changes, reduced the "projected
benefit obligation" at September 29, 1996 by $3,009,000.
Benefits under the noncontributory defined benefit pension plans for
bargaining employees are primarily based on years of service.
The Company's contribution policy for all pension plans is to contribute at
least the minimum amount required by the Employee Retirement Income Security
Act. At September 28, 1997, the assets of these plans are invested primarily in
commingled institutional stock and bond funds and cash equivalents.
F-31
<PAGE> 141
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the status of the Company's qualified
defined benefit pension plans and the pertinent assumptions used in computing
this information as of the end of each respective year:
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation based on
current compensation:
Vested.................................................... $ (90,985) $ (80,235)
Nonvested................................................. (1,580) (6,216)
--------- ---------
Accumulated benefit obligation.............................. (92,565) (86,451)
Increase in present value of benefit obligation to reflect
projected compensation increases.......................... (9,371) (4,846)
--------- ---------
Projected benefit obligation................................ (101,936) (91,297)
Plan assets at fair value................................... 100,537 72,533
--------- ---------
Projected benefit obligation in excess of plan assets....... (1,399) (18,764)
Unrecognized prior service cost............................. (162) (193)
Unrecognized net loss....................................... 26,990 29,810
Unrecognized net asset at transition........................ (230) (1,276)
Adjustment required to recognize minimum liability.......... -- (23,495)
--------- ---------
Pension asset included in "Other assets" and pension
(liability) included in "Deferred employee benefits"...... $ 25,199 $ (13,918)
========= =========
Actuarial assumptions:
Discount rate............................................. 7.5% 7.5%
Projected salary increases................................ 4.5% 4.5%
</TABLE>
Pension expense and the assumed rate of return on plan assets used to
calculate it are summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
------------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Costs related to services provided by employees
during the year.............................. $ 2,104 $ 2,070 $ 2,250
Interest cost on projected benefit
obligation................................... 6,846 6,874 6,601
Actual gain on plan assets..................... (17,023) (5,939) (6,390)
Net amortization and deferrals................. 10,689 659 437
-------- ------- -------
Pension expense related to defined benefit
plans........................................ 2,616 3,664 2,898
Supplemental pension benefits.................. 217 205 190
-------- ------- -------
Total pension expense................ $ 2,833 $ 3,869 $ 3,088
======== ======= =======
Actuarial assumption:
Expected long-term rate of return on plan
assets.................................... 9.5% 9.5% 9.5%
</TABLE>
F-32
<PAGE> 142
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has an unqualified Supplemental Executive Retirement Plan
(SERP) which it amended in 1996 by freezing the years of credited service for
participants as of June 30, 1996. This modification reduced the "projected
benefit obligation" at September 29, 1996 by $3,689,000. The actuarially
determined expense related to the SERP is summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
------------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Costs related to services provided by employees
during the year.............................. $ -- $ 316 $ 283
Interest cost on projected benefit
obligation................................... 908 928 912
Net amortization and deferrals................. 136 203 169
Net curtailment gain........................... -- (189) --
------ ------ ------
Total pension expense related to SERP plan..... $1,044 $1,258 $1,364
====== ====== ======
</TABLE>
The table below summarizes the status of the SERP plan and the pertinent
assumptions used in computing this information at the end of each respective
year:
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation based on
current compensation:
Vested................................................... $ (9,659) $ (7,770)
Nonvested................................................ (61) (648)
-------- --------
Accumulated benefit obligation............................. (9,720) (8,418)
Increase in present value of benefit obligation to reflect
projected compensation increases......................... (3,544) (2,613)
-------- --------
Projected benefit obligation............................... (13,264) (11,031)
Unrecognized prior service cost............................ -- --
Unrecognized net loss...................................... 2,666 700
Adjustment required to recognize minimum liability......... -- (273)
-------- --------
Pension liability included in "Deferred employee
benefits"................................................ $(10,598) $(10,604)
======== ========
Actuarial assumptions:
Discount rate............................................ 7.5% 7.5%
Projected salary increases............................... 4.5% 4.5%
</TABLE>
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87 -- Employers' Accounting for Pensions, the Company has recorded
an additional minimum liability at September 29, 1996 representing the excess of
the accumulated benefit obligation over the fair value of plan assets and
accrued (prepaid) pension expense for its pension and SERP plans. The additional
liability has been offset by an intangible asset which is included in "Other
assets" to the extent of previously unrecognized prior service cost. Amounts in
excess of previously unrecognized prior service cost are recorded net of the
related deferred tax benefit as a reduction of stockholders' equity of
$14,038,000 at September 29, 1996. As a result of significant funding and
improved asset performance during fiscal 1997, the Company was not required to
record an additional minimum pension liability at September 28, 1997.
F-33
<PAGE> 143
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- OTHER RETIREMENT AND BENEFIT PLANS:
The Company has a deferred compensation program, which it modified in 1996.
The modification, effective June 30, 1996, terminated all additional employee
deferrals and reduced the guaranteed rate of interest paid on amounts deferred
by active nonemployee directors to 8% initially, and then to the prime rate in
effect on each January 1. This program allowed directors and certain management
employees to defer all or a portion of their compensation and earn a guaranteed
interest rate on the deferred amounts. In effect, such amounts deferred are
unsecured loans to the Company. The deferred salaries and interest at the market
rate are accrued as incurred. Interest above the market rate is accrued over the
vesting period. The interest expense related to the Company's deferral plan was
$2,529,000 in 1997, $2,523,000 in 1996, and $2,320,000 in 1995.
In addition to the above deferred compensation program for directors and
certain management employees, the Company maintains two stock-based deferred
compensation programs for non-employee directors. See Note 10 -- Stock-Based
Compensation for an explanation of these programs.
The Company has included in "Deferred employee benefits" $23,661,000 at
September 28, 1997 and $20,524,000 at September 29, 1996 to reflect its
liability under its deferred compensation programs. As of September 28, 1997,
payments required to be made to participants in these programs for the next five
fiscal years are approximately $1,510,000 in 1998, $1,607,000 in 1999,
$1,939,000 in 2000, $2,921,000 in 2001 and $2,323,000 in 2002.
Subsequent to September 28, 1997, Imperial Holly purchased 50.1% of the
Company's Common Stock. As a result, the "change in control" provisions of the
nonemployee directors deferred compensation programs were implemented. These
provisions allow the nonemployee directors the option of electing to receive
immediate payment of their vested balances in these programs. After these
elections were made, payments required to be made to participants in these
programs for the next five fiscal years are approximately $7,707,000 in 1998,
$1,607,000 in 1999, $1,930,000 in 2000, $2,029,000 in 2001 and $2,058,000 in
2002.
The Company sponsors 401(k) plans in which substantially all non-bargaining
employees and certain bargaining unit employees are eligible to participate.
These plans allow eligible employees to save a portion of their salary on a
pre-tax basis. The Company makes monthly contributions to these plans which
aggregated $416,000 in 1997, $449,000 in 1996, and $437,000 in 1995.
The Company also sponsors an Employee Stock Ownership Plan (ESOP).
Substantially all non-bargaining employees participate and receive shares in
their account at the discretion of the Board of Directors. Expenses related to
this plan have been immaterial in 1997, 1996, and 1995.
Under the terms of the Company's short-term incentive compensation program,
$5,635,000 was accrued in "Other liabilities and accrued expenses" at September
28, 1997.
The Company also sponsors benefit plans that provide postretirement health
care and life insurance benefits to certain employees who meet the applicable
eligibility requirements. The cost of postretirement health care and life
insurance benefits is summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, OCTOBER 1,
1997 1996 1995
------------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Costs related to services provided by employees
during the year................................ $ 430 $ 520 $ 476
Interest cost on accumulated benefit
obligation..................................... 2,370 2,408 2,447
------ ------ ------
Total postretirement benefit expense............. $2,800 $2,928 $2,923
====== ====== ======
</TABLE>
F-34
<PAGE> 144
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The actuarial and recorded liabilities for these postretirement benefits,
none of which have been funded, and the pertinent assumptions used to compute
this information are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $(23,513) $(20,594)
Active participants...................................... (5,961) (11,865)
-------- --------
Accumulated benefit obligation............................. (29,474) (32,459)
Unrecognized net gain...................................... (5,325) (1,329)
-------- --------
Accrued postretirement benefit obligation included in
"Deferred employee benefits"............................. $(34,799) $(33,788)
======== ========
Actuarial assumptions:
Discount rate............................................ 7.5% 7.5%
Health care cost trend rate --
Fiscal 1997 -- 1999................................... 7.5% 7.5%
Fiscal 2000 -- 2004................................... 6.0% 6.0%
Thereafter............................................ 5.0% 5.0%
</TABLE>
Increasing the health care cost trend rate assumption by one percentage
point would have increased the accumulated postretirement benefit obligation as
of September 28, 1997 by approximately $1,597,000 and would have increased
postretirement benefit expense by approximately $221,000 in fiscal 1997.
NOTE 10 -- STOCK-BASED COMPENSATION:
The Company has four stock-based compensation plans which are described
below.
On December 16, 1996, the Board of Directors adopted the 1996 Equity
Incentive Plan and granted options for employees to purchase 187,558 shares of
Common Stock. The options granted vested over a three-year period. Under the
terms of the Merger Agreement with Imperial Holly, the 187,558 options became
vested, and employees holding these options will, in general, receive cash for
the difference between $20.25 and their exercise price of $13.94, and the
options and the plan will be canceled. The cost related to this plan was $43,000
in fiscal 1997.
In fiscal 1996 the Company had entered into an agreement which granted the
Company's Chairman of the Board an option to purchase 100,000 shares of Common
Stock. This option was surrendered back to the Company in 1997 unexercised and
there are no continuing rights under this option.
To make accounting estimates to calculate the fair value of the above
options at the date of grant using the Black-Scholes option pricing model, the
Company assumed a dividend yield of 1.0%, expected volatility of 36.5%, a risk
free interest rate of 6.2%, and an expected life of 5 years. If compensation
costs for options had been recorded based on the fair value of the options at
the date of grant, such costs, and reported net income, would have changed by
insignificant amounts.
The Company maintains two share unit plans for the non-employee members of
its Board of Directors ("Outside Directors"). One plan relates to the
modification of prior deferred compensation agreements and the other relates to
annual retainers paid to the Directors after June 30, 1996.
Effective June 30, 1996, the existing deferred compensation agreements with
all active Outside Directors were modified to reduce the guaranteed interest
rate to 8%, and then to the prime rate in effect on each January 1. The effect
of this modification is estimated to have reduced the present value, as of June
30, 1996,
F-35
<PAGE> 145
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of the payments which ultimately will be paid to the Outside Directors under the
related deferred compensation agreements by $2,600,000. As consideration for the
reduction in the interest rate credited on the Outside Directors' deferred
compensation, a Supplemental Share Unit Plan was established for these
Directors. This plan granted 111,619 share units (a share unit is the equivalent
of one share of Company Common Stock) to these Directors at an $11.00 per share
unit price. At the $11.00 per share unit price these share units had a value of
$1,228,000 compared to the $2,600,000 reduced value of the deferred compensation
agreements. The value of each share unit fluctuates based on the highest daily
closing price of the Company's Common Stock during the preceding twelve-month
period. Dividend equivalents are reinvested in additional share units.
Under the terms of the Merger Agreement with Imperial Holly Corporation,
these share units were valued at $20.25 and the Outside Directors have the
option to receive cash upon consummation of the Merger, or to defer the cash
value of such share units and to receive interest at the prime rate.
The Board of Directors adopted a Non-Employee Directors' Compensation Plan
as of July 1, 1996. Under this plan, the annual compensation paid to the
Directors as a retainer was set at 1,820 share units per year for 5 1/2 years.
Each Director vests in 455 share units on the last day of each calendar quarter,
as long as the Director remains on the Board of Directors.
Under this plan, 110,110 share units were granted which covered the 5 1/2
year term of the Plan. In fiscal 1997, 8,645 shares were forfeited. In fiscal
1996 and fiscal 1997, respectively, 5,005 and 19,110 share units vested. Under
the terms of the Plan, when Imperial Holly successfully tendered for 50.1% of
the outstanding shares of the Company, 69,615 share units, which would have been
received through the 5 1/2 year Plan term, became vested. All vested share units
were valued at $20.25 and the Outside Directors have the option to receive cash
upon consummation of the Merger, or to defer the cash value of such share units
and to receive interest at the prime rate.
The expense related to the two share unit plans for the Outside Directors
was $951,000 in fiscal 1997 and $1,633,000 in fiscal 1996.
NOTE 11 -- STOCKHOLDERS' EQUITY AND BENEFIT TRUST:
The Certificate of Incorporation of the Company, as amended, authorizes a
class of preferred stock to consist of up to 1,000,000 shares of $.50 par value
stock. The Board of Directors can determine the characteristics of the preferred
stock without further stockholder approval.
During fiscal 1996, the Company established a Benefit Trust (the "Trust")
with 2,500,000 shares of treasury stock. The purpose of this Trust was to
enhance the Company's financial flexibility to provide funds to satisfy its
obligations under various employee benefit plans and agreements. The employee
benefits payable from the Trust are primarily included in the $69,058,000
"Deferred employee benefits" liability. Shares held by the Trust are not
considered outstanding for earnings per share calculations until they are sold,
but are considered outstanding for shareholder voting purposes. The shares are
voted based upon the voting results of the shares held in the Company's Employee
Stock Ownership Plan.
To record this transaction, the Company reduced "Treasury stock" by the
average cost of these shares to the Company, or $15,426,000, and the fair market
value of the stock was recorded as "Stock held by benefit trust" to reflect a
note payable to the Company for the market value of the 2,500,000 shares of
stock. "Capital in excess of stated value" was increased for the difference of
$11,449,000 between the cost of the shares and their fair value. Each quarter,
"Stock held by benefit trust" is adjusted to the fair market value of the shares
held in the Trust, and an adjustment for the same amount is made to "Capital in
excess of stated value". At September 28, 1997, the market value of the stock
was $18.75 per share.
F-36
<PAGE> 146
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Once the tender offer and Merger with Imperial Holly is completed as
discussed in Note 2, the Benefit Trust will have received an estimated
$38,415,000 and 921,000 shares of Imperial Holly Corporation common stock. Under
the terms of the Trust, as amended, the cash received from the tender offer was
used to repay to the Company the note payable due for the shares, plus accrued
interest, aggregating $27,621,000. The balance of the cash will be used to
purchase common stock of Imperial Holly. This purchased stock, along with the
921,000 shares of Imperial Holly common stock received in the Merger, can only
be used to either make, or to reimburse Imperial Holly for, payments due to
Savannah Foods employees and retirees for liabilities under deferred
compensation plans aggregating $23,661,000 and under supplemental executive
retirement plans aggregating $10,598,000 at September 28, 1997.
NOTE 12 -- COMMITMENTS AND CONTINGENCIES:
The Company has contracted for the purchase of a substantial portion of its
future raw sugar requirements. Prices to be paid for raw sugar under these
contracts are based in some cases on market prices during the anticipated
delivery month. In other cases prices are fixed and, in these instances, the
Company generally obtains commitments from its customers to buy the sugar prior
to fixing the price, or enters into futures transactions to hedge the
commitment.
The Company is exposed to loss in the event of non-performance by the other
party to the interest rate swap agreements discussed in Note 6. However, the
Company does not anticipate non-performance by the counter-parties to the
transactions.
As of the end of fiscal 1997, the Company has resolved substantially all of
the claims by the United States Customs Service (Customs) in the Company's
favor. Customs had alleged that drawback claims prepared by the Company for
certain export shipments of sugar during the years 1984 to 1988 were technically
and/or substantively deficient and that the Company, therefore, was not entitled
to amounts previously received under these drawback claims. The Company disputed
Customs' findings and has been vigorously protesting this matter with Customs.
The Company has employment agreements with certain senior management which
contain "change in control" provisions. The Company could be required to pay up
to $5,900,000 to these employees as a result of Imperial Holly's purchase of
50.1% of the Company's Common Stock.
F-37
<PAGE> 147
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
Unaudited quarterly financial information for fiscal 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
FISCAL 1997
Net sales..................................... $303,121 $276,489 $303,546 $308,683
Gross profit.................................. 37,652 36,355 40,446 39,884
Other costs................................... -- -- -- (13,394)
Income from operations........................ 16,408 16,354 19,681 5,215
Income before extraordinary item.............. 9,148 8,829 11,402 2,702
Per share................................... .35 .34 .43 .10
Net income.................................... 9,148 8,829 11,026 2,702
Per share................................... .35 .34 .42 .10
FISCAL 1996
Net sales..................................... $304,409 $250,804 $287,462 $303,657
Gross profit.................................. 27,937 24,951 31,151 34,075
Impairment loss............................... -- -- -- (10,280)
Other costs................................... 1,525 (3,800) -- (1,099)
Income from operations........................ 8,550 162 10,906 2,181
Income (loss) before extraordinary item....... 3,543 (2,043) 4,726 717
Per share................................ .14 (.08) .18 .03
Net income (loss)............................. 3,543 (2,043) 4,028 444
Per share................................... .14 (.08) .15 .02
</TABLE>
"Other costs" included above and in the Consolidated Statements of
Operations include the following:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FISCAL 1997
Merger related costs:
Termination fee and expenses.................. $ -- $ -- $ -- $ (8,000)
Legal and administrative expenses............. -- -- -- (3,894)
Cost of workforce reduction................... -- -- -- (1,500)
-------- -------- -------- --------
Other costs................................... $ -- $ -- $ -- $(13,394)
======== ======== ======== ========
FISCAL 1996
Net gain (loss) on asset disposals............ $ 1,525 $ (3,800) $ -- $ (376)
Cost of workforce reduction................... -- -- -- (723)
-------- -------- -------- --------
Other costs................................... $ 1,525 $ (3,800) $ -- $ (1,099)
======== ======== ======== ========
</TABLE>
F-38
<PAGE> 148
===============================================================================
ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THE PROSPECTUS, THE LETTER OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE
AGENT AS FOLLOWS:
By Mail.:
THE BANK OF NEW YORK
Tender and Exchange Department
P. O. Box 11248
Church Street Station
New York, NY 10286-1248
By Overnight Courier or Hand Delivery:
THE BANK OF NEW YORK
Tender and Exchange Department
101 Barclay Street
Receive & Deliver Window
New York, NY 10286
By Facsimile Transmission:
(for Eligible Institutions only)
(212) 815-6213
Attention:
Confirm by Telephone:
(212) 507-9357
(Originals of all documents submitted by facsimile should be sent promptly by
hand, overnight delivery, or registered or certified mail.)
---------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE INITIAL PURCHASERS OR ANY OF THEIR
RESPECTIVE AFFILIATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL. OR
A SOLICITATION TO BUY, THE NOTES IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
===============================================================================
===============================================================================
$250,000,000
EXCHANGE OFFER
IMPERIAL HOLLY
CORPORATION
9 3/4% SENIOR SUBORDINATED NOTES
DUE 2007, SERIES A
------------------------
PROSPECTUS
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Prospectus Summary.......................... 1
Disclosure Regarding Forward-Looking
Statements................................ 12
Risk Factors................................ 12
The Exchange Offer.......................... 19
Use of Proceeds............................. 28
Capitalization.............................. 28
Pro Forma Financial Statements.............. 29
Selected Historical Consolidated Financial
Information............................... 35
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 37
Business.................................... 43
Board of Directors and Management........... 54
Certain Relationships and Related
Transactions.............................. 58
Ownership of Common Stock................... 59
Description of the Transactions............. 61
Description of Indebtedness................. 61
Description of the Notes.................... 64
Plan of Distribution........................ 102
Legal Matters............................... 103
Experts..................................... 103
Available Information....................... 103
Incorporation of Certain Documents by
Reference................................. 104
Index to Financial Statements............... F-1
</TABLE>
, 1998
===============================================================================
<PAGE> 149
PART II
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles of Incorporation provide that a director will not be
liable to the corporation or its stockholders for monetary damages for an act or
omission in such director's capacity as director, except in the case of: (i)
breach of such director's duty of loyalty to the corporation or its
stockholders, (ii) an act or omission not in good faith or that involves
intentional misconduct or a knowing violation of the law, (iii) a transaction
from which the director received an improper benefit, (iv) an act or omission
for which the liability of a director is expressly provided for by statute or
(v) an act related to an unlawful stock repurchase or payment of a dividend.
The Company's Bylaws provide that the corporation will indemnify, and
advance expenses (including court costs and attorney's fees) to, any officer,
director, employee or agent to the fullest extent permitted by applicable law at
the time of the adoption of the the Company's Bylaws and such greater extent as
applicable law may thereafter permit.
Under the Texas Business Corporation Act (the "TBCA"), directors, officers,
employees or agents are entitled to indemnification against expenses (including
attorneys' fees) whenever they successfully defend legal proceedings brought
against them by reason of the fact that they hold such a position with the
corporation. In addition, with respect to actions not brought by or in the right
of the corporation, indemnification is permitted under the TBCA for expenses
(including attorneys' fees), judgments, fines, penalties and reasonable
settlement if it is determined that the person seeking indemnification acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation or its shareholders and, with respect
to criminal proceedings he or she had no reasonable cause to believe that his or
her conduct was unlawful. With respect to actions brought by or in the right of
the corporation, indemnification is permitted under the TBCA for expenses
(including attorneys' fees) and reasonable settlements, if it is determined that
the person seeking indemnification acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders; provided, indemnification is not permitted if
the person is found liable to the corporation, unless the court in which the
court or suit was brought has determined that indemnification is fair and
reasonable in view of all the circumstances of the case.
Under an insurance policy maintained by the Company, the directors and
officers of the Company are insured within the limits and subject to the
limitations of the policy, against certain expenses in connection with the
defense of certain claims, actions, suits or proceedings and certain liabilities
which might be imposed as a result of such claims, action, suits or proceedings,
which may be brought against them by reason of being or having been such
directors and officers.
ITEM 21. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*2(a) -- Agreement and Plan of Merger, dated September 12, 1997,
among Imperial Holly Corporation, IHK Merger Sub
Corporation and Savannah Foods & Industries, Inc.
(incorporated by reference to Exhibit 2.1 to the
Company's Registration Statement on Form S-4
(Registration No. 333-40445) (the "Savannah S-4")).
*3(a) -- Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3(b) to the
Company's Registration Statement on Form S-4
(Registration No. 33-20959)).
*3(b) -- Articles of Amendment to Restated Articles of
Incorporation (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1990 (File No. 1- 10307)).
</TABLE>
II-1
<PAGE> 150
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*3(c) -- By-Laws of the Company (incorporated by reference to
Exhibit 3(b) to the Company's Annual Report on Form 10-K
for the year ended March 31, 1989 (File No. 0-16674) (the
"1989 Form 10-K")).
+4(a)(1) -- Amended and Restated Credit Agreement, dated as of
December 22, 1997, among Imperial Holly Corporation, as
Borrower, the Several Lenders from time to time Parties
thereto, Lehman Brothers, Inc., as Arranger, Lehman
Brothers Commercial Paper, Inc., as Syndication Agent and
Harris Trust and Savings Bank, as Administrative and
Collateral Agent.
+4(a)(2) -- Amended and Restated Guarantee and Collateral Agreement,
dated as of December 22, 1997, made by Imperial Holly
Corporation and certain of its Subsidiaries in favor of
Harris Trust and Savings Bank, as Collateral Agent.
+4(b) -- Indenture dated as of December 22, 1997 between the
Company, certain subsidiaries of the Company and The Bank
of New York, as Trustee, relating to the Company's 9 3/4%
Senior Subordinated Notes due 2007 (including form of
9 3/4% Senior Subordinated Note due 2007 and form of
Subsidiary Guarantee).
*4(c) -- Indenture dated as of October 15, 1992 by and between the
Company and Texas Commerce Bank National Association, as
Trustee, relating to the Company's 8 3/8% Senior Notes
due 1999 (incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992 (File 1-10307)).
+5(a) -- Opinion of Andrews & Kurth L.L.P. as to the legality of
the securities being registered.
*10(a) -- Imperial Holly Corporation Stock Incentive Plan (as
amended and restated effective May 1, 1997) (incorporated
by reference to Exhibit 10(a) to the Company's Annual
Report on Form 10-K for the year ended March 31, 1997
(File No. 1-10307) (the "1997 Form 10-K")).
*10(b) -- Specimen of the Company's Employment Agreement for
certain of its officers (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1990 (File No.
1-10307) (the "September 1990 Form 10-Q")).
*10(b)(2) -- Specimen of the Company's Amendment to Employment
Agreement for certain of its officers (incorporated by
reference to Exhibit 10(c)(2) to the 1994 Form 10-K).
*10(b)(3) -- Schedule of Employment Agreements (incorporated by
reference to Exhibit 10(a) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1994 (File No. 1-10307) (the "September 1994 Form
10-Q")).
*10(c) -- Specimen of the Company's Severance Pay Agreements for
certain of its officers (incorporated by reference to
Exhibit 10.2 to the September 1990 Form 10-Q).
*10(d)(1) -- Imperial Holly Corporation Salary Continuation Plan (as
amended and restated effective August 1, 1994)
(incorporated by reference to Exhibit 10(b)(1) to the
September 1994 Form 10-Q).
*10(d)(2) -- Specimen of the Company's Salary Continuation Agreement
(Fully Vested) (incorporated by reference to Exhibit
10(b)(2) to the September 1994 Form 10-Q).
*10(d)(3) -- Specimen of the Company's Salary Continuation Agreement
(Graduated Vesting) (incorporated by reference to Exhibit
10(b)(3) to the September 1994 Form 10-Q).
</TABLE>
II-2
<PAGE> 151
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10(d)(4) -- Schedule of Salary Continuation Agreements (incorporated
by reference to Exhibit 10(d)(4) to the Company's Annual
Report on Form 10-K for the year ended March 31, 1996
(File No. 1-10307) (the "1996 Form 10-K")).
*10(e)(1) -- Imperial Holly Corporation Benefit Restoration Plan (as
amended and restated effective August 1, 1994)
(incorporated by reference to Exhibit 10(c)(1) to the
September 1994 Form 10-Q).
*10(e)(2) -- Specimen of the Company's Benefit Restoration Agreement
(Fully Vested) (incorporated by reference to Exhibit
10(c)(2) to the September 1994 Form 10-Q).
*10(e)(3) -- Specimen of the Company's Benefit Restoration Agreement
(Graduated Vesting) (incorporated by reference to Exhibit
10(c)(3) to the September 1994 Form 10-Q).
*10(e)(4) -- Schedule of Benefit Restoration Agreements (incorporated
by reference to Exhibit 10(e)(4) to the 1996 Form 10-K).
*10(f)(1) -- Imperial Holly Corporation Executive Benefits Trust
(incorporated by reference to Exhibit 10.5 to the
September 1990 Form 10-Q).
*10(f)(2) -- First Amendment to the Company's Executive Benefits Trust
dated June 4, 1991 (incorporated by reference to Exhibit
10(g)(2) to the 1994 Form 10-K).
*10(g) -- Imperial Holly Corporation 1989 Nonemployee Director
Stock Option Plan (incorporated by reference to Exhibit A
to the Company's Proxy Statement dated June 16, 1989 for
the 1989 Annual Meeting of Shareholders, File No.
0-16674).
*10(h) -- Imperial Holly Corporation Retirement Plan For
Nonemployee Directors (incorporated by reference to
Exhibit 10(j) to the 1994 Form 10-K).
*10(i)(1) -- Specimen of the Company's Change of Control Agreement
(incorporated by reference to Exhibit 10(d)(1) to the
September 1994 Form 10-Q).
*10(i)(2) -- Schedule of Change of Control Agreements (incorporated by
reference to Exhibit 10(i)(2) to the 1997 Form 10-K).
*10(j) -- Independent Consultant Agreement between I. H. Kempner
III and the Company (incorporated by reference to Exhibit
10(k) to the 1996 Form 10-K).
*10(k) -- Specimen of the Company's Restricted Stock Agreement with
certain of its officers (incorporated by reference to
Exhibit 10(k) to the 1997 Form 10-K).
*10(l) -- Schedule of Restricted Stock Agreements (incorporated by
reference to Exhibit 10(l) to the 1997 Form 10-K).
*10(m) -- Agreement of Limited Partnership of ChartCo Terminal,
L.P. (incorporated by reference to Exhibit 10(j) to the
1990 Form 10-K).
*11 -- Computation of Income Per Common Share (incorporated by
reference to Exhibit 11 to the Company's Transition
Report on Form 10-K for the six months ended September
30, 1997).
+21 -- Subsidiaries of the Company.
+23.1 -- Consent of Deloitte & Touche LLP, Independent Auditors.
+23.2 -- Consent of Arthur Andersen LLP, Independent Public
Accountants.
+23.3 -- Consent of Price Waterhouse LLP, Independent Accountants.
+23.4 -- Consent of Andrews & Kurth L.L.P. (included in opinion
filed as Exhibit 5(a)).
+99(a) -- Form of Letter of Transmittal.
+99(b) -- Form of Notice of Guaranteed Delivery.
</TABLE>
II-3
<PAGE> 152
- ---------------
* Indicates exhibit previously filed with the Commission and incorporated by
reference.
+ Indicates filed herewith.
FINANCIAL STATEMENT SCHEDULES
None.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE> 153
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15 (d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10 (b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 154
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrants
set forth below have duly caused this Registration Statement to be signed on
their behalf by the undersigned, thereunto duly authorized, in the City of Sugar
Land, State of Texas on the day of January, 1998.
IMPERIAL HOLLY CORPORATION
SAVANNAH FOODS & INDUSTRIES, INC.
BIOMASS CORPORATION
DIXIE CRYSTALS BRANDS, INC.
DIXIE CRYSTALS FOODSERVICE, INC.
KING PACKAGING COMPANY, INC.
FOOD CARRIER, INC.
MICHIGAN SUGAR COMPANY
GREAT LAKES SUGAR COMPANY
SAVANNAH FOODS INDUSTRIAL, INC.
PHOENIX PACKAGING CORPORATION
SAVANNAH INVESTMENT COMPANY
SAVANNAH SUGAR REFINING CORPORATION
HOLLY SUGAR CORPORATION
FORT BEND UTILITIES COMPANY
HOLLY NORTHWEST COMPANY
By:
----------------------------------------
William F. Schwer
Senior Vice President
IMPERIAL SWEETENER DISTRIBUTORS, INC.
By:
----------------------------------------
William F. Schwer
Vice President
CROWN EXPRESS, INC.
LIMESTONE PRODUCTS COMPANY, INC.
By:
----------------------------------------
William F. Schwer
Vice President
II-6
<PAGE> 155
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James C. Kempner, H.P. Mechler, and William F.
Schwer and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities, to sign, execute and file this registration
statement under the Securities Act and any and all amendments (including,
without limitation, post-effective amendments and any amendment or amendments or
additional registration statement filed pursuant to Rule 462 under the
Securities Act increasing the amount of securities for which registration is
being sought) to this registration statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, to sign any and all applications,
registration statements, notices or other documents necessary or advisable to
comply with the applicable state security laws, and to file the same, together
with other documents in connection therewith, with the appropriate state
securities authorities, granting unto said attorney-in-fact and agents full
power and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intends and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
IMPERIAL HOLLY CORPORATION
President, Chief Executive January 23, 1998
- ----------------------------------------------------- Officer, Chief Financial Officer
James C. Kempner and Director
(Principal Executive and
Financial Officer)
Vice President -- Accounting January 23, 1998
- ----------------------------------------------------- (Principal Accounting Officer)
H.P. Mechler
Director January 23, 1998
- -----------------------------------------------------
John D. Curtin, Jr.
Director January 23, 1998
- -----------------------------------------------------
David J. Dilger
Director January 23, 1998
- -----------------------------------------------------
Edward O. Gaylord
Director January 23, 1998
- -----------------------------------------------------
Gerald Grinstein
Director January 23, 1998
- -----------------------------------------------------
Ann O. Hamilton
Director January 23, 1998
- -----------------------------------------------------
Robert L. Harrison
</TABLE>
II-7
<PAGE> 156
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director January 23, 1998
- -----------------------------------------------------
Harris L. Kempner, Jr.
Director January 23, 1998
- -----------------------------------------------------
I. H. Kempner, III
Director January 23, 1998
- -----------------------------------------------------
H. E. Lentz
Director January 23, 1998
- -----------------------------------------------------
Kevin C. O'Sullivan
Director January 23, 1998
- -----------------------------------------------------
Fayez Sarofim
Director January 23, 1998
- -----------------------------------------------------
William F. Sprague III
Director January 23, 1998
- -----------------------------------------------------
Daniel K. Thorne
SAVANNAH FOODS & INDUSTRIES, INC.
Chairman of the Board, Chief January 23, 1998
- ----------------------------------------------------- Financial Officer and Director
James C. Kempner (Principal Executive, Financial
and Accounting Officer)
Director January 23, 1998
- -----------------------------------------------------
Peter C. Carrothers
Director January 23, 1998
- -----------------------------------------------------
Douglas W. Ehrenkranz
Director January 23, 1998
- -----------------------------------------------------
Roger W. Hill
Director January 23, 1998
- -----------------------------------------------------
Karen L. Mercer
Director January 23, 1998
- -----------------------------------------------------
John A. Richmond
Director January 23, 1998
- -----------------------------------------------------
William F. Schwer
</TABLE>
II-8
<PAGE> 157
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director January 23, 1998
- -----------------------------------------------------
William W. Sprague, III
BIOMASS CORPORATION
Chairman of the Board and January 23, 1998
- ----------------------------------------------------- Treasurer (Principal Executive,
James C. Kempner Financial and Accounting
Officer)
Director January 23, 1998
- -----------------------------------------------------
Benjamin A. Oxnard, Jr.
Director January 23, 1998
- -----------------------------------------------------
William W. Sprague, III
DIXIE CRYSTALS BRANDS, INC.
Chairman of the Board and January 23, 1998
- ----------------------------------------------------- Treasurer (Principal Executive,
James C. Kempner Financial and Accounting
Officer)
Director January 23, 1998
- -----------------------------------------------------
David H. Roche
Director January 23, 1998
- -----------------------------------------------------
James M. Kelley
Director January 23, 1998
- -----------------------------------------------------
William W. Sprague, III
Director January 23, 1998
- -----------------------------------------------------
Benjamin A. Oxnard, Jr.
DIXIE CRYSTALS FOODSERVICE, INC.
Chairman of the Board and January 23, 1998
- ----------------------------------------------------- Treasurer (Principal Executive,
James C. Kempner Financial and Accounting
Officer)
Director January 23, 1998
- -----------------------------------------------------
David H. Roche
Director January 23, 1998
- -----------------------------------------------------
James M. Kelley
</TABLE>
II-9
<PAGE> 158
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director January 23, 1998
- -----------------------------------------------------
William W. Sprague, III
Director January 23, 1998
- -----------------------------------------------------
Benjamin A. Oxnard, Jr.
KING PACKAGING COMPANY, INC.
Chairman of the Board and January 23, 1998
- ----------------------------------------------------- Treasurer (Principal Executive,
James C. Kempner Financial and Accounting
Officer)
Director January 23, 1998
- -----------------------------------------------------
David H. Roche
Director January 23, 1998
- -----------------------------------------------------
James M. Kelley
Director January 23, 1998
- -----------------------------------------------------
William W. Sprague, III
Director January 23, 1998
- -----------------------------------------------------
Benjamin A. Oxnard, Jr.
FOOD CARRIER, INC.
Chairman of the Board (Principal January 23, 1998
- ----------------------------------------------------- Executive Officer)
James C. Kempner
Treasurer and Director (Principal January 23, 1998
- ----------------------------------------------------- Financial and Accounting
Robert Hickox Officer)
Director January 23, 1998
- -----------------------------------------------------
Benjamin A. Oxnard, Jr.
Director January 23, 1998
- -----------------------------------------------------
Edward H. Millard, Jr.
MICHIGAN SUGAR COMPANY
Chairman of the Board (Principal January 23, 1998
- ----------------------------------------------------- Executive Officer)
James C. Kempner
</TABLE>
II-10
<PAGE> 159
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Treasurer and Director (Principal January 23, 1998
- ----------------------------------------------------- Financial and Accounting
David H. Roche Officer)
Director January 23, 1998
- -----------------------------------------------------
William W. Sprague, III
Director January 23, 1998
- -----------------------------------------------------
Gregory H. Smith
Director January 23, 1998
- -----------------------------------------------------
Mark S. Flegenheimer
GREAT LAKES SUGAR COMPANY
Chairman of the Board (Principal January 23, 1998
- ----------------------------------------------------- Executive Officer)
James C. Kempner
Treasurer and Director (Principal January 23, 1998
- ----------------------------------------------------- Financial and Accounting
David H. Roche Officer)
Director January 23, 1998
- -----------------------------------------------------
William W. Sprague, III
Director January 23, 1998
- -----------------------------------------------------
Gregory H. Smith
Director January 23, 1998
- -----------------------------------------------------
Mark S. Flegenheimer
SAVANNAH FOODS INDUSTRIAL, INC.
Chairman of the Board (Principal January 23, 1998
- ----------------------------------------------------- Executive Officer)
James C. Kempner
Treasurer (Principal Financial and January 23, 1998
- ----------------------------------------------------- Accounting Officer)
Katrina Wigren
Director January 23, 1998
- -----------------------------------------------------
William W. Sprague, III
Director January 23, 1998
- -----------------------------------------------------
David H. Roche
</TABLE>
II-11
<PAGE> 160
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director January 23, 1998
- -----------------------------------------------------
James M. Kelley
PHOENIX PACKAGING CORPORATION
Chairman of the Board and January 23, 1998
- ----------------------------------------------------- Treasurer (Principal Executive,
James C. Kempner Financial and Accounting
Officer)
Director January 23, 1998
- -----------------------------------------------------
David H. Roche
Director January 23, 1998
- -----------------------------------------------------
Benjamin A. Oxnard, Jr.
Director January 23, 1998
- -----------------------------------------------------
Gregory H. Smith
SAVANNAH INVESTMENT COMPANY
Chairman of the Board (Principal January 23, 1998
- ----------------------------------------------------- Executive Officer)
James C. Kempner
Treasurer (Principal Financial and January 23, 1998
- ----------------------------------------------------- Accounting Officer)
John P. Garniewski
Director January 23, 1998
- -----------------------------------------------------
Doug Hutchins
Director January 23, 1998
- -----------------------------------------------------
Peter C. Fulweiler
Director January 23, 1998
- -----------------------------------------------------
Carl Boland
Director January 23, 1998
- -----------------------------------------------------
Gregory H. Smith
Director January 23, 1998
- -----------------------------------------------------
Arthur Dana
</TABLE>
II-12
<PAGE> 161
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
SAVANNAH SUGAR REFINING CORPORATION
Chairman of the Board and January 23, 1998
- ----------------------------------------------------- Treasurer (Principal Executive,
James C. Kempner Financial and Accounting
Officer)
Director January 23, 1998
- -----------------------------------------------------
Benjamin A. Oxnard, Jr.
Director January 23, 1998
- -----------------------------------------------------
William W. Sprague, III
Director January 23, 1998
- -----------------------------------------------------
Gregory H. Smith
HOLLY SUGAR CORPORATION
President, Chief Executive Officer January 23, 1998
- ----------------------------------------------------- and Director (Principal
Roger W. Hill Executive Officer)
Treasurer (Principal Financial and January 23, 1998
- ----------------------------------------------------- Accounting Officer)
Karen L. Mercer
Chairman of the Board and Director January 23, 1998
- -----------------------------------------------------
James C. Kempner
Senior Vice President, General January 23, 1998
- ----------------------------------------------------- Counsel, Corporate Secretary and
William F. Schwer Director
Director January 23, 1998
- -----------------------------------------------------
John A. Richmond
IMPERIAL SWEETENER DISTRIBUTION, INC.
President, Chief Executive Officer January 23, 1998
- ----------------------------------------------------- and Director (Principal
James C. Kempner Executive Officer)
Treasurer (Principal Financial and January 23, 1998
- ----------------------------------------------------- Accounting Officer)
Karen L. Mercer
</TABLE>
II-13
<PAGE> 162
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director January 23, 1998
- -----------------------------------------------------
Peter C. Carrothers
Secretary and Director January 23, 1998
- -----------------------------------------------------
Roy E. Henderson
FORT BEND UTILITIES COMPANY
President, Chief Executive Officer January 23, 1998
- ----------------------------------------------------- and Director (Principal
James C. Kempner Executive Officer)
Treasurer (Principal Financial and January 23, 1998
- ----------------------------------------------------- Accounting Officer)
Karen L. Mercer
Secretary and Director January 23, 1998
- -----------------------------------------------------
Roy E. Henderson
Director January 23, 1998
- -----------------------------------------------------
I. H. Kempner, III
LIMESTONE PRODUCTS COMPANY
President and Director (Principal January 23, 1998
- ----------------------------------------------------- Executive Officer)
William F. Schwer
Treasurer (Principal Financial and January 23, 1998
- ----------------------------------------------------- Accounting Officer)
Karen L. Mercer
Vice President and Director January 23, 1998
- -----------------------------------------------------
Robert A. Strickland
Director January 23, 1998
- -----------------------------------------------------
John A. Richmond
HOLLY NORTHWEST COMPANY
President and Director (Principal January 23, 1998
- ----------------------------------------------------- Executive Officer)
Roger W. Hill
Treasurer (Principal Financial and January 23, 1998
- ----------------------------------------------------- Accounting Officer)
Alan Lebsock
Director January 23, 1998
- -----------------------------------------------------
James C. Kempner
</TABLE>
II-14
<PAGE> 163
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director January 23, 1998
- -----------------------------------------------------
William F. Schwer
CROWN EXPRESS, INC.
President and Director (Principal January 23, 1998
- ----------------------------------------------------- Executive Officer)
William F. Schwer
Vice President, Treasurer and January 23, 1998
- ----------------------------------------------------- Director (Principal Financial
Peter C. Carrothers and Accounting Officer)
Secretary and Director January 23, 1998
- -----------------------------------------------------
Roy E. Henderson
</TABLE>
II-15
<PAGE> 164
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*2(a) -- Agreement and Plan of Merger, dated September 12, 1997,
among Imperial Holly Corporation, IHK Merger Sub
Corporation and Savannah Foods & Industries, Inc.
(incorporated by reference to Exhibit 2.1 to the
Company's Registration Statement on Form S-4
(Registration No. 333-40445) (the "Savannah S-4")).
*3(a) -- Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3(b) to the
Company's Registration Statement on Form S-4
(Registration No. 33-20959)).
*3(b) -- Articles of Amendment to Restated Articles of
Incorporation (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1990 (File No. 1- 10307)).
*3(c) -- By-Laws of the Company (incorporated by reference to
Exhibit 3(b) to the Company's Annual Report on Form 10-K
for the year ended March 31, 1989 (File No. 0-16674) (the
"1989 Form 10-K")).
+4(a)(1) -- Amended and Restated Credit Agreement, dated as of
December 22, 1997, among Imperial Holly Corporation, as
Borrower, the Several Lenders from time to time Parties
thereto, Lehman Brothers, Inc., as Arranger, Lehman
Brothers Commercial Paper, Inc., as Syndication Agent and
Harris Trust and Savings Bank, as Administrative and
Collateral Agent.
+4(a)(2) -- Amended and Restated Guarantee and Collateral Agreement,
dated as of December 22, 1997, made by Imperial Holly
Corporation and certain of its Subsidiaries in favor of
Harris Trust and Savings Bank, as Collateral Agent.
+4(b) -- Indenture dated as of December 22, 1997 between the
Company, certain subsidiaries of the Company and The Bank
of New York, as Trustee, relating to the Company's 9 3/4%
Senior Subordinated Notes due 2007 (including form of
9 3/4% Senior Subordinated Note due 2007 and form of
Subsidiary Guarantee).
*4(c) -- Indenture dated as of October 15, 1992 by and between the
Company and Texas Commerce Bank National Association, as
Trustee, relating to the Company's 8 3/8% Senior Notes
due 1999 (incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992 (File 1-10307)).
+5(a) -- Opinion of Andrews & Kurth L.L.P. as to the legality of
the securities being registered.
*10(a) -- Imperial Holly Corporation Stock Incentive Plan (as
amended and restated effective May 1, 1997) (incorporated
by reference to Exhibit 10(a) to the Company's Annual
Report on Form 10-K for the year ended March 31, 1997
(File No. 1-10307) (the "1997 Form 10-K")).
*10(b) -- Specimen of the Company's Employment Agreement for
certain of its officers (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1990 (File No.
1-10307) (the "September 1990 Form 10-Q")).
*10(b)(2) -- Specimen of the Company's Amendment to Employment
Agreement for certain of its officers (incorporated by
reference to Exhibit 10(c)(2) to the 1994 Form 10-K).
</TABLE>
<PAGE> 165
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10(b)(3) -- Schedule of Employment Agreements (incorporated by
reference to Exhibit 10(a) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1994 (File No. 1-10307) (the "September 1994 Form
10-Q")).
*10(c) -- Specimen of the Company's Severance Pay Agreements for
certain of its officers (incorporated by reference to
Exhibit 10.2 to the September 1990 Form 10-Q).
*10(d)(1) -- Imperial Holly Corporation Salary Continuation Plan (as
amended and restated effective August 1, 1994)
(incorporated by reference to Exhibit 10(b)(1) to the
September 1994 Form 10-Q).
*10(d)(2) -- Specimen of the Company's Salary Continuation Agreement
(Fully Vested) (incorporated by reference to Exhibit
10(b)(2) to the September 1994 Form 10-Q).
*10(d)(3) -- Specimen of the Company's Salary Continuation Agreement
(Graduated Vesting) (incorporated by reference to Exhibit
10(b)(3) to the September 1994 Form 10-Q).
*10(d)(4) -- Schedule of Salary Continuation Agreements (incorporated
by reference to Exhibit 10(d)(4) to the Company's Annual
Report on Form 10-K for the year ended March 31, 1996
(File No. 1-10307) (the "1996 Form 10-K")).
*10(e)(1) -- Imperial Holly Corporation Benefit Restoration Plan (as
amended and restated effective August 1, 1994)
(incorporated by reference to Exhibit 10(c)(1) to the
September 1994 Form 10-Q).
*10(e)(2) -- Specimen of the Company's Benefit Restoration Agreement
(Fully Vested) (incorporated by reference to Exhibit
10(c)(2) to the September 1994 Form 10-Q).
*10(e)(3) -- Specimen of the Company's Benefit Restoration Agreement
(Graduated Vesting) (incorporated by reference to Exhibit
10(c)(3) to the September 1994 Form 10-Q).
*10(e)(4) -- Schedule of Benefit Restoration Agreements (incorporated
by reference to Exhibit 10(e)(4) to the 1996 Form 10-K).
*10(f)(1) -- Imperial Holly Corporation Executive Benefits Trust
(incorporated by reference to Exhibit 10.5 to the
September 1990 Form 10-Q).
*10(f)(2) -- First Amendment to the Company's Executive Benefits Trust
dated June 4, 1991 (incorporated by reference to Exhibit
10(g)(2) to the 1994 Form 10-K).
*10(g) -- Imperial Holly Corporation 1989 Nonemployee Director
Stock Option Plan (incorporated by reference to Exhibit A
to the Company's Proxy Statement dated June 16, 1989 for
the 1989 Annual Meeting of Shareholders, File No.
0-16674).
*10(h) -- Imperial Holly Corporation Retirement Plan For
Nonemployee Directors (incorporated by reference to
Exhibit 10(j) to the 1994 Form 10-K).
*10(i)(1) -- Specimen of the Company's Change of Control Agreement
(incorporated by reference to Exhibit 10(d)(1) to the
September 1994 Form 10-Q).
*10(i)(2) -- Schedule of Change of Control Agreements (incorporated by
reference to Exhibit 10(i)(2) to the 1997 Form 10-K).
*10(j) -- Independent Consultant Agreement between I. H. Kempner
III and the Company (incorporated by reference to Exhibit
10(k) to the 1996 Form 10-K).
*10(k) -- Specimen of the Company's Restricted Stock Agreement with
certain of its officers (incorporated by reference to
Exhibit 10(k) to the 1997 Form 10-K).
</TABLE>
<PAGE> 166
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
*10(l) -- Schedule of Restricted Stock Agreements (incorporated by reference to Exhibit 10(l) to
the 1997 Form 10-K).
*10(m) -- Agreement of Limited Partnership of ChartCo Terminal, L.P. (incorporated by reference
to Exhibit 10(j) to the 1990 Form 10-K).
*11 -- Computation of Income Per Common Share (incorporated by reference to Exhibit 11 to the
Company's Transition Report on Form 10-K for the six months ended September 30, 1997).
+21 -- Subsidiaries of the Company.
+23.1 -- Consent of Deloitte & Touche LLP, Independent Auditors.
+23.2 -- Consent of Arthur Andersen LLP, Independent Public Accountants.
+23.3 -- Consent of Price Waterhouse LLP, Independent Accountants.
+23.4 -- Consent of Andrews & Kurth L.L.P. (included in opinion filed as Exhibit 5(a)).
+99(a) -- Form of Letter of Transmittal.
+99(b) -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Indicates exhibit previously filed with the Commission and incorporated by
reference.
+ Indicates filed herewith.
<PAGE> 1
EXHIBIT 4(a)(i)
EXECUTION COPY
================================================================================
$455,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
among
IMPERIAL HOLLY CORPORATION,
as Borrower,
The Several Lenders
from Time to Time Parties Hereto,
LEHMAN BROTHERS INC.,
as Arranger
LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent
and
HARRIS TRUST AND SAVINGS BANK,
as Administrative Agent and Collateral Agent
Dated as of December 22, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . . 28
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS . . . . . . . . . 28
2.1 Term Loan Commitments . . . . . . . . . . . . . . . 28
2.2 Procedure for Term Loan Borrowing . . . . . . . . . 28
2.3 Repayment of Term Loans . . . . . . . . . . . . . . 29
2.4 Revolving Credit Commitments . . . . . . . . . . . 30
2.5 Procedure for Revolving Credit Borrowing . . . . . 31
2.6 Swing Line Commitment . . . . . . . . . . . . . . . 31
2.7 Procedure for Swing Line Borrowing; Refunding of
Swing Line Loans . . . . . . . . . . . . . . . . 32
2.8 Repayment of Loans; Evidence of Debt . . . . . . . 33
2.9 Commitment Fees, etc. . . . . . . . . . . . . . . 34
2.10 Termination or Reduction of Revolving Credit
Commitments . . . . . . . . . . . . . . . . . . 34
2.11 Optional Prepayments . . . . . . . . . . . . . . . 35
2.12 Mandatory Prepayments and Commitment Reductions . 35
2.13 Conversion and Continuation Options . . . . . . . 36
2.14 Minimum Amounts and Maximum Number of Eurodollar
Tranches . . . . . . . . . . . . . . . . . . . . 37
2.15 Interest Rates and Payment Dates . . . . . . . . . 37
2.16 Computation of Interest and Fees . . . . . . . . . 38
2.17 Inability to Determine Interest Rate . . . . . . . 38
2.18 Pro Rata Treatment and Payments . . . . . . . . . 39
2.19 Requirements of Law . . . . . . . . . . . . . . . 41
2.20 Taxes . . . . . . . . . . . . . . . . . . . . . . 42
2.21 Indemnity . . . . . . . . . . . . . . . . . . . . 44
2.22 Change of Lending Office; Claims Certificate . . . 44
2.23 Margin Regulations . . . . . . . . . . . . . . . . 45
2.24 Illegality . . . . . . . . . . . . . . . . . . . . 46
SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . 46
3.1 L/C Commitment . . . . . . . . . . . . . . . . . . 46
3.2 Procedure for Issuance of Letter of Credit . . . . 47
3.3 Commissions, Fees and Other Charges . . . . . . . . 47
3.4 L/C Participations . . . . . . . . . . . . . . . . 47
3.5 Reimbursement Obligation of the Borrower . . . . . 48
3.6 Obligations Absolute . . . . . . . . . . . . . . . 49
3.7 Letter of Credit Payments . . . . . . . . . . . . . 49
3.8 Reductions and Reinstatements . . . . . . . . . . . 49
3.9 Documents and Reports . . . . . . . . . . . . . . . 49
3.10 Amendments . . . . . . . . . . . . . . . . . . . . 49
3.11 Applications . . . . . . . . . . . . . . . . . . . 50
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Financial Condition . . . . . . . . . . . . . . . . 50
4.2 No Change . . . . . . . . . . . . . . . . . . . . . 51
4.3 Corporate Existence; Compliance with Law . . . . . 51
4.4 Corporate Power; Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . . 52
4.5 No Legal Bar . . . . . . . . . . . . . . . . . . . 52
4.6 No Material Litigation . . . . . . . . . . . . . . 52
4.7 No Default . . . . . . . . . . . . . . . . . . . . 52
4.8 Ownership of Property; Liens . . . . . . . . . . . 52
4.9 Intellectual Property . . . . . . . . . . . . . . . 53
4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . 53
4.11 Federal Regulations . . . . . . . . . . . . . . . 53
4.13 Investment Company Act; Other Regulations . . . . 54
4.14 Subsidiaries . . . . . . . . . . . . . . . . . . . 54
4.15 Use of Proceeds . . . . . . . . . . . . . . . . . 54
4.16 Environmental Matters . . . . . . . . . . . . . . 54
4.17 Accuracy of Information, etc . . . . . . . . . . . 55
4.18 Security Documents . . . . . . . . . . . . . . . . 55
4.19 Solvency . . . . . . . . . . . . . . . . . . . . . 56
4.20 Regulation H . . . . . . . . . . . . . . . . . . . 56
SECTION 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . 56
5.1 Conditions to Initial Extension of Credit . . . . . 56
5.2 Conditions to Each Extension of Credit . . . . . . 61
5.3 Conditions to Issuance of Bond Letters of Credit . 61
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . 62
6.1 Financial Statements . . . . . . . . . . . . . . . 62
6.2 Certificates; Other Information . . . . . . . . . . 63
6.3 Payment of Obligations . . . . . . . . . . . . . . 64
6.4 Conduct of Business and Maintenance of Existence,
etc. . . . . . . . . . . . . . . . . . . . . . 64
6.5 Maintenance of Property; Insurance . . . . . . . . 64
6.6 Inspection of Property; Books and Records;
Discussions . . . . . . . . . . . . . . . . . . 65
6.7 Notices . . . . . . . . . . . . . . . . . . . . . . 65
6.8 Environmental Laws . . . . . . . . . . . . . . . . 66
6.9 Interest Rate Protection . . . . . . . . . . . . . 67
6.10 Additional Collateral, etc . . . . . . . . . . . . 67
SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . 69
7.1 Financial Condition Covenants . . . . . . . . . . . 69
7.2 Limitation on Indebtedness . . . . . . . . . . . . 71
7.3 Limitation on Liens . . . . . . . . . . . . . . . . 72
7.4 Limitation on Fundamental Changes . . . . . . . . . 74
7.5 Limitation on Sale of Assets . . . . . . . . . . . 74
7.6 Limitation on Dividends . . . . . . . . . . . . . . 75
7.7 Limitation on Capital Expenditures . . . . . . . . 75
7.8 Limitation on Investments, Loans and Advances . . . 75
7.9 Limitation on Optional Payments and Modifications
of Debt Instruments, etc. . . . . . . . . . . . 76
</TABLE>
-ii-
<PAGE> 4
Page
7.10 Limitation on Transactions with Affiliates . . . . 77
7.11 Limitation on Sales and Leasebacks . . . . . . . . 77
7.12 Limitation on Changes in Fiscal Periods . . . . . 77
7.13 Limitation on Negative Pledge Clauses . . . . . . 77
7.14 Limitation on Restrictions on Subsidiary
Distributions . . . . . . . . . . . . . . . . . 78
7.15 Limitation on Lines of Business . . . . . . . . . 78
SECTION 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . 78
SECTION 9. THE AGENTS . . . . . . . . . . . . . . . . . . . 82
9.1 Appointment . . . . . . . . . . . . . . . . . . . . 82
9.2 Delegation of Duties . . . . . . . . . . . . . . . 82
9.3 Exculpatory Provisions . . . . . . . . . . . . . . 82
9.4 Reliance by Administrative Agent . . . . . . . . . 82
9.5 Notice of Default . . . . . . . . . . . . . . . . . 83
9.6 Non-Reliance on Agents and Other Lenders . . . . . 83
9.7 Indemnification . . . . . . . . . . . . . . . . . . 84
9.8 Agent in Its Individual Capacity . . . . . . . . . 84
9.9 Successor Administrative Agent . . . . . . . . . . 85
9.10 Authorization to Release Liens . . . . . . . . . . 85
9.11 The Arranger . . . . . . . . . . . . . . . . . . . 86
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . 86
10.1 Amendments and Waivers . . . . . . . . . . . . . . 86
10.2 Notices . . . . . . . . . . . . . . . . . . . . . 87
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . 87
10.4 Survival of Representations and Warranties . . . . 88
10.5 Payment of Expenses . . . . . . . . . . . . . . . 88
10.6 Successors and Assigns; Participations and
Assignments . . . . . . . . . . . . . . . . . . 88
10.7 Adjustments; Setoff . . . . . . . . . . . . . . . 91
10.8 Counterparts . . . . . . . . . . . . . . . . . . . 92
10.9 Severability . . . . . . . . . . . . . . . . . . . 92
10.10 Integration . . . . . . . . . . . . . . . . . . . 92
10.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . 92
10.12 Submission To Jurisdiction; Waivers . . . . . . . 92
10.13 Acknowledgements . . . . . . . . . . . . . . . . 93
10.14 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . 93
10.15 Confidentiality . . . . . . . . . . . . . . . . . 93
-iii-
<PAGE> 5
ANNEXES:
A Pricing Grid
SCHEDULES:
1.1A Commitments
1.1B Mortgaged Property
1.1C Non-Guarantor Subsidiaries
4.14 Subsidiaries
4.18(a) UCC Filing Jurisdictions
4.18(b) Mortgage Filing Jurisdictions
4.20 Real Property Located in Flood Zone
5.1(c) Sources and Use of Funds
7.2(e) Existing Indebtedness
7.3(g) Existing Liens
7.8(j) Extensions of Credit
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Mortgage
E Form of Assignment and Acceptance
F-1 Form of Legal Opinion of Andrews & Kurth L.L.P.
F-2 Form of Legal Opinion of Borrower's General Counsel
F-3 Form of Legal Opinion of Hunter, MacLean, Exley &
Dunn, P.C.
G-1 Form of Term Note
G-2 Form of Revolving Credit Note
G-3 Form of Swing Line Note
H Form of Exemption Certificate
I Form of Prepayment Option Notice
J-1 Form of Notice of Borrowing (Drawings)
J-2 Form of Notice of Borrowing (Conversions)
J-3 Form of Notice of Borrowing (Continuations)
-iv-
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December
22, 1997, among IMPERIAL HOLLY CORPORATION, a Texas corporation (the
"Borrower"), the several banks and other financial institutions or entities
from time to time parties to this Agreement (the "Lenders"), LEHMAN BROTHERS
INC., as arranger (in such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER
INC., as syndication agent (in such capacity, the "Syndication Agent"), HARRIS
TRUST AND SAVINGS BANK, as collateral agent (in such capacity, the "Collateral
Agent") and HARRIS TRUST AND SAVINGS BANK, as administrative agent (in such
capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, IHK Merger Sub Corporation, a Delaware corporation
("IHK Merger Sub"), a wholly owned subsidiary of the Borrower, made an offer
(the "Tender Offer") to purchase a number of the outstanding shares (the
"Shares") of common stock equal to 14,397,836 which represented approximately
50.1% of the Shares outstanding at the date of such purchase, par value $0.25,
of Savannah Foods & Industries, Inc., a Delaware corporation (the "Target"),
pursuant to an Offer to Purchase dated September 18, 1997 (the "Offer to
Purchase") at a price of $20.25 per Share;
WHEREAS, the Offer to Purchase was made pursuant to an
Agreement and Plan of Merger, dated as of September 12, 1997 (including the
schedules thereto, the "Merger Agreement"), among the Borrower, IHK Merger Sub
and Target, which provides that (i) as soon as practicable after the purchase
of Shares (the "Tender Offer Purchase") pursuant to the Offer to Purchase
(subject to certain conditions), each of the Borrower and the Target acting
through its respective Board of Directors shall give notice of, and convene a
special meeting of, its respective stockholders for the purpose of (in the case
of Target) approving and adopting the Merger Agreement and the Merger or (in
the case of the Borrower) approving the issuance of shares of common stock of
the Borrower in the Merger and subject to such stockholder approvals, IHK
Merger Sub will be merged with and into the Target (the "Merger"), with the
Target surviving as a wholly owned subsidiary of the Borrower; (ii) at the
effective time of the Merger, each of the Shares (other than Shares held by the
Borrower, IHK Merger Sub or any of their subsidiaries or in the treasury of the
Target, all of which will be canceled, and Shares held by Target stockholders
who perfect their appraisal rights under Delaware law) will be converted into
the right to receive a combination of cash consideration and shares of common
stock, without par value, of the Borrower pursuant to the proration and stock
price determination procedures set forth in the Merger Agreement and the Offer
to Purchase such that the aggregate cash consideration paid for Shares pursuant
to the Tender Offer Purchase and the Merger equals approximately 70% of the
total such consideration so paid;
WHEREAS, (i) in order to provide the financing for the Tender
Offer Purchase, the repayment of up to approximately $136,000,000 in existing
indebtedness of the Borrower and certain related expenses, and to provide for
the Borrower's working capital needs pending
<PAGE> 7
2
the Merger, the Borrower entered into a $505,000,000 Credit Agreement, dated as
of October 17, 1997, among the Borrower, the lenders party thereto, Lehman
Brothers Inc., as arranger, Lehman Commercial Paper Inc., as syndication agent
and administrative agent and Harris Trust and Savings Bank, as collateral agent
(the "Tender Facilities"), comprised of a term loan facility of $295,000,000
and a revolving credit facility of $210,000,000 and (ii) in order to provide a
portion of the financing for the Merger and certain related expenses, the
refinancing of certain indebtedness of Target, the repayment of amounts owing
under the Tender Facilities and to provide financing for future working capital
and other general corporate purposes, the Borrower will require at the time of
the Merger financing comprised of (A) senior credit facilities made available
pursuant to this Agreement of $455,000,000 comprised of term loan facilities
aggregating $255,000,000 and a $200,000,000 revolving credit facility and (B)
$250,000,000 in proceeds of unsecured senior subordinated notes issued by the
Borrower (as more fully defined herein, the "Senior Subordinated Notes");
WHEREAS, after giving effect to the Merger, Target will be a
wholly owned subsidiary of the Borrower; and
WHEREAS, the Lenders are willing to make the senior tender and
revolving credit facilities referred to above available upon and subject to the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
agreements hereinafter set forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms
listed in this Section 1.1 shall have the respective meanings set forth in this
Section 1.1.
"Adjusted Capital Expenditure Amount" for any period or four
consecutive fiscal quarters shall mean the excess of (i) the aggregate
amount actually paid by the Borrower and its Subsidiaries in cash
during such period on account of Capital Expenditures over (ii) in the
case of any such period ending on or before (A) March 31, 1998,
$30,000,000, (B) June 30, 1998, $35,000,000, (C) September 30, 1998,
$30,000,000, (D) December 31, 1998, $25,000,000, (E) March 31, 1999,
$10,000,000, (G) June 30, 1999, $5,000,000 or (H) thereafter, zero.
"Adjusted Consolidated Working Capital": at any date, the
excess of (i) all amounts which would, in conformity with GAAP, be
attributable to and reflected as accounts receivable, inventory and
deferred costs on a consolidated balance sheet of the Borrower and its
Subsidiaries at such date, over (ii) the sum of (A) all amounts which
would, in conformity with GAAP, be attributable to and reflected as
accounts payable on a consolidated balance sheet of the Borrower and
its Subsidiaries and (B) the aggregate principal amount of all
Indebtedness consisting of Revolving Credit Loans,
<PAGE> 8
3
Swing Line Loans or Indebtedness of the Borrower and its Subsidiaries
incurred pursuant to Section 7.2(k) on such date.
"Adjusted Revolving Credit Commitment": as to any Lender at
any time, (a) the amount of such Lender's Revolving Credit Commitment
less (b) such Lender's Revolving Credit Percentage of the aggregate
principal amount of Indebtedness of the Borrower and its Subsidiaries
incurred pursuant to Section 7.2(k) at such time.
"Adjustment Date": as defined in the Pricing Grid.
"Administrative Agent": as defined in the preamble hereto.
"Affiliate": as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or
indirectly, either to (a) vote 10% or more of the securities having
ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether
by contract or otherwise.
"Agents": the collective reference to the Syndication Agent,
the Administrative Agent and the Collateral Agent.
"Agreement": this Credit Agreement, as amended, supplemented
or otherwise modified from time to time.
"Applicable Margin": for each Type of Loan, the rate per
annum set forth under the relevant column heading below:
<TABLE>
<CAPTION>
Base Rate Eurodollar
Loans Loans
--------- ----------
<S> <C> <C>
Revolving Credit Loans and
Swing Line Loans 0.75% 1.75%
Tranche A Term Loans 0.75% 1.75%
Tranche B Term Loans 1.00% 2.00%
</TABLE>
; provided, that on and after the first Adjustment Date occurring at
least six months after the Merger, the Applicable Margin with respect
to Revolving Credit Loans, Swing Line Loans, Tranche A Term Loans and
Tranche B Term Loans will be determined based on the Consolidated
Total Leverage Ratio in effect from time to time, as set forth in the
Pricing Grid.
"Application": an application, in such form as the Issuing
Lender may specify from time to time, requesting the Issuing Lender to
open a Letter of Credit.
<PAGE> 9
4
"Arranger": as defined in the preamble hereto.
"Asset Sale": any Disposition of Property or series of
related Dispositions of Property (excluding any such Disposition
permitted by clause (a), (b), (c) or (d) of Section 7.5) which yields
gross proceeds to the Borrower or any of its Subsidiaries (valued at
the initial principal amount thereof in the case of non-cash proceeds
consisting of notes or other debt securities and valued at fair market
value in the case of other non- cash proceeds) in excess of $250,000.
"Assignee": as defined in Section 10.6(c).
"Assignor": as defined in Section 10.6(c).
"Available Revolving Credit Commitment": as to any Revolving
Credit Lender at any time, an amount equal to the excess, if any, of
(a) such Lender's Adjusted Revolving Credit Commitment over (b) such
Lender's Revolving Extensions of Credit; provided, that (i) in
calculating any Lender's Revolving Extensions of Credit for the
purpose of determining such Lender's Available Revolving Credit
Commitment pursuant to Section 2.9(a), the aggregate principal amount
of Swing Line Loans then outstanding shall be deemed to be zero and
(ii) in calculating such Lender's Adjusted Revolving Credit Commitment
for the purpose of determining such Lender's Available Revolving
Credit Commitment pursuant to Section 2.9(a), the aggregate principal
amount of Indebtedness incurred pursuant to Section 7.2(k) shall be
deemed to be zero.
"Base Rate": for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean
the rate of interest per annum publicly announced from time to time by
the Reference Lender as its prime rate in effect at its principal
office in Chicago, Illinois (the Prime Rate not being intended to be
the lowest rate of interest charged by the Reference Lender in
connection with extensions of credit to debtors); "Base CD Rate" shall
mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the C/D Reserve Percentage and (b)
the C/D Assessment Rate; and "Three-Month Secondary CD Rate" shall
mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or,
if such day shall not be a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day), or, if such
rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New
York City received at approximately 9:00 A.M., Chicago time, on such
day (or, if such day shall not be a Business Day, on the next
<PAGE> 10
5
preceding Business Day) by the Reference Lender from three New York
City negotiable certificate of deposit dealers of recognized standing
selected by it. Any change in the Base Rate due to a change in the
Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the
effective day of such change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate, respectively.
"Base Rate Loans": Loans the rate of interest applicable to
which is based upon the Base Rate.
"Board": the Board of Governors of the Federal Reserve System
of the United States (or any successor).
"Bonds": any industrial revenue bonds or other similar
obligations of any state or any political subdivision, agency or
municipality thereof.
"Bond Documents": as to any series or issue of Bonds, the
trust indenture, trust agreement, loan agreement, lease, guaranty and
other documents pursuant to which such Bonds are issued or which
evidence such Bonds or the Company's or any Subsidiary's obligations
in any way relating to such Bonds.
"Bond Letter of Credit": any letter of credit issued by the
Issuing Lender under this Agreement to a Bond Trustee to support the
payment of the principal of, premium, if any, and interest on any
Bonds issued for the account or benefit of the Borrower or a
Subsidiary of the Borrower, or to support the obligation of the
Borrower or a Subsidiary of the Borrower, to purchase any such Bonds
upon any tender for purchase pursuant to any of the Bond Documents
relating thereto.
"Bond Trustee": as to any series or issue of Bonds, the
Trustee for such Bonds.
"Borrower": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified by the Borrower
as a date on which the Borrower requests the relevant Lenders to make
Loans hereunder.
"Business Day": (i) for all purposes other than as covered by
clause (ii) below, a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by
law to close and (ii) with respect to all notices and determinations
in connection with, and payments of principal and interest on,
Eurodollar Loans, any day which is a Business Day described in clause
(i) and which is also a day for trading by and between banks in Dollar
deposits in the interbank eurodollar market.
"Capital Expenditures": for any period, with respect to any
Person, the aggregate of all expenditures by such Person and its
Subsidiaries for the acquisition or
<PAGE> 11
6
leasing (pursuant to a capital lease) of fixed or capital assets or
additions to equipment (including replacements, capitalized repairs
and improvements during such period) which should be capitalized under
GAAP on a consolidated balance sheet of such Person and its
Subsidiaries.
"Capitalized Refurbishment Expenditures": manufacturing costs
incurred between processing periods which are necessary to prepare any
factory for the next processing campaign which are deferred and
allocated to the cost of sugar produced in the subsequent campaign.
"Capital Lease Obligations": as to any Person, the
obligations of such Person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a
balance sheet of such Person under GAAP and, for the purposes of this
Agreement, the amount of such obligations at any time shall be the
capitalized amount thereof at such time determined in accordance with
GAAP.
"Capital Stock": any and all shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in
a Person (other than a corporation) and any and all warrants, rights
or options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit
of the United States, in each case maturing within one year from the
date of acquisition; (b) certificates of deposit, time deposits,
eurodollar time deposits or overnight bank deposits having maturities
of six months or less from the date of acquisition issued by any
Lender or by any commercial bank organized under the laws of the
United States of America or any state thereof having combined capital
and surplus of not less than $500,000,000; (c) commercial paper of an
issuer rated at least A-2 by Standard & Poor's Ratings Services
("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), or
carrying an equivalent rating by a nationally recognized rating
agency, if both of the two named rating agencies cease publishing
ratings of commercial paper issuers generally, and maturing within six
months from the date of acquisition; (d) repurchase obligations of any
Lender or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the
United States government; (e) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities
of which state, commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated at
least A by S&P or A by Moody's; (f) securities with maturities of six
months or less from the date of acquisition backed by
<PAGE> 12
7
standby letters of credit issued by any Lender or any commercial bank
satisfying the requirements of clause (b) of this definition; or (g)
shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a)
through (f) of this definition.
"C/D Assessment Rate": for any day as applied to any Base
Rate Loan, the annual assessment rate in effect on such day which is
payable by a member of the Bank Insurance Fund maintained by the
Federal Deposit Insurance Corporation (the "FDIC") classified as
well-capitalized and within supervisory subgroup "B" (or a comparable
successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4 (or any successor provision) to the FDIC (or any
successor) for the FDIC's (or such successor's) insuring time deposits
at offices of such institution in the United States.
"C/D Reserve Percentage": for any day as applied to any Base
Rate Loan, that percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board, for determining the maximum
reserve requirement for a Depositary Institution (as defined in
Regulation D of the Board as in effect from time to time) in respect
of new non-personal time deposits in Dollars having a maturity of 30
days or more.
"Closing Date": the date on which the conditions precedent
set forth in Section 5.1 shall have been satisfied, which date
occurred on December 22, 1997.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": all Property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by
any Security Document.
"Collateral Agent": as defined in the preamble hereto.
"Commitment": as to any Lender, the sum of the Tranche A Term
Loan Commitment, the Tranche B Term Loan Commitment and the Revolving
Credit Commitment of such Lender.
"Commitment Fee Rate": 3/8 of 1% per annum; provided, that on
and after the first Adjustment Date occurring at least six months
after the Merger, the Commitment Fee Rate will be determined based on
the Consolidated Total Leverage Ratio in effect from time to time, as
set forth in the Pricing Grid.
"Commitment Letter Date": September 10, 1997, the date of the
commitment letter executed by the Borrower and the Syndication Agent
in respect of the credit facilities provided for herein (as amended on
September 18, 1997).
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of
<PAGE> 13
8
ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.
"Confidential Information Memorandum": the Confidential
Information Memorandum dated November, 1997 and furnished to the
Lenders.
"Consolidated Current Assets": at any date, all amounts
(other than cash and Cash Equivalents) which would, in conformity with
GAAP, be set forth opposite the caption "total current assets" (or any
like caption) on a consolidated balance sheet of the Borrower and its
Subsidiaries at such date.
"Consolidated Current Liabilities": at any date, all amounts
which would, in conformity with GAAP, be set forth opposite the
caption "total current liabilities" (or any like caption) on a
consolidated balance sheet of the Borrower and its Subsidiaries at
such date, but excluding (a) the current portion of any Funded Debt of
the Borrower and its Subsidiaries and (b) without duplication of
clause (a) above, all Indebtedness consisting of Revolving Credit
Loans or Swing Line Loans to the extent otherwise included therein.
"Consolidated EBITDA": for any period, Consolidated Net
Income for such period plus, without duplication and to the extent
reflected as a charge in the statement of such Consolidated Net Income
for such period, the sum of (a) income tax expense, (b) interest
expense, amortization or writeoff of debt discount and debt issuance
costs and commissions, discounts and other fees and charges associated
with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but
not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including,
whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, losses on
sales of assets outside of the ordinary course of business) and (f)
any other non-cash charges other than amounts expensed during such
period attributable to Capitalized Refurbishment Expenditures, and
minus, to the extent included in the statement of such Consolidated
Net Income for such period, the sum of (a) interest income, (b) any
extraordinary, unusual or non-recurring income or gains (including,
whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on
the sales of assets outside of the ordinary course of business but
excluding, for any period, up to $5,000,000 in gain from sales during
such four quarter period of the Borrower's portfolio of marketable
securities) and (c) any other non-cash income, all as determined on a
consolidated basis.
"Consolidated Fixed Charges": for any period, the sum
(without duplication) of (a) Consolidated Interest Expense for such
period, (b) provision for cash income taxes
<PAGE> 14
9
made by the Borrower or any of its Subsidiaries on a consolidated
basis in respect of such period, (c) cash payments made during such
period on account of principal of Indebtedness of the Borrower or any
of its Subsidiaries (including scheduled principal payments in respect
of the Term Loans) other than the repayment of principal outstanding
under the Tender Facilities at the final maturity thereof and (d)
dividends paid during such period by the Borrower or any of its
Subsidiaries.
"Consolidated Fixed Charge Coverage Ratio": for any period,
the ratio of (a) Consolidated EBITDA for such period less the Adjusted
Capital Expenditure Amount for such period to (b) Consolidated Fixed
Charges for such period.
"Consolidated Interest Coverage Ratio": for any period, the
ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Interest Expense for such period.
"Consolidated Interest Expense": for any period, total cash
interest expense (including that attributable to Capital Lease
Obligations) of the Borrower and its Subsidiaries for such period with
respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries (including, without limitation, all commissions,
discounts and other fees and charges owed with respect to letters of
credit and bankers' acceptance financing and net costs under Interest
Rate Protection Agreements to the extent such net costs are allocable
to such period in accordance with GAAP).
"Consolidated Net Income": for any period, the consolidated
net income (or loss) of the Borrower and its Subsidiaries, determined
on a consolidated basis in accordance with GAAP; provided that there
shall be excluded (a) the income (or deficit) of any Person accrued
prior to the date it becomes a Subsidiary of the Borrower or is merged
into or consolidated with the Borrower or any of its Subsidiaries, (b)
the income (or deficit) of any Person (other than a Subsidiary of the
Borrower) in which the Borrower or any of its Subsidiaries has an
ownership interest, except to the extent that any such income is
actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings
of any Subsidiary of the Borrower to the extent that the declaration
or payment of dividends or similar distributions by such Subsidiary is
not at the time permitted by the terms of any Contractual Obligation
(other than under any Loan Document) or Requirement of Law applicable
to such Subsidiary.
"Consolidated Net Worth": at any date, all amounts which
would, in conformity with GAAP, be included on a consolidated balance
sheet of the Borrower and its Subsidiaries under stockholders' equity
at such date, excluding any amount included therein attributable to
unrealized gains or losses on marketable securities held by the
Borrower or its Subsidiaries.
"Consolidated Senior Debt": all Consolidated Total Debt other
than Subordinated Debt.
<PAGE> 15
10
"Consolidated Senior Leverage Ratio": as of the last day of
any period of four consecutive fiscal quarters, the ratio of (a)
Consolidated Senior Debt on such day to (b) Consolidated EBITDA for
such period; provided that for purposes of calculating Consolidated
EBITDA of the Borrower and its Subsidiaries for any period, the
Consolidated EBITDA of any Person acquired by the Borrower or its
Subsidiaries during such period shall be included on a pro forma basis
for such period (assuming the consummation of each such acquisition
and the incurrence or assumption of any Indebtedness in connection
therewith occurred on the first day of such period) if the
consolidated balance sheet of such acquired Person and its
consolidated Subsidiaries as at the end of the period preceding the
acquisition of such Person and the related consolidated statements of
income and stockholders' equity and of cash flows for the period in
respect of which Consolidated EBITDA is to be calculated (i) have been
previously provided to the Agents and the Lenders and (ii) either (A)
have been reported on without a qualification arising out of the scope
of the audit by independent certified public accountants of nationally
recognized standing or (B) have been found acceptable by the Agents;
provided, further that for purposes of calculating Consolidated EBITDA
of the Borrower and its Subsidiaries for any period, the Consolidated
EBITDA of any Person sold or otherwise disposed of by the Borrower or
its Subsidiaries during such period shall be excluded on a pro forma
basis for such period (assuming the consummation of each such sale or
other disposition occurred on the first day of such period).
"Consolidated Tangible Assets": with respect to any Person as
of any date, the amount which, in accordance with GAAP, would be set
forth under the caption "Total Assets" (or any like caption) on a
consolidated balance sheet of such Person and its Subsidiaries, less
all intangible assets, including, without limitation, goodwill,
organization costs, patents, trademarks, copyrights, franchises and
research and development costs.
"Consolidated Total Debt": at any date, the sum of (a) the
aggregate principal amount of all Funded Debt of the Borrower and its
Subsidiaries at such date minus (b) the excess of (i) the aggregate
principal amount of all Revolving Credit Loans, Swing Line Loans and
Indebtedness incurred pursuant to Section 7.2(k) outstanding at such
date over (ii) the lowest amount described in the foregoing clause (i)
to be outstanding during any consecutive 30 days occurring within the
12 months ending on such date, all determined on a consolidated basis
in accordance with GAAP; provided that for the purposes of calculating
Consolidated Total Leverage Ratio for its use in determining the
Applicable Margin and the Commitment Fee Rate in the Pricing Grid,
"Consolidated Total Debt" shall mean, at any date, the aggregate
principal amount of all Funded Debt of the Borrower and its
Subsidiaries at such date, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Leverage Ratio": as at the last day of
any period of four consecutive fiscal quarters, the ratio of (a)
Consolidated Total Debt on such day to (b) Consolidated EBITDA for
such period; provided that for purposes of calculating
<PAGE> 16
11
Consolidated EBITDA of the Borrower and its Subsidiaries for any
period, the Consolidated EBITDA of any Person acquired by the Borrower
or its Subsidiaries during such period shall be included on a pro
forma basis for such period (assuming the consummation of each such
acquisition and the incurrence or assumption of any Indebtedness in
connection therewith occurred on the first day of such period) if the
consolidated balance sheet of such acquired Person and its
consolidated Subsidiaries as at the end of the period preceding the
acquisition of such Person and the related consolidated statements of
income and stockholders' equity and of cash flows for the period in
respect of which Consolidated EBITDA is to be calculated (i) have been
previously provided to the Agents and the Lenders and (ii) either (A)
have been reported on without a qualification arising out of the scope
of the audit by independent certified public accountants of nationally
recognized standing or (B) have been found acceptable by the Agents;
provided, further that for purposes of calculating Consolidated EBITDA
of the Borrower and its Subsidiaries for any period, the Consolidated
EBITDA of any Person sold or otherwise disposed of by the Borrower or
its Subsidiaries during such period shall be excluded on a pro forma
basis for such period (assuming the consummation of each such sale or
other disposition occurred on the first day of such period).
"Consolidated Working Capital": at any date, the excess of
Consolidated Current Assets on such date over Consolidated Current
Liabilities on such date.
"Continuing Directors": the directors of the Borrower on the
Closing Date, after giving effect to the Merger and the other
transactions contemplated hereby, and each other director, if, in each
case, such other director's nomination for election to the board of
directors of the Borrower is recommended by at least 66-2/3% of the
then Continuing Directors.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or
any of its Property is bound.
"Control Agreement": the Amended and Restated Control
Agreement, dated as of the date hereof, among Harris Trust and Savings
Bank, as securities intermediary, the Collateral Agent and the
Borrower, as the same may be amended, supplemented or otherwise
modified from time to time.
"Debt Tender Offer": the Offer to Purchase and Consent
Solicitation Statement, dated September 18, 1997, in respect of the
Senior Notes.
"Default": any of the events specified in Section 8, whether
or not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
<PAGE> 17
12
"Disposition": with respect to any Property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other
disposition thereof; and the terms "Dispose" and "Disposed of" shall
have correlative meanings.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Domestic Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction within the United States
of America.
"Environmental Laws": any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, or other legally
enforceable requirement (including, without limitation, Environmental
Permits) of any Governmental Authority, regulating, relating to or
imposing liability or standards of conduct concerning protection of
the environment or of human health, or employee health and safety, as
has been, is now, or may at any time hereafter be, in effect.
"Environmental Permits": any and all permits, licenses,
registrations, notifications, exemptions and any other authorization
required under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of the
maximum rates (expressed as a decimal fraction) of reserve
requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board) maintained by
a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined on the basis of the rate for deposits in Dollars for a
period equal to such Interest Period commencing on the first day of
such Interest Period appearing on Page 3750 of the Telerate screen as
of 11:00 A.M., London time, two Business Days prior to the beginning
of such Interest Period. In the event that such rate does not appear
on Page 3750 of the Telerate Service (or otherwise on such service),
the "Eurodollar Base Rate" for purposes of this definition shall be
determined by reference to such other comparable publicly available
service for displaying eurodollar rates as may be selected by the
Administrative Agent and acceptable to Borrower or, in the absence of
such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 10:00
A.M., Chicago time, two Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where its
eurodollar and foreign currency and
<PAGE> 18
13
exchange operations are then being conducted for delivery on the first
day of such Interest Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar
Loans the then current Interest Periods with respect to all of which
begin on the same date and end on the same later date (whether or not
such Loans shall originally have been made on the same day).
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrower, the
excess, if any, of (a) the sum, without duplication, of (i)
Consolidated Net Income for such fiscal year, (ii) an amount equal to
the amount of all non-cash charges (including depreciation and
amortization and amounts expensed during such period attributable to
Capitalized Refurbishment Expenditures) deducted in arriving at such
Consolidated Net Income, (iii) decreases in Consolidated Working
Capital for such fiscal year, (iv) an amount equal to the aggregate
net non-cash loss on the Disposition of Property by the Borrower and
its Subsidiaries during such fiscal year (other than sales of
inventory in the ordinary course of business), to the extent deducted
in arriving at such Consolidated Net Income and (v) the net increase
during such fiscal year (if any) in deferred tax accounts of the
Borrower over (b) the sum, without duplication, of (i) an amount equal
to the amount of all non-cash credits included in arriving at such
Consolidated Net Income, (ii) the aggregate amount actually paid by
the Borrower and its Subsidiaries in cash during such fiscal year on
account of Capital Expenditures (excluding the principal amount of
Indebtedness incurred in connection with such expenditures and any
such expenditures financed with the proceeds of any Recovery
Reinvestment Deferred Amount), (iii) the aggregate amount of all
prepayments of Revolving Credit Loans and Swing Line Loans during such
fiscal year to the extent of accompanying permanent optional
reductions of the Revolving Credit Commitments and all optional
prepayments of the Term Loans during such fiscal year, (iv) the
aggregate amount of all regularly scheduled principal payments of
Funded Debt (including, without limitation, the Term Loans) of the
Borrower and its Subsidiaries made during such fiscal year (other than
in respect of any revolving credit facility to the extent there is not
an equivalent permanent reduction in commitments thereunder), (v)
increases in Consolidated Working Capital for such fiscal
<PAGE> 19
14
year, (vi) an amount equal to the aggregate net non-cash gain on the
Disposition of Property by the Borrower and its Subsidiaries during
such fiscal year (other than sales of inventory in the ordinary course
of business), to the extent included in arriving at such Consolidated
Net Income, and (vii) the net decrease during such fiscal year (if
any) in deferred tax accounts of the Borrower.
"Excess Cash Flow Application Date": as defined in Section
2.12(c).
"Excluded Foreign Subsidiaries": any Foreign Subsidiary the
pledge of all of whose Capital Stock as Collateral would, in the good
faith judgment of the Borrower, result in adverse tax consequences to
the Borrower.
"Facility": each of (a) the Tranche A Term Loan Commitments
and the Tranche A Term Loans made thereunder (the "Tranche A Term Loan
Facility"), (b) the Tranche B Commitments and the Tranche B Term Loans
made thereunder (the "Tranche B Term Loan Facility") and (c) the
Revolving Credit Commitments and the extensions of credit made
thereunder (the "Revolving Credit Facility").
"Federal Funds Effective Rate"; for any day, the weighted
average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Reference Lender from
three federal funds brokers of recognized standing selected by it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is
not a Domestic Subsidiary.
"Funded Debt": as to any Person, all Indebtedness of such
Person that (i) matures more than one year from the date of its
creation or matures within one year from such date but is renewable or
extendible, at the option of such Person, to a date more than one year
from such date or (ii) arises under a revolving credit or similar
agreement that obligates the lender or lenders to extend credit during
a period of more than one year from such date, including, without
limitation, all current maturities and current sinking fund payments
in respect of such Indebtedness whether or not required to be paid
within one year from the date of its creation and, in the case of the
Borrower, Indebtedness in respect of the Loans, provided that,
notwithstanding the foregoing, all Indebtedness incurred pursuant to
Section 7.2(k) shall be included in Funded Debt.
"Funding Office": the office specified from time to time by
the Administrative Agent as its funding office by notice to the
Borrower and the Lenders.
<PAGE> 20
15
"GAAP": generally accepted accounting principles in the
United States of America as in effect from time to time set forth in
the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and the
statements and pronouncements of the Financial Accounting Standards
Board, or in such other statements by such other entity as may be in
general use by significant segments of the accounting profession,
which are applicable to the circumstances of the Borrower as of the
date of determination, except that for purposes of Section 7.1, GAAP
shall be determined on the basis of such principles in effect on the
date hereof and consistent with those used in the preparation of the
most recent audited financial statements delivered pursuant to Section
4.1(b). In the event that any "Accounting Change" (as defined below)
shall occur and such change results in a change in the method of
calculation of financial covenants, standards or terms in this
Agreement, then the Borrower and the Administrative Agent agree to
enter into negotiations in order to amend such provisions of this
Agreement so as to equitably reflect such Accounting Changes with the
desired result that the criteria for evaluating the Borrower's
financial condition shall be the same after such Accounting Changes as
if such Accounting Changes had not been made. Until such time as such
an amendment shall have been executed and delivered by the Borrower,
the Administrative Agent and the Required Lenders, all financial
covenants, standards and terms in this Agreement shall continue to be
calculated or construed as if such Accounting Changes had not
occurred. "Accounting Changes" refers to changes in accounting
principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board
of the American Institute of Certified Public Accountants or, if
applicable, the Securities and Exchange Commission (or successors
thereto or agencies with similar functions).
"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government (including, without
limitation, the National Association of Insurance Commissioners).
"Guarantee and Collateral Agreement": the Amended and
Restated Guarantee and Collateral Agreement to be executed and
delivered by the Borrower and each Subsidiary Guarantor, substantially
in the form of Exhibit A, as the same may be amended, supplemented or
otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation
of the guaranteeing person, whether or not contingent, (i) to purchase
any such primary obligation or any Property constituting
<PAGE> 21
16
direct or indirect security therefor, (ii) to advance or supply funds
(1) for the purchase or payment of any such primary obligation or (2)
to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary
obligor, (iii) to purchase Property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business or purchases of inventory (including crops and raw
materials) in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be
the lower of (a) an amount equal to the stated or determinable amount
of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in which case the amount
of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as
determined by the Borrower in good faith.
"H-S-R Act": the Hart-Scott-Rodino Antitrust Improvement Act
of 1976 as amended.
"IHK Merger Sub": as defined in the recitals hereto.
"Incur": as defined in Section 7.2.
"Indebtedness": of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase price of
Property or services (other than current trade payables incurred in
the ordinary course of such Person's business), (c) all obligations of
such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
Property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such Property), (e) all Capital
Lease Obligations of such Person, (f) all obligations of such Person,
contingent or otherwise, as an account party under acceptance, letter
of credit or similar facilities, (g) all obligations of such Person,
contingent or otherwise, to purchase, redeem, retire or otherwise
acquire for value any Capital Stock (other than common stock) of such
Person, (h) all Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (g) above;
(i) all obligations of the kind referred to in clauses (a) through (h)
above secured by (or for which the holder of such obligation has an
existing right, contingent or otherwise, to be secured by) any Lien on
Property (including, without limitation, accounts and contract rights)
owned by such Person, whether or not such Person has
<PAGE> 22
17
assumed or become liable for the payment of such obligation (for
purposes of calculating the amount of indebtedness referred to in this
clause (i) the amount of indebtedness shall be limited to the value of
such Property) and (j) for the purposes of Section 8(e) only, all
obligations of such Person in respect of Interest Rate Protection
Agreements and (k) the liquidation value of any preferred Capital
Stock of such Person or its Subsidiaries (i) held by any Person other
than such Person and its Wholly Owned Subsidiaries and (ii) providing
for any scheduled or mandatory payment, redemption or sinking fund
prior to one year after the final maturity of the Tranche B Term
Loans.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, copyrights, copyright
licenses, patents, patent licenses, trademarks, trademark licenses,
technology, and all rights to sue at law or in equity for any
infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any Base Rate Loan, the
last day of each March, June, September and December to occur while
such Loan is outstanding and the final maturity date of such Loan, (b)
as to any Eurodollar Loan having an Interest Period of three months or
less, the last day of such Interest Period, (c) as to any Eurodollar
Loan having an Interest Period longer than three months, each day
which is three months, or a whole multiple thereof, after the first
day of such Interest Period and the last day of such Interest Period
and (d) as to any Loan (other than any Revolving Credit Loan that is a
Base Rate Loan and any Swing Line Loan), the date of any repayment or
prepayment made in respect thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially,
the period commencing on the borrowing or conversion date, as the case
may be, with respect to such Eurodollar Loan and ending one, two,
three or six months thereafter, as selected by the Borrower in its
Notice of Borrowing with respect thereto; and (b) thereafter, each
period commencing on the last day of the next preceding Interest
Period applicable to such Eurodollar Loan and ending one, two, three
or six months thereafter, as selected by the Borrower by irrevocable
notice to the Administrative Agent not less than three Business Days
prior to the last day of the then current Interest Period with respect
thereto; provided that, all of the foregoing provisions relating to
Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result
of such extension would be to carry such Interest Period into
<PAGE> 23
18
another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend
beyond the Revolving Credit Termination Date or beyond the
date final payment is due on the Tranche A Term Loans or the
Tranche B Term Loans, as the case may be, shall end on the
Revolving Credit Termination Date or such due date, as
applicable;
(iii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of
a calendar month ending one, two, three or six months
thereafter, as the case may be, as designated in the relevant
Notice of Borrowing; and
(iv) the Borrower shall select Interest Periods so as not
to require a payment or prepayment of any Eurodollar Loan
during an Interest Period for such Loan.
"Interest Rate Protection Agreement": any interest rate
protection agreement, interest rate futures contract, interest rate
option, interest rate cap or other interest rate hedge arrangement, to
or under which the Borrower or any of its Subsidiaries is a party or a
beneficiary on the date hereof or becomes a party or a beneficiary
after the date hereof.
"Issuing Lender": Harris Trust and Savings Bank, in its
capacity as issuer of any Letter of Credit.
"L/C Commitment": $75,000,000.
"L/C Fee Payment Date": the last day of each March, June,
September and December and the Revolving Credit Termination Date.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit (including, in the case of Bond Letters
of Credit, the maximum amount that may be drawn thereunder at any
time, including by virtue of reinstatement thereof) and (b) the
aggregate amount of drawings under Letters of Credit which have not
then been reimbursed pursuant to Section 3.5.
"L/C Participants": the collective reference to all the
Revolving Credit Lenders other than the Issuing Lender.
"Lenders": as defined in the preamble hereto.
"Letters of Credit": as defined in Section 3.1(a).
<PAGE> 24
19
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature
whatsoever, whether or not filed, recorded or otherwise perfected
under applicable law (including, without limitation, any conditional
sale or other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing and any
filing of or agreement to give any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Loan": any loan made by any Lender pursuant to this Agreement.
"Loan Documents": this Agreement, the Security Documents, the
Syndication Letter, the Applications and the Notes.
"Loan Parties": the Borrower and each Subsidiary of the
Borrower which is a party to a Loan Document.
"Loan Percentage": as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the
aggregate Commitments (or, at any time after the Closing Date, the
percentage which the aggregate principal amount of such Lender's
Revolving Credit Commitments (or, if the Revolving Credit Commitments
have been terminated, such Lender's Revolving Extensions of Credit)
and Term Loans then outstanding constitutes of the aggregate principal
amount of the Revolving Credit Commitments (or, if the Revolving
Credit Commitments have been terminated, the Total Revolving
Extensions of Credit) and Term Loans then outstanding).
"Majority Facility Lenders": with respect to any Facility,
the holders of more than 50% of the aggregate unpaid principal amount
of the Term Loans or the Total Revolving Extensions of Credit, as the
case may be, outstanding under such Facility (or, in the case of the
Revolving Credit Facility, prior to any termination of the Revolving
Credit Commitments, the holders of more than 50% of the Total
Revolving Credit Commitments).
"Majority Revolving Credit Facility Lenders": the Majority
Facility Lenders in respect of the Revolving Credit Facility.
"Margin Stock": as defined in Regulation U.
"Margin Stock Collateral": all Margin Stock of the Borrower
and its Subsidiaries by which the Loans are secured pursuant to the
Security Documents or are deemed "indirectly secured" within the
meaning of Regulation U.
"Material Adverse Effect": a material adverse effect on (a)
the business, assets, property, operations, liabilities (including,
without limitation, contingent liabilities), or condition (financial
or otherwise) of the Borrower, the Target and their respective
<PAGE> 25
20
Subsidiaries taken as a whole, (b) the consummation of the Merger or
(c) the validity or enforceability of this Agreement or any of the
other Loan Documents or the rights or remedies of the Agents or the
Lenders hereunder or thereunder which materially affects the benefits
intended to be bestowed thereunder.
"Material Environmental Amount": an amount payable by the
Borrower and/or its Subsidiaries in excess of $10,000,000 in any
individual circumstance, or at the time of any determination,
$15,000,000 in the aggregate at any such time for remedial costs,
compliance costs, compensatory damages, punitive damages, fines,
penalties or any combination thereof.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, urea-formaldehyde insulation,
asbestos, pollutants, contaminants, radioactivity, and any other
substance that is regulated pursuant to or could give rise to
liability under any Environmental Law or common law.
"Merger": as defined in the recitals hereto.
"Merger Agreement": as defined in the recitals hereto.
"Mortgaged Properties": the real properties listed on
Schedule 1.1B, as to which the Collateral Agent for the benefit of the
Lenders shall be granted a Lien pursuant to the Mortgages.
"Mortgages": each of the mortgages and deeds of trust made by
any Loan Party in favor of, or for the benefit of, the Collateral
Agent for the benefit of the Lenders, substantially in the form of
Exhibit D (with such changes thereto as shall be advisable under the
law of the jurisdiction in which such mortgage or deed of trust is to
be recorded), as the same may be amended, supplemented or otherwise
modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or
any Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and
when received) of such Asset Sale or Recovery Event, net of attorneys'
fees, accountants' fees, investment banking fees, amounts required to
be applied to the repayment of Indebtedness secured by a Lien
expressly permitted hereunder on any asset which is the subject of
such Asset Sale or Recovery Event (other than any Lien pursuant to a
Security Document) and other customary fees and expenses actually
incurred in connection therewith and net of taxes paid or reasonably
estimated to be
<PAGE> 26
21
payable as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements realized as
a result of such Asset Sales or Recovery Events) and (b) in connection
with any issuance or sale of equity securities or debt securities or
instruments or the incurrence of loans, the cash proceeds received
from such issuance or incurrence, net of attorneys' fees, investment
banking fees, accountants' fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.
"Non-Excluded Taxes": as defined in Section 2.20(a).
"Non-U.S. Lender": as defined in Section 2.20(d).
"Notes": the collective reference to any promissory note
evidencing Loans.
"Notice of Borrowing": (i) with respect to (a) any borrowing
of Loans, a Notice of Borrowing (Drawings), substantially in the form
of Exhibit J-1, (b) any conversion of Loans, a Notice of Borrowing
(Conversions), substantially in the form of Exhibit J-2 and (c) any
continuation of Eurodollar Loans, a Notice of Borrowing
(Continuations), substantially in the form of Exhibit J-3 or (ii)
telephonic notice of any such borrowing, conversion or continuation
promptly confirmed in writing (in a form reasonably acceptable to the
Administrative Agent).
"Obligations": the unpaid principal of and interest on
(including, without limitation, interest accruing after the maturity
of the Loans and Reimbursement Obligations and interest accruing after
the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the
Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of the Borrower to the Administrative
Agent or to any Lender (or, in the case of Interest Rate Protection
Agreements, any Affiliate of any Lender), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, any other Loan Document, the Letters of Credit,
any Interest Rate Protection Agreement entered into with any Lender or
any Affiliate of any Lender or any other document made, delivered or
given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including, without limitation, all fees, charges and
disbursements of counsel to the Administrative Agent or to any Lender
that are required to be paid by the Borrower pursuant hereto) or
otherwise.
"Offered Rate Loan": a Swing Line Loan which bears interest
as provided in Section 2.15(c) hereof.
"Offer to Purchase": as defined in the recitals hereto.
<PAGE> 27
22
"Other Collateral": all assets of the Borrower and its
Subsidiaries (other than Margin Stock) by which the Loans are secured
pursuant to the Security Documents or are deemed "indirectly secured"
within the meaning of Regulation U.
"Other Taxes": any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies arising from any payment made hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to,
this Agreement.
"Participant": as defined in Section 10.6(b).
"Payment Office": the office specified from time to time by
the Administrative Agent as its payment office by notice to the
Borrower and the Lenders.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor).
"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Pro Forma Balance Sheets": as defined in Section 4.1(a).
"Projections": as defined in Section 6.2(c).
"Properties": as defined in Section 4.16.
"Property": any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible
or intangible, including, without limitation, Capital Stock.
"Recovery Event": any settlement of or payment in excess of
$250,000 in respect of any property or casualty insurance claim or any
condemnation proceeding relating to any asset of the Borrower or any
of its Subsidiaries.
"Recovery Reinvestment Deferred Amount": with respect to any
Recovery Reinvestment Event, the aggregate Net Cash Proceeds received
by the Borrower or any of its Subsidiaries in connection therewith
which are not applied to prepay the Term
<PAGE> 28
23
Loans or reduce the Revolving Credit Commitments pursuant to Section
2.12(b) as a result of the delivery of a Recovery Reinvestment Notice.
"Recovery Reinvestment Event": any Recovery Event in respect
of which the Borrower has delivered a Recovery Reinvestment Notice.
"Recovery Reinvestment Notice": a written notice executed by
a Responsible Officer stating that no Event of Default has occurred
and is continuing and that the Borrower (directly or indirectly
through a Subsidiary) intends and expects to use all or a specified
portion of the Net Cash Proceeds of a Recovery Event to acquire or
construct assets to replace the assets to which such Recovery Event
relates and that such acquisition or construction shall commence
within six months of the Recovery Reinvestment Event.
"Recovery Reinvestment Prepayment Amount": with respect to
any Recovery Reinvestment Event, the Recovery Reinvestment Deferred
Amount relating thereto less any amount (i) expended prior to the
relevant Recovery Reinvestment Prepayment Date to acquire or construct
the replacement assets relating thereto or (ii) to the extent not so
expended, committed prior to the relevant Recovery Reinvestment
Prepayment Date to the commencement (occurring no later than the
relevant Recovery Reinvestment Prepayment Date) of the acquisition or
construction of the replacement assets related thereto.
"Recovery Reinvestment Prepayment Date": with respect to any
Recovery Reinvestment Event, the earlier of (a) the date occurring six
months after such Recovery Reinvestment Event and (b) the date on
which the Borrower shall have determined not to, or shall have
otherwise ceased to, acquire or construct assets to replace the assets
to which the Recovery Reinvestment Event relates with all or any
portion of the relevant Recovery Reinvestment Deferred Amount.
"Reference Lender": Administrative Agent.
"Refunded Swing Line Loans": as defined in Section 2.7.
"Refunding Date": as defined in Section 2.7.
"Register": as defined in Section 10.6(d).
"Regulation G": Regulation G of the Board as in effect from
time to time.
"Regulation U": Regulation U of the Board as in effect from
time to time.
"Regulation T": Regulation T of the Board as in effect from
time to time.
"Regulation X": Regulation X of the Board as in effect from
time to time.
<PAGE> 29
24
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn
under Letters of Credit.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under subsection .13, .14, .16, .18, .19 or
.20 of PBGC Reg. Section 2615.
"Required L/C Participants": the Majority Revolving Credit
Facility Lenders.
"Required Lenders": the holders of more than 50% of (a) until
the Closing Date, the Commitments and (b) thereafter, the sum of (i)
the aggregate unpaid principal amount of the Term Loans and (ii) the
Total Revolving Credit Commitments or, if the Revolving Credit
Commitments have been terminated, the Total Revolving Extensions of
Credit.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its Property or to which such Person or any of its Property is
subject.
"Responsible Officer": the chief executive officer,
president, chief financial officer or vice president/treasurer of the
Borrower, but in any event, with respect to financial matters, the
chief financial officer of the Borrower.
"Revolving Credit Commitment": as to any Lender, the
obligation of such Lender, if any, to make Revolving Credit Loans and
participate in Swing Line Loans and Letters of Credit, in an aggregate
principal and/or face amount not to exceed the amount set forth under
the heading "Revolving Credit Commitment" opposite such Lender's name
on Schedule 1.1A, as the same may be changed from time to time
pursuant to the terms hereof. The original amount of the Total
Revolving Credit Commitments is $200,000,000.
"Revolving Credit Commitment Period": the period from and
including the Closing Date to the Revolving Credit Termination Date.
"Revolving Credit Lender": each Lender which has a Revolving
Credit Commitment or which has made Revolving Credit Loans.
"Revolving Credit Loans": as defined in Section 2.4.
<PAGE> 30
25
"Revolving Credit Percentage": as to any Revolving Credit
Lender at any time, the percentage which such Lender's Revolving
Credit Commitment then constitutes of the Total Revolving Credit
Commitments (or, at any time after the Revolving Credit Commitments
shall have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Revolving Credit Loans then
outstanding constitutes of the aggregate principal amount of the
Revolving Credit Loans then outstanding).
"Revolving Credit Termination Date": the earlier of (a) the
Scheduled Revolving Credit Termination Date and (b) the date on which
the Term Loans shall be paid in full.
"Revolving Extensions of Credit": as to any Revolving Credit
Lender at any time, an amount equal to the sum of (a) the aggregate
principal amount of all Revolving Credit Loans made by such Lender
then outstanding, (b) such Lender's Revolving Credit Percentage of the
L/C Obligations then outstanding and (c) such Lender's Revolving
Credit Percentage of the aggregate principal amount of Swing Line
Loans then outstanding.
"Scheduled Revolving Credit Termination Date": December 31,
2002.
"SEC": the Securities and Exchange Commission (or successors
thereto or an analogous Governmental Authority).
"Security Documents": the collective reference to the
Guarantee and Collateral Agreement, the Mortgages, the Control
Agreement and all other security documents hereafter delivered to the
Administrative Agent granting a Lien on any Property of any Person to
secure the obligations and liabilities of any Loan Party under any
Loan Document.
"Senior Note Indenture": the Indenture, dated as of October
15, 1992, between the Borrower and Texas Commerce Bank National
Association, as trustee (as the same may be amended, supplemented or
otherwise modified from time to time), pursuant to which the Senior
Notes were issued.
"Senior Notes": the 8-3/8% Senior Notes Due October 15, 1999,
issued by the Borrower.
"Senior Subordinated Note Indenture": the Indenture entered
into by the Borrower and certain of its Subsidiaries in connection
with the issuance of the Senior Subordinated Notes, together with all
instruments and other agreements entered into by the Borrower or such
Subsidiaries in connection therewith, as the same may be amended,
supplemented or otherwise modified from time to time in accordance
with Section 7.9.
<PAGE> 31
26
"Senior Subordinated Notes": the subordinated notes of the
Borrower issued on the Closing Date pursuant to the Senior
Subordinated Note Indenture.
"Shares": as defined in the recitals hereto.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that,
as of any date of determination, (a) the amount of the "present fair
saleable value" of the assets of such Person will, as of such date,
exceed the amount of all "liabilities of such Person, contingent or
otherwise", as of such date, as such quoted terms are determined in
accordance with applicable Federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be
greater than the amount that will be required to pay the liability of
such Person on its debts as such debts become absolute and matured,
(c) such Person will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business, and (d) such
Person will be able to pay its debts as they mature.
"Specified Change of Control": a "Change of Control" as
defined in the Senior Subordinated Note Indenture.
"Subordinated Debt": any unsecured Indebtedness of the
Borrower or its Subsidiaries that is (i) stated to be fully
subordinated in payment or priority to the Obligations and any part
thereof and (ii) has no terms requiring or permitting any interim or
final maturity or repayment, repurchase, redemption or sinking fund
payment (including any requirement that the issuer thereof offer to
take any of the foregoing actions) prior to one year after the final
maturity of the Tranche B Term Loans.
"Subsidiary": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or
other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation, partnership
or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower
and shall not include the Target or its Subsidiaries.
"Subsidiary Guarantor": each Subsidiary of the Borrower
(other than any Excluded Foreign Subsidiary or any Subsidiary listed
on Schedule 1.1C (subject to the provisions of the proviso to Section
6.10(c))) that guarantees the Obligations pursuant to the Guarantee
and Collateral Agreement.
<PAGE> 32
27
"Swing Line Commitment": the obligation of the Swing Line
Lender to make Swing Line Loans pursuant to Section 2.6 in an
aggregate principal amount at any one time outstanding not to exceed
$25,000,000.
"Swing Line Lender": Harris Trust and Savings Bank, in its
capacity as the lender of Swing Line Loans.
"Swing Line Loans": as defined in Section 2.6.
"Swing Line Participation Amount": as defined in Section 2.7.
"Target": as defined in the recitals hereto.
"Tender Facilities": as defined in the recitals hereto.
"Tender Offer": as defined in the recitals hereto.
"Tender Offer Purchase": as defined in the recitals hereto.
"Term Loan Lenders": the collective reference to the Tranche
A Term Loan Lenders and the Tranche B Term Loan Lenders.
"Term Loans": the collective reference to the Tranche A Term
Loans and Tranche B Term Loans.
"Total Revolving Credit Commitments": at any time, the
aggregate amount of the Revolving Credit Commitments at such time.
"Total Revolving Extensions of Credit": at any time, the
aggregate amount of the Revolving Extensions of Credit of the
Revolving Credit Lenders at such time.
"Tranche A Term Loan": as defined in Section 2.1.
"Tranche A Term Loan Commitment": as to any Lender, the
obligation of such Lender, if any, to make a Tranche A Term Loan to
the Borrower hereunder in a principal amount not to exceed the amount
set forth under the heading "Tranche A Term Loan Commitment" opposite
such Lender's name on Schedule 1.1A. The original aggregate amount of
the Tranche A Term Loan Commitments is $150,000,000.
"Tranche A Term Loan Lender": each Lender which has a Tranche
A Term Loan Commitment or which has made a Tranche A Term Loan.
"Tranche A Term Loan Percentage": as to any Tranche A Term
Loan Lender at any time, the percentage which such Lender's Tranche A
Term Loan Commitment then constitutes of the aggregate Tranche A Term
Loan Commitments (or, at any time after
<PAGE> 33
28
the Closing Date, the percentage which the aggregate principal amount
of such Lender's Tranche A Term Loans then outstanding constitutes of
the aggregate principal amount of the Tranche A Term Loans then
outstanding).
"Tranche B Term Loan": as defined in Section 2.1.
"Tranche B Term Loan Commitment": as to any Tranche B Term
Loan Lender, the obligation of such Lender, if any, to make a Tranche
B Term Loan to the Borrower hereunder in a principal amount not to
exceed the amount set forth under the heading "Tranche B Term Loan
Commitment" opposite such Lender's name on Schedule 1.1A. The
original aggregate amount of the Tranche B Term Loan Commitments is
$105,000,000.
"Tranche B Term Loan Lender": each Lender which has a Tranche
B Term Loan Commitment or which has made a Tranche B Term Loan.
"Tranche B Term Loan Percentage": as to any Tranche B Term
Loan Lender at any time, the percentage which such Lender's Tranche B
Term Loan Commitment then constitutes of the aggregate Tranche B Term
Loan Commitments (or, at any time after the Closing Date, the
percentage which the aggregate principal amount of such Lender's
Tranche B Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche B Term Loans then outstanding).
"Transaction Documentation": collectively, the Merger
Agreement, the Offer to Purchase (including all documents and
materials filed with the SEC in connection therewith), the Senior
Subordinated Note Indenture and all documentation executed in
connection with the Debt Tender Offer and the other transactions
contemplated thereby, in each case, including all schedules, exhibits,
certificates, documents and agreements entered into, executed or
delivered in connection therewith, and as each such agreement, filing,
schedule, exhibit, certificate or document may be amended,
supplemented or otherwise modified from time to time in accordance
with Section 7.9.
"Transferee": as defined in Section 10.15.
"Type": as to any Loan, its nature as a Base Rate Loan or a
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"Wholly Owned Subsidiary": as to any Person, any other Person
all of the Capital Stock of which (other than directors' qualifying
shares required by law) is owned by such Person directly and/or
through other Wholly Owned Subsidiaries.
<PAGE> 34
29
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor
that is a Wholly Owned Subsidiary of the Borrower.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the other Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Loan Commitments. Subject to the terms and
conditions hereof, (a) each Tranche A Term Loan Lender severally agrees to make
a term loan (a "Tranche A Term Loan") to the Borrower on the Closing Date in
the amount of the Tranche A Term Loan Commitment of such Lender and (b) each
Tranche B Term Loan Lender severally agrees to make a term loan (a "Tranche B
Term Loan") to the Borrower on the Closing Date in the amount of the Tranche B
Term Loan Commitment of such Lender. The Term Loans may from time to time be
Eurodollar Loans or Base Rate Loans, as determined by the Borrower and notified
to the Administrative Agent in accordance with Sections 2.2 and 2.13.
2.2 Procedure for Term Loan Borrowing. The Borrower shall
give the Administrative Agent irrevocable Notice of Borrowing (which notice
must be received by the Administrative Agent prior to 9:00 A.M., Chicago time,
one Business Day prior to the anticipated Closing Date, in the case of Base
Rate Loans, and three Business Days prior to the anticipated Closing Date, in
the case of Eurodollar Loans) requesting that the Term Loan Lenders make the
Term Loans on the Closing Date and specifying the amount to be borrowed. The
Term Loans made on the Closing Date shall initially be Base Rate Loans or
Eurodollar Loans (provided that the Borrower hereby agrees that its agreement
under Section 2.17 of the Tender Facilities shall constitute its agreement with
respect to all the Lenders and all Loans hereunder on the Closing Date). Upon
receipt of such notice the Administrative Agent shall promptly notify each Term
Loan Lender thereof. Not later than 11:00 A.M., Chicago time, on the Closing
Date each Term Loan Lender shall make available to the Administrative Agent at
the Funding Office an amount in immediately available funds equal to the Term
Loan or
<PAGE> 35
30
Term Loans to be made by such Lender. The Administrative Agent shall make
available to the Borrower with the aggregate of the amounts made available to
the Administrative Agent by the Term Loan Lenders in immediately available
funds not later than 1:00 P.M., Chicago time, on the Closing Date.
2.3 Repayment of Term Loans. (a) The Tranche A Term Loan of
each Tranche A Term Loan Lender shall mature in 24 consecutive quarterly
installments, commencing on March 31, 1998, each of which shall be in an amount
equal to such Lender's Tranche A Term Loan Percentage multiplied by the amount
set forth below opposite such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
March 31, 1998 $1,375,000
June 30, 1998 1,375,000
September 30, 1998 1,375,000
December 31, 1998 1,375,000
March 31, 1999 1,750,000
June 30, 1999 1,750,000
September 30, 1999 1,750,000
December 31, 1999 1,750,000
March 31, 2000 1,750,000
June 30, 2000 1,750,000
September 30, 2000 1,750,000
December 31, 2000 1,750,000
March 31, 2001 2,250,000
June 30, 2001 2,250,000
September 30, 2001 2,250,000
December 31, 2001 2,250,000
March 31, 2002 2,250,000
June 30, 2002 2,250,000
September 30, 2002 2,250,000
December 31, 2002 77,250,000
March 31, 2003 9,375,000
June 30, 2003 9,375,000
September 30, 2003 9,375,000
December 31, 2003 9,375,000
</TABLE>
(b) The Tranche B Term Loan of each Tranche B Lender shall
mature in 32 consecutive quarterly installments, commencing on March 31, 1998,
each of which shall be in an amount equal to such Lender's Tranche B Term Loan
Percentage multiplied by the amount set forth below opposite such installment:
<PAGE> 36
31
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
March 31, 1998 $25,000
June 30, 1998 25,000
September 30, 1998 25,000
December 31, 1998 25,000
March 31, 1999 25,000
June 30, 1999 25,000
September 30, 1999 25,000
December 31, 1999 25,000
March 31, 2000 25,000
June 30, 2000 25,000
September 30, 2000 25,000
December 31, 2000 25,000
March 31, 2001 25,000
June 30, 2001 25,000
September 30, 2001 25,000
December 31, 2001 25,000
March 31, 2002 25,000
June 30, 2002 25,000
September 30, 2002 25,000
December 31, 2002 25,000
March 31, 2003 25,000
June 30, 2003 25,000
September 30, 2003 25,000
December 31, 2003 25,000
March 31, 2004 13,050,000
June 30, 2004 13,050,000
September 30, 2004 13,050,000
December 31, 2004 13,050,000
March 31, 2005 13,050,000
June 30, 2005 13,050,000
September 30, 2005 13,050,000
December 31, 2005 13,050,000
</TABLE>
2.4 Revolving Credit Commitments. (a) Subject to the terms
and conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender's Revolving
Credit Percentage of (i) the L/C Obligations then outstanding and (ii) the
aggregate principal amount of the Swing Line Loans then outstanding, does not
exceed the amount of such Lender's Adjusted Revolving Credit Commitment.
During the Revolving Credit Commitment Period the Borrower may use the Adjusted
Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans
in whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof. The Revolving
<PAGE> 37
32
Credit Loans may from time to time be Eurodollar Loans or Base Rate Loans, as
determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.5 and 2.13, provided that no Revolving Credit Loan
shall be made as a Eurodollar Loan if the last day of the Interest Period with
respect thereto would occur on or after the Revolving Credit Termination Date.
(b) The Borrower shall repay all outstanding Revolving Credit
Loans on the Revolving Credit Termination Date.
2.5 Procedure for Revolving Credit Borrowing. The Borrower
may borrow under the Adjusted Revolving Credit Commitments during the Revolving
Credit Commitment Period on any Business Day, provided that the Borrower shall
give the Administrative Agent irrevocable Notice of Borrowing (which notice
must be received by the Administrative Agent prior to 11:00 A.M., Chicago time,
(a) three Business Days prior to the requested Borrowing Date, in the case of
Eurodollar Loans, or (b) one Business Day prior to the requested Borrowing
Date, in the case of Base Rate Loans), specifying (i) the amount and Type of
Revolving Credit Loans to be borrowed and, in the case of Eurodollar Loans, the
length of the initial Interest Period therefor and (ii) the requested Borrowing
Date. Any Revolving Credit Loans made on the Closing Date shall initially be
Base Rate Loans. Each borrowing under the Revolving Credit Commitments shall
be in an amount equal to (x) in the case of Base Rate Loans, $100,000 or a
whole multiple thereof (or, if the then aggregate Available Revolving Credit
Commitments are less than $100,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $1,000,000 or a whole multiple of $500,000 in excess thereof;
provided, that the Swing Line Lender may request, on behalf of the Borrower,
borrowings under the Adjusted Revolving Credit Commitments which are Base Rate
Loans or Offered Rate Loans in other amounts pursuant to Section 2.7. Upon
receipt of any such notice from the Borrower, the Administrative Agent shall
promptly notify each Revolving Credit Lender thereof. Each Revolving Credit
Lender will make the amount of its Revolving Credit Percentage of each
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 12:00 Noon, Chicago time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent in like funds as received by the Administrative Agent as
soon as practicable, in accordance with the Administrative Agent's normal
practice, after receipt thereof from the Lenders.
2.6 Swing Line Commitment. (a) Subject to the terms and
conditions hereof, the Swing Line Lender agrees to make a portion of the credit
otherwise available to the Borrower under the Adjusted Revolving Credit
Commitments from time to time during the Revolving Credit Commitment Period by
making swing line loans ("Swing Line Loans") to the Borrower; provided that (i)
the aggregate principal amount of Swing Line Loans outstanding at any time
shall not exceed the Swing Line Commitment then in effect (notwithstanding that
the Swing Line Loans outstanding at any time, when aggregated with the Swing
Line Lender's other outstanding Revolving Credit Loans hereunder, may exceed
the Swing Line Commitment or the Swing Line Lender's Adjusted Revolving Credit
Commitment then in effect) and (ii) the Borrower shall not request, and the
Swing Line Lender shall not make, any Swing Line Loan
<PAGE> 38
33
if, after giving effect to the making of such Swing Line Loan, the aggregate
amount of the Available Revolving Credit Commitments would be less than zero.
During the Revolving Credit Commitment Period, the Borrower may use the Swing
Line Commitment by borrowing, repaying and reborrowing, all in accordance with
the terms and conditions hereof. Swing Line Loans shall be Base Rate Loans or
Offered Rate Loans only.
(b) The Borrower shall repay all outstanding Swing Line Loans
on the Revolving Credit Termination Date.
2.7 Procedure for Swing Line Borrowing; Refunding of Swing
Line Loans. (a) Whenever the Borrower desires that the Swing Line Lender make
Swing Line Loans it shall give the Swing Line Lender irrevocable telephonic
notice confirmed promptly in writing (which telephonic notice must be received
by the Swing Line Lender not later than 12:00 Noon, Chicago time, in the case
of Base Rate Loans and 11:00 A.M., Chicago time, in the case of Offered Rate
Loans, on the proposed Borrowing Date), specifying (i) the amount to be
borrowed and (ii) the requested Borrowing Date (which shall be a Business Day
during the Revolving Credit Commitment Period). Each borrowing under the Swing
Line Commitment shall be in an amount equal to $100,000 or a whole multiple of
$100,000 in excess thereof. Not later than 2:00 P.M., Chicago time, on the
Borrowing Date specified in a notice in respect of Swing Line Loans, the Swing
Line Lender shall make available to the Administrative Agent at the Funding
Office an amount in immediately available funds equal to the amount of the
Swing Line Loan to be made by the Swing Line Lender. The Administrative Agent
shall make the proceeds of such Swing Line Loan available to the Borrower on
such Borrowing Date in immediately available funds.
(b) The Swing Line Lender, at any time and from time to time
in its sole and absolute discretion may, and, in respect of any Swing Line Loan
outstanding for five Business Days shall, on behalf of the Borrower (which
hereby irrevocably directs the Swing Line Lender to act on its behalf), on one
Business Day's notice given by the Swing Line Lender no later than 11:00 A.M.,
Chicago time, request each Revolving Credit Lender to make, and each Revolving
Credit Lender hereby agrees to make, a Revolving Credit Loan, in an amount
equal to such Revolving Credit Lender's Revolving Credit Percentage of the
aggregate amount of the Swing Line Loans (the "Refunded Swing Line Loans")
outstanding on the date of such notice, to repay the Swing Line Lender. Each
Revolving Credit Lender shall make the amount of such Revolving Credit Loan
available to the Administrative Agent at the Funding Office in immediately
available funds, not later than 9:00 A.M., Chicago time, one Business Day after
the date of such notice. The proceeds of such Revolving Credit Loans shall be
immediately applied by the Swing Line Lender to repay the Refunded Swing Line
Loans.
(c) If prior to the time a Revolving Credit Loan would have
otherwise been made pursuant to Section 2.7(b), one of the events described in
Section 8(f) shall have occurred and be continuing with respect to the Borrower
or if for any other reason, as determined by the Swing Line Lender in its sole
discretion, Revolving Credit Loans may not be made as contemplated by Section
2.7(b), each Revolving Credit Lender shall, on the date such Revolving Credit
Loan was to have been made pursuant to the notice referred to in
<PAGE> 39
34
Section 2.7(b) (the "Refunding Date"), purchase for cash an undivided
participating interest in an amount equal to (i) its Revolving Credit
Percentage times (ii) the aggregate principal amount of Swing Line Loans then
outstanding which were to have been repaid with such Revolving Credit Loans
(the "Swing Line Participation Amount").
(d) Whenever, at any time after the Swing Line Lender has
received from any Revolving Credit Lender such Lender's Swing Line
Participation Amount, the Swing Line Lender receives any payment on account of
the Swing Line Loans, the Swing Line Lender will distribute to such Lender its
Swing Line Participation Amount (appropriately adjusted, in the case of
interest payments, to reflect the period of time during which such Lender's
participating interest was outstanding and funded and, in the case of principal
and interest payments, to reflect such Lender's pro rata portion of such
payment if such payment is not sufficient to pay the principal of and interest
on all Swing Line Loans then due); provided, however, that in the event that
such payment received by the Swing Line Lender is required to be returned, such
Revolving Credit Lender will return to the Swing Line Lender any portion
thereof previously distributed to it by the Swing Line Lender.
(e) Each Revolving Credit Lender's obligation to make the
Loans referred to in Section 2.7(b) and to purchase participating interests
pursuant to Section 2.7(c) shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which such Revolving Credit
Lender or the Borrower may have against the Swing Line Lender, the Borrower or
any other Person for any reason whatsoever; (ii) the occurrence or continuance
of a Default or an Event of Default or the failure to satisfy any of the other
conditions specified in Section 5; (iii) any adverse change in the condition
(financial or otherwise) of the Borrower; (iv) any breach of this Agreement or
any other Loan Document by the Borrower, any other Loan Party or any other
Revolving Credit Lender; or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
2.8 Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of the appropriate Revolving Credit Lender or Term Loan Lender, as the
case may be, (i) the then unpaid principal amount of each Revolving Credit Loan
of such Revolving Credit Lender on the Revolving Credit Termination Date (or
such earlier date on which the Loans become due and payable pursuant to Section
8), (ii) the then unpaid principal amount of each Swing Line Loan of such Swing
Line Lender on the Revolving Credit Termination Date (or such earlier date on
which the Loans become due and payable pursuant to Section 8) and (iii) the
principal amount of each Term Loan of such Term Loan Lender in installments
according to the amortization schedule set forth in Section 2.3 (or on such
earlier date on which the Loans become due and payable pursuant to Section 8).
The Borrower hereby further agrees to pay interest on the unpaid principal
amount of the Loans from time to time outstanding from the date hereof until
payment in full thereof at the rates per annum, and on the dates, set forth in
Section 2.15. Payments received by the Administrative Agent after 2:00 P.M.
Chicago time shall be deemed received on the next succeeding Business Day.
<PAGE> 40
35
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to such
Lender resulting from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower,
shall maintain the Register pursuant to Section 10.6(e), and a subaccount
therein for each Lender, in which shall be recorded (i) the amount of each Loan
made hereunder and any Note evidencing such Loan, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) both the amount of any sum received by the
Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to Section 2.8(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made
to such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and deliver to
such Lender a promissory note of the Borrower evidencing any Term Loans,
Revolving Credit Loans or Swing Line Loans, as the case may be, of such Lender,
substantially in the forms of Exhibit G-1, G-2 or G-3, respectively, with
appropriate insertions as to date and principal amount.
2.9 Commitment Fees, etc. (a) The Borrower agrees to pay to
the Administrative Agent for the account of each Revolving Credit Lender, a
commitment fee for the period from and including the Closing Date to the last
day of the Revolving Credit Commitment Period, computed at the Commitment Fee
Rate on the average daily amount of the Available Revolving Credit Commitment
of such Lender during the period for which payment is made, payable quarterly
in arrears on the last day of each March, June, September and December and on
the Revolving Credit Termination Date, commencing on the first of such dates to
occur after the date hereof.
(b) The Borrower agrees to pay to the Syndication Agent the
fees in the amounts and on the dates from time to time agreed to in writing by
the Borrower and the Syndication Agent.
(c) The Borrower agrees to pay to the Administrative Agent
the fees in the amounts and on the dates from time to time agreed to in writing
by the Borrower and the Administrative Agent.
<PAGE> 41
36
2.10 Termination or Reduction of Revolving Credit
Commitments. The Borrower shall have the right, upon not less than two
Business Days' notice to the Administrative Agent, to terminate the Revolving
Credit Commitments or, from time to time, to reduce the amount of the Revolving
Credit Commitments; provided that no such termination or reduction of Revolving
Credit Commitments shall be permitted if, after giving effect thereto and to
any prepayments of the Revolving Credit Loans and Swing Line Loans made on the
effective date thereof, the Total Revolving Extensions of Credit would exceed
the Total Revolving Credit Commitments. Any such reduction shall be in an
amount equal to $1,000,000, or a whole multiple thereof, and shall reduce
permanently the Revolving Credit Commitments then in effect.
2.11 Optional Prepayments. The Borrower may at any time and
from time to time prepay the Loans, in whole or in part, without premium or
penalty, upon irrevocable notice delivered to the Administrative Agent at least
three Business Days prior thereto in the case of Eurodollar Loans and at least
one Business Day prior thereto in the case of Base Rate Loans, which notice
shall specify the date and amount of prepayment and whether the prepayment is
of Eurodollar Loans or Base Rate Loans; provided, that if a Eurodollar Loan is
prepaid on any day other than the last day of the Interest Period applicable
thereto, the Borrower shall also pay any amounts owing pursuant to Section
2.21. Upon receipt of any such notice the Administrative Agent shall promptly
notify each relevant Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified
therein, together with (except in the case of Revolving Credit Loans which are
Base Rate Loans and Swing Line Loans) accrued interest to such date on the
amount prepaid. Partial prepayments of Term Loans and Revolving Credit Loans
shall be in an aggregate principal amount of $1,000,000 or a whole multiple
thereof. Partial prepayments of Swing Line Loans shall be in an aggregate
principal amount of $100,000 or a whole multiple thereof.
2.12 Mandatory Prepayments and Commitment Reductions. (a)
Unless the Required Lenders shall otherwise agree, if any Capital Stock shall
be issued, or Indebtedness incurred, by the Borrower or any of its Subsidiaries
(excluding any Indebtedness incurred in accordance with Section 7.2), an amount
equal to 100% of the Net Cash Proceeds thereof shall be applied on the date of
such issuance or incurrence toward the prepayment of the Term Loans and the
reduction of the Revolving Credit Commitments as set forth in Section 2.12(d).
(b) Unless the Required Lenders shall otherwise agree, if on
any date the Borrower or any of its Subsidiaries shall receive Net Cash
Proceeds from any Asset Sale or Recovery Event then, except, in the case of a
Recovery Event for which a Recovery Reinvestment Notice shall be delivered in
respect thereof, such Net Cash Proceeds shall be promptly applied toward the
prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments as set forth in Section 2.12(d); provided, that, notwithstanding
the foregoing, (i) on each Recovery Reinvestment Prepayment Date, an amount
equal to the Recovery Reinvestment Prepayment Amount with respect to the
relevant Recovery Reinvestment Event shall be applied toward the prepayment of
the Term Loans and the reduction of the Revolving Credit Commitments as set
forth in Section 2.12(d) and (ii) the Net Cash Proceeds of the sale or other
disposition by the Borrower of marketable securities owned
<PAGE> 42
37
by it shall not be required to be applied to prepayments pursuant to this
Section 2.12(b) to the extent that such Net Cash Proceeds are applied
reasonably promptly to the reinvestment by the Borrower in other marketable
securities of the same general type and quality and such replacement securities
are pledged pursuant to the Guarantee and Collateral Agreement and the Control
Agreement.
(c) Unless the Required Lenders shall otherwise agree, if,
for any fiscal year of the Borrower commencing with the fiscal year ending
September 30, 1998, there shall be Excess Cash Flow, the Borrower shall, on the
relevant Excess Cash Flow Application Date, apply 75% of such Excess Cash Flow
toward the prepayment of the Term Loans and the reduction of the Revolving
Credit Commitments as set forth in Section 2.12(d). Each such prepayment and
commitment reduction shall be made on a date (an "Excess Cash Flow Application
Date") no later than five days after the earlier of (i) the date on which the
financial statements of the Borrower referred to in Section 6.1(a), for the
fiscal year with respect to which such prepayment is made, are required to be
delivered to the Lenders and (ii) the date such financial statements are
actually delivered.
(d) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to Section 2.12 shall be applied, first, to
the prepayment of the Term Loans in the order set forth in Section 2.18(b) and,
second, to reduce permanently the Revolving Credit Commitments. Any such
reduction of the Revolving Credit Commitments shall be accompanied by
prepayment of the Revolving Credit Loans and/or the Swing Line Loans to the
extent, if any, that the Total Revolving Extensions of Credit exceed the amount
of the Total Revolving Credit Commitments as so reduced, provided that if the
aggregate principal amount of Revolving Credit Loans and Swing Line Loans then
outstanding is less than the amount of such excess (because L/C Obligations
constitute a portion thereof), the Borrower shall, to the extent of the balance
of such excess, replace outstanding Letters of Credit and/or deposit an amount
in cash in a cash collateral account established with the Administrative Agent
for the benefit of the Lenders on terms and conditions satisfactory to the
Administrative Agent. The application of any prepayment pursuant to Section
2.12 shall be made first to Base Rate Loans and second to Eurodollar Loans.
Each prepayment of the Loans under Section 2.12 (except in the case of
Revolving Credit Loans that are Base Rate Loans and Swing Line Loans) shall be
accompanied by accrued interest to the date of such prepayment on the amount
prepaid and any amounts owing pursuant to Section 2.21.
2.13 Conversion and Continuation Options. (a) The Borrower
may elect from time to time to convert Eurodollar Loans to Base Rate Loans by
giving the Administrative Agent at least two Business Days' prior irrevocable
Notice of Borrowing containing such election, provided that any such conversion
of Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. The Borrower may elect from time to time to convert Base Rate
Loans to Eurodollar Loans by giving the Administrative Agent at least three
Business Days' prior Notice of Borrowing containing such election (which notice
shall specify the length of the initial Interest Period therefor), provided
that no Base Rate Loan under a particular Facility may be converted into a
Eurodollar Loan (i) when any Event of Default has occurred and is continuing
and the Administrative Agent or the Majority Facility Lenders in
<PAGE> 43
38
respect of such Facility have determined in its or their sole discretion not to
permit such conversions or (ii) after the date that is one month prior to the
final scheduled termination or maturity date of such Facility. Upon receipt of
any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving irrevocable Notice of Borrowing to the Administrative Agent, in
accordance with the applicable provisions of the term "Interest Period" set
forth in Section 1.1, of the length of the next Interest Period to be
applicable to such Loans, provided that no Eurodollar Loan under a particular
Facility may be continued as such (i) when any Event of Default has occurred
and is continuing and the Administrative Agent has or the Majority Facility
Lenders in respect of such Facility have determined in its or their sole
discretion not to permit such continuations or (ii) after the date that is one
month prior to the final scheduled termination or maturity date of such
Facility, and provided, further, that if the Borrower shall fail to give any
required notice as described above in this paragraph or if such continuation is
not permitted pursuant to the preceding proviso such Loans shall be
automatically converted to Base Rate Loans on the last day of such then
expiring Interest Period. Upon receipt of any such notice the Administrative
Agent shall promptly notify each relevant Lender thereof.
2.14 Minimum Amounts and Maximum Number of Eurodollar
Tranches. Notwithstanding anything to the contrary in this Agreement, all
borrowings, conversions, continuations and optional prepayments of Eurodollar
Loans hereunder and all selections of Interest Periods hereunder shall be in
such amounts and be made pursuant to such elections so that, (a) after giving
effect thereto, the aggregate principal amount of the Eurodollar Loans
comprising each Eurodollar Tranche shall be equal to $1,000,000 or a whole
multiple of $500,000 in excess thereof and (b) no more than fifteen Eurodollar
Tranches shall be outstanding at any one time.
2.15 Interest Rates and Payment Dates. (a) Each Eurodollar
Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
day plus the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per
annum equal to the Base Rate plus the Applicable Margin.
(c) Each Offered Rate Loan shall bear interest (computed on
the basis of a year of 365/366 days and actual days elapsed) on the unpaid
principal amount thereof from the date such Offered Rate Loan is made until the
last day of the Interest Period applicable thereto and at maturity (whether by
acceleration or otherwise) at the rate per annum quoted to the Borrower by the
Swing Line Lender for the Interest Period applicable thereto, payable on the
last day of each Interest Period and at maturity (whether by acceleration or
otherwise); provided, however that the Borrower understands and agrees that the
Swing Line Lender has no obligation to quote rates or to make any such Offered
Rate Loan and may refuse to make any such Offered Rate Loan after receiving a
request therefor from the Borrower; provided,
<PAGE> 44
39
further that if an Event of Default has occurred and is continuing, the Offered
Rate Loans will automatically be converted to Base Rate Loans. The Borrower
acknowledges and agrees that the interest rate quoted by the Swing Line Lender
for any Offered Rate Loan may not be the best or lowest rate offered to other
customers of the Swing Line Lender and may not be the same rate offered to
other customers of the Swing Line Lender for loans of similar amounts and
maturities, but is the rate at which the Swing Line Lender in its sole
discretion is willing to make such Loan to the Borrower for the specified
amount and maturity.
(d) (i) If all or a portion of the principal amount of any
Loan or Reimbursement Obligation shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), all of such outstanding Loans
and Reimbursement Obligations shall bear interest at a rate per annum which is
equal to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section 2.15
plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to
Base Rate Loans under the Revolving Credit Facility plus 2%, and (ii) if all or
a portion of any interest payable on any Loan or Reimbursement Obligation or
any commitment fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum equal to the rate applicable to
Base Rate Loans under the relevant Facility plus 2% (or, in the case of any
such other amounts that do not relate to a particular Facility, the Base Rate
plus 4%), in each case, with respect to clauses (i) and (ii) above, from the
date of such non-payment until such amount is paid in full (as well after as
before judgment).
(e) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (d) of this
Section 2.15 shall be payable from time to time on demand.
2.16 Computation of Interest and Fees. (a) Interest, fees
and commissions payable pursuant hereto shall be calculated on the basis of a
360-day year for the actual days elapsed, except that, with respect to Base
Rate Loans the rate of interest on which is calculated on the basis of the
Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Borrower and the
relevant Lenders of each determination of a Eurodollar Rate. Any change in the
interest rate on a Loan resulting from a change in the Base Rate or the
Eurocurrency Reserve Requirements shall become effective as of the opening of
business on the day on which such change becomes effective. The Administrative
Agent shall as soon as practicable notify the Borrower and the relevant Lenders
of the effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the
Borrower, deliver to the Borrower a statement showing the quotations used by
the Administrative Agent in determining any interest rate pursuant to Section
2.15(a).
<PAGE> 45
40
2.17 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from
the Majority Facility Lenders in respect of the relevant Facility that
the Eurodollar Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to such Lenders
(as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to
the Borrower and the relevant Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans under the relevant Facility
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans, (y) any Loans under the relevant Facility that were to have
been converted on the first day of such Interest Period to Eurodollar Loans
shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans
under the relevant Facility shall be converted, on the first day of such
Interest Period, to Base Rate Loans. Until such notice has been withdrawn by
the Administrative Agent which notice shall be withdrawn promptly upon notice
to the Administrative Agent confirming the termination of the events
precipitating same, no further Eurodollar Loans under the relevant Facility
shall be made or continued as such, nor shall the Borrower have the right to
convert Loans under the relevant Facility to Eurodollar Loans.
2.18 Pro Rata Treatment and Payments. (a) Each borrowing by
the Borrower from the Lenders hereunder, each payment by the Borrower on
account of any commitment fee and any reduction of the Commitments of the
Lenders shall be made pro rata according to the respective Tranche A Term Loan
Percentages, Tranche B Term Loan Percentages or Revolving Credit Percentages,
as the case may be, of the relevant Lenders.
(b) Each payment (including each prepayment) by the Borrower
on account of principal of and interest on the Term Loans shall be made pro
rata according to the respective outstanding principal amounts of the Term
Loans then held by the Term Loan Lenders (except as otherwise provided in
Section 2.18(d)). The amount of each principal prepayment of the Term Loans
shall be applied to reduce the then remaining installments of the Tranche A
Term Loans and Tranche B Term Loans, as the case may be, pro rata based upon
the then remaining principal amount thereof. Amounts prepaid on account of the
Term Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrower
on account of principal of and interest on the Revolving Credit Loans shall be
made pro rata according to the
<PAGE> 46
41
respective outstanding principal amounts of the Revolving Credit Loans then
held by the Revolving Credit Lenders.
(d) Notwithstanding anything to the contrary in Sections
2.11, 2.12 or 2.18, so long as any Tranche A Term Loans are outstanding, each
Tranche B Term Loan Lender may, at its option, irrevocably decline any
mandatory prepayment applicable to the Tranche B Term Loans of such Lender;
accordingly, with respect to the amount of any mandatory prepayment described
in Section 2.12 that is allocated to Tranche B Term Loans (such amounts, the
"Tranche B Prepayment Amount"), at any time when Tranche A Term Loans remain
outstanding, the Borrower will, in the case of any mandatory prepayment
required to be made pursuant to Section 2.12, in lieu of applying such amount
to the prepayment of Tranche B Term Loans, as provided in Section 2.12(d), on
the date specified in Section 2.12 for such prepayment, give the Administrative
Agent telephonic notice (promptly confirmed in writing) requesting that the
Administrative Agent prepare and provide to each Tranche B Term Loan Lender a
notice (each, a "Prepayment Option Notice") as described below. As promptly as
practicable after receiving such notice from the Borrower, the Administrative
Agent will send to each Tranche B Lender a Prepayment Option Notice, which
shall be in the form of Exhibit I, and shall include an offer by the Borrower
to prepay on the date (each a "Prepayment Date") that is 10 Business Days after
the date of the Prepayment Option Notice, the relevant Tranche B Term Loans of
such Lender by an amount equal to the portion of the Tranche B Prepayment
Amount indicated in such Lender's Prepayment Option Notice as being applicable
to such Lender's Tranche B Term Loans. On the Prepayment Date, (i) the
Borrower shall pay to the Administrative Agent the aggregate amount necessary
to prepay that portion of the outstanding relevant Term Loans in respect of
which Tranche B Term Loan Lenders have accepted prepayment as described above
(such Lenders, the "Accepting Lenders"), and such amount shall be applied to
reduce the Tranche B Repayment Amounts with respect to each Accepting Lender,
(ii) the Borrower shall pay to the Administrative Agent an amount equal to 50%
of the portion of the Tranche B Prepayment Amount not accepted by the Accepting
Lenders, and such amount shall be applied to the prepayment of the Tranche A
Term Loans, and (iii) the Borrower shall be entitled to retain the remaining
50% of the portion of the Tranche B Prepayment Amount not accepted by the
Accepting Lenders. Each Term Loan Lender other than an Accepting Lender shall
receive its portion of any mandatory prepayment as set forth in Sections 2.12
and 2.18.
(e) All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 11:00 A.M., Chicago time, on the due date thereof to the Administrative
Agent, for the pro rata account of the Lenders, at the Payment Office, in
Dollars and in immediately available funds. The Administrative Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received. If any payment hereunder (other than payments on the Eurodollar
Loans) becomes due and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day. If any payment on a
Eurodollar Loan becomes due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day unless
the result of such extension would be to extend such payment into another
calendar
<PAGE> 47
42
month, in which event such payment shall be made on the immediately preceding
Business Day. In the case of any extension of any payment of principal
pursuant to the preceding two sentences, interest thereon shall be payable at
the then applicable rate during such extension.
(f) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make
the amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to
the Administrative Agent by the required time on the Borrowing Date therefor,
such Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available
to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this Section
2.18(e) shall be conclusive in the absence of manifest error. If such Lender's
share of such borrowing is not made available to the Administrative Agent by
such Lender within three Business Days of such Borrowing Date, the
Administrative Agent shall also be entitled to recover such amount with
interest thereon at the rate per annum applicable to Base Rate Loans under the
relevant Facility, on demand, from the Borrower.
(g) Unless the Administrative Agent shall have been notified
in writing by the Borrower prior to the date of any payment being made
hereunder that the Borrower will not make such payment to the Administrative
Agent, the Administrative Agent may assume that the Borrower is making such
payment, and the Administrative Agent may, but shall not be required to, in
reliance upon such assumption, make available to the Lenders their respective
pro rata shares of a corresponding amount. If such payment is not made to the
Administrative Agent by the Borrower within three Business Days of such
required date, the Administrative Agent shall be entitled to recover, on
demand, from each Lender to which any amount which was made available pursuant
to the preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing herein
shall be deemed to limit the rights of the Administrative Agent or any Lender
against the Borrower.
2.19 Requirements of Law. (a) If the adoption of or any
change in any Requirement of Law or in the interpretation or application
thereof or compliance by any Lender with any request or directive (whether or
not having the force of law) from any central bank or other Governmental
Authority in all cases made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by Section 2.20 and changes in the rate of
tax on the overall net income of such Lender);
<PAGE> 48
43
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting
into, continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes
entitled to claim any additional amounts pursuant to this Section 2.19, it
shall promptly notify the Borrower (with a copy to the Administrative Agent) of
the event by reason of which it has become so entitled.
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority in all cases made subsequent to the date hereof shall have the effect
of reducing the rate of return on such Lender's or such corporation's capital
as a consequence of its obligations hereunder or under or in respect of any
Letter of Credit to a level below that which such Lender or such corporation
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, after submission by such Lender to the Borrower (with a copy to
the Administrative Agent) of a written request therefor, the Borrower shall
promptly pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.
(c) A certificate as to any additional amounts payable
pursuant to this Section 2.19 shall be submitted by the relevant Lender to the
Borrower (with a copy to the Administrative Agent) and shall set forth in
detail the reason for such compensation together with a computation of the
amount claimed shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section 2.19 shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder for a period of one year.
2.20 Taxes. (a) All payments made by the Borrower under
this Agreement shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in
<PAGE> 49
44
lieu of net income taxes) imposed on any Agent or any Lender as a result of a
present or former connection between such Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from such Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any other Loan Document). If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") or Other Taxes are required to be withheld from any
amounts payable to any Agent or any Lender hereunder, the amounts so payable to
such Agent or such Lender shall be increased to the extent necessary to yield
to such Agent or such Lender (after payment of all Non-Excluded Taxes and Other
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement, provided, however, that the Borrower
shall not be required to increase any such amounts payable to any Lender with
respect to any Non-Excluded Taxes (i) that are attributable to such Lender's
failure to comply with the requirements of paragraph (d) or (e) of this
subsection or (ii) that are United States withholding taxes imposed on amounts
payable to such Lender at the time the Lender becomes a party to this
Agreement, except to the extent that such Lender's assignor (if any) was
entitled, at the time of assignment, to receive additional amounts from the
Borrower with respect to such Non-Excluded Taxes pursuant to Section 2.20(a).
(b) In addition, the Borrower shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable law upon
receipt of a written request complying with Section 2.19(c).
(c) Whenever any Non-Excluded Taxes or Other Taxes are
payable by the Borrower, as promptly as possible thereafter the Borrower shall
send to the Administrative Agent for the account of the relevant Agent or
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing
authority or fails to remit to the Agents the required receipts or other
required documentary evidence, the Borrower shall indemnify the Administrative
Agent and the Lenders for any incremental taxes, interest or penalties that may
become payable by any Agent or any Lender as a result of any such failure. The
agreements in this Section 2.20 shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder for a
period of one year.
(d) Each Lender (or Transferee) that is not a citizen or
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under the laws of the United States of
America (or any jurisdiction thereof), or any estate or trust that is subject
to federal income taxation regardless of the source of its income (a "Non-U.S.
Lender") shall deliver to the Borrower and the Administrative Agent (or, in the
case of a Participant, to the Lender from which the related participation shall
have been purchased) two copies of either U.S. Internal Revenue Service Form
1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from
U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with
respect to payments of "portfolio interest" a statement substantially
<PAGE> 50
45
in the form of Exhibit H and a Form W-8, or any subsequent versions thereof or
successors thereto properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from, or a reduced rate of, U.S. federal
withholding tax on all payments by the Borrower under this Agreement and the
other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on
or before the date it becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related
participation). In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered
by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the
Borrower at any time it determines that it is no longer in a position to
provide any previously delivered certificate to the Borrower (or any other form
of certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this Section 2.20(d), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.20(d) that
such Non-U.S. Lender is not legally able to deliver.
(e) A Lender that is entitled to an exemption from or
reduction of non-U.S. withholding tax under the law of the jurisdiction in
which the Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law or reasonably requested by the Borrower, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate,
provided that such Lender is legally entitled to complete, execute and deliver
such documentation and in such Lender's reasonable judgment such completion,
execution or submission would not materially prejudice the legal position of
such Lender.
2.21 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a prepayment of Eurodollar
Loans on a day which is not the last day of an Interest Period with respect
thereto. Such indemnification may include an amount equal to the excess, if
any, of (i) the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, converted or continued, for the period from the
date of such prepayment or of such failure to borrow, convert or continue to
the last day of such Interest Period (or, in the case of a failure to borrow,
convert or continue, the Interest Period that would have commenced on the date
of such failure) in each case at the applicable rate of interest for such Loans
provided for herein (excluding, however, the Applicable Margin included
therein, if any) over (ii) the amount of interest (as reasonably determined by
such Lender) which would have accrued to such Lender on such amount by placing
such amount on deposit for a comparable period with leading banks in the
interbank eurodollar market. A certificate as to any amounts payable pursuant
to this Section 2.21 submitted to the Borrower by any Lender and shall set
forth in detail the reason for such compensation together with a
<PAGE> 51
46
computation of the amount claimed shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
2.22 Change of Lending Office; Claims Certificate. (a) Each
Lender agrees that, upon the occurrence of any event giving rise to the
operation of Section 2.19 or 2.20(a) with respect to such Lender, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any
Loans affected by such event with the object of avoiding the consequences of
such event; provided that such designation is made on terms that, in the sole
judgment of such Lender, cause such Lender and its lending office(s) to suffer
no economic, legal or regulatory disadvantage, and provided, further, that
nothing in this Section 2.22 shall affect or postpone any of the obligations of
the Borrower or the rights of any Lender pursuant to Section 2.19 or 2.20(a).
(b) In the event any Lender gives a notice to the Borrower
pursuant to Section 2.19, or any Lender is one of the Lenders notifying the
Agent pursuant to Section 2.17(d), or is unable to deliver the forms as
required by Section 2.20(d), or with respect to whom the Borrower is required
to pay additional amounts pursuant to Section 2.20 or any Lender is unable to
make Eurodollar Loans or cancels its commitment to make Eurodollar Loans
pursuant to Section 2.24, the Borrower may give notice in response, with copies
to the Administrative Agent, that it wishes to seek one or more financial
institutions to replace such Lender in accordance with the provisions set forth
in Section 10.6. Each Lender giving such a notice agrees that, at the request
of the Borrower, it will assign all of its interests thereunder and under the
Notes and the Commitment to a designated Assignee for the full amount then
owing to it, all in accordance with Section 10.6. Thereafter, said assignee
shall have all of the rights hereunder and obligations of the assigning Lender
(except as otherwise expressly set forth herein) and such Lender shall have no
further obligations to the Borrower hereunder.
(c) Any notice given pursuant to this Section 2.22 shall be
deemed to contain a representation by the Lender issuing such notice that: (i)
such Lender has used reasonable efforts to minimize said costs or charges but
cannot, in its sole judgment, do so at reasonable expense, and (ii) the
increased costs and charges are common to substantially all of the comparable
loan customers of such Lender and are not unique to the Borrower.
2.23 Margin Regulations. (a) The Loans made by each Lender
shall at all times be treated for purposes of Regulation G and Regulation U as
two separate extensions of credit (the "A Credit" and the "B Credit" of such
Lender and, collectively, the "A Credits" and the "B Credits"), as follows:
(i) the aggregate amount of the A Credit of such Lender
shall be an amount equal to such Lender's pro rata share (based on the
amount of its Loan Percentage) of the maximum loan value (as
determined in accordance with Regulation G and Regulation U), of all
Margin Stock Collateral; and
<PAGE> 52
47
(ii) the aggregate amount of the B Credit of such Lender
shall be an amount equal to such Lender's pro rata share (based on the
amount of its Loan Percentage) of all Loans outstanding hereunder
minus such Lender's A Credit.
In the event that any Margin Stock Collateral is acquired or sold, the amount
of the A Credit of such Lender shall be adjusted (if necessary), including, to
the extent necessary, by prepayment, to an amount equal to such Lender's pro
rata share (based on the amount of its Loan Percentage) of the maximum loan
value (determined in accordance with Regulation G and Regulation U) as of the
date of such acquisition or sale) of the Margin Stock Collateral immediately
after giving effect to such acquisition or sale. Nothing contained in this
subsection 2.23(a) shall be deemed to permit any sale of Margin Stock
Collateral in violation of any other provisions of this Agreement.
(b) Each Lender will maintain its records to identify the A
Credit of such Lender and the B Credit of such Lender, and, solely for the
purposes of complying with Regulation G and Regulation U, the A and B Credits
shall be treated as separate extensions of credit. Each Lender hereby
represents and warrants that the loan value of the Other Collateral is
sufficient for such Lender to lend its pro rata share of the B Credit.
(c) The benefits of the direct and indirect security in
Margin Stock Collateral created by any provisions of this Agreement and the
other Loan Documents shall be allocated first to the benefit and security of
the payment of the principal of and interest on the A Credits of the Lenders
and of all other amounts payable by the Borrower under this Agreement in
connection with the A Credits (collectively, the "A Credit Amounts") and
second, only after the payment in full of the A Credit Amounts, to the benefit
and security of the payment of the principal of and interest on the B Credits
of the Lenders and of all other amounts payable by the Borrower under this
Agreement in connection with the B Credits (collectively, the "B Credit
Amounts"). The benefits of the direct and indirect security in Other Collateral
created by any provisions of this Agreement and the other Loan Documents, shall
be allocated first to the benefit and security of the payment of the B Credit
Amounts and second, only after the payment in full of the B Credit Amounts, to
the benefit and security of the payment of the A Credit Amounts.
(d) The Borrower shall furnish to each Lender at the time of
each acquisition and sale of Margin Stock Collateral such information and
documents as the Administrative Agent or such Lender may require to determine
the A and B Credits, and at any time and from time to time, such other
information and documents as the Administrative Agent or such Lender may
reasonably require to determine compliance with Regulation U or Regulation G,
as applicable.
(e) Each Lender shall be responsible for its own compliance
with and administration of the provisions of this Section 2.23 and Regulation G
and Regulation U, and the Agents shall have no responsibility for any
determinations or allocations made or to be made by any Lender as required by
such provisions.
<PAGE> 53
48
2.24 Illegality. Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall
forthwith be cancelled and (b) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans
on the respective last days of the then current Interest Periods with respect
to such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of
the then current Interest Period with respect thereto, the Borrower shall pay
to such Lender such amounts, if any, as may be required pursuant to subsection
2.21.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Lender, in reliance on the agreements of the other
Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue letters
of credit ("Letters of Credit") for the account of the Borrower on any Business
Day during the Revolving Credit Commitment Period in such form as may be
approved from time to time by the Issuing Lender; provided that the Issuing
Lender shall have no obligation to issue any Letter of Credit if, after giving
effect to such issuance, (i) the L/C Obligations would exceed the L/C
Commitment or (ii) the aggregate amount of the Available Revolving Credit
Commitments would be less than zero. Each Letter of Credit shall (i) be
denominated in Dollars and (ii) expire no later than the earlier of (x) the
first anniversary of its date of issuance and (y) the date which is five
Business Days prior to the Revolving Credit Termination Date, provided that any
Letter of Credit with a one-year term may provide for the renewal thereof for
additional one-year periods (which shall in no event extend beyond the date
referred to in clause (y) above).
(b) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(c) The Issuing Lender shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Lender or any L/C Participant to exceed any limits imposed
by, any applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrower
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender at its address for notices specified herein
an Application therefor, completed to the satisfaction of the Issuing Lender,
and such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing
Lender will process such Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures and shall promptly issue the Letter of Credit
requested thereby (but in no event shall the Issuing Lender be required to
issue any Letter of Credit earlier than three Business Days after
<PAGE> 54
49
its receipt of the Application therefor and all such other certificates,
documents and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise
may be agreed to by the Issuing Lender and the Borrower. The Issuing Lender
shall furnish a copy of such Letter of Credit to the Borrower promptly
following the issuance thereof. The Issuing Lender shall promptly furnish to
the Administrative Agent, which shall in turn promptly furnish to the Lenders,
notice of the issuance of each Letter of Credit (including the amount thereof).
3.3 Commissions, Fees and Other Charges. (a) The Borrower
will pay a commission on all outstanding Letters of Credit at a per annum rate
equal to the Applicable Margin then in effect with respect to Eurodollar Loans
under the Revolving Credit Facility, shared ratably among the Revolving Credit
Lenders and payable quarterly in arrears on each L/C Fee Payment Date after the
issuance date.
(b) In addition to the foregoing fees and commissions, the
Borrower shall pay or reimburse the Issuing Lender for such normal and
customary costs and expenses as are incurred or charged by the Issuing Lender
in issuing, negotiating, effecting payment under, amending or otherwise
administering any Letter of Credit.
3.4 L/C Participations. (a) The Issuing Lender irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce the
Issuing Lender to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Lender, on the terms and conditions hereinafter stated, for such
L/C Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Percentage in the Issuing Lender's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Revolving Credit Percentage of the amount of such draft,
or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on demand
an amount equal to the product of (i) such amount, times (ii) the daily average
Federal Funds Effective Rate during the period from and including the date such
payment is required to the date on which such payment is immediately available
to the Issuing Lender, times (iii) a fraction the numerator of which is the
number of days that elapse during such period and the denominator of which is
360. If any such amount required to be paid by any L/C Participant pursuant to
Section 3.4(a) is not made available to the Issuing Lender by such L/C
Participant within three Business Days after the date such payment is due, the
Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with
<PAGE> 55
50
interest thereon calculated from such due date at the rate per annum applicable
to Base Rate Loans under the Revolving Credit Facility. A certificate of the
Issuing Lender submitted to any L/C Participant with respect to any amounts
owing under this Section shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant
its pro rata share of such payment in accordance with Section 3.4(a), the
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from the Borrower or otherwise, including proceeds of collateral
applied thereto by the Issuing Lender), or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its pro
rata share thereof; provided, however, that in the event that any such payment
received by the Issuing Lender shall be required to be returned by the Issuing
Lender, such L/C Participant shall return to the Issuing Lender the portion
thereof previously distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. The Borrower
agrees to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Lender for the amount of (a) such
draft so paid and (b) any taxes, fees, charges or other costs or expenses
incurred by the Issuing Lender in connection with such payment. Each such
payment shall be made to the Issuing Lender at its address for notices
specified herein in lawful money of the United States of America and in
immediately available funds. Interest shall be payable on any and all amounts
remaining unpaid by the Borrower under this Section from the date such amounts
become payable (whether at stated maturity, by acceleration or otherwise) until
payment in full at the rate set forth in Section 2.15(c). Each drawing under
any Letter of Credit shall (unless an event of the type described in clause (i)
or (ii) of Section 8(f) shall have occurred and be continuing with respect to
the Borrower, in which case the procedures specified in Section 3.4 for funding
by L/C Participants shall apply) constitute a request by the Borrower to the
Administrative Agent for a borrowing pursuant to Section 2.5 of Base Rate Loans
(or, at the option of the Administrative Agent and the Swing Line Lender in
their sole discretion, a borrowing pursuant to Section 2.7 of Swing Line Loans)
in the amount of such drawing. The Borrowing Date with respect to such
borrowing shall be the date of such drawing.
3.6 Obligations Absolute. The Borrower's obligations under
this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing Lender, any
beneficiary of a Letter of Credit or any other Person. The Borrower also
agrees with the Issuing Lender that the Issuing Lender shall not be responsible
for, and the Borrower's Reimbursement Obligations under Section 3.5 shall not
be affected by, among other things, the validity or genuineness of documents or
of any endorsements thereon, even though such documents shall in fact prove to
be invalid, fraudulent or forged, or any dispute between or among the Borrower
and any beneficiary of any Letter of Credit or any other party to which such
Letter of Credit may be transferred or any claims whatsoever of the Borrower
against any beneficiary of such Letter of Credit or any such transferee. The
Issuing Lender
<PAGE> 56
51
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions resulting from the gross negligence or willful misconduct of the
Issuing Lender. The Borrower agrees that any action taken or omitted by the
Issuing Lender under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards or care specified in the
Uniform Commercial Code of the State of New York, shall be binding on the
Borrower and shall not result in any liability of the Issuing Lender to the
Borrower.
3.7 Letter of Credit Payments. If any draft shall be
presented for payment under any Letter of Credit, the Issuing Lender shall
promptly notify the Borrower of the date and amount thereof. The
responsibility of the Issuing Lender to the Borrower in connection with any
draft presented for payment under any Letter of Credit shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be
limited to determining that the documents (including each draft) delivered
under such Letter of Credit in connection with such presentment are
substantially in conformity with such Letter of Credit.
3.8 Reductions and Reinstatements. The Borrower and the L/C
Participants recognize, acknowledge and agree that (i) each Bond Letter of
Credit provides, or may provide, for automatic reductions and reinstatements as
set forth in the provisions of such Bond Letter of Credit, and (ii) each Bond
Letter of Credit provides, or may provide, for the beneficiary thereof to
reduce from time to time the amounts available to be drawn thereon.
3.9 Documents and Reports. The Issuing Lender agrees to
deliver to the L/C Participants promptly upon receipt thereof copies of all
documents and reports delivered to the Issuing Lender pursuant to any Bond
Document.
3.10 Amendments. The Issuing Lender may enter into any
amendment or modification of, or may waive compliance with the terms of any
Bond Document (other than an Indenture) without the consent of any L/C
Participants; provided (a) that without the consent of the Required L/C
Participants, the Issuing Lender shall not execute any instrument agreeing to
any amendment or modification of, or waiver of compliance with any Bond
Document, which would waive any "Event of Default" arising under any Bond
Document, and (b) without the consent of all of the L/C Participants, the
Issuing Lender shall not execute any instrument agreeing to any amendment or
modification of, or waiver of compliance with any Bond Document, (i) which
would (A) reduce the principal of, or interest on, any Reimbursement
Obligation, (B) postpone the due date for any payment of principal of, or
interest on, any Reimbursement Obligation, (C) extend the stated expiration
date of the Bond Letter of Credit, (D) increase in any material manner (in the
reasonable opinion of the Issuing Lender) the obligations of the L/C
Participants or, in any event, increase the obligations of the L/C Participants
the effect of which shall cause any such L/C Participant's Revolving Extensions
of Credit to exceed such L/C Participant's Revolving Credit Commitment, or (E)
release or otherwise adversely affect the interests of the L/C Participants in
any collateral granted under any Bond Document, or (ii) after the occurrence of
a default or event of default.
<PAGE> 57
52
3.11 Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to each Agent and each
Lender that:
4.1 Financial Condition. (a) Unaudited pro forma
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at September 30, 1997 (including the notes thereto) (the "Pro Forma Balance
Sheet"), copies of which have heretofore been furnished to each Lender, have
been prepared giving effect (as if such events had occurred on such date) to
(i) the consummation of the Merger, (ii) the Loans to be made and the Senior
Subordinated Notes to be issued on the Closing Date and the use of proceeds
thereof, (iii) the other transactions contemplated hereby and (iv) the payment
of fees and expenses in connection with the foregoing. The Pro Forma Balance
Sheet has been prepared based on the best information available to the Borrower
as of the date of delivery thereof, and presents fairly on a pro forma basis
the estimated financial position of Borrower and its consolidated Subsidiaries
as at September 30, 1997, assuming that the events specified in the preceding
sentence had actually occurred at such date and based upon good faith estimates
and assumptions believed by management of the Borrower to be reasonable at the
time made, it being recognized by the Lenders that such financial information
as it relates to future events is not viewed as fact and that actual results
during the period or periods covered by such financial information may differ
from the projected results set forth therein by a material amount.
(b) The audited consolidated balance sheets of the Borrower
as at March 31, 1995, March 31, 1996 and March 31, 1997, and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
Deloitte & Touche LLP, present fairly the consolidated financial condition of
the Borrower as at such date, and the consolidated results of its operations
and its consolidated cash flows for the respective fiscal years then ended.
The unaudited consolidated balance sheet of the Borrower as at September 30,
1997, and the related unaudited consolidated statements of income and cash
flows for the six-month period ended on such date, present fairly the
consolidated financial condition of the Borrower as at such dates, and the
consolidated results of its operations and its consolidated cash flows for the
six-month period then ended (including all adjustments consisting only of
normal recurring accruals necessary for fair presentation of such interim
periods). All such financial statements, including the related schedules and
notes thereto, if any, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by the
aforementioned firm of accountants and disclosed therein). The Borrower and
its Subsidiaries do not have any material Guarantee Obligations, contingent
liabilities and liabilities for taxes,
<PAGE> 58
53
or any long-term leases or unusual forward or long-term commitments, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction or other obligation in respect of derivatives, which are not
reflected in the most recent financial statements referred to in this paragraph
(b). During the period from March 31, 1997 to and including the date hereof
there has been no Disposition by the Borrower or its Subsidiaries of any
material part of its business or Property or any transfer of Capital Stock to
any Person other than a Wholly Owned Subsidiary Guarantor.
(c) The audited consolidated balance sheets of the Target as
at October 2, 1994, October 1, 1995 and September 29, 1996 and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
Price Waterhouse LLP, present fairly the consolidated financial condition of
the Target as at such dates, and the consolidated results of its operations and
its consolidated cash flows for the respective fiscal years then ended. All
such financial statements, including the related schedules and notes thereto,
if any, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the aforementioned firm
of accountants and disclosed therein). The Target and its Subsidiaries do not
have any material Guarantee Obligations, contingent liabilities and liabilities
for taxes, or any long-term leases or unusual forward or long-term commitments,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, which are
not reflected in the most recent financial statements referred to in this
paragraph (c). During the period from September 30, 1996 to and including the
date hereof there has been no Disposition by the Target or its Subsidiaries of
any material part of its business or Property.
4.2 No Change. Since March 31, 1997 there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.
4.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
Property, to lease the Property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of Property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law except, in the case of clauses (c) and (d), to the extent that the failure
to so qualify, be in good standing or comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and, in the
case of the Borrower, to borrow hereunder. Each Loan Party has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Loan Documents to which it is a party and, in the case of the Borrower,
to authorize the borrowings on the terms and conditions of this
<PAGE> 59
54
Agreement. No consent or authorization of, filing with, notice to or other act
by or in respect of, any Governmental Authority or any other Person is required
in connection with the Merger or the financing transactions contemplated hereby
and the borrowings hereunder or with the execution, delivery, performance,
validity or enforceability of this Agreement or any of the Loan Documents,
except (i) consents, authorizations, filings and notices which have been
obtained or made and are in full force and effect and (ii) the filings referred
to in Section 4.18(b). Each Loan Document has been duly executed and delivered
on behalf of each Loan Party party thereto. This Agreement constitutes, and
each other Loan Document upon execution will constitute, a legal, valid and
binding obligation of each Loan Party party hereto and thereto, enforceable
against each such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of
this Agreement and the other Loan Documents, the issuance of Letters of Credit,
the borrowings hereunder and the use of the proceeds thereof will not violate
any Requirement of Law or any Contractual Obligation of the Borrower or any of
its Subsidiaries and will not result in, or require, the creation or imposition
of any Lien on any of their respective material properties or revenues pursuant
to any Requirement of Law or any such Contractual Obligation (other than the
Liens created by the Security Documents). No Requirement of Law or Contractual
Obligation applicable to the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
4.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of its Subsidiaries or against any of their respective properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated hereby or thereby, or (b) which if adversely determined could
reasonably be expected to have a Material Adverse Effect.
4.7 No Default. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to (i) any of its Contractual
Obligations in any respect which could reasonably be expected to have a
Material Adverse Effect or (ii) the Tender Facilities. No Default or Event of
Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Borrower and
its Subsidiaries has indefeasible title to, or a valid leasehold interest in,
all its material real property necessary for the conduct of its business as
currently conducted, and good title to, or a valid leasehold interest in, all
its other material Property necessary for the conduct of its business as
currently conducted, and none of such Property is subject to any Lien except as
permitted by Section 7.3.
<PAGE> 60
55
4.9 Intellectual Property. The Borrower and each of its
Subsidiaries owns, or is licensed to use, all Intellectual Property necessary
to conduct its business as currently conducted. No material claim has been
asserted and is pending by any Person challenging or questioning the use of any
Intellectual Property or the validity or effectiveness of any Intellectual
Property. The use of Intellectual Property by the Borrower and its
Subsidiaries does not infringe on the rights of any Person in any material
respect.
4.10 Taxes. Each of the Borrower and each of its
Subsidiaries has filed or caused to be filed all Federal, state and other
material tax returns which are required to be filed and has paid all taxes
shown to be due and payable on said returns or on any assessments made against
it or any of its Property and all other taxes, fees or other charges imposed on
it or any of its Property by any Governmental Authority (other than amounts the
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have
been provided on the books of the Borrower or its Subsidiaries, as the case may
be); no material tax Lien has been filed, and, to the knowledge of the
Borrower, no material claim is being asserted, with respect to any such tax,
fee or other charge.
4.11 Federal Regulations. Assuming compliance by the Lenders
with Section 2.23 and the accuracy of the representations in Section 2.23(b),
no part of the proceeds of any Loans will be used for any purpose which
violates the provisions of Regulations G, T, U or X of the Board.
4.12 ERISA. Except for the Merger of Spreckels Sugar
Company, Inc. into Holly Sugar Company on March 31, 1997, neither a Reportable
Event nor an "accumulated funding deficiency" (within the meaning of Section
412 of the Code or Section 302 of ERISA) has occurred during the five-year
period prior to the date on which this representation is made or deemed made
with respect to any Plan, and each Plan has complied in all material respects
with the applicable provisions of ERISA and the Code. No termination of a
Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan
has arisen, during such five-year period. The present value of all accrued
benefits under each Single Employer Plan (based on those assumptions used to
fund such Plans) did not, as of the last annual valuation date prior to the
date on which this representation is made or deemed made, exceed the value of
the assets of such Plan allocable to such accrued benefits by an amount
material in light of such amounts and related circumstances. Neither the
Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan which has resulted or could reasonably
be expected to result in a material liability under ERISA, and neither the
Borrower nor any Commonly Controlled Entity would become subject to any
material liability under ERISA if the Borrower or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent.
4.13 Investment Company Act; Other Regulations. No Loan
Party is an "investment company", or a company "controlled" by an "investment
company", within the
<PAGE> 61
56
meaning of the Investment Company Act of 1940, as amended.
No Loan Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
4.14 Subsidiaries. The Subsidiaries listed on Schedule 4.14
constitute all the Subsidiaries of the Borrower at the date hereof.
4.15 Use of Proceeds. (a) The proceeds of the Term Loans
shall be used (i) to refinance a portion of the borrowings of the Borrower
under the Tender Facilities, (ii) to refinance certain indebtedness of Target
outstanding after the Merger, (iii) to finance the remaining cash consideration
to be paid on the Closing Date pursuant to the Merger Agreement to stockholders
of Target and (iv) to finance the payment of the fees and expenses of the
Merger and the Tender Offer and the transactions contemplated thereby.
(b) The proceeds of the Revolving Credit Loans and the Swing
Line Loans shall be used (i) to refinance a portion of the borrowings of the
Borrower under the Tender Facilities and (ii) for working capital purposes and
other general corporate purposes of the Borrower and its Subsidiaries. Letters
of Credit shall be used to provide credit support for general corporate
requirements of the Borrower and its Subsidiaries.
4.16 Environmental Matters. Other than exceptions to any of
the following that could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect or the payment of a Material
Environmental Amount:
(a) The Borrower and its Subsidiaries: (i) are, and within
the period of all applicable statutes of limitation have been, in compliance
with all applicable Environmental Laws; (ii) hold all Environmental Permits
(each of which is in full force and effect) required for any of their current
operations or for any property owned, leased, or otherwise operated by any of
them; (iii) are, and within the period of all applicable statutes of limitation
have been, in compliance with all of their Environmental Permits; and (iv)
reasonably believe that there are no pending changes in applicable
Environmental Laws.
(b) Materials of Environmental Concern are not present at, on,
under, in, or about any real property now or formerly owned, leased or operated
by the Borrower or any of its Subsidiaries or, to the Borrower's knowledge, at
any other location (including, without limitation, any location to which
Materials of Environmental Concern have been sent for re-use or recycling or
for treatment, storage, or disposal) which could reasonably be expected to (i)
give rise to liability of the Borrower or any Subsidiary, or (ii) interfere
with the Borrower's or any Subsidiary's continued operations, or (iii) impair
the fair saleable value, as a component of a going business, of any real
property owned or leased by the Borrower or any Subsidiary.
(c) There is no judicial, administrative, or arbitral
proceeding (including any notice of violation or alleged violation) under or
relating to any Environmental Law to which the Borrower or any of its
Subsidiaries is, or to the knowledge of the Borrower will be, named as a party
that is pending or, to the knowledge of the Borrower, threatened.
<PAGE> 62
57
(d) Neither the Borrower nor any of its Subsidiaries has
received any written request for information, or been notified that it is a
potentially responsible party under or relating to the federal Comprehensive
Environmental Response, Compensation, and Liability Act or any similar
Environmental Law, or with respect to any Materials of Environmental Concern.
(e) Neither the Borrower nor any of its Subsidiaries has
entered into or agreed to any consent decree, order, or settlement or other
agreement, nor is subject to any judgment, decree, or order or other agreement,
in any judicial, administrative, arbitral, or other forum, relating to
compliance with or liability under any Environmental Law.
(f) Neither the Borrower nor any of its Subsidiaries has
assumed or retained, by contract or operation of law, any liabilities of any
kind, fixed or contingent, known or unknown, under any Environmental Law or
with respect to any Material of Environmental Concern.
Notwithstanding the qualification as to the Borrower's knowledge set forth in
the foregoing subsection 4.16(b), for purposes of Section 8(b) the
representations contained in such subsection 4.16(b) shall be deemed to be
made, or have been made, as the case may be, without giving effect to such
qualification.
4.17 Accuracy of Information, etc. No statement or
information when taken as a whole contained in this Agreement, any other Loan
Document or any other document, certificate or statement furnished to the
Administrative Agent or the Lenders or any of them, by or on behalf of any Loan
Party for use in connection with the transactions contemplated by this
Agreement or the other Loan Documents, contained as of the date such statement,
information, document or certificate was so furnished, any untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statements contained herein or therein not misleading. The projections and
pro forma financial information contained in the materials referenced above are
based upon good faith estimates and assumptions believed by management of the
Borrower to be reasonable at the time made, it being recognized by the Lenders
that such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth
therein by a material amount. As of the date hereof, the representations and
warranties contained in the Transaction Documentation are true and correct in
all material respects. There is no fact known to any Loan Party that could
reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to the Administrative Agent
and the Lenders for use in connection with the transactions contemplated hereby
and by the other Loan Documents.
4.18 Security Documents. (a) The Guarantee and Collateral
Agreement is effective to create in favor of the Collateral Agent, for the
benefit of the Agents and the Lenders, a legal, valid and enforceable security
interest in the Collateral described therein and proceeds thereof. In the case
of the Pledged Stock described in the Guarantee and Collateral
<PAGE> 63
58
Agreement, when stock certificates representing such Pledged Stock are
delivered to the Administrative Agent and in the case of the other Collateral
described in the Guarantee and Collateral Agreement, when financing statements
in appropriate form are filed in the offices specified on Schedule 4.18(a), the
Guarantee and Collateral Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the Loan Parties in
such Collateral and, subject to compliance with applicable law, the proceeds
thereof, as security for the Obligations (as defined in the Guarantee and
Collateral Agreement), in each case prior and superior in right to any other
Person (other than Liens expressly permitted by Section 7.3).
(b) Each of the Mortgages is effective to create in favor of
the Collateral Agent, for the benefit of the Agents and the Lenders, a legal,
valid and enforceable Lien on the Mortgaged Properties described therein and
proceeds thereof, and when the Mortgages are filed in the offices specified on
Schedule 4.18(b), each such Mortgage shall constitute a fully perfected Lien
on, and security interest in, all right, title and interest of the Loan Parties
in the Mortgaged Properties and the proceeds thereof, as security for the
Obligations (as defined in the relevant Mortgage), in each case prior and
superior in right to any other Person except for (i) Liens expressly permitted
by Section 7.3 hereof and (ii) all matters set forth in Schedule B to the
mortgagees title insurance policy delivered to the Administrative Agent in
accordance with Section 5.1(n)(iii) herein.
4.19 Solvency. Each Loan Party is, and after giving effect
to the Merger and the other transactions contemplated hereby and the incurrence
of all Indebtedness and obligations being incurred in connection herewith and
therewith will be and will continue to be, Solvent.
4.20 Regulation H. No Mortgage encumbers improved real
property which is located in an area that has been identified by the Secretary
of Housing and Urban Development as an area having special flood hazards and in
which flood insurance has been made available under the National Flood
Insurance Act of 1968 except as set forth on Schedule 4.20.
4.21 Senior Indebtedness. The Obligations constitute "Senior
Indebtedness" of the Borrower under and as defined in the Senior Subordinated
Note Indenture. The obligations of each Subsidiary Guarantor under the
Guarantee and Collateral Agreement constitute "Guarantor Senior Indebtedness"
of such Subsidiary Guarantor under and as defined in the Senior Subordinated
Note Indenture.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement
of each Lender to make the initial extension of credit requested to be made by
it is subject to the satisfaction, prior to or concurrently with the making of
such extension of credit on the Closing Date, of the following conditions
precedent:
<PAGE> 64
59
(a) Loan Documents. The Administrative Agent shall have
received (i) this Agreement, executed and delivered by a duly
authorized officer of the Borrower, (ii) the Guarantee and Collateral
Agreement, executed and delivered by a duly authorized officer of the
Borrower and each Subsidiary Guarantor, (iii) each of the Mortgages,
executed and delivered by a duly authorized officer of each party
thereto, (iv) for the account of each relevant Lender, Notes
conforming to the requirements hereof and executed and delivered by a
duly authorized officer of the Borrower and (v) the Control Agreement,
executed and delivered by a duly authorized officer of each party
thereto.
(b) Public Filings. The documents and materials filed
publicly by the Borrower, IHK Merger Sub and Target in connection with
the Tender Offer and the Merger shall have been furnished to the
Administrative Agent and the Syndication Agent and shall be reasonably
satisfactory in form and substance to the Syndication Agent.
(c) Merger; etc. The following transactions shall have been
consummated, in each case, on terms and conditions reasonably
satisfactory to the Syndication Agent:
(i) The Merger shall have been, or shall be
concurrently, consummated pursuant to the Merger Agreement and
all required stockholder approval to effect the Merger shall
have been obtained; and the Merger Agreement shall have
remained in full force and effect and shall not have been
amended, supplemented, waived or otherwise modified in any
material respect without the prior written consent of the
Syndication Agent;
(ii) The sources and uses of funds for the Tender
Offer and the Merger shall be as set forth on Schedule 5.1(c);
and
(iii) The Borrower shall have issued and sold
$250,000,000 in aggregate principal amount of the Senior
Subordinated Notes on terms and conditions satisfactory to the
Syndication Agent.
(d) Tender Facilities. (i) The Tender Facilities shall have
closed and the conditions thereto shall have been satisfied or waived.
(ii) No default or event of default under the Tender
Facilities shall have occurred and be continuing.
(iii) On the Closing Date, all obligations of the
Borrower under the Tender Facilities shall have been
refinanced with the proceeds of the Facility and the Senior
Subordinated Notes.
(e) Fees. The Lenders, the Syndication Agent and the
Administrative Agent shall have received all fees required to be paid,
and all expenses for which invoices have been presented, on or before
the Closing Date.
<PAGE> 65
60
(f) Approvals. All governmental (including compliance with
the H-S-R Act in respect of the Merger), stockholder and third party
approvals (including debtholders', landlords' and other consents)
reasonably necessary in connection with the Tender Offer, the Merger,
the financing contemplated hereby and the continuing operations of the
Borrower and its Subsidiaries after the Merger shall have been
obtained and be in full force and effect, and all applicable waiting
periods shall have expired or been extended without any action being
taken or threatened by any Governmental Authority which would
restrain, prevent or otherwise impose adverse conditions on Tender
Offer or the Merger.
(g) Proceedings. There shall exist no judgment, order,
injunction or other restraint which would prevent or delay the
consummation of, or impose materially adverse conditions upon, the
Tender Offer or the Merger, and there shall exist no claim, action,
suit, investigation, litigation or proceeding (including, without
limitation, shareholder or derivative litigation) pending or
threatened in any court or before any arbitrator or governmental
instrumentality which relates to the Tender Offer or the Merger which
has any reasonable likelihood of having a material adverse effect on
(i) the financial condition, operations, business or properties of
either the Borrower or the Target and their respective subsidiaries
taken as a whole, (ii) the Tender Offer, the Merger, or the financing
thereof or (iii) the rights and remedies of the Administrative Agent,
the Syndication Agent or the Lenders under the Loan Documents or on
the ability of the Borrower and its subsidiaries to perform their
respective obligations thereunder.
(h) Marketable Securities. The Syndication Agent shall be
reasonably satisfied that the Borrower's portfolio of marketable
securities shall have remained substantially equivalent (other than
changes resulting from changes in market value thereof) to that
previously described in writing to the Syndication Agent prior to the
Commitment Letter Date.
(i) Regulations of Board. The Lenders shall be satisfied
that the Merger and the financing thereof comply with Regulation G, T,
U and X of the Board. Each Lender shall have received a duly
completed and executed Form G-3 or Form FR U-1, as applicable, of the
Board, demonstrating such compliance.
(j) Closing Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of each
Loan Party, dated the Closing Date, substantially in the form of
Exhibit C, with appropriate insertions and attachments.
(k) Legal Opinions. The Administrative Agent shall have
received the following executed legal opinions:
(i) the legal opinion of Andrews & Kurth
L.L.P., counsel to the Borrower and its Subsidiaries,
substantially in the form of Exhibit F-1;
<PAGE> 66
61
(ii) the legal opinion of William Schwer,
general counsel of the Borrower and its Subsidiaries,
substantially in the form of Exhibit F-2;
(iii) to the extent consented to by the relevant
counsel, each legal opinion, if any, delivered in connection
with the Merger Agreement, accompanied by a reliance letter in
favor of the Lenders;
(iv) the legal opinion of local counsel in each
of California, Florida, Georgia, Louisiana, Michigan,
Missouri, Montana, Ohio and Wyoming and of such other special
and local counsel as may be required by the Syndication Agent;
and
(v) the legal opinion of Hunter, MacLean, Exley
& Dunn, P.C., substantially in the form of Exhibit F-3.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Syndication Agent
may reasonably require.
(l) Pledged Stock; Stock Powers; Pledged Notes. The
Collateral Agent shall have received (i) the certificates representing
the shares of Capital Stock pledged pursuant to the Guarantee and
Collateral Agreement, together with an undated stock power for each
such certificate executed in blank by a duly authorized officer of the
pledgor thereof and (ii) each promissory note pledged to the
Collateral Agent pursuant to the Guarantee and Collateral Agreement
endorsed (without recourse) in blank (or accompanied by an executed
transfer form in blank satisfactory to the Syndication Agent) by the
pledgor thereof. The Borrower shall have pledged 100% of the Shares
of the Target pursuant to the Guarantee and Collateral Agreement.
(m) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing
statement) required by the Security Documents or under law or
reasonably requested by the Collateral Agent to be filed, registered
or recorded in order to create in favor of the Collateral Agent, for
the benefit of the Agents and the Lenders, a perfected Lien on the
Collateral described therein, prior and superior in right to any other
Person (other than with respect to Liens expressly permitted by
Section 7.3), shall be in proper form for filing, registration or
recordation. The Syndication Agent shall have received the results of
a recent lien, tax and judgment search in each of the jurisdictions
and offices where assets of each of the Borrower, Target and their
subsidiaries are located or recorded, and such search shall reveal no
material liens on any of their assets except for liens permitted by
this Agreement or liens to be discharged substantially concurrently
with the Closing Date.
(n) Mortgages, etc. (i) The Syndication Agent shall have
received a Mortgage with respect to each Mortgaged Property, executed
and delivered by a duly authorized officer of each party thereto.
<PAGE> 67
62
(ii) If requested by the Syndication Agent, the
Administrative Agent shall have received, and the title insurance
company issuing the policy referred to in Section 5.1(n)(iii) (the
"Title Insurance Company") shall have received, maps or plats of an
as-built survey of the sites of the Mortgaged Properties certified to
the Administrative Agent and the Title Insurance Company in a manner
satisfactory to the Title Insurance Company and the Syndication Agent,
dated a date satisfactory to the Syndication Agent and the Title
Insurance Company by an independent professional licensed land
surveyor satisfactory to the Syndication Agent and the Title Insurance
Company, which maps or plats and the surveys on which they are based
shall be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted by
the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality of
the foregoing, there shall be surveyed and shown on such maps, plats
or surveys the following: (A) the locations on such sites of all the
buildings, structures and other improvements and the established
building setback lines; (B) the lines of streets abutting the sites
and width thereof; (C) all access and other easements appurtenant to
the sites; (D) all roadways, paths, driveways, easements,
encroachments and overlapping improvements and similar encumbrances
affecting the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor; (E) any
encroachments on any adjoining property by the building structures and
improvements on the sites; (F) if the site is described as being on a
filed map, a legend relating the survey to said map; and (G) the flood
zone designations, if any, in which the Mortgaged Properties are
located.
(iii) The Administrative Agent shall have received in
respect of each Mortgaged Property a mortgagee's title insurance
policy (or policies) or marked up unconditional binder for such
insurance or, in the case of Mortgaged Property located in the State
of Texas, an effective commitment in respect thereof. Each such
policy shall (A) be in an amount satisfactory to the Syndication
Agent; (B) be issued at ordinary rates; (C) insure that the Mortgage
insured thereby creates a valid first Lien on such Mortgaged Property
free and clear of all defects and encumbrances, except (i) as
disclosed therein and (ii) those Liens expressly permitted by Section
7.3 hereof; (D) name the Administrative Agent for the benefit of the
Lenders as the insured thereunder; (E) be in the form of ALTA Loan
Policy (or equivalent policies); (F) contain such endorsements and
affirmative coverage as the Syndication Agent may reasonably request
and (G) be issued by title companies satisfactory to the Syndication
Agent (including any such title companies acting as co-insurers or
reinsurers, at the option of the Syndication Agent). The Syndication
Agent shall have received evidence satisfactory to it that all
premiums in respect of each such policy, all charges for mortgage
recording tax, and all related expenses, if any, have been paid.
(iv) If requested by the Syndication Agent, the
Administrative Agent shall have received (A) a policy of flood
insurance which (1) covers any parcel of improved real property which
is encumbered by any Mortgage (2) is written in an amount not less
than the outstanding principal amount of the indebtedness secured by
such Mortgage
<PAGE> 68
63
which is reasonably allocable to such real property or the maximum
limit of coverage made available with respect to the particular type
of property under the National Flood Insurance Act of 1968, whichever
is less, and (3) has a term ending not later than the maturity of the
Indebtedness secured by such Mortgage and (B) confirmation that the
Borrower has received the notice required pursuant to Section
208(e)(3) of Regulation H of the Board.
(v) The Administrative Agent shall have received a copy
of all recorded documents referred to, or listed as exceptions to
title in, the title policy or policies referred to in Section
5.1(n)(iii) and a copy of all other material documents affecting the
Mortgaged Properties.
(vi) The Lenders shall have received environmental
information with respect to the real property owned or leased by the
Borrower or its Subsidiaries satisfactory to the Syndication Agent.
(o) Insurance. The Administrative Agent shall have received
insurance certificates satisfying the requirements of Section 6.5 and
Section 5.3 of the Guarantee and Collateral Agreement. The
Syndication Agent shall be reasonably satisfied that satisfactory
insurance relating to the Borrower, Target and their Subsidiaries
shall be in place after the Merger.
(p) Indebtedness, Liens or Preferred Stock. Neither the
Borrower nor its Subsidiaries shall have any outstanding Indebtedness,
Liens or preferred Capital Stock after giving effect to the Merger
other than such Indebtedness, Liens or preferred Capital Stock
permitted by Sections 7.2 and 7.3.
5.2 Conditions to Each Extension of Credit. The agreement of
each Lender to make any extension of credit requested to be made by it on any
date (including, without limitation, its initial extension of credit) is
subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made in all material respects by any
Loan Party in or pursuant to the Loan Documents shall be true and
correct on and as of such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
<PAGE> 69
64
5.3 Conditions to Issuance of Bond Letters of Credit. The
agreement of the Issuing Lender to issue any Bond Letter of Credit requested to
be issued by it on any date is subject to the satisfaction of the following
conditions precedent:
(a) The Issuing Lender shall have received, in form and
substance satisfactory to it:
(i) evidence that the issuer of the Bonds
supported by such Bond Letter of Credit has authorized the
execution and delivery of such Bonds and the related Bond
Documents;
(ii) executed originals of each of the Bond
Documents and all legal opinions and certificates relating to
the applicable Bonds; and
(iii) evidence that the issuer of such Bonds shall
have executed, issued and delivered the Bonds to the Bond
Trustee therefor and the bond registrar for such Bonds shall
have duly authenticated the Bonds and delivered the Bonds
against payment therefor.
Each issuance of a Bond Letter of Credit on behalf of the Borrower hereunder
shall constitute a representation and warranty by the Borrower as of the date
of such issuance that the conditions contained in this Section 5.3 have been
satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender or any Agent hereunder, the Borrower shall and
shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to each Agent and each
Lender:
(a) as soon as available, but in any event within 100 days
after the end of each fiscal year of the Borrower, a copy of the
audited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such year and the related
audited consolidated statements of income and of cash flows for such
year, setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope
of the audit, by Deloitte & Touche LLP or other independent certified
public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 50
days after the end of each of the first three quarterly periods of
each fiscal year of the Borrower, the unaudited consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated statements of
<PAGE> 70
65
income for such quarter and the portion of the fiscal year through the
end of such quarter and an unaudited consolidated statement of cash
flow for the portion of the fiscal year through the end of such
quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (including all adjustments
consisting only of normal recurring accruals necessary for fair
presentation of such interim periods);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 Certificates; Other Information. Furnish to each Agent
and each Lender, or, in the case of clause (g), to the relevant Lender:
(a) concurrently with the delivery of the financial
statements referred to in Section 6.1(a), a certificate of the
independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except
as specified in such certificate;
(b) concurrently with the delivery of any financial
statements pursuant to Sections 6.1(a) and (b), (i) a certificate of a
Responsible Officer stating that, to the best of each such Responsible
Officer's knowledge, each Loan Party during such period has observed
or performed all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and the other Loan
Documents to which it is a party to be observed, performed or
satisfied by it, and that such Responsible Officer has obtained no
knowledge of any Default or Event of Default except as specified in
such certificate and (ii) (x) a Compliance Certificate containing all
information and calculations necessary for determining compliance by
the Borrower and its Subsidiaries with the provisions of this
Agreement referred to therein as of the last day of the fiscal quarter
or fiscal year of the Borrower, as the case may be, and (y) to the
extent not previously disclosed to the Administrative Agent, a listing
of any county or state within the United States where any Loan Party
keeps inventory or equipment and of any Intellectual Property acquired
by any Loan Party since the date of the most recent list delivered
pursuant to this clause (y) (or, in the case of the first such list so
delivered, since the Closing Date);
(c) as soon as available, and in any event no later than 60
days after the end of each fiscal year of the Borrower, a detailed
consolidated budget for the following fiscal year (including a
projected consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of the following fiscal year, and the
related consolidated statements of projected cash flow, projected
changes in financial position and projected income), and, as soon as
available, significant revisions, if any, of such budget and
projections with respect to such fiscal year (collectively, the
"Projections"), which
<PAGE> 71
66
Projections shall in each case be accompanied by a certificate of a
Responsible Officer stating that such Projections are based on
reasonable estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such Projections are
incorrect or misleading in any material respect;
(d) within 50 days after the end of each fiscal quarter of
the Borrower, a narrative discussion and analysis of the financial
condition and results of operations of the Borrower and its
Subsidiaries for such fiscal quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal
quarter, as compared to the comparable periods of the previous year;
(e) no later than 10 Business Days prior to the effectiveness
thereof, copies of substantially final drafts of any proposed material
amendment, supplement, waiver or other modification with respect to
the Senior Subordinated Note Indenture or the Merger Agreement;
(f) promptly after the same are sent, copies of all financial
statements and reports which the Borrower sends to the holders of any
class of its debt securities or public equity securities and within
five days after the same are filed, copies of all financial statements
and reports which the Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority; and
(g) promptly, such additional financial and other information
as any Agent or any Lender may from time to time reasonably request
through the Administrative Agent.
6.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its material obligations of whatever nature (including, without
limitation, tax obligations), except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower or its Subsidiaries, as the case may be.
6.4 Conduct of Business and Maintenance of Existence, etc.
(a) (i) Continue to engage in business of the same general type as now
conducted by it and business related thereto, all as set forth in subsection
7.15, (ii) preserve, renew and keep in full force and effect its corporate
existence except that the Borrower shall not be required to preserve, renew or
keep in full force and effect the corporate or other existence of any
Subsidiary, if the Board of Directors of the Borrower shall determine in the
exercise of its business judgment that the preservation thereof is no longer
desirable in the conduct of the business of the Borrower or any Subsidiary and
that abandonment of any such right shall not have a Material Adverse Effect and
(iii) take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business,
except, in each case, as otherwise permitted by Section 7.4 and except, in the
case of clause (iii) above, to the extent that failure
<PAGE> 72
67
to do so could not reasonably be expected to have a Material Adverse Effect and
(b) comply with all Contractual Obligations and Requirements of Law except to
the extent that failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all
Property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted and (b) maintain with financially
sound and reputable insurance companies insurance or by means of self insurance
with adequate provisions made for the funding therefor on all its Property in
at least such amounts and against at least such risks (but including in any
event public liability, product liability and business interruption) as are
usually insured against in the same general area by companies engaged in the
same or a similar business.
6.6 Inspection of Property; Books and Records; Discussions.
(a) Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of
all dealings and transactions in relation to its business and activities and
(b) permit representatives of the Administrative Agent and any Lender
(coordinated, to the extent reasonable, through the Administrative Agent) to
visit and inspect any of its properties and examine and make abstracts from any
of its books and records at any reasonable time during normal business hours
and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Borrower and
its Subsidiaries with officers and employees of the Borrower and its
Subsidiaries and with its independent certified public accountants. If an
Event of Default has occurred and is continuing, Borrower will pay for all such
examinations; prior thereto the examining Lender will pay for same.
6.7 Notices. Promptly upon a Responsible Officer becoming
aware thereof, give notice to the Administrative Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between the Borrower or any of its Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or
any of its Subsidiaries in which the amount involved is $10,000,000 or
more and not covered by insurance or in which injunctive or similar
relief is sought which if adversely determined could be reasonably
expected to cause a Material Adverse Effect;
(d) the following events, as soon as possible and in any
event within 30 days after the Borrower knows or has reason to know
thereof: (i) the occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution
<PAGE> 73
68
to a Plan, the creation of any Lien in favor of the PBGC or a Plan or
any withdrawal from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan or (ii) the institution of proceedings or
the taking of any other action by the PBGC or the Borrower or any
Commonly Controlled Entity or any Multiemployer Plan with respect to
the withdrawal from, or the termination, Reorganization or Insolvency
of, any Plan; and
(e) any development or event which has had or could
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower or the relevant Subsidiary
proposes to take with respect thereto.
6.8 Environmental Laws. (a)(i) Comply with all Environmental
Laws applicable to it, and obtain, comply with and maintain any and all
Environmental Permits necessary for its operations as conducted and as planned;
and (ii) take reasonable efforts to ensure that all of its tenants, subtenants,
contractors, subcontractors, and invitees comply with all Environmental Laws,
and obtain, comply with and maintain any and all Environmental Permits,
applicable to any of them insofar as any failure to so comply, obtain or
maintain reasonably could be expected to adversely affect the Borrower or any
of its Subsidiaries. For purposes of this 6.8(a), noncompliance by the
Borrower or any of its Subsidiaries with any applicable Environmental Law or
Environmental Permit shall be deemed not to constitute a breach of this
covenant so long as (x) upon learning of any actual or suspected noncompliance,
the Borrower and any affected Subsidiary shall promptly undertake reasonable
efforts to achieve compliance, and (y) in any case, such non-compliance, and
any other noncompliance with Environmental Law, individually or in the
aggregate, could not reasonably be expected to give rise to a Material Adverse
Effect or materially and adversely affect the value of the Mortgaged Property,
taken as a whole.
(b) Promptly comply with all enforceable requirements of all
Governmental Authorities regarding Environmental Laws, other than such
enforceable requirements as to which appropriate proceedings have been timely
and properly taken in good faith so long as the pendency of any and all such
proceedings could not reasonably be expected to give rise to a Material Adverse
Effect or the payment of a Material Environmental Amount.
(c) Prior to acquiring any ownership or leasehold interest in
real property, or other interest in any real property (x) involving aggregate
value for such property (including improvements thereof) of $2,000,000 or more
and (y) that could give rise to Borrower being found an owner, operator, or
otherwise subject to potential liability under any Environmental Law (or any
entity with such interests in any real property): (i) obtain a written report
by an environmental consulting firm reasonably acceptable to the Syndication
Agent (an "Environmental Consultant") of the Environmental Consultant's
assessment of the presence or potential presence of significant levels of any
Materials of Environmental Concern on, in, under, or about such property, or of
other conditions that could give rise to potentially
<PAGE> 74
69
significant liability under or violations of Environmental Law relating to such
acquisition, and notify the Agents of such potential acquisition; and (ii) if
requested by the Syndication Agent after learning of such potential
acquisition, provide such Report to the Administrative Agent, provided that in
the event that the Borrower is contractually prohibited from providing any such
requested Report prior to the consummation of the applicable acquisition, such
Report shall be delivered promptly upon such consummation. The Syndication
Agent shall have the right, but shall not have any duty, to obtain any such
report.
(d) Promptly upon the Syndication Agent's request if there
has occurred or the Syndication Agent reasonably anticipates an Event of
Default, permit an environmental consultant whom the Syndication Agent in its
discretion designates to perform an environmental assessment (including,
without limitation: reviewing documents; interviewing knowledgeable persons;
and sampling and analyzing soil, air, surface water, groundwater, and/or other
media in or about property owned or leased by the Borrower or any of its
Subsidiaries, or on which operations of the Borrower or any of its Subsidiaries
otherwise take place.) Such environmental assessment shall be in form, scope,
and substance satisfactory to the Syndication Agent. The Borrower and its
Subsidiaries shall cooperate fully in the conduct of such environmental
assessment, and Borrower shall pay the costs of such environmental assessment
immediately upon written demand by the Administrative Agent. The Syndication
Agent shall have the right, but shall not have any duty, to request and/or
obtain such environmental assessment.
6.9 Interest Rate Protection. In the case of the Borrower,
within 60 days after the Closing Date, enter into Interest Rate Protection
Agreements to the extent necessary to provide that at least 50% of the
aggregate principal amount of the Senior Subordinated Notes and the Term Loans
is subject to either a fixed interest rate or interest rate protection for a
period of not less than three years, which Interest Rate Protection Agreements
shall have terms and conditions reasonably satisfactory to the Syndication
Agent.
6.10 Additional Collateral, etc. (a) With respect to any
Property acquired after the Closing Date by the Borrower or any of its
Subsidiaries (other than (x) any Property described in paragraph (b), (c) or
(d) below and (y) any Property subject to a Lien expressly permitted by Section
7.3(g)) as to which the Collateral Agent, for the benefit of the Agents and the
Lenders, does not have a perfected Lien, promptly (i) execute and deliver to
the Administrative Agent such amendments to the Guarantee and Collateral
Agreement or such other documents as the Administrative Agent deems necessary
or advisable in order to grant to the Collateral Agent, for the benefit of the
Agents and the Lenders, a security interest in such Property and (ii) take all
actions necessary or advisable to grant to the Collateral Agent, for the
benefit of the Agents and the Lenders, a perfected first priority security
interest in such Property, including without limitation, the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be required
by the Guarantee and Collateral Agreement or by law or as may be requested by
the Administrative Agent.
<PAGE> 75
70
(b) With respect to any fee interest in any real estate
having a value (together with improvements thereof) of at least $2,000,000
acquired after the Closing Date by the Borrower or any of its Subsidiaries
(other than any such real estate subject to a Lien expressly permitted by
Section 7.3(g)), promptly (i) execute and deliver a first priority mortgage or
deed of trust, as the case may be, in favor of the Collateral Agent, for the
benefit of the Agents and the Lenders, covering such real estate, in form and
substance reasonably satisfactory to the Administrative Agent, (ii) if
requested by the Administrative Agent, provide the Lenders with (x) title and
extended coverage insurance covering such real estate in an amount at least
equal to the purchase price of such real estate (or such other amount as shall
be reasonably specified by the Administrative Agent) as well as a current ALTA
survey thereof, together with a surveyor's certificate and (y) any consents or
estoppels reasonably deemed necessary or advisable by the Administrative Agent
in connection with such mortgage or deed of trust, each of the foregoing in
form and substance reasonably satisfactory to the Administrative Agent and
(iii) if requested by the Administrative Agent, deliver to the Agents legal
opinions relating to the matters described above, which opinions shall be in
form and substance substantially similar to the relevant opinions delivered on
the Closing Date and otherwise reasonably satisfactory to the Administrative
Agent, and from counsel reasonably satisfactory to the Administrative Agent.
(c) With respect to any new Subsidiary (other than an
Excluded Foreign Subsidiary) created or acquired after the Closing Date (which,
for the purposes of this paragraph (c), shall include any existing Subsidiary
that ceases to be an Excluded Foreign Subsidiary), by the Borrower or any of
its Subsidiaries, promptly (i) execute and deliver to the Administrative Agent
such amendments to the Guarantee and Collateral Agreement as the Administrative
Agent deems necessary or advisable in order to grant to the Collateral Agent,
for the benefit of the Agents and the Lenders, a perfected first priority
security interest in the Capital Stock of such new Subsidiary which is owned by
the Borrower or any of its Subsidiaries, (ii) deliver to the Collateral Agent
the certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of the
Borrower or such Subsidiary, as the case may be, (iii) cause such new
Subsidiary (A) to become a party to the Guarantee and Collateral Agreement and
(B) to take such actions necessary or advisable to grant to the Collateral
Agent for the benefit of the Agents and the Lenders a perfected first priority
security interest in the Collateral described in the Guarantee and Collateral
Agreement with respect to such new Subsidiary, including, without limitation,
the filing of Uniform Commercial Code financing statements in such
jurisdictions as may be required by the Guarantee and Collateral Agreement or
by law or as may be requested by the Administrative Agent, and (iv) if
requested by the Administrative Agent, deliver to the Administrative Agent
legal opinions relating to the matters described above, which opinions shall be
in form and substance substantially similar to the relevant opinions delivered
on the Closing Date and otherwise reasonably satisfactory to the Administrative
Agent, and from counsel reasonably satisfactory to the Administrative Agent.
Notwithstanding the foregoing, the provisions of this Section 6.10(c) shall not
apply to (i) Holly Finance Company and HSC Export Corporation, (ii) Pioneer
Trading Corporation, Michigan Sugar (Canada Ltd.) and Refined Sugar Trading
Institute so long as the aggregate value of the total assets of such entities
is not in excess of $1,000,000 and (iii) Savannah
<PAGE> 76
71
International Company, Savannah Packaging Company, Savannah Total Invert
Company and Savannah Molasses & Specialties Company so long as each such entity
has no assets or liabilities.
(d) With respect to any new Excluded Foreign Subsidiary
created or acquired after the Closing Date by the Borrower or any of its
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative
Agent deems necessary or advisable in order to grant to the Collateral Agent,
for the benefit of the Agents and the Lenders, a perfected first priority
security interest in the Capital Stock of such new Subsidiary which is owned by
the Borrower or any of its Subsidiaries (provided that in no event shall more
than 65% of the total outstanding Capital Stock of any such new Subsidiary be
required to be so pledged), (ii) deliver to the Collateral Agent the
certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of the
Borrower or such Subsidiary, as the case may be and (iii) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(e) Within 30 days after the Closing Date, the Borrower shall
(i) cause to be released any Liens in favor of those secured parties described
on Schedule 7.3(g) that are letter of credit issuers securing Indebtedness of
the Borrower and its Subsidiaries described on Schedule 7.2(e) in respect of
the Bonds, pursuant to documentation in form and substance satisfactory to the
Administrative Agent, (ii) take all actions as the Administrative Agent
reasonably deems necessary or advisable in order to cause the release of such
Liens and (iii) take all such actions described in Section 6.10(b) with respect
to the properties originally subject to such Liens.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender or any Agent hereunder, the Borrower shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants.
(a) Consolidated Total Leverage Ratio. Permit the
Consolidated Total Leverage Ratio as at the last day of any period of four
consecutive fiscal quarters of the Borrower (or, if less, the number of full
fiscal quarters subsequent to the Closing Date) ending with any fiscal quarter
set forth below to exceed the ratio set forth below opposite such fiscal
quarter:
<PAGE> 77
72
<TABLE>
<CAPTION>
Consolidated Total
Fiscal Quarter Leverage Ratio
-------------- --------------
<S> <C>
March 31, 1998 5.40 to 1.00
June 30, 1998 5.40 to 1.00
September 30, 1998 5.40 to 1.00
December 31, 1998 5.20 to 1.00
March 31, 1999 5.00 to 1.00
June 30, 1999 5.00 to 1.00
September 30, 1999 5.00 to 1.00
December 31, 1999 4.75 to 1.00
March 31, 2000 4.75 to 1.00
June 30, 2000 4.75 to 1.00
September 30, 2000 4.75 to 1.00
December 31, 2000 4.50 to 1.00
March 31, 2001 4.50 to 1.00
June 30, 2001 4.50 to 1.00
September 30, 2001 4.50 to 1.00
December 31, 2001 4.00 to 1.00
Thereafter 4.00 to 1.00
</TABLE>
(b) Consolidated Senior Leverage Ratio. Permit the
Consolidated Senior Leverage Ratio as at the last day of any period of four
consecutive fiscal quarters of the Borrower (or, if less, the number of full
fiscal quarters subsequent to the Closing Date) ending with any fiscal quarter
set forth below to exceed the ratio set forth below opposite such fiscal
quarter:
<TABLE>
<CAPTION>
Consolidated Senior
Fiscal Quarter Leverage Ratio
-------------- --------------
<S> <C>
March 31, 1998 3.00 to 1.00
June 30, 1998 3.00 to 1.00
September 30, 1998 3.00 to 1.00
December 31, 1998 2.75 to 1.00
March 31, 1999 2.75 to 1.00
June 30, 1999 2.75 to 1.00
September 30, 1999 2.75 to 1.00
December 31, 1999 2.50 to 1.00
March 31, 2000 2.50 to 1.00
June 30, 2000 2.50 to 1.00
September 30, 2000 2.50 to 1.00
December 31, 2000 2.25 to 1.00
March 31, 2001 2.25 to 1.00
June 30, 2001 2.25 to 1.00
September 30, 2001 2.25 to 1.00
December 31, 2001 2.00 to 1.00
Thereafter 2.00 to 1.00
</TABLE>
<PAGE> 78
73
(c) Consolidated Interest Coverage Ratio. Permit the
Consolidated Interest Coverage Ratio for any period of four consecutive fiscal
quarters of the Borrower (or, if less, the number of full fiscal quarters
subsequent to the Closing Date) ending with any fiscal quarter set forth below
to be less than the ratio set forth below opposite such fiscal quarter:.
<TABLE>
<CAPTION>
Consolidated Interest
Fiscal Quarter Coverage Ratio
-------------- ---------------------
<S> <C>
March 31, 1998 2.00 to 1.00
June 30, 1998 2.00 to 1.00
September 30, 1998 2.00 to 1.00
December 31, 1998 2.00 to 1.00
March 31, 1999 2.00 to 1.00
June 30, 1999 2.00 to 1.00
September 30, 1999 2.00 to 1.00
December 31, 1999 2.00 to 1.00
March 31, 2000 2.00 to 1.00
June 30, 2000 2.00 to 1.00
September 30, 2000 2.00 to 1.00
December 31, 2000 2.30 to 1.00
March 31, 2001 2.30 to 1.00
June 30, 2001 2.30 to 1.00
September 30, 2001 2.30 to 1.00
December 31, 2001 2.30 to 1.00
March 31, 2002 2.30 to 1.00
June 30, 2002 2.30 to 1.00
September 30, 2002 2.30 to 1.00
December 31, 2002 2.50 to 1.00
Thereafter 2.50 to 1.00
</TABLE>
(d) Consolidated Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio for any period of four consecutive
fiscal quarters of the Borrower (or, if less, the number of full fiscal
quarters subsequent to the Closing Date) to be less than 1.00 to 1.00.
(e) Adjusted Consolidated Working Capital. Permit Adjusted
Consolidated Working Capital to be less than $250,000,000 on the last day of
any fiscal quarter of the Borrower.
(f) Maintenance of Net Worth. Permit Consolidated Net Worth
as of the last day of any fiscal quarter of the Borrower to be less than the
sum of (i) $300,000,000 and (ii) an amount equal to the aggregate of 80% of
Consolidated Net Income for each fiscal quarter of
<PAGE> 79
74
the Borrower commencing after the Closing Date for which Consolidated Net
Income is positive.
7.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist (in each case, to "Incur") any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan
Document;
(b) Indebtedness of the Borrower to any Subsidiary and of any
Wholly Owned Subsidiary Guarantor to the Borrower or any other
Subsidiary;
(c) Indebtedness secured by Liens permitted by Section 7.3(g)
in an aggregate principal amount not to exceed, when added to the
Capital Lease Obligations permitted under paragraph (d) of this
Section 7.2, $30,000,000 at any one time outstanding;
(d) Capital Lease Obligations in an aggregate principal
amount not to exceed, when added to the Indebtedness permitted under
paragraph (c) of this Section 7.2, $30,000,000 at any one time
outstanding;
(e) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(e) and any refinancings, refundings, renewals or
extensions thereof (without any increase in the principal amount
thereof);
(f) guarantees made in the ordinary course of business by the
Borrower or any of its Subsidiaries of obligations of any Wholly Owned
Subsidiary Guarantor;
(g) Indebtedness under any Interest Rate Protection
Agreements entered into to protect the Borrower or any of its
Subsidiaries against fluctuations in interest rates and not for
speculative purposes;
(h) other Indebtedness (contingent or direct) not to exceed
$6,000,000 outstanding at any one time in respect of letters of credit
issued for the account of the Borrower or any of its Subsidiaries in
the conduct of their business in the ordinary course and any Guarantee
Obligations thereof;
(i) Indebtedness of the Borrower under the remaining Senior
Notes outstanding upon the consummation of the Debt Tender Offer in an
aggregate principal amount not to exceed $6,000,000 at any time
outstanding;
(j) renewals and extensions (in the same or lesser principal
amount on similar terms and conditions and in any case no less
favorable to the interests of the Lenders) of any Indebtedness listed
in the foregoing clauses;
(k) Indebtedness of the Borrower and its Subsidiaries to
Commodity Credit Corporation in an aggregate principal amount not to
exceed the lesser of (i)
<PAGE> 80
75
$50,000,000 and (ii) 80% of the fair market value of the Property
securing such Indebtedness pursuant to Section 7.3(f) at any one time
outstanding;
(l) Indebtedness of Holly Finance Company not to exceed
$15,000,000 in aggregate principal amount outstanding at any time;
(m) other unsecured Indebtedness not to exceed $10,000,000 in
aggregate principal amount outstanding at any time; and
(n) (i) Indebtedness of the Borrower in respect of the Senior
Subordinated Notes in an aggregate principal amount not to exceed
$250,000,000 and (ii) Guarantee Obligations of any Subsidiary
Guarantor in respect of such Indebtedness; provided that such
Guarantee Obligations are subordinated to the same extent as the
obligations of the Borrower in respect of the Senior Subordinated
Notes.
7.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its Property or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the
Borrower or its Subsidiaries, as the case may be, in conformity with
GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like nonconsensual Liens imposed by operation of
law, arising in the ordinary course of business which are not overdue
for a period of more than 30 days or which are being contested in good
faith by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions, minor
irregularities in title, and other similar encumbrances incurred in
the ordinary course of business which, in the aggregate, are not
material in amount and which do not in any case materially detract
from the value of the Property subject thereto or materially interfere
with the ordinary conduct of the business of the Borrower or any of
its Subsidiaries and all such title matters described in the
Mortgages;
(f) Liens securing Indebtedness of the Borrower and any of
its Subsidiaries incurred pursuant to Section 7.2(k); provided that
(i) such Indebtedness provides no recourse to the Borrower and any of
its Subsidiaries and (ii) such Liens do not at any
<PAGE> 81
76
time encumber any Property other than the specific sugar or
sugar-related products financed by such Indebtedness;
(g) Liens in existence on the date hereof listed on Schedule
7.3(g), securing Indebtedness permitted by Section 7.2(e), provided
that no such Lien is spread to cover any additional Property after the
Closing Date and that the amount of Indebtedness secured thereby is
not increased;
(h) Liens securing Indebtedness of the Borrower and any of
its Subsidiaries incurred pursuant to Section 7.2(c) or (d) to finance
the acquisition or lease of fixed or capital assets, provided that (i)
such Liens shall be created substantially simultaneously with the
acquisition of such fixed or capital assets, (ii) such Liens do not at
any time encumber any Property other than the Property financed by
such Indebtedness and (iii) the amount of Indebtedness secured thereby
is not increased;
(i) Liens created pursuant to the Security Documents;
(j) any interest or title of a lessor under any lease entered
into by the Borrower or any Subsidiary of the Borrower in the ordinary
course of its business and covering only the assets so leased;
(k) Liens securing judgments which do not constitute an Event
of Default;
(l) Liens on Cash Equivalents to secure letter of credit
reimbursement obligations permitted under Section 7.2(h) in an
aggregate amount not to exceed $6,000,000;
(m) Liens securing Indebtedness of Holly Finance Company
permitted under subsection 7.2(k) on notes payable to Holly Finance
Company in respect of loans made by it in the ordinary course of its
business to growers;
(n) additional Liens securing obligations in an aggregate
amount not to exceed $5,000,000; and
(o) rights of lessees of equipment owned by the Borrower or
any of its Subsidiaries not interfering with the normal conduct of the
Borrower's business.
7.4 Limitation on Fundamental Changes. Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or Dispose of, all or substantially
all of its Property or business, or make any material change in its present
method of conducting business, except:
(a) any Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or with or into any
Wholly Owned Subsidiary Guarantor (provided that the
<PAGE> 82
77
Wholly Owned Subsidiary Guarantor shall be the continuing or surviving
corporation); and
(b) any Subsidiary of the Borrower may Dispose of any or all
of its assets (upon voluntary liquidation or otherwise) to the
Borrower or any Wholly Owned Subsidiary Guarantor.
7.5 Limitation on Sale of Assets. Dispose of any of its
Property or business (including, without limitation, receivables and leasehold
interests), whether now owned or hereafter acquired, or, in the case of any
Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any
Person, except:
(a) the Disposition of surplus, obsolete or worn out property
in the ordinary course of business (including the expiration or
termination of leasehold interests related to receiving station
leases);
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) Dispositions in the normal course of the Borrower's
business of non-operating assets unnecessary for the continued
operation of the Borrower's business;
(e) Dispositions of assets to the extent such assets are
replaced with assets providing the same function for the Borrower and
its Subsidiaries as such replaced assets provided; provided that the
fair market value of all such Dispositions (determined at the time
thereof) shall not exceed (i) $10,000,000 in any year and (ii)
$50,000,000 in the aggregate on a cumulative basis after the Closing
Date;
(f) Disposition of the real property, improvements and
equipment associated with the non operating facilities at Hamilton
City, California and Santa Barbara, California;
(g) the sale or issuance of any Subsidiary's Capital Stock to
the Borrower or any Wholly Owned Subsidiary Guarantor;
(h) the sale or other disposition of any portion of the
Borrower's portfolio of marketable securities; provided that the
proceeds of such sale are applied as set forth in Section 2.12(b); and
(i) additional Dispositions not to exceed $5,000,000 in the
aggregate on a cumulative basis after the Closing Date.
7.6 Limitation on Dividends. Declare or pay any dividend
(other than dividends payable solely in common stock of the Person making such
dividend) on, or make
<PAGE> 83
78
any payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of, any shares of any class of Capital Stock of the Borrower or any Subsidiary
or any warrants or options to purchase any such Capital Stock, whether now or
hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
the Borrower or any Subsidiary (collectively, "Restricted Payments"), except
that (a) any Subsidiary may make Restricted Payments to the Borrower or any
Wholly Owned Subsidiary Guarantor and (b) so long as no Event of Default has
occurred and is continuing, the Borrower may continue to pay dividends on its
common stock in accordance with past practice and in amounts per share not in
excess of recent such amounts.
7.7 Limitation on Capital Expenditures. Make or commit to
make (by way of the acquisition of securities of a Person or otherwise) any
Capital Expenditure or Capitalized Refurbishment Expenditure, except (i)
Capitalized Refurbishment Expenditures of the Borrower and its Subsidiaries in
the ordinary course of business not to exceed $50,000,000 in any fiscal year
and (ii) other Capital Expenditures of the Borrower and its Subsidiaries in the
ordinary course of business not to exceed (A) $60,000,000 in the fiscal year
ending September 30, 1998, or (b) $45,000,000 in any fiscal year thereafter;
provided that any portion of the amount specified in clause (ii) for any fiscal
year that is not expended in such fiscal year may be carried over to increase
the amount of Capital Expenditures permitted under clause (ii) for the
immediately succeeding fiscal year.
7.8 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit (by way of guaranty or otherwise) or capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting all or a material part of a business
unit of, or make any other investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
(d) loans and advances to employees of the Borrower or its
Subsidiaries in the ordinary course of business (including, without
limitation, for travel, entertainment and relocation expenses) in an
aggregate amount for the Borrower and its Subsidiaries not to exceed
$250,000 at any one time outstanding;
(e) the Merger;
(f) investments by the Borrower or any of its Subsidiaries in
the Borrower or any Person that, prior to such investment, is a Wholly
Owned Subsidiary Guarantor;
(g) investments and reinvestments in the Borrower's portfolio
of marketable securities in the ordinary course of business;
<PAGE> 84
79
(h) Loans by Holly Finance Company or Holly Sugar Corporation
in the ordinary course of business not to exceed $15,000,000 in the
aggregate outstanding at any time;
(i) investments made by the Borrower or any of its
Subsidiaries with the proceeds of any Recovery Reinvestment Deferred
Amount;
(j) advances, loans, extensions of credit existing on the
date hereof and listed on Schedule 7.8(j);
(k) investments by the Borrower or any of its Subsidiaries
constituting contributions of amounts the fair market value of which
at the time of the making thereof does not exceed, in the aggregate,
an amount equal to 5% of Consolidated Tangible Assets as reflected in
the financial statements most recently delivered pursuant to Section
6.1(a) or (b) prior to such time (with the fair market value of each
such investment being measured at the time made and without giving
effect to subsequent changes in value); provided that such investments
are in joint venture arrangements of the Borrower or any of its
Subsidiaries with entities that are raw material suppliers or that are
related to the primary business of the Borrower;
(l) investments made by the Borrower or any of its
Subsidiaries in Holly Finance Company in an aggregate amount
outstanding at any one time not to exceed $3,000,000; and
(m) any other loans or investments not otherwise permitted
under this Section 7.8 having an aggregate amount at any time not in
excess of $10,000,000 (determined at any time as the aggregate initial
amount of such investment or loan less returns or repayments of such
investments at or prior to such time).
7.9 Limitation on Optional Payments and Modifications of Debt
Instruments, etc. (a) Make or offer to make any payment, prepayment,
repurchase or redemption of or otherwise defease or segregate funds with
respect to the Senior Subordinated Notes (other than scheduled interest
payments required to be made in cash), (b) amend, modify, waive or otherwise
change, or consent or agree to any material amendment, modification, waiver or
other change to, any of the terms of the Senior Subordinated Notes (other than
any such amendment, modification, waiver or other change which (i) would extend
the maturity or reduce the amount of any payment of principal thereof or which
would reduce the rate or extend the date for payment of interest thereon and
(ii) does not involve the payment of a consent fee), (c) designate any
Indebtedness as "Designated Senior Indebtedness" for the purposes of the Senior
Subordinated Note Indenture (other than the Indebtedness incurred under this
Agreement) or (d) amend any terms of any capitalization or organizational
documents (including in respect of Capital Stock) in any manner determined by
the Administrative Agent to be adverse to the Lenders without the prior written
consent of the Required Lenders; provided, however, that this Section 7.9 shall
not prohibit the Borrower or any of its Affiliates from acquiring, from time to
time, any of the Senior Notes which remain
<PAGE> 85
80
outstanding following consummation or expiration of the Debt Tender Offer in
accordance with the terms thereof and with the terms of the Senior Note
Indenture.
7.10 Limitation on Transactions with Affiliates. Enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than the
Borrower or any Wholly Owned Subsidiary Guarantor) unless such transaction is
(a) not prohibited under this Agreement and (b) upon fair and reasonable terms
no less favorable to the Borrower or such Subsidiary, as the case may be, than
it would obtain in a comparable arm's length transaction with a Person which is
not an Affiliate. Notwithstanding the foregoing, the Tender Offer and the
Merger may be consummated.
7.11 Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by the Borrower or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Borrower or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Borrower or such
Subsidiary, other than any arrangements otherwise expressly permitted
hereunder.
7.12 Limitation on Changes in Fiscal Periods. Permit the
fiscal year of the Borrower to end on a day other than September 30 or change
the Borrower's method of determining fiscal quarters, provided that the
Borrower may make one election after the Closing Date to change its fiscal year
end, if the Borrower enters into such amendments to this Agreement as the
Syndication Agent shall request to reflect such change, including modifications
to Section 7, such that the covenants affected by such change shall have the
same effect (or, in any case, be substantively no less favorable to the
Lenders, in the determination of the Syndication Agent) after giving effect
thereto as if such change were not made. The Lenders hereby authorize the
Syndication Agent and the Administrative Agent to enter into such amendments to
effect such modifications, if any, in accordance with the provisions of this
subsection.
7.13 Limitation on Negative Pledge Clauses. Enter into or
suffer to exist or become effective any agreement which prohibits or limits the
ability of the Borrower or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its Property or revenues, whether now
owned or hereafter acquired, other than (a) this Agreement and the other Loan
Documents, (b) any agreements governing any purchase money Liens or Capital
Lease Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby) and (c)
the Senior Subordinated Note Indenture.
7.14 Limitation on Restrictions on Subsidiary Distributions.
Enter into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary of the Borrower to (a) pay
dividends or make any other distributions in respect of any Capital Stock of
such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any
other Subsidiary of the Borrower, (b) make loans or advances to the
<PAGE> 86
81
Borrower or any other Subsidiary of the Borrower or (c) transfer any of its
assets to the Borrower or any other Subsidiary of the Borrower, except for such
encumbrances or restrictions existing under or by reason of (i) any
restrictions existing under the Loan Documents, (ii) any restriction existing
under the Senior Subordinated Note Indenture and (iii) any restrictions with
respect to a Subsidiary imposed pursuant to an agreement which has been entered
into in connection with the Disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary.
7.15 Limitation on Lines of Business. Enter into any
business, either directly or through any Subsidiary, except for (a) those
businesses in which the Borrower or any of its Subsidiaries are engaged on the
date of this Agreement and (b) businesses reasonably related thereto, the
revenues of which do not exceed 10% of the Borrower's consolidated gross
revenues.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan
or Reimbursement Obligation when due in accordance with the terms
hereof; or the Borrower shall fail to pay any interest on any Loan or
Reimbursement Obligation, or any other amount payable hereunder or
under any other Loan Document, within five Business Days after any
such interest or other amount becomes due in accordance with the terms
hereof; or
(b) Any representation or warranty made or deemed made by any
Loan Party herein or in any other Loan Document or which is contained
in any certificate, document or financial or other statement furnished
by it at any time under or in connection with this Agreement or any
such other Loan Document shall prove to have been inaccurate in any
material respect on or as of the date made or deemed made; or
(c) (i) Any Loan Party shall default in the observance or
performance of any agreement contained in clause (i) or (ii) of
Section 6.4(a) (with respect to the Borrower only), Section 6.7(a),
Section 7, or Section 5 of the Guarantee and Collateral Agreement or
(ii) an "Event of Default" under and as defined in any Mortgage shall
have occurred and be continuing; or
(d) Any Loan Party shall default in the observance or
performance of any other agreement contained in this Agreement or any
other Loan Document (other than as provided in paragraphs (a) through
(c) of this Section), and such default shall continue unremedied for a
period of 30 days after notice to the Borrower from the Administrative
Agent or the Required Lenders; or
(e) The Borrower or any of its Subsidiaries shall (i) default
in making any payment of any principal of any Indebtedness (including,
without limitation, any
<PAGE> 87
82
Guarantee Obligation, but excluding the Loans) on the scheduled or
original due date with respect thereto; or (ii) default in making any
payment of any interest on any such Indebtedness beyond the period of
grace, if any, provided in the instrument or agreement under which
such Indebtedness was created; or (iii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or beneficiary of such
Indebtedness (or a trustee or agent on behalf of such holder or
beneficiary) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or (in the
case of any such Indebtedness constituting a Guarantee Obligation) to
become payable; provided, that a default, event or condition described
in clause (i), (ii) or (iii) of this paragraph (e) shall not at any
time constitute an Event of Default under this Agreement unless, at
such time, one or more defaults, events or conditions of the type
described in clauses (i), (ii) and (iii) of this paragraph (e) shall
have occurred and be continuing with respect to Indebtedness the
outstanding principal amount of which exceeds in the aggregate
$10,000,000; or
(f) (i) The Borrower or any of its Subsidiaries (other than
Holly Finance Company) shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of
a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the
Borrower or any of its Subsidiaries (other than Holly Finance Company)
shall make a general assignment for the benefit of its creditors; or
(ii) there shall be commenced against the Borrower or any of its
Subsidiaries (other than Holly Finance Company) any case, proceeding
or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged or unbonded
for a period of 60 days; or (iii) there shall be commenced against the
Borrower or any of its Subsidiaries (other than Holly Finance Company)
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order
for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof;
or (iv) the Borrower or any of its Subsidiaries (other than Holly
Finance Company) shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the
Borrower or any of its Subsidiaries (other than Holly Finance Company)
shall generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due; or
<PAGE> 88
83
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan or any Lien in favor of
the PBGC or a Plan shall arise on the assets of the Borrower or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion
of the Required Lenders, likely to result in the termination of such
Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan
shall terminate for purposes of Title IV of ERISA, (v) the Borrower or
any Commonly Controlled Entity shall, or in the reasonable opinion of
the Required Lenders is likely to, incur any liability in connection
with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through
(vi) above, such event or condition, together with all other such
events or conditions, if any, could reasonably be expected to have a
Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries (other than Holly Finance
Company) involving in the aggregate a liability (to the extent not
paid or fully covered by insurance as to which the relevant insurance
company has acknowledged coverage) of $10,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 30 days from the entry thereof;
or
(i) Any of the Security Documents shall cease, for any
reason, to be in full force and effect, or any Loan Party or any
Affiliate of any Loan Party shall so assert, or any Lien created by
any of the Security Documents shall cease to be enforceable and
substantially of the same effect and priority purported to be created
thereby; or
(j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force
and effect or any Loan Party or any Affiliate of any Loan Party shall
so assert; or
(k) (i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), (A) shall become, or obtain rights
(whether by means or warrants, options or otherwise) to become, the
"beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act), directly or indirectly, of more than 40% of the
outstanding common stock of the Borrower or (B) shall obtain the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the
Borrower; (ii) the board of directors of the Borrower shall cease to
consist of a majority of Continuing Directors; or (iii) a Specified
Change of Control shall occur; or
<PAGE> 89
84
(l) The Senior Subordinated Notes or the guarantees thereof
shall cease, for any reason, to be validly subordinated to the
Obligations or the obligations of the Subsidiary Guarantors under the
Guarantee and Collateral Agreement, as the case may be, as provided in
the Senior Subordinated Note Indenture, or any Loan Party, any
Affiliate of any Loan Party, the trustee in respect of the Senior
Subordinated Notes or the holders of at least 25% in aggregate
principal amount of the Senior Subordinated Notes shall so assert;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under
this Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) shall immediately become due and payable, and (B) if such event is
any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Majority Revolving Credit Facility Lenders,
the Administrative Agent may, or upon the request of the Majority Revolving
Credit Facility Lenders, the Administrative Agent shall, by notice to the
Borrower declare the Revolving Credit Commitments to be terminated forthwith,
whereupon the Revolving Credit Commitments shall immediately terminate; and
(ii) with the consent of the Required Lenders, the Administrative Agent may, or
upon the request of the Required Lenders, the Administrative Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the other Loan
Documents (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit
shall have presented the documents required thereunder) to be due and payable
forthwith, whereupon the same shall immediately become due and payable. With
respect to all Letters of Credit with respect to which presentment for honor
shall not have occurred at the time of an acceleration pursuant to this
paragraph, the Borrower shall at such time deposit in a cash collateral account
opened by the Administrative Agent an amount equal to the aggregate then
undrawn and unexpired amount of such Letters of Credit. Amounts held in such
cash collateral account shall be applied by the Administrative Agent to the
payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon, if any, shall be applied to repay other obligations of the Borrower
hereunder and under the other Loan Documents. After all such Letters of Credit
shall have expired or been fully drawn upon, all Reimbursement Obligations
shall have been satisfied and all other obligations of the Borrower hereunder
and under the other Loan Documents shall have been paid in full, the balance,
if any, in such cash collateral account shall be returned to the Borrower (or
such other Person as may be lawfully entitled thereto).
SECTION 9. THE AGENTS
9.1 Appointment. Each Lender hereby irrevocably designates
and appoints the Agents as the agents of such Lender under this Agreement and
the other Loan Documents, and each such Lender irrevocably authorizes each
Agent, in such capacity, to take such action on
<PAGE> 90
85
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to such Agent by the terms of this Agreement and the other Loan Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, no
Agent shall have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against any Agent.
9.2 Delegation of Duties. Each Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
9.3 Exculpatory Provisions. Neither any Agent, the Issuing
Lender nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or any other Loan Document (except to the extent that any of the
foregoing are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from its or such Person's own gross
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made by
any Loan Party or any officer thereof contained in this Agreement, any other
Loan Document or any Bond Document or in any certificate, report, statement or
other document referred to or provided for in, or received by the Agents under
or in connection with, this Agreement, any other Loan Document or any Bond
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement, any other Loan Document or any Bond Document
or for any failure of any Loan Party a party thereto to perform its obligations
hereunder or thereunder. Neither the Agents nor the Issuing Lender shall be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, any other Loan Document or any Loan Document, or to inspect
the properties, books or records of any Loan Party. Without limiting the
generality of the foregoing, the Collateral Agent shall not be responsible to
any of the Agents or any of the Lenders for the existence, creation,
attachment, perfection or priority of any lien or security interest in the
Collateral or any part thereof or for the existence of any liens, security
interests or other encumbrances or charges thereon.
9.4 Reliance by Administrative Agent. Each Agent and the
Issuing Lender shall be entitled to rely, and shall be fully protected in
relying, upon any instrument, writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including, without limitation,
counsel to the Loan Parties), independent accountants and other experts
selected by the Administrative Agent. The Agents
<PAGE> 91
86
may deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. Each Agent and the Issuing
Lender shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document (or in the case of the Issuing
Lender, any Bond Document) unless it shall first receive such advice or
concurrence of the Required Lenders (or, if so specified by this Agreement, all
Lenders) as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
Each Agent and the Issuing Lender shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents (or, in the case of the Issuing Lender, any Bond Document) in
accordance with a request of the Required Lenders (or, if so specified by this
Agreement, all Lenders), and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Loans.
9.5 Notice of Default. No Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". The Issuing Lender shall
not be deemed to have knowledge or notice of the occurrence of any default or
event of default under any Bond Document, unless the Issuing Lender shall have
received written notice from the Borrower or any other party to a Bond
Document. In the event that the Administrative Agent or the Issuing Lender
receives such a notice, the Administrative Agent or the Issuing Lender, as
applicable, shall give notice thereof to the Lenders. The Administrative Agent
and the Collateral Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders (or,
if so specified by this Agreement, all Lenders); provided that unless and until
the Administrative Agent or the Collateral Agent, as the case may be, shall
have received such directions, the Administrative Agent and the Collateral
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as such
Agent shall deem advisable in the best interests of the Lenders. The Issuing
Lender shall take such action with respect to such default or event of default
under the Bond Documents as shall be required pursuant to Section 8 hereof;
provided that unless and until the Issuing Lender shall have received direction
under Section 8, the Issuing Lender may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such default
or event of default as it shall deem advisable and in the best interest of the
L/C Participants, except any action resulting in the acceleration or redemption
of any Bonds.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender
expressly acknowledges that neither the Agents nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by any Agent
hereinafter taken, including any review of the affairs of a Loan Party or any
affiliate of a Loan Party, shall be deemed to constitute any representation or
warranty by any Agent to any Lender. Each Lender represents to the Agents that
it has, independently and without reliance upon any Agent or any other Lender,
and based on such documents and
<PAGE> 92
87
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Loan Parties and their affiliates and
made its own decision to make its Loans hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon any Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and
their affiliates. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Administrative Agent hereunder,
no Agent shall have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of any Loan
Party or any affiliate of a Loan Party which may come into the possession of
such Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify each
Agent (and the Revolving Credit Lenders agree to indemnify the Issuing Lender)
in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective aggregate Revolving Credit Percentages, Tranche A Term Loan
Percentages and Tranche B Term Loan Percentages (and in the case of the Issuing
Lender, ratably according to their respective Revolving Credit Percentages) in
effect on the date on which indemnification is sought under this Section 9.7
(or, if indemnification is sought after the date upon which the Commitments
shall have terminated and the Loans shall have been paid in full, ratably in
accordance with such Percentages immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans or the termination of any Bond Letter of
Credit) be imposed on, incurred by or asserted against such Agent or the
Issuing Lender, as applicable, in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by such Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements which are found by a final and nonappealable decision of a court
of competent jurisdiction to have resulted from such Agent's or the Issuing
Lender's, as the case may be, gross negligence or willful misconduct or, in the
case of the Issuing Lender, for the fees and expenses of counsel in connection
with the preparation, execution, delivery, administration or modification of
any Bond Document or any amendments thereto. The agreements in this Section
9.7 shall survive the payment of the Loans and all other amounts payable
hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with any Loan
<PAGE> 93
88
Party as though such Agent was not an Agent. With respect to its Loans made or
renewed by it and with respect to any Letter of Credit issued or participated
in by it, each Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not an Agent, and the terms "Lender" and "Lenders" shall include each
Agent in its individual capacity.
9.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 10 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Loan Documents, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall (unless an Event of Default under Section 8(a) or Section
8(f) with respect to the Borrower shall have occurred and be continuing) be
approved by the Borrower (which approval shall not be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers
and duties of the Administrative Agent, and the term "Administrative Agent"
shall mean such successor agent effective upon such appointment and approval,
and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Loans. If no successor agent has accepted
appointment as Administrative Agent by the date that is 30 days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become
effective and the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above. The Syndication Agent or the
Collateral Agent, as the case may be, may, at any time, by notice to the
Lenders and the Administrative Agent, resign as Syndication Agent or Collateral
Agent (as applicable), hereunder, whereupon the duties, rights, obligations and
responsibilities hereunder shall automatically be assumed by, and inure to the
benefit of, the Administrative Agent, without any further act by the
Syndication Agent, the Collateral Agent, the Administrative Agent or any
Lender; provided that in the case of a resignation by the Collateral Agent, the
Collateral Agent shall (i) assign and deliver to the Administrative Agent any
Collateral pledged to the Collateral Agent, for the benefit of the Agents and
the Lenders, (ii) execute and deliver to the Administrative Agent any
amendments to the Security Documents or such other documents as the Syndication
Agent deems necessary or advisable in order to continue the security interest
of the Lenders in the Collateral and (iii) take all other actions necessary or
advisable to continue the security interest of the Lenders in the Collateral
(including, without limitation, the execution and delivery of amendments to the
Uniform Commercial Code financing statements filed, registered or recorded in
order to create in favor of the Collateral Agent, for the benefit of the Agents
and the Lenders, the perfected, first priority Lien on the Collateral). After
any retiring Agent's resignation as Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement and the other Loan Documents.
9.10 Authorization to Release Liens. The Administrative
Agent is hereby irrevocably authorized by each of the Lenders to release any
Lien covering any Property of the Borrower or any of its Subsidiaries that is
the subject of a Disposition which is permitted by this Agreement or which has
been consented to in accordance with Section 10.1.
<PAGE> 94
89
9.11 The Arranger. The Arranger, in its capacity as such,
shall have no duties or responsibilities, and shall incur no liability, under
this Agreement and the other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section 10.1. The Required Lenders and each Loan Party party to the relevant
Loan Document may, or (with the written consent of the Required Lenders) the
Syndication Agent, the Administrative Agent and each Loan Party party to the
relevant Loan Document may, from time to time, (a) enter into written
amendments, supplements or modifications hereto and to the other Loan Documents
for the purpose of adding any provisions to this Agreement or the other Loan
Documents or changing in any manner the rights of the Lenders or of the Loan
Parties hereunder or thereunder or (b) waive, on such terms and conditions as
the Required Lenders, or the Agents, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall (i) forgive the principal amount or extend the final scheduled date of
maturity of any Loan, extend the scheduled date of any amortization payment in
respect of any Term Loan, reduce the stated rate of any interest, fee or letter
of credit commission payable hereunder or extend the scheduled date of any
payment thereof, or increase the amount or extend the expiration date of any
Lender's Revolving Credit Commitment, in each case without the consent of each
Lender directly affected thereby; (ii) amend, modify or waive any provision of
this Section 10.1 or reduce any percentage specified in the definition of
Required Lenders, consent to the assignment or transfer by the Borrower of any
of its rights and obligations under this Agreement and the other Loan
Documents, release all or substantially all of the Collateral or release all or
substantially all of the Subsidiary Guarantors from their obligations under the
Guarantee and Collateral Agreement, in each case without the written consent of
all Lenders; (iii) amend, modify or waive any condition precedent to any
extension of credit under the Revolving Credit Facility set forth in Section
5.2 (including, without limitation, in connection with any waiver of an
existing Default or Event of Default) without the written consent of the
Majority Revolving Credit Facility Lenders; (iv) reduce the percentage
specified in the definition of Majority Facility Lenders without the written
consent of all Lenders under each affected Facility; (v) amend, modify or waive
any provision of Section 9 without the written consent of the Agents; (vi)
amend, modify or waive any provision of Section 2.6 or 2.7 without the written
consent of the Swing Line Lender; (vii) amend, modify or waive any provision of
Section 3 without the written consent of the Issuing Lender; or (viii) amend,
modify or waive any provision of Section 2.18(d) without the written consent of
the Majority Facility Lenders of the Tranche B Term Loans; provided, further,
notwithstanding the provisions set forth above, no Lender consent shall be
required in connection with the release
<PAGE> 95
90
of any Liens on Property sold by the Borrower or its Subsidiaries if such sale
is permitted pursuant to Section 7.5. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and shall
be binding upon the Loan Parties, the Lenders, the Administrative Agent and all
future holders of the Loans. In the case of any waiver, the Loan Parties, the
Lenders and the Administrative Agent shall be restored to their former position
and rights hereunder and under the other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Default or Event of
Default, or impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice,
when received, addressed as follows in the case of the Borrower, the
Syndication Agent, the Collateral Agent and the Administrative Agent, and as
set forth in an administrative questionnaire delivered to the Administrative
Agent in the case of the Lenders, or to such other address as may be hereafter
notified by the respective parties hereto:
<TABLE>
<S> <C>
The Borrower: Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Attention: Karen Mercer
Telecopy: (281) 490-9895
Telephone: (281) 490-9506
The Syndication Agent: Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Michele Swanson
Telecopy: (212) 528-0819
Telephone: (212) 526-0330
The Collateral Agent and Harris Trust and Savings Bank
the Administrative Agent: 111 West Monroe Street
Chicago, Illinois 60690
Attention: Agribusiness Division
Telecopy: (312) 765-8095
Telephone: (312) 461-2744
</TABLE>
provided that any notice, request or demand to or upon any Agent or the Lenders
shall not be effective until received.
<PAGE> 96
91
10.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of either Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
10.5 Payment of Expenses. The Borrower agrees (a) to pay or
reimburse the Agents for all their reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other Loan
Documents (except for any costs or expenses specifically excluded in the
commitment letter executed by the Borrower and the Syndication Agent in respect
of the credit facilities provided for herein) and any other documents prepared
in connection herewith or therewith, and the consummation and administration of
the transactions contemplated hereby and thereby, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent, (b) to pay or reimburse each Lender and the Agents for
all its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, including, without limitation, the reasonable fees
and disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to each Lender and of counsel to the Agents, (c) to pay,
indemnify, and hold each Lender and the Agents harmless from, any and all
recording and filing fees or any amendment, supplement or modification of, or
any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold
each Lender and the Agents and their respective officers, directors, trustees,
investment advisors, employees, affiliates, agents and controlling persons
(each, an "indemnitee") harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and administration
of this Agreement, the other Loan Documents and any such other documents,
including, without limitation, any of the foregoing relating to the use of
proceeds of the Loans or the violation of, noncompliance with or liability
under, any Environmental Law applicable to the operations of the Borrower any
of its Subsidiaries or any of the Properties (all the foregoing in this clause
(d), collectively, the "indemnified liabilities"), provided, that the Borrower
shall have no obligation hereunder to any indemnitee with respect to
indemnified liabilities to the extent such indemnified liabilities resulted
from the gross negligence or willful misconduct of such indemnitee. Without
limiting the foregoing, and to the extent permitted by applicable law, the
Borrower agrees not to assert and hereby waives, and shall cause each of its
Subsidiaries not to assert and to waive, all rights of contribution or any
other rights of recovery with respect to all
<PAGE> 97
92
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any Indemnitee.
The agreements in this Section 10.5 shall survive repayment of the Loans and
all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agents, all future holders of the Loans and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agents and each Lender.
(b) Any Lender may, without the consent of the Borrower, in
accordance with applicable law, at any time sell to one or more banks,
financial institutions or other entities (each, a "Participant") participating
interests in any Loan owing to such Lender, any Commitment of such Lender or
any other interest of such Lender hereunder and under the other Loan Documents.
In the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan for all purposes under this Agreement and the other
Loan Documents, and the Borrower and the Agents shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. In no event
shall any Participant under any such participation have any right to approve
any amendment or waiver of any provision of any Loan Document, or any consent
to any departure by any Loan Party therefrom, except to the extent that such
amendment, waiver or consent would reduce the principal of, or interest on, the
Loans or any fees payable hereunder, or postpone the date of the final maturity
of the Loans, in each case to the extent subject to such participation. The
Borrower agrees that if amounts outstanding under this Agreement and the Loans
are due or unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall, to
the maximum extent permitted by applicable law, be deemed to have the right of
setoff in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement, provided that, in
purchasing such participating interest, such Participant shall be deemed to
have agreed to share with the Lenders the proceeds thereof as provided in
Section 10.7(a) as fully as if it were a Lender hereunder. The Borrower also
agrees that each Participant shall be entitled to the benefits of Sections
2.19, 2.20 and 2.21 with respect to its participation in the Commitments and
the Loans outstanding from time to time as if it was a Lender; provided that,
in the case of Section 2.20, such Participant shall have complied with the
requirements of said Section and provided, further, that no Participant shall
be entitled to receive any greater amount pursuant to any such Section than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such Participant
had no such transfer occurred.
<PAGE> 98
93
(c) Any Lender (an "Assignor") may, in accordance with
applicable law, at any time and from time to time, subject to the consent of
the Syndication Agent (which shall not be unreasonably withheld), assign to any
Lender or any affiliate thereof or any Approved Fund or, with the consent of
the Borrower and the Agents (which, in each case, shall not be unreasonably
withheld or delayed) (provided that no such consent need be obtained for
assignments involving the Syndication Agent or its Affiliates), to an
additional bank, financial institution or other entity (an "Assignee") all or
any part of its rights and obligations under this Agreement pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit E, executed by
such Assignee, such Assignor, the Syndication Agent and the Administrative
Agent (and, where the consent of the Borrower is required pursuant to the
foregoing provisions, by the Borrower) and delivered to the Administrative
Agent for its acceptance and recording in the Register; provided that no such
assignment to an Assignee (other than any Lender or any affiliate thereof or an
Approved Fund) shall be in an aggregate principal amount of less than
$5,000,000 (other than in the case of an assignment of all of a Lender's
interests under this Agreement), unless otherwise agreed by the Borrower, the
Syndication Agent and the Administrative Agent. Any such assignment need not
be ratable as among the Facilities. Upon such execution, delivery, acceptance
and recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder with a Commitment and/or Loans as set
forth therein, and (y) the Assignor thereunder shall, to the extent provided in
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of an
Assignor's rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto). Notwithstanding any provision of this
Section 10.6, the consent of the Borrower shall not be required for any
assignment which occurs at any time when any of the events described in Section
8(f) shall have occurred and be continuing. For purposes of this Section 10.6,
"Approved Fund" shall mean, with respect to any Lender that is a fund that
invests in bank loans, any other fund that invests in bank loans which is
managed or advised by the same investment advisor as such Lender or by an
affiliate of such investment advisor.
(d) The Administrative Agent shall maintain at its address
referred to in Section 10.2 a copy of each Assignment and Acceptance delivered
to it and a register (the "Register") for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of the
Loans owing to, each Lender from time to time and any Notes evidencing such
Loans. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Administrative Agent and the Lenders
shall treat each Person whose name is recorded in the Register as the owner of
the Loan and any Note evidencing such Loan recorded therein for all purposes of
this Agreement. Any assignment of any Loan whether or not evidenced by a Note
shall be effective only upon appropriate entries with respect thereto being
made in the Register (and each Note shall expressly so provide). Any
assignment or transfer of all or part of a Loan evidenced by a Note shall be
registered on the Register only upon surrender for registration of assignment
or transfer of the Note evidencing such Loan, accompanied by a duly executed
Assignment and Acceptance, and thereupon one or more new Notes in the same
aggregate principal amount shall be issued to the
<PAGE> 99
94
designated Assignee and the old Notes shall be returned by the Administrative
Agent to the Borrower marked "cancelled". The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender, an Assignee and the Syndication Agent (and, in the case
of an Assignee that is not then a Lender or an affiliate thereof or a Person
under common management with such Lender, by the Borrower, the Administrative
Agent and the Issuing Lender) together with payment to the Administrative Agent
of a registration and processing fee of $3,500 (except that no such
registration and processing fee shall be payable in connection with certain
assignments involving the Syndication Agent related to the primary syndication
hereof, and in the case of an assignment to an Assignee that is a Lender or an
affiliate thereof or an Approved Fund, such fee shall be reduced to $1,000; and
except that in the case of contemporaneous assignments by a Lender to more than
one fund managed by the same investment advisor (which funds are not then
Lenders hereunder, affiliates thereof or Approved Funds), only a single fee of
$3,500 shall be payable for all such contemporaneous assignments), the
Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such
acceptance and recordation to the Lenders and the Borrower. On or prior to
such effective date, the Borrower, at its own expense, upon request, shall
execute and deliver to the Administrative Agent (in exchange for the Revolving
Credit Note and/or Term Notes, as the case may be, of the assigning Lender) a
new Revolving Credit Note and/or Term Notes, as the case may be, to the order
of such Assignee in an amount equal to the Revolving Credit Commitment and/or
applicable Term Loans, as the case may be, assumed or acquired by it pursuant
to such Assignment and Acceptance and, if the assigning Lender has retained a
Revolving Credit Commitment and/or Term Loans, as the case may be, upon
request, a new Revolving Credit Note and/or Term Notes, as the case may be, to
the order of the assigning Lender in an amount equal to the Revolving Credit
Commitment and/or applicable Term Loans, as the case may be, retained by it
hereunder. Such new Notes shall be dated the Closing Date and shall otherwise
be in the form of the Note replaced thereby.
(f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section 10.6 concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
10.7 Adjustments; Setoff. (a) Except to the extent that
this Agreement provides for payments to be allocated to the Lenders under a
particular Facility, if any Lender (a "Benefitted Lender") shall at any time
receive any payment of all or part of its Loans or the Reimbursement
Obligations owing to it, or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by setoff, pursuant to
events or proceedings of the nature referred to in Section 8(f), or otherwise),
in a greater proportion than any such payment to or collateral received by any
other Lender, if any, in respect of such other Lender's Loans or the
Reimbursement Obligations owing to such other Lender, or interest thereon, such
<PAGE> 100
95
Benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan and/or
of the Reimbursement Obligations owing to each such other Lender, or shall
provide such other Lenders with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to setoff and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender
agrees promptly to notify the Borrower and the Administrative Agent after any
such setoff and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such setoff and application.
(c) Notwithstanding the foregoing, no Lender shall institute
or commence any proceeding to collect any amounts owed to it hereunder or shall
otherwise exercise any remedies (including setoff) with respect to the amounts
owed to it unless such Lender shall provide at least five Business Days' (or
such shorter period as may be consented to by the Collateral Agent) prior
written notice thereof to the Collateral Agent.
10.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
10.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan
Documents represent the entire agreement of the Borrower, the Administrative
Agent and the Lenders with respect to the subject matter hereof, and there are
no promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth
or referred to herein or in the other Loan Documents.
<PAGE> 101
96
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. The Borrower
hereby irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action
or proceeding relating to this Agreement and the other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate
courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in Section 10.2 or
at such other address of which the Administrative Agent shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this Section 10.12 any special, exemplary,
punitive or consequential damages.
10.13 Acknowledgements. The Borrower hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or
in connection with this Agreement or any of the other Loan Documents,
and the relationship between Administrative Agent and Lenders, on one
hand, and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
<PAGE> 102
97
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS AND
THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.15 Confidentiality. Each of the Agents and each Lender
agrees to keep confidential all non-public information provided to it by any
Loan Party pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent any Agent or any
Lender from disclosing any such information (a) to the Administrative Agent,
any other Lender or any affiliate of any Lender, (b) to any Participant or
Assignee (each, a "Transferee") or prospective Transferee which agrees to
comply with the provisions of this Section 10.15, (c) to the employees,
directors, agents, attorneys, accountants and other professional advisors of
such Lender or its affiliates, (d) upon the request or demand of any
Governmental Authority having jurisdiction over the such Agent or such Lender,
(e) in response to any order of any court or other Governmental Authority or as
may otherwise be required pursuant to any Requirement of Law, (f) if requested
or required to do so in connection with any litigation or similar proceeding,
provided that such Agent will use commercially reasonable efforts to give
notice to the Borrower thereof, (g) which has been publicly disclosed other
than in breach of this Section 10.15, (h) to the National Association of
Insurance Commissioners or any similar organization or any nationally
recognized rating agency that requires access to information about a Lender's
investment portfolio in connection with ratings issued with respect to such
Lender, or (i) in connection with the exercise of any remedy hereunder or under
any other Loan Document.
<PAGE> 103
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
IMPERIAL HOLLY CORPORATION
By:
------------------------------------
Name:
Title:
<PAGE> 104
HARRIS TRUST AND SAVINGS BANK, as
Administrative Agent, Collateral Agent,
Issuing Lender and as a Lender
By:
------------------------------------
Name:
Title:
<PAGE> 105
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent and as a
Lender
By:
------------------------------------
Name:
Title:
<PAGE> 106
WACHOVIA BANK, N.A.
By:
------------------------------------
Name:
Title:
<PAGE> 107
UNION BANK OF CALIFORNIA, N.A.
By:
------------------------------------
Name:
Title:
<PAGE> 108
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND" NEW YORK BRANCH
By:
------------------------------------
Name:
Title:
<PAGE> 109
WELLS FARGO BANK (TEXAS), N.A.
By:
------------------------------------
Name:
Title:
<PAGE> 110
CREDIT AGRICOLE INDOSUEZ
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
<PAGE> 111
FBS AG CREDIT, INC.
By:
------------------------------------
Name:
Title:
<PAGE> 112
THE BANK OF NEW YORK
By:
------------------------------------
Name:
Title:
<PAGE> 113
THE FROST NATIONAL BANK
By:
------------------------------------
Name:
Title:
<PAGE> 114
ST. PAUL BANK FOR COOPERATIVES
By:
------------------------------------
Name:
Title:
<PAGE> 115
ING HIGH INCOME PRINCIPAL
PRESENTATION FUND HOLDINGS, LDC
c/o ING CAPITAL ADVISORS, INC.
By:
------------------------------------
Name:
Title:
<PAGE> 116
111
PRIME INCOME TRUST
By:
------------------------------------
Name:
Title:
<PAGE> 117
PILGRIM AMERICA PRIME RATE TRUST
By:
------------------------------------
Name:
Title:
<PAGE> 118
METROPOLITAN LIFE INSURANCE
COMPANY
By:
------------------------------------
Name:
Title:
<PAGE> 119
MERRILL LYNCH SENIOR FLOATING RATE
FUND
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By:
------------------------------------
Name:
Title:
<PAGE> 120
THE TRAVELERS INSURANCE COMPANY
By:
------------------------------------
Name:
Title:
<PAGE> 121
PEOPLES SECURITY LIFE INSURANCE
COMPANY
By:
------------------------------------
Name:
Title:
<PAGE> 122
GCB INVESTMENT PORTFOLIO
By:
------------------------------------
Name:
Title:
<PAGE> 123
Annex A
PRICING GRID FOR REVOLVING CREDIT LOANS, SWING LINE LOANS,
TRANCHE A TERM LOANS AND COMMITMENT FEES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Consolidated Total Applicable Margin Applicable Margin for Commitment Fee Rate
Leverage Ratio for Eurodollar Loans Base Rate Loans
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Greater than or equal 2.00% 1.00% 0.375%
to 4.00 to 1.00
- ---------------------------------------------------------------------------------------------------------
Less than 4.00 to 1.00 1.75% 0.75% 0.375%
but greater than or
equal to 3.50 to 1.00
- ---------------------------------------------------------------------------------------------------------
Less than 3.50 to 1.00 1.50% 0.50% 0.375%
but greater than or
equal to 3.00 to 1.00
- ---------------------------------------------------------------------------------------------------------
Less than 3.00 to 1.00 1.25% 0.25% 0.250%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
PRICING GRID FOR
TRANCHE B TERM LOANS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Consolidated Total Leverage Applicable Margin Applicable Margin for Base
Ratio for Eurodollar Loans Rate Loans
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Greater than or equal to 3.00 2.00% 1.00%
to 1.00
- ---------------------------------------------------------------------------------------------------------
Less than 3.00 to 1.00 1.75% 0.75%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Changes in the Applicable Margin with respect to Tranche A Term Loans, Tranche
B Term Loans, Revolving Credit Loans, Swing Line Loans or in the Commitment Fee
Rate resulting from changes in the Consolidated Total Leverage Ratio shall
become effective on the date (the "Adjustment Date") on which financial
statements are delivered to the Lenders pursuant to Section 6.1 (but in any
event not later than the 50th day after the end of each of the first three
quarterly periods of each fiscal year or the 100th day after the end of each
fiscal year, as the case may be) and shall remain in effect until the next
change to be effected pursuant to this paragraph. If any financial statements
referred to above are not delivered within the time periods specified above,
then, until such financial statements are delivered, the Consolidated Total
Leverage Ratio as at the end of the fiscal period that would have been covered
thereby shall for the purposes of this definition be deemed to be greater than
4.00 to 1.00. In addition,
<PAGE> 124
3
at all times while an Event of Default shall have occurred and be continuing,
the Consolidated Total Leverage Ratio shall for the purposes of this definition
be deemed to be greater than 4.00 to 1.00. Each determination of the
Consolidated Total Leverage Ratio pursuant to this definition shall be made
with respect to the period of four consecutive fiscal quarters of the Borrower
ending at the end of the period covered by the relevant financial statements.
<PAGE> 125
SCHEDULES 1.1A
COMMITMENTS: LENDING OFFICES AND ADDRESSES
<TABLE>
<CAPTION>
Commitments
-----------
Name of Lender and Revolving Tranche A Tranche B
Information for Notices Credit Term Loan Term Loan
------ --------- ---------
<S> <C> <C> <C>
</TABLE>
<PAGE> 126
SCHEDULE 1.1B
MORTGAGED PROPERTY
<PAGE> 127
SCHEDULE 4.4
CONSENTS, AUTHORIZATIONS, FILINGS AND NOTICES
<PAGE> 128
SCHEDULE 4.14
SUBSIDIARIES
<PAGE> 129
SCHEDULE 4.18(a)
UCC FILING JURISDICTIONS
<PAGE> 130
SCHEDULE 4.18(b)
MORTGAGE FILING JURISDICTIONS
<PAGE> 131
SCHEDULE 7.2(e)
EXISTING INDEBTEDNESS
<PAGE> 132
SCHEDULE 7.3(f)
EXISTING LIENS
<PAGE> 1
EXHIBIT 4(a)(2)
================================================================================
AMENDED AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT
made by
IMPERIAL HOLLY CORPORATION
and certain of its Subsidiaries
in favor of
HARRIS TRUST AND SAVINGS BANK,
as Collateral Agent
Dated as of December 22, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2. GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Right of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Amendments, etc. with respect to the Borrower Obligations . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Guarantee Absolute and Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Representations in Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Title; No Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Perfected First Priority Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Inventory and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 Pledged Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.8 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Covenants in Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Delivery of Instruments and Chattel Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 Maintenance of Perfected Security Interest; Further Documentation . . . . . . . . . . . . . . . . . . . 12
5.6 Changes in Locations, Name, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.8 Pledged Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.9 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6. REMEDIAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Certain Matters Relating to Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Communications with Obligors; Grantors Remain Liable . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Pledged Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Proceeds to be Turned Over To Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.5 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6 Code and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.7 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.8 Waiver; Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7. THE COLLATERAL AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Collateral Agent's Appointment as Attorney-in-Fact, etc . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 Duty of Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Execution of Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.4 Authority of Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Amendments in Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.3 No Waiver by Course of Conduct; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.4 Enforcement Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.6 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.9 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.14 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.15 Additional Grantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.16 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT
AMENDED AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT, dated
as of December 22, 1997, made by each of the signatories hereto (together with
any other entity that may become a party hereto as provided herein, the
"Grantors"), in favor of Harris Trust and Savings Bank, an Illinois banking
corporation, as collateral agent (in such capacity, the "Collateral Agent") for
the Agents and the banks and other financial institutions (the "Lenders") from
time to time parties to the Amended and Restated Credit Agreement, dated as of
December 22, 1997 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among Imperial Holly
Corporation (the "Borrower"), the Lenders, Lehman Brothers Inc., as Arranger,
Lehman Commercial Paper Inc., as Syndication Agent and Harris Trust and Savings
Bank, as Administrative Agent and Collateral Agent.
W I T N E S S E T H:
WHEREAS, certain of the parties hereto are parties to that
certain Guarantee and Collateral Agreement, dated as of October 17, 1997 (as
amended, supplemented or otherwise modified prior to the date hereof, the
"Existing Guarantee and Collateral Agreement");
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms
and subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of
companies that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the
Credit Agreement will be used in part to enable the Borrower to make valuable
transfers to one or more of the other Grantors in connection with the operation
of their respective businesses;
WHEREAS, the Borrower and the other Grantors are engaged in
related businesses, and each Grantor will derive substantial direct and
indirect benefit from the making of the extensions of credit under the Credit
Agreement; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit to the Borrower under the
Credit Agreement that the Grantors shall have amended and restated the Existing
Guarantee and Collateral Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and to induce
the Agents and the Lenders to amend and restate the Existing Credit Agreement
and to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, each Grantor hereby agrees with the Collateral Agent, for
the ratable benefit of the Lenders, to amend and restate the Existing Guarantee
and Collateral Agreement to read in its entirety as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement, and the following terms which are defined in
the Uniform Commercial Code in effect in the State of New
<PAGE> 5
2
York on the date hereof are used herein as so defined: Accounts, Chattel
Paper, Documents, Equipment, Farm Products, Instruments and Inventory.
(b) The following terms shall have the following meanings:
"Agreement": this Guarantee and Collateral Agreement, as the
same may be amended, amended and restated, supplemented or otherwise
modified from time to time.
"Borrower Obligations": the collective reference to the
unpaid principal of and interest on the Loans and Reimbursement
Obligations and all other obligations and liabilities of the Borrower
(including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of
the Loans and Reimbursement Obligations and interest accruing at the
then applicable rate provided in the Credit Agreement after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether
or not a claim for post-filing or post-petition interest is allowed
in such proceeding) to any Agent or any Lender (or, in the case of any
Hedge Agreement referred to below, any Affiliate of any Lender),
whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement, this Agreement, the
other Loan Documents, any Letter of Credit or any Hedge Agreement
entered into by the Borrower with any Lender (or any Affiliate of any
Lender) or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements
of counsel to the Agents or to the Lenders that are required to be
paid by the Borrower pursuant to the terms of any of the foregoing
agreements).
"Collateral": as defined in Section 3.
"Collateral Account": any collateral account established by
the Collateral Agent as provided in Section 6.1 or 6.4.
"Contracts": to the extent assignment thereof is not
expressly prohibited by applicable law or prohibited by such contract
or agreement, all contracts and agreements to which any Grantor is a
party or under which any Grantor is a beneficiary or has rights, in
each case, as the same may be amended, supplemented or otherwise
modified from time to time, including, without limitation, (i) all
rights of any Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of any Grantor
to damages arising thereunder and (iii) all rights of any Grantor to
perform and to exercise all remedies thereunder.
"Copyrights": (i) all copyrights arising under the laws of
the United States, any other country or any political subdivision
thereof, whether registered or unregistered and whether published or
unpublished (including, without limitation, those listed in Schedule
6), all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, all
registrations, recordings and applications in the United States
Copyright Office, and (ii) the right to obtain all renewals thereof.
<PAGE> 6
3
"Copyright Licenses": any written agreement naming any
Grantor as licensor or licensee (including, without limitation, those
listed in Schedule 6), granting any right under any Copyright,
including, without limitation, the grant of rights to manufacture,
distribute, exploit and sell materials derived from any Copyright.
"General Intangibles": all "general intangibles" as such term
is defined in Section 9-106 of the Uniform Commercial Code in effect
in the State of New York on the date hereof and, in any event,
including, without limitation, with respect to any Grantor, all
contracts, agreements, instruments and indentures in any form, and
portions thereof, to which such Grantor is a party or under which such
Grantor has any right, title or interest or to which such Grantor or
any property of such Grantor is subject, as the same may from time to
time be amended, supplemented or otherwise modified, including,
without limitation, (i) all rights of such Grantor to receive moneys
due and to become due to it thereunder or in connection therewith,
(ii) all rights of such Grantor to damages arising thereunder and
(iii) all rights of such Grantor to perform and to exercise all
remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its
right, title and interest in such contract, agreement, instrument or
indenture is not prohibited by applicable law or prohibited by such
contract, agreement, instrument or indenture without the consent of
any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate
its obligations thereunder, or is permitted with consent if all
necessary consents to such grant of a security interest have been
obtained from the other parties thereto (it being understood that the
foregoing shall not be deemed to obligate such Grantor to obtain such
consents); provided, that the foregoing limitation shall not affect,
limit, restrict or impair the grant by such Grantor of a security
interest pursuant to this Agreement in any Receivable or any money or
other amounts due or to become due under any such contract, agreement,
instrument or indenture.
"Guarantor Obligations": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or
in connection with this Agreement or any other Loan Document to which
such Guarantor is a party, in each case whether on account of
guarantee obligations, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees
and disbursements of counsel to the Agents or to the Lenders that are
required to be paid by such Guarantor pursuant to the terms of this
Agreement or any other Loan Document).
"Guarantors": the collective reference to each Grantor other
than the Borrower.
"Hedge Agreements": as to any Person, all interest rate
swaps, caps or collar agreements or similar arrangements entered into
by such Person providing for protection against fluctuations in
interest rates or currency exchange rates or the exchange of nominal
interest obligations, either generally or under specific
contingencies.
"Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the
Copyright Licenses, the Patents, the Patent Licenses, the Trademarks
and the Trademark Licenses, and all rights to sue at law or in equity
for any infringement or other impairment thereof, including the right
to receive all proceeds and damages therefrom.
<PAGE> 7
4
"Intercompany Note": any promissory note evidencing loans
made by any Grantor to the Borrower or any of its Subsidiaries.
"Investment Property": as defined in Section 9-115 of the
Uniform Commercial Code in effect in the State of New York on the date
hereof, excluding the items set forth on Schedule 8 hereto.
"Issuers": the collective reference to each issuer of a
Pledged Security.
"New York UCC": the Uniform Commercial Code as from time to
time in effect in the State of New York.
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Patents": (i) all letters patent of the United States, any
other country or any political subdivision thereof, all reissues and
extensions thereof and all goodwill associated therewith, including,
without limitation, any of the foregoing referred to in Schedule 6,
(ii) all applications for letters patent of the United States or any
other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any of
the foregoing referred to in Schedule 6, and (iii) all rights to
obtain any reissues or extensions of the foregoing.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to any Grantor of any right to
manufacture, use or sell any invention covered in whole or in part by
a Patent, including, without limitation, any of the foregoing referred
to in Schedule 6.
"Pledged Notes": all promissory notes listed on Schedule 2,
all Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than
promissory notes issued in connection with extensions of trade credit
by any Grantor in the ordinary course of business).
"Pledged Securities": the collective reference to the Pledged
Notes and the Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on
Schedule 2, together with any other shares, stock certificates,
options or rights of any nature whatsoever in respect of the Capital
Stock of any Person that may be issued or granted to, or held by, any
Grantor while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New
York on the date hereof and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Securities,
collections thereon or distributions or payments with respect thereto.
"Receivable": any right to payment for goods sold or leased
or for services rendered, whether or not such right is evidenced by an
Instrument or Chattel Paper and whether or not it has been earned by
performance (including, without limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
<PAGE> 8
5
"Trademarks": (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and all goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related
thereto, including, without limitation, any of the foregoing referred
to in Schedule 6, and (ii) the right to obtain all renewals thereof.
"Trademark License": any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark, including, without limitation, any of the foregoing
referred to in Schedule 6.
1.2 Other Definitional Provisions. (a) The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section and Schedule references are
to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly
and severally, unconditionally and irrevocably, guarantees to the Collateral
Agent, for the ratable benefit of the Lenders and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating
to the insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may
at any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section 2
or affecting the rights and remedies of any Agent or any Lender hereunder.
(d) The guarantee contained in this Section 2 shall remain in
full force and effect until all the Borrower Obligations and the obligations of
each Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full, no Letter of Credit shall be outstanding and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Borrower may be free from any Borrower
Obligations.
<PAGE> 9
6
(e) No payment made by the Borrower, any of the Guarantors,
any other guarantor or any other Person or received or collected by any Agent
or any Lender from the Borrower, any of the Guarantors, any other guarantor or
any other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Borrower Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment (other than any payment made by such
Guarantor in respect of the Borrower Obligations or any payment received or
collected from such Guarantor in respect of the Borrower Obligations), remain
liable for the Borrower Obligations up to the maximum liability of such
Guarantor hereunder until the Borrower Obligations are paid in full, no Letter
of Credit shall be outstanding and the Commitments are terminated.
2.2 Right of Contribution. Each Guarantor hereby agrees that
to the extent that a Guarantor shall have paid more than its proportionate
share of any payment made hereunder, such Guarantor shall be entitled to seek
and receive contribution from and against any other Guarantor hereunder which
has not paid its proportionate share of such payment. Each Guarantor's right
of contribution shall be subject to the terms and conditions of Section 2.3.
The provisions of this Section 2.2 shall in no respect limit the obligations
and liabilities of any Guarantor to the Agents and the Lenders, and each
Guarantor shall remain liable to the Agents and the Lenders for the full amount
guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
any Agent or any Lender, no Guarantor shall be entitled to be subrogated to any
of the rights of any Agent or any Lender against the Borrower or any other
Guarantor or any collateral security or guarantee or right of offset held by
any Agent or any Lender for the payment of the Borrower Obligations, nor shall
any Guarantor seek or be entitled to seek any contribution or reimbursement
from the Borrower or any other Guarantor in respect of payments made by such
Guarantor hereunder, until all amounts owing to the Agents and the Lenders by
the Borrower on account of the Borrower Obligations are paid in full, no Letter
of Credit shall be outstanding and the Commitments are terminated. If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Borrower Obligations shall not have been paid in full,
such amount shall be held by such Guarantor in trust for the Agents and the
Lenders, segregated from other funds of such Guarantor, and shall, forthwith
upon receipt by such Guarantor, be turned over to the Collateral Agent in the
exact form received by such Guarantor (duly indorsed by such Guarantor to the
Collateral Agent, if required), to be applied against the Borrower Obligations,
whether matured or unmatured, in such order as the Credit Agreement shall
prescribe.
2.4 Amendments, etc. with respect to the Borrower
Obligations. Each Guarantor shall remain obligated hereunder notwithstanding
that, without any reservation of rights against any Guarantor and without
notice to or further assent by any Guarantor, any demand for payment of any of
the Borrower Obligations made by any Agent or any Lender may be rescinded by
such Agent or such Lender and any of the Borrower Obligations continued, and
the Borrower Obligations, or the liability of any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by any Agent or any Lender, and the Credit Agreement
and the other Loan Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Agents (or the Required Lenders or all Lenders, as the
case may be) may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by any Agent or any Lender for
the payment of the Borrower Obligations may be sold, exchanged, waived,
surrendered or released. Neither any Agent nor any Lender shall as a condition
to
<PAGE> 10
7
any Guarantor's liability hereunder have any obligation to protect, secure,
perfect or insure any Lien at any time held by it as security for the Borrower
Obligations or for the guarantee contained in this Section 2 or any property
subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Borrower Obligations and notice of or proof of reliance by any Agent or
any Lender upon the guarantee contained in this Section 2 or acceptance of the
guarantee contained in this Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Borrower
and any of the Guarantors, on the one hand, and the Agents and the Lenders, on
the other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in this Section 2. Each
Guarantor waives diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon the Borrower or any of the Guarantors with
respect to the Borrower Obligations. Each Guarantor understands and agrees
that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity or enforceability of the Credit Agreement or any other Loan
Document, any of the Borrower Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by any Agent or any Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Borrower or any other Person against
any Agent or any Lender, or (c) any other circumstance whatsoever (with or
without notice to or knowledge of the Borrower or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for the Borrower Obligations, or of such Guarantor
under the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights
and remedies hereunder against any Guarantor, any Agent or any Lender may, but
shall be under no obligation to, make a similar demand on or otherwise pursue
such rights and remedies as it may have against the Borrower, any other
Guarantor or any other Person or against any collateral security or guarantee
for the Borrower Obligations or any right of offset with respect thereto, and
any failure by any Agent or any Lender to make any such demand, to pursue such
other rights or remedies or to collect any payments from the Borrower, any
other Guarantor or any other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release
of the Borrower, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of any
Agent or any Lender against any Guarantor. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by any Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent specified in
the Credit Agreement.
<PAGE> 11
8
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Collateral
Agent, and hereby grants to the Collateral Agent, for the ratable benefit of
the Lenders, a security interest in, all of the following property now owned or
at any time hereafter acquired by such Grantor or in which such Grantor now has
or at any time in the future may acquire any right, title or interest
(collectively, the "Collateral"), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of such Grantor's Obligations,:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Investment Property;
(k) all Pledged Securities;
(l) all Farm Products;
(m) all books and records pertaining to the Collateral; and
(n) to the extent not otherwise included, all Proceeds,
investment securities and products of any and all of the foregoing and
all collateral security and guarantees given by any Person with
respect to any of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Grantor hereby represents and warrants
to each Agent and each Lender that:
4.1 Representations in Credit Agreement. In the case of each
Guarantor, the representations and warranties set forth in Section 4 of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby
<PAGE> 12
9
incorporated herein by reference, are true and correct, and each Agent and each
Lender shall be entitled to rely on each of them as if they were fully set
forth herein, provided that each reference in each such representation and
warranty to the Borrower's knowledge shall, for the purposes of this Section
4.1, be deemed to be a reference to such Guarantor's knowledge.
4.2 Title; No Other Liens. Except for the security interest
granted to the Collateral Agent for the ratable benefit of the Lenders pursuant
to this Agreement and the other Liens permitted to exist on the Collateral by
the Credit Agreement, such Grantor owns each item of the Collateral free and
clear of any and all Liens or claims of others or, with respect to Collateral
acquired after the date hereof, such Grantor will own each item of the
Collateral free and clear of any and all Liens and claims of others. No
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as
have been filed in favor of the Collateral Agent, for the ratable benefit of
the Lenders, pursuant to this Agreement or as are permitted by the Credit
Agreement.
4.3 Perfected First Priority Liens. The security interests
granted pursuant to this Agreement (a) upon completion of the filings and other
actions specified on Schedule 3 (which, in the case of all filings and other
documents referred to on said Schedule, have been delivered to the Collateral
Agent in completed and duly executed form) will constitute valid perfected
security interests in all of the Collateral in favor of the Collateral Agent,
for the ratable benefit of the Lenders, as collateral security for such
Grantor's Obligations, enforceable in accordance with the terms hereof against
all creditors of such Grantor and any Persons purporting to purchase any
Collateral from such Grantor to the extent such liens can be perfected under
domestic law and (b) are prior to all other Liens on the Collateral in
existence on the date hereof except for (i) unrecorded Liens permitted by the
Credit Agreement which have priority over the Liens on the Collateral by
operation of law and (ii) Liens described on Schedule 7.
4.4 Chief Executive Office. On the date hereof, such
Grantor's jurisdiction of organization and the location of such Grantor's chief
executive office or sole place of business are specified on Schedule 4.
4.5 Inventory and Equipment. On the date hereof, the
Inventory, the Farm Products and the Equipment (other than mobile goods) are
kept at the locations listed on Schedule 5.
4.6 Pledged Securities. (a) The shares of Pledged Stock
pledged by such Grantor hereunder constitute all the issued and outstanding
shares of all classes of the Capital Stock of each Issuer owned by such
Grantor.
(b) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid
and binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and
has good and marketable title to, the Pledged Securities pledged by it
hereunder, free of any and all Liens or options in favor of, or claims of, any
other Person, except the security interest created by this Agreement.
<PAGE> 13
10
4.7 Receivables. (a) No amount payable to such Grantor
under or in connection with any Receivable is evidenced by any Instrument or
Chattel Paper which has not been delivered to the Collateral Agent and for
which delivery thereof has been requested by the Collateral Agent.
(b) None of the obligors on any Receivables having an
aggregate value of $1,000,000 is a Governmental Authority.
(c) The amounts represented by such Grantor to the Lenders
from time to time as owing to such Grantor in respect of the Receivables will
at such times be substantially accurate.
4.8 Contracts. (a) No consent of any party (other than such
Grantor) to any Contract is required, or purports to be required, in connection
with the execution, delivery and performance of this Agreement.
(b) Each Contract is in full force and effect and constitutes
a valid and legally enforceable obligation of the parties thereto, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act
by or in respect of any Governmental Authority is required in connection with
the execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or
general in nature.
(d) Neither such Grantor nor (to the best of such Grantor's
knowledge) any of the other parties to the Contracts is in default in the
performance or observance of any of the terms thereof in any manner that, in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
(e) The right, title and interest of such Grantor in, to and
under the Contracts are not subject to any defenses, offsets, counterclaims or
claims that, in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
(f) Such Grantor has delivered, made available or will upon
request make available to the Collateral Agent a complete and correct copy of
each Contract, including all amendments, supplements and other modifications
thereto.
(g) No amount payable to such Grantor under or in connection
with any Contract is evidenced by any Instrument or Chattel Paper which has not
been delivered to the Collateral Agent and for which delivery thereof has been
requested by the Collateral Agent.
(h) None of the parties to any Contract which has generated
Receivables in excess of that referenced in Section 4.7 is a Governmental
Authority.
4.9 Intellectual Property. (a) Schedule 6 lists all
Intellectual Property owned by such Grantor in its own name on the date hereof.
<PAGE> 14
11
(b) On the date hereof, all material Intellectual Property is
valid, subsisting, unexpired and enforceable, has not been abandoned and, to
Grantor's knowledge, does not infringe the intellectual property rights of any
other Person.
(c) Except as set forth in Schedule 6, on the date hereof,
none of the Intellectual Property is the subject of any licensing or franchise
agreement pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of,
or such Grantor's rights in, any Intellectual Property in any respect that
could reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge
of such Grantor, threatened, on the date hereof (i) seeking to limit, cancel or
question the validity of any Intellectual Property or such Grantor's ownership
interest therein, or (ii) which, if adversely determined, would have a material
adverse effect on the value of any Intellectual Property.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Agents and the
Lenders that, from and after the date of this Agreement until the Obligations
shall have been paid in full, and no Letter of Credit shall be outstanding and
the Commitments shall have terminated:
5.1 Covenants in Credit Agreement. In the case of each
Guarantor, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case may
be, so that no Default or Event of Default is caused by the failure to take
such action or to refrain from taking such action by such Guarantor or any of
its Subsidiaries.
5.2 Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper,
upon the request of the Collateral Agent, shall be immediately delivered to the
Collateral Agent, duly indorsed in a manner satisfactory to the Collateral
Agent, to be held as Collateral pursuant to this Agreement.
5.3 Maintenance of Insurance. (a) Such Grantor will
maintain, with financially sound and reputable companies, insurance policies as
is customary in its business (i) insuring the Inventory and Equipment against
loss by fire, explosion, theft and such other casualties as may be reasonably
satisfactory to the Collateral Agent and (ii) to the extent requested by the
Collateral Agent, insuring such Grantor, the Agents and the Lenders against
liability for personal injury and property damage relating to such Inventory
and Equipment, such policies to be in such form and amounts and having such
coverage as is customary in Grantor's business.
(b) All such insurance shall (i) provide that no
cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after receipt by the
Collateral Agent of written notice thereof, (ii) name the Collateral Agent as
insured party or loss payee and (iii) if reasonably requested by the Collateral
Agent, include a breach of warranty clause.
<PAGE> 15
12
(c) The Borrower shall deliver to the Collateral Agent and
the Lenders a report of a reputable insurance broker with respect to such
insurance from time to time as reasonably requested by the Collateral Agent.
5.4 Payment of Obligations. Such Grantor will pay and
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all taxes, assessments and governmental charges
or levies imposed upon the Collateral or in respect of income or profits
therefrom, as well as all claims of any kind (including, without limitation,
claims for labor, materials and supplies) against or with respect to the
Collateral, except that no such charge need be paid if the amount or validity
thereof is currently being contested in good faith by appropriate proceedings,
reserves in conformity with GAAP with respect thereto have been provided on the
books of such Grantor and such proceedings could not reasonably be expected to
result in the sale, forfeiture or loss of any material portion of the
Collateral or any interest therein.
5.5 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created
by this Agreement as a perfected security interest having at least the priority
described in Section 4.3 and shall defend such security interest against the
claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Collateral Agent and the
Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written
request of the Collateral Agent, and at the sole expense of such Grantor, such
Grantor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further actions as the
Collateral Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code (or other similar
laws) in effect in any jurisdiction with respect to the security interests
created hereby.
5.6 Changes in Locations, Name, etc. Such Grantor will not,
except upon 15 days' prior written notice to the Collateral Agent and delivery
to the Collateral Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Collateral Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 5 showing any
additional location at which Inventory, Equipment or Farm Products shall be
kept:
(i) permit any portion with an aggregate value in excess of
$1,000,000 of the Inventory, Equipment or Farm Products to be kept at
a location other than those listed on Schedule 5;
(ii) change the location of its chief executive office or sole
place of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Collateral Agent
in connection with this Agreement would become misleading.
<PAGE> 16
13
5.7 Notices. Such Grantor will, promptly after acquiring
knowledge thereof, advise the Agents and the Lenders promptly, in reasonable
detail, of:
(a) any Lien (other than security interests created hereby or
Liens permitted under the Credit Agreement) on any of the Collateral which
would adversely affect the ability of the Collateral Agent to exercise any of
its remedies hereunder; and
(b) of the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate value
of the Collateral or on the security interests created hereby.
5.8 Pledged Securities. (a) If such Grantor shall become
entitled to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Agents and the Lenders, hold the same in trust for the
Agents and the Lenders and deliver the same forthwith to the Collateral Agent
in the exact form received, duly indorsed by such Grantor to the Collateral
Agent, if required, together with an undated stock power covering such
certificate duly executed in blank by such Grantor and with, if the Collateral
Agent so requests, signature guaranteed, to be held by the Collateral Agent,
subject to the terms hereof, as additional collateral security for the
Obligations. Any sums paid upon or in respect of the Pledged Securities upon
the liquidation or dissolution of any Issuer shall, promptly but in no event
later than ten days unless the prior consent of the Collateral Agent is
obtained, be paid over to the Collateral Agent to be held by it hereunder as
additional collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged
Securities or any property shall be distributed upon or with respect to the
Pledged Securities pursuant to the recapitalization or reclassification of the
capital of any Issuer or pursuant to the reorganization thereof, the property
so distributed shall, unless otherwise subject to a perfected security interest
in favor of the Collateral Agent, be delivered, promptly but in not event later
than ten days unless the prior consent of the Collateral Agent is obtained, to
the Collateral Agent to be held by it hereunder as additional collateral
security for the Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Securities shall be received by such
Grantor, such Grantor shall, until such money or property is paid or delivered
to the Collateral Agent, hold such money or property in trust for the Lenders,
segregated from other funds of such Grantor, as additional collateral security
for the Obligations.
(b) Without the prior written consent of the Administrative
Agent and Syndication Agent, such Grantor will not (i) vote to enable, or take
any other action to permit, any Issuer to issue any stock or other equity
securities of any nature or to issue any other securities convertible into or
granting the right to purchase or exchange for any stock or other equity
securities of any nature of any Issuer, (ii) sell, assign, transfer, exchange,
or otherwise dispose of, or grant any option with respect to, the Pledged
Securities or Proceeds thereof (except pursuant to a transaction expressly
permitted by the Credit Agreement), (iii) create, incur or permit to exist any
Lien or option in favor of, or any claim of any Person with respect to, any of
the Pledged Securities or Proceeds thereof, or any interest therein, except for
the security interests created by this Agreement or (iv) enter into any
agreement or undertaking restricting the right or ability of such Grantor or
the Collateral Agent to sell, assign or transfer any of the Pledged Securities
or Proceeds thereof.
<PAGE> 17
14
(c) In the case of each Grantor which is an Issuer, such
Issuer agrees that (i) it will be bound by the terms of this Agreement relating
to the Pledged Securities issued by it and will comply with such terms insofar
as such terms are applicable to it, (ii) it will notify the Collateral Agent
promptly in writing of the occurrence of any of the events described in Section
5.8(a) with respect to the Pledged Securities issued by it and (iii) the terms
of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to
all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with
respect to the Pledged Securities issued by it.
5.9 Receivables. (a) Other than in the ordinary course of
business consistent with its past practice, such Grantor will not (i) grant any
extension of the time of payment of any material portion of the Receivables,
(ii) compromise or settle any material portion of the Receivables for less than
the full amount thereof, (iii) release, wholly or partially, any Person liable
for the payment of any material portion of the Receivables, (iv) allow any
credit or discount whatsoever on any material portion of the Receivables or (v)
amend, supplement or modify any Receivable in any manner that could adversely
affect the value thereof.
(b) Such Grantor will deliver to the Collateral Agent a copy
of each material demand, notice or document received by it that questions or
calls into doubt the validity or enforceability of more than 5% of the
aggregate amount of the then outstanding Receivables.
5.10 Contracts. (a) Except to the extent that could not
reasonably be expected to have a Material Adverse Effect, such Grantor will
perform and comply in all material respects with all its obligations under the
Contracts.
(b) Such Grantor will not amend, modify, terminate or waive
any provision of any Contract in any manner which could reasonably be expected
to materially adversely affect the value of such Contract as Collateral.
(c) Such Grantor will exercise promptly and diligently each
and every material right which it may have under each Contract (other than any
right of termination).
(d) Such Grantor will deliver to the Collateral Agent a copy
of each material demand, notice or document received by it relating in any way
to any Contract that questions the validity or enforceability of such Contract.
5.11 Intellectual Property. (a) Except to the extent that
could not reasonably be expected to have a Material Adverse Effect, such
Grantor (either itself or through licensees) will (i) continue to use each
material Trademark on each and every trademark class of goods applicable to its
current line as reflected in its current catalogs, brochures and price lists in
order to maintain such Trademark in full force free from any claim of
abandonment for non-use, (ii) maintain as in the past the quality of products
and services offered under such Trademark, (iii) use such Trademark with the
appropriate notice of registration and all other notices and legends required
by applicable Requirements of Law, (iv) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Collateral Agent, for the ratable benefit of the Lenders, shall obtain a
perfected security interest in such mark pursuant to this Agreement, and (v)
not (and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such Trademark may become invalidated or
impaired in any way.
<PAGE> 18
15
(b) Except to the extent that could not reasonably be
expected to have a Material Adverse Effect, such Grantor (either itself or
through licensees) will not do any act, or omit to do any act, whereby any
material Patent may become forfeited, abandoned or dedicated to the public.
(c) Except to the extent that could not reasonably be
expected to have a Material Adverse Effect, such Grantor (either itself or
through licensees) (i) will employ each material Copyright and (ii) will not
(and will not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any material portion of the Copyrights may
become invalidated or otherwise impaired. Such Grantor will not (either itself
or through licensees) do any act whereby any material portion of the Copyrights
may fall into the public domain.
(d) Except to the extent that could not reasonably be
expected to have a Material Adverse Effect, such Grantor (either itself or
through licensees) will not do any act that knowingly uses any material
Intellectual Property to infringe the intellectual property rights of any other
Person.
(e) Such Grantor will notify the Agents and the Lenders
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the institution
of, or any such determination or development in, any proceeding in the United
States Patent and Trademark Office, the United States Copyright Office or any
court or tribunal in any country) regarding such Grantor's ownership of, or the
validity of, any material Intellectual Property or such Grantor's right to
register the same or to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any Intellectual Property with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, such Grantor
shall report such filing to the Collateral Agent within five Business Days
after the last day of the fiscal quarter in which such filing occurs. Upon
request of the Collateral Agent, such Grantor shall execute and deliver, and
have recorded, any and all agreements, instruments, documents, and papers as
the Collateral Agent may request to evidence the Agents' and the Lenders'
security interest in any Copyright, Patent or Trademark and the goodwill and
general intangibles of such Grantor relating thereto or represented thereby.
(g) Such Grantor will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the United
States Patent and Trademark Office, the United States Copyright Office or any
similar office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the relevant
registration) and to maintain each registration of the material Intellectual
Property, including, without limitation, filing of applications for renewal,
affidavits of use and affidavits of incontestability.
(h) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall (i)
take such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Collateral Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and
to recover any and all damages for such infringement, misappropriation or
dilution.
<PAGE> 19
16
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Receivables. (a) The
Collateral Agent shall have the right to make test verifications of the
Receivables in any manner and through any medium that it reasonably considers
advisable, and each Grantor shall furnish all such assistance and information
as the Collateral Agent may require in connection with such test verifications.
At any time and from time to time, upon the Collateral Agent's request and at
the expense of the relevant Grantor, such Grantor shall cause independent
public accountants or others satisfactory to the Collateral Agent to furnish to
the Collateral Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.
(b) The Collateral Agent hereby authorizes each Grantor to
collect such Grantor's Receivables, subject to the Collateral Agent's direction
and control, and the Collateral Agent may curtail or terminate said authority
by written notice at any time after the occurrence and during the continuance
of an Event of Default. If required by written notice by the Collateral Agent
at any time after the occurrence and during the continuance of an Event of
Default, any payments of Receivables, when collected by any Grantor, (i) shall
be forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the
Collateral Agent if required, in a Collateral Account maintained under the sole
dominion and control of the Collateral Agent, subject to withdrawal by the
Collateral Agent for the account of the Lenders only as provided in Section
6.5, and (ii) until so turned over, shall be held by such Grantor in trust for
the Agents and the Lenders, segregated from other funds of such Grantor. Each
such deposit of Proceeds of Receivables shall be accompanied by a report
identifying in reasonable detail the nature and source of the payments included
in the deposit.
(c) At the Collateral Agent's request, each Grantor shall
deliver or make available to the Collateral Agent all original and other
documents evidencing, and relating to, the agreements and transactions which
gave rise to the Receivables, including, without limitation, all original
orders, invoices and shipping receipts.
6.2 Communications with Obligors; Grantors Remain Liable.
(a) The Collateral Agent in its own name or in the name of others may at any
time after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables and parties to the Contracts to
verify with them to the Collateral Agent's satisfaction the existence, amount
and terms of any Receivables or Contracts.
(b) Upon the request of the Collateral Agent at any time
after the occurrence and during the continuance of an Event of Default, each
Grantor shall notify obligors on the Receivables and parties to the Contracts
that the Receivables and the Contracts have been assigned to the Collateral
Agent for the ratable benefit of the Lenders and that payments in respect
thereof shall be made directly to the Collateral Agent.
(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables and Contracts to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving rise thereto. Neither any Agent nor any Lender shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) or Contract by reason of or arising out of this Agreement or the
receipt by any Agent or any Lender of any payment relating thereto, nor shall
any Agent or any Lender be obligated in any manner to perform any of the
obligations of any Grantor under or pursuant to any Receivable (or any
agreement giving rise thereto) or Contract, to make any
<PAGE> 20
17
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall
have occurred and be continuing and the Collateral Agent shall have given
notice to the relevant Grantor of the Collateral Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be
permitted to receive all cash dividends paid in respect of the Pledged Stock
and all payments made in respect of the Pledged Notes, in each case paid in the
normal course of business of the relevant Issuer and consistent with past
practice, to the extent permitted in the Credit Agreement, and to exercise all
voting and corporate rights with respect to the Pledged Securities; provided,
however, that no vote shall be cast which would result in any violation of any
provision of the Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and
the Collateral Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Collateral Agent shall have the right
to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Securities and make application thereof to the
Obligations in such order as the Collateral Agent may determine, and (ii) any
or all of the Pledged Securities shall be registered in the name of the
Collateral Agent or its nominee, and the Collateral Agent or its nominee may
thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders of the relevant Issuer
or Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Collateral Agent of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Collateral Agent may determine), all
without liability except to account for property actually received by it, but
the Collateral Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do
so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer
of any Pledged Securities pledged by such Grantor hereunder to (i) comply with
any instruction received by it from the Collateral Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each
Issuer shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to the Collateral Agent.
6.4 Proceeds to be Turned Over To Collateral Agent. In
addition to the rights of the Agents and the Lenders specified in Section 6.1
with respect to payments of Receivables, if an Event of Default shall occur and
be continuing, and the written notice required by Section 6.1 shall have been
delivered by the Collateral Agent, all Proceeds received by any Grantor after
such notice consisting of cash, checks and other near-cash items shall be held
by such Grantor in trust for the Agents and the Lenders, segregated from other
funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be
turned over to the Collateral Agent in the exact form received by such Grantor
<PAGE> 21
18
(duly indorsed by such Grantor to the Collateral Agent, if required). All
Proceeds received by the Collateral Agent hereunder shall be held by the
Collateral Agent in a Collateral Account maintained under its sole dominion and
control. All Proceeds while held by the Collateral Agent in a Collateral
Account (or by such Grantor in trust for the Agents and the Lenders) shall
continue to be held as collateral security for all the Obligations and shall
not constitute payment thereof until applied as provided in Section 6.5.
6.5 Application of Proceeds. At such intervals as may be
agreed upon by the Borrower and the Collateral Agent, or, if an Event of
Default shall have occurred and be continuing, at any time at the Collateral
Agent's and Syndication Agent's election, the Collateral Agent may apply all or
any part of Proceeds constituting Collateral, whether or not held in any
Collateral Account, and any proceeds of the guarantee set forth in Section 2,
in payment of the Obligations in the following order:
First, to pay incurred and unpaid fees and expenses of the
Agents under the Loan Documents;
Second, to the Administrative Agent, for application by it
towards payment of amounts then due and owing and remaining unpaid in
respect of the Obligations, pro rata among the Lenders according to
the amounts of the Obligations then due and owing and remaining unpaid
to the Lenders;
Third, to the Administrative Agent, for application by it
towards prepayment of the Obligations, pro rataamong the Lenders
according to the amounts of the Obligations then held by the Lenders;
and
Fourth, any balance of such Proceeds remaining after the
Obligations shall have been paid in full, no Letters of Credit shall
be outstanding and the Commitments shall have terminated shall be paid
over to the Borrower or to whomsoever may be lawfully entitled to
receive the same.
6.6 Code and Other Remedies. If an Event of Default shall
occur and be continuing, the Collateral Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the New York UCC or any other applicable law. Without limiting the generality
of the foregoing, the Collateral Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required in the Credit Agreement, herein or any other Loan Document or
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of any Agent or any Lender or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. Any Agent or any Lender shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in any Grantor, which right or
equity
<PAGE> 22
19
is hereby waived and released. Each Grantor further agrees, at the Collateral
Agent's request, to assemble the Collateral and make it available to the
Collateral Agent at places which the Collateral Agent shall reasonably select,
whether at such Grantor's premises or elsewhere. The Collateral Agent shall
apply the net proceeds of any action taken by it pursuant to this Section 6.6,
after deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Agents
and the Lenders hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations,
in such order as the Collateral Agent may elect, and only after such
application and after the payment by the Collateral Agent of any other amount
required by any provision of law, including, without limitation, Section
9-504(1)(c) of the New York UCC, need the Collateral Agent account for the
surplus, if any, to any Grantor. To the extent permitted by applicable law,
each Grantor waives all claims, damages and demands it may acquire against any
Agent or any Lender arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition.
6.7 Registration Rights. (a) If the Collateral Agent shall
determine to exercise its right to sell any or all of the Pledged Stock
pursuant to Section 6.6, and if in the opinion of the Collateral Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the relevant
Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as
may be, in the opinion of the Collateral Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering
of the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of
the Collateral Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Collateral Agent shall designate
and to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the
provisions of Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Collateral Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Collateral
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its reasonable commercial
efforts to do or cause to be done all such other acts as may be necessary to
make such sale or sales of all or any portion of the Pledged Stock pursuant to
this Section 6.7 valid and binding and in compliance with any and all other
<PAGE> 23
20
applicable Requirements of Law. Each Grantor further agrees that a breach of
any of the covenants contained in this Section 6.7 will cause irreparable
injury to the Agents and the Lenders, that the Agents and the Lenders have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 6.7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under the
Credit Agreement.
6.8 Waiver; Deficiency. Each Grantor waives and agrees not
to assert any rights or privileges which it may acquire under Section 9-112 of
the New York UCC. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the any Agent or any Lender to collect such deficiency.
SECTION 7. THE COLLATERAL AGENT
7.1 Collateral Agent's Appointment as Attorney-in-Fact, etc.
(a) Each Grantor hereby irrevocably constitutes and appoints the Collateral
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name, for the purpose of carrying out the terms of this Agreement, upon the
occurrence and during the continuance of an Event of Default to take any and
all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the foregoing, each Grantor
hereby gives the Collateral Agent the power and right, on behalf of such
Grantor, without notice to or assent by such Grantor, to do any or all of the
following upon the occurrence and during the continuance of an Event of
Default:
(i) in the name of such Grantor or its own name, or
otherwise, take possession of and indorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Receivable or Contract or with respect to any
other Collateral and file any claim or take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Collateral Agent for the purpose of collecting any
and all such moneys due under any Receivable or Contract or with
respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments,
documents and papers as the Collateral Agent may request to evidence
the Agents' and the Lenders' security interest in such Intellectual
Property and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of
the premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in
Section 6.6 or 6.7, any indorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral; and
<PAGE> 24
21
(v) (1) direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become
due thereunder directly to the Collateral Agent or as the Collateral
Agent shall direct; (2) ask or demand for, collect, and receive
payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out
of any Collateral; (3) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (4) commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of any
Collateral; (5) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral; (6) settle, compromise or
adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Collateral Agent
may deem appropriate; (7) assign any Copyright, Patent or Trademark
(along with the goodwill of the business to which any such Copyright,
Patent or Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Collateral Agent
shall in its sole discretion determine; and (8) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Collateral Agent were the absolute owner thereof for all purposes, and
do, at the Collateral Agent's option and such Grantor's expense, at
any time, or from time to time, all acts and things which the
Collateral Agent deems necessary to protect, preserve or realize upon
the Collateral and the Collateral Agent's and the Lenders' security
interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Collateral Agent agrees that it will not exercise any rights under the power of
attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Collateral Agent, at its option, but without
any obligation so to do, may perform or comply, or otherwise cause performance
or compliance, with such agreement.
(c) The expenses of the Collateral Agent incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable on past due Revolving Credit Loans that are Base
Rate Loans under the Credit Agreement, from the date of written demand by the
Collateral Agent to the relevant Grantor after payment by the Collateral Agent
to the date reimbursed by the relevant Grantor, shall be payable by such
Grantor to the Collateral Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys
shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.
7.2 Duty of Collateral Agent. The Collateral Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Collateral Agent
deals with similar property for its own account. Neither the Collateral Agent,
any Agent, any Lender nor any of their respective officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under
<PAGE> 25
22
any obligation to sell or otherwise dispose of any Collateral upon the request
of any Grantor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The powers conferred on the
Collateral Agent, the Agents and the Lenders hereunder are solely to protect
the Collateral Agent's, the Agents' and the Lenders' interests in the
Collateral and shall not impose any duty upon the Collateral Agent, any Agent
or any Lender to exercise any such powers. The Agents and the Lenders shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section
9-402 of the New York UCC and any other applicable law, each Grantor authorizes
the Collateral Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Collateral
Agent reasonably determines appropriate to perfect the security interests of
the Collateral Agent under this Agreement. A photographic or other
reproduction of this Agreement shall be sufficient as a financing statement or
other filing or recording document or instrument for filing or recording in any
jurisdiction.
7.4 Authority of Collateral Agent. Each Grantor acknowledges
that the rights and responsibilities of the Collateral Agent under this
Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Agreement shall, as between the Collateral Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Collateral Agent and the Grantors, the Collateral Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and no Grantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions
of this Agreement may be waived, amended, supplemented or otherwise modified
except in accordance with subsection 10.1 of the Credit Agreement.
8.2 Notices. All notices, requests and demands to or upon
the Collateral Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 10.2 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.
8.3 No Waiver by Course of Conduct; Cumulative Remedies.
Neither any Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise
be deemed to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of any Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
<PAGE> 26
23
privilege. A waiver by any Agent or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which such Agent or such Lender would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each
Guarantor agrees to pay or reimburse each Lender and each Agent for all its
costs and expenses incurred in collecting against such Guarantor under the
guarantee contained in Section 2 or otherwise enforcing or preserving any
rights under this Agreement and the other Loan Documents to which such
Guarantor is a party, including, without limitation, the fees and disbursements
of counsel (including the allocated fees and expenses of in-house counsel) to
each Lender and of counsel to each Agent.
(b) Each Guarantor agrees to pay, and to save the Agents and
the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
(c) Each Guarantor agrees to pay, and to save the Agents and
the Lenders harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement to the extent the
Borrower would be required to do so pursuant to subsection 10.5 of the Credit
Agreement.
(d) The agreements in this Section 8.4 shall survive
repayment of the Obligations and all other amounts payable under the Credit
Agreement and the other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of each Grantor and shall inure to the benefit
of the Agents and the Lenders and their successors and assigns; provided that
no Grantor may assign, transfer or delegate any of its rights or obligations
under this Agreement without the prior written consent of the Collateral Agent.
8.6 Set-Off. Each Grantor hereby irrevocably authorizes each
Agent and each Lender at any time and from time to time while an Event of
Default pursuant to subsection 8(a) of the Credit Agreement shall have occurred
and be continuing, without notice to such Grantor or any other Grantor, any
such notice being expressly waived by each Grantor, to set-off and appropriate
and apply any and all deposits (general or special, time or demand, provisional
or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Agent or such Lender to
or for the credit or the account of such Grantor, or any part thereof in such
amounts as such Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to such Agent or such Lender
hereunder and claims of every nature and description of such Agent or such
Lender against such Grantor, in any currency, whether arising hereunder, under
the Credit Agreement, any other Loan Document or otherwise, as such Agent or
such Lender may elect, whether or not any Agent or any Lender has made any
demand for payment and although such obligations, liabilities and claims may be
contingent or unmatured. Each Agent and each Lender shall notify such Grantor
promptly of any such set-off and the application made by such Agent or such
Lender of the proceeds thereof, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Agent and each Lender under this Section
<PAGE> 27
24
8.6 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Agent or such Lender may have.
8.7 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
8.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
8.10 Integration. This Agreement and the other Loan
Documents represent the agreement of the Grantors, the Collateral Agent, the
Agents and the Lenders with respect to the subject matter hereof and thereof,
and there are no promises, undertakings, representations or warranties by any
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each Grantor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action
or proceeding relating to this Agreement and the other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate
courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address referred to in Section 8.2 or
at such other address of which the Collateral Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
<PAGE> 28
25
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents
to which it is a party;
(b) neither any Agent nor any Lender has any fiduciary
relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between the Grantors, on the one hand, and the Agents
and Lenders, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Grantors and the
Lenders.
8.14 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
8.15 Additional Grantors. Each Subsidiary of the Borrower
that is required to become a party to this Agreement pursuant to Section 6.10
of the Credit Agreement shall become a Grantor for all purposes of this
Agreement upon execution and delivery by such Subsidiary of an Assumption
Agreement in the form of Annex 1 hereto.
8.16 Releases. (a) At such time as the Loans, the
Reimbursement Obligations and the other Obligations shall have been paid in
full, the Commitments have been terminated and no Letters of Credit shall be
outstanding, the Collateral shall be released from the Liens created hereby,
and this Agreement and all obligations (other than those expressly stated to
survive such termination) of the Collateral Agent and each Grantor hereunder
shall terminate, all without delivery of any instrument or performance of any
act by any party, and all rights to the Collateral shall revert to the
Grantors. At the request and sole expense of any Grantor following any such
termination, the Collateral Agent shall deliver to such Grantor any Collateral
held by the Collateral Agent hereunder, and execute and deliver to such Grantor
such documents as such Grantor shall reasonably request to evidence such
termination.
(b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then the Collateral Agent, at the request and sole expense of such
Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens
created hereby on such Collateral. At the request and sole expense of the
Borrower, a Subsidiary Guarantor shall be released from its obligations
hereunder in the event that all the Capital Stock of such Subsidiary Guarantor
shall be sold, transferred or otherwise disposed of in a transaction permitted
by the Credit Agreement; provided that the Borrower shall have delivered to the
Collateral Agent, at least ten Business Days prior to the date of the proposed
release, a written request for release identifying the relevant Subsidiary
Guarantor and the terms of the sale or other disposition in reasonable detail,
including the
<PAGE> 29
26
price thereof and any expenses in connection therewith, together with a
certification by the Borrower stating that such transaction is in compliance
with the Credit Agreement and the other Loan Documents.
<PAGE> 30
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
IMPERIAL HOLLY CORPORATION
By: /s/ KAREN O. MERCER
-----------------------------
Title: Vice President
SAVANNAH FOODS & INDUSTRIES, INC.
By: /s/ W.F. SCHWER
-----------------------------
Title: Senior Vice President
HOLLY SUGAR CORPORATION
By: /s/ W.F. SCHWER
-----------------------------
Title: Senior Vice President
HOLLY NORTHWEST COMPANY
By: /s/ W.F. SCHWER
-----------------------------
Title: Vice President
FORT BEND UTILITIES COMPANY
By: /s/ W.F. SCHWER
-----------------------------
Title: Vice President
<PAGE> 31
IMPERIAL SWEETENER DISTRIBUTORS, INC.
By: /s/ W.F. SCHWER
---------------------------------
Title: Vice President
CROWN EXPRESS INC.
By: /s/ W.F. SCHWER
---------------------------------
Title: President
LIMESTONE PRODUCTS COMPANY, INC.
By: /s/ W.F. SCHWER
---------------------------------
Title: President
BIOMASS CORPORATION
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
DIXIE CRYSTALS BRANDS, INC.
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
DIXIE CRYSTALS FOODSERVICE, INC.
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
<PAGE> 32
KING PACKAGING COMPANY, INC.
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
FOOD CARRIER, INC.
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
MICHIGAN SUGAR COMPANY
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
GREAT LAKES SUGAR COMPANY
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
SAVANNAH FOODS INDUSTRIAL, INC.
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
PHOENIX PACKAGING CORPORATION
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
<PAGE> 33
SAVANNAH INVESTMENT COMPANY
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
SAVANNAH SUGAR REFINING CORPORATION
By: /s/ W.F. SCHWER
---------------------------------
Title: Senior Vice President
Accepted and Agreed:
HARRIS TRUST AND SAVINGS BANK,
as Collateral Agent
By: /s/ SHARRY L. BURKE
--------------------------
Title: VP
<PAGE> 34
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Amended
and Restated Guarantee and Collateral Agreement dated as of December 22, 1997
(the "Agreement"), made by the Grantors parties thereto for the benefit of
Harris Trust and Savings Bank, as Collateral Agent. The undersigned agrees for
the benefit of the Agents and the Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement and
will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) of
the Agreement.
3. The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply
to it, mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 6.3(a) or 6.7 of the Agreement.
HSC EXPORT CORPORATION
By /s/ W.F. SCHWER
-------------------------------
Title Vice President
----------------------------
Address for Notices: One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Fax: (281)490-9895
<PAGE> 35
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Amended
and Restated Guarantee and Collateral Agreement dated as of December 22, 1997
(the "Agreement"), made by the Grantors parties thereto for the benefit of
Harris Trust and Savings Bank, as Collateral Agent. The undersigned agrees for
the benefit of the Agents and the Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement and
will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) of
the Agreement.
3. The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply
to it, mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 6.3(a) or 6.7 of the Agreement.
HOLLY FINANCE COMPANY
By /s/ W.F. SCHWER
---------------------------------
Title Senior Vice President
------------------------------
Address for Notices: One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Fax: (281)490-9895
<PAGE> 36
Annex 1 to
Guarantee and Collateral Agreement
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made
by ______________________________, a ______________ corporation (the
"Additional Grantor"), in favor of Harris Trust and Savings Bank, as collateral
agent (in such capacity, the "Collateral Agent") for the Agents and the banks
and other financial institutions (the "Lenders") parties to the Credit
Agreement referred to below. All capitalized terms not defined herein shall
have the meaning ascribed to them in such Credit Agreement.
W I T N E S S E T H :
WHEREAS, Imperial Holly Corporation (the "Borrower"), the
Lenders and the Agents have entered into an Amended and Restated Credit
Agreement, dated as of December 22, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrower
and certain of its Affiliates (other than the Additional Grantor) have entered
into the Amended and Restated Guarantee and Collateral Agreement, dated as of
December 22, 1997 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Guarantee and Collateral Agreement") in favor
of the Collateral Agent for the benefit of the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor
to become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and
deliver this Assumption Agreement in order to become a party to the Guarantee
and Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and
delivering this Assumption Agreement, the Additional Grantor, as provided in
Section 8.15 of the Guarantee and Collateral Agreement, hereby becomes a party
to the Guarantee and Collateral Agreement as a Grantor thereunder with the same
force and effect as if originally named therein as a Grantor and, without
limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Grantor thereunder. The information set forth
in Annex 1-A hereto is hereby added to the information set forth in Schedules
____________* to the Guarantee and Collateral Agreement. The Additional
Grantor hereby represents and warrants that each of the representations and
warranties contained in Section 4 of the Guarantee and Collateral Agreement is
true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
- -----------------
* Refer to each Schedule which needs to be supplemented.
<PAGE> 37
2
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
--------------------------------------
Name:
Title:
<PAGE> 38
Annex 2 to
Guarantee and Collateral Agreement
FORM OF
AMENDED AND RESTATED CONTROL AGREEMENT
AMENDED AND RESTATED CONTROL AGREEMENT, dated as of December
22, 1997, among HARRIS TRUST AND SAVINGS BANK, as securities intermediary (in
such capacity, the "Intermediary"), HARRIS TRUST AND SAVINGS BANK, as
collateral agent for the Lenders and Agents under the Credit Agreement referred
to below (in such capacity, the "Collateral Agent") and IMPERIAL HOLLY
CORPORATION, a Texas corporation (the "Pledgor") ;
W I T N E S S E T H :
WHEREAS, the parties hereto are parties to that certain
Control Agreement, dated as of October 17, 1997 (as amended, supplemented or
otherwise modified prior to the date hereof, the "Existing Control Agreement");
WHEREAS, the Pledgor is a party to the Amended and Restated
Credit Agreement, dated as of December 22, 1997 (as amended, supplemented,
restated or otherwise modified from time to time, the "Credit Agreement"),
among the Pledgor, the Lenders parties thereto, Harris Trust and Savings Bank,
as Administrative Agent and Collateral Agent, Lehman Brothers Inc., as Arranger
and Lehman Commercial Paper Inc., as Syndication Agent;
WHEREAS, the Pledgor is a party to the Amended and Restated
Guarantee and Collateral Agreement, dated as of December 22, 1997 (as amended,
supplemented, restated or otherwise modified from time to time, the "Pledge
Agreement"), in favor of the Collateral Agent (unless otherwise defined herein
or the context otherwise requires, all capitalized terms used herein shall have
the meanings assigned thereto in the Credit Agreement or the Pledge Agreement,
as the case may be); AND
WHEREAS, the Lenders are willing to make extensions of credit
under the Credit Agreement upon satisfaction of the conditions, among others,
that the Collateral Agent obtain a perfected first priority security interest
in the Pledged Securities Collateral (as defined herein) and that the Pledgor
shall have amended and restated the Existing Control Agreement as set forth
herein;
NOW, THEREFORE, the parties hereto hereby agree to amend and
restate the Existing Control Agreement in its entirety as follows:
1. The parties hereto acknowledge that (a) Intermediary
maintains securities account number 2158079 (the "Account") for the Pledgor in
which are held or to which are credited investment property of the Pledgor and
(b) the Pledgor has granted a security interest to the Collateral Agent in the
Pledgor's investment property (within the meaning of Section 9-115 of the
Uniform Commercial Code as in effect in the State of New York (the "New York
UCC")), including the Account and all of the Pledgor's security entitlements
(within the meaning of Section 8-102 of the New York UCC) with respect to the
Intermediary other than those securities specified on Schedule 9 to the Pledge
Agreement, now existing or hereafter arising (the Account and such security
entitlements, collectively, the "Investment Collateral"). The parties hereto
agree that each item of property (whether investment property, financial asset,
security, instrument or cash) credited to the Account shall be treated as a
"financial asset" within the meaning of Section 8-102 of the New York UCC.
<PAGE> 39
2
2. The Pledgor hereby irrevocably directs the Intermediary
to, and the Intermediary agrees it will, comply with entitlement orders (within
the meaning of Section 8-102 of the New York UCC) from the Collateral Agent
with respect to the Investment Collateral without further consent by the
Pledgor. In furtherance of, and without limiting the effectiveness of the
foregoing, the Intermediary will comply with orders from the Collateral Agent
directing the Intermediary to hold, transfer or dispose of the Investment
Collateral (and any financial asset (within the meaning of Section 8-102 of the
New York UCC) subject to any security entitlement included therein), or any
part thereof, as the Collateral Agent may from time to time specify, in each
case without obtaining consent from the Pledgor in respect thereof, provided
that, unless the Collateral Agent has notified the Intermediary otherwise, the
Intermediary may comply with requests to purchase securities with the proceeds
and dividends arising from the Investment Collateral and to sell financial
assets subject to any security entitlement included in the Investment
Collateral, so long as (i) with respect to any such request resulting in
proceeds or investment property (as defined above) arising from or received as
consideration, or in exchange or substitution, such proceeds or investment
property (as defined above) remain in a securities account with the
Intermediary subject to a securities entitlement included in the Investment
Collateral and subject to the foregoing provisions of this paragraph 2, and
(ii) the Pledgor does not withdraw any investment property from the Account.
The Intermediary agrees that will not comply with any entitlement order
originated by the Pledgor (i) that would require Intermediary to make a free
delivery of any cash or other investment property to the Pledgor or any other
person or (ii) that is received by the Intermediary after notice by to comply
exclusively with entitlement orders from the Collateral Agent until such notice
is expressly revoked by the Collateral Agent.
3. The Intermediary waives all rights of offset and bank
liens afforded it by law, agreement or otherwise against any of the Investment
Collateral, any proceeds thereof, and any funds and amounts deposited by the
Pledgor with it in connection therewith. Each of the Pledgor and the
Intermediary further agree that it will not enter into any agreement with any
third party other than the Collateral Agent that provides or has the effect of
allowing or requiring the Intermediary to comply with entitlement orders
originated by such third party.
4. The Intermediary represents and warrants to the
Collateral Agent, each Agent, each Lender and the Pledgor that (a) it has full
power and authority to enter into this Control Agreement and perform its
obligations hereunder; (b) the execution, delivery and performance of this
Control Agreement by the Intermediary has been duly authorized by all necessary
corporate action; and (c) this Control Agreement is the legal, valid and
binding obligation of the Intermediary, enforceable against the Intermediary in
accordance with its terms.
5. The Intermediary and the Pledgor agree that the
Intermediary's "jurisdiction", within the meaning of Section 8-110(b) of the
New York UCC, is the State of New York.
6. By its execution hereof in the space provided below,
the Pledgor hereby (a) agrees to and authorizes the applicable provisions
hereof and (b) agrees to indemnify and hold free and harmless each of the
Intermediary, the Lenders, the Agents and the Collateral Agent from and against
any and all actions, losses, costs, liabilities and damages in connection with
or arising out of or relating to, with respect to the Intermediary, this
Control Agreement, the Pledge Agreement and the Credit Agreement, and, with
respect to the Collateral Agent, the Collateral Agent's obligations hereunder
or performance hereof, in each case, other than arising out of the gross
negligence or willful misconduct of the indemnified person. The
indemnification obligation set forth in this paragraph shall survive
termination of this Control Agreement, the Credit Agreement and the Pledge
Agreement.
<PAGE> 40
3
7. (a) The duties and obligations of the Intermediary
hereunder shall be determined solely by the express provisions of this Control
Agreement, and the Intermediary shall not be liable except for the performance
of such duties and obligations as are specifically set forth in this Control
Agreement, and no implied covenants or obligations shall be read into this
Control Agreement against the Intermediary. If the Credit Agreement or the
Pledge Agreement as in effect on the date hereof is amended, supplemented,
restated or otherwise modified in a manner which affects the rights and
obligations of the Intermediary hereunder, the Intermediary's rights and
obligations hereunder shall not be so affected without the Intermediary's prior
consent.
(b) The Intermediary assumes no responsibility or
liability for and makes no representations as to the validity or sufficiency of
this Control Agreement (other than as specified in paragraph 4 above), the
Credit Agreement or the Pledge Agreement, including with respect to the
sufficiency of such agreements to perfect the security interest in the
Investment Collateral under the Pledge Agreement.
8. The Pledgor shall pay the reasonable out-of-pocket
expenses and reasonable administrative fees of the Intermediary in connection
with the Intermediary's obligations pursuant to this Control Agreement,
including the reasonable fees and disbursements of counsel.
9. This Control Agreement may be amended, modified or
supplemented only pursuant to a written instrument executed by all parties.
THIS CONTROL AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT
LIMITATION, FOR THE PURPOSES OF SECTION 8- 110(E)(1) OF THE NEW YORK UCC.
<PAGE> 41
4
IN WITNESS WHEREOF, each of the undersigned has caused this
Control Agreement to be duly executed and delivered as of the date first
written above.
HARRIS TRUST AND SAVINGS BANK, as Intermediary
By:
--------------------------------
Title:
HARRIS TRUST AND SAVINGS BANK,
as Collateral Agent
By:
--------------------------------
Title:
IMPERIAL HOLLY CORPORATION, as Pledgor
By:
--------------------------------
Title:
<PAGE> 1
================================================================================
IMPERIAL HOLLY CORPORATION
Issuer
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
INDENTURE
Dated as of December 22, 1997
The Bank of New York
Trustee
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06, 7.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06, 12.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.02
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
</TABLE>
N.A. means not applicable.
__________________________________
This Cross-Reference Table is not part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . 16
Section 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2
THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.04. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.07. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.08. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.13. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 3
REDEMPTION AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.02. Selection of Notes to be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.07. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.09. Offer to Purchase by Application of Excess Proceeds . . . . . . . . . . . . . . . . . . . 32
Section 3.10. Special Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 4
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.03. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.05. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.06. Waiver of Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.07. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock. . . . . . . . . . . . . . . . 38
Section 4.10. Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
-i-
<PAGE> 4
<TABLE>
<S> <C>
Section 4.11. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.12. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.13. Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.14. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.15. Offer to Repurchase upon Change of Control . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.16. No Senior Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.17. Limitation on Issuance and Sales of Capital Stock of
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.18. Subsidiary Guarantees of Certain Indebtedness . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.19. Payments for Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.20. Deposit of Proceeds with Trustee Pending Consummation of the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 5
SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.01. Merger, Consolidation, or Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.02. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 6
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.07. Rights of Holders of Notes to Receive Payment . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 7
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.06. Reports by Trustee to Holders of the Notes . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7 09. Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . 53
Section 8.02. Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.03 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.04. Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C>
Section 8.06. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.07. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.01. Without Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.02. With Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.03. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.04. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.05. Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.06. Trustee to Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 10
SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.01. Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.02. Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.03. Default on Designated Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.04. Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.05. Notice by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.06. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.07. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.08. Subordination May Not Be Impaired by Company . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.09. Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.10. Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.11. Authorization to Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.12. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.13. Continued Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.14. Cumulative Rights; No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.15. Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 11
GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 11.01. Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 11.02. Execution and Delivery of Subsidiary Guarantee . . . . . . . . . . . . . . . . . . . . . 63
Section 11.03. Guarantors May Consolidate, Etc., on Certain Terms . . . . . . . . . . . . . . . . . . . 63
Section 11.04. Releases Following Release Under All Indebtedness or Sale of
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 11.05. Limitation on Guarantor Liability; Contribution . . . . . . . . . . . . . . . . . . . . . 64
Section 11.06. Trustee to Include Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.07. Subordination of Subsidiary Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 12.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 12.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 12.03. Communication by Holders of Notes with Other Holders of Notes . . . . . . . . . . . . . . 66
Section 12.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . 66
Section 12.05. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . 66
Section 12.06. Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.09. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.10. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<S> <C> <C>
Section 12.11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.12. Counterpart Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.13. Table of Contents, Headings, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
-iv-
<PAGE> 7
EXHIBITS
<TABLE>
<S> <C>
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
Exhibit E FORM OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
</TABLE>
-v-
<PAGE> 8
INDENTURE dated as of December 22, 1997 between Imperial Holly
Corporation, a Texas corporation (the "Company"), the subsidiaries of the
Company listed on the signature pages hereof (the "Guarantors"), and The Bank
of New York, a New York banking corporation, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows
for the benefit of each other and for the equal and ratable benefit of the
Holders of the 9 3/4% Senior Subordinated Notes due 2007 (the "Initial Notes")
and the 9 3/4% Senior Subordinated Notes due 2007 issued in the Exchange Offer
(the "Exchange Notes" and, together with the Initial Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured
by a Lien encumbering any asset acquired by such specified Person.
"Adjusted Net Assets" of a Guarantor at any date means the
lesser of the amount by which (i) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under its Guarantee, of such Guarantor at such date and (ii) the
present fair salable value of the assets of such Guarantor at such date exceeds
the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date and after giving effect to any
collection from any Subsidiary of such Guarantor in respect of the obligations
of such Subsidiary under such Subsidiary Guarantee), excluding debt in respect
of such Subsidiary Guarantee, as they become absolute and matured.
"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 that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depository, Euroclear and Cedel that apply to such transfer
or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than in the ordinary course of business consistent
with past practices (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole will be governed by Sections 4.15 and
5.01, respectively, hereof and not by the provisions of Section 4.10 hereof,
and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries
of Equity Interests of any of the Company's Restricted Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of
$2,000,000 or (b) for Net Proceeds in excess of $2,000,000. Notwithstanding
the foregoing: (i) a transfer of assets by the Company to a Restricted
Subsidiary of the Company or by a Restricted Subsidiary of the Company to the
<PAGE> 9
Company or to a Restricted Subsidiary of the Company, (ii) an issuance or sale
of Equity Interests by a Restricted Subsidiary of the Company to the Company or
to another Restricted Subsidiary of the Company, (iii) (A) a Permitted
Investment or (B) a Restricted Payment that is permitted by Section 4.07 hereof
and (iv) the sale or other disposition of any portion of the Marketable
Securities Portfolio that is reinvested in the Marketable Securities Portfolio
within three days after the consummation of such sale or disposition, will not
be deemed to be Asset Sales.
"Bankruptcy Code" means Title 11, U.S. Code, as amended, or
any similar federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of the Board
of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of
a capital lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participation, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than one year from the date of acquisition, (iii) certificates of
deposit and Eurodollar time deposits with maturities of not more than one year
from the date of acquisition, bankers' acceptances with maturities of not more
than one year from the date of acquisition and overnight bank deposits, in each
case with any domestic commercial bank having capital and surplus in excess of
$500,000,000 and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above and (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Ratings Group with
maturities of not more than one year from the date of acquisition.
"CCC Loans" means loans made to the Company and its Restricted
Subsidiaries to finance their acquisition of sugar under loan programs extended
by the Commodity Credit Corporation for which recourse is limited to the
acquired sugar.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group") together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of the Indenture) unless immediately following such sale, lease, exchange or
other transfer in compliance with the Indenture such assets are owned, directly
or indirectly, by the Company or a Wholly Owned Subsidiary of the Company, (ii)
the approval by the holders of Capital Stock of the Company of any plan or
proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of the Indenture); (iii) the
acquisition in one or more transactions, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of Voting Securities of the
Company by (x) any Person or Group that either (A) beneficially owns (within
the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, at
least 50% or more of the Company's then outstanding voting securities entitled
to vote on a regular basis for the board of directors of the Company) or (B)
otherwise has the ability to elect, directly or indirectly, a majority of the
members of the Company's board of directors, including, without limitation, by
the acquisition of revocable proxies for the election of directors; or (iv) the
first day on which a majority
-2-
<PAGE> 10
of the members of the Company's board of directors are not Continuing
Directors. Notwithstanding clause (iii) above, the acquisition in one or more
transactions, of beneficial ownership of up to 65% of the Company's then
outstanding Voting Securities by a Person or Group consisting of the Permitted
Holders shall not constitute a Change of Control (unless directly or indirectly
(x) such acquisition has a reasonable likelihood or a purpose of causing such
Voting Securities to be or (y) following such acquisition, such Voting
Securities are (A) held of record by less than 300 persons or (B) neither
listed on any national securities exchange nor authorized to be quoted on an
inter-dealer quotation system of any registered national securities
association.
"Collateral" means (i) the Collateral Account, (ii) the
Special Redemption Amount and all other cash or Cash Equivalents deposited in
the Collateral Account from time to time pursuant to Section 4.20 hereof, (iii)
all rights and privileges of the Company with respect to the Collateral Account
and such cash and Cash Equivalents, (iv) all dividends, interest and other
payments and distributions made on or with respect to such Cash Equivalents or
the Collateral Account and (v) all proceeds of any of the foregoing.
"Commodity Hedging Obligations" means, with respect to any
Person, the net payment Obligations of such Person under agreements or
arrangements designed to protect such Person against fluctuations in the price
of (i) natural gas, heating fuels, electricity and other sources of energy or
power used in the Company's sugar refining or processing operations or (ii) or
refined or raw sugar, in either case in connection with the conduct of its
business and not for speculative purposes and consistent with past practices.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary, unusual or non-recurring expenses, or
losses (including, whether or not otherwise includable as a separate item in
the statement of Consolidated Net Income for such period, losses on sales of
assets outside of the ordinary course of business) plus any net loss realized
in connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Restricted Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized (including, without limitation, amortization of
debt issuance costs and original issue discount, non- cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation and amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the extent that such
depreciation and amortization were deducted in computing such Consolidated Net
Income, minus (v) non-cash items increasing such Consolidated Net Income for
such period, in each case, on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes on the
income or profits of, and the depreciation and amortization and other non-cash
charges of, a Restricted Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in same proportion) that the Net Income of such Restricted Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries (for such period, on a consolidated basis, determined
in accordance with GAAP); provided that (i) the Net Income (but not loss) of
any Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a
Restricted Subsidiary, (ii) the Net Income of any Restricted Subsidiary shall
be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or
-3-
<PAGE> 11
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Restricted Subsidiaries as of such date
plus (ii) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by such Person upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset owned by
such Person or a consolidated Restricted Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Restricted Subsidiaries and in
Persons that are not Restricted Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Consolidated Tangible Assets" means, with respect to any
Person as of any date, the amount which, in accordance with GAAP, would be set
forth under the caption "Total Assets" (or any like caption) on a consolidated
balance sheet of such Person and its Restricted Subsidiaries, less all
intangible assets, including, without limitation, goodwill, organization costs,
patents, trademarks, copyrights, franchises and research and development costs.
"Continuing Director" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of
such Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 12.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facility" means, with respect to the Company or any
Restricted Subsidiary, one or more debt facilities (including, without
limitation, the Senior Credit Facility) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans,
other borrowings (including term loans), receivables financing (including
through the sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables) or letters of
credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequester or similar official under the Bankruptcy Code.
"date of the Indenture" means the date on which the Notes of
the first series of Notes issued under the Indenture are first issued and
delivered.
"Default" means any event that is or with the passage of time
or the giving of notice (or both) would be an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof,
in the form of Exhibit A-1 hereto except that such Note shall not bear the
Global Note Legend and shall not have the "Schedule of Exchanges of Interests
in the Global Note" attached thereto.
"Depository" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depository with respect to the Notes, and any and all successors
thereto appointed as depository hereunder and having become such pursuant to
the applicable provision of this Indenture.
-4-
<PAGE> 12
"Designated Senior Debt" means (i) any Indebtedness
outstanding under the Senior Credit Facility and (ii) any other Senior Debt
permitted hereunder the principal amount of which is $25,000,000 or more and
that has been designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature, except to the extent that such Capital Stock is
solely redeemable with, or solely exchangeable for, any Capital Stock of such
Person that is not Disqualified Stock.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any primary offering of the Voting
Stock (other than Disqualified Stock) of the Company; provided, however, that
the proceeds net of any underwriting discount and commission and other expenses
to the Company from any such offering shall be at least $25,000,000.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means notes registered under the Securities
Act that are issued under Section 2.06 hereof in exchange for the Notes
pursuant to the Exchange Offer.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Existing Indebtedness" means up to $41,310,000 in aggregate
principal amount of Indebtedness of the Company and its Restricted Subsidiaries
(other than Indebtedness under the Senior Credit Facility and the Notes) in
existence on the date of the Indenture, until such amounts are repaid.
"Financial Hedging Obligations" means, with respect to any
Person, the net payment Obligations of such Person under (i) interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or currency exchange rates in connection
with the conduct of its business and not for speculative purposes and
consistent with past practices.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees
or redeems any Indebtedness (other than revolving credit borrowings under any
Credit Facility) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation
Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect to such incurrence, assumption, guarantee or redemption of
Indebtedness, or such issuance or redemption of preferred stock, as if the same
had occurred at the beginning of the applicable four-quarter reference period.
In addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, (ii)
-5-
<PAGE> 13
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall
be excluded, but only to the extent that the obligations giving rise to such
Fixed Charges will not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), (ii)
the consolidated interest of such Person and its Restricted Subsidiaries that
was capitalized during such period, (iii) any interest expense on Indebtedness
of another Person that is guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely
in Equity Interests of the Company (other than Disqualified Stock), times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants, the statements and
pronouncements of the Financial Accounting Standards Board and such other
statements by such other entities as have been approved by a significant
segment of the accounting profession, which are applicable at the date of
determination.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii) hereof, which is required to be placed on all Global Notes issued
under this Indenture.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(iv) or 2.06(f) hereof.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of
which guarantees or obligations the fall faith and credit of the United States
is pledged.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof or pledging assets to
secure), of all or any part of any Indebtedness.
"Guarantors" means (i) each of (a) Biomass Corporation; (b)
Dixie Crystals Brands, Inc.; (c) Dixie Crystals Foodservice, Inc.; (d) King
Packaging Company, Inc.; (e) Food Carrier, Inc.; (f) Michigan Sugar Company;
(g) Great Lakes Sugar Company; (h) Savannah Foods Industrial, Inc.; (i) Phoenix
Packaging Corporation; (j) Savannah Sugar Refining Corporation; (k) Holly Sugar
Corporation; (l) Imperial Sweetener Distributors, Inc.; (m) Fort Bend Utilities
Company; (n) Limestone Products Company; (o) Holly Northwest Company; (p) Crown
Express Inc.; (q) Savannah Foods & Industries, Inc., and (r) Savannah
Investment Company, (ii) each of the Company's Restricted Subsidiaries which
becomes a guarantor of the Notes pursuant to the covenant described above under
Section 4.18 hereof and (iii) each of the Company's Restricted Subsidiaries
executing a supplemental indenture in which such Restricted Subsidiary agrees
to be bound by the terms of the Indenture; provided that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Subsidiary Guarantee is released in accordance
with the terms thereof.
"Hedging Obligations" means, with respect to any Person,
collectively, Commodity Hedging Obligations of such Person and Financial
Hedging Obligations of such Person.
-6-
<PAGE> 14
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the Global Note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depository or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Financial
Hedging Obligations or Commodity Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any Indebtedness of any other Person, and any
liability, whether or not contingent, whether or not it appears on the balance
sheet of such Person. The amount of any Indebtedness outstanding as of any
date shall be (i) the accreted value thereof, in the case of any Indebtedness
that does not require current payments of interest, and (ii) the principal
amount thereof, together with any interest thereon that is more than 30 days
past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Independent Financial Advisor" means a nationally recognized
accounting, appraisal or investment banking firm that is, in the reasonable
judgment of the Board of Directors, qualified to perform the task for which
such firm has been engaged hereunder and disinterested and independent with
respect to the Company and its Affiliates; provided, that providing accounting,
appraisal or investment banking services to the Company or any of its
Affiliates or having an employee, officer or other representative serving as a
member of the Board of Directors of the Company or any of its Affiliates will
not disqualify any firm from being an Independent Financial Advisor.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act.
"Intellectual Property" means patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
Obligations), advances or capital contributions (excluding commission, travel
and entertainment, moving, and similar advances to officers and employees made
in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP. If the Company or any of its
Restricted Subsidiaries sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
direct or indirect Subsidiary of the Company, the Company, or such Restricted
Subsidiary, as the case may be, shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in the fourth paragraph of Section 4.07 hereof.
"Issue Date" means the date on which the Initial Notes are
first issued and delivered.
-7-
<PAGE> 15
"Legal Holiday" a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in any asset and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Marketable Securities" means publicly traded debt and equity
securities of a type consistent with those held in the Marketable Securities
Portfolio on the date of the Indenture.
"Marketable Securities Portfolio" means publicly traded debt
and equity securities maintained in the portfolio of the Company and its
Restricted Subsidiaries, having an aggregate fair market value on the date of
the Indenture not to exceed $60,000,000.
"Merger" means the merger of IHK Merger Sub Corporation with
and into the Company with the Company being the surviving entity pursuant to
the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger,
dated as of September 12, 1997, among Imperial Holly Corporation, IHK Merger
Sub Corporation and Savannah Foods & Industries, Inc.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions)
or (b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries and (ii) any extraordinary or
nonrecurring gain (but not loss), together with any related provision for taxes
on such extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration received in
any Asset Sale), net of the direct costs relating to such Asset Sale
(including, without limitation, legal, accounting, investment banking and
brokers fees, and sales and underwriting commissions) and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements), amounts required to be applied to the repayment
of Indebtedness (other than Indebtedness under any Credit Facility) secured by
a Lien on the asset or assets that were the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"Non-Recourse Indebtedness" means Indebtedness (i) as to which
neither the Company nor any of its Restricted Subsidiaries, (a) provides any
guarantee or credit support of any kind (including any undertaking, guarantee,
indemnity, agreement or instrument that would constitute Indebtedness) or (b)
is directly or indirectly liable (as a guarantor or otherwise), (ii) the
incurrence of which will not result in any recourse against any of the assets
of the Company or its Restricted Subsidiaries, and (iii) no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare
-8-
<PAGE> 16
pursuant to the express terms governing such Indebtedness a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity.
"Non-U.S. Person" means a person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect
to the Notes in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company or its Restricted
Subsidiaries whether or not a claim for post-filing interest is allowed in such
proceeding), penalties, fees, charges, expenses, indemnifications,
reimbursement obligations, damages (including Liquidated Damages), guarantees
(including the Subsidiary Guarantees) and other liabilities or amounts payable
under the documentation governing any Indebtedness or in respect thereof.
"Offering" means the offering of the Initial Notes by the
Company.
"Offering Memorandum" means the Offering Memorandum of the
Company dated December 17, 1997 with respect to the Offering.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the
principal executive officer, the principal financial officer, the treasurer or
the principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company or
any Subsidiary of the Company.
"Participant" means, with respect to DTC, Euroclear or Cedel,
a Person who has an account with DTC, Euroclear or Cedel, respectively (and,
with respect to DTC, shall include Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means the lines of business conducted by
the Company on the date hereof and any businesses reasonably related or
incidental thereto or which is a reasonable extension thereof.
"Permitted Holders" means the descendants of H. Kempner, a
Galveston entrepreneur who died in 1894, or trusts controlled by or for the
benefit of the descendants of H. Kempner.
"Permitted Investments" means (a) any Investment in the
Company or in a Restricted Subsidiary of the Company; (b) any Investment in
Cash Equivalents or deposit accounts maintained in the ordinary course of
business consistent with past practices; (c) any Investment by the Company or
any Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Restricted Subsidiary of the Company or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Restricted Subsidiary of the Company; and (d) any Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.10
hereof; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; (f) any
Investment received in settlement of debts, claims or disputes owed to the
Company or any Restricted Subsidiary of the Company that arose out of
transactions in the ordinary course of business;
-9-
<PAGE> 17
(g) any Investment received in connection with or as a result of a bankruptcy,
workout or reorganization of any Person; (h) advances and extensions of credit
in the nature of accounts receivable arising from the sale or lease of goods or
services or the licensing of property in the ordinary course of business; (i)
other Investments by the Company or any Restricted Subsidiary of the Company in
any Person having an aggregate fair market value (measured as of the date each
such Investment is made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (i) (net of returns of capital, dividend and interest paid on
Investments and sales, liquidations, and redemptions of Investments), not to
exceed $10,000,000; (j) Investments in the form of intercompany Indebtedness or
Guarantees of Indebtedness of a Restricted Subsidiary of the Company permitted
under clauses (v) and (xi) of Section 4.07 hereof; (k) Investments arising in
connection with Financial Hedging Obligations or Commodity Hedging Obligations
that are incurred in the ordinary course of business for the purpose of fixing
or hedging currency, commodity or interest rate risk (including with respect to
any floating rate Indebtedness that is permitted by the terms of the Indenture
to be outstanding) in connection with the conduct of the business of the
Company and its Subsidiaries and not for speculative purposes and consistent
with past practices; (1) any Investment in the Marketable Securities Portfolio
existing as of the date of the Indenture and future purchases of and
reinvestment in Marketable Securities from the proceeds (net of taxes,
commissions and other costs and expenses) of dividends and interest and other
distributions from and in respect of the Marketable Securities Portfolio and
sales and other transfers of Marketable Securities in the Marketable Securities
Portfolio; and (m) any Investments by the Company or any Restricted Subsidiary
of the Company in Unrestricted Subsidiaries or Permitted Joint Ventures made
after the date of the Indenture having an aggregate fair market value, when
taken together with all other Investments made pursuant to this clause (m) (net
of returns of capital, dividends and interest paid on Investments and sales,
liquidations and redemptions of Investments) not exceeding in the aggregate 5%
of the Consolidated Tangible Assets of the Company as of the last day of the
most recent full fiscal quarter ending immediately prior to the date of such
Investment (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value).
"Permitted Joint Venture" means any corporation, limited
liability company, joint venture, partnership or other business entity
designated by the Board of Directors, and until designation by the Board of
Directors to the contrary, (i) which is engaged in a Permitted Business and
(ii) of which 50% or less of the Capital Stock with voting power under ordinary
circumstances to elect directors (or Persons having similar or corresponding
powers and responsibilities) is at the time owned (beneficially, directly or
indirectly) by the Company and its Restricted Subsidiaries. Any such
designation or designation to the contrary shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Permitted Junior Securities" means (i) Equity Interests in
the Company or any Guarantor which, to the extent received by any Holder in
connection with any bankruptcy, reorganization, insolvency or similar
proceeding in which any Equity Interests are also exchanged for or distributed
in respect of Senior Debt, are either common equity securities or are
subordinated to all such Equity Interests so exchanged or distributed to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to the Indenture, and (ii) debt securities
that are subordinated to all Senior Debt (and any debt securities issued in
exchange for Senior Debt) to substantially the same extent as, or to a greater
extent than, the Notes are subordinated to Senior Debt pursuant to the
Indenture.
"Permitted Liens" means (i) Liens on assets of the Company or
its Restricted Subsidiaries that secure Senior Debt permitted by the terms of
the Indenture to be incurred; (ii) Liens in favor of the Company or any
Guarantor; (iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Restricted Subsidiary of
the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition; (v) Liens
existing on the date of the Indenture and any extensions or renewals thereof,
provided that such extension or renewal of such Liens does not extend to or
cover any other property or assets of the Company or any Restricted Subsidiary;
(vi) statutory Liens (other than any Lien imposed by ERISA) or landlords and
carriers', warehouseman's, mechanics', suppliers', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business; (vii) Liens for
taxes, assessments, government charges or claims not yet due and payable or
which are being contested
-10-
<PAGE> 18
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if a reserve or other appropriate provisions, if any, as shall be
required in conformity with GAAP shall have been made therefor; (viii) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (ix) Liens created or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (x) easements,
rights-of-way, restrictions and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any
Restricted Subsidiary incurred in the ordinary course of business; (xi) any
attachment or judgment Lien, unless the judgment it secures shall not, within
60 days after the entry thereof, have been discharged or execution thereof
stayed pending appeal, or shall not have been discharged within 60 days after
the expiration of any such stay; (xii) any other Liens imposed by operation of
law which do not materially affect the Company's or any Guarantor's ability to
perform its obligations under the Notes, the Subsidiary Guarantees and the
Indenture; (xiii) rights of banks to set off deposits against debts owed to
said bank; (xiv) Liens upon specific items of inventory or other goods and
proceeds of the Company or its Restricted Subsidiaries securing the Company's
or any Restricted Subsidiary's obligations in respect of bankers' acceptances
issued or created for the account of any such Person to facilitate the
purchase, shipment or storage of such inventory or other goods; (xv) Liens
securing reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit and
the products and proceeds thereof entered into in the ordinary course of
business consistent with past practices; (xvi) Liens securing Indebtedness that
is pari passu in right of payment with the Notes, provided that the Notes are
equally and ratably secured; (xvii) Liens to secure any Permitted Refinancing
Indebtedness incurred to refinance any Indebtedness secured by any Lien
referred to in the foregoing clauses (i), (iii), (iv), (v) and (xvi), provided,
however, that such new Lien shall be limited to all or part of the same
property that secured the original Lien (provided that such Liens may extend to
after-acquired property, including any assets or Capital Stock of any
subsequently formed or acquired Subsidiary, if such original Lien included such
property or assets as collateral), (xviii) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted clause (vi) of the second
paragraph of Section 4.09 hereof covering only the assets acquired with such
Indebtedness, together with any additions and accessions thereto and
replacements, substitutions and proceeds (including insurance proceeds)
thereof; (xix) Liens in favor of customs and revenue authorities to secure
payment of customs duties in connection with the importation of goods in the
ordinary course of business and other similar Liens arising in the ordinary
course of business, (xx) leases or subleases granted to third Persons in
ordinary course of business consistent with past practices not interfering with
the ordinary course of business of the Company or its Restricted Subsidiaries;
(xxi) deposits made in the ordinary course of business to secure liability to
insurance carriers, and Liens on the proceeds of insurance granted to insurance
carriers solely to secure the payment of financed premiums; (xxii) Liens in
favor of a trustee under any indenture securing amounts due to the trustee in
connection with its services under such indenture; (xxiii) Liens under
licensing agreements for use of intellectual property entered into in the
ordinary course of business; (xxiv) Liens incurred in the ordinary course of
business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $10,000,000 at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary course
of business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary; and (xxv) any attachment
or judgment Lien not constituting an Event of Default under Section 6.01(f)
hereof.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Company or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued and unpaid interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced,
-11-
<PAGE> 19
renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred
either by the Company or a Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, limited liability company,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the
holders of the other Capital Stock issued by such Person.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) hereof to be placed on all Notes issued under this Indenture
except where otherwise permitted by the provisions of this Indenture.
"Proceeding" means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of creditors, appointment of a
custodian, receiver, trustee or other officer with similar powers or any other
proceeding for the liquidation, dissolution or other winding up of a Person
(including, without limitation, any such proceeding under Bankruptcy Code).
"Purchase Agreement" means the Purchase Agreement dated
December 17, 1997 among the Company, the Guarantors and the Initial Purchasers
(as defined therein).
"QIB" means a "qualified institution buyer" as defined in Rule
144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 22, 1997, by and among the Company and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a Regulation S Temporary
Global Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global
Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depository or its nominee, issued in a denomination equal to
the outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depository or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Representative" means the administrative agent under the
Senior Credit Facility or its successor thereunder or any other agent or
representative on behalf of the holders of Designated Senior Debt.
"Responsible Officer," when used with respect to the Trustee,
means any officer, including, without limitation, any vice president, assistant
vice president, assistant treasurer or secretary within the Corporate Trust
Administration of the Trustee (or any successor group of the Trustee) or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to particular corporate trust matter, any other officer or employee to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
-12-
<PAGE> 20
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means any Investment other than a
Permitted Investment.
"Restricted Period" means the 40-day restricted period as
defined in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of
the referenced Person that is not an Unrestricted Subsidiary; provided that, on
the date of the Indenture, all Subsidiaries of the Company (other than Holly
Finance Company) shall be Restricted Subsidiaries of the Company.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 144A Global Note" means the Global Note in the form of
Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with and registered in the name of the Depository or its
nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated under the Securities
Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means that certain Senior Credit
Facility, dated as of December 22, 1997, by and among the Company, Lehman
Brothers, as Arranger, Lehman Brothers Commercial Paper Inc. (as Syndication
Agent), and Harris Trust and Savings Bank (as Administrative Agent and
Collateral Agent) providing for up to $255,000,000 of term loan borrowings and
$200,000,000 of revolving credit borrowings and letters of credit in each case,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith and in each case as amended,
modified, renewed, restated, refunded, replaced or refinanced from time to time
and any agreement (and related documents) governing Indebtedness incurred to
refund or refinance credit extensions and commitments then outstanding or
permitted to be outstanding under such Senior Credit Facility or a successor
Credit Facility, whether by the same or any other lender or group of lenders.
The Company shall promptly notify the Trustee of any other lender or group of
lenders. The Company shall promptly notify the Trustee of any such refunding
or refinancing of the existing Senior Credit Facility.
"Senior Debt" means (i) indebtedness of the Company or any
Guarantor for money borrowed and all obligations, whether direct or indirect,
under guarantees, letters of credit, foreign currency or interest rate swaps,
foreign exchange contracts, caps, collars, options, hedges or other agreements
or arrangements designed to protect against fluctuations in currency values or
interest rates, other extensions of credit, expenses, fees, reimbursements,
indemnities and all other amounts (including interest at the contract rate
accruing on or after the filing of any petition in bankruptcy or reorganization
relating to the Company or any Guarantor whether or not a claim for post-filing
interest is allowed in such proceeding) owed by the Company or any Guarantor
under, or with respect to, the Senior Credit Facility or any other Credit
Facility, (ii) the principal of and premium, if any, and accrued and unpaid
interest, whether existing on the date hereof or hereafter incurred, in respect
of (A) indebtedness of the Company or any Guarantor for money borrowed, (B)
guarantees by the Company or any Guarantor of indebtedness for money borrowed
by any other person, (C) indebtedness evidenced by notes, debentures, bonds, or
other instruments of indebtedness for the payment of which the Company or any
Guarantor is responsible or liable, by guarantees or otherwise, (D) obligations
of the Company or any Guarantor for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (E)
obligations of the Company or any Guarantor under any agreement to lease, or
any lease of, any real or personal property which, in accordance with GAAP, is
classified on the Company's or any Guarantor's consolidated balance sheet as a
liability, and (F) obligations of the Company or any Guarantor under interest
rate swaps, caps, collars,
-13-
<PAGE> 21
options and similar arrangements and commodity or foreign currency hedges and
(iii) modifications, renewals, extensions, replacements, refinancings and
refundings of any such indebtedness, obligations or guarantees, unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is expressly provided that such indebtedness, obligations or
guarantees, or such modifications, renewals, extensions, replacements,
refinancings or refundings thereof, are not superior in right of payment to
the Notes; provided that Senior Debt will not be deemed to include (a) any
obligation of the Company or any Guarantor to any Subsidiary or other
Affiliate, (b) any liability for federal, state, local or other taxes owed or
owing by the Company or any Guarantor, (c) any accounts payable or other
liability to trade creditors, (d) any Indebtedness, guarantee or obligation of
the Company or any Guarantor which is expressly subordinate or junior by its
terms in right of payment to any other Indebtedness, guarantee or obligation of
the Company or any Guarantor, (e) that portion of any Indebtedness incurred in
violation of Section 4.07 hereof (other than Indebtedness incurred under a
Credit Facility if prior to the incurrence thereof or, in the case of
contingent obligations such as letters of credit pursuant to which such
Indebtedness is incurred, prior to the issuance thereof or agreement to extend
credit in respect thereof, the Company has certified to the lenders under such
Credit Facility that the such incurrence or extension of credit does not
violate such covenant) or (f) Indebtedness of the Company or any Guarantor
which is classified as non-recourse in accordance with GAAP or any unsecured
claim arising in respect thereof by reason of the application of section
1111(b)(1) of the Bankruptcy Code.
"Shelf Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of the Indenture.
"Special Redemption Date" means February 2, 1998.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subordinated Obligations" means any Indebtedness of the
Company which is expressly subordinated or junior in right of payment to the
Notes.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by such Person and (ii) any partnership (a) the sole general partner or the
managing general partner of which is such Person or an entity described in
clause (i) and related to such Person or (b) the only general partners of which
are such Person or of one or more entities described in clause (i) and related
to such Person (or any combination thereof).
"Subsidiary Guarantee" means the guarantee of the Notes by
each of the Guarantors pursuant to Article 11 of the Indenture and in the form
of guarantee endorsed on the form of Note attached as Exhibit A to the
Indenture and any additional guarantee of the Notes to be executed by any
Restricted Subsidiary of the Company pursuant to Section 4.18 hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
-14-
<PAGE> 22
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depository, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company (including any newly acquired or newly formed Subsidiary of the
Company) that is designated by the Board of Directors as an Unrestricted
Subsidiary and (ii) and each of its Subsidiaries at the time of designation and
thereafter, (a) have no Indebtedness other than Non- Recourse Indebtedness; (b)
are not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any
such agreement, contract, arrangement or understanding are no less favorable to
the Company or such Restricted Subsidiary than those that might be obtained, in
light of all the circumstances, at the time from Persons who are not Affiliates
of the Company; (c) are Persons with respect to which neither the Company nor
any of its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Persons' financial condition or to cause such Persons to achieve any specified
levels of operating results; (d) have not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any
of its Restricted Subsidiaries and (e) do not own any Capital Stock of or own
or hold any Lien on any property of, the Company or any Restricted Subsidiary
of the Company.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of
the Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" means a Subsidiary, 100% of the
outstanding Capital Stock and other Equity Interests of which is directly or
indirectly owned by the Company.
Section 1.02. Other Definitions.
<TABLE>
<Caption
Defined in
Term Section
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
"Merger Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.20
"Asset Sale Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . . . . . 4.15
"Change of Control Payment" . . . . . . . . . . . . . . . . . . . . . . . . 4.15
"Change of Control Payment Date" . . . . . . . . . . . . . . . . . . . . . 4.15
"Collateral Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.20
"Collateral Funds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.20
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.03
"DTC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10
"Funding Guarantor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
"incur" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.02
"Net Offering Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.20
</TABLE>
-15-
<PAGE> 23
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Payment Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Permitted Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payments" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
"Special Redemption" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.01
"Special Redemption Amount" . . . . . . . . . . . . . . . . . . . . . . . . 4.20
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(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 GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
-16-
<PAGE> 24
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof. Subject to
Section 4.18, the Notes may bear notations of Subsidiary Guarantees.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions
of this Indenture, the provisions of this Indenture shall govern and be
controlling.
Notes issued in global form shall be substantially in the form
of Exhibit A-1 or A-2 attached hereto (including the Global Note Legend and the
"Schedule of Exchanges in the Global Note" attached thereto). Notes issued in
definitive form shall be substantially in the form of Exhibit A-1 attached
hereto (but without the Global Note Legend and without the "Schedule of
Exchanges of Interests in the Global Note" attached thereto). Each Global Note
shall represent such of the outstanding Notes as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee, the Depository or the Note Custodian, at
the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.06 hereof.
Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of the Regulation S Temporary Global Note, which
shall be deposited on behalf of the purchasers of the Notes represented thereby
with the Trustee, at its New York office, as custodian for the Depository, and
registered in the name of the nominee of the Depository for credit to the
accounts of designated agents holding on behalf of Euroclear or Cedel Bank,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The Restricted Period shall be terminated upon the receipt by the
Trustee of (i) a written certificate from the Depository, together with copies
of certificates from Euroclear and Cedel Bank certifying that they have
received certification of non-United States beneficial ownership of 100% of the
aggregate principal amount of the Regulation S Temporary Global Note (except to
the extent of any beneficial owners thereof who acquired an interest therein
during the Restricted Period pursuant to another exemption from registration
under the Securities Act and who will take delivery of a beneficial ownership
interest in a 144A Global Note or an IAI Global Note bearing a Private
Placement Legend, all as contemplated by Section 2.06(b) hereof), and (ii) an
Officers' Certificate from the Company. Following the termination of the
Restricted Period, beneficial interests in the Regulation S Temporary Global
Note shall be exchanged for beneficial interests in Regulation S Permanent
Global Notes pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Notes, the Trustee shall cancel
the Regulation S Temporary Global Note. The aggregate principal amount of the
Regulation S Temporary Global Note and the Regulation S Permanent Global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depository or its nominee, as the case may be,
in connection with transfers of interest as hereinafter provided.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall
be applicable to transfers of beneficial interests in the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes that are held
by members of, or Participants, in DTC through Euroclear or Cedel Bank.
-17-
<PAGE> 25
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by two Officers, authenticate Notes for original issue on the Issue Date up to
$250,000,000 aggregate principal amount of the Notes. The aggregate principal
amount of Notes outstanding at any time may not exceed $350,000,000 except as
provided in Section 2.07 hereof. Additional amounts may be issued after the
Issue Date in one or more series from time to time subject to the limitations
set forth under Section 4.09 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency within the City
and State of New York where Notes may be presented for registration of transfer
or for exchange ("Registrar") and an office or agency where Notes may be
presented for payment ("Paying Agent"). The Registrar shall keep a register of
the Notes and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term
"Registrar" includes any co-registrar and the term "Paying Agent" includes any
additional paying agent. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company shall promptly notify the Trustee in
writing of the name and address of any Agent not a party to this Indenture. If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company or any of its Subsidiaries
may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal or Liquidated Damages, if any, or interest on the Notes,
and will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
Upon any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
-18-
<PAGE> 26
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA Section 312(a).
If the Trustee is not the Registrar, the Company shall provide to a Responsible
Officer of the Trustee at least seven Business Days before each interest
payment date and at such other times as the Trustee may request in writing, a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of the Holders of Notes and the Company shall otherwise
comply with TIA Section 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note
may not be transferred as a whole except by the Depository to a nominee of the
Depository, by a nominee of the Depository to the Depository or to another
nominee of the Depository, or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository. All Global
Notes will be exchanged by the Company for Definitive Notes if (i) the Company
delivers to the Trustee notice from the Depository that it is unwilling or
unable to continue to act as Depository for the Global Notes or that it is no
longer a clearing agency registered under the Exchange Act and, in either case,
a successor Depository is not appointed by the Company within 90 days after the
date of such notice from the Depository or (ii) the Company in its sole
discretion notifies the Trustee in writing that it elects to cause issuance of
the Notes in certificated form; provided that in no event shall the Regulation
S Temporary Global Note be exchanged by the Company for Definitive Notes prior
to (x) the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon the occurrence of either of the preceding events in (i)
or (ii) above, Definitive Notes shall be issued in such names as the Depository
shall instruct the Trustee. Global Notes also may be exchanged or replaced, in
whole or in part, as provided in Sections 2.07 and 2.11 hereof. Every Note
authenticated and delivered in exchange for, or in lieu of, a Global Note or
any portion thereof, pursuant to Section 2.07 or 2.11 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in
this Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Notes. The transfer and exchange of beneficial interests in the Global
Notes shall be effected through the Depository, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Notes also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs as
applicable:
(i) Transfer of Beneficial Interests in the Same Global
Note. Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in accordance
with the transfer restrictions set forth in the Private Placement
Legend; provided, however, that prior to the expiration of the
Restricted Period transfers of beneficial interests in the Temporary
Regulation S Global Note may not be made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser).
Beneficial interests in any Unrestricted Global Note may be
transferred only to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written orders
or instructions shall be required to be delivered to the Registrar to
effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial
Interests in Global Notes. In connection with all transfers and
exchanges of beneficial interests (other than a transfer of a
beneficial interest in a Global Note to a Person who takes delivery
thereof in the form of a beneficial interest in the same Global Note),
the transferor of such beneficial interest must deliver to the
Registrar (A) (1) a written order from a Participant or an Indirect
Participant given to the Depository in accordance with the Applicable
Procedures directing the Depository to credit or cause to be credited
a beneficial interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be
credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depository in
-19-
<PAGE> 27
accordance with the Applicable Procedures directing the Depository to
cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2)
instructions given by the Depository to the Registrar containing
information regarding the Person in whose name such Definitive Note
shall be registered to effect the transfer or exchange referred to in
(1) above; provided that in no event shall Definitive Notes be issued
upon the transfer or exchange of beneficial interests in the
Regulation S Temporary Global Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903 under the Securities Act.
Upon an Exchange Offer by the Company in accordance with Section
2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be
deemed to have been satisfied upon receipt by the Registrar of the
instructions contained in the Letter of Transmittal delivered by the
Holder of such beneficial interests in the Restricted Global Notes.
Upon satisfaction of all of the requirements for transfer or exchange
of beneficial interests in Global Notes contained in this Indenture,
the Notes and otherwise applicable under the Securities Act, the
Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another
Restricted Global Note. A beneficial interest in any Restricted
Global Note may be transferred to a Person who takes delivery thereof
in the form of a beneficial interest in another Restricted Global Note
if the transfer complies with the requirements of clause (ii) above
and the Registrar receives the following:
(A) if the transferee will take delivery in the
form of a beneficial interest in the 144A Global Note, then
the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in Item (1)
thereof;
(B) if the transferee will take delivery in the
form of the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in Item (2) thereof; or
(C) if the transferee will take delivery in the
form of a beneficial interest in the IAI Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications and certificates and
Opinion of Counsel required by Item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may
be exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
clause (ii) above and:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of the beneficial
interest to be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to exchange such
beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in
Item (1)(a) thereof;
-20-
<PAGE> 28
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in
the form of Exhibit B hereto, including the certifications in
Item (4) thereof; and
(3) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange
or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the
Private Placement Legend are not required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraph
(B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for
Definitive Notes.
(i) If any holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Definitive Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in
a Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note, a certificate from such holder
in the form of Exhibit C hereto, including the certifications
in Item (2)(a) thereof;
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in Item (1)
thereof;
(C) if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in Item (2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
Item (3)(a) thereof;
(E) if such beneficial interest is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by Item (3)
thereof, if applicable;
(F) if such beneficial interest is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in Item (3)(b) thereof; or
(G) if such beneficial interest is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
Item (3)(c) thereof,
-21-
<PAGE> 29
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and make available for delivery to the Person designated
in the instructions a Definitive Note in the appropriate principal
amount. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)
shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depository and the Participant or Indirect Participant. The Trustee
shall make available for delivery such Definitive Notes to the Persons
in whose names such Notes are so registered. Any Definitive Note
issued in exchange for a beneficial interest in a Restricted Global
Note pursuant to this Section 2.06(c)(i) shall bear the Private
Placement Legend and shall be subject to all restrictions on transfer
contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C)
hereof, a beneficial interest in the Regulation S Temporary Global
Note may not be (A) exchanged for a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903(c)(3)(B)
under the Securities Act or (B) transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to the
conditions set forth in clause (A) above or unless the transfer is
pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 903 or Rule 904.
(iii) Notwithstanding 2.06(c)(i) hereof, a holder of a
beneficial interest in a Restricted Global Note may exchange such
beneficial interest for an Unrestricted Definitive Note or may
transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of such
beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to exchange such
beneficial interest for a Definitive Note that does not bear
the Private Placement Legend, a certificate from such holder
in the form of Exhibit C hereto, including the certifications
in Item (1)(b) thereof;
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a Definitive Note that does not bear
the Private Placement Legend, a certificate from such holder
in the form of Exhibit B hereto, including the certifications
in Item (4) thereof; and
(3) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form reasonably
acceptable to the Company, to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are not required in order to maintain
compliance with the Securities Act.
(iv) If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Definitive Note,
then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be
-22-
<PAGE> 30
reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and make
available for delivery to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iv) shall be registered in such name or names and in
such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depository and the Participant or Indirect Participant. The
Trustee shall make available for delivery such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iv) shall not bear the Private Placement Legend. A
beneficial interest in an Unrestricted Global Note cannot be exchanged
for a Definitive Note bearing the Private Placement Legend or
transferred to a Person who takes delivery thereof in the form of a
Definitive Note bearing the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for
Beneficial Interests.
(i) If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial interest
in a Restricted Global Note, then, upon receipt by the Registrar of
the following documentation:
(A) if the Holder of such Restricted Definitive
Note proposes to exchange such Note for a beneficial interest
in a Restricted Global Note, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
Item (2)(b) thereof;
(B) if such Definitive Note is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in Item (1) thereof,
(C) if such Definitive Note is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in Item (2) thereof;
(D) if such Definitive Note is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in Item (3)(a)
thereof,
(E) if such Definitive Note is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by Item (3) thereof, if applicable;
(F) if such Definitive Note is being transferred
to the Company or any of its subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in Item (3)(b) thereof; or
(G) if such Definitive Note is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in Item (3)(c)
thereof,
the Trustee shall cancel the Definitive Note, increase or cause to be
increased the aggregate principal amount of, in the case of
subparagraph (A) above, the appropriate Restricted Global Note and, in
the case of subparagraph (B) above, the 144A Global Note, and, in the
case of subparagraph (C) above, the Regulation S Global Note, and in
all other cases, the IAI Global Note.
-23-
<PAGE> 31
(ii) A Holder of a Restricted Definitive Note may exchange
such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer, is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive
Notes proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit C hereto, including the
certifications in Item (1)(c) thereof;
(2) if the Holder of such Definitive
Notes proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial interest in
the Unrestricted Global Note, a certificate from such Holder
in the form of Exhibit B hereto, including the certifications
in Item (4) thereof; and
(3) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or
transfer is in compliance with the Securities Act, that the
restrictions on transfer contained herein and in the Private
Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Definitive Notes
are being exchanged or transferred in compliance with any
applicable blue sky securities laws of any State of the United
States.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive
Notes and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Note.
(iii) A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note at any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Unrestricted
Definitive Note and increase or cause to be increased the aggregate
principal amount of one of the Unrestricted Global Notes.
(iv) If any such exchange or transfer from a Definitive
Note to a beneficial interest is effected pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global
Note has not yet been issued, the Company shall issue and, upon
receipt of an authentication order in accordance with Section 2.02
hereof, the Trustee shall authenticate one or more Unrestricted Global
Notes in an aggregate principal amount equal to the principal amount
of beneficial interests transferred pursuant to subparagraphs (ii)(B),
(ii)(D) or (iii) above.
(e) Transfer and Exchange of Definitive Notes for
Definitive Notes. Upon request by a Holder of Definitive Notes and such
Holder's compliance with the provisions of this Section 2.06(e), the Registrar
shall register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in
-24-
<PAGE> 32
writing. In addition, the requesting Holder shall provide any additional
certifications, documents and information, as applicable, pursuant to the
provisions of this Section 2.06(e).
(i) Restricted Definitive Notes may be transferred to and
registered in the name of Persons who take delivery thereof if the
Registrar receives the following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in Item (1) thereof;
(B) if the transfer will be made pursuant to Rule
903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in Item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by Item (3)
thereof, if applicable.
(ii) Any Restricted Definitive Note may be exchanged by
the Holder thereof for an Unrestricted Definitive Note or transferred
to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer, is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for an
Unrestricted Definitive Note, a certificate from such Holder
in the form of Exhibit C hereto, including the certifications
in Item (1)(b) thereof;
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a Person
who shall take delivery thereof in the form of an Unrestricted
Definitive Note, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in Item (4)
thereof; and
(3) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or
transfer is in compliance with the Securities Act, that the
restrictions on transfer contained herein and in the Private
Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Restricted
Definitive Note is being exchanged or transferred in
compliance with any applicable blue sky securities laws of any
State of the United States.
(iii) A Holder of Unrestricted Definitive Notes may
transfer such Notes to a Person who takes delivery thereof in the form
of an Unrestricted Definitive Note. Upon receipt of a request for
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder
-25-
<PAGE> 33
thereof. Unrestricted Definitive Notes cannot be exchanged for or
transferred to Persons who take delivery thereof in the form of a
Restricted Definitive Note.
(f) Exchange Offer. Upon the occurrence of the Exchange
Offer in accordance with the Registration Rights Agreement, the Company shall
issue and, upon receipt of (A) an authentication order in accordance with
Section 2.02 hereof and (B) an Opinion of Counsel opining as to the
enforceability of the Exchange Notes and the guarantees thereof, the Trustee
shall authenticate (i) one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Notes tendered for acceptance by persons that are not (x)
broker-dealers, (y) Persons participating in the distribution of the Exchange
Notes or (z) Persons who are affiliates (as defined in Rule 144) of the Company
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrent with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and make available
for delivery to the Persons designated by the Holders of Definitive Notes so
accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the
face of all Global Notes and Definitive Notes issued under this Indenture
unless specifically stated otherwise in the applicable provisions of this
Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B)
below, each Global Note and each Definitive Note (and all
Notes issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT, OF 1933 AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER: REPRESENTS
THAT (1) IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),(2),(3) OR (7)
UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C)
NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THE NOTE EVIDENCED HEREBY EXCEPT TO (A) THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE),
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A
SUCCESSOR TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE
EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C),
(D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
-26-
<PAGE> 34
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES," AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT."
(B) Notwithstanding the foregoing, any
Global Note or Definitive Note issued pursuant to subparagraph
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii),
(e)(iii) or (f) of this Section 2.06 (and all Notes issued in
exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a
legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY
MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO ARTICLE 2 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT
IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT
OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in
substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At
such time as all beneficial interests in a particular Global Note have been
exchanged for Definitive Notes or a particular Global Note has been redeemed,
repurchased or canceled in whole and not in part, each such Global Note shall
be returned to or retained and canceled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Note is exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Note or for Definitive Notes, the principal amount of Notes represented by such
Global Note shall be reduced accordingly and an endorsement shall be made on
such Global Note, by the Trustee, the Note Custodian or the Depository at the
direction of the Trustee, to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Note,
such other Global Note shall be increased accordingly and an endorsement shall
be made on such Global Note, by the Trustee, the Note Custodian or by the
Depository at the direction of the Trustee, to reflect such increase.
(i) General Provisions Relating to Transfers and
Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall
authenticate Global Notes and Definitive Notes upon
the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder
of a Definitive Note for any registration of transfer
or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith
(other than any such transfer taxes or similar
-27-
<PAGE> 35
governmental charge payable upon exchange or transfer
pursuant to Sections 2.10, 3.06, 4.10, 4.15 and 9.05
hereof).
(iii) The Registrar shall not be required to register the
transfer or exchange of any Note selected for
redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes
or Definitive Notes shall be the valid obligations of
the Company, evidencing the same debt, and entitled
to the same benefits under this Indenture and the
Subsidiary Guarantees, as the Global Notes or
Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange Notes during
a period beginning at the opening of business 15 days
before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at
the close of business on the day of selection, (B) to
register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in
part or (C) to register the transfer of or to
exchange a Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name
any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of
principal of and interest on such Notes and for all
other purposes, and none of the Trustee, any Agent or
the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of
Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar
pursuant to this Section 2.06 to effect a transfer or
exchange may be submitted by facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Note if the Trustee's requirements
are met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and
the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note.
-28-
<PAGE> 36
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date,
money sufficient to pay Notes payable on that date, then on and after that date
such Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Responsible Officer of the
Trustee actually knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until Definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon a written order
of the Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of Definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate Definitive Notes in exchange for
temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall return
such canceled Notes to the Company. The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall promptly notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Note and the date of the proposed payment. The Company shall fix or cause
to be fixed each such special record date and payment date, provided that no
such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to
be mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
Section 2.13. CUSIP Numbers.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption
and that reliance may be placed only on the other identification numbers
printed on the
-29-
<PAGE> 37
Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If (x) the Company elects to redeem Notes pursuant to the
optional redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee, at least 30 days but not more than 60 days before a redemption date
and (y) the Company redeems Notes pursuant to the redemption provisions of
Section 3.10 hereof (a "Special Redemption"), it shall furnish, subject to
Section 3.03 hereof, to the Trustee at least two days before notice of the
Special Redemption is to be mailed to the Holders (unless a shorter notice
period shall be satisfactory to the Trustee, as evidenced in writing signed on
behalf of the Trustee), in each such case an Officers' Certificate setting
forth (i) the clause of this Indenture pursuant to which the redemption shall
occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to be Redeemed.
If less than all of the Notes are to be redeemed at any time,
selection of Notes for redemption shall be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not so listed, on a pro rata
basis, by lot or in accordance with any other method the Trustee considers fair
and appropriate; provided that no Notes of $1,000 or less shall be redeemed in
part. In the event of partial redemption by lot, the particular Notes to be
redeemed shall be selected, unless otherwise provided herein, not less than
[20] nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date (other than in
connection with a Special Redemption), the Company shall mail or cause to be
mailed, by first class mail, a notice of redemption to each Holder whose Notes
are to be redeemed at its registered address. In the event of a Special
Redemption, at least three Business Days before a Special Redemption other than
on the Special Redemption Date, the Company shall mail or cause to be mailed a
notice of redemption by first class mail, postage prepaid, to each Holder, with
a copy to the Trustee. In the event of a Special Redemption on the Special
Redemption Date the Company shall provide the Trustee with notice on or prior
to 9:30 a.m. New York City time on the Business Day immediately preceding the
Special Redemption Date to effect such Special Redemption; provided that
failure to provide any such notice of a Special Redemption shall not affect the
Company's right to effect a Special Redemption on the Special Redemption Date,
or the amount of the Company's obligation on the Notes.
The notice shall identify the Notes (including CUSIP numbers)
to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
-30-
<PAGE> 38
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or
printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least 30 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as
provided in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
No later than 10:00 a.m. New York City Time on the redemption
date (other than in connection with a Special Redemption), the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest and Liquidated Damages, if any, on all
Notes to be redeemed on that date. The Trustee or the Paying Agent shall
promptly return to the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued interest and Liquidated Damages, if any, on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph and from and after the Special Redemption Date or such earlier date
of a Special Redemption in accordance with Sections 3.03 and 3.10 hereof, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest and Liquidated Damages, if any, shall be
paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption shall not be
so paid upon surrender for redemption because of the failure of the Company to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case
at the rate provided in the Notes and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section
3.07 and Section 3.10 hereof, the Notes shall not be redeemable at the
Company's option prior to December 15, 2002. Thereafter, the Notes will be
subject to redemption at any time at the option of the Company in whole or in
part, at the redemption prices (expressed as
-31-
<PAGE> 39
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on
December 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002 . . . . . . . . . . . . . . . . 104.875%
2003 . . . . . . . . . . . . . . . . 103.250%
2004 . . . . . . . . . . . . . . . . 101.625%
2005 and thereafter . . . . . . . . . 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time before
December 15, 2000, the Company may on any one or more occasions redeem up to an
aggregate of 35% of the principal amount of Notes outstanding at a redemption
price of 109.75% of the principal amount thereof, plus accrued and unpaid
interest, if any, and Liquidated Damages, if any, thereon, to the redemption
date, with the net cash proceeds of any Equity Offering; provided that at least
65% of the aggregate principal amount of Notes outstanding on the date of the
Indenture remain outstanding immediately after each occurrence of such
redemption; and provided, further, that each such redemption shall occur within
60 days of the date of the closing of such Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be
made pursuant to the provisions of Sections 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
Except as set forth under Sections 3.09, 3.10, 4.10 and 4.15
hereof, the Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders to purchase Notes
(an "Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest and Liquidated Damages, if any, shall be paid to the Person in whose
name a Note is registered at the close of business on such record date, and no
additional interest or Liquidated Damages shall be payable to Holders who
tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The
notice, which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made
pursuant to this Section 3.09 and Section 4.10 hereof and the length
of time the Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the
Purchase Date;
-32-
<PAGE> 40
(c) that any Note not tendered or accepted for
payment shall continue to accrete or accrue interest;
(d) that, unless the Company defaults in making
such payment, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrete or accrue interest after the Purchase
Date;
(e) that Holders electing to have a Note
purchased pursuant to an Asset Sale Offer may only elect to have all
of such Note purchased and may not elect to have only a portion of
such Note purchased;
(f) that Holders electing to have a Note
purchased pursuant to any Asset Sale Offer shall be required to
surrender the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, or transfer by
book-entry transfer, to the Company, a depository, if appointed by the
Company, or a Paying Agent at the address specified in the notice at
least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw
their election if the Company, the depository or the Paying Agent, as
the case may be, receives, not later than the expiration of the Offer
Period, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Note the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of
Notes surrendered by Holders and holders of any other Indebtedness
(including the Seller Note) entitled to participate in such Asset Sale
Offer, if any, exceeds the Offer Amount, the Company shall select the
Notes to be purchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Company so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(i) that Holders whose Notes were purchased only
in part shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered (or transferred by
book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to, the extent
necessary, the Offer Amount of Notes or portions thereof tendered pursuant to
the Asset Sale Offer, or if less than the Offer Amount has been tendered, all
Notes tendered, and shall deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Company in accordance with the terms of this Section 3.09. The Company, the
Depository or the Paying Agent, as the case may be, shall promptly (but in any
case not later than five days after the Purchase Date) mail or deliver to each
tendering Holder an amount equal to the purchase price of the Notes tendered by
such Holder and accepted by the Company for purchase, and the Company shall
promptly issue a new Note, and the Trustee, upon written request from the
Company shall authenticate and make available for delivery such new Note to
such Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
Section 3.10. Special Redemption.
If the Merger has not been consummated prior to the Special
Redemption Date, all outstanding Notes shall be redeemed by the Company on the
Special Redemption Date at a redemption price equal to 101% of the principal
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of redemption. The Company may redeem all outstanding Notes at any
time on or prior to the Special Redemption Date if the Merger has not been
consummated and the Merger Agreement has been terminated on or prior to such
time, on or prior to such date at a
-33-
<PAGE> 41
redemption price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the
date of redemption.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest and Liquidated Damages, if any, on the Notes on
the dates and in the manner provided in the Notes. Principal, interest and
Liquidated Damages, if any, shall be considered paid on the date due if the
Paying Agent, if other than the Company or a Subsidiary thereof, holds as of
10:00 a.m. New York City Time on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal and interest then due. The Company shall pay all Liquidated Damages,
if any, in the same manner on the dates and in the amounts set forth in the
Registration Rights Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under the Bankruptcy Code) on overdue principal at
the rate borne on the Notes to the extent lawful; it shall pay interest
(including post- petition interest in any proceeding under the Bankruptcy Code)
on overdue installments of interest and Liquidated Damages (without regard to
any applicable grace period) at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03 hereof.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations
of the SEC, so long as any Notes are outstanding, the Company shall furnish to
each of the Holders of Notes within the time periods specified in the SEC's
rules and regulations, beginning with annual financial information for the year
ended December 31, 1997, (i) all quarterly and annual financial information
that would be required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if the Company were required to file such financial information,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" that describes the financial condition and results of
operations of the Company and any consolidated Subsidiaries and, with respect
to the annual information only, reports thereon by the Company's independent
public accountants (which shall be firm(s) of established national reputation)
and (ii) all information that would be required to be filed with the SEC on
Form 8-K if the Company were required to file such reports. All such
information and reports shall be delivered to the Holders of Notes on or prior
to the dates on which such filings would have been required to be made had the
Company been subject to the rules and regulations
-34-
<PAGE> 42
of the SEC. All such information and reports shall be filed with the SEC on or
prior to the dates on which such filings would have been required to be made
had the Company been subject to the rules and regulations of the SEC. In
addition, whether or not required by the rules and regulations of the SEC, the
Company shall file a copy of all such information and reports with the SEC for
public availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company shall at all times comply with TIA Section 314(a).
(b) For so long as any Notes remain outstanding, the
Company shall furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Delivery of such reports, information and documents
to the Trustee is for informational purposes only and the Trustee's receipt of
such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions and conditions of
this Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Company is taking or proposes to take with
respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of the
principal of or interest, if any, on the Notes is prohibited or if such event
has occurred, a description of the event and what action the Company is taking
or proposes to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.03(a) above shall
be accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial
statements, nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Article 4 or Article 5 hereof
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any future knowledge of any
such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, charges,
assessments, and governmental levies except such as are contested in good faith
and by appropriate proceedings or where the failure to effect such payment is
not adverse in any material respect to the Holders of the Notes.
Section 4.06. Waiver of Stay, Extension and Usury Laws.
Each of the Company and the Subsidiaries 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
-35-
<PAGE> 43
stay, extension or usury law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
each of the Company and the Subsidiaries (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it shall not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been
enacted.
Section 4.07. Restricted Payments.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's or
any of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire
or retire for value (including without limitation, in connection with any
merger or consolidation involving the Company) any Equity Interests of the
Company (other than any such Equity Interests owned by a Wholly Owned
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.09 hereof;
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company or any of
its Restricted Subsidiaries after the date of the Indenture (excluding
Restricted Payments permitted by clauses (ii), (iii), (iv), (v),
(vii), (viii) or (ix) of the next succeeding paragraph), is less than
the sum of (i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the
first fiscal quarter immediately following the date of the Indenture
to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Company from the issue or
sale, in either case, since the date of the Indenture of (A) Equity
Interests of the Company (other than Disqualified Stock), or (B)
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible or exchangeable debt securities)
sold to a Restricted Subsidiary of the Company and other than
Disqualified Stock or debt securities that have been converted or
exchanged into Disqualified Stock), plus (iii) in case any
Unrestricted Subsidiary has been redesignated a Restricted Subsidiary
pursuant to the terms of the Indenture or has been merged,
consolidated or amalgamated with or into, or transfers or conveys
assets to or is liquidated into, the Company or a Restricted
Subsidiary and provided that no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof,
the lesser of (A) the book value (determined in accordance with GAAP)
at the date of such redesignation, combination or transfer of the
aggregate Investments made by the Company and its Restricted
Subsidiaries in such Unrestricted Subsidiary (or of the assets
transferred or conveyed, as applicable) and (B) the fair market value
of such Investment in such Unrestricted Subsidiary at the time of such
redesignation, combination or transfer (or of the assets transferred
or conveyed, as applicable), in each case as determined in good faith
by the Board of Directors of the Company, whose determination shall be
conclusive and evidenced by a resolution of such Board and,
-36-
<PAGE> 44
in each case, after deducting any Indebtedness associated with the Unrestricted
Subsidiary so designated or combined or with the assets so transferred or
conveyed, plus (iv) to the extent not already included in Consolidated Net
Income for such period, without duplication, any Restricted Investment that was
made after the date of the Indenture is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (A) the cash return of capital with respect
to such Restricted Investment (less the cost of disposition, if any) and (B)
the initial amount of such Restricted Investment, plus (v) $10,000,000.
The foregoing provisions shall not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance, or other
acquisition of any Indebtedness which is subordinated to the Notes or Equity
Interests of the Company in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (c) (ii) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
Indebtedness which is subordinated to the Notes with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend or distribution by a Restricted Subsidiary of the Company to the
holders of its common Equity Interests on a pro rata basis;(v) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any Restricted Subsidiary of the Company held by any employee
or director of the Company (or any of its Subsidiaries), or any former employee
or director of the Company (or any of its Subsidiaries) issued pursuant to any
management equity plan or stock option plan or any other management or employee
benefit plan, agreement or trust; provided, however, that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity Interests
pursuant to this clause (v) shall not exceed $1,000,000 in any twelve-month
period; (vi) other Restricted Payments not to exceed $10,000,000 in the
aggregate; (vii) repurchases of Equity Interests deemed to occur upon the
cashless exercise of stock options; (viii) payments in accordance with the
terms of the Merger Agreement; and (ix) reasonable and customary directors'
fees to the members of the Company's Board of Directors, provided that such
fees are consistent with past practice, provided, further, that, with respect
to clauses (ii), (iii), (v), (vi), (vii), (viii) and (ix) above, no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction.
In determining whether any Restricted Payment is permitted by
the foregoing covenant, the Company may allocate or reallocate all or any
portion of such Restricted Payment among the clauses (i) through (ix) of the
preceding paragraph or among such clauses and the first paragraph of this
covenant including clauses (a), (b) and (c), provided that at the time of such
allocation or reallocation, all such Restricted Payments, or allocated portions
thereof, would be permitted under the various provisions of the foregoing
covenant.
The amount of all Restricted Payments (other than cash) shall
be the fair market value (as determined by the Board of Directors of the
Company and as evidenced by a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate delivered to the Trustee) on the
date of the Restricted Payment of the asset(s) or securities proposed to be
transferred or issued by the Company or such Restricted Subsidiary, as the case
may be, pursuant to the Restricted Payment, such determination to be based upon
an opinion or appraisal by an Independent Financial Advisor if the fair market
value of any Restricted Payment is greater than $10,000,000. Not later than
(i) the end of any calendar quarter in which any Restricted Payment is made or
(ii) the making of a Restricted Payment which, when added to the sum of all
previous Restricted Payments made in a calendar quarter, would cause the
aggregate of all Restricted Payments made in such quarter to exceed $5,000,000,
the Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed, which calculations may be
based upon the Company's latest available financial statements.
The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (i) immediately after giving
effect to such designation, the Company is able to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09, (ii) immediately before and
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing and (iii) the Company certifies
that such designation complies with this covenant. Any such designation by the
Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of
-37-
<PAGE> 45
the resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
For purposes of making the determination as to whether such
designation would cause a Default or Event of Default, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the
extent repaid in cash) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under the first paragraph of this covenant.
All such outstanding Investments will be deemed to constitute Investments in an
amount equal to the greatest of (i) the net book value (determined in
accordance with GAAP) of such Investments at the time of such designation, (ii)
the fair market value of such Investments at the time of such designation and
(iii) the original fair market value of such Investments at the time they were
made. Such designation will only be permitted if such Restricted Payment would
be permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred as of
such date.
Section 4.08. Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company or the Company to (i)(x)
pay dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (y) pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)
make loans or advances to the Company or any of its Restricted Subsidiaries or
(iii) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) the Indenture, the Notes, Existing Indebtedness and
the Senior Credit Facility as in effect on the date of the Indenture, (b)
applicable law, (c) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except with respect to Indebtedness
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or the property or assets of
the Person or such Person's subsidiaries, so acquired, provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred, (d) restrictions of the nature described in clause
(iii) above by reason of customary non-assignment provisions in contracts,
agreements, and leases entered into in the ordinary course of business and
consistent with past practices, (e) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (f) any
restriction with respect to a Restricted Subsidiary imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
of the Capital Stock or assets of such Restricted Subsidiary pending the
closing of such sale or disposition, (g) agreements relating to secured
Indebtedness otherwise permitted to be incurred pursuant to Sections 4.09 and
4.12 hereof that limit the right of the debtor to dispose of assets securing
such Indebtedness, ((h) Permitted Refinancing Indebtedness in respect of
Indebtedness referred to in clause (a), (c) and (e) of this paragraph, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company shall not issue any
Disqualified Stock and shall not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided,
-38-
<PAGE> 46
however, that the Company or any Guarantor may incur Indebtedness (including
Acquired Debt) or the Company may issue shares of Disqualified Stock if the
Company's Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been at least 2.25 to
1, during the period from the date of the Indenture until the second
anniversary of the date of the Indenture, and, thereafter, 2.50 to 1, in each
case determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred,
or the Disqualified Stock had been issued, as the case may be, at the beginning
of such four-quarter period.
The provisions of the first paragraph of this covenant shall
not apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Notes and the Subsidiary Guarantees;
(ii) the incurrence by the Company or its Restricted
Subsidiaries of Indebtedness and letters of credit pursuant to the
Senior Credit Facility (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the
Company or its Restricted Subsidiaries thereunder) in an aggregate
principal amount not to exceed $455,000,000, less the sum of (A) the
aggregate amount of all proceeds of Assets Sales that have been
applied since the date of the Indenture to permanently reduce the
outstanding amount of such Indebtedness pursuant to Section 4.10
hereof; plus (B) Indebtedness incurred and outstanding pursuant to
clause (ix) below;
(iii) the incurrence by the Company or any of its
Restricted Subsidiaries of Existing Indebtedness;
(iv) the incurrence by the Company or any of its
Restricted Subsidiaries of Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund, Indebtedness that was
permitted by the Indenture to be incurred;
(v) the incurrence by the Company or any of its
Restricted Subsidiaries of intercompany Indebtedness between or among
the Company and any of its Restricted Subsidiaries; provided, however,
that (i) if the Company or any Guarantor is the obligor on such
Indebtedness, such Indebtedness is expressly subordinate to the
payment in full of all Obligations with respect to the Notes and (ii)
(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary and (B) any sale or other transfer
of any such Indebtedness to a Person that is not either the Company or
a Restricted Subsidiary shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(vi) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in
each case incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of property,
plant or equipment used in the business of the Company or such
Restricted Subsidiary, in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace Indebtedness incurred pursuant to this clause (vi), not to
exceed $20,000,000 at any time outstanding.
(vii) the incurrence by the Company or any of its
Restricted Subsidiaries of obligations in the ordinary course of
business under (A) trade letters of credit which are to be repaid in
full not more than one year after the date on which such Indebtedness
is originally incurred to finance the purchase of goods by the Company
or a Restricted Subsidiary of the Company; (B) standby letters of
credit issued for the purpose of supporting (1) workers' compensation
liabilities of the Company or any of its Restricted Subsidiaries, or
(2) performance, payment, deposit or surety obligations of the
-39-
<PAGE> 47
Company or any of its Restricted Subsidiaries; and (C) bid, advance
payment and performance bonds and surety bonds, and refinancings
thereof;
(viii) the incurrence by the Company or any of its
Restricted Subsidiaries of Financial Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate risk
(including with respect to any floating rate Indebtedness that is
permitted by the terms of the Indenture to be outstanding; and) and
Commodity Hedging Obligations in connection with the conduct of their
respective businesses and not for speculative purposes and otherwise
consistent with past practices;
(ix) the incurrence by the Company or any Restricted
Subsidiary of CCC Loans in an aggregate principal amount outstanding
not to exceed the lesser (A) $200,000,000; and (B) the undrawn portion
of the revolving credit facility and unused letter of credit facility
available under the Senior Credit Facility would be permitted to be
incurred pursuant to clause (ii) above;
(x) Indebtedness arising from agreements of the Company
or any Restricted Subsidiary providing for indemnification, adjustment
of purchase price or similar obligations, in each case, incurred in
connection with the disposition of any business, assets or a
Restricted Subsidiary of the Company, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of
such business, assets or a Restricted Subsidiary of the Company for
the purposes of financing such acquisition; provided, however, that
(A) such Indebtedness is not reflected on the balance sheet of the
Company or any of its Restricted Subsidiaries (contingent obligations
referred to in a footnote to financial statements and not otherwise
reflected on the balance sheet will not be deemed to be reflected on
such balance sheet for purposes of this clause (A)) and (B) the
maximum assumable liability in respect of all such Indebtedness shall
at no time exceed the gross proceeds including noncash proceeds (the
fair market value of such noncash proceeds being measured at the time
received and without giving effect to any subsequent changes in value)
actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;
(xi) the guarantee by the Company or any of the Guarantors
of Indebtedness of the Company or a Restricted Subsidiary of the
Company that was permitted to be incurred by another provision of this
covenant; provided, that the Guarantee of any Indebtedness of a
Restricted Subsidiary of the Company that is not or is no longer a
Guarantor shall be deemed a Restricted Investment at the time of such
guarantee or at the time such Restricted Subsidiary's Guarantor status
terminates in an amount equal to the maximum principal amount so
guaranteed, for so long as, and to the extent that, such guarantee
remains outstanding;
(xii) the issuance by a Restricted Subsidiary of the
Company of preferred stock to the Company or to any of its Restricted
Subsidiaries; provided, however, that any subsequent event or issuance
or transfer of any Equity Interests that results in the owner of such
preferred stock ceasing to be the Company or any of its Restricted
Subsidiaries or any subsequent transfer of such preferred stock to a
Person, other than the Company or one of its Restricted Subsidiaries,
shall be deemed to be an issuance of preferred stock by such
Subsidiary that was not permitted by this clause (xii); and
(xiii) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness (in addition to Indebtedness
permitted by any other clause of this paragraph) in an aggregate
principal amount (or accreted value, as applicable) at any time
outstanding not to exceed $25,000,000.
For purposes of determining compliance with this covenant, in
the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through (xiii) above
or is entitled to be incurred pursuant to the first paragraph of this covenant,
the Company shall, in its sole discretion, classify such item of Indebtedness
in any manner that complies with this covenant and such item of Indebtedness
shall be treated as having been incurred pursuant to only one of such clauses
or pursuant to the first paragraph hereof. Accrual of interest, the accretion
of accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for
purposes of this covenant.
-40-
<PAGE> 48
Section 4.10. Asset Sales.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, engage in an Asset Sale unless (i) 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 (which shall be
determined in good faith by the Company's Board of Directors) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration (other than the consideration received in the disposition
of the real property, improvements and equipment associated with Holly Sugar
Corporation's non-operating facilities at Hamilton City, California and Santa
Barbara, California) therefor received by the Company or such Restricted
Subsidiary is in the form of cash or Cash Equivalents; provided that the amount
of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary of the Company (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes or any Subsidiary Guarantee)
that are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) any securities, notes or other obligations received
by the Company or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash
(to the extent of the cash received), shall be deemed to be cash for purposes
of this provision and provided, further, that any Asset Sale pursuant to a
condemnation, appropriation or other similar taking, including by deed in lieu
of condemnation, or pursuant to the foreclosure or other enforcement of a
Permitted Lien or exercise by the related lienholder of rights with respect
thereto, including by deed or assignment in lieu of foreclosure shall not be
required to satisfy the conditions set forth in clauses (i) and (ii) of this
paragraph.
Within 270 days after the receipt of any Net Proceeds from an
Asset Sale, the Company or such Restricted Subsidiary, as the case may be, may
apply such Net Proceeds, at its option, (a) to permanently repay Senior Debt
(and to correspondingly permanently reduce the commitments with respect thereto
in the case of revolving borrowings), (b) to acquire a controlling interest in
another business or all or substantially all of the assets of a business,
engaged in a Permitted Business, provided that the Company or such Restricted
Subsidiary will have complied with clause (b) or (c) if, within 270 days of
such Asset Sale, the Company or such Restricted Subsidiary shall have commenced
and not completed or abandoned an investment in compliance with clause (b) or
(c) and such Investment is substantially completed within 90 days after the
first anniversary of such Asset Sale, or (c) to acquire other long term assets
to be used in a Permitted Business. Pending the final application of any such
Net Proceeds, the Company may temporarily reduce Indebtedness under any Credit
Facility or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph shall
be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10,000,000, the Company shall be required to make an offer to
all Holders of Notes and other Indebtedness that ranks by its terms pari passu
in right of payment with the Notes and the terms of which contain substantially
similar requirements with respect to the application of net proceeds from asset
sales as are contained in the Indenture (an "Asset Sale Offer") to purchase on
a pro rata basis the maximum principal amount of Notes, that is an integral
multiple of $1,000, that may be purchased out of the Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase, in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate amount of Notes and other such Indebtedness
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes.
If the aggregate principal amount of Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, make any payment to, or
sell, lease, transfer or otherwise dispose of any properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate of any such Person (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction
is on terms that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate
-41-
<PAGE> 49
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1,000,000, a resolution of its Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above, (b) with respect to any Affiliate
Transaction or series of related Affiliate Transaction involving aggregate
consideration in excess of $5,000,000, a resolution of its Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of its Board of
Directors, and (c) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$10,000,000, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an Independent Financial
Advisor; provided that none of the following shall be deemed to be Affiliate
Transactions: (1) any employment agreement entered into by the Company or any
of its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted Subsidiary,
as the case may be, (2) transactions between or among the Company and/or its
Restricted Subsidiaries, (3) Restricted Payments that are permitted by Sections
4.07 hereof, (4) fees and compensation paid to members of the Board of
Directors of the Company and of its Restricted Subsidiaries in their capacity
as such, to the extent such fees and compensation are reasonable and customary,
(5) advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business
and consistent with past practices, (6) maintenance in the ordinary course of
business of customary benefit programs or arrangements for employees, officers
or directors, including vacation plans, health and life insurance plans,
deferred compensation plans and retirement or savings plans and similar plans;
(7) payments in accordance with the terms of the Merger Agreement; and (8) fees
and compensation paid to, and indemnity provided on behalf of, officers,
directors or employees of the Company or any of its Restricted Subsidiaries, as
determined by the Board of Directors of the Company or of any such Restricted
Subsidiary, to the extent such fees and compensation are reasonable and
customary as determined by the Board of Directors of the Company or such
Restricted Subsidiary.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer
to exist or become effective any Lien of any kind securing Indebtedness or
trade payables (other than Permitted Liens) upon any of their property or
assets, now owned or hereafter acquired, unless all payments due under this
Indenture and the Notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer
secured by a Lien.
Section 4.13. Business Activities.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, engage in any line of
business other than a Permitted Business, except to such extent as would not be
material to the Company and its Restricted Subsidiaries taken as a whole.
Section 4.14. Corporate Existence.
Subject to Articles 5 and 11 hereof, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate existence, and the corporate, partnership or other
existence of each of its Restricted Subsidiaries, in accordance with the
respective organizational documents (as the same may be amended from time to
time) of the Company or any such Restricted Subsidiary and (ii) the rights
(charter and statutory), licenses and franchises of the Company and its
Restricted Subsidiaries; provided, however, that the Company shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Restricted Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase upon Change of Control.
(a) Upon the occurrence of a Change of Control, each
Holder of Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of
-42-
<PAGE> 50
the aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, if any, to the purchase date (the "Change
of Control Payment").
Within 10 days following any Change of Control, the Company
will mail a notice to each Holder stating: (i) the description of the
transaction or transactions that constitute the Change of Control and that the
Change of Control Offer is being made pursuant to this Section 4.15 and that
all Notes tendered will be accepted for payment; (ii) the purchase price and
the purchase date, which shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment
Date"); (iii) that any Note not tendered will continue to accrue interest and
Liquidated Damages, if any; (iv) that, unless the Company defaults in the
payment of the Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after
the Change of Control Payment Date; (v) that Holders electing to have any Notes
purchased pursuant to a Change of Control Offer will be required to surrender
the Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date; (vi) that Holders will be entitled to
withdraw their election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have the Notes
purchased; and (vii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof. The Company shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes as a
result of a Change of Control.
(b) On the Change of Control Payment Date, the Company
shall, to the extent lawful, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit
with the Paying Agent an amount equal to the Change of Control Payment in
respect of all Notes or portions thereof so tendered and (iii) deliver or cause
to be delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee shall promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note shall be in a principal amount of $1,000 or an integral multiple
thereof. Prior to complying with the provisions of this Section 4.15 but in
any event within 90 days following a Change of Control, the Company shall
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this covenant. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) The Company shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth herein applicable to a Change of Control Offer made by
the Company and purchases all Notes validly tendered and not withdrawn under
such Change of Control Offer.
Section 4.16. No Senior Subordinated Debt.
Notwithstanding any other provision hereof, (i) the Company
shall not incur, create, issue, assume, guarantee or otherwise become liable
directly or indirectly for any Indebtedness (including Acquired Debt) that is
expressly subordinate or junior in right of payment to any Senior Debt and
senior in any respect in right of payment to the Notes, and (ii) no Guarantor
shall incur, create, issue, assume, guarantee or otherwise become liable for
any Indebtedness (including Acquired Debt) that is expressly subordinate or
junior in right of payment to any Senior Debt of a Guarantor and senior in any
respect in right of payment to the Subsidiary Guarantees, it being understood
that Indebtedness will not be considered senior to other Indebtedness solely by
reason of being secured.
-43-
<PAGE> 51
Section 4.17. Limitation on Issuance and Sales of Capital
Stock of Subsidiaries.
The Company (i) will not, and will not permit any Restricted
Subsidiary of the Company to, transfer, convey, sell or otherwise dispose of
any Capital Stock of any Restricted Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Subsidiary of the Company), unless
(a) such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Restricted Subsidiary and (b) the net proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof and (ii) shall not permit any Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary of
the Company.
Section 4.18. Subsidiary Guarantees of Certain Indebtedness.
No Subsidiary of the Company may guarantee any Indebtedness of
the Company, unless such Subsidiary (i) executes a supplemental indenture in
form and substance satisfactory to the Trustee providing that such Subsidiary
shall become a Guarantor under the Indenture and evidencing such Subsidiary
Guarantee of the Notes in accordance with Article 11 hereof, such Subsidiary
Guarantee to be a senior subordinated unsecured obligation of such Restricted
Subsidiary and (ii) delivers an opinion of counsel to the effect, inter alia,
that such supplemental indenture has been duly authorized and executed by such
Subsidiary. Neither the Company nor any Guarantor shall be required to make a
notation on the Notes to reflect any such subsequent Subsidiary Guarantee.
Nothing in this Section 4.18 shall be construed to permit any Restricted
Subsidiary of the Company to incur Indebtedness otherwise prohibited by Section
4.09 hereof.
Section 4.19. Payments for Consent.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of this Indenture, the Subsidiary Guarantees or the
Notes unless such consideration is offered to be paid or is paid to all Holders
of the Notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
Section 4.20. Deposit of Proceeds with Trustee Pending Consummation
of the Merger.
(a) If the Merger has not been consummated by the close
of business on the Issue Date, the Company shall deposit, at or prior to such
time, with the Trustee as hereinafter provided the net proceeds from the
issuance of the Notes (the "Net Offering Proceeds") and such other amount as,
when added to the Net Offering Proceeds, equals $252,500,000 plus an amount
equal to the interest that would accrue on $250,000,000 from the Issue Date to
the Special Redemption Date at an interest rate of 9 3/4% per annum (the
"Special Redemption Amount") in the Collateral Account described in Section
4.20(c). If the Merger has been consummated by the close of business on the
Issue Date, this Section 4.20 shall be of no further force or effect, and shall
be deemed to be deleted for all purposes from this Indenture.
(b) In order to secure the full and punctual payment and
performance of the Company's obligation, subject to Section 4.20(d), to redeem
the Notes upon a Special Redemption, the Company hereby grants to the Trustee,
for the benefit of the Holders, a continuing security interest in and to the
Collateral, whether now owned or existing or hereafter acquired or arising.
(c) If the Merger is not completed on the Issue Date, at
all times until the earliest to occur of (i) receipt by the Trustee of (x) an
Officers' Certificate stating that the Merger is to be consummated on a date
specified therein which shall be on or before February 1, 1998 (the "Merger
Date") on terms and conditions at least as favorable to the Company considered
as a whole, as the terms and conditions described in the Offering Memorandum
and in the Purchase Agreement relating to the Notes in all material respects of
the Purchase Agreement) and requesting the Trustee to release the Collateral to
the order of the Company for application in connection with the Merger and (y)
an Opinion of Counsel to the effect that the condition precedent described in
the preceding clause (x) has been satisfied, (ii) receipt
-44-
<PAGE> 52
by the Trustee of notice from the Company pursuant to Section 3.03 hereof to
effect a Special Redemption, and (iii) the Special Redemption Date, there shall
be maintained with the Trustee a securities account established for such
purpose (the "Collateral Account"), which account shall be under the sole
dominion and control of the Trustee. Amounts on deposit in the Collateral
Account shall be invested and reinvested in Cash Equivalents from time to time
in accordance with applicable law as directed by the Company with such
investment held in the Collateral Account. Any income received with respect to
the balance from time to time standing to the credit of the Collateral Account,
including any interest or capital gains on Cash Equivalents, shall so long as
no Default or Event of Default shall have occurred and be continuing, be
distributed to the Company, as and when instructed by the Company, so long as
the balance thereof is at all times at least equal to the Special Redemption
Amount. The Trustee shall not be liable or accountable for any losses
resulting without negligence on the part of the Trustee from the sale or
depreciation in the market value of any investment of amounts on deposit in the
Collateral Account. Subject to Article 7 hereof, the Trustee solely in its
individual capacity hereby waives any rights it may have in such individual
capacity to the Collateral Account and all funds and investments therein
including, without limitation, any such rights arising through any
counterclaim, defense, recoupment, charge, lien or right of set-off.
(d) Upon notice from the Company to the Trustee pursuant
to Section 4.20(c)(i) above, the security interests in the Collateral shall
terminate as of the Merger Date and all funds in the Collateral Account (the
"Collateral Funds") shall be released as of the Merger Date by wire transfer of
immediately available funds to the Company to an account previously designated
by it. Upon notice from the Company to the Trustee pursuant to subsection
(c)(ii) above, the Trustee shall apply Collateral Funds to fund the Special
Redemption, the security interests in the Collateral shall terminate as of the
date of such application and the Trustee shall pay any amount in the Collateral
Account in excess of the amount needed to fund the Special Redemption to the
Company. Upon receipt of a notice pursuant to Section 4.20(a)(1) or (ii)
above, the Trustee shall execute, deliver or acknowledge any necessary or
property instruments of termination or release, to evidence the release of any
Collateral permitted to by released pursuant to this Section 4.20. TIA Section
314(d) shall not apply to the release of Collateral pursuant to this provision
if such release occurs prior to the filing of the Exchange Offer Registration
Statement pursuant to the Registration Rights Agreement, after which time this
sentence shall be deemed deleted from this Indenture.
(e) The Parties intend that the Trustee shall have
"control" of the Collateral Account within the meaning of Article 8 of the
Uniform Commercial Code as in effect in the State of New York on the Issue
Date, and shall not release Collateral Funds except as provided in this Section
4.20.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Indenture will provide that the Company will not
consolidate or merge with or into (whether or not the Company is the surviving
corporation), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (i) the Company
is the surviving corporation or the entity or the Person formed by or surviving
any such consolidation or merger (if other than the Company) or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately before and after such transaction no Default or Event of Default
shall have occurred; and (iv) except in the case of a merger of the Company
with or into a Wholly Owned Subsidiary, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning
-45-
<PAGE> 53
of the applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of
interest on, or Liquidated Damages with respect to, the Notes and such
default continues for a period of 30 days (whether or not prohibited
by Article 10 hereof);
(b) the Company defaults in the payment when due of
principal of or premium, if any, on the Notes (whether or not
prohibited by Article 10 hereof);
(c) the Company fails to comply with any of the
provisions of Sections 4.07, 4.09, 4.10, 4.15 or 5.01 hereof;
(d) the Company or any of its Restricted Subsidiaries
fails to observe or perform any other covenant, representation,
warranty or other agreement in this Indenture or the Notes for 60 days
after notice to the Company by the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding;
(e) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which
is guaranteed by the Company or any of its Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after
the Issue Date, which default (a) is caused by a failure to pay
principal of such Indebtedness at final maturity prior to the
expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and,
in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates without duplication $10,000,000 or more and
such default shall not have been cured or acceleration rescinded
within five Business Days after such occurrence;
(f) a final judgment or final judgments for the payment
of money are entered by a court or courts of competent jurisdiction
against the Company or any of its Significant Subsidiaries and such
judgment or judgments remain unpaid or undischarged for a period
(during which execution shall not be effectively stayed) of 60 days,
provided that the aggregate of all such unpaid or undischarged
judgments exceeds $5,000,000 (excluding amounts covered by insurance);
-46-
<PAGE> 54
(g) the Company or any of its Significant Subsidiaries or
any group of Subsidiaries that, when taken together, would constitute
a Significant Subsidiary pursuant to or within the meaning of the
Bankruptcy Code:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a custodian of
it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of
its creditors, or
(v) generally is not paying its debts as they
become due;
(h) a court of competent jurisdiction enters an order or
decree under the Bankruptcy Code that:
(i) is for relief against the Company or any of
its Significant Subsidiaries or any group of Subsidiaries
that, when taken together, would constitute a Significant
Subsidiary, in an involuntary case;
(ii) appoints a Custodian of the Company or any of
its Significant Subsidiaries or any group of Subsidiaries
that, when taken together, would constitute a Significant
Subsidiary, or for all or substantially all of the property of
the Company or any of its Significant Subsidiaries or any
group of Subsidiaries that, when taken together, would
constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any
of its Significant Subsidiaries or any group of Subsidiaries
that, when taken together, would constitute a Significant
Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(i) except as permitted herein, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect
or any Guarantor, or any Person acting on behalf of any Guarantor,
shall deny or disaffirm its obligations under its Subsidiary Guarantee
(other than by reason of the termination of this Indenture or the
release of any such Subsidiary Guarantee in accordance with this
Indenture).
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding
Notes may declare all the Notes to be due and payable immediately. Upon any
such declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (g)
or (h) of Section 6.01 hereof occurs with respect to the Company or any
Significant Subsidiary, all outstanding Notes shall be due and payable
immediately without further action or notice. The Holders of at least a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or Liquidated Damages that has become due solely because of
the acceleration) have been cured or waived.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, interest
and Liquidated Damages, if any, on the Notes or to enforce the performance of
any provision of the Notes or this Indenture.
-47-
<PAGE> 55
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of interest or Liquidated Damages, if any, on, or the principal
of, the Notes including in connection with an offer to purchase; provided,
however, that the Holders of a majority in aggregate principal amount of then
outstanding Notes may rescind an acceleration and its consequences, including
any related payment default that resulted from such acceleration, to the extent
permitted by applicable law. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note has previously given to the
Trustee written notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of
the then outstanding Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and,
if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense to be incurred in
compliance with such request;
(d) the Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if requested,
the provision of indemnity; and
(e) during such 60-day period the Holders of a majority
in principal amount of the then outstanding Notes do not give the
Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the
respective due dates expressed in the Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
-48-
<PAGE> 56
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b)
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue principal and,
to the extent lawful, interest and such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof. To the extent that
the payment of any such compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.07 hereof out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties that the Holders may be entitled to receive in such
proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense,
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the cost 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 does not apply to a suit by the
Trustee,
-49-
<PAGE> 57
a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by
Holders of more than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in its
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties
that are specifically set forth in this Indenture and the TIA and no
others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee. To the extent of any conflict
between the duties of the Trustee hereunder and under the TIA, the TIA
shall control.
(ii) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine
the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts
stated therein).
(c) The Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise any of its rights and powers under
this Indenture at the request of any Holders, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document
(whether in its original or facsimile form) 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.
-50-
<PAGE> 58
(b) Before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel of its selection and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection from liability in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized or
within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities (including fees and expenses of its agents and counsel) that might
be incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee, any Paying Agent, any authenticating agent or
registrar in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would have if it were not Trustee.
However, in the event that the Trustee acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this or the Notes, it shall
not be accountable for the Company's use of the proceeds from the Notes or any
money paid to the Company or upon the Company's direction under any provision
of this Indenture, it shall not be responsible for the use or application of
any money received by any Paying Agent other than the Trustee, and it shall not
be responsible for any statement or recital herein or any statement in the
Notes or any other document in connection with the sale of the Notes or
pursuant to this Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and
if it is actually known to a Responsible Officer of the Trustee, the Trustee
shall mail to Holders of Notes a notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in payment of principal of, or interest or Liquidated Damages, if any,
on any Note, the Trustee may withhold the notice if and so long as a committee
of its Responsible Officers in good faith determines that withholding the
notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each November 15 beginning with the
November 15 following the date of this Indenture, and for so long as Notes
remain outstanding, the Trustee shall mail to the Holders of the Notes a brief
report dated as of such reporting date that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).
-51-
<PAGE> 59
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Notes are
listed on any stock exchange or delisted therefrom.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation for its acceptance of this Indenture and services hereunder as the
parties shall agree from time to time. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify each of the Trustee and any
predecessor Trustee against any and all losses, liabilities, claims, damages or
expenses (including taxes other than taxes based upon the income or gross
receipts of the Trustee) incurred by it arising out of or in connection with
the acceptance or administration of its duties under this Indenture, including
the costs and expenses of enforcing this Indenture against the Company
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability, claim, damage or
expense may be attributable to its negligence or bad faith. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company
of its obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable fees and expenses of such counsel.
The Company need not pay for any settlement made without its consent, which
consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of
administration under the Bankruptcy Code.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof,
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under the
Bankruptcy Code;
(c) a custodian or public officer takes charge of the
Trustee or its property; or
-52-
<PAGE> 60
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the
then outstanding Notes may, at the expense of the Company, petition any court
of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10 hereof, such Holder of a Note may, at the expense of the Company,
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7 09. Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
-53-
<PAGE> 61
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company and the Guarantors shall,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be deemed to have been discharged from its obligations with respect to all
outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance") except for (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages, if any, on such Notes when such
payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of this Indenture. For this purpose, Legal
Defeasance means that the Company or the Guarantors shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Article 2 and Section 4.02 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Company's obligations in connection therewith and (d) this Article 8.
Subject to compliance with this Article 8, the Company may exercise its option
under this Section 8.02 notwithstanding the prior exercise of its option under
Section 8.03 hereof.
Section 8.03 Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company and the Guarantors shall,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be released from its obligations under the covenants contained in Sections
4.03, 4.04, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17,
4.18, 4.19 and 4.20 hereof, Article 5 hereof and Section 11.03 hereof with
respect to the outstanding Notes on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03 hereof, subject to
the satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(c) through 6.01(g) hereof and 6.01(j) hereof shall not constitute Events
of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders, cash in U.S.
dollars, non-callable Government Securities, or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay
-54-
<PAGE> 62
the principal of, premium, if any, and interest and Liquidated
Damages on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(b) in the case of an election under Section 8.02 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of
this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied
to such deposit) or insofar as Section 6.01(h) or 6.01(i) hereof is
concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default under,
the Senior Credit Facility or any material agreement or instrument
(other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that on the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others;
and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held
in Trust; Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest and Liquidated Damages, if any, but such money
need not be segregated from other funds except to the extent required by law.
-55-
<PAGE> 63
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 hereof or
the principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held by
it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of,
premium, if any, or interest and Liquidated Damages, if any, on any Note and
remaining unclaimed for two years after such principal, and premium, if any, or
interest and Liquidated Damages, if any, has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S.
dollars or non-callable Government Securities in accordance with Section 8.02
or 8.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the
Company makes any payment of principal of, premium, if any, or interest and
Liquidated Damages, if any, on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 hereof, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or
in place of certificated Notes or to alter the provisions of Article 2
hereof (including the related definitions) in a manner that does not
materially adversely affect any Holder;
-56-
<PAGE> 64
(c) to provide for the assumption of the Company's
obligations to the Holders of the Notes in the case of a merger,
consolidation or sale of assets of the Company pursuant to Article 5
hereof or of any Guarantor pursuant to Article 11 hereof or to add any
Person as a Guarantor hereunder;
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder of any Holder of the Note;
or
(e) to comply with requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in
the execution of any amended or supplemental Indenture authorized or permitted
by the terms of this Indenture and to make any further appropriate agreements
and stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties, liabilities or immunities under this Indenture or
otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Sections 3.09,
4.10 and 4.15 hereof) and the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in
connection with a tender offer or exchange offer for the Notes), and, subject
to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default
(other than a Default or Event of Default in the payment of the principal of,
premium, if any, or interest and Liquidated Damages, if any, on the Notes,
except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes). Without the consent of at least
75% in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for such Notes),
no waiver or amendment to this Indenture may make any change in the provisions
of Section 4.20 hereof or Article 10 hereof that adversely affects the rights
of any Holder of Notes.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by a Responsible Officer of the Trustee of the
documents described in Section 7.02 hereof, the Trustee shall join with the
Company in the execution of such amended or supplemental Indenture unless such
amended or supplemental Indenture affects the Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver may not (with respect to any Notes
held by a nonconsenting Holder):
-57-
<PAGE> 65
(a) reduce the principal amount of Notes whose Holders
must consent to an amendment, supplement or waiver of any provision of
this Indenture, the Notes or any Subsidiary Guarantee;
(b) reduce the principal of or change the fixed maturity
of any Note or alter or waive in any manner that adversely affects the
rights of any Holder of Notes any of the provisions with respect to
the redemption of the Notes except as provided above with respect to
Sections 3.09, 4.10 and 4.15 hereof and the related definitions;
(c) reduce the rate of or change the time for payment of
interest, including default interest, or Liquidated Damages, if any,
on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest and Liquidated Damages,
if any, on the Notes (except a rescission of acceleration of the Notes
by the Holders of at least a majority in aggregate principal amount of
the then outstanding Notes and a waiver of the payment default that
resulted from such acceleration);
(e) make any Note payable in money other than that stated
in the Notes;
(f) make any change that adversely affects the rights of
any Holder of Notes in the provisions of this Indenture relating to
waivers of past Defaults or make any change to the rights of Holders
of Notes to receive payments of principal of or interest and
Liquidated Damages, if any, on the Notes;
(g) make any change in Section 6.04 or 6.07 hereof or in
the foregoing amendment and waiver provisions; or
(h) waive a redemption payment with respect to any Note
(other than a payment required by Sections 3.09, 4.10 and 4.15
hereof).
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with
the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent
Holder of a Note may revoke the consent as to its Note if the Trustee receives
written notice of revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company, in exchange for all Notes, may issue and the Trustee shall
authenticate new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
Section 9.06. Trustee to Sign Amendments, Etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The
-58-
<PAGE> 66
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties, liabilities or
immunities under this Indenture or otherwise. The Company may not sign an
amendment or supplemental Indenture until the Board of Directors approves it.
In executing any amended or supplemental indenture, the Trustee shall be
entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note
agrees, that the payment of principal of, premium, if any, and interest and
Liquidated Damages, if any, on the Notes is subordinated in right of payment,
to the extent and in the manner provided in this Article 10, to the prior
payment in full, in cash or Cash Equivalents, of all Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshaling of
the Company's assets and liabilities:
(1) the holders of Senior Debt shall be entitled to
receive payment in full, in cash or Cash Equivalents, of all
Obligations due in respect of such Senior Debt (including interest
after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt (whether or not an allowable claim)) before
Holders of the Notes shall be entitled to receive any payment with
respect to the Notes (except that Holders may receive and retain (i)
Permitted Junior Securities and (ii) payments and other distributions
made from any defeasance trust created pursuant to Article 8 hereof;
provided that at the tie of its creation such trust does not violate
the Senior Credit Facility); and
(2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full, in cash or Cash
Equivalents, any distribution to which Holders would be entitled but
for this Article 10 shall be made to the holders of Senior Debt
(except that Holders of Notes may receive and retain (i) Permitted
Junior Securities and (ii) payments and other distributions made from
any defeasance trust created pursuant to Article 8 hereof; provided
that at the tie of its creation such trust does not violate the Senior
Credit Facility), as their interests may appear.
Section 10.03. Default on Designated Senior Debt.
The Company may not make any payment upon or in respect of or
distribution to the Trustee or any Holder in respect of Obligations with
respect to the Notes and may not acquire from the Trustee or any Holder any
Notes for cash or property (other than (i) Permitted Junior Securities and (ii)
payments and other distributions made from any defeasance trust created
pursuant to Article 8 hereof; provided that at the tie of its creation such
trust does not violate the Senior Credit Facility) until all principal and
other Obligations with respect to the Senior Debt have been paid in full in
cash or Cash Equivalents if:
(i) a default in the payment of the principal of,
premium, if any, or interest and Liquidated Damages, if any, on
Designated Senior Debt occurs and is continuing beyond any applicable
grace period in the agreement, indenture or other document governing
such Designated Senior Debt; or
(ii) a default, other than a payment default, on
Designated Senior Debt occurs and is continuing that then permits
holders of the Designated Senior Debt as to which such default relates
to
-59-
<PAGE> 67
accelerate its maturity and the Trustee receives a notice of the default (a
"Payment Blockage Notice") from a Person who may give it pursuant to Section
10.10 hereof, which notice states it is a Payment Blockage Notice under this
Indenture.
The Company may and shall resume payments on and distributions
in respect of the Notes and may acquire them upon:
(1) in the case of a payment default, the date on which
the default is cured or waived, and
(2) in the case of a default referred to in Section
10.03(ii) hereof, the earlier of (a) the date on which such nonpayment
default is cured or (b) 179 days after notice is received if the
maturity of such Designated Senior Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition
at the time of such payment or acquisition.
If the Trustee receives any such Payment Blockage Notice, no
subsequent Payment Blockage Notice shall commence or be effective for purposes
of this Section unless and until (i) 360 days shall have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest and Liquidated
Damages, if any, on the Notes that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default shall
have been waived for a period of not less than 90 days.
Section 10.04. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
Section 10.05. Notice by Company.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure
to give such notice shall not affect the subordination of the Notes to the
Senior Debt as provided in this Article 10.
Section 10.06. Subrogation.
After all Senior Debt is paid in full in cash or Cash
Equivalents and until the Notes are paid in full, Holders of Notes shall be
subrogated (equally and ratably with all other Indebtedness pari passu with the
Notes) to the rights of holders of Senior Debt to receive distributions
applicable to Senior Debt to the extent that distributions otherwise payable to
the Holders of Notes have been applied to the payment of Senior Debt. A
distribution made under this Article 10 to holders of Senior Debt that
otherwise would have been made to Holders of Notes is not, as between the
Company and Holders, a payment by the Company on the Notes.
Section 10.07. Relative Rights.
This Article 10 defines the relative rights of Holders of
Notes and holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes,
the obligation of the Company, which is absolute and unconditional, to
pay principal of and interest and Liquidated Damages, if any, on the
Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to
holders of Senior Debt; or
-60-
<PAGE> 68
(3) prevent the Trustee or any Holder of Notes
from exercising its available remedies upon a Default or Event
of Default, subject to the rights of holders and owners of
Senior Debt to receive distributions and payments otherwise
payable to Holders of Notes.
If the Company fails because of this Article 10 to pay
principal of or interest and Liquidated Damages, if any, on a Note on the due
date, the failure after any applicable grace period has elapsed is still a
Default or Event of Default.
Section 10.08. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
Section 10.09. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to
holders of any Senior Debt, the distribution may be made and the notice given
to the Representative of such Senior Debt.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders of Notes shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of Notes for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt
and other Indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
Section 10.10. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless a Responsible Officer of the Trustee
shall have received at its Corporate Trust Office at least five Business Days
prior to the date of such payment written notice of facts that would cause the
payment of any Obligations with respect to the Notes to violate this Article
10. Only the Company or a Representative of the holders of any Designated
Senior Debt may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07
hereof.
The Trustee in its individual or any other capacity may hold
Senior Debt with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
Section 10.11. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof,
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 10, and appoints the Trustee to act as such Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of
the time to file such claim, the Representative is hereby authorized to file an
appropriate claim for and on behalf of the Holders of the Notes.
Section 10.12. Amendments.
The provisions of this Article 10 shall not be amended or
modified without the written consent of the respective Representatives under
the Senior Credit Facility and all other Designated Senior Debt.
-61-
<PAGE> 69
Section 10.13. Continued Effectiveness.
The terms of this Indenture, the subordination effected
hereby, and the rights and other obligations of the Holders of the Notes of the
holders of Senior Debt arising hereunder, shall not be affected, modified or
impaired in any manner or to any extent by: (i) any amendment or modification
of or supplement to any Credit Facility (to the extent not prohibited by this
Indenture); (ii) the validity and enforceability of any of such documents; or
(iii) any exercise or non-exercise of any right, power or remedy under or in
respect of the Senior Debt or the Obligations evidenced by the Notes or any of
the instruments or documents referred to in clause (i) above. Each Holder of
Notes hereby acknowledges that the provisions of this Indenture are intended to
be enforceable at all times, whether before the commencement of, in connection
with or premised on the occurrence of a Proceeding.
Section 10.14. Cumulative Rights; No Waivers.
Subject to Section 10.13 hereof, each and every right, remedy
and power granted to any Representative of any Senior Debt hereunder shall be
cumulative and in addition to any other right, remedy or power specifically
granted herein, in the related Senior Debt or now or hereafter existing in
equity, at law, by virtue of statute or otherwise, and may be exercised by any
Representative of any Senior Debt or the holders of any Senior Debt, from time
to time, concurrently or independently and as often and in such order as such
any Representative or the holders of Senior Debt may deem expedient (subject to
the limits provided in Section 10.03 hereof with respect to payment blockages).
Any failure or delay on the part of any Representative of Senior Debt or the
holders of Senior Debt in exercising any such right, remedy or power, or
abandonment or discontinuance of steps to enforce the same, shall not operate
as a waiver thereof or affect the rights of such any Representative or the
holders of Senior Debt thereafter to exercise the same, and any single or
partial exercise of any such right, remedy or power shall not preclude any
other or further exercise thereof or the exercise of any other right, remedy or
power, and no such failure, delay, abandonment or single or partial exercise of
the rights of any Representative of Senior Debt or the holders of Senior Debt
hereunder shall be deemed to establish a custom or course of dealing or
performance among the parties hereto.
Section 10.15. Trustee.
Any Representative of Senior Debt shall be entitled to send
any notices required or permitted to be delivered to the Holders of the Notes
to the Trustee on behalf of such holders and any such notice so delivered to
the Trustee shall be deemed to have been delivered to all Holders of Notes.
ARTICLE 11
GUARANTEES
Section 11.01. Subsidiary Guarantees.
Subject to Section 11.05 hereof, each of the Guarantors
hereby, jointly and severally, unconditionally guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, the Notes and the Obligations of the Company hereunder
and thereunder, that: (a) the principal of, premium, if any, interest and
Liquidated Damages, if any, on the Notes will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal,
premium, if any (to the extent permitted by law), interest on any interest, if
any, and Liquidated Damages, if any, on the Notes, and all other payment
Obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full and performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other Obligations, the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration, redemption or otherwise. Failing payment
when so due of any amount so guaranteed or any performance so guaranteed for
whatever reason the Guarantors will be jointly and severally obligated to pay
the same immediately. An Event of Default under this Indenture or the Notes
shall constitute an event of default under the Subsidiary Guarantees, and shall
entitle the Holders to accelerate the Obligations of the Guarantors hereunder
in the same manner and to the same extent as the Obligations of the Company.
The Guarantors hereby agree that their Obligations hereunder shall be
unconditional, irrespective of the validity or
-62-
<PAGE> 70
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder with respect to any
provisions hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Guarantor. Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice
and all demands whatsoever and covenants that this Subsidiary Guarantee will
not be discharged except by complete performance of the Obligations contained
in the Notes and this Indenture. If any Holder or the Trustee is required by
any court or otherwise to return to the Company, the Guarantors, or any Note
Custodian, Trustee, liquidator or other similar official acting in relation to
either the Company or the Guarantors, any amount paid by the Company or any
Guarantor to the Trustee or such Holder, this Subsidiary Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor agrees that it shall not be entitled to, and hereby waives, any
right to exercise any right of subrogation in relation to the Holders in
respect of any Obligations guaranteed hereby, except as provided under Section
11.05 hereof. Each Guarantor further agrees that, as between the Guarantors,
on the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the Obligations guaranteed hereby may be accelerated as provided in
Article 6 hereof for the purposes of its Subsidiary Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Obligations guaranteed thereby, and (y) in the event of any
declaration of acceleration of such Obligations as provided in Article 6
hereof, such Obligations (whether or not due and payable) shall forthwith
become due and payable by the Guarantor for the purpose of its Subsidiary
Guarantee. The Guarantors shall have the right to seek contribution from any
non-paying Guarantor pursuant to Section 11.05 after the Notes and the
Obligations hereunder shall have been paid in full of the Holders under the
Subsidiary Guarantees.
Section 11.02. Execution and Delivery of Subsidiary Guarantee.
To evidence its Subsidiary Guarantee set forth in Section
11.01 hereof, each Guarantor hereby agrees that a notation of such Subsidiary
Guarantee substantially in the form of Exhibit E hereto shall be endorsed by
manual or facsimile signature by an Officer of such Guarantor on each Note
authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of such Guarantor, by manual or facsimile signature, by an
Officer of such Guarantor.
Each Guarantor hereby agrees that its Subsidiary Guarantee set
forth in Section 11.01 hereof shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
If an officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors.
Section 11.03. Guarantors May Consolidate, Etc., on Certain Terms.
(a) Except as set forth in Articles 4 and 5 hereof,
nothing contained in this Indenture shall prohibit a merger between a Guarantor
and another Guarantor or a merger between a Guarantor and the Company.
(b) No Guarantor shall consolidate with or merge with or
into (whether or not such Guarantor is the surviving Person) or sell all or
substantially all of its assets to, another corporation, Person or entity
whether or not affiliated with such Guarantor unless, subject to the following
paragraph, the Person formed by or surviving any such merger or consolidation,
or to which such sale of assets shall have been made (if other than such
Guarantor) assumes all the Obligations of such Guarantor, pursuant to a
supplemental indenture substantially in the form of Exhibit F hereto, under
this Indenture; (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists; (iii) such Guarantor, or any Person formed
by or surviving any such consolidation or merger, would have Consolidated Net
Worth (immediately after giving effect to such transaction) equal to or greater
than the Consolidated Net Worth of such Guarantor immediately preceding the
transaction; and (iv) except in the case of the merger of a
-63-
<PAGE> 71
Guarantor with or into another Guarantor or the Company, the Company would be
permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 hereof.
Notwithstanding the foregoing paragraph, (i) any Guarantor may
consolidate with, merger into or transfer all or a part of its properties and
assets to the Company or any other Guarantor and (ii) any Guarantor may merge
with a Wholly Owned Subsidiary of the Company that has no significant assets or
liabilities and was incorporated solely for purpose of reincorporating such
Guarantor in another State of the United States; provided that such merged
entity continues to be a Guarantor.
(c) In the case of any such consolidation, merger, sale
or conveyance and upon the assumption by the successor Person, by supplemental
indenture, executed and delivered to the Trustee and substantially in the form
of Exhibit F hereto, of the Subsidiary Guarantee endorsed upon the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Guarantor, such successor Person shall succeed
to and be substituted for the Guarantor with the same effect as if it had been
named herein as a Guarantor. Such successor Person thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All of the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution hereof.
Section 11.04. Releases Following Release Under All Indebtedness or
Sale of Assets.
In the event of (i) the release by the lenders under all
Indebtedness of the Company of all guarantees of a Guarantor and all Liens on
the property and assets of such Guarantor relating to such Indebtedness, or
(ii) a sale or other disposition of all of the assets of any Guarantor, by way
of merger, consolidation or otherwise, or a sale or other disposition of all of
the capital stock of any Guarantor in compliance with the Indenture to any
entity that is not the Company or a Subsidiary, then such Guarantor (in the
event of a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the capital stock of such Guarantor), or the Person
acquiring the property (in the event of such a sale or other disposition of all
of the assets of such Guarantor), will be released and relieved of any
obligations under its Subsidiary Guarantee; provided, however, that any such
termination shall occur only to the extent that all obligations of such
Guarantor under such Indebtedness and all of its guarantees of, and under all
of its pledges of assets or other security interests which secure, Indebtedness
of the Company shall also terminate upon such release, sale or transfer and, in
the event of any sale or other disposition, that the Net Proceeds of such sale
or other disposition are applied in accordance with Section 4.10 hereof. Upon
delivery by the Company to the Trustee of an Officers' Certificate to the
effect of the foregoing, the Trustee shall execute any documents reasonably
required in order to evidence the release of any Guarantor from its Obligation
under its Subsidiary Guarantee. Any Guarantor not released from its
Obligations under its Subsidiary Guarantee shall remain liable for the full
amount of principal of, premium, if any, interest and Liquidated Damages, if
any, on the Notes and for the other Obligations of such Guarantor under this
Indenture as provided in this Article 11.
Section 11.05. Limitation on Guarantor Liability; Contribution.
For purposes hereof, each Guarantor's liability shall be
limited to the lesser of (i) the aggregate amount of the Obligations of the
Company under the Notes and this Indenture and (ii) the amount, if any, which
would not have (A) rendered such Guarantor "insolvent" (as such term is defined
in the Bankruptcy Code and in the Debtor and Creditor Law of the State of New
York) or (B) left such Guarantor with unreasonably small capital at the time
its Subsidiary Guarantee of the Notes was entered into; provided that, it will
be a presumption in any lawsuit or other proceeding in which a Guarantor is a
party that the amount guaranteed pursuant to the Subsidiary Guarantee is the
amount set forth in clause (i) above unless any creditor, or representative of
creditors of such Guarantor, or debtor in possession or trustee in bankruptcy
of the Guarantor, otherwise proves in such a lawsuit that the aggregate
liability of the Guarantor is the amount set forth in clause (ii) above. In
making any determination as to solvency or sufficiency of capital of a
Guarantor in accordance with the previous sentence, the right of such Guarantor
to contribution from other Guarantors as set forth below, and any other rights
such Guarantor may have, contractual or otherwise, shall be taken into account.
-64-
<PAGE> 72
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment
or distribution is made by any Guarantor (a "Funding Guarantor") under its
Subsidiary Guarantee, such Funding Guarantor shall be entitled to a
contribution from all other Guarantors in a pro rata amount based on the
Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in
discharging the Company's obligations with respect to the Notes or any other
Guarantor's Obligations with respect to its Subsidiary Guarantee.
Section 11.06. Trustee to Include Paying Agent.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 11 shall in each case (unless the context
shall otherwise require) be construed as extending to and including such Paying
Agent within its meaning as fully and for all intents and purposes as if such
Paying Agent were named in this Article 11 in place of the Trustee.
Section 11.07. Subordination of Subsidiary Guarantee.
The obligations of each Guarantor under its Subsidiary
Guarantee pursuant to this Article 11 shall be junior and subordinated to the
prior payment in full of all Senior Debt of such Guarantor, and the amounts for
which the Guarantors will be liable under the guarantees issued from time to
time with respect to Senior Debt, on the same basis as the Notes are junior and
subordinated to Senior Debt. For the purposes of the foregoing sentence, the
Trustee and the Holders of Notes shall have the right to receive and/or retain
payments by any of the Guarantors only at such times as they may receive and/or
retain payments in respect of the Notes pursuant to this Indenture, including
Article 10 hereof.
Each Holder of a Note by its acceptance thereof (a) agrees to
and shall be bound by the provisions of this Section 11.07, (b) authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee its attorney-in-fact for any and all such purposes. Consistent with
the subordination of the Subsidiary Guarantees, for purposes of any applicable
fraudulent transfer or similar laws, Indebtedness incurred under any Credit
Facility will be deemed to have been incurred prior to the incurrence by any
Guarantor of its liability under its Subsidiary Guarantee.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
Section 12.02. Notices.
Any notice or communication by the Company or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company:
Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Telecopier No.: (281) 490-9895
Attention: Secretary
-65-
<PAGE> 73
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: 212-815-5915
Attention: Corporate Trust Trustee Administration
The Company or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when answered back ; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also be
so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of Notes with Other Holders
of Notes.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.05 hereof) stating that, in the
opinion of the signers, all conditions precedent and covenants, if
any, provided for in this Indenture relating to the proposed action
have been satisfied; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.05 hereof) stating that, in the
opinion of such counsel, all such conditions precedent and covenants
have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions
of TIA Section 314(e) and shall include:
-66-
<PAGE> 74
(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he
or she has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers,
Employees and Stockholders.
No past, present or future director, officer, employee,
incorporator, partner, member or stockholder of the Company or any Guarantor,
or of any member, partner or stockholder of any such entity, as such, shall
have any liability for any obligations of the Company under the Notes, this
Indenture or the Guarantors, under the Subsidiary Guarantees or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
Section 12.08. Governing Law.
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES THEREOF, SHALL GOVERN AND BE USED TO CONSTRUE THIS
INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
Section 12.10. Successors.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
Section 12.11. Severability.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
Section 12.13. Table of Contents, Headings, Etc.
-67-
<PAGE> 75
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures Page(s) Follow]
-68-
<PAGE> 76
SIGNATURES
Dated as of December 22, 1997
Issuer:
IMPERIAL HOLLY CORPORATION
By:
------------------------------------------------
Name:
Title:
Guarantors:
SAVANNAH FOODS & INDUSTRIES, INC.
By:
------------------------------------------------
Name:
Title:
BIOMASS CORPORATION
By:
------------------------------------------------
Name:
Title:
DIXIE CRYSTALS BRANDS, INC.
By:
------------------------------------------------
Name:
Title:
-69-
<PAGE> 77
DIXIE CRYSTALS FOODSERVICE, INC.
By:
-----------------------------------------------
Name:
Title:
KING PACKAGING COMPANY, INC.
By:
-----------------------------------------------
Name:
Title:
FOOD CARRIER, INC.
By:
-----------------------------------------------
Name:
Title:
MICHIGAN SUGAR COMPANY
By:
----------------------------------------------
Name:
Title:
GREAT LAKES SUGAR COMPANY
By:
----------------------------------------------
Name:
Title:
-70-
<PAGE> 78
SAVANNAH FOODS INDUSTRIAL, INC.
By:
---------------------------------------------
Name:
Title:
PHOENIX PACKAGING CORPORATION
By:
---------------------------------------------
Name:
Title:
SAVANNAH INVESTMENT COMPANY
By:
---------------------------------------------
Name:
Title:
SAVANNAH SUGAR REFINING CORPORATION
By:
---------------------------------------------
Name:
Title:
HOLLY SUGAR CORPORATION
By:
---------------------------------------------
Name:
Title:
-71-
<PAGE> 79
IMPERIAL SWEETENER DISTRIBUTORS, INC.
By:
-----------------------------------------------
Name:
Title:
FORT BEND UTILITIES, COMPANY
By:
-----------------------------------------------
Name:
Title:
LIMESTONE PRODUCTS COMPANY
By:
-----------------------------------------------
Name:
Title:
HOLLY NORTHWEST COMPANY
By:
-----------------------------------------------
Name:
Title:
CROWN EXPRESS INC.
By:
-----------------------------------------------
Name:
Title:
-72-
<PAGE> 80
Trustee:
THE BANK OF NEW YORK
By:
-----------------------------------------------
Name:
Title:
-73-
<PAGE> 81
EXHIBIT A-1
(Face of Note)
================================================================================
CUSIP/CINS
---------
9 3/4% Senior Subordinated Notes due 2007
No.
------ $
------
IMPERIAL HOLLY CORPORATION
promises to pay to
--------------------
or registered assigns,
the principal sum of
-------------------------
Dollars on December 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
IMPERIAL HOLLY CORPORATION
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
THE BANK OF NEW YORK
as Trustee
By: Dated:
------------------------------- --------------------------
================================================================================
A1-1
<PAGE> 82
(Back of Note)
9 3/4% Senior Subordinated Notes due 2007
[Insert the Global Note Legend, if applicable, pursuant to the provisions of
the Indenture]
[Insert the Private Placement Legend, if applicable, pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Imperial Holly Corporation, a Texas corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 9 3/4% per annum, from December 15, 1997 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually in arrears on June 15 and December 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be June 15, 1998.
The Company shall pay interest (including post-petition interest in any
proceeding under the Bankruptcy Code) on overdue principal and premium, if any,
from time to time on demand at the rateborne on the Notes; it shall pay
interest (including post-petition interest in any proceeding under the
Bankruptcy Code) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the June 1 or December
1 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. Paying Agent and Registrar. Initially, The Bank of New York,
the Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. Indenture, Subordination. The Company issued the Notes under
an Indenture dated as of December 22, 1997 ("Indenture") between the Company,
Guarantors and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The
Notes are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. To the extent any provision of
this Note conflicts with the express provisions of the Indenture, the
provisions of the Indenture shall govern and be controlling. The Notes are
obligations of the Company limited to $350,000,000 in aggregate principal
amount, $250,000,000 of which will be issued in the Offering.
The Notes are subordinated in right of payment, in the manner
and to the extent set forth in the Indenture, to the prior payment in full in
cash or Cash Equivalents of all Senior Debt, whether Outstanding on the date of
the Indenture or thereafter created, incurred, assumed or guaranteed. The
Subsidiary Guarantees in respect of the Notes will be subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt of each
Guarantor, whether outstanding on the date of
A1-2
<PAGE> 83
the Indenture or thereafter created, incurred assumed or guaranteed. Each
Holder by its acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on its behalf, to take such
action as may be necessary or appropriate to effectuate the subordination
provided for in the Indenture and appoints the Trustee its attorney-in-fact for
such purposes.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this
paragraph 5 and paragraph 8 below, the Notes shall not be redeemable at the
Company's option prior to December 15, 2002. Thereafter, the Notes will be
subject to redemption at any time at the option of the Company in whole or in
part, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on December 15 of the years indicated below:
YEAR PERCENTAGE
2002 . . . . . . . . . . . . . . . . 104.875%
2003 . . . . . . . . . . . . . . . . 103.250%
2004 . . . . . . . . . . . . . . . . 101.625%
2005 and thereafter . . . . . . . . . 100.000%
(b) Notwithstanding the foregoing, at any time prior to
December 15, 2000, the Company may on any one or more occasions redeem an
aggregate of up to 35% of the original aggregate principal amount of Notes at a
redemption price of 109.75% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of any Equity Offering; provided that at least 65%
of the original aggregate principal amount of Notes originally issued on the
Issue Date remain outstanding immediately after each occurrence of such
redemption; and provided, further, that each such redemption shall occur within
60 days of the date of the closing of such Equity Offering.
6. Mandatory Redemption. Except as set forth in paragraphs 7 and
8 below, the Company shall not be required to make mandatory redemption
payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, each
Holder of Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any to the
date of purchase (the "Change of Control Payment"). Within 30 days following
any Change of Control, the Company shall mail a notice to each Holder setting
forth the procedures governing the Change of Control Offer as by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates
any Asset Sales and the aggregate amount of Excess Proceeds exceeds
$10,000,000, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture (after complying
with any applicable asset sale offer requirements of any Senior Debt and pro
rata in proportion to outstanding Indebtedness that is pari passu with the
Notes that require asset sale offers) to purchase the maximum principal amount
of Notes that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount thereof plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company (or such Restricted
Subsidiary) may use such deficiency for general corporate purposes including
payment of Subordinated Obligations. If the aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
A1-3
<PAGE> 84
8. Special Redemption. If the Merger has not been consummated
prior to the Special Redemption Date, all outstanding Notes shall be redeemed
by the Company on the Special Redemption Date at a redemption price equal to
101% of the principal thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption. The Company may redeem all
outstanding Notes at any time on or prior to the Special Redemption Date if the
Merger has not been consummated, and the Company believes in good faith that
the consummation of the Merger prior to the Special Redemption Date is not
reasonably possible, on terms and conditions at least as favorable to the
Company, considered as a whole, as the terms and conditions described in the
Offering Memorandum, on or prior to such date at a redemption price equal to
101% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption.
9. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
10. Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, it need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
11. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
12. Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes, and any existing default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation or to add any Person as a Guarantor, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, or to comply with the requirements of the SEC
in order to effect or maintain the qualification of the Indenture under the
TIA.
13. Defaults and Remedies. Events of Default include: (a) default
in the payment when due of interest on, or Liquidated Damages with respect to,
the Notes and such default continues for a period of 30 days (whether or not
prohibited by Article 10 of the Indenture); (b) default in the payment when due
of principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise (whether or not prohibited by Article 10 of the
Indenture); (c) failure by the Company to comply with any of the provisions of
Section 5.01 of the Indenture; (d) failure by the Company or any of its
Restricted Subsidiaries to comply with any of the provisions of Section 4.07,
4.09, 4.10 or 4.15 of the Indenture; (e) failure by the Company or any of its
Restricted Subsidiaries to observe or perform any other covenant,
representation, warranty or other agreement in the Indenture or the Notes for
60 days after notice to the Company by the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding; (f) a default
occurs under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the payment
of which is guaranteed by the Company or any of its Restricted Subsidiaries),
whether such Indebtedness or guarantee now exists, or is created after the
Issue Date (a) is caused by a failure to pay principal of such Indebtedness at
final maturity prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
without duplication $10,000,000 or more and such default shall not have been
cured or acceleration rescinded within five
A1-4
<PAGE> 85
Business Days after such occurrences; (g) a final judgment or final judgments
for the payment of money are entered by a court or courts of competent
jurisdiction against the Company or any of its Significant Subsidiaries and
such judgment or judgments remain unpaid or undischarged for a period (during
which execution shall not be effectively stayed) of 60 days, provided that the
aggregate of all such unpaid or undischarged judgments exceeds $5,000,000
(excluding amounts covered by insurance); (h) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries;
or (i) except as permitted in the Indenture, any Subsidiary Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all outstanding Notes
will become due and payable without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the then outstanding Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in
aggregate principal amount of the Notes then outstanding by notice to the
Trustee may on behalf of the Holders of all of the Notes waive any existing
Default or Event of Default and its consequences under the Indenture except a
continuing Default or Event of Default in the payment of interest on, or the
principal of, the Notes. The Company is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and the Company
is required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
14. Trustee Dealings with Company. The Trustee, in its individual
or any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. No Recourse Against Others. A director, officer, employee,
incorporator, partner, member or stockholder, of the Company or any Subsidiary
of the Company or any Guarantor, as such, shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
16. Authentication. This Note shall not be valid until
authenticated by the manual signature of a Responsible Officer of the Trustee
or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of December 22, 1997, between the Company and the parties
named on the signature pages thereof (the "Registration Rights Agreement").
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
A1-5
<PAGE> 86
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Telecopier No.: (281) 490-9895
Attention: Secretary
A1-6
<PAGE> 87
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- -------------------------------------------------------------------------------
Date:
------------------
Your Signature:
----------------------------
(Sign exactly as your name
appears on the face of this
Note)
SIGNATURE GUARANTEE
-------------------------------------------
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.
A1-7
<PAGE> 88
Opinion of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $
-----------
Date:
--------------
Your Signature:
---------------------------
(Sign exactly as your name
appears on the face of
the Note)
Tax Identification No.:
-------------------
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.
A1-8
<PAGE> 89
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of increase this Global Note authorized
Amount of decrease in following such signatory of
in Principal Amount Principal Amount of decrease Trustee or Note
Date of Exchange of this Global Note this Global Note (or increase) Custodian
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ------------------------------------------
This should be included only if the Note is issued in global form.
A1-9
<PAGE> 90
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
===============================================================================
CUSIP/CINS
----------
9 3/4% Senior Subordinated Notes due 2007
No.
-------- $
----------
IMPERIAL HOLLY CORPORATION
promises to pay to
-------------------
or registered assigns,
the principal sum of
-------------------------
Dollars on December 15, 2007.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
IMPERIAL HOLLY CORPORATION
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
BANK OF NEW YORK
as Trustee
By: Dated:
------------------------------- --------------------
================================================================================
A2-1
<PAGE> 91
(Back of Regulation S Temporary Global Note)
9 3/4% Senior Subordinated Notes due 2007
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY
OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE
TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)
(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (1) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the indenture referred to below unless otherwise indicated.
1. Interest. Imperial Holly Corporation, a Texas corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 9 3/4% per annum from December 15, 1997 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually in arrears on June 15 and December 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note
A2-2
<PAGE> 92
is authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be June 15, 1998. The Company shall pay interest (including
postpetition interest in any proceeding under the Bankruptcy Code) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under the Bankruptcy Code)
on overdue installments of interest and Liquidated Damages (without regard to
any applicable grace periods) from time to time on demand at the same rate to
the extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Notes under the Indenture.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the June 1 or December
1 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. Paying Agent and Registrar. Initially, The Bank of New York,
the Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. Indenture; Subordination. The Company issued the Notes under
an Indenture dated as of December 22, 1997 ("Indenture") between the Company,
the Guarantors and the Trustee. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The
Notes are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. To the extent any provision of
this Note conflicts with the express provisions of the Indenture, the
provisions of the Indenture shall govern and be controlling. The Notes are
obligations of the Company limited to $350,000,000 in aggregate principal
amount, $250,000,000 of which will be issued in the Offering.
The Notes are subordinated in right of payment, in the manner
and to the extend set forth in the Indenture, to the prior payment in full in
cash or Cash Equivalents of all Senior Debt, whether outstanding on the date of
the Indenture or thereafter created, incurred, assumed or guaranteed. The
Subsidiary Guarantees in respect of the Notes will be subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt of each
Guarantor, whether outstanding on the date of the Indenture or thereafter
created, incurred assumed or guaranteed. Each Holder by its acceptance hereof
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on its behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee its attorney-in-fact for such purposes.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this paragraph 5
and paragraph 8 below, the Notes shall not be redeemable at the Company's
option prior to December 15, 2002. Thereafter, the Notes will be subject to
redemption at any time at the option of the Company in whole or in part, at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the
A2-3
<PAGE> 93
applicable redemption date, if redeemed during the twelve-month period
beginning on December 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002 . . . . . . . . . . . . . 104.875%
2003 . . . . . . . . . . . . . 103.250%
2004/ . . . . . . . . . . . . . 101.625%
2005 and thereafter . . . . . . 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to December
15, 2000, the Company may on any one or more occasions redeem an aggregate of
up to 35% of the original aggregate principal amount of Notes at a redemption
price of 109.75% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date, with
the net cash proceeds of any Equity Offering; provided that at least 65% of the
original aggregate principal amount of Notes originally issued on the Issue
Date remain outstanding immediately after each occurrence of such redemption;
and provided, further, that each such redemption shall occur within 60 days of
the date of the closing of such Equity Offering.
6. Mandatory Redemption. Except as set forth in paragraphs 7 and
8 below, the Company shall not be required to make mandatory redemption
payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any to the
date of purchase (the "Change of Control Payment"). Within 30 days following
any Change of Control, the Company shall mail a notice to each Holder setting
forth the procedures governing the Change of Control Offer as by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales and the aggregate amount of Excess Proceeds exceeds $10,000,000,
the Company shall commence an offer to all Holders of Notes (as "Asset Sale
Offer") pursuant to Section 3.09 of the Indenture (after complying with any
applicable asset sale offer requirements of any Senior Debt and pro rata in
proportion to outstanding Indebtedness that is pari passu with the Notes that
require asset sales offers) to purchase the maximum principal amount of Notes
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company (or such Restricted Subsidiary) may use
such deficiency for general corporate purposes including payment of
Subordinated Obligations. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. Special Redemption. If the Merger has not been consummated
prior to the Special Redemption Date, all outstanding Notes shall be redeemed
by the Company on the Special Redemption Date at a redemption price equal to
101% of the principal thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption. The Company may redeem all
outstanding Notes at any time on or prior to the Special Redemption Date if the
Merger has not been consummated, and the Company believes in good faith that
the consummation of the Merger prior to the Special Redemption Date is not
reasonably possible on terms and conditions at least as favorable to the
Company, considered as a whole, as the terms and conditions described in the
Offering Memorandum, on or prior to
A2-4
<PAGE> 94
such date at a redemption price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption.
9. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date (other than
in connection with a Special Redemption) to each Holder whose Notes are to be
redeemed at its registered address. Notes in denominations larger than $1,000
may be redeemed in part but only in whole multiples of $1,000, unless all of
the Notes held by a Holder are to be redeemed. On and after the redemption
date interest ceases to accrue on Notes or portions thereof called for
redemption.
10. Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, it need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Global Notes only (i) on or after the termination of the
40-day restricted period (as defined in Regulation S) and (ii) upon
presentation of certificates (accompanied by an Opinion of Counsel, if
applicable) required by Article 2 of the Indenture. Upon exchange of this
Regulation S Temporary Global Note for one or more Global Notes, the Trustee
shall cancel this Regulation S Temporary Global Note.
11. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
12. Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes, and any existing default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation or to add any Person as a Guarantor, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, or to comply with the requirements of the SEC
in order to effect or maintain the qualification of the Indenture under the
TIA.
13. Defaults and Remedies. Events of Default include: (a) default
in the payment when due of interest on, or Liquidated Damages with respect to,
the Notes and such default continues for a period of 30 days (whether or not
prohibited by Article 10 of the Indenture); (b) default in the payment when due
of principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise (whether or not prohibited by Article 10 of the
Indenture); (c) failure by the Company to comply with any of the provisions of
Section 5.01 of the Indenture; (d) failure by the Company or any of its
Restricted Subsidiaries to comply with any of the provisions of Sections 4.07,
4.09, 4.10 or 4.15 of the Indenture; (e) failure by the Company or any of its
Restricted Subsidiaries to observe or perform any other covenant,
representation, warranty or other agreement in the Indenture or the Notes for
60 days after notice to the Company by the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding; (f) a default
occurs under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the payment
of which is guaranteed by the Company or any of its Restricted Subsidiaries),
whether such Indebtedness or guarantee now exists, or is created after the
Issue Date (a) is caused by a failure to pay principal of such Indebtedness at
final maturity prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or results in
the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under
A2-5
<PAGE> 95
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates without duplication $10,000,000 or more and such
default shall not have been cured or acceleration rescinded within five
Business Days after such occurrences; (g) a final judgment or final judgments
for the payment of money are entered by a court or courts of competent
jurisdiction against the Company or any of its Significant Subsidiaries and
such judgment or judgments remain undischarged for a period (during which
execution shall not be effectively stayed) of 60 days, provided that the
aggregate of all such unpaid or undischarged judgments exceeds $5,000,000
(excluding amounts covered by insurance); (h) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries;
or (i) except as permitted in the Indenture, any Subsidiary Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all outstanding Notes
will become due and payable without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the then outstanding Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in
aggregate principal amount of the Notes then outstanding by notice to the
Trustee may on behalf of the Holders of all of the Notes waive any existing
Default or Event of Default and its consequences under the Indenture except a
continuing Default or Event of Default in the payment of interest on, or the
principal of, the Notes. The Company is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and the Company
is required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
14. Trustee Dealings with Company. The Trustee, in its individual
or any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. No Recourse Against Others. A director, officer, employee,
incorporator, partner, member or stockholder, of the Company or any Subsidiary
of the Company or any Guarantor, as such, shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
16. Authentication. This Note shall not be valid until
authenticated by the manual signature of a Responsible Officer of the Trustee
or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of December 22, 1997, between the Company and the parties
named on the signature pages thereof (the "Registration Rights Agreement").
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
A2-6
<PAGE> 96
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478.
Telecopier No.: (281) 490-9895
Attention: Secretary
A2-7
<PAGE> 97
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
_______________________________________________________________________________
Date:
--------------
Your Signature:
-----------------------------------
(Sign exactly as your name appears
on the face of this Note)
SIGNATURE GUARANTEE
___________________________________________________
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.
A2-8
<PAGE> 98
Opinion of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $__________
Date:
----------------------
Your Signature:
-----------------------------
(Sign exactly as your name appears on the
face of the Note)
Tax Identification No.:
---------------------
SIGNATURE GUARANTEE
----------------------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements
include membership or participation
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.
A2-9
<PAGE> 99
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of increase this Global Note authorized
Amount of decrease in following such signatory of
in Principal Amount Principal Amount of decrease Trustee or Note
Date of Exchange of this Global Note this Global Note (or increase) Custodian
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A2-10
<PAGE> 100
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Attention: Secretary
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 1028 6
Attention: Corporate Trust Trustee Administration
Re: 9 3/4% Senior Subordinated Notes due 2007
Reference is hereby made to the Indenture, dated as of December 22,
1997 (the "Indenture"), between Imperial Holly Corporation, as issuer (the
"Company"), the Company's subsidiaries listed on the signature pages thereof
(collectively, as the "Guarantors") and The Bank of New York, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
____________________, (the "Transferor") owns and proposes to transfer
the Note[s] or interest in such in such Note[s] specified in Annex A hereto, in
the principal amount of $__________ in such Note[s] or interests (the
"Transfer"), to ____________________ (the "Transferee"), as further specified
in Annex A hereto. In connection with the Transfer, the Transferor hereby
certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Note is being transferred to a Person that
the Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A
and such Transfer is in compliance with any applicable blue sky securities laws
of any state of the United States. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the 144A Global Note
and/or the Definitive Note and in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL
NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being
effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a person in the United States and (x) at
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the
United States, (ii) no directed selling efforts have been made in contravention
of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the
Securities Act and (iii) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
B-1
<PAGE> 101
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note, the Temporary Regulation S Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY
PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that the Transfer complies with the
transfer restrictions applicable to beneficial interests in a Restricted Global
Note or Restricted Definitive Notes and the requirements of the exemption
claimed, which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer
is in respect of a principal amount of Notes at the time of transfer of less
than $250,000, an Opinion of Counsel provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this certification),
to the effect that such Transfer is in compliance with the Securities Act.
Upon consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the IAI Global Note and/or the Definitive Notes and in the
Indenture and the Securities Act.
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i)
The transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain
B-2
<PAGE> 102
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION.
(i) The Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other than
Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
State of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will not be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the
Restricted Global Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
---------------------------------------
[Insert Name of Transferor]
By:
---------------------------------------
Name:
Title:
Dated:
-----------------
B-3
<PAGE> 103
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP __________), or
(ii) [ ] Regulation S Global Note (CUSIP _________), or
(iii) [ ] IAI Global Note (CUSIP __________); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP __________),
or
(ii) [ ] Regulation S Global Note (CUSIP
__________), or
(iii) [ ] IAI Global Note (CUSIP __________);
or
(iv) [ ] Unrestricted Global Note (CUSIP
__________); or
(b) [ ] a Restricted Definitive Note.
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE> 104
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Attention: Secretary
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 1028 6
Attention: Corporate Trust Trustee Administration
Re: 9 3/4% Senior Subordinated Notes due 2007
(CUSIP __________)
Reference is hereby made to the Indenture, dated as of December 22,
1997 (the "Indenture"), between Imperial Holly Corporation as issuer (the
"Company"), the Company's subsidiaries listed on the signature pages thereof
(collectively, as the "Guarantors"), and The Bank of New York as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
____________________ (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount
of $__________ in such Note[s] or interests (the "Exchange"). In connection
with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DERIVATIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global Note
in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the
United States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global Note
is being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive
Note is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Definitive Note is
being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficiary interest in
an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
C-1
<PAGE> 105
applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest is
being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to Restricted Definitive
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Unrestricted Definitive Note is being acquired in compliance with
any applicable blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Definitive Note and
in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI
Global Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-----------------------------------------
[Insert Name of Owner)
By:
-----------------------------------------
Name:
Title:
Dated:_______________, _____
C-2
<PAGE> 106
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Attention: Secretary
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: 9 3/4% Senior Subordinated Notes due 2007
Reference is hereby made to the Indenture, dated as of December 22,
1997 (the "Indenture"), between Imperial Holly Corporation, as issuer (the
"Company"), the Company's subsidiaries listed on the signature pages thereof
(collectively, as the "Guarantors") and The Bank of New York, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
In connection with our proposed purchase of $__________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. we are an "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule (501)(a)(1), (2), (3)
or (7) under the Securities Act (an "institutional accredited
investor");
2. (i)(A) any purchase of the Notes by us will be for our own account or
for the account of one or more other institutional accredited
investors or as fiduciary for the account of one or more trusts, each
of which is an "accredited investor" within the meaning of Rule
501(a)(7) under the Securities Act and for each of which we exercise
sole investment discretion or (B) we are a "bank," within the meaning
of Section 3(a)(2) of the Securities Act, or a "savings and loan
association" or other institution described in Section 3(a)(5)(A) of
the Securities Act that is acquiring Notes as fiduciary for the
account of one or more institutions for which we exercise sole
investment discretion;
3. in the event that we purchase any Notes, we will acquire Notes having
a minimum purchase price of not less than $250,000 for our own account
and for each separate account for which we are acting;
4. we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of
purchasing Notes;
5. we are not acquiring the Notes with a view to any distribution thereof
in a transaction that would violate the Securities Act or the
securities laws of any State of the United States or any other
applicable jurisdictions, provided that the disposition of our
property and the property of any accounts for which we are acting as
fiduciary shall remain at all times within our control;
D-1
<PAGE> 107
6. we have received a copy of the Offering Memorandum relating to the
offering of the Notes and acknowledge that we have had access to such
financial and other information, and have been afforded the
opportunity to ask such questions of representatives of the Company
and receive answers thereto, as we deem necessary in connection with
our decision to purchase the Notes; and
7. (vii)(a) we are not an employee benefit plan or other arrangement that
is subject to the Employee Retirement Income Security Act of 1974, as
amended, or Section 4975 of the Internal Revenue Code of 1986, as
amended, or an entity whose underlying assets include assets of such a
plan or arrangement (pursuant to 29 C.F.R. Section 2510.3-101 or
otherwise), and we are not purchasing (and will not hold) the Notes on
behalf of, or with the assets of, any such plan, arrangement or
entity; or (b) our purchase and holding of the Notes are completely
covered by the full exemptive relief provided by U.S. Department of
Labor Prohibited Transaction Class Exemption 96-23, 95-60, 91-38, 90-1
or 84-14.
We understand that the Notes are being offered in a
transaction not involving any public offering with the United States within the
meaning of the Securities Act and that the Notes have not been registered under
the Securities Act, and we agree, on our own behalf, and on behalf of each
account for which we acquire any Notes, that if in the future we decide to
resell or otherwise transfer such Notes, such Notes may be resold or otherwise
transferred only (i) to the Company or any subsidiary thereof, or (ii) inside
the United States to a person who is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in a transaction meeting the
requirements of Rule 144A, or (iii) inside the United States to an
institutional accredited investor or a person that is not a U.S. Person that,
prior to such transfer, furnishes to the trustee for such Notes a signed letter
containing certain representations and agreements relating to the restrictions
on transfer of such Notes (the form of which letter can be obtained from such
trustee), or (iv) outside the United States in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (v) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act (if
applicable) or in accordance with another exemption from the registration
requirements of the Securities Act, or (vi) pursuant to an effective
registration statement under the Securities Act and, in each case, in
accordance with any applicable securities laws of any State or any other
applicable jurisdiction and in accordance with the legends set forth on the
Notes. We further agree to provide any person purchasing any of the Notes
other than pursuant to clause (vi) above from us a notice advising such
purchaser that resales of such securities are restricted as stated herein. We
understand that the registrar and transfer agent for the Notes will not be
required to accept for registration of transfer any Notes, except upon
presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with. We further understand that
any Notes will be in the form of definitive physical certificates and that such
certificates will bear a legend reflecting the substance of this paragraph.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or, official
inquiry with respect to the matters covered hereby.
--------------------------------------------
[Insert Name of Accredited Investor]
By:
-----------------------------------------
Name:
Title:
Dated:
---------------, -----
D-2
<PAGE> 108
EXHIBIT E
FORM OF SUBSIDIARY GUARANTEE
Subject to Section 11.05 of the Indenture, each Guarantor hereby,
jointly and severally, unconditionally guarantees on a senior subordinated
basis to each Holder of a Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns, the Notes and the Obligations of
the Company under the Notes or under the Indenture, that: (a) the principal of,
premium, if any, interest and Liquidated Damages, if any, on the Notes will be
promptly paid in full when due, subject to any applicable grace period, whether
at maturity, by acceleration, redemption or otherwise, and interest on overdue
principal, premium, if any, (to the extent permitted by law) interest on any
interest, if any, and Liquidated Damages, if any, on the Notes and all other
payment Obligations of the Company to the Holders or the Trustee under the
Indenture or under the Notes will be promptly paid in full and performed, all
in accordance with the terms thereof; and (b) in case of any extension of time
of payment or renewal of any Notes or any of such other payment Obligations,
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, subject to any applicable grace period,
whether at stated maturity, by acceleration, redemption or otherwise. Failing
payment when so due of any amount so guaranteed or any performance so
guaranteed for whatever reason. the Guarantors will be jointly and severally
obligated to pay the same immediately.
The obligations of the Guarantors to the Holders and to the Trustee
pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth
in Article 11 of the Indenture, and reference is hereby made to such Indenture
for the precise terms of this Subsidiary Guarantee. The terms of Article 11 of
the Indenture are incorporated herein by reference. This Subsidiary Guarantee
is subject to release as and to the extent provided in Section 11.04 of the
Indenture.
The obligations of each Guarantor to the Holders and to the Trustee
pursuant to the Subsidiary Guarantee and the Indenture are expressly
subordinated in right of payment to the prior payment in full in cash or Cash
Equivalents of all Senior Debt of such Guarantor, to the extent and in the
manner set forth in the Indenture.
This is a continuing Subsidiary Guarantee and shall remain in full
force and effect and shall be binding upon each Guarantor and its respective
successors and assigns to the extent set forth in the Indenture until full and
final payment of all of the Company's Obligations under the Notes and the
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a
Subsidiary Guarantee of payment and not a guarantee of collection.
Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Subsidiary
Guarantee will not be discharged except by complete performance of the
Obligations contained in the Notes and the Indenture.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
For purposes hereof, each Guarantor's liability shall be limited to
the lesser of (i) the aggregate amount of the Obligations of the Company under
the Notes and the Indenture and (ii) the amount, if any, which would not have
(A) rendered such Guarantor "insolvent" (as such term is defined in the
Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or
(B) left such Guarantor with unreasonably small capital at the time its
Subsidiary Guarantee of the Notes was entered into; provided that, it will be a
presumption in any lawsuit or other proceeding in which a Guarantor is a party
that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount
set forth in clause (i) above unless any creditor, or representative of
creditors of such Guarantor, or debtor in possession or trustee in bankruptcy
of such Guarantor, or proves in such a lawsuit that the aggregate liability of
the Guarantor is limited to the amount set forth in clause (ii) above. The
Indenture provides that, in making any determination as to the solvency or
sufficiency of capital of a Guarantor in accordance with the previous sentence,
the right of such Guarantors to
E-1
<PAGE> 109
contribution from other Guarantors as set forth in the Indentures and any other
rights such Guarantors may have, contractual or otherwise, shall be taken into
account.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Dated: [NEW GUARANTOR]
By:
--------------------------------------------
Name:
Title:
By:
--------------------------------------------
Name:
Title:
By:
--------------------------------------------
Name:
Title:
By:
--------------------------------------------
Name:
Title:
E-2
<PAGE> 110
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________, _____ among Imperial Holly Corporation, a Texas corporation
(the "Company"), the subsidiaries of the Company listed on the signatures pages
thereof (collectively, the "Guarantors"), [New Guarantor] (the "New
Guarantor"), an affiliate of the Company and The Bank of New York, as trustee
under the indenture referred to below (the "Trustee"). Capitalized terms used
herein and not defined herein shall have the meaning ascribed to them in the
Indenture (as defined below).
W I T N E S S E T H
WHEREAS, the Company and the Guarantors have heretofore executed and
delivered to the Trustee an indenture (the "Indenture"), dated as of December
22, 1997, providing for the issuance of an aggregate principal amount of
$250,000,000 of 9 3/4% Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Article 11 of the Indenture provides that under certain
circumstances the Company may or must cause certain of its subsidiaries to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such subsidiaries shall unconditionally guarantee all of the Company's
Obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and
conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Company, the New Guarantor and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The New Guarantor hereby agrees,
jointly and severally with all other Guarantors, to guarantee the Company's
Obligations under the Notes and the Indenture on the terms and subject to the
conditions set forth in Article 11 of the Indenture and to be bound by all
other applicable provisions of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, partner, member, shareholder or
agent of any Guarantor, as such, shall have any liability for any obligations
of the Company or any Guarantor under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
4. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.
5. COUNTERPARTS. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
7. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the correctness of the recitals
of fact contained herein, all of which recitals are made solely by the New
Guarantor.
F-1
<PAGE> 111
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: IMPERIAL HOLLY CORPORATION
By:
--------------------------------------------
Name:
Title:
[NEW GUARANTOR]
By:
--------------------------------------------
Name:
Title:
By:
--------------------------------------------
Name:
Title:
By:
--------------------------------------------
Name:
Title:
BANK OF NEW YORK
as Trustee
By:
--------------------------------------------
Name:
Title:
F-2
<PAGE> 1
EXHIBIT 5(A)
January 23, 1998
Board of Directors
Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Gentlemen:
We have acted as counsel to Imperial Holly Corporation, a Texas
corporation (the "Company"), in connection with the Company's Registration
Statement on Form S-4 (the "Registration Statement") relating to the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of the offer by the Company to exchange up to $250,000,000 aggregate
principal amount of its 9 3/4% Senior Subordinated Notes Due 2007, Series A (the
"Exchange Notes") for its existing 9 3/4% Senior Subordinated Notes Due 2007
(the "Old Notes"). The Exchange Notes are proposed to be issued in accordance
with the provisions of the Indenture, dated as of December 22, 1997, between the
Company and The Bank of New York, as Trustee (the "Indenture").
As the basis for the opinions expressed below, we have examined the
Registration Statement, the Prospectus contained therein, the Indenture, which
is filed as an exhibit to the Registration Statement, and such statutes,
regulations, corporate records and documents, certificates of corporate and
public officials and other instruments as we have deemed necessary or advisable
for the purposes of this opinion. In such examination, we have assumed (i) that
the signatures on all documents that we have examined are genuine, (ii) the
authenticity of all documents submitted to us as originals, and (iii) the
conformity with the original documents of all documents submitted to us as
copies.
Based upon the foregoing and having due regard for such legal
considerations as we deem relevant, we are of the opinion that the Exchange
Notes, (a) when exchanged in the manner described in the Registration Statement,
(b) when duly executed, authenticated, issued and delivered in accordance with
the terms of the Indenture, (c) when the Indenture has been duly qualified under
the Trust Indenture Act of 1939, as amended, and (d) when applicable provisions
of "blue sky" laws have been complied with, will be legally issued and
constitute binding obligations of the Company, enforceable against the Company
in accordance with their terms and the terms of the Indenture.
<PAGE> 2
Imperial Holly Corporation
January 23, 1998
Page 2
The opinion expressed above with respect to the Exchange Notes may be
limited by applicable bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfer), reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law). Such opinion is also subject to the qualification that the remedy of
specific performance and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which proceedings
may be brought.
This opinion is limited in all respects to the laws of the States of
New York and Texas, and the laws of the United States of America insofar as such
laws are applicable. We hereby consent to the use of this opinion as an exhibit
to the Registration Statement and to the use of the firm name under the heading
"Legal Matters" in the Registration Statement.
Very truly yours,
/s/ Andrews & Kurth L.L.P.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF IMPERIAL HOLLY CORPORATION
<TABLE>
<CAPTION>
STATE OR OTHER
NAME OF SUBSIDIARY JURISDICTION OF
AND NAME UNDER INCORPORATION
WHICH IT CONDUCTS BUSINESS OF ORGANIZATION
-------------------------- ---------------
<S> <C>
Savannah Foods & Industries Delaware
Biomass Corporation Delaware
Dixie Crystals Brand, Inc. Delaware
Dixie Crystals Foodservice, Inc. Delaware
King Packaging Company, Inc. Georgia
Food Carrier, Inc. Georgia
Michigan Sugar Company Michigan
Great Lakes Sugar Company Ohio
Savannah Foods Industrial, Inc. Delaware
Phoenix Packing Corporation Delaware
Savannah Sugar Refining Corporation Georgia
Savannah Investment Company Delaware
Holly Northwest Company Nevada
Holly Sugar Corporation New York
Fort Bend Utilities Company Texas
Imperial Sweetener Distributors, Inc. Texas
Limestone Products Company Delaware
Crown Express, Inc. Texas
</TABLE>
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion by reference in this Registration Statement of
Imperial Holly Corporation on Form S-4 of our report dated November 21, 1997,
appearing in the Form 10-K of Imperial Holly Corporation for the six-month
transition period ended September 30, 1997, and to the use of our report dated
November 21, 1997 appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the headings "Experts" in such
Prospectus.
Deloitte & Touche LLP
Houston, Texas
January 23, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated November 17, 1997 relating to the financial statements of Savannah Foods
& Industries, Inc. (and to all references to our Firm) included or made a part
of this Registration Statement on Form S-4 of Imperial Holly Corporation.
Arthur Andersen LLP
Atlanta, GA
January 23, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Imperial Holly Corporation of our report
dated November 18, 1996 relating to the financial statements of Savannah Foods &
Industries, Inc. which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Atlanta, Georgia
January 23, 1998
<PAGE> 1
EXHIBIT 99(a)
IMPERIAL HOLLY CORPORATION
LETTER OF TRANSMITTAL
FOR TENDER OF ALL OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
PURSUANT TO THE PROSPECTUS DATED ____________, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ______________, 1998, UNLESS
THE EXCHANGE OFFER IS EXTENDED.
TO: THE BANK OF NEW YORK (THE "EXCHANGE AGENT")
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier
The Bank of New York (for Eligible Institutions Only) The Bank of New York
Tender and Exchange Department (212) 815-6213 Tender and Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive & Deliver Window
New York, NY 10286-1248 For Information or Confirmation by Telephone: New York, NY 10286
(212) 507-9357
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION TO A
FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES, IS
AT THE RISK OF THE HOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges that he or she has received the
Prospectus, dated ___________, 1998 (the "Prospectus") of Imperial Holly
Corporation, a Texas Corporation (the "Company") and this Letter of Transmittal
and the instructions hereto (the "Letter of Transmittal"), which together
constitute the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 9 3/4% Senior Subordinated Notes due 2007, Series A (the
"Exchange Notes") that have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus is a part, for each $1,000 principal amount of its outstanding 9
3/4% Senior Subordinated Notes due 2007, (the "Old Notes"), of which $250,00,000
aggregate principal amount is outstanding, upon the terms and subject to the
conditions set forth in the Prospectus. The term "Expiration Date" shall mean
5:00 p.m., New York City time, on ___________, 1998, unless the Company, in its
sole discretion, extends the Exchange Offer, in which case the term shall mean
the latest date and time to which the Exchange Offer is extended by the Company.
Capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
This Letter of Transmittal is to be used either if (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders, (ii) tender of Old Notes is m be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company ("DTC"), pursuant to the procedures
<PAGE> 2
set forth in "The Exchange Offer--Procedures for Tendering" in the Prospectus
by any financial institution that is a participant in DTC and whose name
appears on a security position listing as the owner of Old Notes or (iii)
tender of Old Notes is to be made according to the guaranteed delivery
procedures set forth in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures."Delivery of this Letter of Transmittal and any other
required documents must be made to the Exchange Agent. Delivery of documents
to DTC does not constitute delivery to the Exchange Agent.
The term "Holder" as used herein means any person in whose name Old
Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder.
All Holders of Old Notes who wish to tender their Old Notes must,
prior to the Expiration Date: (1) complete, sip, and deliver this Letter of
Transmittal, or a facsimile thereof, to the Exchange Agent, in person or to the
address set forth above; and (2) tender (and not withdraw) his or her Old Notes
or, if a tender of Old Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at DTC, confirm such book-entry
transfer (a "Book- Entry Confirmation"), in each case in accordance with the
procedures for tendering described in the Instructions to this Letter of
Transmittal. Holders of Old Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or Book-Entry
Confirmation and all other documents required by this Letter of Transmittal to
be delivered to the Exchange Agent on or prior to the Expiration Date, must
tender their Old Notes according to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer-- Guaranteed Delivery Procedures"
in the Prospectus. (See Instruction 2.)
Upon the terms and subject to the conditions of the Exchange Offer,
the acceptance for exchange of the Old Notes validly tendered and not withdrawn
and the issuance of the Exchange Notes will be made promptly following the
Expiration Date. For the purposes of the Exchange Offer, the Company shall be
deemed to have accepted for exchange validly tendered Old Notes when, as and if
the Company has given written notice thereof to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must
complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING any BOX BELOW. THE INSTRUCTIONS INCLUDED IN THIS
LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE
OR FOR ADDITIONAL COPIES OF THE PROSPECTUS, THIS LETTER OF TRANSMITTAL AND THE
NOTICE OF GUARANTEED DELIVERY MAY BE DIRECTED TO THE EXCHANGE AGENT. SEE
INSTRUCTION 12 HEREIN.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD
NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY AND COMPLY WITH
ALL OF ITS TERMS.
List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the Certificate Numbers and
Principal Amounts should be listed on a separate signed schedule, attached
hereto. The minimum permitted tender is $ 1,000 in principal amount of 9 3/4%
Senior Subordinated Notes due 2007. All other tenders must be in integral
multiples of $1,000.
-2-
<PAGE> 3
DESCRIPTION OF 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
BOX I
<TABLE>
<CAPTION>
=============================================================================================================
Name(s) and Address(es) of Registered Holder(s) *
(Please fill in, if blank)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(A) (B)
Aggregate Principal
Amount Tendered
Certificate Number(s) (if less than all)**
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
--------------------------------------------
Total Principal
Amount of Old Notes
Tendered
=============================================================================================================
</TABLE>
* Need not be completed by book-entry holders
** Need not be completed by Holders who wish to tender with respect to
all Old Notes listed.
-3-
<PAGE> 4
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
<TABLE>
<CAPTION>
BOX II BOX III
- ----------------------------------------------------- -----------------------------------------------------
<S> <C>
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
SEE INSTRUCTIONS 4, 5 AND 6) (SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for To be completed ONLY if certificates for
Old Notes in a principal amount not tendered, or Old Notes in a principal amount not tendered, or
Exchange Notes issued in exchange for Old Notes Exchange Notes issued in exchange for Old Notes
accepted for exchange, are to be issued in the name accepted for exchange, are to be delivered to
of someone other than the undersigned. someone other than the undersigned.
Issue certificates to: Issue certificates to:
Name . . . . . . . . . . . . . . . . . . . . . . . Name . . . . . . . . . . . . . . . . . . . . . .
(PLEASE PRINT) (PLEASE PRINT)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE PRINT) (PLEASE PRINT)
Address . . . . . . . . . . . . . . . . . . . . . . Address . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(INCLUDING ZIP CODE) (INCLUDING ZIP CODE)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
- ----------------------------------------------------- -----------------------------------------------------
</TABLE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF
(TOGETHER WITH THE CERTIFICATE(S) FOR OLD NOTES OR A CONFIRMATION OF BOOK-ENTRY
TRANSFER OF SUCH OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR, IF GUARANTEED
DELIVERY PROCEDURES ARE TO BE COMPLIED WITH, A NOTICE OF GUARANTEED DELIVERY,
MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY DTC TO AN ACCOUNT
MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
[ ] The Depository Trust Company -----------------------------
Account Number
---------------------------------------------
Transaction Code Number
------------------------------------
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date may tender their Old Notes according
to the guaranteed delivery procedures set forth in the Prospectus under the
caption "The Exchange Offer--Guaranteed Delivery Procedures."(See Instruction
2.)
-4-
<PAGE> 5
[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of tendering Holder(s)
-------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------------------
Name of Institution which Guaranteed Delivery
----------------------------
Transaction Code Number
--------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
--------------------------------------------------------------------
Address:
-----------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to Imperial Holly Corporation (the "Company") the
principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the
principal amount of Old Notes tendered hereby in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Old Notes tendered
hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company and as Trustee and
Registrar under the Indenture for the Old Notes and the Exchange Notes) with
respect to the tendered Old Notes with full power of substitution (such power
of attorney being deemed an irrevocable power coupled with an interest),
subject only to the right of withdrawal described in the Prospectus, to (i)
deliver certificates for such Old Notes to the Company or transfer ownership of
such Old Notes on the account books maintained by DTC, together, in either such
case, with all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company and (ii) present such Old Notes for transfer on the
books of the Company and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Old Notes, all in accordance with the terms of
the Exchange Offer.
The undersigned acknowledges that the Exchange Offer is being made in
reliance upon interpretative advice given by the staff of the Securities and
Exchange Commission to third parties in connection with transactions similar to
the Exchange Offer, so that the Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Old Notes may
-5-
<PAGE> 6
be offered for resale, resold and otherwise transferred by holders thereof
(other than a broker-dealer who purchased such Old Notes directly from the
Company for resale pursuant to Rule 144A or any other available exemption under
the Securities Act or a person that is an "affiliate" of the Company or any
Guarantor within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such Exchange Notes.
The undersigned agrees that acceptance of any tendered Old Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement, (as defined in the Prospectus) and that, upon
the issuance of the Exchange Notes, the Company will have no further
obligations or liabilities thereunder (except in certain limited
circumstances).
The undersigned represents and warrants that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving Exchange Notes (which shall be the
undersigned unless otherwise indicated in the box entitled "Special Delivery
Instructions" above) (the "Recipient"), (ii) neither the undersigned nor the
Recipient (if different) is engaged in, intends to engage in or has any
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes, and (iii) neither the undersigned nor the Recipient (if
different) is an "affiliate" of the Company or any Guarantor as defined in Rule
405 under the Securities Act. If the undersigned is not a broker-dealer, the
undersigned further represents that it is not engaged in, and does not intend
to engage in, a distribution of the Exchange Notes. If the undersigned is a
broker- dealer, the undersigned further (x) represents that it acquired Old
Notes for the undersigned's own account as a result of market making activities
or other trading activities, (y) represents that it has not entered into any
arrangement or understanding with the Company or any "affiliate" of the Company
(within the meaning of Rule 405 under the Securities Act) to distribute the
Exchange Notes to be received in the Exchange Offer and (z) acknowledges that
it will deliver a prospectus meeting the requirements of the Securities Act
(for which purposes delivery of the Prospectus, as the same may be hereafter
supplemented or amended, shall be sufficient) in connection with any resale of
Exchange Notes received in the Exchange Offer. Such a broker-dealer will not
be deemed, solely by reason of such acknowledgment and prospectus delivery, to
admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned understands and agrees that the Company reserves the
right not to accept tendered Old Notes from any tendering holder if the Company
determines, in its sole and absolute discretion, that such acceptance could
result in a violation of applicable securities laws.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed to be necessary or desirable by the
Exchange Agent or the Company in order to complete the exchange, assignment and
transfer of tendered Old Notes or transfer of ownership of such Old Notes on
the account books maintained by a book- entry transfer facility.
The undersigned understands and acknowledges that the Company reserves
the right in its sole discretion to purchase or make offers for any Old Notes
that remain outstanding subsequent to the Expiration Date or, as set forth in
the Prospectus under the caption "The Exchange Offer--Procedures for
Tendering,"to terminate the Exchange Offer and, to the extent permitted by
applicable law, purchase Old Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
The undersigned understands that the Company may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
validly tendered Old Notes when,
-6-
<PAGE> 7
as and if the Company has given oral (which shall be confirmed in writing) or
written notice thereof to the Exchange Agent.
The undersigned understands that the first interest payment following
the Expiration Date will include unpaid interest on the Old Notes accrued
through the date of issuance of the Exchange Notes.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
The undersigned acknowledges that the Exchange Offer is subject to the
more detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter of Transmittal, the
Prospectus shall prevail.
If any tendered Old Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Old
Notes will be returned (except as noted below with respect to tenders through
DTC, at the Company's cost and expense, to the undersigned at the address shown
below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns. This tender may be withdrawn only in
accordance with the procedures set forth in this Letter of Transmittal.
By acceptance of the Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby acknowledges and agrees
that upon the receipt of notice by the Company of the happening of any event
which makes any statement in the Prospectus untrue in any material respect or
which requires the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemented prospectus to such broker-dealer.
Unless otherwise indicated under "Special Registration
Instructions,"please issue the certificates representing the Exchange Notes
issued in exchange for the Old Notes accepted for exchange and return any
certificates for Old Notes not tendered or not exchanged, in the name(s) of the
undersigned (or, in either such event in the case of Old Notes tendered by DTC,
by credit to the account at DTC. Similarly, unless otherwise indicated under
"Special Delivery Instructions,"please send the certificates representing the
Exchange Notes issued in exchange for the Old Notes accepted for exchange and
any certificates for Old Notes not tendered or not exchanged (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s), unless, in either event, tender is being made
through DTC. In the event that both "Special Registration Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Old Notes accepted
for exchange in the name(s) of, and return any certificates for Old Notes not
tendered or not exchanged to, the person(s) so indicated. The undersigned
understands that the Company has no obligations pursuant to the "Special
Registration Instructions" or "Special Delivery Instructions" to transfer any
Old Notes from the name of the registered Holder(s) thereof if the Company does
not accept for exchange any of the Old Notes so tendered.
Holders who wish to tender the Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date, may tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction I
regarding the completion of the Letter of Transmittal.
-7-
<PAGE> 8
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
AND WHETHER OR NOT TENDER IS TO BE MADE
PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES
This Letter of Transmittal must be signed by the registered holder(s)
as their name(s) appear on the Old Notes or, if tendered by a participant in
DTC, exactly as such participant's name appears on a security listing as the
owner of Old Notes, or by person(s) authorized to become registered holder(s)
by a properly completed bond power from the registered holder(s), a copy of
which must be transmitted with this Letter of Transmittal. If Old Notes to
which this Letter of Transmittal relate are held of record by two or more joint
holders, then all such holders must sign this Letter of Transmittal. If
signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, then such person must (i) set forth his or her full
title below and (h) unless waived by the Company, submit evidence satisfactory
to the Company of such person's authority so to act. (See Instruction 4.)
X Date
------------------------------------ ----------------------------------
X Date
------------------------------------ ----------------------------------
Signature(s) of Holder(s) of
Authorized Signatory
Name(s): Address:
----------------------------- ------------------------------
----------------------------- ------------------------------
(Please Print) (including Zip Code)
Capacity: Area Code and Telephone Number:
------------------------ -------
Social Security No.:
-------------
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
-8-
<PAGE> 9
BOX IV
================================================================================
SIGNATURE GUARANTEE (SEE INSTRUCTION 1)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
- --------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number (including area code) of
Firm)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Printed Name)
- --------------------------------------------------------------------------------
(Title)
Date:
------------------
================================================================================
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Guarantee of Signatures. Signatures on this Letter of
Transmittal need not be guaranteed if (a) this Letter of Transmittal is signed
by the registered holder(s) of the Old Notes tendered herewith and such
holder(s) have not completed the box set forth herein entitled "Special
Registration Instructions" or the box entitled "Special Delivery Instructions"
or (b) such Old Notes are tendered for the account of an Eligible Institution.
(See Instruction 6.) Otherwise, all signatures on this Letter of Transmittal or
a notice of withdrawal, as the case may be, must be guaranteed by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States (an "Eligible Institution"). All
signatures on bond powers and endorsements on certificates must also be
guaranteed by an Eligible Institution.
2. Delivery of this Letter of Transmittal and Old Notes.
Certificates for all physically delivered Old Notes or confirmation of any
book-entry transfer to the Exchange Agent at DTC of Old Notes tendered by
book-entry transfer, as well as, in each case (including cases where tender is
affected by book-entry transfer), a properly completed and duly executed copy
of this Letter of Transmittal or facsimile hereof and any other documents
required by this Letter of Transmittal must be received by the Exchange Agent
at its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date.
The method of delivery of the tendered Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and the delivery will be deemed made only when
actually received by the Exchange Agent. If Old Notes are sent by mail,
registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery. No Letter of Transmittal or Old Notes should be sent to the Company.
-9-
<PAGE> 10
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Depositary for purposes of the Exchange Offer
within two business days after receipt of this Prospectus, and any financial
institution that is a participant in the Depositary may make book-entry
delivery of Old Notes by causing the Depositary to transfer such Old Notes into
the Exchange Agent's account at the Depositary in accordance with the
Depositary's procedures for transfer. However, although delivery of Old Notes
may be effected through book-entry transfer at the Depositary, the Letter of
Transmittal, with any required signature guarantees or an Agent's Message (as
defined below) in connection with a book-entry transfer and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address specified on the cover page of the Letter of Transmittal
on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
A Holder may tender Old Notes that are held through the Depositary by
transmitting its acceptance through the Depositary's Automatic Tender Offer
Program, for which the transaction will be eligible, and the Depositary will
then edit and verify the acceptance and send an Agent's Message to the Exchange
Agent for its acceptance. The term "Agent's Message" means a message
transmitted by the Depositary to, and received by, the Exchange Agent and
forming part of the Book-Entry Confirmation, which states that the Depositary
has received an express acknowledgment from each participant in the Depositary
tendering the Old Notes and that such participant has received the Letter of
Transmittal and agrees to be bound by the terms of the Letter of Transmittal
and the Company may enforce such agreement against such participant.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date or comply with book-entry transfer
procedures on a timely basis must tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus. See "Exchange
Offer--Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such
tender must be made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, overnight courier, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the Expiration
Date, this Letter of Transmittal (or facsimile hereof) together with the
certificate(s) representing the Old Notes and any other required documents will
be deposited by the Eligible Institution with the Exchange Agent; and (iii)
such properly completed and executed Letter of Transmittal (or facsimile
hereof), as well as all other documents required by this Letter of Transmittal
and the certificate(s) representing all tendered Old Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC), must be received by the Exchange Agent within
three New York Stock Exchange trading days after the Expiration Date, all in
the manner provided in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." Any Holder who wishes to tender his Old
Notes pursuant to the guaranteed delivery procedures described above must
ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior
to 5:00 p.m., New York City time, on the Expiration Date. Upon request to the
Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who
wish to tender their Old Notes according to the guaranteed delivery procedures
set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes, and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. All tendering holders, by execution
of this Letter of Transmittal (or facsimile thereof), shall waive any right to
receive notice of the acceptance of the Old Notes for exchange. The Company
reserves the absolute right to reject any and all Old Notes not properly
tendered or any Old Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any irregularities or conditions of tender as to particular Old
Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in this Letter of Transmittal) shall
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within
such time as the Company shall determine. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Old Notes, nor shall any
of them incur any liability
-10-
<PAGE> 11
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such defects or irregularities have been cured to the
Company's satisfaction or waived. Any Old Notes received by the Exchange Agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned by the Exchange Agent to the
tendering Holders pursuant to the Company's determination, unless otherwise
provided in this Letter of Transmittal as soon as practicable following the
Expiration Date. The Exchange Agent has no fiduciary duties to the Holders
with respect to the Exchange Offer and is acting solely on the basis of
directions of the Company.
3. Inadequate Space. If the space provided is inadequate, the
certificate numbers and/or the number of Old Notes should be listed on a
separate signed schedule attached hereto.
4. Tender by Holder. Only a Holder of Old Notes may tender such
Old Notes in the Exchange Offer. Any beneficial owner of Old Notes who is not
the registered Holder and who wishes to tender should arrange with such
registered holder to execute and deliver this Letter of Transmittal on such
beneficial owner's behalf or must, prior to completing and executing this
Letter of Transmittal and delivering his Old Notes, either make appropriate
arrangements to register ownership of the Old Notes in such beneficial owner's
name or obtain a properly completed bond power from the registered holder or
properly endorsed certificates representing such Old Notes.
5. Partial Tenders; Withdrawals. Tenders of Old Notes will be
accepted only in integral multiples of $ 1,000. If less than the entire
principal amount of any Old Notes is tendered, the tendering Holder should fill
in the principal amount tendered in the third column of the box entitled
"Description of 9 3/4% Senior Subordinated Notes due 2007" above. The entire
principal amount of any Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Old Notes is not tendered, then Old Notes for the
principal amount of Old Notes not tendered and a certificate or certificates
representing Exchange Notes issued in exchange for any Old Notes accepted will
be sent to the Holder at his or her registered address, unless a different
address is provided in the "Special Delivery Instructions" box above on this
Letter of Transmittal or unless tender is made through DTC, promptly after the
Old Notes are accepted for exchange.
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes, or, in
the case of Old Notes transferred by book-entry transfer the name and number of
the account at DTC to be credited), (iii) be signed by the Depositor in the
same manner as the original signature on the Letter of Transmittal by which
such Old Notes were tendered (including any required signature guarantees) or
be accompanied by documents of transfer sufficient to have the Registrar with
respect to the Old Notes register the transfer of such Old Notes into the name
of the person withdrawing the tender and (iv) specify the name in which any
such Old Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no Exchange Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. Any Old Notes which have been tendered but
which are not accepted for exchange by the Company will be returned to the
Holder thereof without cost to such Holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described in the Prospectus under "The Exchange Offer--Procedures for
Tendering" at any time prior to the Expiration Date.
6. Signatures on the Letter of Transmittal; Bond Powers and
Endorsements. If this Letter of Transmittal (or facsimile hereof) is signed by
the registered holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the Old Note without
alteration, enlargement or any change whatsoever.
-11-
<PAGE> 12
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered,
it will be necessary to complete, sign and submit as many copies of this Letter
of Transmittal as there are different registrations of Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders (which term, for the Purposes described herein,
shall include a book-entry transfer facility whose name appears on a security
listing as the owner of the Old Notes) of Old Notes tendered and the
certificate or certificates for Exchange Notes issued in exchange therefor is
to be issued (or any untendered principal amount of Old Notes to be reissued)
to the registered Holder, then such Holder need not and should not endorse any
tendered Old Notes, nor provide a separate bond power. In any other case, such
Holder must either properly endorse the Old Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered Holder or Holders of any Old Notes listed,
such Old Notes must be endorsed or accompanied by appropriate bond powers in
each case signed as the name of the registered Holder or Holders appears on the
Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by
this Instruction 6 must be guaranteed by an Eligible Institution.
7. Special Registration and Delivery Instructions. Tendering
Holders should indicate, in the applicable box or boxes, the name and address
to which Exchange Notes or substitute Old Notes for principal amounts not
tendered or not accepted for exchange are to be issued or sent, if different
from the name and address of the person signing this Letter of Transmittal. In
the case of issuance in a different name, the taxpayer identification or social
security number of the person named must also be indicated.
8. Backup Federal Income Tax Withholding and Substitute Form W-9.
Under the federal income tax laws, payments that may be made by the Company on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute Form
W-9 included in this Letter of Transmittal and either (a) provide the correct
taxpayer identification number ("TIN") and certify, under penalties of perjury,
that the TIN provided is correct and that (i) the holder has not been notified
by the Internal Revenue Service (the "IRS") that the holder is subject to
backup withholding as a result of failure to report all interest or dividends
or (ii) the IRS has notified the holder that the holder is no longer subject to
backup withholding; or (b) provide an adequate basis for exemption. If the
tendering holder has not been issued a TIN and has applied for one, or intends
to apply for one in the near future, such holder should write "Applied For" in
the space provided for the TIN in Part I of the Substitute Form W-9, sign and
date the Substitute Form W-9 and sign the Certificate of Payee Awaiting
Taxpayer Identification Number. If "Applied For" is written in Part 1, the
Company (or the Paying Agent under the Indenture governing the Exchange Notes)
shall retain 31% of payments made to the tendering holder during the sixty-day
period following the date of the Substitute Form W-9. If the Holder furnishes
the Exchange Agent or the Company with its TIN within sixty days after the date
of the Substitute Form W-9, the Company (or the Paying Agent) shall remit such
amounts retained during the sixty-day period to the Holder and no further
amounts shall be retained or withheld from payments made to the Holder
thereafter. If, however, the Holder has not provided the Exchange Agent or the
Company with its TIN within such sixty-day period, the Company (or the Paying
Agent) shall remit such previously retained amounts to the IRS as backup
withholding. In general, if a Holder is an individual, the TIN is the Social
Security number of such individual. If the Exchange Agent
-12-
<PAGE> 13
or the Company are not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by the Internal Revenue Service. Certain Holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. In order
for a foreign individual to qualify as an exempt recipient, such Holder must
submit a statement (generally, IRS Form W-8), signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Exchange Agent. For further information concerning backup
withholding and instructions for completing the Substitute Form W-9 (including
how to obtain a taxpayer identification number if you do not have one and how
to complete the Substitute Form W-9 if Old Notes are registered in more than
one name), consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Old Notes to be deemed invalidly tendered, but may require the Company (or the
Paying Agent) to withhold 31% of the amount of any payments made on account of
the Exchange Notes. Backup withholding is not an additional federal income
tax. Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
9. Transfer Taxes. The Company will pay all transfer taxes, if
any, applicable to the exchange of Old Notes pursuant to the Exchange Offer.
If, however, certificates representing Exchange Notes or Old Notes for
principal amounts not tendered or accepted for exchange are to be delivered to,
or are to be registered in the name of, any person other than the registered
holder of the Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of a person other than the person signing this Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or on any other
persons) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with this Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering Holder. See the Prospectus under "The Exchange
Offer--Solicitation of Tenders; Fees and Expenses."
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
10. Waiver of Conditions. The Company reserves the right, in
their sole discretion, to amend, waive or modify specified conditions in the
Exchange Offer in the case of any Old Notes tendered.
11. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering
Holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
12. Requests for Assistance or Additional Copies. Requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified
in the Prospectus. Holder may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
-13-
<PAGE> 14
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<S> <C>
CERTIFICATE SURRENDERED OLD NOTES TENDERED OLD NOTES ACCEPTED
--------------------- --------------------- ----------------------
--------------------- --------------------- ----------------------
Date Received Accepted by Checked by
------------------ ---------- -----------
Delivery Prepared by Checked by Date
----------- ------------ ----------------
</TABLE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $50 penalty may be imposed by the Internal Revenue
Service, and payments made pursuant to the Exchange Offer may be subject to
backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Exchange Agent is required to
withhold 20% of any payments made to the Holder or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the
Exchange Offer, the Holder is required to provide the Exchange Agent with
either: (i) the Holder's correct TIN by completing the form below, certifying
that the TIN provided on Substitute Form W-9 is correct (or that such Holder is
awaiting a TIN) and that (A) the Holder has been notified by the Internal
Revenue Service that the Holder is subject to backup withholding as a result of
failure to report all interest or dividends or (B) the internal Revenue Service
has notified the Holder that the Holder is no longer subject to backup
withholding or (ii) an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the registered
Holder of the Old Notes. If the Old Notes are held in more than one name or
are held not in the name of the actual owner, consult the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
-14-
<PAGE> 15
- -------------------------------------------------------------------------------
CERTIFICATION OF PAYEE AWAITING TAXPAYER INDEMNIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center of Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31% of all payments
made to me on account of the Exchange Notes shall be retained until I provide a
Taxpayer Identification Number to the payer and that, if I do not provide my
Taxpayer Identification Number within sixty days, such retained amounts shall
be remitted to the Internal Revenue Service as backup withholding and 31% of
all reportable payments made to me thereafter will be withheld and remitted to
the Internal Revenue Service until I provide a Taxpayer Identification Number.
SIGNATURE
---------------------------------
DATE
---------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE
EXCHANGE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
- -------------------------------------------------------------------------------
-15-
<PAGE> 16
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYER'S NAME: IMPERIAL HOLLY CORPORATION
<TABLE>
<S> <C> <C>
===================================================================================================================================
SUBSTITUTE PART 1 -- TAXPAYER IDENTIFICATION NUMBER (TIN) SOCIAL SECURITY NUMBER
FORM W-9 ENTER YOUR TIN IN THE APPROPRIATE BOX. FOR -------------------------------
INDIVIDUALS, THIS IS YOUR SOCIAL SECURITY NUMBER (SSN). OR
DEPARTMENT OF THE TREASURY FOR SOLE PROPRIETORS, SEE THE INSTRUCTIONS IN THE
INTERNAL REVENUE SERVICE ENCLOSED GUIDELINES. FOR OTHER ENTITIES, IT IS YOUR EMPLOYEE IDENTIFICATION NUMBER
EMPLOYER IDENTIFICATION NUMBER (EIN). IF YOU DO NOT
REQUEST FOR TAXPAYER HAVE A NUMBER, SEE HOW TO GET A TIN IN THE ENCLOSED -------------------------------
IDENTIFICATION NUMBER GUIDELINES.
AND CERTIFICATION
NOTE: IF THE ACCOUNT IS IN MORE THAN ONE NAME, SEE
THE CHART ON PAGE 2 OF THE ENCLOSED GUIDELINES ON
WHOSE NUMBER TO ENTER.
=======================================================================================================
PART II -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
(See Part II instructions in the enclosed Guidelines.)
===================================================================================================================================
PART III -- CERTIFICATION--UNDER PENALTIES
- ------------------------------------------------------------------------------------------------------------------------------------
OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me),
and
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the
Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
Signature Date , 1998
---------------------------------------------------------------------- --------------------------------------
===================================================================================================================================
</TABLE>
CERTIFICATION INSTRUCTIONS.--You must cross out item 2 above if you
have been notified by the IRS that you are currently subject to backup
withholding because of under reporting interest or dividends on your tax return.
For real estate transactions, item 2 does not apply. For mortgage interest paid,
the acquisition or abandonment of secured property, cancellation of debt,
contributions to an individual retirement arrangement (IRA), and generally
payments other than interest and dividends, you are not required to sign the
Certification, but you must provide your correct TIN.
-16-
<PAGE> 1
EXHIBIT 99(b)
NOTICE OF GUARANTEED DELIVERY
FOR 9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
OF IMPERIAL HOLLY CORPORATION
As set forth in the Prospectus dated _____________, 1999 (the
"Prospectus") of Imperial Holly Corporation (the "Company") and in the Letter
of Transmittal (the "Letter of Transmittal"), this form or a form substantially
equivalent to this form must be used to accept the Exchange Offer (as defined
below) if the certificates for the outstanding 9 3/4% Senior Subordinated Notes
due 2007 (the "Old Notes") of the Company and all other documents required by
the Letter of Transmittal cannot be delivered to the Exchange Agent by the
expiration of the Exchange Offer or compliance with book- entry transfer
procedures cannot be effected on a timely basis. Such form may be delivered by
hand or transmitted by facsimile transmission, telex or mail to the Exchange
Agent no later than the Expiration Date, and must include a signature guarantee
by an Eligible Institution as set forth below. Capitalized terms used herein
but not defined herein have the meanings ascribed thereto in the Prospectus.
TO: THE BANK OF NEW YORK (THE "EXCHANGE AGENT")
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
The Bank of New York (for Eligible Institutions Only) The Bank of New York
Tender and Exchange Department (212) 815-6213 Tender and Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive & Deliver Window
New York, NY 10286-1248 For Information or Confirmation by Telephone: New York, NY 10286
(212) 507-9357
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE METHOD OF DELIVERY OF ALL
DOCUMENTS, INCLUDING CERTIFICATES, IS AT THE RISK OF THE HOLDER. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. THE INSTRUCTIONS ACCOMPANYING THE LETTER OF TRANSMITTAL SHOULD BE
READ CAREFULLY BEFORE THIS NOTICE OF GUARANTEED DELIVERY IS COMPLETED.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instruction thereto, such
signatures must appear in the applicable space provided on the Letter of
Transmittal for Guarantee of Signature(s).
<PAGE> 2
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus and the related
Letter of Transmittal which describes the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of a new series of 9 3/4% Senior
Subordinated Notes due 2007, Series A (the "Exchange Notes") for each $1,000 in
principal amount of the Old Notes.
The undersigned hereby tenders to the Company the aggregate principal
amount of Old Notes set forth below on the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal pursuant to the guaranteed
delivery procedure set forth in the "The Exchange Offer--Guaranteed Delivery
Procedures" section in the Prospectus and the accompanying Letter of
Transmittal.
The undersigned understands that no withdrawal of a tender of Old
Notes may be made on or after the Expiration Date. The undersigned understands
that for a withdrawal of a tender of Old Notes to be effective, a written
notice of withdrawal that complies with the requirements of the Exchange Offer
must be timely received by the Exchange Agent at one of its addresses specified
on the cover of this Notice of Guaranteed Delivery prior to the Expiration
Date.
The undersigned understands that the exchange of Old Notes for
Exchange Notes pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of (i) such Old Notes (or Book-Entry Confirmation
of the transfer of such Old Notes into the Exchange Agent's account at The
Depository Trust Company (the "Depositary" or "DTC")) and (ii) a Letter of
Transmittal (or facsimile thereof) with respect to such Old Notes, properly
completed and duly executed, with any required signature guarantees, this
Notice of Guaranteed Delivery and any other documents required by the Letter of
Transmittal or a properly transmitted Agent's Message. The term "Agent's
Message" means a message transmitted by the Depositary to, and received by, the
Exchange Agent and forming part of the confirmation of a book-entry transfer,
which states that the Depositary has received an express acknowledgment from
each participant in the Depositary tendering the Old Notes and that such
participant has received the Letter of Transmittal and agrees to be bound by
the terms of the Letter of Transmittal and the Company may enforce such
agreement against such participant.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
-2-
<PAGE> 3
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Name(s) of Registered Holder(s)
Owner(s) or Authorized
Signatory:
----------------------- -----------------------------------
- --------------------------------- -----------------------------------
- --------------------------------- -----------------------------------
Principal Amount of Old Notes Tendered: Address:
---------------------------
- --------------------------------- -----------------------------------
Certificate No(s) of
Old Notes (if available): Area Code and Telephone No.:
- --------------------------------- If Old Notes will be delivered by
book-entry transfer at The
Depository Trust Company, insert
- ---------------------------------
Depository Account No.:
------------
Date:
----------------------------
This Notice of Guaranteed Delivery must be signed by the registered Holder(s)
of Old Notes exactly as its (their) name(s) appear on certificates for Old
Notes or on a security position listing as the owner of Old Notes, or by
person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
Capacity:
-----------------------------------------------------------------
Address(es):
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE EXCHANGE
AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
-3-
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in the
United States, or otherwise an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
hereby (a) represents that each holder of Old Notes on whose behalf this tender
is being made "own(s)" the Old Notes covered hereby within the meaning of Rule
l3d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (b) represents that such tender of Old Notes complies with Rule 14e-4 of
the Exchange Act and (c) guarantees that, within three New York Stock Exchange
trading days from the expiration date of the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof),
together with certificates representing the Old Notes covered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Old Notes
into the Exchange Agent's account at The Depository Trust Company, pursuant to
the procedure for book- entry transfer set forth in the Prospectus) and
required documents will be deposited by the undersigned with the Exchange
Agent.
The undersigned acknowledges that it must deliver the Letter of
Transmittal and Old Notes tendered hereby to the Exchange Agent within the time
period set forth above and that failure to do so could result in financial loss
to the undersigned.
Name of Firm:
------------------------ -------------------------------
Authorized Signature
Address: Name:
----------------------------- --------------------------
Title:
- ------------------------------------- -------------------------
Area Code and Telephone No.: Date:
--------- --------------------------
-4-
