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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
SAVANNAH FOODS & INDUSTRIES, INC.
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(Name of Issuer)
Common Stock, par value $0.25 per share
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(Title of Class of Securities)
804795 10 2
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(CUSIP Number)
William F. Schwer Robert V. Jewell
Imperial Holly Corporation Andrews & Kurth L.L.P.
One Imperial Square, Suite 200 4200 Texas Commerce Tower
8016 Highway 90-A Houston, Texas 77002
Houston, Texas 77478 (713) 220-4200
(281) 491-9181
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 17, 1997
--------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
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CUSIP NO. 804795 10 2
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
IHK Merger Sub Corporation
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [x]
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SEC USE ONLY
3
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SOURCE OF FUNDS
4
BK; AF
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e)
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
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SOLE VOTING POWER
7
NUMBER OF
14,397,836
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 0
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
14,397,836
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
14,397,836
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
50.1%
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TYPE OF REPORTING PERSON*
14
CO
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* SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
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CUSIP NO. 804795 10 2
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Imperial Holly Corporation
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [x]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- -------------------------------------------------------------------------------
SOURCE OF FUNDS
4
BK
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e)
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
14,348,284
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 0
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
14,398,284
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
14,398,284
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
50.1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
* SEE INSTRUCTIONS BEFORE FILLING OUT!
3
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ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to shares if Common Stock, par value $0.25
per share (the "Shares"), of Savannah Foods & Industries, Inc, (the "Company").
The address of the Company's principal executive office is 2 East Bryan Street,
Savannah, Georgia 31401.
ITEM 2. IDENTITY AND BACKGROUND
This Schedule 13D is filed on behalf of Imperial Holly Corporation, a
Texas corporation ("Imperial Holly") and IHK Merger Sub Corporation, a Delaware
corporation and a wholly owned subsidiary of Imperial Holly (the "Purchaser").
The Purchaser and Imperial Holly are referred to herein collectively as the
Reporting Persons. Imperial Holly is a producer, marketer and distributor of
refined sugar, producing both cane and beet sugar. The Purchaser is a recently
organized corporation that has not conducted any business except in connection
with the transactions described below. Imperial Holly maintains its principal
offices at One Imperial Square, Suite 200, 8016 Highway 90-A, Sugar Land, Texas
77478. The Purchaser maintains its principal executive office at the same
address.
The name, residence or business address, citizenship and present
principal occupation or employment of each of the directors and executive
officers of each of the Reporting Persons, and the name principal business and
address of the organization in which such occupation or employment is conducted
are set forth in Schedule I attached hereto.
During the five years immediately prior to the date hereof, none of the
Reporting Persons nor, to the best of their knowledge, any of the persons whose
names are set forth on Schedule I, (i) has been convicted in a criminal
proceeding (excluding traffic violations and similar misdemeanors), or (ii) has
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On September 12, 1997, Imperial Holly, the Purchaser and the Company
entered into an Agreement and Plan of Merger, dated September 12, 1997 (the
"Merger Agreement"), which provided for the acquisition of the Company by the
Purchaser by means of a tender offer for 14,397,836 Shares representing 50.1% of
the Shares outstanding (the "Tender Offer") and the subsequent merger of the
Purchaser with and into the Company (the "Merger").
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In order to (i) finance the cash consideration to be paid to
stockholders of the Company in the Tender Offer and the Merger, (ii) refinance
certain indebtedness of Imperial Holly and the Company, (iii) pay fees and
expenses related to the Tender Offer and the Merger and (iv) provide working
capital to Imperial Holly, Imperial Holly will replace its and the Company's
existing 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 has entered into a $505
million credit facility (the "Tender Credit Facility") arranged by Lehman
Commercial Paper, Inc. ("LCPI"), an affiliate of Lehman Brothers Inc. and a
financial advisor to Imperial Holly in connection with the Merger. The Tender
Credit Facility is comprised of a term loan facility in the amount of $295
million and a revolving credit facility in the amount of $210 million. The
Tender Credit Facility is guaranteed by each of Imperial Holly's direct and
indirect subsidiaries (other than the Company and its subsidiaries), and is
secured by substantially all the assets of Imperial Holly and each of such
guarantors. The term loan will be repayable on the earlier of (i) the date of
the closing of the Merger and (ii) January 15, 1998 (the "Maturity Date"). The
revolving credit facility will be available on a revolving basis to refinance
certain existing indebtedness and will mature on the Maturity Date. The Tender
Credit Facility will bear interest, at Imperial Holly's election, at either (i)
the highest of (A) the prime rate of the administrative agent selected in the
syndication process, (B) the secondary market rate for certificates of deposit
plus 1%, or (C) the federal funds effective rate plus 0.50% (the "Base Rate"),
in each case plus a margin of 1.50% or (ii) the rate for Eurodollar deposits in
the interbank Eurodollar market (the "Eurodollar Rate") plus a margin of 2.50%.
Senior Credit Facility. In connection with the consummation of the
Merger, the Tender Credit Facility will be replaced by a senior credit facility
(the "Senior Credit Facility") arranged by LCPI. The Senior Credit Facility
will be comprised of either (i) senior credit facilities of up to $455 million
(the "Alternative A Facility"), comprised of term loan facilities aggregating
not more than $255 million (the "Alternative A Term Loans") and a $200 million
revolving credit facility (the "Alternative A Revolver"), which will be
implemented in conjunction with the issuance of the Notes or (ii) in the event
the offering of the Senior Subordinated Notes (as defined below) is not
consummated on or prior to the date of the consummation of the Merger, senior
credit facilities of up to $705 million (the "Alternative B Senior Credit
Facility"), comprised of term loan facilities aggregating not more than $505
million (the "Alternative B Term Loans") and a $200 million revolving credit
facility (the "Alternative B Revolver"). The proceeds of the Senior Credit
Facility will provide the financing necessary to repay 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
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corporate purposes. The Senior Credit Facility will be guaranteed by each of
Imperial Holly's direct and indirect subsidiaries, including the Company and its
subsidiaries, and will be secured by substantially all the assets of Imperial
Holly and each of the guarantors.
The Alternative A Term Loans will be available for one drawing on the
date of the closing of the Merger, and will consist of two tranches. The two
tranches, in the aggregate principal amounts of $150 million and $105 million,
respectively, will fully amortize over a period of six and eight years,
respectively. The Alternative A 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
Alternative A Revolver and the Alternative A 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%.
The Alternative B Term Loans will be available for one drawing on the
date of the closing of the Merger, and will consist of four tranches. The four
tranches, in the aggregate principal amounts of $150 million, $127.5 million,
$127.5 million and $100 million, respectively, will fully amortize over periods
of five, six, seven and eight years, respectively. The Alternative B 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 Alternative B Revolver and the
Alternative B Term Loans will bear interest, at Imperial Holly's election, at
either the Base Rate plus a margin ranging from 0.75% to 2.50% or the Eurodollar
Rate plus a margin ranging from 1.75% to 3.50%.
Although LCPI anticipates that it may syndicate all or a portion of the
Tender Credit Facility and the Senior Credit Facility to other lenders, the
Financing Commitment Letter provides that LCPI will, subject to customary
conditions, underwrite the entire amount of the Tender Credit Facility and the
Senior Credit Facility.
Senior Subordinated Notes. Imperial Holly intends to issue senior
subordinated notes due 2007 (the "Senior Subordinated Notes") in an aggregate
principal amount of approximately $250 million at or prior to the time of the
consummation of the Merger in a private placement exempt from registration
pursuant to Rule 144A under the Securities Act. In the event the offering of
the Senior Subordinated Notes is not consummated on or prior to the consummation
of the Merger, pursuant to a commitment letter from LCPI, LCPI has agreed to
increase the amount of the Senior Credit Facility in the aggregate amount of
$250 million.
The Senior Subordinated Notes will be general unsecured obligations of
Imperial Holly and guaranteed by the direct and indirect existing and future
subsidiaries of Imperial Holly and the Company. The Senior Subordinated Notes
and such guarantees will be subordinated to the obligations of Imperial Holly
and its subsidiaries under the Senior Credit Facility, other borrowed money,
capital lease and certain other obligations of Imperial Holly and its
subsidiaries.
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The indenture under which the Senior Subordinated Notes will be issued
will limit the ability of Imperial Holly and its subsidiaries to make dividends
or distributions on their stock (other than regular quarterly dividends), prepay
subordinated debt and make certain restricted investments. The indenture also
will limit the ability of Imperial Holly and its subsidiaries to incur other
indebtedness or issue preferred stock, create liens other than certain permitted
liens, merge, consolidated or sell its assets with certain exceptions, guarantee
certain other indebtedness, enter into certain transactions with affiliates and
sale and leaseback transactions, issue other senior subordinated debt, change
its business, consent and enter into certain other transactions. In the event
of a change of control or certain asset sales, Imperial Holly may be required,
at the option of the holders of the Senior Subordinated Notes, to repurchase all
or a part of the Senior Subordinated Notes, subject to the limitations set forth
in the indenture.
Equity Financing. Imperial Holly has entered into an agreement to sell
shares of Imperial 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 the lesser of $14.50 per share and the price per
share of Common Stock, no par value ("Imperial Common Stock"), of Imperial
Holly issued in the Merger.
ITEM 4. PURPOSE OF THE TRANSACTION
The Board of Directors of Imperial Holly believe that the acquisition of
the Company offers a number of strategic benefits to the company including
broadened national market participation and increased geographic diversity of
production facilities and marketing activities. Accordingly, Imperial Holly and
the Purchaser entered into the Merger Agreement with the Company.
(a) Acquisition and Disposition of Securities of the Issuer
Pursuant to the Tender Offer, on October 17, 1997, Imperial Holly
announced that the Purchaser had successfully completed the Tender Offer for
14,397,836 Shares, representing 50.1% of the issued and outstanding Shares, for
$20.25 per share in cash. The Merger will constitute the second and final step
in the acquisition of the Company by Imperial Holly. The Merger Agreement
provides that upon consummation of the Merger, each outstanding Share (other
than Shares owned by Imperial Holly and its affiliates, which include Shares
purchased in the Tender Offer, and Shares held by stockholders of the Company
exercising dissenters' rights of appraisal under Delaware law) will be converted
into the right to receive, subject to stockholder elections and proration,
either (i) $20.25 of Imperial Common Stock, subject to a collar of $13.25 to
$17.25 per share, or (ii) $20.25 in cash. In the Merger, 30% of the outstanding
Shares will be converted into the right to receive Imperial Common Stock, and
19.9% of the outstanding Shares will be converted into the right to receive
$20.25 in cash. The remaining 50.1% of the outstanding Shares purchased by the
Purchaser in the Tender Offer will be canceled.
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(b) Merger of Purchaser and the Company
Pursuant to the terms of the Merger Agreement, Imperial Holly intends to
effect the Merger of the Purchaser with and into the Company as soon as possible
following the approval of the Merger Agreement and the Merger by the
stockholders of the Company and the approval of the issuance of shares of
Imperial Common Stock in the Merger by the shareholders of Imperial Holly. The
Merger Agreement is attached as Exhibit C hereto.
(c) Sales or Transfers of Material Amounts of Assets of the Company or
its Subsidiaries
While the Reporting Persons reserve the right to take or recommend such
action as they may consider desirable in light of their ongoing review of the
businesses and operations of the Company and its subsidiaries, neither of the
Reporting Persons has any present plans or proposals which relate to or would
result in the sale or transfer of a material amount of assets of the Company or
any of its subsidiaries.
(d) Change in the Present Board of Directors and Management of the
Company
The Merger Agreement provides that, upon the Purchaser's acquisition of
a majority of the outstanding Shares pursuant to the Tender Offer, the Purchaser
will be entitled to designate such number of directors, rounded up to the next
whole number, on the Board of Directors of the Company as will give the
Purchaser representation on the Board of Directors equal to the product of the
total number of directors on the Board of Directors multiplied by the percentage
that the aggregate number of Shares beneficially owned by the Purchaser at such
time bears to the total number of Shares then outstanding, and the Company will,
at such time, promptly take all actions necessary to cause the Purchaser's
designees to be elected as directors of the Company, including increasing the
size of the Board of Directors or securing the resignations of incumbent
directors of both. On October 24, 1997, pursuant to such provisions of the
Merger Agreement, the following directors of the Company resigned: Dale C.
Critz, John Carswell, E. Sprague Exley, Lee B. Durham, Robert L. Harrison and
James M. Reed. The following designees of Imperial Holly were elected to replace
such resigning directors: Roger W. Hill, James C. Kempner, Peter C. Carrothers,
Douglas W. Ehrenkranz, Karen L. Mercer, John A. Richmond and William F. Schwer.
Notwithstanding the foregoing, at all times prior to the effective time
of the Merger, the Board of Directors of the Company will include at least two
directors who held office as of the date of the Merger Agreement (any such
director remaining in office being a "Continuing Director"). Following the
election or appointment of the Purchaser's designees and prior to such effective
time, such designees will abstain from acting upon, and the approval of a
majority of the Continuing Directors will be required to authorize and will be
sufficient to authorize, any resolution with respect to any termination of the
Merger Agreement by the Company, any amendment of the Merger
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Agreement requiring action by the Board of Directions of the Company, any
extension of time for the performance of any of the obligations or other acts of
Imperial Holly or the Purchaser under the Merger Agreement, any wavier of
compliance with any of the agreements or conditions under the Merger Agreement
for the benefit of the Company and any action to seek to enforce any obligation
of Imperial Holly or the Purchaser under the Merger Agreement.
Pursuant to the terms of the Merger Agreement upon consummation of the
Merger, the directors of the Purchaser will become the directors of the
surviving corporation. The directors of Purchaser are listed on Schedule I
hereto.
(e) Material Changes in Present Capitalization and Dividend Policy of
the Company
Imperial Holly plans to engage in a material change in the present
capitalization of the Company by retiring all of its outstanding indebtedness
upon entering into the Senior Credit Facility upon consummation of the Merger.
However, the Senior Credit Facility and the Senior Subordinated Notes will be
guaranteed by the Company and its subsidiaries.
On October 24, 1997 the Company declared its regular quarterly dividend
of $0.0375 per share payable December 26, 1997 to stockholders of record at the
close of business on December 5, 1997. The Company will not pay any additional
dividends until after the consummation of the Merger. Imperial Holly will
determine the dividend policy of the Company after such time in its sole
discretion in accordance with the restrictions imposed by the terms of the
Senior Credit Facility and the Senior Subordinated Notes.
(f) Other Material Changes in the Company's Business or Corporate
Structure
Upon consummation of the Merger, the Company's business will continue to
be conducted in its current corporate form but as a wholly owned subsidiary of
Imperial Holly . Various corporate, administrative and departmental functions of
the Company and its subsidiaries may be consolidated with those of Imperial
Holly. While the Reporting Persons reserve the right to take or recommend such
action as they may consider desirable in light of their ongoing review of the
business and operations of the Company and its subsidiaries, neither of the
Reporting Persons has any present plans or proposals which relate to other
material changes in the Company's business or corporate structure.
(g) Changes in the Company's Charter, Bylaws or Instruments
Corresponding Thereto or Other Actions Which May Impede the Acquisition
or Control of the Company by Any Person
While the Reporting Persons reserve the right to take or recommend such
actions as they may consider desirable in light of their ongoing review of the
businesses and operations of the Company and its subsidiaries, neither of the
Reporting Persons has any present plans or proposals which relate to changes in
the Company's Certificate of Incorporation or Bylaws which may impede
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the acquisition of control of the Company by any person or other actions which
may impede the acquisition of control of the Company by any person. However,
pursuant to the terms of the Merger Agreement upon consummation of the Merger,
the certificate of incorporation and bylaws of the Purchaser will become the
certificate of incorporation and bylaws of the surviving corporation.
(h-i) Delisting of Securities of the Company; Termination of
Registration Pursuant to Section 12(g)(4) of the Securities and Exchange
Act
Following the consummation of the Merger, it is expected that the Shares
will be delisted from the New York Stock Exchange and application will be made
for the termination of the registration of the Shares under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"). The Shares are currently
registered under the Exchange Act. Such registration may be terminated upon
application of the Company to the Securities and Exchange Commission if the
Shares are not listed on any national exchange and there are fewer than 300
record holders of the Shares. Termination of registration of the Shares would
reduce substantially the information required to be furnished by the Company to
holders of Shares and would make certain provisions of the Exchange Act,
including the requirement of furnishing a proxy statement or information
statement in connection with stockholders' meetings pursuant to Section 14 and
the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Shares. Furthermore, if the
registration of the Shares under the Exchange Act were to be terminated, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
under the Securities Act of 1933, as amended, may be impaired or eliminated. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be eligible for listing or of an exchange or quotation on the
National Association of Securities Dealers Automated Quotation system.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) and (b) The Purchaser has voting and dispositive power over
14,397,836 Shares acquired in the Tender Offer, which represent 50.1% of the
outstanding Shares. Imperial Holly also has voting and dispositive power over
such Shares, and has voting and dispositive power over 448 Shares acquired prior
to the Tender Offer. Imperial Holly, by virtue of its ownership of all of the
capital stock of the Purchaser, is a beneficial owner of all of the Shares owned
by the Purchaser. If the Merger is consummated, the Purchaser will acquire 100%
of the outstanding Shares.
(c) Except as disclosed in this Schedule 13D, no Reporting Person has
effected any other transactions in Shares in the 60 day period ended the date
hereof.
(d) No other person is known to have the right to receive or the power
to direct the receipt of dividends from, or the proceeds form the sale of, the
Shares reported in this Item 5.
(e) Not applicable.
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
(a) The Merger Agreement
THE MERGER AGREEMENT
The Merger Agreement provided for, and the Purchaser has designated,
various persons for election to the Board of Directors of the Company as
described in Item 4(d) above. Additional terms of the Merger Agreement include:
The Offer. The Merger Agreement provides for the Tender Offer. The
obligation of the Purchaser to accept for payment or pay for shares of Savannah
Common Stock tendered pursuant to the Tender Offer was conditioned upon, among
other things, (i) there being validly tendered and not withdrawn as of the date
of expiration of the Tender Offer (the "Expiration Date") at least 14,397,836
Shares constituting at least 50.1% of the Shares outstanding, (ii) the
expiration of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (iii)
Imperial Holly having obtained the necessary financing to consummate the Offer
and the Merger. The waiting period under the HSR Act expired on October 2,
1997.
Recommendation. The Board of Directors of the Company (the "Company
Board") determined, based in part upon the opinion of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), that the proposed consideration to be
received by holders of Shares pursuant to the Merger Agreement is fair from a
financial point of view to the Company's stockholders, determined that the Offer
and the Merger are fair to and in the best interests of the Company's
stockholders, approved the Offer and the Merger and recommended acceptance of
the Offer and approval and adoption of the Merger Agreement by the Company's
stockholders and approved the amendment to Company's rights plan so as to
provide that no purchase rights under such agreement would become exercisable as
a result of the approval, execution or delivery of the Merger Agreement or the
consummation of the transactions contemplated thereby (including the Offer and
the Merger).
The Merger. The Merger Agreement provides that, unless the Merger
Agreement is terminated or abandoned, at the effective time, the Purchaser will
be merged with and into the Company, whereupon the separate corporate existence
of the Purchaser will cease, and the Company will be the surviving corporation
in the Merger. The Merger Agreement also provides that (i) subject to certain
requirements in the Merger Agreement, the Certificate of Incorporation and the
Bylaws of the Purchaser as in effect at the effective time will be the
Certificate of Incorporation and the Bylaws of the surviving corporation, (ii)
the directors of the Purchaser immediately prior to the effective time will be
the initial directors of the surviving corporation, and (iii) the officers of
the Company immediately prior to the effective time will be the initial officers
of the surviving corporation.
Consideration to be Paid in the Merger. The Merger Agreement provides that
each Share issued and outstanding immediately prior to the effective time (other
than Shares owned by Imperial Holly and its affiliates, which includes Shares
purchased in the Tender Offer, and Shares held by stockholders of the Company
exercising dissenters' rights of appraisal under Delaware law) will be converted
into the right to receive (i) $20.25 in cash or (ii) $20.25 of Imperial Common
Stock,
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subject to a collar of $13.25 to $17.25 per share. In the Merger, 30%
of the outstanding Shares will be converted into the right to receive Imperial
Common Stock, and 19.9% of the outstanding Shares will be converted into the
right to receive $20.25 in cash. The remaining 50.1% of the outstanding Shares
purchased by the Purchaser in the Tender Offer will be canceled.
Stockholders' Meetings. In the Merger Agreement, each of the Company and
Imperial Holly agreed to take all action necessary in accordance with applicable
law to duly call, give notice of, convene and hold the special meetings to
approve the Merger Agreement and the Merger (in the case of the Company) and the
issuance of shares of Imperial Common Stock (in the case of Imperial Holly).
Subject to their fiduciary duties under applicable law, the respective Boards of
Directors of the Company and Imperial Holly will recommend that their
respective stockholders approve such actions.
Registration Statement. Imperial Holly will file a Registration Statement
on Form S-4 (the "Registration Statement") which will register the shares of
Imperial Common Stock issued in the Merger under the Securities Act and will
also register the resale of Imperial Common Stock received in the Merger by
affiliates of the Company. Imperial Holly has agreed to maintain the
effectiveness of the Registration Statement with respect to such resales for a
period of one year after the effective time, subject to certain exceptions.
Appraisal Rights. If the Merger is consummated, persons who hold Shares at
that time will have the right to appraisal of their Shares in accordance with
Section 262 of the Delaware General Corporate Law (the "DGCL"). Such appraisal
rights, if the statutory procedures are compiled with, will result in a judicial
determination of "fair value" of the Shares (excluding any element of value the
accomplishment or expectation of the Merger) owned by such holders. In
addition, such dissenting stockholders may be entitled to receive payment of a
fair rate of interest from the date of consummation of the Merger on the amount
determined to be the fair value of their Savannah Common Stock.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties by the Company and the Purchaser and Imperial
Holly, relating to, among other things, (i) due organization and qualification,
including subsidiaries, (ii) charter documents, (iii) capitalization, (iv) due
authorization, execution and delivery of the Merger Agreement and consummation
of the transactions contemplated thereby, (v) conflict with charter documents
and required consents, (vi) possession of all necessary permits, (vii) accuracy
of information contained in documents filed with the Securities and Exchange
Commission (the "Commission") and financial statements prepared in accordance
with U.S. generally accepted accounting principles, (viii) no material adverse
effect since the end of the Company's and Imperial Holly's last fiscal year,
(ix) the absence of material litigation, (x) matters relating to the Employee
Retirement Income Security Act, (xi) intellectual property, (xii) taxes, (xiii)
environmental matters, (xiv) products, (xv) real property and other assets,
(xvi) insurance, (xvii) opinions of financial advisors, (xviii) majority vote
necessary for stockholder approval, (xix) no brokers other than financial
advisors and (xx) no material misstatements or omissions in documents filed with
the Commission in connection with Offer and
12
<PAGE>
Merger. The Company also represented and warranted that it (a) amended the
Company's Rights Agreement and (b) terminated the Agreement and Plan of Merger,
dated July 14, 1997, among the Company, XSF Holdings, Inc., DXE Merger Corp. and
Flo-Sun Incorporated. In addition, the Purchaser and Imperial Holly represented
that Imperial Holly received a commitment letter from LCPI to provide financing
to complete the Offer and the Merger.
Employee Benefit Matters. For a one-year period immediately following the
closing of the Merger, Imperial Holly has agreed to provide or cause the
Company to provide all of its employees who continue to be employed by Imperial
Holly or the Company or any of their respective affiliates as of the effective
time ("Continuing Employees") with compensation and benefits on terms which are,
in the aggregate, not substantially less favorable than those provided to
Continuing Employees immediately prior to the date of the Merger Agreement.
Agreements with Respect to the Conduct of Business Pending the Merger. The
Merger Agreement provides that, between the date of the Merger Agreement and the
effective time, the Company and Imperial Holly will not, unless agreed to in
writing by the other party, fail to carry on their business and the business of
their subsidiaries in the usual, regular and ordinary course in substantially
the same manner as conducted beforehand, or fail to use commercially reasonable
efforts to preserve substantially intact their present lines of business,
maintain their rights and franchises and preserve their relationships with
employees, customers and suppliers. The Merger Agreement contains additional
covenants of both the Company and Imperial Holly with respect to the period
between the date of the Merger Agreement and the effective time, including
covenants that:(i) prevent amendment to corporate governance documents, (ii)
prevent issuance of securities, (iii) prevent declaration and payment of
dividends (other than regular quarterly dividends), (iv) limit reclassification
or alteration of any capital stock, (v) limit acquisition or disposition of any
entity or assets not in the ordinary course of business, (vi) limit incurrence
of any indebtedness, (vii) limit entrance into, amendment or termination of any
material contract, (viii) limit authorization of any material capital
expenditure, (ix) limit increases of the compensation to officers or employees,
(x) limit entrance into or amendment of any employment or severance agreement,
(xi) prevent the establishment or amendment of any benefit or option plan, (xii)
limit changes in accounting methods, (xiii) prevent the making of any tax
election with respect to any material tax liability and (xiv) limit payment,
discharge or satisfaction of any obligation.
In addition, the Merger Agreement contains covenants of both the Company
and Imperial Holly with respect to the period between the date of the Merger
Agreement and effective time, that neither party will (i) take any action that
would prevent or impede any party from obtaining any material consent or
approval, (ii) enter into any agreement that would limit such company's ability
to compete or (iii) take any action that would result in breach of any
representation or warranty or prevent the conditions to the Merger from being
satisfied.
Neither the Company, Imperial Holly nor any subsidiary thereof may
authorize or enter into an agreement to do anything listed above.
13
<PAGE>
No Solicitation. The Merger Agreement provides that neither the Company
nor any subsidiary will initiate, solicit, encourage, or otherwise facilitate
any inquiries or the making of any proposal or offer relating to a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction (other than
the transactions contemplated by the Merger Agreement) (any of such transactions
being an "Acquisition Proposal") involving, or any purchase or sale of all or
any significant portion of the assets or 20% or more of the equity securities
of, the Company or any subsidiary that could reasonably be expected to interfere
with the completion of the Merger or the other transactions contemplated by the
Merger Agreement. Neither the Company nor any of its subsidiaries will have
any discussion with or provide any confidential information or data to any
person or entity relating to an Acquisition Proposal or engage in any
negotiations concerning an Acquisition Proposal, or otherwise facilitate, any
effort or attempt to make or implement an Acquisition Proposal or accept an
Acquisition Proposal. However, nothing in the Merger Agreement will prevent the
Company or Company's Board of Directors from (i) complying with Rule 14e-2
under the Exchange Act with regard to an Acquisition Proposal; (ii) engaging in
any discussions or negotiations with, or providing any information to, any
person or entity in response to an unsolicited bona fide written Acquisition
Proposal by any such person or entity, or (iii) recommending such an unsolicited
bona fide written Acquisition Proposal to the Company's stockholders if and only
to the extent that, in any such case as is referred to in (ii) and (iii), (A)
the Savannah Board concludes in good faith (after consultation with its legal
counsel and financial advisors) that such Acquisition Proposal is reasonably
capable of being completed, and would, if consummated, result in a transaction
more favorable to the Company's stockholders than the transactions contemplated
by the Merger Agreement (any such more favorable Acquisition Proposal being
hereinafter referred to as a "Superior Proposal"), (B) the Company's Board of
Directors determines in good faith after consultation with legal counsel that
such action is necessary for it to act in a manner consistent with its fiduciary
duties, (C) prior to providing any information or data to any person or entity
in connection with a Superior Proposal, the Company's Board of Directors
receives from such person or entity an executed confidentiality agreement on
terms substantially similar to those contained in the confidentiality agreement,
dated August 26, 1997, between the Company and Imperial Holly and (D) prior to
providing any information or data to or entering into discussions or
negotiations with any person or entity, the Company's Board of Directors
notifies Imperial Holly promptly of the inquiries, proposals or offers received
by, the information requested from, or the discussions or negotiations sought to
be initiated or continued with, the Company or any subsidiary indicating the
name of such person or entity and the terms and conditions of any proposals or
offers. The Company also agreed to cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal.
Indemnification of Directors. As provided in the Merger Agreement,
Imperial Holly will maintain all rights of indemnification existing in favor of,
and indemnify, each "Indemnified Party" to the fullest extent permitted under
applicable law against all losses and claims arising out of or pertaining to any
action or omission in their capacity as an officer, director, employee or
fiduciary of the Company. Under the Merger Agreement, all rights to
indemnification existing in favor of the Indemnified Parties as provided in the
Company's Bylaws with respect to matters occurring through
14
<PAGE>
the effective time win survive the Merger and continue in full force and effect
for a period of not less than six years from the effective time. In the event
any claim, action, suit, proceeding or investigation (a "Claim") is brought
against any Indemnified Party (whether arising before or after the effective
time) after the effective time, Indemnified Parties have certain rights with
respect to retention of counsel, payment of fees and expenses and assistance in
the defense of any Claim (provided that Imperial Holly will not be liable for
any settlement of any Claim effected without its written consent).
For a period of six years after the effective time, Imperial Holly will
cause to be maintained in effect the current directors' and officers' liability
insurance policies maintained by the Company (provided that Imperial Holly may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous) with respect to claims arising from
facts or events that occurred prior to the effective time. However, Imperial
Holly is not required to expend more than an amount per year equal to 200% of
current annual premiums paid by the Company for such insurance.
Savannah Foods' Rights Agreement. The Company's Board of Directors has
taken further action necessary to render the preferred stock purchase rights
under the Company's Rights Agreement inapplicable to the Offer, the Merger and
the other transactions contemplated by the Merger Agreement, to terminate the
Company's Rights Agreement as of the effective time and to ensure that Imperial
Holly and the Purchaser will not have any obligations in connection with the
Company's Rights Agreement or such related purchase rights.
Conditions to Each Party's Obligation to Effect the Merger. In addition to
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby by the affirmative vote of the stockholders of the Company
in accordance with the DGCL and the Company's Certificate of Incorporation and
the approval of the issuance of the shares of Imperial Common Stock pursuant to
the Merger by the affirmative vote of the shareholders of Imperial Holly in
accordance with the applicable rules and regulations of the American Stock
Exchange, the obligations of the Company, Imperial Holly and the Purchaser to
consummate the Merger are subject to the following conditions: (i) any waiting
period (and any extension thereof) applicable to the consummation of the Merger
under the HSR Act will have expired or been terminated (which waiting period
expired on October 2, 1997); (ii) the absence of any law, rule, regulation or
other order by any governmental entity which would have the effect of
restraining or making the Merger illegal or otherwise prohibiting consummation
of the Merger, (iii) the Registration Statement having been declared effective
and the absence of a stop order suspending such effectiveness; (iv) the shares
of Imperial Common Stock to be issued in the Merger and pursuant to options
assumed by Imperial Holly shall have been authorized for listing on the American
Stock Exchange, subject to official notice of issuance; and (v) the Purchaser
having purchased a majority of Shares pursuant to the Offer (which occurred on
October 24, 1997).
Termination. The Merger Agreement may be terminated and the Merger and the
other transactions contemplated thereby may be abandoned at any time prior to
the effective time,
15
<PAGE>
notwithstanding any requisite approval and adoption of the Merger Agreement and
the transactions contemplated thereby in certain cases including the following
which are applicable:
(i) by mutual written consent of Imperial Holly and the Company; or
(ii) by Imperial Holly or the Company if the effective time has not
occurred on or before May 31, 1998; provided however, that the right to
terminate the Merger Agreement will not be available to any party whose failure
to fulfill any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of the effective time to occur on or before such date;
or
(iii) by either Imperial Holly or the Company, if any court of
competent jurisdiction in the United States or other governmental entity, based
otherwise than on any antitrust law, (A) shall have issued an order, decree,
judgment, injunction, ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by the Merger
Agreement and such order, decree, judgment, injunction, ruling or other action
shall have become final and nonappealable or (B) shall have failed to issue an
order, decree, judgment, injunction, ruling or other action or to take any other
action necessary to fulfill the conditions to the closing of the Merger and such
denial of a request to issue such order, decree, judgment, injunction, ruling or
other action or take such other action shall have become final and
nonappealable; or
(iv) (A) by either Imperial Holly or the Company, if the Merger Agreement
and the transactions contemplated thereby shall fail to receive the requisite
vote for approval and adoption at the special meeting of the Company's
stockholders or (B) by the Company, if the issuance of the shares of Imperial
Common Stock as part of the Merger shall fail to receive the requisite vote for
approval at the special meeting of the stockholders of Imperial Holly.
Termination Fees. The Merger Agreement provides that if (i) Imperial Holly
or the Company terminates the Merger Agreement due to the failure of the Company
stockholders to approve and adopt the Merger Agreement and (ii) at the time of
such failure to so approve and adopt the Merger Agreement there shall exist an
Acquisition Proposal with respect to the Company and, within 12 months of the
termination of the Merger Agreement, the Company enters into a definitive
agreement with any third party with respect to an Acquisition Proposal with
respect to the Company, then the COMPANY shall pay to Imperial Holly an amount
equal to $8 million.
16
<PAGE>
(b) Company Stockholders' Agreement
As a condition and inducement to entering the Merger Agreement, Imperial
Holly and the Purchaser required that substantially all of the directors and
executive officers of the Company enter into a stockholders agreement, dated
September 12, 1997. Pursuant to the Stockholders Agreement, each such
stockholder severally agreed to tender all Shares owned by such stockholder into
the Tender Offer prior to the expiration of the Tender Offer and not to withdraw
any Shares so tendered so long as the per Share price is not less than $20.25 in
cash net to the seller.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit A Credit Agreement among Imperial Holly Corporation, as
Borrower, the Several Lenders from time to time Parties
thereto, Lehman Brothers, Inc., as Arranger, Lehman
Commercial Paper Inc., as Syndication Agent and Lehman
Commercial Paper Inc., as Administrative Agent dated as of
October 17, 1997.
Exhibit B 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 October 17, 1997.
Exhibit C Agreement and Plan of Merger, dated September 12, 1997 among
Imperial Holly Corporation, IHK Merger Sub Corporation and
Savannah Foods & Industries, Inc.
Exhibit D Stockholders Agreement, dated September 12, 1997, between
Imperial Holly Corporation, IHK Merger Sub Corporation and
the executive officers and directors of Savannah Foods &
Industries, Inc. listed therein.
17
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 27, 1997
IHK MERGER SUB CORPORATION
By: /s/ James C. Kempner
-----------------------------------------
James C. Kempner
President
IMPERIAL HOLLY CORPORATION
By: /s/ James C. Kempner
-----------------------------------------
James C. Kempner
President, Chief Executive Officer and
Chief Financial Officer
12
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND IMPERIAL HOLLY
1. Directors and Executive Officers of the Purchaser.
The following table sets forth the name, current business address and
present principal occupation or employment and material occupations,
positions, offices or employments for the past five years of each director and
executive officer of the Purchaser. Unless otherwise indicated, the current
business address of each person is c/o One Imperial Square, Suite 200, 8016
Highway 90-A, Sugar Land, Texas 77478, and each occupation set forth opposite
an individual's name refers to employment with the Purchaser. Each such person
is a citizen of the United States, unless otherwise indicated.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- --------------------------- ----------------------------------------------------
<S> <C>
James C. Kempner........... Director; Chief Executive Officer and Chief
Financial Officer; see "Directors and Executive
Officers of Imperial Holly."
William F. Schwer.......... Director; Vice President and Secretary; see
"Directors and Executive Officers of Imperial
Holly."
Roger W. Hill.............. Director; Vice President; see "Directors and
Executive Officers of Imperial Holly."
</TABLE>
2. Directors and Executive Officers of Imperial Holly.
The following table sets forth the name, business address and present
principal occupation or employment, and material occupations, positions,
offices or employments for the past five years of each director and executive
officer of Imperial Holly. Unless otherwise indicated, the current business
address of each such person is c/o One Imperial Square, Suite 200, 8016
Highway 90-A, Sugar Land, Texas 77478, and each occupation set forth opposite
an individual's name refers to employment with Imperial Holly. Each such
person is a citizen of the United States, unless otherwise indicated.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- --------------------------- ----------------------------------------------------
<S> <C>
John D. Curtin, Jr......... Director since 1993. Chairman and CEO, Aearo Company
from 1994 to present. Executive Vice President and
Director of Cabot Corporation from 1989-1994.
Director of Eastern Enterprises.
David J. Dilger............ Director since 1996. Chief Executive Officer of
Greencore Group plc from 1996 to Present. Chief
Operating Officer of Greencore Group plc from 1991-
1996. Mr. Dilger is a citizen of Ireland.
E. O. Gaylord.............. Director since 1978. President, Gaylord & Company (a
venture capital firm) since 1988. Chairman of the
Board of Directors EOTT Energy Corp. from 1993 to
present. Director of Seneca Funds Corporation,
Essex International, Kinder Morgan Energy Partners,
L.P. and Stant Corporation.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- --------------------------- ----------------------------------------------------
<S> <C>
Gerald Grinstein........... Director since 1996. Chairman of the Board of Delta
Air Lines, Inc. from August, 1997 to present,
director from 1987 to present. Chairman of the
Board of Burlington Northern, Inc. from 1987 to
1995. Director of Browning Ferris Industries,
Paccar, Inc. and Suntrend Corp.
Ann O. Hamilton............ Director since 1974. Retired Senior Advisor, World
Bank, Washington, D.C. Employed with World Bank
from 1971-1995.
Roger W. Hill.............. Director since 1988. President and CEO Holly Sugar
Corp. from 1988 to present and Managing Director of
Imperial Holly Corporation from 1996 to present.
Harris L. Kempner, Jr...... Director since 1966. President of Kempner Capital
Management, Inc. from 1982 to present. Director TNP
Enterprises and American Indemnity Financial
Corporation. Advisory Director of Cullen/Frost
Bankers, Inc.
I. H. Kempner, III......... Director since 1967. Chairman of the Board of
Imperial Holly Corporation from 1971 to present.
James C. Kempner........... Director since 1988. President, Chief Executive
Officer and Chief Financial Officer of Imperial
Holly Corporation from 1993 to present. Executive
Vice President and Chief Financial Officer from
1988-1993.
H. E. Lentz................ Director since 1993. Managing Director of Lehman
Brothers Inc. from 1993 to present. Managing
Director of Wasserstein, Perella & Co., Inc. from
1987 to 1993. Director of Rowan Companies, Inc.
Robert L. K. Lynch......... Director since 1990. Chairman, President and Chief
Executive Officer of Yaga, Inc. from 1995 to
present. President of Galveston Management Co. from
1987-1994. Director of United States National Bank
and Foster Farms.
Kevin C. O'Sullivan........ Director since 1996. Chief Financial Officer of
Greencore Group plc from 1992 to present. Mr.
O'Sullivan is a citizen of Great Britain.
Fayez Sarofim.............. Director since 1991. President and Chairman of the
Board of Fayez Sarofim & Co. from 1958 to present.
Director of Allegheny-Teledyne, Argonaut Group,
Inc., EXOR Group and Unitrin, Inc.
Daniel K. Thorne........... Director since 1988. President of Star Lake Cattle
Company from 1984 to present and President Star
Lake Properties, Inc. from 1992 to present.
Peter C. Carrothers........ Officer since 1994. Senior Vice President--
Operations from 1994 to present. Pepsico Foods
International, Vice President--Logistics from 1990
to 1994.
Douglas W. Ehrenkranz...... Officer since 1995. Vice President--Sales and
Marketing 1995 to present and Managing Director
from April 1997 to present. Procter & Gamble Corp.,
Category Sales Manager from 1979 to 1993.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- --------------------------- ----------------------------------------------------
<S> <C>
John A. Richmond........... Officer since 1991. Vice President--Operations from
1995 to present and Managing Director from April
1997 to present. Holly Sugar Corp., Senior Vice
President and General Manager--Beet Sugar
Operations from 1993 to 1995. Holly Sugar Corp.,
Senior Vice President and General Manager--Eastern
Division from 1992 to 1993.
William F. Schwer.......... Officer since 1989. Managing Director from 1995 to
present. Senior Vice President and General Counsel
from 1993 to 1995. Vice President and General
Counsel 1992 to 1993.
</TABLE>
<TABLE>
<S> <C>
Roy E. Henderson............ Officer since 1981. Vice President--Administration
from 1994 to present, Vice President and Treasurer
from 1981 to 1994.
</TABLE>
<TABLE>
<S> <C>
H. P. Mechler.............. Officer since 1988. Vice President--Accounting from
April 1997 to present, Controller from 1988 to
April 1997.
Karen L. Mercer............ Officer since 1993. Vice President and Treasurer
from April 1997 to present. Treasurer from 1994 to
April 1997. Texas Commerce Bank, Vice President--
General Lending in 1993. First City Bank, various
positions 1988 to 1993.
Alan K. Lebsock............ Officer since 1997. Controller from April 1997 to
present. Holly Sugar Corp., Controller from 1990 to
April 1997.
</TABLE>
S-3
<PAGE>
EXECUTION FORM
================================================================================
$505,000,000
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
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
Dated as of October 17, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS................................................... 2
1.1 Defined Terms........................................................ 2
1.2 Other Definitional Provisions........................................ 20
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS............................... 20
2.1 Term Loan Commitments................................................ 20
2.2 Procedure for Term Loan Borrowing.................................... 20
2.3 Revolving Credit Commitments......................................... 21
2.4 Procedure for Revolving Credit Borrowing............................. 21
2.5 Repayment of Loans; Evidence of Debt................................. 22
2.6 Commitment Fees, etc................................................. 22
2.7 Termination or Reduction of Revolving Credit Commitments............. 23
2.8 Optional Prepayments................................................. 23
2.9 Conversion and Continuation Options.................................. 23
2.10 Minimum Amounts and Maximum Number of Eurodollar Tranches........... 24
2.11 Interest Rates and Payment Dates.................................... 24
2.12 Computation of Interest and Fees.................................... 25
2.13 Inability to Determine Interest Rate................................ 25
2.14 Pro Rata Treatment and Payments..................................... 26
2.15 Requirements of Law................................................. 27
2.16 Taxes............................................................... 28
2.17 Indemnity........................................................... 30
2.18 Change of Lending Office; Claims Certificate........................ 30
2.19 Margin Regulations.................................................. 31
2.20 Illegality.......................................................... 32
SECTION 3. LETTERS OF CREDIT............................................. 32
3.1 L/C Commitment....................................................... 32
3.2 Procedure for Issuance of Letter of Credit........................... 33
3.3 Commissions, Fees and Other Charges.................................. 33
3.4 L/C Participations................................................... 33
3.5 Reimbursement Obligation of the Borrower............................. 34
3.6 Obligations Absolute................................................. 35
3.7 Letter of Credit Payments............................................ 35
3.8 Applications......................................................... 35
SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 35
4.1 Financial Condition.................................................. 35
4.2 No Change............................................................ 37
4.3 Corporate Existence; Compliance with Law............................. 37
4.4 Corporate Power; Authorization; Enforceable Obligations.............. 37
4.5 No Legal Bar......................................................... 38
4.6 No Material Litigation............................................... 38
4.7 No Default........................................................... 38
-i-
<PAGE>
4.8 Ownership of Property; Liens........................................ 38
4.9 Intellectual Property............................................... 38
4.10 Taxes............................................................... 38
4.11 Federal Regulations................................................. 39
4.13 Investment Company Act; Other Regulations........................... 39
4.14 Subsidiaries........................................................ 39
4.15 Use of Proceeds..................................................... 39
4.16 Environmental Matters............................................... 40
4.17 Accuracy of Information, etc........................................ 41
4.18 Security Documents.................................................. 41
4.19 Solvency............................................................ 42
4.20 Regulation H........................................................ 42
SECTION 5. CONDITIONS PRECEDENT.......................................... 42
5.1 Conditions to Initial Revolving Extension of Credit................. 42
5.2 Conditions to Term Loans............................................ 47
5.3 Conditions to Each Extension of Credit.............................. 48
SECTION 6. AFFIRMATIVE COVENANTS......................................... 49
6.1 Financial Statements................................................ 49
6.2 Certificates; Other Information..................................... 49
6.3 Payment of Obligations.............................................. 50
6.4 Conduct of Business and Maintenance of Existence, etc............... 51
6.5 Maintenance of Property; Insurance.................................. 51
6.6 Inspection of Property; Books and Records; Discussions.............. 51
6.7 Notices............................................................. 51
6.8 Environmental Laws.................................................. 52
6.9 Additional Collateral, etc.......................................... 53
6.10 Merger Consummation; Merger Agreement............................... 55
SECTION 7. NEGATIVE COVENANTS............................................ 55
7.1 Limitation on Activities of IHK Merger Sub.......................... 55
7.2 Limitation on Indebtedness.......................................... 55
7.3 Limitation on Liens................................................. 56
7.4 Limitation on Fundamental Changes................................... 58
7.5 Limitation on Sale of Assets........................................ 58
7.6 Limitation on Dividends............................................. 59
7.7 Limitation on Capital Expenditures.................................. 59
7.8 Limitation on Investments, Loans and Advances....................... 59
7.9 Limitation on Transactions with Affiliates.......................... 60
7.10 Limitation on Sales and Leasebacks.................................. 60
7.11 Limitation on Changes in Fiscal Periods............................. 60
7.12 Limitation on Negative Pledge Clauses............................... 60
7.13 Limitation on Restrictions on Subsidiary Distributions.............. 61
7.14 Limitation on Lines of Business..................................... 61
7.15 Limitation on Amendments to Transaction Documentation............... 61
7.16 Limitation on Optional Payments and Modifications of Debt
Instruments Organizational Documentation, etc....................... 61
SECTION 8. EVENTS OF DEFAULT............................................. 62
-ii-
<PAGE>
SECTION 9. THE AGENTS.................................................... 65
9.1 Appointment......................................................... 65
9.2 Delegation of Duties................................................ 65
9.3 Exculpatory Provisions.............................................. 65
9.4 Reliance by Administrative Agent.................................... 66
9.5 Notice of Default................................................... 66
9.6 Non-Reliance on Agents and Other Lenders............................ 66
9.7 Indemnification..................................................... 67
9.8 Agent in Its Individual Capacity.................................... 67
9.9 Successor Administrative Agent...................................... 68
9.10 Authorization to Release Liens...................................... 68
9.11 The Arranger........................................................ 68
SECTION 10. MISCELLANEOUS................................................ 68
10.1 Amendments and Waivers............................................. 68
10.2 Notices............................................................ 69
10.3 No Waiver; Cumulative Remedies..................................... 70
10.4 Survival of Representations and Warranties......................... 70
10.5 Payment of Expenses................................................ 70
10.6 Successors and Assigns; Participations and Assignments............. 71
10.7 Adjustments; Setoff................................................ 74
10.8 Counterparts....................................................... 74
10.9 Severability....................................................... 74
10.10 Integration........................................................ 75
10.11 GOVERNING LAW...................................................... 75
10.12 Submission To Jurisdiction; Waivers................................ 75
10.13 Acknowledgements................................................... 75
10.14 WAIVERS OF JURY TRIAL.............................................. 76
10.15 Confidentiality.................................................... 76
-iii-
<PAGE>
SCHEDULES:
1.1A Commitments
1.1B Mortgaged Property
1.1C Permitted Investors
1.1D Non-Subsidiary Guarantor Subsidiaries
4.4 Consents, Authorizations, Filings and Notices
4.14 Subsidiaries
4.17 Real Property Located in Flood Zone
4.18(a) UCC Filing Jurisdictions
4.18(b) Mortgage Filing Jurisdictions
5.2(c) Governmental and Third Party Approvals
7.2(e) Existing Indebtedness
7.3(f) Existing Liens
7.8(i) 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
G-1 Form of Term Note
G-2 Form of Revolving Credit Note
H Form of Exemption Certificate
I Form of Target Pledge Agreement
J Form of Depositary Agency Agreement
K-1 Form of Notice of Borrowing (Drawings)
K-2 Form of Notice of Borrowing (Conversions)
K-3 Form of Notice of Borrowing (Continuations)
-iv-
<PAGE>
CREDIT AGREEMENT, dated as of October 17, 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 LEHMAN
COMMERCIAL PAPER INC., 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, has made an offer (the
"Tender Offer") to purchase a number (the "Specified Number of Shares") of the
outstanding shares (the "Shares") of common stock equal to 14,397,836 or such
other number of Shares which represents 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 (as amended, supplemented or otherwise
modified from time to time in accordance with the terms hereof, the "Offer to
Purchase") at a price of $20.25 per Share;
WHEREAS, the Offer to Purchase is being 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"; together with the Tender Offer, the Tender
Offer Purchase and the transactions contemplated in connection therewith, the
"Acquisition"), 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;
<PAGE>
2
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 the Merger, the Borrower will
require senior tender and revolving credit facilities in the aggregate amount of
$505,000,000, 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 financing comprised of either (A)
(1) senior credit facilities of up to $455,000,000 (the "Alternative A Merger
Facilities"), comprised of term loan facilities aggregating not more than
$255,000,000 and a $200,000,000 revolving credit facility and (2) $250,000,000
in proceeds of unsecured senior subordinated notes issued by the Borrower (the
"Senior Subordinated Notes") or (B) in the event that the Senior Subordinated
Notes are not issued and sold on the date of consummation of the Merger, senior
credit facilities of up to $705,000,000 (the "Alternative B Merger Facilities"),
comprised of term loan facilities aggregating not more than $505,000,000 and a
$200,000,000 revolving credit facility; 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.
"Acquisition": as defined in the recitals hereto.
"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.
<PAGE>
3
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Alternative A Merger Facilities": as defined in the recitals hereto.
"Alternative B Merger Facilities": as defined in the recitals hereto.
"Applicable Margin": for each Type of Loan, the rate per annum set
forth under the relevant column heading below:
Base Rate Eurodollar
Loans Loans
--------- ----------
Revolving Credit Loans 1.50% 2.50%
Term Loans 1.50% 2.50%
"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.
"Arranger": as defined in the preamble hereto.
"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 Revolving Credit Commitment over (b) such Lender's Revolving
Extensions of Credit.
"Available Commitment": as to any Lender at any time, an amount equal
to the sum of (a) such Lender's Available Revolving Credit Commitment at
such time plus (b) the excess, if any, of such Lender's Term Loan
Commitment over the aggregate principal amount of the Term Loans made by
such Lender.
"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 New York City (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
<PAGE>
4
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 10:00 A.M., New York City time, on such
day (or, if such day shall not be a Business Day, on the next 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).
"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 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.
"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
<PAGE>
5
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
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. (S) 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
<PAGE>
6
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 shall not occur later
than November 30, 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 Term Loan Commitment
and the Revolving Credit Commitment of such Lender.
"Commitment Fee Rate": 3/8 of 1% per annum.
"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 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.
"Continuing Directors": the directors of the Borrower on the Closing
Date, after giving effect to the Tender Offer and the other transactions
contemplated hereby to occur prior to the Closing Date, 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 Custody and Control Agreement, dated as of
the date hereof, among Goldman Sachs & Co., as securities intermediary, the
Collateral Agent and the Borrower, as the same may be amended, supplemented
or otherwise modified from time to time.
<PAGE>
7
"Control Investment Affiliate": as to any Person, any other Person
which (a) directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person and (b) is organized by such Person
primarily for the purpose of making equity or debt investments and/or
holding investments or funds in trust or similar arrangements for the
benefit of such Person's family members. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, to direct or
cause the direction of the management and policies of such Person whether
by contract or otherwise.
"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.
"Depositary": Wachovia Bank, N.A., in its capacity as depositary
under the Depositary Agency Agreement.
"Depositary Agency Agreement": the Depositary Agency Agreement to be
executed and delivered by the Depositary, the Administrative Agent and the
Borrower, substantially in the form of Exhibit J, as the same may be
amended, supplemented or otherwise modified from time to time.
"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.
<PAGE>
8
"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 11:00 A.M., New
York City time, two Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where its eurodollar and foreign
currency and 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.
<PAGE>
9
"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.
"Existing Borrower Indebtedness": the collective reference to the
Senior Notes and the Existing Credit Facility.
"Existing Credit Facility": the Credit Agreement, dated as of June
10, 1993, among the Borrower, Harris Trust and Savings Bank, as agent,
Texas Commerce Bank National Association, as co-agent and the Banks, as the
same may be amended, supplemented or otherwise modified from time to time.
"Facility": each of (a) the Term Loan Commitments and the Term Loans
made thereunder (the "Term Loan Facility") and (b) 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.
"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.
"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.
"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 Guarantee and Collateral
Agreement to be executed and delivered by the Borrower and each Subsidiary
Guarantor, substantially
<PAGE>
10
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 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
<PAGE>
11
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 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 Maturity
Date.
"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, the last day of such Interest Period and (c) as to any
Loan (other than any Revolving Credit Loan that is a Base Rate 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 month thereafter; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending one
month thereafter; provided that, all of the foregoing provisions relating
to Interest Periods are subject to the following:
<PAGE>
12
(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 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 Term Loans, as the case may be, shall end on the Revolving
Credit Termination Date or such due date, as applicable; and
(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.
"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": Lehman Commercial Paper Inc., in its capacity as
issuer of any Letter of Credit.
"L/C Commitment": $10,000,000.
"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 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).
"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
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13
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 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 Tender Funding 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
Acquisition, (b) the business, assets, property, operations, liabilities
(including, without limitation, contingent liabilities), or condition
(financial or otherwise) of the Borrower, the Target or their respective
Subsidiaries taken as a whole, (c) the consummation of the Tender Offer or
the Merger or (d) the validity or enforceability of this Agreement or any
of the other Loan
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14
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.
"Maturity Date": the earliest to occur of (i) the date of the
consummation of the Merger, and (ii) January 15, 1998.
"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 Administrative 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 Administrative 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.
"Non-Excluded Taxes": as defined in Section 2.16(a).
"Non-U.S. Lender": as defined in Section 2.16(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 K-1, (b) any conversion of Loans, a Notice of Borrowing
(Conversions), substantially in the form of Exhibit K-2 and
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15
(c) any continuation of Eurodollar Loans, a Notice of Borrowing
(Continuations), substantially in the form of Exhibit K-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.
"Offer to Purchase": as defined in the recitals hereto.
"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).
"Permitted Investors": the collective reference to the Persons listed
on Schedule 1.1C, and their respective Control Investment Affiliates.
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16
"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.
"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.
"Reference Lender": Administrative Agent.
"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.
"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. (S)
2615.
"Required Lenders": the holders of more than 50% of (a) until the
Tender Funding 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
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17
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 or
chief financial officer 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
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 $210,000,000.
"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.
"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 Maturity
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
and (b) such Lender's Revolving Credit Percentage of the L/C Obligations
then outstanding.
"SEC": the Securities and Exchange Commission (or successors thereto
or an analogous Governmental Authority).
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18
"Security Documents": the collective reference to the Guarantee and
Collateral Agreement, the Mortgages, the Target Pledge Agreement, 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.
"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 Number of Shares": as defined in the recitals hereto.
"Specified Change of Control": a "change of control" shall occur as
defined in the Senior Note Indenture, as amended, supplemented or otherwise
modified from time to time.
"Stockholders Agreement": the Stockholders Agreement, dated as of
September 12, 1997, among IHK Merger Sub, Imperial Holly and each of the
executive officers and directors of the Target, pursuant to which each such
stockholder has agreed to tender all Shares owned by such stockholder into
the Tender Offer.
"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
<PAGE>
19
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, the Target and its Subsidiaries and those
Subsidiaries listed on Schedule 1.1D) that guarantees the Obligations
pursuant to the Guarantee and Collateral Agreement.
"Syndication Letter": the letter agreement, dated as of October 17,
1997, between the Borrower and the Syndication Agent relating to the
syndication of the Facilities.
"Target": as defined in the recitals hereto.
"Target Pledge Agreement": the Target Pledge Agreement to be executed
by the Borrower, substantially in the form of Exhibit I, as the same may be
amended, supplemented or otherwise modified from time to time.
"Tender Funding Date": as defined in Section 2.2.
"Tender Offer": as defined in the recitals hereto.
"Tender Offer Purchase": as defined in the recitals hereto.
"Term Loan Lender": each Lender which has a Term Loan Commitment or
which has made a Term Loan.
"Term Loan": as defined in Section 2.1.
"Term Loan Commitment": as to any Lender, the obligation of such
Lender, if any, to make a Term Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth under the heading "Term
Loan Commitment" opposite such Lender's name on Schedule 1.1A. The
original aggregate amount of the Term Loan Commitments is $295,000,000.
"Term Loan Percentage": as to any Term Loan Lender at any time, the
percentage which such Lender's Term Loan Commitment then constitutes of the
aggregate Term Loan Commitments (or, at any time after the Tender Funding
Date, the percentage which the aggregate principal amount of such Lender's
Term Loans then outstanding constitutes of the aggregate principal amount
of the Term Loans then outstanding).
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20
"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.
"Transaction Documentation": collectively, the Merger Agreement, the
Offer to Purchase (including all documents and materials filed with the SEC
in connection therewith) 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 7.15.
"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.
"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.
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21
(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, each Term Loan Lender severally agrees to make a term loan (a "Term
Loan") to the Borrower on the Tender Funding Date in an amount not to exceed the
amount of the 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
2.9.
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 one Business Day prior to the anticipated
funding of the Term Loans (the "Tender Funding Date"), in the case of Base Rate
Loans) requesting that the Term Loan Lenders make the Term Loans on the Tender
Funding Date and specifying the amount to be borrowed. The Term Loans made on
the Tender Funding Date shall initially be Base Rate Loans and no Term Loan may
be converted into or continued as a Eurodollar Loan if the last day of the
Interest Period with respect thereto would occur on or after the Maturity Date.
Upon receipt of such notice the Administrative Agent shall promptly notify each
Term Loan Lender thereof. Not later than 12:00 noon, New York City time, on the
Tender Funding 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 Term Loans to be made by such Lender. The
Administrative Agent shall make available to the Borrower the aggregate of the
amounts made available to the Administrative Agent by the Term Loan Lenders in
immediately available funds not later than 2:00 P.M., New York City time, on the
Tender Funding Date.
2.3 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 the L/C Obligations then outstanding does not exceed the
amount of such Lender's Revolving Credit Commitment. During the Revolving
Credit Commitment Period the Borrower may use the 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 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 2.4 and 2.9, 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.
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22
2.4 Procedure for Revolving Credit Borrowing. The Borrower may
borrow under the 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 12:00 Noon, New York City time,
(a) three Business Days prior to the requested Borrowing Date, in the case of
Eurodollar Loans, or (b) 12:00 noon New York City time on the day of 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 (ii) the requested
Borrowing Date. Any Revolving Credit Loans made on the Closing Date shall
initially be Base Rate Loans and no Revolving Credit Loan may be made as,
converted into or continued 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. 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 thereof. 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 1:00 P.M., New York City 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.
2.5 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)
and (ii) the principal amount of each Term Loan of such Term Loan Lender on the
Maturity Date (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 2.11.
(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
<PAGE>
23
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 2.5(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 or Revolving Credit
Loans, as the case may be, of such Lender, substantially in the forms of Exhibit
G-1 or G-2, respectively, with appropriate insertions as to date and principal
amount.
2.6 Commitment Fees, etc. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender, a commitment fee for the
period from and including the Closing Date to the Revolving Credit Termination
Date, computed at the Commitment Fee Rate on the average daily amount of the
Available 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 previously 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.
2.7 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 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.
2.8 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
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24
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 2.17. 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) 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.
2.9 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 of 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 irrevocable notice of such election, 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 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, 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.
2.10 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
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25
$1,000,000 in excess thereof and (b) no more than ten Eurodollar Tranches shall
be outstanding at any one time.
2.11 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) (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 2.11 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).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
2.11 shall be payable from time to time on demand.
2.12 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
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26
Borrower, deliver to the Borrower a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to Section
2.11(a).
2.13 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.
2.14 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 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. 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 respective outstanding principal amounts of the
Revolving Credit Loans then held by the Revolving Credit Lenders.
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27
(d) 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 12:00 Noon,
New York City 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 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.
(e) 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 2.14(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.
(f) 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.
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28
2.15 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 2.16 and changes in the rate of tax on the overall net income of
such Lender);
(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 2.15, 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 2.15 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
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29
of the amount claimed shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section 2.15 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.
2.16 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 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 2.16(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 2.15(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 2.16 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
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30
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 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 2.16(d), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.16(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.
2.17 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)
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31
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 2.17
submitted to the Borrower by any Lender 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. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.18 Change of Lending Office; Claims Certificate. (a) Each Lender
agrees that, upon the occurrence of any event giving rise to the operation of
Section 2.15 or 2.16(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
2.18 shall affect or postpone any of the obligations of the Borrower or the
rights of any Lender pursuant to Section 2.15 or 2.16(a).
(b) In the event any Lender gives a notice to the Borrower pursuant
to Section 2.15, or any Lender is one of the Lenders notifying the Agent
pursuant to Section 2.13(d), or is unable to deliver the forms as required by
Section 2.16(d), or with respect to whom the Borrower is required to pay
additional amounts pursuant to Section 2.16 or any Lender is unable to make
Eurodollar Loans or cancels its commitment to make Eurodollar Loans pursuant to
Section 2.20, 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 2.18 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.
2.19 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
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32
maximum loan value (as determined in accordance with Regulation G and
Regulation U), of all Margin Stock Collateral; and
(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
2.19(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 2.19 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.
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33
2.20 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 2.17.
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 date which is five Business Days prior to January 31,
1998.
(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 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
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34
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 (ii 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 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.
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35
(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 2.11(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 2.4 of Base Rate 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
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
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36
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 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, IHK Merger Sub, the Target and their consolidated
Subsidiaries as at June 30, 1997 (including the notes thereto) (the "Pro Forma
Balance Sheets"), 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 Tender Offer, the Loans to be made on the Closing
Date and the Tender Funding Date and the use of proceeds thereof, and,
separately, (ii) the transactions described in the foregoing clause (i) as well
as the Merger and the financings contemplated by the Alternative A Merger
Facilities or the Alternative B Merger Facilities, as contemplated hereby,
together with, in the case of each of the Pro Forma Balance Sheets, the other
financings and transactions contemplated hereby and the payment of fees and
expenses in connection with the foregoing. The Pro Forma Balance Sheets have
been prepared based on the best information available to the Borrower as of the
date of delivery thereof, and present fairly on a pro forma basis the estimated
financial position of Borrower and its consolidated Subsidiaries as at June 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
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37
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 June 30, 1997, and the related unaudited consolidated statements
of income and cash flows for the three-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 three-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, 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. The
unaudited consolidated balance sheet of the Target as at June 30, 1997, and the
related unaudited consolidated statements of income and cash flows for the nine-
month period ended on such date, present fairly the consolidated financial
condition of the Target as at such date, and the consolidated results of its
operations and its consolidated cash flows for the nine-month period then ended
(subject to normal year-end audit adjustments). 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.
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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 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 Tender Offer, the Debt Tender Offer, 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, (ii)
the filings referred to in Section 4.18(b) and (iii) with respect to the Tender
Offer and the Debt Tender Offer, those which if not obtained could not, in the
aggregate, reasonably be expected to materially affect the consummation thereof.
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 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,
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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 any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect.
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.
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 2.19 and the accuracy of the representations in Section 2.19(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.
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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 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. The proceeds of the Term Loans shall be used to
finance the acquisition by the Borrower of the Specified Number of Shares
pursuant to the Tender Offer. The proceeds of the Revolving Credit Loans and the
Letters of Credit shall be used for (a) the repayment of the principal of, and
accrued interest on and premium, if any, in respect of, the Existing Borrower
Debt, (b) the payment of interest, fees and other expenses incurred in
connection with the Tender Offer and the Merger and (iii) working capital
purposes and other general corporate purposes of the Borrower and its
Subsidiaries.
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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.
(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.
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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 Administrative Agent, for the benefit of
the Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. In the case of the Pledged Stock that is
certificated described in the Guarantee and Collateral Agreement, when stock
certificates representing such Pledged Stock are delivered to the Administrative
Agent, in the case of Book Entry Securities (as defined in the Target Pledge
Agreement), upon the taking of the actions described in Section 5.2(f) and in
the case of the other Collateral (including uncertificated Pledged Stock)
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
Administrative Agent, for the benefit of 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(r)(iii) herein.
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(c) The Target Pledge Agreement is effective to create in favor of
the Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral described therein and proceeds
thereof. In the case of the Collateral described in the Target Pledge
Agreement, upon compliance with the provisions of Sections 3(a) and (b) thereof,
the Target Pledge Agreement shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the IHK Merger Sub in
such Collateral and the proceeds thereof, subject in the case of proceeds to
compliance with applicable law, as security for the Obligations (as defined in
the Target Pledge Agreement), in each case prior and superior in right to any
other Person.
4.19 Solvency. Each Loan Party is, and after giving effect to the
Tender Offer 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.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Revolving Extension of Credit. The
agreement of each Lender to make the initial extension of credit requested to be
made by it under the Revolving Credit Commitments 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:
(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) Related Agreements. The Administrative Agent shall have received
(in a form reasonably satisfactory to the Syndication Agent), true and
correct copies, certified as to authenticity by the Borrower, of the Merger
Agreement, the Offer to Purchase, the Debt Tender Offer, the Senior Note
Indenture (including the supplemental indenture reflecting the
effectiveness of amendments pursuant to the Debt Tender Offer as described
in clause (e) below), the Stockholders Agreement and such other documents
or instruments as may be reasonably requested by the Syndication Agent.
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44
(c) Acquisition Matters. (i) Each of the Offer to Purchase, 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 (other than to the extent the Offer to Purchase is
supplemented to extend the final date for the Tender Offer Purchase to a
date not later than November 30, 1997), and the conditions to the Tender
Offer Purchase set forth in the Offer to Purchase shall not have been
waived, in each case without the prior written consent of the Syndication
Agent; (ii) the Tender Offer shall have been made in accordance with
applicable law and the Offer to Purchase and shall not have been terminated
or expired without extension in accordance therewith; (iii) the Specified
Number of Shares shall have been tendered and not withdrawn pursuant to the
Tender Offer; and (iv) the capital structure, corporate structure,
ownership and management of each Loan Party as contemplated after giving
effect to the Tender Offer and as contemplated by the Merger Agreement
shall be substantially as described to the Syndication Agent in writing
prior to the Commitment Letter Date, and the sources and uses of funds for
the Tender Offer and the Merger shall be as set forth on Schedule 4.1(b).
(d) Public Filings. The documents and materials filed publicly by
the Borrower, IHK Merger Sub and Target in connection with the Acquisition
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.
(e) Existing Debt. On the Closing Date after giving effect to the
repayments made on the Closing Date concurrently with the other conditions
precedent to be satisfied on the Closing Date, (i) the Existing Credit
Facility shall have been paid in full and terminated, and the Syndication
Agent shall have received such evidence thereof, along with documents and
instruments terminating and releasing any liens thereunder, as shall be
reasonably satisfactory to it, (ii) the Debt Tender Offer shall not have
been amended, supplemented, waived or otherwise modified in any material
respect without the prior written consent of the Syndication Agent, and the
"Proposed Amendments to Indenture" set forth (and as defined) therein shall
have become effective in accordance with applicable law and the terms of
the Debt Tender Offer, and (iii) the "Consent Payments" and "Tender Offer
Consideration" under (and as defined in) the Debt Tender Offer shall be
made with respect to Senior Notes tendered thereunder in accordance
therewith.
(f) Fees. The Lenders, 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.
(g) Approvals. All governmental, shareholder and third party
approvals (including debtholders', landlords' and other consents)
reasonably necessary in connection with the making of the Tender Offer, the
effectiveness of the Merger Agreement and the financing contemplated hereby
shall have been obtained, 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, the Merger or the financing
thereof.
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45
(h) Financial Information. The Lenders shall have received (i)
satisfactory Pro Forma Balance Sheets described in subsection 4.1(a), (ii)
audited financial statements of Target for its fiscal years ended October
2, 1994, October 1, 1995 and September 29, 1996, (iii) audited financial
statements of the Borrower for its fiscal years ended March 31 of 1995,
1996 and 1997 and (iv) unaudited interim financial statements of each of
the Borrower and the Target for each quarterly period ended subsequent to
September 29, 1996, in the case of Target, and March 31, 1997, in the case
of the Borrower, as to which such financial statements are available, and
such financial statements shall not, in the reasonable judgment of the
Lenders, reflect any material adverse change in the consolidated financial
condition of the Borrower and its Subsidiaries (including for this purpose
Target as a Subsidiary), as reflected in the financial statements or
projections provided to the Syndication Agent prior to the Commitment
Letter Date.
(i) Solvency Opinion. The Lenders shall have received a satisfactory
solvency opinion from an independent valuation firm satisfactory to the
Syndication Agent which shall document the solvency of the Borrower and its
subsidiaries taken as a whole after giving effect to the Closing Date and
after giving effect to the Tender Offer Purchase and the financings and
related transactions contemplated hereby.
(j) Environmental Information. The Lenders shall have received
environmental information with respect to the Borrower and its subsidiaries
and Target and its subsidiaries satisfactory to the Syndication Agent.
(k) 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 Credit Documentation or on the
ability of the Borrower and its subsidiaries to perform their respective
obligations thereunder.
(l) 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.
(m) Regulations of Board. The Lenders shall be satisfied that the
Tender Offer and the financing thereof comply with Regulation G, T, U and X
of the Board.
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46
(n) 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.
(o) 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;
(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; and
(iv) the legal opinion of local counsel in each of California,
Montana and Wyoming and of such other special and local counsel as may be
required by the Administrative Agent.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(p) Pledged Stock; Stock Powers. The Administrative Agent shall have
received 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.
(q) 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 Administrative Agent to be filed, registered or recorded in order to
create in favor of the Administrative Agent, for the benefit of 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, IHK Merger
Sub, 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.
(r) 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>
46
(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(r)(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 them, 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 which is reasonably allocable
to such real property or the maximum limit of coverage made
<PAGE>
48
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(r)(iii) and a copy of
all other material documents affecting the Mortgaged Properties.
(s) Insurance. The Administrative Agent shall have received
insurance certificates satisfying the requirements of Section 5.3 of the
Guarantee and Collateral Agreement.
5.2 Conditions to Term Loans. The agreement of each Lender to make
the Term Loan requested to be made by it under the Term Loan Commitments is
subject to the satisfaction, prior to or concurrently with the making of such
Term Loan on the Tender Funding Date, of the following conditions precedent:
(a) Initial Conditions. The conditions precedent set forth in
Section 5.1 hereto shall have been satisfied (or waived in a manner
satisfactory to the Syndication Agent) and shall remain satisfied as of the
Tender Funding Date.
(b) Tender Offer. (i) The Tender Offer Purchase shall have been, or
concurrently with the making of the Term Loans on the Tender Funding Date
shall be, consummated pursuant to the Offer to Purchase and in accordance
with the Merger Agreement, (ii) IHK Merger Sub shall have acquired,
concurrently with the making of the Loans on the Tender Funding Date, the
Specified Number of Shares, and there shall not have been any material
change from 14,397,836 as the number of Shares representing the Specified
Number of Shares on the date the Tender Offer is consummated, and (iii) the
Administrative Agent shall have received certified copies of such documents
as shall be requested by the Syndication Agent to evidence that the actions
described above in this paragraph have been taken.
(c) Approvals. All governmental (including compliance with the H-S-R
Act in respect of the Tender Offer and the Merger) and third party
approvals (including debtholders', landlords' and other consents) necessary
or advisable in connection with the Tender Offer, the Tender Offer
Purchase, the Merger, the continuing operations of the Borrower, Target and
each of their Subsidiaries after the Tender Offer Purchase and the Merger
and the financing provided pursuant to this Agreement shall have been
obtained and be in full force and effect, and all applicable waiting
periods shall have expired without any action being taken or threatened by
any competent authority which would restrain, prevent or otherwise impose
adverse conditions on the Tender Offer, the Tender Offer Purchase, the
Merger or the other transactions and financings contemplated hereby.
<PAGE>
49
(d) Regulations of Board; Forms G-3 and U-1. The Lenders shall be
satisfied that the Tender Offer 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.
(e) Loan Documents. The Administrative Agent shall have received (i)
the Target Pledge Agreement, executed and delivered by a duly authorized
officer of the IHK Merger Sub, and (ii) the Depositary Agency Agreement,
executed and delivered by a duly authorized officer of each party thereto.
(f) Pledged Stock; Stock Powers. The Administrative Agent or the
Depositary shall have received the certificates representing the Shares
pledged pursuant to the Target Pledge Agreement (other than such Shares
constituting Book-Entry Shares (as defined in the Target Pledge
Agreement)), together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the Borrower, and with
respect to Shares consisting of Book-Entry Shares, evidence that all
actions described in Section 3(b) of the Target Pledge Agreement which are
necessary to create and perfect the security interests pursuant to the
Target Pledge Agreement in accordance with Article 8 of the Uniform
Commercial Code have been taken. The Shares pledged on the Closing Date
pursuant to the Target Pledge Agreement shall constitute all Shares owned
by the Borrower or any of its affiliates, whether acquired in the Tender
Offer or otherwise.
(g) Fees. The Lenders, the Syndication Agent and the Administrative
Agent shall have received all fees required to be paid on or before the
Tender Funding Date.
5.3 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 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 5.3 have been satisfied.
<PAGE>
50
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 90 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 45 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 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 (f), 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
<PAGE>
51
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 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 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 45 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 portion
of the Projections covering such periods and to the comparable periods of
the previous year;
(e) 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
(f) 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, 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.
<PAGE>
52
6.4 Conduct of Business and Maintenance of Existence, etc. 1 (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 7.14, (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 to do so could not reasonably be expected to have a Material
Adverse Effect; (b) comply with its obligations under the Merger Agreement in
all material respects; and1 (c) 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
<PAGE>
53
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 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.
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54
(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 Administrative 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 significant liability under or
violations of Environmental Law relating to such acquisition, and notify the
Administrative Agent of such potential acquisition; and (ii) if requested by the
Administrative 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 Administrative Agent shall have the right,
but shall not have any duty, to obtain any such report.
(d) Promptly upon the Administrative Agent's request if there has
occurred or the Administrative Agent reasonably anticipates an Event of Default,
permit an environmental consultant whom the Administrative 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 Administrative 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 Administrative Agent shall have
the right, but shall not have any duty, to request and/or obtain such
environmental assessment.
6.9 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 Administrative Agent, for the benefit of 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 Administrative Agent, for the benefit of the Lenders, a security
interest in such Property and (ii) take all actions necessary or advisable to
grant to the Administrative Agent, for the benefit of 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.
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55
(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 Administrative Agent, for the benefit of 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 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 Syndication Agent, and from counsel reasonably satisfactory
to the Syndication 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 Administrative Agent, for
the benefit of 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 Administrative 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 Administrative Agent for the benefit of
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 Syndication Agent, and from counsel reasonably satisfactory
to the Syndication Agent.
(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 Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of
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56
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 Administrative 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
Syndication Agent.
6.10 Merger Consummation; Merger Agreement. Use its best efforts to
cause Target to comply in all material respects with all of its material
obligations under the Merger Agreement; cause the consummation of the Merger in
accordance with the Merger Agreement and all applicable Requirements of Law as
promptly as practicable, and, in any event, on or prior to the earlier of
January 31, 1998 and the date that is 90 days after the consummation of the
Tender Offer; and comply in all materials respects with its obligations under
the Transaction Documentation.
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 Limitation on Activities of IHK Merger Sub. In the case of IHK
Merger Sub, notwithstanding anything to the contrary in this Agreement or any
other Loan Document, except to the extent necessary for the consummation of the
Tender Offer and the Merger in accordance with the Transaction Documentation:
(a) conduct, transact or otherwise engage in, or commit to conduct, transact or
otherwise engage in, any business or operations, (b) incur, create, assume or
suffer to exist any Indebtedness or other liabilities or financial obligations,
except (i) nonconsensual obligations imposed by operation of law, (ii) pursuant
to the Loan Documents to which it is a party and (iii) obligations with respect
to its Capital Stock, or (c) own, lease, manage or otherwise operate any
properties or assets (including cash and cash equivalents).
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;
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57
(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 $_________ 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 Holly Finance Company not to exceed $13,500,000
in aggregate principal amount outstanding at any time, provided that the
aggregate principal amount of such Indebtedness outstanding at any time,
when added to the aggregate principal amount of Indebtedness incurred
pursuant to subsection 7.2(l) below and outstanding at such time, does not
exceed $20,000,000; and
(l) other unsecured Indebtedness not to exceed $10,000,000 in
aggregate principal amount outstanding at any time, provided that the
aggregate principal amount of such Indebtedness outstanding at any time,
when added to the aggregate principal amount of Indebtedness incurred
pursuant to subsection 7.2(k) above and outstanding at such time, does not
exceed $20,000,000.
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58
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 in existence on the date hereof listed on Schedule 7.3(f),
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;
(g) 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;
(h) Liens created pursuant to the Security Documents;
(i) 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;
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(j) Liens securing judgments which do not constitute an Event of
Default;
(k) 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;
(l) 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;
(m) additional Liens securing obligations in an aggregate amount not
to exceed $3,000,000; and
(n) 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 Wholly Owned Subsidiary Guarantor shall be the
continuing or surviving corporation);
(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; and
(c) the Tender Offer, Tender Offer Purchase, and the Merger may be
consummated so long as concurrently with the Merger all amounts outstanding
hereunder and under the Loan Documents shall be repaid in full.
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);
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(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) Disposition of the real property, improvements and equipment
associated with the non operating facilities at Hamilton City, California
and Santa Barbara, California; and
(f) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Wholly Owned Subsidiary Guarantor.
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 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) 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, except (i) Capital Expenditures of the Borrower and its
Subsidiaries in the ordinary course of business constituting 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 not to exceed $40,000,000 in any
fiscal year and (ii) other Capital Expenditures of the Borrower and its
Subsidiaries in the ordinary course of business not to exceed $45,000,000 in any
fiscal year; 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;
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61
(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 Tender Offer Purchase;
(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;
(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) advances, loans, extensions of credit existing on the date hereof
and listed on Schedule 7.8(i); and
(j) 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 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, the Tender
Offer Purchase, and the Merger may be consummated.
7.10 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.
7.11 Limitation on Changes in Fiscal Periods. Permit the fiscal year
of the Borrower to end on a day other than March 31 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
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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.
7.12 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
and (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).
7.13 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 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 and (ii) 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.
7.14 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, or the Target 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.
7.15 Limitation on Amendments to Transaction Documentation. Amend,
supplement or otherwise modify (pursuant to a waiver or otherwise) the terms and
conditions of the Transaction Documentation in any material respect; or fail to
use commercially reasonable efforts to enforce any material right of such Loan
Party under the Merger Agreement.
7.16 Limitation on Optional Payments and Modifications of Debt
Instruments and Organizational Documentation, etc. (a) Make any optional
payment or prepayment on or redemption or purchase of any material Indebtedness
(other than the Loans), (b) amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms of any such Indebtedness
on terms less favorable to the Borrower and its Subsidiaries or to the interests
of the Lenders than those currently in effect on such Indebtedness, or (c)
amend, modify or change in any material respect, or consent or agree to any
amendment, modification, or change in any material respect to the terms of any
capitalization or organizational documents (including
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63
in respect of any Capital Stock); provided, however, that this Section 7.16
shall not prohibit (i) the Borrower or any of its Affiliates from acquiring,
from time to time, any of the Senior Notes which remain 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 as described in Section
5.1(e) or (ii) the Borrower or any Subsidiary to amend its charter or other
organizational documents to increase the amount of authorized Capital Stock or
other equity thereunder.
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,
Section 5 of the Guarantee and Collateral Agreement or Section 5(b) of the
Target Pledge 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 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,
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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
(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
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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;
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
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66
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 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 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
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67
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 or any other Loan 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 or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of any Loan Party a party thereto to perform its obligations
hereunder or thereunder. The Agents shall not 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 or any other 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 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 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 shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
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 shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents 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". In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof to
the Lenders. The Administrative 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 shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or
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68
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
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 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 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 Revolving Credit Percentages and Term Loan 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) be imposed on, incurred by or asserted against such Agent 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
gross negligence or willful misconduct. The agreements in this Section 9.7
shall survive the payment of the Loans and all other amounts payable hereunder.
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69
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 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 may, at any time, by notice
to the Lenders and the Administrative Agent, resign as Syndication Agent
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
Administrative Agent or any Lender. 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.
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.
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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 5.3 (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; or (vi) amend, modify or waive any provision of
Section 3 without the written consent of the Issuing Lender; provided, further,
notwithstanding the provisions set forth above, no Lender consent shall be
required in connection with the release 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.
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71
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:
The Borrower: Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Attention:
Telecopy:
Telephone:
The Syndication Agent and
the Administrative 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: Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Attention: Agribusiness Division
Telecopy: (312) 765-8095
Telephone: (312) 461-2744
with a copy to:
provided that any notice, request or demand to or upon either Agent or the
Lenders shall not be effective until received.
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
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72
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, 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 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
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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 2.15, 2.16 and 2.17 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 2.16, 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.
(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, assign to any Lender or any affiliate thereof 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
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for assignments involving Lehman Commercial Paper Inc.), 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) 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.
(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 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
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registration and processing fee shall be payable in connection with an
assignment by Lehman Commercial Paper Inc.), 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 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,
<PAGE>
76
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.
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.
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;
<PAGE>
77
(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
(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
<PAGE>
78
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>
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: /s/KAREN MERCER
----------------------------------
Name: Karen Mercer
Title: Vice President and Treasurer
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent, Issuing Bank and as a
Lender
By:________________________________________
Name:
Title:
LEHMAN COMMERCIAL PAPER INC., as
Administrative Agent
By:________________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as
Collateral Agent
By:________________________________________
Name:
Title:
<PAGE>
================================================================================
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 October 17, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINED TERMS.................................................... 1
1.1 Definitions......................................................... 1
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................................ 6
2.6 Reinstatement....................................................... 7
2.7 Payments............................................................ 7
SECTION 3. GRANT OF SECURITY INTEREST....................................... 7
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......................................................... 9
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............................................................. 12
5.8 Pledged Securities.................................................. 13
5.9 Receivables......................................................... 14
5.10 Contracts........................................................... 14
5.11 Intellectual Property............................................... 14
SECTION 6. REMEDIAL PROVISIONS.............................................. 15
6.1 Certain Matters Relating to Receivables............................. 15
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
i
<PAGE>
Page
----
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
ii
<PAGE>
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of October 17, 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 banks and other financial
institutions (the "Lenders") from time to time parties to the Credit Agreement,
dated as of October 17, 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 Administrative
Agent and the Collateral Agent.
W I T N E S S E T H:
-------------------
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 executed and delivered this Agreement to
the Collateral Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and 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 agrees with the Administrative Agent, for the
ratable benefit of the Lenders, 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 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:
<PAGE>
2
"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.
"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.
<PAGE>
3
"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.
"Intercompany Note": any promissory note evidencing loans made by any
Grantor to the Borrower or any of its Subsidiaries.
<PAGE>
4
"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.
"Trademarks": (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source
<PAGE>
5
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>
6
(e) No payment made by the Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by the 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 Administrative Agent, if
required), to be applied against the Borrower Obligations, whether matured or
unmatured, in such order as the Collateral Agent may determine.
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,
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7
waived, surrendered or released. Neither any Agent nor any Lender shall as a
condition to 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.
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8
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.
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
<PAGE>
9
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 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.
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10
(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.
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.
<PAGE>
11
(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.
(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
<PAGE>
12
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.
(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:
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13
(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.
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.
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14
(b) Without the prior written consent of the Collateral 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.
(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)
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15
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.
(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
<PAGE>
16
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.
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.
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17
(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 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.
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(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
(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 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 rata among 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
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19
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 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.
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20
(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 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
<PAGE>
21
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
(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.
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22
(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 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.
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23
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 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.
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8.6 Set-Off. Each Grantor hereby irrevocably authorizes the 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 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
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25
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
(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 6.9 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
<PAGE>
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 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>
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 MERCER
----------------------------
Title: Vice President and Treasurer
IHK MERGER SUB CORPORATION
By: /s/WILLIAM F. SCHWER
----------------------------
Title: Senior Vice President
HOLLY SUGAR CORPORATION
By: /s/WILLIAM F. SCHWER
----------------------------
Title: Senior Vice President, Secretary
and General Counsel
HOLLY NORTHWEST COMPANY
By: /s/WILLIAM F. SCHWER
----------------------------
Title: Vice President
<PAGE>
FORT BEND UTILITIES COMPANY
By: /s/WILLIAM F. SCHWER
----------------------------
Title: Vice President
IMPERIAL SWEETENER DISTRIBUTORS, INC.
By: /s/WILLIAM F. SCHWER
----------------------------
Title: Vice President
CROWN EXPRESS INC.
By: /s/WILLIAM F. SCHWER
----------------------------
Title: Vice President
LIMESTONE PRODUCTS COMPANY, INC.
By: /s/WILLIAM F. SCHWER
----------------------------
Title: President
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
IMPERIAL HOLLY CORPORATION,
IHK MERGER SUB CORPORATION
AND
SAVANNAH FOODS & INDUSTRIES, INC.
DATED AS OF SEPTEMBER 12, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I THE OFFER
SECTION 1.01 The Offer............................................ 2
SECTION 1.02 Company Actions...................................... 3
SECTION 1.03 Stockholder Lists.................................... 4
SECTION 1.04 Directors............................................ 4
ARTICLE II THE MERGER
SECTION 2.01 The Merger........................................... 5
SECTION 2.02 Effective Time; Closing.............................. 5
SECTION 2.03 Effects of the Merger................................ 6
SECTION 2.04 Certificate of Incorporation and By-Laws............. 6
SECTION 2.05 Directors and Officers............................... 6
SECTION 2.06 Conversion of Shares................................. 6
SECTION 2.07 Conversion of Common Stock of Merger Sub............. 8
SECTION 2.08 Stockholders' Meetings............................... 9
SECTION 2.09 Rights Under Stock Plans............................. 9
SECTION 2.10 Exchange of Certificates............................. 10
SECTION 2.11 Elections............................................ 12
SECTION 2.12 Dissenting Shares.................................... 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01 Organization and Qualification; Subsidiaries......... 14
SECTION 3.02 Certificate of Incorporation and By-Laws............. 15
SECTION 3.03 Capitalization....................................... 15
SECTION 3.04 Authority Relative to this Agreement................. 16
SECTION 3.05 No Conflict; Required Filings and Consents........... 17
SECTION 3.06 Permits; Compliance.................................. 17
SECTION 3.07 SEC Filings; Financial Statements.................... 18
SECTION 3.08 Absence of Certain Changes or Events................. 19
SECTION 3.09 Absence of Litigation................................ 20
SECTION 3.10 Employee Benefit Plans; Labor Matters................ 20
SECTION 3.11 Intellectual Property................................ 23
SECTION 3.12 Taxes................................................ 24
SECTION 3.13 Environmental Matters................................ 24
SECTION 3.14 Products............................................. 25
SECTION 3.15 Properties and Assets; Real Property
and Leases......................................... 25
SECTION 3.16 Insurance............................................ 26
SECTION 3.17 Opinion of Financial Advisor......................... 27
SECTION 3.18 Vote Required........................................ 27
SECTION 3.19 Brokers.............................................. 27
ii
<PAGE>
SECTION 3.20 Company Rights Agreement............................. 28
SECTION 3.21 Information Supplied................................. 28
SECTION 3.22 Termination of Existing Merger Agreement............. 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF IHK AND MERGER SUB
SECTION 4.01 Organization and Qualification; Subsidiaries......... 29
SECTION 4.02 Certificate of Incorporation and By-Laws............. 30
SECTION 4.03 Capitalization....................................... 30
SECTION 4.04 Authority Relative to this Agreement................. 31
SECTION 4.05 No Conflict; Required Filings and Consents........... 31
SECTION 4.06 Permits; Compliance.................................. 32
SECTION 4.07 SEC Filings; Financial Statements.................... 32
SECTION 4.08 Absence of Certain Changes or Events................. 33
SECTION 4.09 Absence of Litigation................................ 34
SECTION 4.10 Employee Benefit Plans; Labor Matters................ 35
SECTION 4.11 Intellectual Property................................ 37
SECTION 4.12 Taxes................................................ 38
SECTION 4.13 Environmental Matters................................ 38
SECTION 4.14 Products............................................. 39
SECTION 4.15 Properties and Assets; Real Property and Leases...... 39
SECTION 4.16 Insurance............................................ 40
SECTION 4.17 Opinion of Financial Advisor......................... 40
SECTION 4.18 Vote Required........................................ 40
SECTION 4.19 Brokers.............................................. 41
SECTION 4.20 Information Supplied................................. 41
SECTION 4.21 Financing............................................ 42
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01 Conduct of Business by the Company Pending
the Merger......................................... 42
SECTION 5.02 Conduct of Business by IHK and the IHK Subsidiaries
Pending the Merger................................. 45
SECTION 5.03 Government Filings................................... 47
ARTICLE VI ADDITIONAL AGREEMENTS
SECTION 6.01 Stockholders' Meetings............................... 48
SECTION 6.02 Registration Statement; Proxy Statement.............. 49
SECTION 6.03 Access to Information; Confidentiality............... 51
SECTION 6.04 Approvals and Consents; Cooperation.................. 52
SECTION 6.05 No Solicitation of Transactions...................... 52
SECTION 6.06 Employee Benefits Matters............................ 53
SECTION 6.07 Directors' and Officers' Indemnification
and Insurance...................................... 53
SECTION 6.08 Obligations of IHK and Merger Sub.................... 54
SECTION 6.09 Affiliates' Letters.................................. 54
iii
<PAGE>
SECTION 6.10 Letters of Accountants............................... 55
SECTION 6.11 Listing Market....................................... 55
SECTION 6.12 IHK Board Representation............................. 55
SECTION 6.13 Company Rights Plan.................................. 56
SECTION 6.14 Public Announcements................................. 56
SECTION 6.15 Subsequent Financial Statements...................... 56
ARTICLE VII CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect
the Merger......................................... 57
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination.......................................... 58
SECTION 8.02 Effect of Termination................................ 60
SECTION 8.03 Amendment............................................ 60
SECTION 8.04 Waiver............................................... 60
SECTION 8.05 Fees and Expenses.................................... 60
ARTICLE IX GENERAL PROVISIONS
SECTION 9.01 Non-Survival of Representations, Warranties
and Agreements..................................... 62
SECTION 9.02 Notices.............................................. 62
SECTION 9.03 Severability......................................... 63
SECTION 9.04 Assignment........................................... 63
SECTION 9.05 Interpretation....................................... 64
SECTION 9.06 Specific Performance................................. 64
SECTION 9.07 Governing Law........................................ 64
SECTION 9.08 Parties in Interest.................................. 64
SECTION 9.09 Counterparts......................................... 65
SECTION 9.10 Waiver of Jury Trial................................. 65
SECTION 9.11 Entire Agreement..................................... 65
SECTION 9.12 Certain Definitions.................................. 65
iv
<PAGE>
TABLE OF DEFINED TERMS
(not a part of the Agreement)
SECTION
-------
Acquisition Proposal.................................. 6.05(a)
Affiliate............................................. 9.12(a)
Agreement............................................. Preamble
AMEX.................................................. 9.12(o)
Beneficial Owner...................................... 9.12(b)
Benefit Trust......................................... 3.03
Benefit Trust Agreement............................... Annex B
Benefit Trust Shares.................................. 3.03
Blue Sky Laws......................................... 3.05(b)
Business Day.......................................... 9.12(c)
Cash Consideration.................................... 2.06(a)
Claim................................................. 6.07(b)
Closing............................................... 2.02
Closing Price......................................... 9.12(d)
Code.................................................. 2.09(a)
Company............................................... Preamble
Company Affiliate..................................... 6.09
Company Common Stock.................................. 1.01(a)
Company Disclosure Schedule........................... Article III Preamble
Company Environmental Permits......................... 3.13(b)
Company ERISA Affiliate............................... 3.01(3)
Company Executive Deferred Compensation Plans......... 3.10(h)
Company Financial Statements.......................... 3.07(b)
Company Material Adverse Effect....................... 3.01
Company Options....................................... 2.09(a)
Company Permits....................................... 3.06
Company Plans......................................... 3.10(a)
Company Preferred Stock............................... 3.03
Company Products...................................... 3.14
Company Rights........................................ 3.03
Company Rights Agreement.............................. 3.03
Company Rights Agreement Amendment.................... 3.20
Company SEC Reports................................... 3.07(a)
Company Specified Stockholders........................ 9.12(e)
Company Stock Option Plan............................. 2.09(a)
Company Stockholder Approval.......................... 2.08
Company Stockholder Meeting........................... 6.01(a)
v
<PAGE>
Company Subsequent Financial Statements............... 6.15(a)
Company Subsidiary.................................... 3.01
Confidentiality Agreement............................. 6.03(b)
Continuing Director................................... 1.04(a)
Control............................................... 9.12(e)
Deed Reservations..................................... 3.15(c)
Dissenting Shares..................................... 2.12
DGCL.................................................. 1.02
DLJ................................................... 1.02
Effective Time........................................ 2.02(b)
Election Date......................................... 2.11(c)
Environmental Laws.................................... 3.13(a)
ERISA................................................. 3.10(a)
Exchange Act.......................................... 9.12(f)
Exchange Agent........................................ 2.10(a)
Exchange Fund......................................... 2.10(f)
Excluded Shares....................................... 2.06(a)
Expense Amount........................................ 8.05(b)
Expenses.............................................. 8.05(a)
Flo-Sun Agreement..................................... 3.22
Governmental Entity................................... 9.12(g)
Hazardous Substances.................................. 3.13
HSR Act............................................... 1.01(a)
IHK................................................... Preamble
IHK Disclosure Schedule............................... Article IV Preamble
IHK Environmental Permits............................. 4.13
IHK ERISA Affiliate................................... 4.10(b)
IHK Financial Statements.............................. 4.07(b)
IHK Junior Preferred Stock............................ 2.06(a)
IHK Material Adverse Effect........................... 4.01
IHK Permits........................................... 4.06
IHK Plans............................................. 4.10(a)
IHK Preferred Stock................................... 4.03
IHK Products.......................................... 4.14
IHK Purchase Rights................................... 2.06(a)
IHK Rights Agreement.................................. 2.06(a)
IHK SEC Reports....................................... 4.07(a)
IHK Shareholders' Meeting............................. 6.01(b)
IHK Specified Stockholders............................ 9.12(i)
IHK Stockholder Approval.............................. 2.08
IHK Subsequent Financial Statements................... 6.15(b)
IHK Subsidiary........................................ 4.01
Indemnified Parties................................... 6.07(a)
vi
<PAGE>
Intellectual Property Rights.......................... 3.11
Knowledge or Known.................................... 9.12(h)
Law................................................... 9.12(i)
Lehman Brothers....................................... 4.17
Liens................................................. 3.15(c)
Listing Market........................................ 6.11
Merger................................................ Recitals
Merger Consideration.................................. 2.06(a)
Merger Shares......................................... 2.06(b)
Merger Sub............................................ Preamble
Multiemployer Plan.................................... 3.10(b)
Multiple Employer Plan................................ 3.10(b)
NYSE.................................................. 9.12(o)
Offer................................................. 1.01(a)
Offer Documents....................................... 1.01(b)
Offer Price........................................... 1.01(a)
Order................................................. 9.12(j)
Permitted Liens....................................... 3.15(c)
Person................................................ 9.12(k)
Proxy Statement....................................... 6.02(b)
Registration Statement................................ 3.21
Representatives....................................... 6.03(a)
Schedule 14D-1........................................ 1.01(b)
Schedule 14D-9........................................ 1.02
SEC................................................... 1.01(b)
Securities Act........................................ 9.12(l)
Special Meetings...................................... 2.08
Stock Consideration................................... 9.12(m)
Stockholder Approvals................................. 2.08
Stockholders' Meetings................................ 2.08
Subsidiary or Subsidiaries............................ 9.12(n)
Substitute Options.................................... 6.05(a)
Superior Proposal..................................... 7.05(a)
Surviving Corporation................................. 2.01
Terminating Company Breach............................ 8.01(g)
Terminating IHK Breach................................ 8.01(g)
Termination Fee....................................... 8.05(b)
Total Shares.......................................... 2.06(b)
Trading Day........................................... 9.12(o)
U.S. GAAP............................................. 3.07(b)
WARN.................................................. 3.10(f)
Waterway Works........................................ 3.15(c)
vii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September 12,
1997 among IMPERIAL HOLLY CORPORATION, a Texas corporation ("IHK"), IHK MERGER
SUB CORPORATION, a Delaware corporation ("Merger Sub"), and SAVANNAH FOODS &
INDUSTRIES, INC., a Delaware corporation (the "Company").
R E C I T A L S:
- - - - - - - -
WHEREAS, the Board of Directors of each of IHK and the Company has
determined that it is in the best interests of their respective stockholders for
Merger Sub to acquire the Company upon the terms and subject to the conditions
set forth herein;
WHEREAS, the Board of Directors of the Company has unanimously adopted
resolutions approving the acquisition of the Company by Merger Sub, this
Agreement and the transactions contemplated hereby, and has unanimously agreed
to recommend that the Company's stockholders approve this Agreement and the
transactions contemplated hereby and tender their shares of Company Common Stock
(as defined below) in the Offer (as defined below);
WHEREAS, if at least 50.1% of the outstanding shares of Company Common
Stock are purchased pursuant to the Offer, IHK, Merger Sub and the Company have
agreed (subject to the terms and conditions of this Agreement), after the
expiration or termination of the Offer and as soon as practicable following the
approval of the stockholders of the Company, to effect the merger of Merger Sub
with and into the Company (the "Merger") as more fully described herein; and
WHEREAS, the Company has advised IHK, Merger Sub and the IHK Specified
Stockholders (as hereinafter defined) that it will not enter into this Agreement
unless the IHK Specified Stockholders execute and deliver to the Company an
Agreement and Irrevocable Proxy in the form set forth in Annex C to this
Agreement; and
WHEREAS, IHK has advised the Company and the Company Specified Stockholders
that IHK will not enter into this Agreement unless the Company Specified
Stockholders (as hereinafter defined) execute and deliver to IHK the
Stockholders Agreement in form set forth as Annex D to this Agreement and
providing that the Company Specified Stockholders will tender their shares of
Company Common Stock into the Offer under the terms set forth therein; and
WHEREAS, IHK, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and intending to be legally bound hereby, the parties hereto agree
as follows:
<PAGE>
ARTICLE I
THE OFFER
SECTION 1.01 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.01 hereof, promptly (but in no event later than five
Business Days (as defined below) following the date hereof), Merger Sub shall
commence (within the meaning of Rule 14d-2 under the Exchange Act) an offer to
purchase (the "Offer") at least 50.1% of all shares outstanding (on a fully
diluted basis) of common stock, par value $.25 per share, of the Company
("Company Common Stock") at a price of $20.25 per share, net to the seller in
cash (such price, or any such higher price as may be paid in the Offer, being
referred to herein as the "Offer Price"). The obligation of Merger Sub to
consummate the Offer and to accept for payment and to pay for any shares of
Company Common Stock tendered pursuant thereto shall be subject only to those
conditions set forth in Annex A hereto. The Company agrees that no shares of
Company Common Stock held by the Company or any of the Company Subsidiaries (as
defined below) will be tendered pursuant to the Offer; provided, however, that
prior to the Effective Time (as defined below), shares of Company Common Stock
held by the Company may be allocated, issued, delivered or transferred pursuant
to the Company Stock Option Plan (as such term is defined in Section 2.09) in
accordance with the terms thereof or Section 2.09. Merger Sub will not, without
the prior written consent of the Company, (i) decrease or change the form of the
consideration payable in the Offer, (ii) decrease the number of shares of
Company Common Stock sought pursuant to the Offer, (iii) impose additional
conditions to the Offer, (iv) change the conditions to the Offer, except that
Merger Sub in its sole discretion may waive any of the conditions to the Offer
(but may not waive the condition that not less than 50.1% of the Company Common
Stock outstanding on a fully diluted basis shall have been validly tendered and
not withdrawn), or (v) make any other change in the terms or conditions of the
Offer which is adverse to the holders of the shares of Company Common Stock.
Merger Sub agrees that, subject to the terms and conditions of the Offer and
this Agreement, it will accept for payment and pay for all shares of Company
Common Stock validly tendered and not withdrawn pursuant to the Offer promptly
after expiration of the Offer; provided, however, that Merger Sub shall not be
obligated to accept for payment and pay for in the Offer, in the aggregate, more
than 50.1% of the outstanding shares of Company Common Stock. The Offer shall
initially provide that it shall expire 20 Business Days after it is commenced,
and may not be extended except as provided below. If the conditions set forth
in Annex A are not satisfied or, to the extent permitted by this Agreement,
waived by Merger Sub as of any scheduled expiration date, Merger Sub may extend
the Offer from time to time until the earlier of the consummation of the Offer
or 30 Business Days after the date hereof, and shall extend the Offer (x) to the
extent necessary to comply with the waiting period requirements (including any
extension or second request) under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder (the "HSR
Act") and (y) upon the request of the Company, to a date no later than November
30, 1997 to the extent
2
<PAGE>
necessary for IHK to satisfy the condition set forth in clause (2) of Annex A.
The Company and Merger Sub shall use commercially reasonable efforts to satisfy
the conditions set forth in Annex A as soon as practicable.
(b) On the date of commencement of the Offer, IHK and Merger Sub shall file
or cause to be filed with the Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1 (together with all amendments thereto,
the "Schedule 14D-1") with respect to the Offer, which shall contain the offer
to purchase and related letter of transmittal and other ancillary Offer
documents and instruments pursuant to which the Offer will be made (collectively
with any supplements or amendments thereto, the "Offer Documents"). Merger Sub
will disseminate the Offer Documents to holders of shares of Company Common
Stock. IHK, Merger Sub and the Company will promptly correct any information
provided by them for use in the Offer Documents that becomes false or misleading
in any material respect, and Merger Sub will take all steps necessary to cause
the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to holders of shares of Company Common Stock, in each case as and
to the extent required by applicable law. The Company and its counsel shall be
given a reasonable opportunity to review and comment on the Schedule 14D-1
(including the Offer Documents) prior to its filing with the SEC. Merger Sub
agrees to provide the Company with any comments that may be received from the
SEC or its staff with respect to the Schedule 14D-1 (including the Offer
Documents) and any amendments thereto, promptly after receipt thereof.
SECTION 1.02 Company Actions. The Company hereby consents to the Offer
and represents and warrants that (a) its Board of Directors (at a meeting duly
called and held), has (i) determined that the Offer and the Merger are fair to
and in the best interests of the stockholders of the Company, (ii) resolved to
approve the Offer and the Merger and recommend (subject to its fiduciary duties
after taking into account advice of legal counsel) acceptance of the Offer and
approval and adoption of this Agreement by such stockholders of the Company,
(iii) taken all necessary steps to render Section 203 of the Delaware General
Corporation Law (the "DGCL") inapplicable to the Merger, (iv) resolved to elect
not to be subject, to the extent permitted by law, to any state takeover law
other than Section 203 of the DGCL that may purport to be applicable to the
Offer, the Merger or the transactions contemplated by this Agreement and (v)
approved the Company Rights Agreement Amendment (as defined below), and (b)
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), the Company's
financial advisor, has advised the Company's Board of Directors that, in their
opinion, the consideration to be paid in the Offer and the Merger to the
Company's stockholders is fair, from a financial point of view, to such
stockholders. Upon commencement of the Offer, the Company shall file with the
SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") containing the recommendations of its Board of Directors in favor of the
Offer and the Merger and shall permit the inclusion in the Offer Documents of
such recommendations, in each case subject to the fiduciary duties of the Board
of Directors of the Company. The Company, IHK and Merger Sub will promptly
correct any information provided by them for use in the Schedule 14D-9 that
becomes false or misleading in any material respect, and the Company will take
all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with
the SEC and to be disseminated to holders of shares of Company Common
3
<PAGE>
Stock, in each case as and to the extent required by applicable law. IHK and
its counsel shall be given a reasonable opportunity to review and comment on the
Schedule 14D-9 prior to its filing with the SEC. The Company agrees to provide
IHK with any comments that may be received from the SEC or its staff with
respect to the Schedule 14D-9 and any amendments thereto, promptly after receipt
thereof.
SECTION 1.03 Stockholder Lists. In connection with the Offer, the
Company shall promptly furnish Merger Sub with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of shares of Company Common Stock as of a recent
date and shall furnish Merger Sub with such information and assistance as Merger
Sub or its agents may reasonably request in communicating the Offer to the
record and beneficial stockholders of the Company. Subject to the requirements
of applicable law, IHK and Merger Sub will hold such listings and other
information in confidence and in accordance with the terms of the
Confidentiality Agreement (as defined below), shall use such information only in
connection with the Offer and the Merger and, if this Agreement is terminated,
shall deliver to the Company all copies of all such information (and extracts or
summaries thereof) then in their or their agents' or advisors' possession.
SECTION 1.04 Directors.
(a) Promptly upon the purchase by Merger Sub pursuant to the Offer of such
number of shares of Company Common Stock as represents at least 50.1% of the
outstanding shares of Company Common Stock and from time to time thereafter,
Merger Sub shall be entitled to designate such number of directors, rounded up
to the next whole number, on the Board of Directors of the Company as will give
Merger Sub representation on the Board of Directors of the Company equal to the
product of the number of directors on the Board of Directors of the Company and
the percentage that such number of shares of Company Common Stock so purchased
bears to the number of shares of Company Common Stock outstanding, and the
Company shall promptly, to the extent permitted by the Company's Certificate of
Incorporation and By-Laws and the DGCL, upon request by Merger Sub, either (at
the Company's election) increase the size of the Board of Directors of the
Company or exercise all reasonable efforts to secure the resignations of such
number of directors as is necessary to provide Merger Sub with such level of
representation and to enable Merger Sub's designees to be so elected.
Notwithstanding the foregoing, at all times prior to the Effective Time (as
hereinafter defined) of the Merger the Board of Directors of the Company shall
include at least two directors in office as of the date hereof (any such
director remaining in office being a "Continuing Director"). The Company's
obligations to appoint designees to the Board of Directors of the Company shall
be subject to Section 14(f) of the Exchange Act. At the request and expense of
Merger Sub, the Company shall take all action necessary to effect any such
election, including mailing to its stockholders the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. IHK
and Merger Sub will timely supply to the Company in writing and IHK and Merger
Sub will be solely responsible for any and all information with respect to
themselves and their respective officers, directors and affiliates and director
designees required by such Section and Rule.
4
<PAGE>
(b) Following the election or appointment of Merger Sub's designees
pursuant to this Section and prior to the Effective Time, such designees shall
abstain from acting upon, and the approval of a majority of the Continuing
Directors shall be required to authorize and shall be sufficient to authorize,
any resolution with respect to any termination of this Agreement by the Company,
any amendment of this Agreement requiring action by the Board of Directors of
the Company, any extension of time for the performance of any of the obligations
or other acts of IHK or Merger Sub under this Agreement, any waiver of
compliance with any of the agreements or conditions under this Agreement for the
benefit of the Company, and any action to seek to enforce any obligation of IHK
or Merger Sub under this Agreement. The Continuing Directors shall be appointed
as a Special Committee of the Board of Directors of the Company and, in addition
to having all of the powers of the Continuing Directors set out in the preceding
sentence, the Special Committee shall have the full power over all issues
relating to the relationship between the Company on the one hand and IHK and
Merger Sub on the other and the Company shall not take any action if, in the
opinion of a majority of the Special Committee, such action would frustrate or
be reasonably likely to impair or delay the ability of the parties to consummate
the Merger. In connection herewith, the Continuing Directors (as such or in
their capacity as the Special Committee) shall be authorized, on behalf of and
at the expense of the Company, to retain financial and legal advisors.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the DGCL, the Merger
shall occur as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions set forth in Article VII hereof. The Company
shall be the surviving corporation in the Merger (the "Surviving Corporation")
under the name SAVANNAH FOODS & INDUSTRIES, INC. (or such other name as the
parties shall agree) and shall continue its existence under the laws of
Delaware. The separate corporate existence of Merger Sub shall cease.
SECTION 2.02 Effective Time; Closing.
(a) The closing of the Merger (the "Closing") will take place on the day
that is two Business Days (as defined below) after satisfaction or waiver
(subject to applicable Law (as defined below)) of the conditions set forth in
Article VII (excluding conditions that, by their terms, cannot be satisfied
until the Closing Date), unless another time or date is agreed to in writing by
the parties hereto. The Closing shall be held at the offices of Andrews & Kurth
L.L.P., 4200 Texas Commerce Tower, 600 Travis, Houston, Texas 77002, unless
another place is agreed to in writing by the parties hereto.
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(b) As soon as practicable following the Closing, the parties hereto shall
cause the Merger to be consummated by filing a Certificate of Merger with the
Secretary of State of Delaware in such form as is required by, and executed in
accordance with, the relevant provisions of the DGCL. The term "Effective Time"
means the date and time of the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware (or such later time as may be agreed
in writing by each of the parties hereto and specified in the Certificate of
Merger; provided, however, that for financial accounting purposes, the Effective
Time shall be the first day of the month in which the Closing occurs.
SECTION 2.03 Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the DGCL and set forth herein.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of each
of the Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.04 Certificate of Incorporation and By-Laws. The Certificate
of Incorporation and the By-Laws of Merger Sub, in each case as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation; provided, however, that
Article I of the Certificate of Incorporation of the Surviving Corporation shall
be amended to read in its entirety as follows: "ARTICLE I. The name of the
Corporation is SAVANNAH FOODS & INDUSTRIES, INC." (or such other name as the
parties shall agree).
SECTION 2.05 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time and the officers of the Company
immediately prior to the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation until their respective successors are
duly elected and qualified.
SECTION 2.06 Conversion of Shares.
(a) At the Effective Time, except as otherwise provided herein and subject
to Section 2.06(b), each share of Company Common Stock, issued and outstanding
immediately prior to the Effective Time (other than the shares of Company Common
Stock owned by IHK, Merger Sub or any of their Subsidiaries or held in the
treasury of the Company, all of which shall be canceled and cease to exist,
without consideration being payable therefore (the "Excluded Shares"), shall, by
virtue of the Merger and, except as provided in Section 2.11, without any action
on the part of the holder thereof, be converted into, exchanged for and
represent the right to receive (without interest), subject to the proration
procedures described below, either (i) the Stock Consideration (as defined
below) or (ii) cash in an amount equal to the Offer Price ("Cash Consideration"
and, together with the Stock Consideration, the "Merger Consideration"));
provided, however, that, in any event, if between the date of this Agreement and
the Effective Time the outstanding shares of IHK Common Stock or Company Common
Stock shall have been changed into a different number of shares or a
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different class by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Cash
Consideration and the Stock Consideration shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares. All shares of Company Common Stock so
converted or exchanged shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate previously
evidencing any such shares shall thereafter represent the right to receive, upon
the surrender of such certificate in accordance with the provisions of Section
2.11, only the applicable Merger Consideration and any cash to be paid in lieu
of fractional shares of IHK Common Stock and associated fractional rights ("IHK
Purchase Rights") to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock, without par value, of IHK ("IHK Junior Preferred
Stock") pursuant to the Rights Agreement, dated as of September 14, 1989, as
amended (the "IHK Rights Agreement"), between IHK and The Bank of New York, as
rights agent, to which such holder is entitled pursuant to Section 2.10(e)
(without interest thereon). The holders of such certificates previously
evidencing such shares of Company Common Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such shares of
Company Common Stock except as otherwise provided herein or by law. IHK shall
prepare a statement setting forth the calculations required or otherwise
contemplated by this Section 2.06 in reasonable detail prior to the Closing Date
and shall furnish a copy thereof to the Company.
(b) Notwithstanding anything in this Agreement to the contrary, the number
of shares of Company Common Stock (the "Cash Election Number") to be converted
into the right to receive the Cash Consideration in the Merger shall be equal to
70% of the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time less the sum of (i) the number of
Dissenting Shares (as hereinafter defined) and (ii) the number of Excluded
Shares.
(c) In the event that the aggregate number of shares in respect of which
Cash Elections (as defined below) have been made (the "Cash Election Shares")
exceeds the Cash Election Number, each share of Company Common Stock in respect
of which a Cash Election has not been made shall be converted into the right to
receive the Stock Consideration, and each of the Cash Election Shares shall be
converted into the right to receive the Stock Consideration or the Cash
Consideration in the following manner:
(i) A proration factor (the "Proration Factor") shall be determined by
dividing the Cash Election Number by the total number of Cash Election Shares.
(ii) The number of Cash Election Shares as to which each stockholder who
made a Cash Election shall be converted into the right to receive the Cash
Consideration (on a consistent basis among stockholders who made a Cash Election
pro rata to the number of shares as to which they made such elections) shall be
equal to the product of the Proration Factor multiplied by the total number of
Cash Election Shares beneficially owned by such stockholder.
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(iii) Subject to Section 2.10(e), each Cash Election Share other than
those shares that shall receive the Cash Election Amount in accordance with
Section 2.06(c)(ii), shall be converted into the right to receive the Stock
Consideration.
(d) Subject to Section 2.10(e), if the number of Cash Election Shares is
less than the Cash Election Number, then:
(i) Each Cash Election Share shall be converted into the right to receive
the Cash Consideration; and
(ii) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time other than Cash Election Shares, the shares of
Company Common Stock to be canceled in accordance with Section 2.06(e) and
Dissenting Shares (the "Eligible Shares"), shall be converted into the right to
receive the Cash Consideration or the Stock Consideration in the following
manner:
(A) The number of Eligible Shares to be converted into the right to receive
the Cash Consideration shall be equal to the excess of the Cash Election Number
over the number of Cash Election Shares (which shall be allocated on a basis
consistent among all stockholders who beneficially own Eligible Shares pro rata
to the number of Eligible Shares beneficially owned by each such stockholder).
(B) Each other Eligible Share shall be converted into the right to receive
the Stock Consideration.
(e) At the Effective Time, each Excluded Share shall be canceled without
any conversion thereof and no payment or distribution shall be made with respect
thereto.
SECTION 2.07 Conversion of Common Stock of Merger Sub. Each share of
common stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become at the Effective Time one
share of common stock of the Surviving Corporation.
SECTION 2.08 Stockholders' Meetings. Subject to applicable law, each
of IHK and the Company, acting through its respective Board of Directors, shall,
in accordance with applicable law, duly call, give notice of, convene and hold a
special meeting (the "Special Meetings" or the "Stockholders' Meetings") of its
respective stockholders as soon as practicable for the purpose (in the case of
the Company) of approving and adopting the agreement of merger (within the
meaning of Section 251 of the DGCL) set forth in this Agreement and approving
the Merger (the "Company Stockholder Approval") or (in the case of IHK) the
issuance of the shares of IHK Common Stock to the stockholders of the Company
in the Merger (the "IHK Stockholder Approval" and together with the Company
Stockholder Approval, the "Stockholder Approvals"), and, subject to the
fiduciary duties of the respective Boards of Directors under applicable law as
determined by such
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directors in good faith after consultation with and based upon the advice of
outside counsel, include in the Proxy Statement (as defined in Section 6.02) of
each of the Company and IHK for use in connection with the Special Meetings,
the recommendation of their Boards of Directors that stockholders vote in favor
of the Company Stockholder Approval or IHK Stockholder Approval, as the case may
be. The Company and IHK agree to use commercially reasonable efforts to cause
the Special Meetings to occur within 30 days after the Registration Statement
(as defined below in Section 3.21) is effective under the Securities Act. IHK
and Merger Sub agree that, at the Company Stockholders' Meeting, all of the
shares of Company Common Stock acquired pursuant to the Offer or otherwise by
IHK or Merger Sub will be voted in favor of the Company Stockholder Approval.
SECTION 2.09 Rights Under Stock Plans.
(a) Each unexpired and unexercised option to purchase shares of Company
Common Stock (the "Company Options") issued pursuant to the Company's 1996
Equity Incentive Plan (the "Company Stock Option Plan"), or otherwise granted
by the Company outside the Company Stock Option Plan, each of which issued and
outstanding Company Options are set forth in Section 3.03 of the Company
Disclosure Schedule (as defined below), shall, at the Effective Time and at the
election of the holder of such Company Options, either (i) be assumed by IHK and
shall constitute an option to acquire, on the same terms and conditions as were
applicable under such assumed Company Option, a number of shares of IHK Common
Stock equal to the product of (A) the Stock Consideration and (B) the number of
shares of Company Common Stock subject to such Company Option, at a price per
share equal to the amount obtained by dividing the exercise price of such
Company Option by the Stock Consideration (the "Substitute Options") or (ii)
each Company Option which is vested or exercisable or shall become vested or
exercisable as a result of the Offer or the Merger shall be canceled by the
Company, and each holder of a Company Option so canceled shall be entitled to
receive an amount in cash equal to the difference between the Offer Price and
the exercise price of such Company Option. Each holder of a Company Option
shall make such election by notifying the Company and IHK by 5:00 p.m. New York
City time on the Election Date (as defined below). At the Effective Time, IHK
shall deliver to holders of Company Options, who make the election set forth in
clause (i) of the preceding sentence, appropriate option agreements representing
the right to acquire shares of IHK Common Stock on the same terms and conditions
as contained in the outstanding Company Options. IHK shall adopt and comply
with the terms of the Company Stock Option Plan as it applies to Company Options
assumed as set forth above including, without limitation, provisions regarding
the accelerated vesting of Company Options which shall occur by virtue of
consummation of the Merger, to the extent required by the terms of such Company
Options or the Company Stock Option Plan. The date of grant of each Substitute
Option shall be deemed to be the date on which the corresponding Company Option
was granted. It is the intention of the parties that, subject to applicable
Law, the Substitute Options qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), to the extent that the Company Options qualified as
incentive stock options prior to the Effective Time.
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(b) IHK shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of IHK Common Stock for delivery upon exercise of
Company Options assumed in accordance with this Section 2.09. Promptly after
the Effective Time, the shares of IHK Common Stock subject to Substitute Options
shall be covered by an effective registration statement on Form S-8 (or any
successor form) or another appropriate form and IHK shall use commercially
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements for so long as Substitute Options remain outstanding.
In addition, IHK shall use commercially reasonable efforts to cause the shares
of IHK Common Stock subject to Substitute Options to be listed on the Listing
Market (as defined below).
SECTION 2.10 Exchange of Certificates.
(a) Prior to the mailing of the Proxy Statement, IHK shall appoint a bank
or trust company to act as paying agent (the "Exchange Agent") for the payment
of the Merger Consideration. As of or promptly after the Effective Time, IHK
shall deposit the aggregate Merger Consideration with the Exchange Agent for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article II.
(b) As soon as practicable after the Effective Time, each holder of an
outstanding certificate or certificates which prior thereto represented shares
of Company Common Stock shall, upon surrender to the Exchange Agent of such
certificate or certificates and acceptances thereof by the Exchange Agent, be
entitled to a certificate or certificates representing the number of full shares
of IHK Common Stock received as Stock Consideration and the Cash Consideration,
if any, into which the number of shares of Company Common Stock previously
represented by such certificate or certificates surrendered shall have been
converted pursuant to this Agreement. The Exchange Agent shall accept such
certificates upon compliance with such reasonable terms and conditions as the
Exchange Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. After the Effective Time, there shall be no
further transfer on the records of the Company or its transfer agent of
certificates representing shares of Company Common Stock, and if such
certificates are presented to the Surviving Corporation for transfer, they shall
be canceled against delivery of cash and/or certificates for shares of IHK
Common Stock in accordance with this Agreement. If any certificate for such
shares of IHK Common Stock is to be issued in, or if cash is to be remitted to,
a name other than that in which the certificate for shares of Company Common
Stock surrendered for exchange is registered, it shall be a condition of such
exchange that the certificate so surrendered shall be properly endorsed, with
signature guaranteed or otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Surviving Corporation or its
transfer agent any transfer or other taxes required by reason of the issuance of
certificates for such shares of IHK Common Stock in a name other than that of
the registered holder of the certificate surrendered, or establish to the
satisfaction of the Surviving Corporation or its transfer agent that such tax
has been paid or is not applicable. Until surrendered as contemplated by this
Section 2.10(b), each certificate for shares of Company Common Stock shall be
deemed at any time after the Effective Time of the Merger to represent only the
right to receive upon such surrender the Merger Consideration as contemplated by
Section 2.06.
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(c) No dividends or other distributions with respect to shares of IHK
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered certificate for shares of Company Common Stock with
respect to the shares of IHK Common Stock represented thereby and no cash
payment in lieu of fractional shares of IHK Common Stock shall be paid to any
such holder pursuant to Section 2.10(e) until the surrender of the certificate
for shares of Company Common Stock with respect to the shares of IHK Common
Stock represented thereby in accordance with this Article II. Subject to the
effect of applicable laws, following surrender of any such certificates, these
shall be paid to the holder of the certificate representing whole shares of IHK
Common Stock issued in connection therewith, without interest (i) at the time of
such surrender the amount of any cash payable in lieu of fractional shares to
which such holder is entitled pursuant to Section 2.10(e) and the proportionate
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such shares of IHK Common Stock,
and (ii) at the appropriate payment date, the proportionate amount of dividends
or other distributions with a record date after the Effective Time but prior to
such surrender and a payment date subsequent to such surrender payable with
respect to such whole shares of IHK Common Stock.
(d) All cash paid upon the surrender for exchange of certificates
representing shares of Company Common Stock in accordance with the terms of this
Article II (including any cash paid pursuant to Section 2.10(e)) shall be deemed
to have been issued (and paid) in full satisfaction of all rights pertaining to
the shares of Company Common Stock exchanged for cash theretofore represented by
such certificates.
(e) Notwithstanding any other provisions of this Agreement, each holder of
shares of Company Common Stock after the Effective Time who would otherwise have
been entitled to receive as Stock Consideration a fraction of a share of IHK
Common Stock (after taking into account all shares of Company Common Stock
delivered by such holder) shall receive, in lieu thereof, a cash payment
(without interest) equal to such fraction multiplied by the Cash Consideration.
(f) Any portion of the Merger Consideration deposited with the Exchange
Agent pursuant to this Section 2.10 (the "Exchange Fund") which remains
undistributed to the holders of the certificates representing shares of Company
Common Stock for six months after the Effective Time shall be delivered to IHK,
and any holders of shares of Company Common Stock prior to the Effective Time
who have not theretofore complied with this Article II shall thereafter look
only to IHK and only as general creditors thereof for payment of their claim for
cash or shares of IHK Common Stock, if any.
(g) None of Merger Sub, the Company, IHK or the Exchange Agent shall be
liable to any person in respect of any cash or any shares of IHK Common Stock
from the Exchange Fund delivered to a public office pursuant to any applicable
abandoned property, escheat or similar law. If any certificates representing
shares of Company Common Stock shall not have been surrendered immediately prior
to the date on which any Merger Consideration in respect of such certificate
would otherwise escheat to or become the property of any Government Authority,
any such Merger Consideration in respect of such certificate shall, as such time
and to the extent permitted by
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applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(h) The Exchange Agent shall invest any cash included in the Exchange Fund,
as directed by IHK, on a daily basis, provided that such investments shall be in
obligations of the United States of America or obligations fully guaranteed as
to principal and interest by the United States of America, any of which may be
made through a repurchase agreement in commercially reasonable form with any
bank or other financial institution having capital, surplus and undivided
profits of at least $500,000,000. Any interest and other income resulting from
such investments shall be paid to IHK. To the extent that there are losses with
respect to such investments, or the Exchange Fund diminishes for other reasons
below the level required to make prompt payments of the Merger Consideration as
contemplated hereby, IHK shall promptly replace or restore the portion of the
Exchange Fund lost through investments or other events so as to ensure that the
Exchange Fund is, at all times, maintained at a level sufficient to make such
payments.
(i) The Company shall pay all charges and expenses of the Exchange Agent.
SECTION 2.11 Elections.
(a) Each person who, on or prior to the Election Date referred to in
paragraph (c) below, is a record holder of shares of Company Common Stock (other
than holders of shares to be canceled as set forth in Section 2.06(a)) will be
entitled, with respect to all or any portion of his shares, to make an
unconditional election (a "Cash Election") on or prior to such Election Date to
receive the Cash Consideration (subject to Section 2.06), on the basis
hereinafter set forth.
(b) Prior to the mailing of the Proxy Statement, IHK shall appoint the
Exchange Agent for the payment of the Merger Consideration.
(c) The Company shall prepare and mail a form of election, which form shall
be subject to the reasonable approval of IHK and Merger Sub (the "Form of
Election"), with the Proxy Statement to the record holders of shares of Company
Common Stock as of the record date for the Company Stockholders' Meeting, which
Form of Election shall be used by each record holder of shares of Company Common
Stock who wishes to make a Cash Election, subject to the provisions of Section
2.06 hereof, for any or all shares of Company Common Stock held by such holder.
The Company will use commercially reasonable efforts to make the Form of
Election and the Proxy Statement available to all persons who become holders of
shares of Company Common Stock during the period between such record date and
the Election Date referred to below. Any such holder's Cash Election shall have
been properly made only if the Exchange Agent shall have received at its
designated office, by 5:00 p.m., New York City time on the Business Day (the
"Election Date") next preceding the day on which the vote is taken at the
Company Stockholders' Meeting (or any adjournment thereof) a Form of Election
properly completed and signed and accompanied by certificates for the shares of
Company Common Stock to which such Form of Election relates (or by an
appropriate guarantee of delivery of such certificates as set forth in such Form
of Election from
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a firm which is a member 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, provided such
certificates are in fact delivered to the Exchange Agent within three NYSE
trading days after the date of execution of such guarantee of delivery).
Failure to deliver shares covered by such a guarantee of delivery within the
time set forth therein shall invalidate an otherwise properly made Cash
Election.
(d) Any Form of Election may be revoked by the stockholder submitting it to
the Exchange Agent only by written notice received by the Exchange Agent (i)
prior to 5:00 p.m., New York City time, on the Election Date or (ii) after the
date of the Company Stockholders Meeting, if (and to the extent that) the
Exchange Agent is legally required to permit revocations and the Effective Time
shall not have occurred prior to such date. In addition, all Forms of Election
shall automatically be revoked if the Exchange Agent is notified in writing by
IHK, Merger Sub and the Company that the Merger has been abandoned. If a Form
of Election is revoked, the certificate or certificates (or guarantees of
delivery, as appropriate) for the shares of Company Common Stock to which such
Form of Election relates shall be promptly returned to the stockholder
submitting the same to the Exchange Agent.
(e) The determination of the Exchange Agent shall be binding as to whether
or not elections to receive the Cash Consideration have been properly made or
revoked pursuant to this Section 2.11 with respect to shares of Company Common
Stock and when elections and revocations were received by it. If the Exchange
Agent determines that any Cash Election was not properly made with respect to
shares of Company Common Stock, such shares of Company Common Stock shall be
treated by the Exchange Agent as shares of Company Common Stock which were not
Cash Election Shares at the Effective Time, and such shares of Company Common
Stock shall be exchanged in the Merger for Stock Consideration pursuant to
Section 2.06. The Exchange Agent shall also make all computations as to the
allocation and the proration contemplated by Section 2.06, and any such
computation shall be conclusive and binding on the holders of shares of Company
Common Stock. The Exchange Agent may, with the mutual agreement of IHK and
Merger Sub, make such rules as are consistent with this Section 2.11 for the
implementation of the elections provided for herein as shall be necessary or
desirable fully to effect such elections.
SECTION 2.12 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding shares of Company Common
Stock which are held by stockholders who did not vote in favor of the Merger and
who comply with all of the relevant provisions of Section 262 of the DGCL (the
"Dissenting Shares") shall not be converted into or be exchanged for the right
to receive the Merger Consideration (but instead shall be converted into the
right to receive payment from the Surviving Corporation with respect to such
Dissenting Shares in accordance with the DGCL), unless and until such holders
shall have failed to perfect or shall have effectively withdrawn or lost their
rights to appraisal under the DGCL. If any such holder shall have failed to
perfect or shall have effectively withdrawn or lost such right, such holder's
shares of Company Common Stock shall be entitled to receive either (i) the Stock
Consideration or (ii) the Cash Consideration in accordance with Section 2.06.
The Company shall give prompt notice to
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Merger Sub and IHK of any demands received by the Company for appraisal of
shares of Company Common Stock, and Merger Sub and IHK shall have the right to
participate in and direct all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Merger
Sub and IHK, make any payment with respect to, or settle or offer to settle, any
such demands. IHK agrees to invest in, or lend to, the Surviving Corporation
sufficient funds to permit any payment with respect to Dissenting Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company
concurrently with the execution of this Agreement (the "Company Disclosure
Schedule") (each section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified therein), the
Company hereby represents and warrants to IHK and the Merger Sub that:
SECTION 3.01 Organization and Qualification; Subsidiaries. Each of the
Company and each subsidiary of the Company (a "Company Subsidiary") is a
corporation duly incorporated, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not, individually or in
the aggregate, have a Company Material Adverse Effect (as defined below). The
Company and each Company Subsidiary are duly qualified or licensed as a foreign
corporation to do business, and are in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by the Company and the
respective Company Subsidiaries or the nature of their respective businesses
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Company Material Adverse Effect. The term "Company
Material Adverse Effect" means any adverse change, circumstance or effect that,
individually or in the aggregate with all other adverse changes, circumstances
and effects, is or is reasonably likely to be materially adverse to the
business, operations, assets, liabilities (including, without limitation,
contingent liabilities), financial condition or results of operations of the
Company and the Company Subsidiaries taken as a whole. Section 3.01 of the
Company Disclosure Schedule sets forth, as of the date of this Agreement, a true
and complete list of all of the Company Subsidiaries, together with the
jurisdiction of incorporation of each Company Subsidiary and the percentage of
each Company Subsidiary's outstanding capital stock or other equity interests
owned by the Company and the Company Subsidiaries, as the case may be, and the
name of each other holder of any such outstanding capital stock or other equity
interests and the percentage so held with respect to each such Company
Subsidiary. There are no partnerships or joint venture arrangements or other
business entities in which the Company or any Company Subsidiary owns an equity
interest that are material to the business of the Company and the Company
Subsidiaries taken as a whole.
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SECTION 3.02 Certificate of Incorporation and By-Laws. The Company has
made available to IHK complete and correct copies of its Certificate of
Incorporation and By-Laws and the certificates of incorporation and by-laws or
other comparable charter or organizational documents of the Company
Subsidiaries, in each case as amended to the date of this Agreement. The Company
is not in violation of any of the provisions of its Certificate of Incorporation
or By-Laws. Except as would not have a Company Material Adverse Effect, no
Company Subsidiary is in violation of any of the provisions of its Certificate
of Incorporation or By-Laws or other comparable charter or organizational
documents.
SECTION 3.03 Capitalization. The authorized capital stock of the
Company consists of 64,000,000 shares of Company Common Stock and 1,000,000
shares of preferred stock ("Company Preferred Stock"). As of September 1, 1997,
(i) 28,738,196 shares of Company Common Stock are issued and outstanding, all of
which are validly issued, fully paid and nonassessable and 2,500,000 of which
are held by Wachovia Bank, N.A. (formerly Wachovia Bank of North Carolina N.A.),
as trustee of the trust created pursuant to the Savannah Foods & Industries,
Inc. Benefit Trust Agreement (the "Benefit Trust"; shares held by the trustee of
the Benefit Trust immediately prior to the Effective Time being referred to
herein as the "Benefit Trust Shares"); (ii) 2,568,604 shares of Company Common
Stock are held in the treasury of the Company; (iii) 1,250,000 shares of Company
Common Stock are reserved for future issuance pursuant to Company Options and
(iv) 1,000,000 shares of Company Preferred Stock are reserved for issuance
pursuant to the Rights Agreement, dated as of March 31, 1989, between the
Company and Citizens and Southern Trust Company, as Rights Agent (as amended,
the "Company Rights Agreement"). Except for Company Options heretofore granted
pursuant to the Company Stock Option Plan or pursuant to agreements or
arrangements described in Section 3.03 of the Company Disclosure Schedule and
the Preferred Stock Purchase Rights (the "Company Rights") issued pursuant to
the Company Rights Agreement, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or any Company Subsidiary or obligating
the Company or any Company Subsidiary to issue or sell any shares of capital
stock of, or other equity interests in, the Company or any Company Subsidiary.
All shares of Company Common Stock and Company Preferred Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of the Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or Company
Preferred Stock or any capital stock of any Company Subsidiary. Each
outstanding share of capital stock of each Company Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and each such share
owned by the Company or another Company Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Company Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever. Neither
the Company nor any Company Subsidiary directly or indirectly owns, or has
agreed to purchase or otherwise acquire, 5% or more of the capital stock of any
corporation, partnership, joint venture or other business association or entity,
assuming for such purpose the conversion of all securities convertible into such
capital stock held by the Company or any Company Subsidiary and the
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exercise of all warrants, options and other rights of the Company or any Company
Subsidiary to purchase such capital stock (other than the Company Subsidiaries
set forth in Section 3.01 of the Company Disclosure Schedule). There are no
material outstanding contractual obligations of the Company or any Company
Subsidiary to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any Company Subsidiary or any other
Person. There are no voting trusts or other agreements or understandings to
which the Company or any Company Subsidiary is a party with respect to the
voting of capital stock of the Company or any Company Subsidiary.
SECTION 3.04 Authority Relative to this Agreement.
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the then
outstanding shares of Company Common Stock, and the filing and recordation of
appropriate merger documents as required by the DGCL). This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by IHK and Merger Sub, constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms (except insofar as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or principles governing the
availability of equitable remedies).
(b) The Company's Board of Directors has approved the Offer, the Merger and
this Agreement, and such approval is sufficient to render inapplicable to the
Offer, the Merger and this Agreement and the transactions contemplated by this
Agreement the provisions of Section 203 of the DGCL. To the Knowledge of the
Company, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Merger, this Agreement or any of the
transactions contemplated by this Agreement.
SECTION 3.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company will not,
(i) conflict with or violate the Certificate of Incorporation or By-laws or
equivalent organizational documents of the Company or any Company Subsidiary,
(ii) assuming that all consents, approvals, authorizations and other actions
described in Section 3.05(b) have been obtained and all filings and obligations
described in Section 3.05(b) have been made, conflict with or violate any
foreign or domestic Law applicable to the Company or any Company Subsidiary or
by which any property or asset of the Company or any Company Subsidiary is bound
or affected, or (iii) result in any breach
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of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of the Company or any Company
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults, or other occurrences which would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for applicable requirements, if any, of the
Exchange Act, state securities or "blue sky" Laws ("Blue Sky Laws"), the NYSE,
the Listing Market and state takeover Laws, the pre-merger notification
requirements of the HSR Act, and filing and recordation of appropriate merger
documents as required by the DGCL and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger, or
otherwise prevent the Company from performing its obligations under this
Agreement, and would not, individually or in the aggregate, have a Company
Material Adverse Effect.
SECTION 3.06 Permits; Compliance. Each of the Company and the Company
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
Company Subsidiary to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits would not, individually or in the aggregate, have a Company Material
Adverse Effect, and, as of the date hereof, no suspension or cancellation of any
of the Company Permits is pending or, to the Knowledge of the Company,
threatened, except where the failure to have, or the suspension or cancellation
of, any of the Company Permits would not, individually or in the aggregate, have
a Company Material Adverse Effect. Neither the Company nor any Company
Subsidiary is in conflict with, or in default or violation of, (i) any Law
applicable to the Company or any Company Subsidiary or by which any property or
asset of the Company or any Company Subsidiary is bound or affected, (ii) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary or any
property or asset of the Company or any Company Subsidiary is bound or affected
or (iii) any Company Permits, except for any such conflicts, defaults or
violations that would not, individually or in the aggregate, have a Company
Material Adverse Effect.
SECTION 3.07 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents required to be
filed by it with the SEC since October 1, 1995 (collectively, the "Company SEC
Reports"). The Company SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act, or the
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Exchange Act, as the case may be, and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No Company Subsidiary is required to file any form, report or other
document with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Company SEC Reports (the "Company Financial
Statements"), (i) was prepared from the books of account and other financial
records of the Company and the consolidated Company Subsidiaries, (ii) was
prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP") applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and (iii) presented
fairly, in all material respects, the consolidated financial position of the
Company and the consolidated Company Subsidiaries as at the respective dates
thereof and the results of their operations and their cash flows for the
respective periods indicated therein except as otherwise noted therein (subject,
in the case of unaudited statements, to normal and recurring year-end
adjustments which were not and are not expected, individually or in the
aggregate, to have a Company Material Adverse Effect and the omission of
footnotes).
(c) The books of account and other financial records of the Company and the
Company Subsidiaries from which the Company Financial Statements were prepared:
(i) reflect all items of income and expense and all assets and liabilities
required to be reflected therein in accordance with U.S. GAAP applied on a basis
consistent with the past practices of the Company, (ii) are in all material
respects complete and correct, and do not contain or reflect any material
inaccuracies or discrepancies and (iii) have been maintained in accordance with
good business and accounting practices.
(d) Except for liabilities and obligations reflected on the September 29,
1996 consolidated balance sheet of the Company (including the notes thereto),
liabilities and obligations disclosed in the Company SEC Reports filed prior to
the date of this Agreement and other liabilities and obligations incurred in the
ordinary course of business consistent with past practice since September 29,
1996, neither the Company nor any Company Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which, individually or in the aggregate, are or are reasonably likely to be
material to the Company and the Company Subsidiaries taken as a whole.
(e) The Company has heretofore furnished to IHK complete and correct copies
of (i) all agreements, documents and other instruments not yet filed by the
Company with the SEC but that are currently in effect and that the Company
expects to file with the SEC after the date of this Agreement and (ii) all
amendments and modifications that have not been filed by the Company with the
SEC to all agreements, documents and other instruments that previously have been
filed by the Company with the SEC and are currently in effect.
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SECTION 3.08 Absence of Certain Changes or Events. Since September
29, 1996, except as contemplated by this Agreement or as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, the Company and
the Company Subsidiaries have conducted their businesses only in the ordinary
course and in a manner consistent with past practice and, since such date, there
has not been (a) any Company Material Adverse Effect, (b) any change by the
Company in its accounting methods, principles or practices, except as may be
required by U.S. GAAP, (c) any damage, destruction or loss (whether or not
covered by insurance) with respect to properties or assets of the Company or any
Company Subsidiary that, individually or in the aggregate, would result in a
Company Material Adverse Effect, (d) any declaration, setting aside or payment
of any dividend or distribution in respect of shares of Company Common Stock or
any redemption, purchase or other acquisition of any of its securities other
than the previously declared regular quarterly dividend of $0.0375 per share of
Company Common Stock, (e) any revaluation by the Company and the Company
Subsidiaries of any asset (including, without limitation, any writing down of
the value of inventory or writing off of notes or accounts receivable), other
than in the ordinary course of business consistent with past practice, (f) any
entry by the Company or any Company Subsidiary into any commitment or
transaction material to the Company and the Company Subsidiaries taken as a
whole, except in the ordinary course of business consistent with past practice,
(g) any increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
the Company or any Company Subsidiary, except in the ordinary course of business
consistent with past practice, (h) any acquisition or disposition by the Company
or any Company Subsidiary of any material asset, except in the ordinary course
of business consistent with past practice, (i) any incurrence, assumption or
guarantee of any indebtedness or obligation relating to any lending or borrowing
except current liabilities and commitments incurred in the ordinary course of
business consistent with past practice, or (j) any amendment, modification or
termination of any existing, or entering into any new, material contract, or any
material plan, lease, license, permit or franchise, except in the ordinary
course of business consistent with past practice.
SECTION 3.09 Absence of Litigation.
(a) Except as set forth in Section 3.09 of the Company Disclosure Schedule,
there is no litigation, suit, claim, action, proceeding or investigation pending
or, to the Knowledge of the Company, threatened against or affecting the Company
or any Company Subsidiary, or any property or asset of the Company or any
Company Subsidiary, before any court, arbitrator or Governmental Entity, which
(i) individually or in the aggregate has had or is reasonably likely to have a
Company Material Adverse Effect or (ii) seeks to delay or prevent the
consummation of the Offer or the Merger.
(b) Neither the Company nor any Company Subsidiary nor any property or
asset of the Company or any Company Subsidiary is subject to any continuing
order of, consent decree, settlement agreement or other similar written
agreement with, or, to the Knowledge of the Company,
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continuing investigation by, any Governmental Entity, or any Order,
determination or award of any Governmental Entity or arbitrator having or
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
SECTION 3.10 Employee Benefit Plans; Labor Matters.
(a) Section 3.10(a) of the Company Disclosure Schedule contains a true and
complete list of (i) all "employee benefit plans" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements to which the Company or any Company Subsidiary is a party, by which
the Company or any Company Subsidiary is bound, with respect to which the
Company or any Company Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Company Subsidiary for the
benefit of any current or former employee, officer or director of the Company or
any Company Subsidiary and (ii) each employee benefit plan for which the Company
or any Company Subsidiary could incur liability under Section 4069 of ERISA, in
the event such plan were terminated, or under Section 4212(c) of ERISA, or in
respect of which the Company or any Company Subsidiary remains secondarily
liable under Section 4204 of ERISA (collectively, the "Company Plans"). Each
Company Plan is in writing and the Company has previously made available to IHK
a true and complete copy of each Company Plan and a true and complete copy of
(1) each trust or other funding arrangement, (2) each summary plan description
and summary of material modifications, (3) the most recently filed Internal
Revenue Service ("IRS") Form 5500, (4) the most recently received IRS
determination letter for each such Company Plan, and (5) the most recently
prepared actuarial report and financial statement in connection with each such
Company Plan. Neither the Company nor any Company Subsidiary has any express or
implied commitment (I) to create, to incur liability with respect to, or to
cause to exist any other employee benefit plan, program or arrangement, (II) to
enter into any contract or agreement to provide compensation or benefits to any
individual or (III) to modify, change or terminate any Company Plan (other than
with respect to a modification, change or termination required by ERISA or the
Code).
(b) None of the Company Plans is a multiemployer plan, within the meaning
of Section 3(37) or 4001(a)(3) of ERISA (a "Multiemployer Plan"), or a single
employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for
which the Company or any Company Subsidiary could incur liability under Section
4063 or 4064 of ERISA (a "Multiple Employer Plan"). With respect to each Company
Plan, neither the Company nor any Company Subsidiary nor any trade or business,
whether or not incorporated (a "Company ERISA Affiliate") that together with the
Company or any Company Subsidiary would be deemed a "single employer" within the
meaning of Section 4001(b) of ERISA has made or suffered a "complete withdrawal"
or a "partial withdrawal" as such terms are respectively defined in Sections
4203 and 4205 of ERISA (or any liability resulting therefrom has been satisfied
in full). None of the Company Plans (i) provides for the payment of separation,
severance, termination or similar-type benefits to any Person, (ii)
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obligates the Company or any Company Subsidiary to pay separation, severance,
termination or other benefits as a result of the Merger or (iii) obligates the
Company or any Company Subsidiary to make any payment or provide any benefit
that would be subject to a tax under Section 4999 of the Code. None of the
Company Plans provides for or promises retiree medical, disability or life
insurance benefits to any current or former employee, officer or director of the
Company or any Company Subsidiary.
(c) Each Company Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS
that such Company Plan is so qualified and each trust established in connection
with any Company Plan which is intended to be exempt from federal income
taxation under Section 501(a) of the Code has received a determination letter
from the IRS that such trust is so exempt. To the Company's Knowledge, no fact
or event has occurred since the date of any such determination letter from the
IRS that would adversely affect the qualified status of any such Company Plan or
the exempt status of any such trust. Each trust maintained or contributed to by
the Company or any Company Subsidiary which is intended to be qualified as a
voluntary employees' beneficiary association exempt from federal income taxation
under Sections 501(a) and 501(c)(9) of the Code has received a favorable
determination letter from the IRS that it is so qualified and so exempt, and, to
the Company's Knowledge, no fact or event has occurred since the date of such
determination by the IRS that would adversely affect such qualified or exempt
status.
(d) To the Company's Knowledge, there has been no non-exempt prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Company Plan. Neither the Company nor any Company
Subsidiary is currently liable or has previously incurred any liability for any
tax or penalty (other than any tax or penalty that would not have a Company
Material Adverse Effect) arising under Section 4971, 4972, 4979, 4980 or 4980B
of the Code or Section 502(c) of ERISA, and to the Company's Knowledge, no fact
or event exists which would give rise to any such liability. Neither the
Company nor any Company Subsidiary has incurred any liability (other than any
liability that would not have a Company Material Adverse Effect) under, arising
out of or by operation of Title IV of ERISA that has not been satisfied in full
(other than liability for premiums to the Pension Benefit Guaranty Corporation
arising in the ordinary course), including, without limitation, any liability in
connection with (i) the termination or reorganization of any employee pension
benefit plan subject to Title IV of ERISA or (ii) the withdrawal from any
Multiemployer Plan or Multiple Employer Plan, and, to the Company's Knowledge,
no fact or event exists which would give rise to any such liability. No
complete or partial termination has occurred within the five years preceding the
date hereof with respect to any Company Plan. No reportable event (within the
meaning of Section 4043 of ERISA) for which the 30-day notice requirement to the
Pension Benefit Guaranty Corporation has not been waived has occurred or is
expected to occur with respect to any Company Plan subject to Title IV of ERISA.
No asset of the Company or any Company Subsidiary is the subject of any lien
arising under Section 302(f) of ERISA or Section 412(n) of the Code; neither the
Company nor any Company Subsidiary has been required to post any security under
Section 307 of ERISA or Section 401(a)(29) of the
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Code; and no fact or event exists which would give rise to any such lien or
requirement to post any such security.
(e) Each Company Plan is now and has been operated in all respects in
accordance with the requirements of all applicable Laws, including, without
limitation, ERISA and the Code, except where any failure to so operate would not
have a Company Material Adverse Effect. No Company Plan has incurred an
"accumulated funding deficiency" (within the meaning of Section 302 of ERISA or
Section 412 of the Code), whether or not waived. The Company's September 29,
1996 balance sheet reflects an accrual of all amounts of employer contributions
and premiums accrued but unpaid with respect to the Company Plans. With respect
to each Company Plan subject to Title IV of ERISA, the accumulated benefit
obligations of such Company Plan are set forth in the footnotes to the Company's
September 29, 1996 balance sheet.
(f) The Company and the Company Subsidiaries have not incurred any
liability under, and have complied in all respects with, the Worker Adjustment
and Retraining Notification Act and the regulations promulgated thereunder
("WARN") and do not reasonably expect to incur any such liability as a result of
actions taken or not taken prior to the Effective Time. Section 3.10(f) of the
Company Disclosure Schedule lists all notices given by the Company and the
Company Subsidiaries in connection with WARN.
(g) (i) Neither the Company nor any Company Subsidiary is a party to any
collective bargaining agreement or other labor union contract applicable to
Persons employed by the Company or any Company Subsidiary, nor, to the Knowledge
of the Company, are there any activities or proceedings of any labor union to
organize any such employees; (ii) except as would not have a Company Material
Adverse Effect, neither the Company nor any Company Subsidiary has breached or
otherwise failed to comply with any provision of any such agreement or contract
and there are no grievances outstanding against the Company or any Company
Subsidiary under any such agreement or contract; (iii) there are no unfair labor
practice complaints pending against the Company or any Company Subsidiary before
the National Labor Relations Board or any current union representation questions
involving employees of the Company or any Company Subsidiary; and (iv) there is
no strike, slowdown, work stoppage or lockout, or, to the Knowledge of the
Company, threat thereof, by or with respect to any employees of the Company or
any Company Subsidiary. The consent of the labor unions which are parties to the
collective bargaining agreements listed in Section 3.10(g) of the Company
Disclosure Schedule is not required to consummate the Merger.
(h) The Board of Directors of the Company has, prior to its execution of
this Agreement, amended each of (i) the Company's Supplemental Executive
Retirement Plan, (ii) the Deferred Compensation Plan for Key Employees of
Michigan Sugar Company, (iii) the Deferred Compensation Plan for Key Employees
of the Company, as amended and restated as of August 12, 1983, and (iv) the
Deferred Compensation Plan for Key Employees of the Company, as amended and
restated as of August 1, 1990 (collectively, the "Company Executive Deferred
Compensation Plans"), to provide that neither the execution of this Agreement,
nor the consummation of the transactions contemplated by this Agreement, shall
constitute a "change in control" for purposes of
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such Company Executive Deferred Compensation Plans or otherwise will result in
the acceleration of vesting or payment of any benefit, or the triggering of any
ancillary or supplemental benefit or subsidy, under such plan. The Company has
the authority and power to amend the Company Executive Deferred Compensation
Plans as described in this Section 3.10(h) without limitation or restriction
with respect to any current participants or beneficiaries, and none of such
participants or beneficiaries shall have a valid claim in law or equity that
such amendment was not effective against them, or otherwise that they are
entitled to rights or benefits that would have accrued to them under such plans
had they not been so amended.
SECTION 3.11 Intellectual Property. "Intellectual Property Rights"
means trademarks, trademark rights, trade names, trade name rights, patents,
patent rights, industrial models, inventions, copyrights, service marks, trade
secrets, applications for trademarks and for service marks, know-how and other
proprietary rights and information. The Company and the Company Subsidiaries
own, or possess adequate licenses or other valid rights to use, all Intellectual
Property Rights used or held for use in connection with the business of the
Company and the Company Subsidiaries as currently conducted. The conduct of the
business of the Company and the Company Subsidiaries as currently conducted does
not and will not conflict in any way with any Intellectual Property Rights of
any third party that, individually or in the aggregate, would have a Company
Material Adverse Effect. To the Knowledge of the Company, there are no
infringements of an Intellectual Property Right owned by or licensed by or to
the Company or any Company Subsidiary that, individually or in the aggregate,
would have a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary has licensed or otherwise permitted the use by any third
party of any Intellectual Property Rights on terms or in a manner which,
individually or in the aggregate, would have a Company Material Adverse Effect.
Neither the Company nor any Company Subsidiary is in breach of any agreements
pursuant to which the Company or any Company Subsidiary has a license to use
Intellectual Property Rights, which breach has had or is reasonably likely to
have a Company Material Adverse Effect, and the Merger will not constitute such
a breach or otherwise reduce or impair, in any material respect, the rights of
the Company or any Company Subsidiary under such license agreements. No claims
are pending or, to the Knowledge of the Company, threatened by any Person with
respect to the ownership, validity or enforceability of any Intellectual
Property Rights owned by or licensed to or by the Company or any Company
Subsidiary or challenging or questioning the right of the Company or any Company
Subsidiary to use any Intellectual Property Rights, except claims that would
not, if determined adversely to the Company or any Company Subsidiary,
individually or in the aggregate, have a Company Material Adverse Effect.
SECTION 3.12 Taxes. The Company and each of the Company Subsidiaries
have (a) filed all federal, state, local and foreign tax returns required to be
filed by them prior to the date of this Agreement (taking into account
extensions), (b) paid or accrued all taxes shown to be due on such returns and
have paid all applicable ad valorem and value added taxes as are due, and (c)
paid or accrued all taxes for which a notice of assessment or collection has
been received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of any failure to file such returns or to pay
or accrue such taxes which would not individually or in the aggregate,
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have a Company Material Adverse Effect. The Company has open years for federal
income tax returns and state income and franchise tax returns only as set forth
in the Section 3.12 of the Company Disclosure Schedule. The Company and each
Company Subsidiary have withheld or collected and paid over to the appropriate
Governmental Entity (or are properly holding for such payment) all taxes
required by Law to be withheld or collected. Neither the Company nor any
Company Subsidiary has made an election under Section 341(f) of the Code.
Except as set forth in Section 3.12 of the Company Disclosure Schedule, no
requests for waivers of the time to assess any taxes against the Company or any
Company Subsidiary have been granted or are pending, except for requests with
respect to such taxes that have been adequately reserved for in the most recent
financial statements contained in the Company SEC Reports, or, to the extent not
adequately reserved, the assessment of which would not, in the aggregate, have a
Company Material Adverse Effect. Except as set forth in Section 3.12 of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code. As used in
this Agreement the term "taxes" includes all federal, state, local and foreign
income, franchise, property, sales, use, excise and other taxes, including
without limitation obligations for withholding taxes from payments due or made
to any other person and any interest, penalties or additions to tax.
SECTION 3.13 Environmental Matters.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) those substances
defined in or regulated under the following federal statutes and their state
counterparts, as each may be amended from time to time, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide
Act and the Clean Air Act; (B) petroleum and petroleum products including crude
oil and any fractions thereof; (C) natural gas, synthetic gas and any mixtures
thereof; (D) radon; (E) any other pollutant or contaminant; and (F) any
substance with respect to which a federal, state or local agency requires
environmental investigation, monitoring, reporting or remediation; and (ii)
"Environmental Laws" means any Law relating to (A) releases or threatened
releases of Hazardous Substances or materials containing Hazardous Substances;
(B) the manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; or (C)
otherwise relating to pollution of the environment or the protection of human
health and safety and natural resources.
(b) Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect: (i) neither the Company nor any Company Subsidiary has
violated or is in violation of any Environmental Law; (ii) none of the
properties owned or leased by the Company or any
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Company Subsidiary (including, without limitation, soils and surface and ground
waters) are contaminated with any Hazardous Substance; (iii) neither the Company
nor any Company Subsidiary is actually or potentially or, to the Knowledge of
the Company, allegedly liable for any off-site contamination; (iv) neither the
Company nor any Company Subsidiary is actually or potentially or, to the
Knowledge of the Company, allegedly liable under any Environmental Law
(including, without limitation, pending or threatened liens); (v) each of the
Company and each Company Subsidiary has all permits, licenses and other
authorizations required under any Environmental Law ("Company Environmental
Permits"); and (vi) each of the Company and each Company Subsidiary has always
been and is in compliance with its Company Environmental Permits.
SECTION 3.14 Products. Except as would not have a Company Material
Adverse Effect, (a) there have been no written notices, citations or decisions
by any Governmental Entity that any product produced, manufactured, marketed or
distributed by the Company or any Company Subsidiary (the "Company Products") is
defective or fails to meet any applicable standards promulgated by such
Governmental Entity, (b) the Company and the Company Subsidiaries have complied
with all Laws applicable to design, manufacture, labeling, testing and
inspection of Company Products, and (c) there have been no recalls ordered or,
to the knowledge of the Company, threatened by any Governmental Entity with
respect to any of the Company Products. Neither the Company nor any Company
Subsidiary has entered into any agreement or arrangement that limits or
otherwise restricts the Company or any Company Subsidiary or any successor
thereto, or that would limit IHK or any subsidiary thereof or any successor
thereto, from engaging or competing in any line of business or in any geographic
area.
SECTION 3.15 Properties and Assets; Real Property and Leases.
(a) The Company and the Company Subsidiaries have sufficient title to all
their respective properties and assets to conduct their respective businesses as
currently conducted or as contemplated to be conducted, with only such
exceptions as, individually or in the aggregate, would not have a Company
Material Adverse Effect.
(b) Set forth in Section 3.15(b) of the Company's Disclosure Schedule is a
true, correct and complete list (including a general description of the uses for
such real property) of all real property owned or leased by the Company and each
of the Company Subsidiaries.
(c) Except as would not have a Company Material Adverse Effect, each parcel
of real property owned or leased by the Company or any Company Subsidiary (i) is
owned or leased free and clear of all mortgages, pledges, liens, security
interests, conditional and installment sale agreements, encumbrances, charges or
other claims of third parties of any kind (collectively, "Liens"), other than
(A) Liens for current taxes and assessments not yet past due, (B) inchoate
mechanics' and materialmen's Liens for construction in progress, (C) workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of business of the Company or such Company Subsidiary consistent with past
practices and (D) all matters of record, Liens and other imperfections of title
and encumbrances (including, without limitation, (l) reservations
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specified in instruments of conveyance such as deeds and indentures, reserving
in favor of the grantor under such instrument ("Deed Reservations"), the right
to make or construct canals, cuts, sluice-ways, dikes and other works ("Waterway
Works") for the drainage or reclamation of any lands, (2) Deed Reservations for
the exclusive possession of a portion of the land on either side of such
Waterway Works, (3) Deed Reservations reserving an interest in mineral rights,
including without limitation, petroleum, petroleum products, phosphate minerals,
oil and gas, (4) any covenant or restriction pursuant to any deed or recorded
plat affecting the Property and (5) any other Deed Reservation) which,
individually or in the aggregate, would not adversely affect the use of the
property for its intended purpose (Liens described in clauses (A) through (D)
being referred to herein as "Permitted Liens"), and (ii) is neither subject to
any governmental decree or order to be sold nor is being condemned, expropriated
or otherwise taken by any public authority with or without payment of
compensation therefor, nor, to the Knowledge of the Company, has any such
condemnation, expropriation or taking been proposed.
(d) All leases of real property leased for the use or benefit of the
Company or any Company Subsidiary to which the Company or any Company Subsidiary
is a party or by which the Company or any Company Subsidiary is bound, and all
amendments and modifications thereto are in full force and effect and have not
been modified or amended, and there exists no default under any such lease by
the Company or any Company Subsidiary or any other party thereto, nor any event
which with notice or lapse of time or both would constitute a default thereunder
by the Company or any Company Subsidiary or any other party thereto, except as,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
SECTION 3.16 Insurance. The Company and the Company Subsidiaries have
obtained and maintained in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such terms,
with such deductibles, and covering such risks, including fire and other risks
insured against by extended coverage, as is customarily carried by reasonably
prudent Persons conducting businesses or owning assets similar to those of the
Company and the Company Subsidiaries, and each has maintained in full force and
effect liability insurance against claims for personal injury or death or
property damage occurring in connection with the activities of the Company and
the Company Subsidiaries or any properties owned, occupied or controlled by the
Company or any Company Subsidiary in such amount as is customarily carried by
reasonably prudent Persons conducting businesses or owning assets similar to
those of the Company and the Company Subsidiaries. The Company and each of the
Company Subsidiaries may terminate each of its insurance policies or binders at
or after the Closing and will incur no penalties or other costs in doing so that
would, individually or in the aggregate, have a Company Material Adverse Effect.
None of such policies or binders was obtained through the use of false or
misleading information or the failure to provide the insurer with all
information requested in order to evaluate the liabilities and risks. There is
no material default with respect to any provision contained in any such policy
or binder, nor has the Company or any of the Company Subsidiaries failed to give
any material notice or present any material claim under any such policy or
binders in due and timely fashion. There are no billed but unpaid premiums past
due under any such policy or binder, the failure of which to be paid would
result in the cancellation of such policy or binder. Except as
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otherwise set forth in the Company SEC Reports or in Section 3.16 of the Company
Disclosure Schedule, (a) there are no outstanding claims in excess of normal
retentions that are not covered under any such policies or binders and, to the
Knowledge of the Company, there has not occurred any event that might
reasonably form the basis of any claim in excess of normal retentions that is
not covered against or relating to the Company or any of the Company
Subsidiaries that is not covered by any of such policies or binders; (b) no
notice of cancellation or non-renewal of any such policies or binders has been
received; and (c), except as set forth in Section 3.16 of the Company Disclosure
Schedule, there are no performance bonds outstanding with respect to the Company
or any of the Company Subsidiaries.
SECTION 3.17 Opinion of Financial Advisor. The Company has received a
fairness opinion of DLJ on the date of this Agreement and the Company will
promptly, upon the execution of this Agreement, deliver a copy of such opinion
to IHK.
SECTION 3.18 Vote Required. The only vote of the holders of any class
or series of capital stock of the Company necessary to approve this Agreement
and the transactions contemplated hereby is the affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock.
SECTION 3.19 Brokers. Except as set forth in Section 3.19 of the
Company's Disclosure Schedule, other than DLJ and The Robinson-Humphrey Company,
Inc. ("Robinson-Humphrey"), no broker, finder or investment banker is entitled
to a brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Company. The
Company has heretofore made available to IHK a complete and correct copy of all
agreements between the Company and either DLJ or Robinson-Humphrey pursuant to
which such firms would be entitled to any payment relating to the Transactions.
SECTION 3.20 Company Rights Agreement. The Company Rights Agreement
has been amended (the "Company Rights Agreement Amendment") so as to provide
that neither IHK nor Merger Sub will become an "Acquiring Person" and that no
"Stock Acquisition Date" or "Distribution Date" (as such terms are defined in
the Company Rights Agreement) will occur as a result of the approval, execution
or delivery of this Agreement or the consummation of the transactions
contemplated hereby. In addition, the Company Rights Agreement contains no
exception from the definition of "Acquiring Person" for Flo-Sun Incorporated and
its Affiliates.
SECTION 3.21 Information Supplied. The Schedule 14D-9 and any other
documents to be filed by the Company with the SEC or any other governmental or
regulatory authority in connection with the Offer and the other transactions
contemplated hereby will not, on the date of its filing or, with respect to the
Schedule 14D-9, on the date it is filed with the SEC and first published, sent
or given to stockholders, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation is made by the
Company with respect to information supplied in writing by or on behalf of IHK
or
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Merger Sub expressly for inclusion therein and information incorporated by
reference therein from documents filed by IHK or Merger Sub with the SEC. The
Schedule 14D-9 and any such other documents filed by the Company with the SEC
under the Exchange Act or with any other Governmental Entity under applicable
law will comply as to form in all material respects with the requirements of the
Exchange Act or other applicable law, as the case may be. None of the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Offer Documents or the Registration Statement
on Form S-4 (together with all amendments thereto, the "Registration Statement")
to be filed with the SEC by IHK in connection with the issuance of shares of IHK
Common Stock in the Merger and as contemplated by Section 2.06 will at the time
the Registration Statement becomes effective under the Securities Act or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and none of the information supplied or to be
supplied by the Company and included or incorporated by reference in the Proxy
Statement (as defined in Section 6.02), as supplemented if necessary, will, at
the date mailed to stockholders of the Company, or at the time of the Company
Stockholder Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the time of such meeting, any
event with respect to the Company or any Company Subsidiary, or with respect to
other information supplied by the Company for inclusion in the Proxy Statement
or the Registration Statement, shall occur which is required to be described in
an amendment of, or a supplement to, the Proxy Statement or the Registration
Statement, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC. The Proxy Statement, insofar as it
relates to other information supplied by the Company for inclusion therein, will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder.
SECTION 3.22 Termination of Existing Merger Agreement. The Company
has terminated the Agreement and Plan of Merger dated as of July 14, 1997 among
XSF Holdings, Inc., DXE Merger Corp., the Company and Flo-Sun Incorporated (the
"Flo-Sun Agreement"), in accordance with the provisions thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IHK AND
MERGER SUB
Except as set forth in the Disclosure Schedule delivered by IHK and Merger
Sub concurrently with the execution of this Agreement (the "IHK Disclosure
Schedule") (each section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified therein), IHK
and Merger Sub, jointly and severally, hereby represent and warrant to the
Company that:
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SECTION 4.01 Organization and Qualification; Subsidiaries.
(a) Each of IHK and each subsidiary of IHK (an "IHK Subsidiary") is a
corporation duly incorporated, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not, individually or in
the aggregate, have an IHK Material Adverse Effect (as defined below). IHK and
each IHK Subsidiary are duly qualified or licensed as a foreign corporation to
do business, and are in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by IHK and the respective IHK
Subsidiaries or the nature of their respective businesses makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not, individually or in
the aggregate, have an IHK Material Adverse Effect. The term "IHK Material
Adverse Effect" means any adverse change, circumstance or effect that,
individually or in the aggregate with all other adverse changes, circumstances
and effects, is or is reasonably likely to be materially adverse to the
business, operations, assets, liabilities (including, without limitation,
contingent liabilities), financial condition or results of operations of IHK and
the IHK Subsidiaries taken as a whole. Section 4.01 of the IHK Disclosure
Schedule sets forth, as of the date of this Agreement, a true and complete list
of all of the IHK Subsidiaries, together with the jurisdiction of incorporation
of each IHK Subsidiary and the percentage of each IHK Subsidiary's outstanding
capital stock or other equity interests owned by IHK and the IHK Subsidiaries,
as the case may be, and the name of each other holder of any such outstanding
capital stock or other equity interests and the percentage so held with respect
to each such IHK Subsidiary. Except as set forth in Schedule 4.01 of the IHK
Disclosure Schedule, there are no partnerships or joint venture arrangements or
other business entities in which IHK or any IHK Subsidiary owns an equity
interest that are material to the business of IHK and the IHK Subsidiaries taken
as a whole.
(b) Merger Sub is a corporation duly incorporated, validly existing and in
good standing under the Laws of Delaware. Merger Sub has not conducted any
activities other than in connection with the organization of Merger Sub, the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby. Merger Sub has no Subsidiaries. Except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, Merger Sub has
not incurred, directly or indirectly, through any Subsidiary or Affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any Person.
From the date of this Agreement until the Effective Time, all of the outstanding
capital stock of Merger Sub will be owned directly by IHK.
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SECTION 4.02 Certificate of Incorporation and By-Laws. IHK has made
available to the Company complete and correct copies of its Articles of
Incorporation and By-Laws and the certificates of incorporation and by-laws or
other comparable charter or organizational documents of the IHK Subsidiaries, in
each case as amended to the date of this Agreement. IHK is not in violation of
any of the provisions of its Articles of Incorporation or By-Laws. Except as
would not have an IHK Material Adverse Effect, no IHK Subsidiary is in violation
of any of the provisions of its Certificate of Incorporation or By-Laws or other
comparable charter or organizational documents.
SECTION 4.03 Capitalization. The authorized capital stock of IHK
consists of 50,000,000 shares of IHK Common Stock and 5,000,000 shares of
preferred stock ("IHK Preferred Stock"). As of September 1, 1997, (i)
14,282,728 shares of IHK Common Stock are issued and outstanding, all of which
are validly issued, fully paid and nonassessable; (ii) no shares of IHK Common
Stock are held in the treasury of IHK; (iii) 773,860 shares of IHK Common Stock
are reserved for future issuance pursuant to IHK Options and (iv) 333,334 shares
of IHK Preferred Stock are reserved for issuance pursuant to the IHK Rights
Agreement. Except for IHK Options heretofore granted pursuant to the IHK
Stock Option Plan as set forth in Section 4.03 of the IHK Disclosure Schedule or
pursuant to agreements or arrangements described in Section 4.03 of the IHK
Disclosure Schedule and the IHK Purchase Rights, there are no options, warrants
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of IHK or any IHK Subsidiary or
obligating IHK or any IHK Subsidiary to issue or sell any shares of capital
stock of, or other equity interests in, IHK or any IHK Subsidiary. All shares
of IHK Common Stock and IHK Preferred Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. There are no outstanding contractual obligations of IHK or
any IHK Subsidiary to repurchase, redeem or otherwise acquire any shares of IHK
Common Stock or IHK Preferred Stock or any capital stock of any IHK Subsidiary.
Each outstanding share of capital stock of each IHK Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and except as set forth
in Section 4.03 of the IHK Disclosure Schedule each such share owned by IHK or
another IHK Subsidiary is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
IHK's or such other IHK Subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever. Neither IHK nor any IHK Subsidiary
directly or indirectly owns, or has agreed to purchase or otherwise acquire, 5%
or more of the capital stock of any corporation, partnership, joint venture or
other business association or entity, assuming for such purpose the conversion
of all securities convertible into such capital stock held by IHK or any IHK
Subsidiary and the exercise of all warrants, options and other rights of IHK or
any IHK Subsidiary to purchase such capital stock (other than the IHK
Subsidiaries set forth in Section 4.01 of the IHK Disclosure Schedule). Except
as set forth in Section 4.03 of the IHK Disclosure Schedule, there are no
material outstanding contractual obligations of IHK or any IHK Subsidiary to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any IHK Subsidiary or any other Person. Except
for the Investor Agreement dated August 27, 1996, among IHK, Greencore Group plc
and Earlsfort Holdings B.V., there are no voting trusts or other agreements or
understandings to which IHK or any IHK Subsidiary is a party with respect to the
voting of capital stock of IHK or any IHK Subsidiary.
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SECTION 4.04 Authority Relative to this Agreement. IHK and Merger Sub
have all necessary corporate power and authority to execute and deliver this
Agreement, to perform their respective obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by IHK and Merger Sub and the consummation by IHK and Merger Sub of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the part of
IHK or Merger Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval of the issuance of the Stock Consideration by the holders of a majority
of the shares of IHK Common Stock voted at the IHK Shareholders' Meeting (as
defined in Section 6.01(b)), and the filing and recordation of appropriate
merger documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by IHK and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligation of IHK and Merger Sub, enforceable against them in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or principles governing the availability
of equitable remedies).
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by IHK and Merger Sub will
not, (i) conflict with or violate the Articles of Incorporation or By-laws or
equivalent organizational documents of IHK, Merger Sub or any other IHK
Subsidiary, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 4.05(b) have been obtained and all filings and
obligations described in Section 4.05(b) have been made, conflict with or
violate any foreign or domestic Law applicable to IHK, Merger Sub or any other
IHK Subsidiary or by which any property or asset of IHK, Merger Sub or any other
IHK Subsidiary is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of IHK, Merger Sub or any other
IHK Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults, or other occurrences which would not,
individually or in the aggregate, have an IHK Material Adverse Effect.
(b) The execution and delivery of this Agreement by IHK and Merger Sub do
not, and the performance of this Agreement by IHK and Merger Sub will not
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for applicable
requirements, if any, of the Exchange Act, Blue Sky Laws, the Listing Market and
state takeover Laws, the pre-merger notification requirements of the HSR Act,
and filing and recordation of appropriate merger documents as required by the
DGCL and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent IHK or Merger Sub from
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performing their respective obligations under this Agreement, and would not,
individually or in the aggregate, have an IHK Material Adverse Effect.
SECTION 4.06 Permits; Compliance. Each of IHK and the IHK Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for IHK or any IHK Subsidiary to own, lease
and operate its properties or to carry on its business as it is now being
conducted (the "IHK Permits"), except where the failure to have, or the
suspension or cancellation of, any of the IHK Permits would not, individually or
in the aggregate, have an IHK Material Adverse Effect, and, as of the date
hereof, no suspension or cancellation of any of the IHK Permits is pending or,
to the Knowledge of IHK, threatened, except where the failure to have, or the
suspension or cancellation of, any of the IHK Permits would not, individually or
in the aggregate, have an IHK Material Adverse Effect. Neither IHK nor any IHK
Subsidiary is in conflict with, or in default or violation of, (i) any Law
applicable to IHK or any IHK Subsidiary or by which any property or asset of IHK
or any IHK Subsidiary is bound or affected, (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which IHK or any IHK Subsidiary is a party or by
which IHK or any IHK Subsidiary or any property or asset of IHK or any IHK
Subsidiary is bound or affected or (iii) any IHK Permits, except for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, have an IHK Material Adverse Effect.
SECTION 4.07 SEC Filings; Financial Statements.
(a) IHK has filed all forms, reports and documents required to be filed by
it with the SEC since March 31, 1995 (collectively, the "IHK SEC Reports"). The
IHK SEC Reports (i) were prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at the
time they were filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. No IHK Subsidiary is required to file any form,
report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the IHK SEC Reports (the "IHK Financial
Statements"), (i) was prepared from the books of account and other financial
records of IHK and the consolidated IHK Subsidiaries, (ii) was prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and (iii) presented
fairly, in all material respects, the consolidated financial position of IHK and
the consolidated IHK Subsidiaries as at the respective dates thereof and the
results of their operations and their cash flows for the respective periods
indicated therein except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have an IHK
Material Adverse Effect and the omission of footnotes).
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(c) The books of account and other financial records of IHK and the IHK
Subsidiaries from which the IHK Financial Statements were prepared: (i) reflect
all items of income and expense and all assets and liabilities required to be
reflected therein in accordance with U.S. GAAP applied on a basis consistent
with the past practices of IHK, (ii) are in all material respects complete and
correct, and do not contain or reflect any material inaccuracies or
discrepancies and (iii) have been maintained in accordance with good business
and accounting practices.
(d) Except for liabilities and obligations reflected on the March 31, 1997
consolidated balance sheet of IHK (including the notes thereto), liabilities and
obligations disclosed in the IHK SEC Reports filed prior to the date of this
Agreement and other liabilities and obligations incurred in the ordinary course
of business consistent with past practice since March 31, 1997, neither IHK nor
any IHK Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which, individually or in the
aggregate, are or are reasonably likely to be material to IHK and the IHK
Subsidiaries taken as a whole.
(e) IHK has heretofore furnished to the Company complete and correct copies
of (i) all agreements, documents and other instruments not yet filed by IHK with
the SEC but that are currently in effect and that IHK expects to file with the
SEC after the date of this Agreement and (ii) all amendments and modifications
that have not been filed by IHK with the SEC to all agreements, documents and
other instruments that previously have been filed by IHK with the SEC and are
currently in effect.
SECTION 4.08 Absence of Certain Changes or Events. Since March 31,
1997, except as contemplated by this Agreement or as disclosed in the IHK SEC
Reports filed prior to the date of this Agreement, IHK and the IHK Subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (a) any
IHK Material Adverse Effect, (b) any change by IHK in its accounting methods,
principles or practices, except as may be required by U.S. GAAP, (c) any damage,
destruction or loss (whether or not covered by insurance) with respect to
properties or assets of IHK or any IHK Subsidiary that, individually or in the
aggregate, would result in an IHK Material Adverse Effect, (d) any declaration,
setting aside or payment of any dividend or distribution in respect of shares of
IHK Common Stock or any redemption, purchase or other acquisition of any of its
securities other than the previously declared regular quarterly dividend of
$0.03 per share of IHK Common Stock, (e) any revaluation by IHK and the IHK
Subsidiaries of any asset (including, without limitation, any writing down of
the value of inventory or writing off of notes or accounts receivable), other
than in the ordinary course of business consistent with past practice, (f) any
entry by IHK or any IHK Subsidiary into any commitment or transaction material
to IHK and the IHK Subsidiaries taken as a whole, except in the ordinary course
of business consistent with past practice, (g) any increase in or establishment
of any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any officers or key employees
of IHK or any IHK Subsidiary, except in the ordinary course of business
consistent with past practice,
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(h) any acquisition or disposition by IHK or any IHK Subsidiary of any material
asset, except in the ordinary course of business consistent with past practice,
(i) any incurrence, assumption or guarantee of any indebtedness or obligation
relating to any lending or borrowing except current liabilities and commitments
incurred in the ordinary course of business consistent with past practice, or
(j) any amendment, modification or termination of any existing, or entering into
any new, material contract, or any material plan, lease, license, permit or
franchise, except in the ordinary course of business consistent with past
practice.
SECTION 4.09 Absence of Litigation.
(a) Except as set forth in Section 4.09 of the IHK Disclosure Schedule,
there is no litigation, suit, claim, action, proceeding or investigation pending
or, to the Knowledge of IHK, threatened against or affecting IHK or any IHK
Subsidiary, or any property or asset of IHK or any IHK Subsidiary, before any
court, arbitrator or Governmental Entity, which (i) individually or in the
aggregate has had or is reasonably likely to have an IHK Material Adverse Effect
or (ii) seeks to delay or prevent the consummation of the Merger.
(b) Neither IHK nor any IHK Subsidiary nor any property or asset of IHK or
any IHK Subsidiary is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
Knowledge of IHK, continuing investigation by, any Governmental Entity, or any
Order, determination or award of any Governmental Entity or arbitrator having or
reasonably likely to have, individually or in the aggregate, an IHK Material
Adverse Effect.
SECTION 4.10 Employee Benefit Plans; Labor Matters.
(a) Section 4.10(a) of the IHK Disclosure Schedule contains a true and
complete list of (i) all "employee benefit plans" (within the meaning of Section
3(3) of ERISA) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements to which IHK or any IHK Subsidiary is a party, by which IHK or any
IHK Subsidiary is bound, with respect to which IHK or any IHK Subsidiary has any
obligation or which are maintained, contributed to or sponsored by IHK or any
IHK Subsidiary for the benefit of any current or former employee, officer or
director of IHK or any IHK Subsidiary and (ii) each employee benefit plan for
which IHK or any IHK Subsidiary could incur liability under Section 4069 of
ERISA, in the event such plan were terminated, or under Section 4212(c) of
ERISA, or in respect of which IHK or any IHK Subsidiary remains secondarily
liable under Section 4204 of ERISA (collectively, the "IHK Plans"). Each IHK
Plan is in writing and IHK has previously made available to the Company a true
and complete copy of each IHK Plan and a true and complete copy of (1) each
trust or other funding arrangement, (2) each summary plan description and
summary of material modifications, (3) the most recently filed IRS Form 5500,
(4) the most recently received IRS determination letter for each such IHK Plan,
and (5) the most recently prepared actuarial report and financial statement in
connection with each such IHK Plan.
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Neither IHK nor any IHK Subsidiary has any express or implied commitment (I) to
create, to incur liability with respect to, or to cause to exist any other
employee benefit plan, program or arrangement, (II) to enter into any contract
or agreement to provide compensation or benefits to any individual or (III) to
modify, change or terminate any IHK Plan (other than with respect to a
modification, change or termination required by ERISA or the Code).
(b) Each of the IHK Plans that is a Multiemployer Plan or a Multiple
Employer Plan is designated as such on Section 4.10(b) of the IHK Disclosure
Schedule and, with respect to each IHK Plan so designated, except as would not
have an IHK Material Adverse Effect: (i) neither IHK nor any IHK Subsidiary nor
any trade or business, whether or not incorporated (an "ERISA Affiliate") that
together with IHK or any IHK Subsidiary would be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA has made or suffered a "complete
withdrawal" or a "partial withdrawal," as such terms are respectively defined in
Sections 4203 and 4205 of ERISA (or any liability resulting therefrom has been
satisfied in full), (ii) no event has occurred that presents a risk of a partial
withdrawal, (iii) neither IHK, nor any IHK Subsidiary, nor any ERISA Affiliate
has any contingent liability under Section 4204 of ERISA, and (iv) no
circumstances exist that present a risk that any such plan will go into
reorganization. With respect to Multiemployer Plans and Multiple Employer
Plans, except as would not have an IHK Material Adverse Effect, neither IHK nor
any IHK Subsidiary would incur withdrawal liability in the event of a complete
withdrawal within the meaning of Title IV of ERISA from any such Plan. None of
the IHK Plans (i) provides for the payment of separation, severance, termination
or similar-type benefits to any Person, (ii) obligates IHK or any IHK Subsidiary
to pay separation, severance, termination or other benefits as a result of the
Merger or (iii) obligates IHK or any IHK Subsidiary to make any payment or
provide any benefit that would be subject to a tax under Section 4999 of the
Code. None of the IHK Plans provides for or promises retiree medical,
disability or life insurance benefits to any current or former employee, officer
or director of IHK or any IHK Subsidiary.
(c) Each IHK Plan which is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the IRS that such
IHK Plan is so qualified and each trust established in connection with any IHK
Plan which is intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the IRS that such
trust is so exempt. To IHK's Knowledge, no fact or event has occurred since the
date of any such determination letter from the IRS that would adversely affect
the qualified status of any such IHK Plan or the exempt status of any such
trust. Each trust maintained or contributed to by the IHK or any IHK Subsidiary
which is intended to be qualified as a voluntary employees' beneficiary
association exempt from federal income taxation under Sections 501(a) and
501(c)(9) of the Code has received a favorable determination letter from the IRS
that it is so qualified and so exempt, and, to IHK's Knowledge, no fact or event
has occurred since the date of such determination by the IRS that would
adversely affect such qualified or exempt status.
(d) To IHK's Knowledge, there has been no non-exempt prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) with
respect to any IHK Plan. Neither IHK nor any IHK Subsidiary is currently liable
or has previously incurred any liability for
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any tax or penalty (other than any tax or penalty that would not have an IHK
Material Adverse Effect) arising under Section 4971, 4972, 4979, 4980 or 4980B
of the Code or Section 502(c) of ERISA, and to IHK's Knowledge, no fact or event
exists which would give rise to any such liability. Neither IHK nor any IHK
Subsidiary has incurred any liability (other than any liability that would not
have an IHK Material Adverse Effect) under, arising out of or by operation of
Title IV of ERISA that has not been satisfied in full (other than liability for
premiums to the Pension Benefit Guaranty Corporation arising in the ordinary
course), including, without limitation, any liability in connection with (i) the
termination or reorganization of any employee pension benefit plan subject to
Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple
Employer Plan, and, to IHK's Knowledge, no fact or event exists which would give
rise to any such liability. No complete or partial termination has occurred
within the five years preceding the date hereof with respect to any IHK Plan.
No reportable event (within the meaning of Section 4043 of ERISA) for which the
30-day notice requirement to the Pension Benefit Guaranty Corporation has not
been waived has occurred or is expected to occur with respect to any IHK Plan
subject to Title IV of ERISA. No asset of IHK or any IHK Subsidiary is the
subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code; neither IHK nor any IHK Subsidiary has been required to post any
security under Section 307 of ERISA or Section 401(a)(29) of the Code; and no
fact or event exists which would give rise to any such lien or requirement to
post any such security.
(e) Each IHK Plan is now and has been operated in all respects in
accordance with the requirements of all applicable Laws, including, without
limitation, ERISA and the Code, except where any failure to so operate would not
have an IHK Material Adverse Effect. No IHK Plan has incurred an "accumulated
funding deficiency" (within the meaning of Section 302 of ERISA or Section 412
of the Code), whether or not waived. IHK's March 31, 1997 balance sheet
reflects an accrual of all amounts of employer contributions and premiums
accrued but unpaid with respect to the IHK Plans. With respect to each IHK Plan
subject to Title IV of ERISA, the accumulated benefit obligations of such IHK
Plan are set forth in the footnotes to IHK's March 31, 1997 balance sheet.
(f) IHK and the IHK Subsidiaries have not incurred any liability under, and
have complied in all respects with, WARN and do not reasonably expect to incur
any such liability as a result of actions taken or not taken prior to the
Effective Time.
(g) (i) Except as set forth in Section 4.10(g) of the IHK Disclosure
Schedule, neither IHK nor any IHK Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to Persons
employed by IHK or any IHK Subsidiary, nor, to the Knowledge of IHK, are there
any activities or proceedings of any labor union to organize any such employees;
(ii) except as would not have an IHK Material Adverse Effect, neither IHK nor
any IHK Subsidiary has breached or otherwise failed to comply with any provision
of any such agreement or contract and there are no grievances outstanding
against IHK or any IHK Subsidiary under any such agreement or contract; (iii)
there are no unfair labor practice complaints pending against IHK or any IHK
Subsidiary before the National Labor Relations Board or any current union
representation questions involving employees of IHK or any IHK Subsidiary; and
(iv) there is no strike, slowdown, work stoppage or lockout, or, to the
Knowledge of IHK, threat thereof, by or with respect to any
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employees of IHK or any IHK Subsidiary. The consent of the labor unions which
are parties to the collective bargaining agreements listed in Section 4.10(g) of
the IHK Disclosure Schedule is not required to consummate the Merger.
SECTION 4.11 Intellectual Property. IHK and the IHK Subsidiaries own,
or possess adequate licenses or other valid rights to use, all Intellectual
Property Rights used or held for use in connection with the business of IHK and
the IHK Subsidiaries as currently conducted. The conduct of the business of IHK
and the IHK Subsidiaries as currently conducted does not and will not conflict
in any way with any Intellectual Property Rights of any third party that,
individually or in the aggregate, would have an IHK Material Adverse Effect. To
the Knowledge of IHK, there are no infringements of an Intellectual Property
Right owned by or licensed by or to IHK or any IHK Subsidiary that, individually
or in the aggregate, would have an IHK Material Adverse Effect. Neither IHK nor
any IHK Subsidiary has licensed or otherwise permitted the use by any third
party of any Intellectual Property Rights on terms or in a manner which,
individually or in the aggregate, would have an IHK Material Adverse Effect.
Neither IHK nor any IHK Subsidiary is in breach of any agreements pursuant to
which IHK or any IHK Subsidiary has a license to use Intellectual Property
Rights, which breach has had or is reasonably likely to have an IHK Material
Adverse Effect, and the Merger will not constitute such a breach or otherwise
reduce or impair, in any material respect, the rights of IHK or any IHK
Subsidiary under such license agreements. No claims are pending or, to the
Knowledge of IHK, threatened by any Person with respect to the ownership,
validity or enforceability of any Intellectual Property Rights owned by or
licensed to or by IHK or any IHK Subsidiary or challenging or questioning the
right of IHK or any IHK Subsidiary to use any Intellectual Property Rights,
except claims that would not, if determined adversely to IHK or any IHK
Subsidiary, individually or in the aggregate, have an IHK Material Adverse
Effect.
SECTION 4.12 Taxes. IHK and each of the IHK Subsidiaries have (a)
filed all federal, state, local and foreign tax returns required to be filed by
them prior to the date of this Agreement (taking into account extensions), (b)
paid or accrued all taxes shown to be due on such returns and have paid all
applicable ad valorem and value added taxes as are due, and (c) paid or accrued
all taxes for which a notice of assessment or collection has been received
(other than amounts being contested in good faith by appropriate proceedings),
except in the case of any failure to file such returns or to pay or accrue such
taxes which would not individually or in the aggregate, have an IHK Material
Adverse Effect. IHK has open years for federal income tax returns and state
income and franchise tax returns only as set forth in the Section 4.12 of the
IHK Disclosure Schedule. IHK and each IHK Subsidiary have withheld or collected
and paid over to the appropriate Governmental Entity (or are properly holding
for such payment) all taxes required by Law to be withheld or collected.
Neither IHK nor any IHK Subsidiary has made an election under Section 341(f) of
the Code. No requests for waivers of the time to assess any taxes against IHK
or any IHK Subsidiary have been granted or are pending, except for requests with
respect to such taxes that have been adequately reserved for in the most recent
financial statements contained in the IHK SEC Reports, or, to the extent not
adequately reserved, the assessment of which would not, in the aggregate, have
an IHK Material Adverse Effect. Except as set forth in Section 4.12 of the IHK
Disclosure Schedule, neither IHK nor any IHK Subsidiary has made any payments,
is obligated to make any payments,
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or is a party to any agreement that under certain circumstances could obligate
it to make any payments that will not be deductible under Section 280G of the
Code. As used in this Agreement the term "taxes" includes all federal, state,
local and foreign income, franchise, property, sales, use, excise and other
taxes, including without limitation obligations for withholding taxes from
payments due or made to any other person and any interest, penalties or
additions to tax.
SECTION 4.13 Environmental Matters. Except as would not, individually
or in the aggregate, have an IHK Material Adverse Effect: (i) neither IHK nor
any IHK Subsidiary has violated or is in violation of any Environmental Law;
(ii) none of the properties owned or leased by IHK or any IHK Subsidiary
(including, without limitation, soils and surface and ground waters) are
contaminated with any Hazardous Substance; (iii) neither IHK nor any IHK
Subsidiary is actually or potentially or, to the Knowledge of IHK, allegedly
liable for any off-site contamination; (iv) neither IHK nor any IHK Subsidiary
is actually or potentially or, to the Knowledge of IHK, allegedly liable under
any Environmental Law (including, without limitation, pending or threatened
liens); (v) each of IHK and each IHK Subsidiary has all permits, licenses and
other authorizations required under any Environmental Law ("IHK Environmental
Permits"); and (vi) each of IHK and each IHK Subsidiary has always been and is
in compliance with its IHK Environmental Permits.
SECTION 4.14 Products. Except as would not have an IHK Material
Adverse Effect, (a) there have been no written notices, citations or decisions
by any Governmental Entity that any product produced, manufactured, marketed or
distributed by IHK or any IHK Subsidiary (the "IHK Products") is defective or
fails to meet any applicable standards promulgated by such Governmental Entity,
(b) IHK and the IHK Subsidiaries have complied with all Laws applicable to
design, manufacture, labeling, testing and inspection of IHK Products, and (c)
there have been no recalls ordered or, to the knowledge of IHK, threatened by
any Governmental Entity with respect to any of the IHK Products. Neither IHK
nor any IHK Subsidiary has entered into any agreement or arrangement that limits
or otherwise restricts IHK or any IHK Subsidiary or any successor thereto, or
that would limit IHK or any subsidiary thereof or any successor thereto, from
engaging or competing in any line of business or in any geographic area.
SECTION 4.15 Properties and Assets; Real Property and Leases.
(a) IHK and the IHK Subsidiaries have sufficient title to all their
respective properties and assets to conduct their respective businesses as
currently conducted or as contemplated to be conducted, with only such
exceptions as, individually or in the aggregate, would not have an IHK Material
Adverse Effect.
(b) Set forth in Section 4.15(b) of IHK's Disclosure Schedule is a true,
correct and complete list (including a general description of the uses for such
real property) of all real property owned or leased by IHK and each of the IHK
Subsidiaries.
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(c) Except as would not have an IHK Material Adverse Effect, each parcel of
real property owned or leased by IHK or any IHK Subsidiary (i) is owned or
leased free and clear of all Liens, other than (A) Liens for current taxes and
assessments not yet past due, (B) inchoate mechanics' and materialmen's Liens
for construction in progress, (C) workmen's, repairmen's, warehousemen's and
carriers' Liens arising in the ordinary course of business of IHK or such IHK
Subsidiary consistent with past practices and (D) all matters of record, Liens
and other imperfections of title and encumbrances (including, without
limitation, Deed Reservations), (2) Deed Reservations reserving an interest in
mineral rights, including without limitation, petroleum, petroleum products,
phosphate minerals, oil and gas, (3) any covenant or restriction pursuant to any
deed or recorded plat affecting the Property and (4) any other Deed Reservation)
which, individually or in the aggregate, would not adversely affect the use of
the property for its intended purpose, and (ii) is neither subject to any
governmental decree or order to be sold nor is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the Knowledge of IHK, has any such condemnation,
expropriation or taking been proposed.
(d) All leases of real property leased for the use or benefit of IHK or any
IHK Subsidiary to which IHK or any IHK Subsidiary is a party or by which IHK or
any IHK Subsidiary is bound, and all amendments and modifications thereto are in
full force and effect and have not been modified or amended, and there exists no
default under any such lease by IHK or any IHK Subsidiary or any other party
thereto, nor any event which with notice or lapse of time or both would
constitute a default thereunder by IHK or any IHK Subsidiary or any other party
thereto, except as, individually or in the aggregate, would not have an IHK
Material Adverse Effect.
SECTION 4.16 Insurance. IHK and the IHK Subsidiaries have obtained and
maintained in full force and effect insurance with responsible and reputable
insurance companies or associations in such amounts, on such terms, with such
deductibles, and covering such risks, including fire and other risks insured
against by extended coverage, as is customarily carried by reasonably prudent
Persons conducting businesses or owning assets similar to those of IHK and the
IHK Subsidiaries, and each has maintained in full force and effect public
liability insurance, insurance against claims for personal injury or death or
property damage occurring in connection with the activities of IHK and the IHK
Subsidiaries or any properties owned, occupied or controlled by IHK or any IHK
Subsidiary in such amount as is customarily carried by reasonably prudent
Persons conducting businesses or owning assets similar to those of IHK and the
IHK Subsidiaries. IHK and each of the IHK Subsidiaries may terminate each of
its insurance policies or binders at or after the Closing and will incur no
material penalties or other material costs in doing so. None of such policies
or binders was obtained through the use of false or misleading information or
the failure to provide the insurer with all information requested in order to
evaluate the liabilities and risks. There is no material default with respect
to any provision contained in any such policy or binder, nor has IHK or any of
the IHK Subsidiaries failed to give any material notice or present any material
claim under any such policy or binders in due and timely fashion. There are no
billed but unpaid premiums past due under any such policy or binder, the failure
of which to be paid would result in the cancellation of such policy or binder.
Except as otherwise set forth in the IHK SEC Reports or in Schedule 4.16 of
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the IHK Disclosure Schedule, (a) there are no outstanding claims in excess of
normal retentions that are not covered under any such policies or binders and,
to the Knowledge of IHK, there has not occurred any event that might reasonably
form the basis of any claim in excess of normal retentions that is not covered
against or relating to IHK or any of the IHK Subsidiaries that is not covered by
any of such policies or binders; (b) no notice of cancellation or non-renewal of
any such policies or binders has been received; and (c) there are no performance
bonds outstanding with respect to IHK or any of the IHK Subsidiaries.
SECTION 4.17 Opinion of Financial Advisor. IHK has received a
fairness opinion of Lehman Brothers Inc. ("Lehman Brothers") on the date of this
Agreement and IHK will promptly, upon the execution of this Agreement by the
Company, deliver a copy of such opinion to the Company.
SECTION 4.18 Vote Required. The only vote of the holders of any class
or series of capital stock of IHK necessary to approve the transactions
contemplated by this Agreement is the approval of the issuance of the Stock
Consideration by the affirmative vote of the holders of a majority of the shares
of IHK Common Stock voted at the IHK Shareholders' Meeting (as defined in
Section 6.01(b)).
SECTION 4.19 Brokers. Except as set forth in Section 4.19 of the IHK
Disclosure Schedule, other than Lehman Brothers, no broker, finder or investment
banker is entitled to a brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf of IHK.
IHK has heretofore made available to the Company a complete and correct copy of
all agreements between IHK and Lehman Brothers pursuant to which such firm
would be entitled to any payment relating to the Merger.
SECTION 4.20 Information Supplied.
(a) The Offer Documents and any other documents to be filed by IHK and
Merger Sub with the SEC or any other governmental or regulatory authority in
connection with the Offer and the other transactions contemplated hereby will
not, on the date of its filing or, with respect to the Offer Documents, on the
date they are filed with the SEC and first published, sent or given to
stockholders of the Company and the date shares of Company Common Stock are
purchased pursuant to the Offer, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation is made by IHK or Merger Sub with respect to information supplied
in writing by or on behalf of the Company expressly for inclusion therein and
information incorporated by reference therein from documents filed by the
Company or any of the Company Subsidiaries with the SEC. The Offer Documents
and any other such documents filed by IHK or Merger Sub with the SEC under the
Exchange Act or with any other governmental or regulatory authority under
applicable law will comply as to form in all material respects with the
requirements of the Exchange Act or applicable law, as the case may be.
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(b) Neither the information supplied or to be supplied in writing by or on
behalf of IHK or Merger Sub for inclusion, nor the information incorporated by
reference from documents filed by IHK or any of the IHK Subsidiaries including
Merger Sub, with the SEC, in the Schedule 14D-9, or any other documents to be
filed by IHK or Merger Sub or the Company with the SEC or any other governmental
or regulatory authority in connection with the Offer and the other transactions
contemplated hereby will on the date of its filing or, with respect to the
Schedule 14D-9, on the date it is filed with the SEC and first published, sent
or given to stockholders of the Company, contains any untrue statement of a
material fact or omit to state any material fact required to be stated therein,
in light of the circumstances under which they are made, not misleading.
(c) None of the information supplied or to be supplied by IHK for inclusion
or incorporation by reference in the Registration Statement will at the time the
Registration Statement becomes effective under the Securities Act or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and none of the information supplied or to be
supplied by IHK and included or incorporated by reference in the Proxy
Statement, as supplemented if necessary, will, at the date mailed to
shareholders of IHK, or at the time of the IHK Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at any
time prior to the time of such meeting, any event with respect to IHK or any IHK
Subsidiary, or with respect to other information supplied by IHK for inclusion
in the Proxy Statement or the Registration Statement, shall occur which is
required to be described in an amendment of, or a supplement to, the Proxy
Statement or the Registration Statement, such event shall be so described, and
such amendment or supplement shall be promptly filed with the SEC. The Proxy
Statement, insofar as it relates to other information supplied by IHK for
inclusion therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
SECTION 4.21 Financing. In connection with the transactions
contemplated by this Agreement, Lehman Brothers Commercial Paper Inc. ("LBCPI")
has issued a commitment letter (the "Lehman Brothers Commitment") to IHK, a true
and correct copy of which has been delivered to the Company, for funds which,
together with cash available to IHK, will enable IHK (or cause Merger Sub) to
(a) pay the Offer Price pursuant to the Offer, (b) pay the Cash Consideration
pursuant to the Merger, (c) refinance such of its existing indebtedness as shall
be necessary to consummate the Offer and the Merger and the financing therefor
and provide working capital prior to the Effective Time and (d) pay related fees
and expenses. Upon consummation of the Offer, IHK will provide funds obtained
from the Lehman Brothers Commitment to Merger Sub sufficient to pay for all
amounts described above.
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01 Conduct of Business by the Company Pending the Merger.
The Company covenants and agrees that, between the date of this Agreement and
the Effective Time, except as set forth in Section 5.01 of the Company
Disclosure Schedule or as specifically contemplated by any other provision of
this Agreement, unless IHK shall otherwise agree in writing:
(a) the Company and the Company Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in all material
respects, in substantially the same manner as heretofore conducted, and shall
use commercially reasonable efforts to preserve intact their present lines of
business, maintain their rights and franchises and preserve their relationships
with employees, customers, suppliers and others having business dealings with
them to the end that their ongoing businesses shall not be impaired in any
material respect at the Effective Time; provided, however, that no action by the
Company or any Company Subsidiary specifically permitted by any other provision
of this Section 5.01 shall be deemed a breach of this Section 5.01(a);
(b) neither the Company nor any Company Subsidiary shall amend or otherwise
change its Certificate of Incorporation or By-Laws or equivalent organizational
documents;
(c) neither the Company nor any Company Subsidiary shall issue, sell,
pledge, dispose of, grant or encumber, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of, (i) any shares of capital stock of the
Company or any Company Subsidiary of any class or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of the Company or any Company Subsidiary (except for (A)
the issuance of a maximum of 200,000 shares of Company Common Stock issuable
pursuant to Company Options outstanding on the date hereof in accordance with
the terms thereof and (B) issuances by a direct or indirect wholly owned
subsidiary of the Company of capital stock to such subsidiary's parent) or (ii)
any assets of the Company or any Company Subsidiary, except in the ordinary
course of business and in a manner consistent with past practice;
(d) neither the Company nor any Company Subsidiary shall declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock, other than (i)
any regular quarterly dividends declared and paid in accordance with past
practice and not in excess of $0.0375 per share of Company Common Stock and (ii)
dividends by a direct or indirect wholly owned subsidiary of the Company to such
subsidiary's parent;
(e) neither the Company nor any Company Subsidiary shall reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock,
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except for any such transaction by a wholly owned subsidiary of the Company
that remains a wholly owned subsidiary of the Company after the consummation of
such transaction;
(f) neither the Company nor any Company Subsidiary shall (i) acquire or
dispose of (including, without limitation, by merger, consolidation,
acquisition or disposition of stock or assets, or by liquidation or dissolution)
any interest in any corporation, partnership, other business organization or any
division thereof or any assets, other than the acquisition or disposition of
assets in the ordinary course of business consistent with past practice and any
other acquisitions for consideration which is not, in the aggregate, in excess
of $10,000,000 and any other dispositions for consideration which is not, in the
aggregate, in excess of $10,000,000; (ii) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any Person, or
make any loans or advances, except for (A) indebtedness incurred in the ordinary
course of business and consistent with past practice, (B) indebtedness of the
Company to a direct or indirect wholly owned Company Subsidiary or indebtedness
of a direct or indirect wholly owned Company Subsidiary to the Company or
another direct or indirect wholly owned Company Subsidiary and (C) other
indebtedness with a maturity of not more than one year incurred in the ordinary
course of business consistent with past practice; (iii) enter into, amend or
terminate any contract or agreement material to the business, results of
operations or financial condition of the Company and the Company Subsidiaries
taken as a whole other than in the ordinary course of business, consistent with
past practice; (iv) authorize any capital expenditure, other than capital
expenditures for the Company and the Company Subsidiaries as a whole, in an
aggregate amount not exceeding the sum of (A) the amount provided in the capital
expenditure budget for the fiscal year ending September 28, 1997 previously
provided to IHK and (B) $5,000,000; or (v) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would not be
permitted under this subsection (f);
(g) neither the Company nor any Company Subsidiary shall (i) increase the
compensation payable or to become payable to its officers or employees, except
for increases in accordance with past practices in salaries or wages of
employees of the Company or any Company Subsidiary who are not officers of the
Company, or (ii) except pursuant to existing policies and agreements, grant any
severance or termination pay to any director, officer or other employee of the
Company or any Company Subsidiary, or (iii) enter into or amend any employment
or severance agreement with any director, officer or other employee of the
Company or any Company Subsidiary or (iv) establish, adopt, enter into, extend,
amend or terminate any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other agreement, trust,
fund, policy or arrangement for the benefit of any director, officer or
employee;
(h) neither the Company nor any Company Subsidiary shall take any action,
other than as required by the SEC or by U.S. GAAP, with respect to accounting
policies or procedures (including, without limitation, procedures with respect
to the payment of accounts payable and collection of accounts receivable);
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(i) neither the Company nor any Company Subsidiary shall make any tax
election or settle or compromise any material federal, state, local or foreign
income tax liability;
(j) neither the Company nor any Company Subsidiary shall take any action
that would prevent or impede any party to this Agreement from obtaining any
consent or approval the receipt of which is a condition to the consummation of
the Offer or the Merger;
(k) neither the Company nor any Company Subsidiary shall enter into any
agreement or arrangement that would limit or otherwise restrict the Company or
any Company Subsidiary or any successor thereto or, after consummation of the
Merger, IHK or any subsidiary thereof or any successor thereto, from engaging or
competing in any line of business or in any geographic area;
(l) neither the Company nor any Company Subsidiary shall pay, discharge or
satisfy any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course business and consistent with past practice,
of liabilities reflected or reserved against in the September 29, 1996
consolidated balance sheet of the Company (including the notes thereto) or
subsequently incurred in the ordinary course of business and consistent with
past practice;
(m) neither the Company nor any Company Subsidiary shall take any action
that would result in (i) any of the representations or warranties of the Company
set forth in this Agreement that are qualified as to materiality becoming
untrue, (ii) any of such representations or warranties that are not so qualified
becoming untrue in any material respect or (iii) except as otherwise permitted
by Section 6.05, any of the conditions to the Offer set forth in Annex A or the
conditions to the Merger set forth in Article VII not being satisfied; and
(n) neither the Company nor any Company Subsidiary shall authorize or enter
into an agreement to do anything prohibited by Sections 5.01(b) through (m).
SECTION 5.02 Conduct of Business by IHK and the IHK Subsidiaries
Pending the Merger. Except with respect to any action taken to incur
indebtedness to fund the Offer, the Cash Consideration and any expenses incurred
in connection therewith and to fund working capital requirements in the ordinary
course of business prior to the Effective Time, IHK covenants and agrees that,
between the date of this Agreement and the Effective Time, except as set forth
in Section 5.02 of the IHK Disclosure Schedule or as specifically contemplated
by any other provision of this Agreement, unless the Company shall otherwise
agree in writing:
(a) IHK and the IHK Subsidiaries shall carry on their respective businesses
in the usual, regular and ordinary course in all material respects, in
substantially the same manner as heretofore conducted, and shall use
commercially reasonable efforts to preserve intact their present lines of
business, maintain their rights and franchises and preserve their relationships
with employees, customers, suppliers and others having business dealings with
them to the end that their ongoing businesses shall not be impaired in any
material respect at the Effective Time; provided, however,
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that no action by IHK or any IHK Subsidiary specifically permitted by any other
provision of this Section 5.02 shall be deemed a breach of is Section 5.02(a);
(b) Neither IHK nor any IHK Subsidiary shall amend or otherwise change its
Articles of Incorporation or By-Laws or equivalent organizational documents;
(c) Neither IHK nor any IHK Subsidiary shall issue, sell, pledge, dispose
of, grant or encumber, or authorize the issuance, sale, pledge, disposition,
grant or encumbrance of, (i) any shares of capital stock of IHK or any IHK
Subsidiary of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom interest),
of IHK or any IHK Subsidiary (except for (A) the issuance of a maximum of
590,870 shares of IHK Common Stock pursuant to the IHK Option Plan, (B) pursuant
to the IHK Employee Stock Purchase Plan and (C) issuances by a direct or
indirect wholly owned subsidiary of IHK of capital stock to such subsidiary's
parent or (ii) any assets of IHK or any IHK Subsidiary, except in the ordinary
course of business and in a manner consistent with past practice;
(d) Neither IHK nor any IHK Subsidiary shall declare, set aside, make or
pay any dividend or other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock, other than (i) any
quarterly dividends declared and paid in accordance with past practice and not
in excess of $0.03 per share of IHK Common Stock and (ii) such dividends by a
direct or indirect wholly owned subsidiary of IHK to such subsidiary's parent;
(e) Neither IHK nor any IHK Subsidiary shall reclassify, combine, split,
subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any
of its capital stock, except for any such transaction by a direct or indirect
wholly owned subsidiary of IHK that remains a wholly-owned subsidiary of IHK
after the consummation of such transaction;
(f) Neither IHK nor any IHK Subsidiary shall (i) acquire or dispose of
(including, without limitation, by merger, consolidation, or acquisition or
disposition of stock or assets, or by liquidation or dissolution) any interest
in any corporation, partnership, other business organization or any division
thereof or any assets, other than the acquisition or disposition of assets in
the ordinary course of business consistent with past practice and any other
acquisitions for consideration which is not, in the aggregate, in excess of
$10,000,000 and any other dispositions for consideration which is not, in the
aggregate, in excess of $10,000,000; (ii) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any Person, or
make any loans or advances, except for (A) indebtedness incurred in the ordinary
course of business and consistent with past practice, (B) indebtedness of IHK to
a direct or indirect wholly owned IHK Subsidiary or indebtedness of IHK or a
direct or indirect wholly owned IHK Subsidiary to another direct or indirect
wholly owned IHK Subsidiary, (C) other indebtedness with a maturity of not more
than one year incurred in the ordinary course of business consistent with past
practice and (D) indebtedness to fund the Offer and the Cash Consideration and
the expenses incurred in connection therewith and
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to refinance the Company's and IHK's existing indebtedness; (iii) enter into,
amend or terminate any contract or agreement material to the business, results
of operations or financial condition of IHK and the IHK Subsidiaries taken as a
whole other than in the ordinary course of business, consistent with past
practice; (iv) authorize any capital expenditure, other than capital
expenditures for IHK and the IHK Subsidiaries as a whole, in an aggregate ate
amount not exceeding the sum of (A) the amount provided in the capital
expenditure budget for the fiscal year ending March 31, 1998 previously provided
to the Company and (B) $5,000,000; or (v) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would not be
permitted under this subsection (f);
(g) Neither IHK nor any IHK Subsidiary shall (i) increase the compensation
payable or to become payable to its officers or employees, except for increases
in accordance with past practices in salaries or wages of employees of IHK or
any IHK Subsidiary who are not officers of IHK, or (ii) except pursuant to
existing policies and agreements, grant any severance or termination pay to any
director, officer or other employee of IHK or any IHK Subsidiary, or (iii)
except for change of control agreements specified in Section 5.02(g) of the IHK
Disclosure Schedule enter into or amend any employment or severance agreement
with any director, officer or other employee of IHK or any IHK Subsidiary or
(iv) establish, adopt enter into, extend, amend or terminate any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;
(h) Neither IHK nor any IHK Subsidiary shall take any action, other than as
required by the SEC or U.S. GAAP, with respect to accounting policies or
procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivable);
(i) Neither IHK nor any IHK Subsidiary shall make any tax election or
settle or compromise any material federal, state, local or foreign income tax
liability;
(j) Neither IHK nor any IHK Subsidiary shall take any action that would
prevent or impede any party to this Agreement from obtaining any consent or
approval the receipt of which is a condition to the consummation of the Offer or
the Merger;
(k) Neither IHK nor any IHK Subsidiary shall enter into any agreement or
arrangement that would limit or otherwise restrict IHK or any IHK Subsidiary or
any successor thereto, after the consummation of the Merger, from engaging or
competing in any line of business or in any geographic area;
(l) Neither IHK nor any IHK Subsidiary shall pay, discharge or satisfy any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business and consistent with past
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practice, of liabilities reflected or reserved against in the March 31, 1997
consolidated balance sheet of IHK or subsequently incurred in the ordinary
course of business and consistent with past practice;
(m) Neither IHK nor any IHK Subsidiary shall take any action that would
result in (i) any of the representations or warranties of IHK and the Merger Sub
set forth in this Agreement that are qualified as to materiality becoming
untrue, (ii) any of such representations or warranties that are not so qualified
becoming untrue in any material respect or (iii) any of the conditions to the
Offer set forth in Annex A or the conditions to the Merger set forth in Article
VII not being satisfied; and
(n) Neither IHK nor any IHK Subsidiary shall authorize or enter into an
agreement to do anything prohibited by Sections 5.02(b) through (m).
SECTION 5.03 Government Filings.
(a) The Company shall use commercially reasonable efforts to promptly file
and shall cause the Company Subsidiaries to promptly file all reports required
to be filed by any of them with any Governmental Entities between the date of
this Agreement and the Effective Time and shall (to the extent permitted by Law
or regulation or any applicable confidentiality agreement) deliver to IHK copies
of all such reports promptly after the same are filed.
(b) IHK shall use commercially reasonable efforts to promptly file and
shall cause each IHK Subsidiary to promptly file all reports required to be
filed by any of them with any Governmental Entities between the date of this
Agreement and the Effective Time and shall (to the extent permitted by Law or
regulation or any applicable confidentiality agreement) deliver to the Company
copies of all such reports promptly after the same are filed.
(c) Subject to applicable Laws, IHK shall have the right to review in
advance, and to the extent practicable to consult with the Company, with respect
to all the information relating to IHK or any IHK Subsidiary or the Merger which
appears in any Company or Company Subsidiary filings made with, or written
materials submitted to, any Governmental Entity.
(d) Subject to applicable Laws, the Company shall have the right to review
in advance, and to the extent practicable to consult with IHK, with respect to
all the information relating to the Company or any Company Subsidiary or the
Merger which appears in any IHK or IHK Subsidiary filings made with, or written
materials submitted to, any Governmental Entity.
(e) In exercising the rights provided by Sections 5.03(c) and 5.03(d), each
of the parties hereto agrees to act reasonably and as promptly as practicable.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Stockholders' Meetings.
(a) Unless otherwise required pursuant to the applicable fiduciary duties
of the Company's Board of Directors to the stockholders of the Company (as
determined in good faith by the Company's Board of Directors based upon the
advice of outside counsel), (i) the Company shall call and hold a meeting of its
stockholders (the "Company Stockholders' Meeting") as promptly as practicable to
consider and vote upon the approval of this Agreement and the Merger, and the
Company shall use commercially reasonable efforts to hold the Company
Stockholders' Meeting as soon as practicable after the date on which shares of
Company Common Stock are purchased in the Offer and the Registration Statement
becomes effective, (ii) the Company's Board of Directors shall recommend such
approval (as well as acceptance of the Offer), and (iii) the Company shall take
all lawful action to solicit such approval, including, without limitation,
timely mailing the Proxy Statement.
(b) Unless otherwise required pursuant to the applicable fiduciary duties
of IHK's Board of Directors to the shareholders of IHK (as determined in good
faith by IHK's Board of Directors based upon the advice of outside counsel), (i)
IHK shall call and hold a meeting of its shareholders (the "IHK Shareholders'
Meeting") as promptly as practicable to consider and vote upon the approval of
the issuance of the Stock Consideration, and IHK shall use commercially
reasonable efforts to hold the IHK Shareholders' Meeting as soon as practicable
after the date on which shares of Company Common Stock are purchased in the
Offer and the Registration Statement becomes effective, (ii) the IHK's Board of
Directors shall recommend such approval, and (iii) IHK shall take all lawful
action to solicit such approval, including, without limitation, timely mailing
the Proxy Statement.
SECTION 6.02 Registration Statement; Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement (i)
IHK and the Company shall prepare and IHK shall file with the SEC the
Registration Statement in connection with the registration under the Securities
Act of the shares of IHK Common Stock to be issued to the stockholders of the
Company in the Merger, a portion of which Registration Statement shall also
serve as the joint proxy statement/prospectus (together with any amendments
thereof or supplements thereto, the "Proxy Statement") relating to the
Stockholders' Meetings. The Registration Statement shall also register the
resale of IHK Common Stock received in the Offer and the Merger by Affiliates of
the Company by such Affiliates and IHK shall maintain the effectiveness of the
Registration Statement with respect to such resales of such IHK Common Stock for
a period of one year after the Effective Time. At any time during such one year
period, upon IHK's request, any such Affiliates shall not be allowed to sell IHK
Common Stock pursuant to such Registration
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Statement for a period of 45 days if (i) IHK or any IHK Subsidiary is engaged in
confidential negotiations or other confidential business activities, disclosure
of which would be required in such registration statement (but would not be
required if such sales were not made), and IHK determines in good faith that
such disclosure would be materially detrimental to IHK and its stockholders, or
(ii) IHK determines to effect a registered underwritten public offering of IHK's
equity securities or of securities convertible to IHK's equity securities for
IHK's account and IHK takes substantial steps (including, but not limited to,
selecting the managing underwriter for such offering) and is proceeding with
reasonable diligence to effect such offering; provided, however, that IHK may
only make such a request twice during such one year period. A deferral of such
sales shall be lifted, if, in the case of a deferral pursuant to clause (i) of
the preceding sentence, the negotiations or other activities are disclosed or
terminated, or, in the case of a deferral pursuant to clause (ii) of the
preceding sentence, the proposed registration for IHK's account is abandoned.
The Company and such Affiliates shall furnish all information concerning the
Company and such Affiliates as IHK may reasonably request in connection with
such actions and the preparation of the Registration Statement and the Proxy
Statement. IHK shall use commercially reasonable efforts, and the Company and
such Affiliates will cooperate with IHK, to cause the Registration Statement to
become effective as promptly as practicable and to keep the Registration
Statement effective as long as is necessary to consummate the Merger. Prior to
the effective date of the Registration Statement, IHK shall take all action
required under any applicable federal or state securities Laws in connection
with the issuance of shares of IHK Common Stock pursuant to the Merger. IHK
shall, as promptly as practicable, provide copies of any written comments
received from the SEC with respect to the Registration Statement to the Company
and advise the Company of any verbal comments with respect to the Registration
Statement received from the SEC. IHK and the Company shall each give the other
and its counsel the opportunity to review the Registration Statement and each
document to be incorporated by reference therein and all responses to requests
for additional information by and replies to comments of the SEC before their
being filed with, or sent to, the SEC. IHK and the Company shall each use
commercially reasonable efforts, after consultation with the other party, to
respond promptly to all such comments of and requests by the SEC. Unless
otherwise required by the applicable fiduciary duties of the respective Boards
of Directors to their respective stockholders (as determined in good faith by
each respective Board of Directors based upon the advice of its outside
counsel), as promptly as practicable after the Registration Statement shall have
become effective, the Company and IHK shall mail the Proxy Statement to their
respective stockholders.
(b) Unless otherwise required pursuant to the applicable fiduciary duties
of the respective Boards of Directors to their respective stockholders (as
determined in good faith by each respective Board of Directors based upon the
advice of its outside counsel), no amendment or supplement to the Proxy
Statement or the Registration Statement will be made by IHK or the Company
without the approval of the other party, which approval shall not be
unreasonably withheld. IHK will advise the Company, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of IHK Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of any
request by the SEC for amendment of the Proxy Statement or the Registration
Statement.
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(c) Notwithstanding anything to the contrary in this Agreement, (i) IHK
shall have no obligation to mail the Proxy Statement to its shareholders unless
and until IHK shall have received the "comfort letter" referred to in Section
6.10(a) and (ii) the Company shall have no obligation to mail the Proxy
Statement to its stockholders unless and until the Company shall have received
the "comfort letter" referred to in Section 6.10(b).
(d) The information supplied by IHK for inclusion in the Registration
Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to its shareholders
and (iii) the time of the IHK Shareholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. If at any time prior to the time of the IHK Shareholders' Meeting,
any event or circumstance relating to IHK or any IHK Subsidiary, or their
respective officers or directors, should be discovered by IHK which should be
set forth in an amendment or a supplement to the Registration Statement or Proxy
Statement, IHK shall promptly inform the Company.
(e) The information supplied by the Company for inclusion in the
Registration Statement and the Proxy Statement shall not, at (i) the time the
Registration Statement is declared effective, (ii) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of the Company and (iii) the time of the Company Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. If at any time prior to the time of the
Company Stockholders' Meeting any event or circumstance relating to the Company
or any Company Subsidiary, or their respective officers or directors, should be
discovered by the Company which should be set forth in an amendment or a
supplement to the Registration Statement or Proxy Statement, the Company shall
promptly inform IHK.
(f) All documents that IHK is responsible for filing with the SEC in
connection with the transactions contemplated herein will comply as to form and
substance in all material respects with the applicable requirements of the
Securities Act and the rules and regulations thereunder and the Exchange Act and
the rules and regulations thereunder.
(g) All documents that the Company is responsible for filing with the SEC
in connection with the transactions contemplated herein will comply as to form
and substance in all material aspects with the applicable requirements of the
Securities Act and the rules and regulations thereunder and the Exchange Act and
the rules and regulations thereunder.
SECTION 6.03 Access to Information; Confidentiality.
(a) To the fullest extent possible, consistent with applicable Law, the
Company shall afford to IHK and its officers, employees, accountants, counsel,
financial advisors and other representatives ("Representatives") reasonable
access during normal business hours during the
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period prior to the Effective Time to all the officers, employees, agents,
properties, books, contracts, commitments and records of the Company and the
Company Subsidiaries, and will cooperate in furnishing and cause its officers,
employees and agents to furnish information regarding the Company and the
Company Subsidiaries reasonably required in connection with the indebtedness
contemplated by the Lehman Brothers Commitment and during such period, the
Company shall furnish promptly to IHK and its Representatives all information
concerning the businesses, properties and personnel of the Company and the
Company Subsidiaries as IHK may reasonably request.
(b) Until the Effective Time, IHK and the Company will be bound by, and
will hold any information received pursuant to this Agreement in confidence in
accordance with the terms of, the confidentiality agreement between the Company
and IHK dated August 26, 1997 (the "Confidentiality Agreement").
(c) To the fullest extent possible, consistent with applicable Law, IHK
shall, and shall cause the IHK Subsidiaries to, afford to the Company and its
Representatives reasonable access during normal business hours during the period
prior to the Effective Time to all the officers, employees, agents, properties,
books, contracts, commitments and records of IHK and the IHK Subsidiaries, and
during such period, IHK shall furnish promptly to the Company and its
Representatives all information concerning the businesses, properties and
personnel of IHK and the IHK Subsidiaries as the Company may reasonably request.
(d) No investigation by either the Company or IHK shall affect the
representations and warranties of the other.
SECTION 6.04 Approvals and Consents; Cooperation.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties (i) shall make promptly its filings, and
thereafter make any other required submissions, under the HSR Act with respect
to the Offer and the Merger and (ii) shall use all commercially reasonable
efforts to obtain as promptly as practicable (A) all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities,
including opposing any attempt by any Governmental Entity to obtain a
preliminary or permanent injunction, or to affirm on appeal any such injunction,
from the Federal Trade Commission or a federal or state court to enjoin the
consummation of the Offer and the Merger under any antitrust Law, and provided
that IHK shall consider in good faith but shall not be required to agree to any
proposal to make any material modification to the business transaction
contemplated by this Agreement in order to obtain the agreement of any
Governmental Entity to permit the Offer and Merger to be consummated, and (B)
all necessary consents, approvals or waivers from third parties and (iii) shall
execute and deliver any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement.
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(b) The Company and IHK each agrees that it will consult with the other
party with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other party apprised of the status of matters relating to
completion of the transactions contemplated by this Agreement.
SECTION 6.05 No Solicitation of Transactions.
(a) The Company agrees that neither it nor any Company Subsidiary shall,
and that it shall cause its and each Company Subsidiary's Representatives not
to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate
(including by way of furnishing information) any inquiries or the making of any
proposal, or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase or sale of all or any
significant portion of the assets or 20% or more of the equity securities of,
the Company or any Company Subsidiary that, in any such case, could reasonably
be expected to interfere with the completion of the Merger or the other
transactions contemplated by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). The Company further
agrees that neither it nor any Company Subsidiary shall, and that it shall cause
its and each Company Subsidiary's Representatives not to, directly or
indirectly, have any discussion with or provide any confidential information or
data to any Person relating to an Acquisition Proposal or engage in any
negotiations concerning an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal or accept an
Acquisition Proposal; provided, however, that nothing contained in this
Agreement shall prevent the Company or the Company's Board of Directors from (i)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal; (ii) engaging in any discussions or negotiations with, or
providing any information to, any Person in response to an unsolicited bona fide
written Acquisition Proposal by any such Person; or (iii) recommending such an
unsolicited bona fide written Acquisition Proposal to the holders of Company
Common Stock if and only to the extent that, in any such case as is referred to
in clause (ii) or (iii), (A) the Company's Board of Directors concludes in good
faith (after consultation with its legal counsel and financial advisors) that
such Acquisition Proposal is reasonably capable of being completed, taking into
account all legal, financial, regulatory and other aspects of the Acquisition
Proposal and the Person making the Acquisition Proposal, and would, if
consummated, result in a transaction more favorable to holders of Company Common
Stock than the transaction contemplated by this Agreement (any such more
favorable Acquisition Proposal being hereinafter referred to as a "Superior
Proposal"), (B) the Company's Board of Directors determines in good faith after
consultation with legal counsel that such action is necessary for it to act in a
manner consistent with its fiduciary duties under applicable law, (C) prior to
providing any information or data to any Person in connection with a Superior
Proposal by any such Person, the Company's Board of Directors receives from such
Person an executed confidentiality agreement on terms substantially similar to
those contained in the Confidentiality Agreement and (D) prior to providing any
information or data to any Person or entering into discussions or negotiations
with any Person, the Company's Board of Directors notifies IHK promptly of such
inquiries, proposals or offers received by, any such information requested
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from, or any such discussions or negotiations sought to be initiated or
continued with, the Company, any Company Subsidiary or any of their
Representatives indicating, in connection with such notice, the name of such
Person and the terms and conditions of any proposals or offers. The Company
agrees that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. The Company agrees that it shall keep
IHK informed, on a current basis, of the status and terms of any such proposals
or offers and the status of any such discussions or negotiations.
(b) The Company agrees that it will take the necessary steps to promptly
inform each Company Subsidiary and each Representative of the Company or any
Company Subsidiary of the obligations undertaken in this Section 6.05.
SECTION 6.06 Employee Benefits Matters. Annex B hereto sets forth
certain agreements among the parties hereto with respect to employee benefits
matters and is incorporated herein by this reference.
SECTION 6.07 Directors' and Officers' Indemnification and Insurance.
(a) From and after the Effective Time, IHK shall, and shall cause the
Surviving Corporation to, indemnify and hold harmless, each present and former
director, officer, employee and fiduciary the Company and each Company
Subsidiary and each Person who served at the request of the Company or any
Company Subsidiary as a director, officer, trustee, partner, fiduciary or
employee of another corporation, partnership, joint venture, trust pension or
other employee benefit plan or enterprise (collectively, the "Indemnified
Parties"), to the fullest extent permitted under applicable Law, against all
costs and expenses (including attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and settlement amounts paid in connection with any
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer, director, employee or fiduciary, whether occurring
before or after the Effective Time, including, without limitation, the
transactions contemplated by this Agreement (and shall also advance, or cause to
be advanced, expenses as incurred to the fullest extent permitted under the
DGCL, provided that the Person to whom expenses are advanced provides the
undertaking to repay such advances contemplated by Section 145(e) of the DGCL).
IHK and Merger Sub agree that all rights to indemnification existing in favor of
the Indemnified Parties as provided in the Company's By-Laws, as in effect as of
the date hereof, with respect to matters occurring through the Effective Time,
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
(b) Without limiting the foregoing, in the event any claim, action, suit,
proceeding or investigation (a "Claim") is brought against any Indemnified Party
(whether arising before or after the Effective Time) after the Effective Time
(i) the Indemnified Parties may retain counsel satisfactory to them and
reasonably satisfactory to IHK and the Surviving Corporation, (ii) IHK and the
Surviving Corporation shall pay all reasonable fees and expenses of such counsel
for the
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Indemnified Parties promptly as statements therefor are received and (iii) IHK
and the Surviving Corporation will use commercially reasonable efforts to assist
in the vigorous defense of any such matter, provided that neither IHK nor the
Surviving Corporation shall be liable for any settlement of any Claim effected
without its written consent, which consent, however, shall not be unreasonably
withheld. Any Indemnified Party wishing to claim indemnification under this
Section 6.07, upon learning of any such Claim, shall notify IHK (but the failure
so to notify IHK shall not relieve IHK from any liability that IHK may have
under this Section 6.07 except to the extent such failure materially prejudices
IHK), and shall deliver to IHK the undertaking contemplated by Section 145(e) of
the DGCL. The Indemnified Parties as a group may retain only one law firm to
represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties.
(c) For a period of six years after the Effective Time, IHK shall cause to
be maintained in effect the current directors' and officers' liability insurance
policies maintained by the Company (provided that IHK may substitute therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous) with respect to claims arising from facts or events that
occurred prior to the Effective Time; provided, however, that in no event shall
IHK be required to expend pursuant to this Section 6.07(c) more than an amount
per year equal to 200% of current annual premiums paid by the Company for such
insurance (which premiums the Company represents and warrants to be
approximately $260,000 per year in the aggregate).
SECTION 6.08 Obligations of IHK and Merger Sub. IHK shall take all
action necessary to perform, and shall cause Merger Sub to perform, its
obligations under this Agreement and to consummate the Merger on the terms and
subject to conditions set forth in this Agreement.
SECTION 6.09 Affiliates' Letters. No later than 5 days from the date
of this Agreement, the Company shall deliver to IHK a list of names and
addresses of those persons who were, in the Company's reasonable judgment, on
such date, affiliates within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act of the Company (each such
person being a "Company Affiliate"). The Company shall provide IHK with such
information and documents as IHK shall reasonably request for purposes of
reviewing such list. The Company shall use its reasonable efforts to deliver or
cause to be delivered to IHK, prior to the Effective Time, a letter
substantially in the form attached hereto as Exhibit 6.09, executed by each of
the Company Affiliates identified in the foregoing list and of any person who
shall have become a Company Affiliate subsequent to the delivery of such list.
SECTION 6.10 Letters of Accountants.
(a) The Company shall use commercially reasonable efforts to cause to be
delivered to IHK a "comfort" letter of Price Waterhouse LLP or Arthur Andersen
LLP, the Company's independent public accountants, dated and delivered the date
on which the Registration Statement shall become effective and addressed to IHK,
in the form, scope and content contemplated by Statement on Auditing Standards
No. 72, as amended issued by the American Institute of Certified
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Public Accountants, Inc. ("SAS 72"), relating to the financial statements and
other financial data with respect to the Company and its consolidated
subsidiaries included or incorporated by reference in the Proxy Statement and
such other matters as may be reasonably required by IHK, and based upon
procedures carried out to a specified date not earlier than five days prior to
the date thereof.
(b) IHK shall use commercially reasonable efforts to cause to be delivered
to the Company a "comfort letter" of Deloitte & Touche LLP, IHK's independent
public accountants, dated the date on which the Registration Statement shall
become effective, and addressed to the Company, in the form, scope and content
contemplated by SAS 72, relating to the financial statements and other financial
data with respect to IHK and the IHK Subsidiaries included in or incorporated by
reference in the Proxy Statement and such other matters as may be reasonably
required by the Company, and based upon procedures carried out to a specified
date not earlier than five days prior to the date thereof.
SECTION 6.11 Listing Market. IHK shall promptly prepare and submit to
the American Stock Exchange or such other stock exchange or market as the
parties reasonably agree (the "Listing Market") a listing application covering
the shares of IHK Common Stock to be issued in the Merger and pursuant to
Substitute Options, and shall use commercially reasonable efforts to obtain,
prior to the Effective Time, approval for the listing of such IHK Common Stock,
subject to official notice to the Listing Market of issuance, and the Company
shall cooperate with IHK with respect to such listing.
SECTION 6.12 IHK Board Representation. Prior to the Effective Time,
IHK shall cause two nominees of the Company ("Company Nominees"), subject to the
reasonable approval of IHK, to be elected as directors of IHK (and to be in
office immediately prior to the Effective Time). For a period of one or two
years after the Effective Time, depending on the class to which such Company
Nominee is initially elected, IHK shall cause each such Company Nominee to be
nominated for re-election to an additional three year term at the expiration of
his initial term in office.
SECTION 6.13 Company Rights Plan. The Company's Board of Directors
shall take all further action (in addition to that described in Section 3.20)
necessary in order to render the Company Rights inapplicable to the Offer, the
Merger and the other transactions contemplated by this Agreement, to terminate
the Company Rights Agreement as of the Effective Time and to ensure that IHK and
Merger Sub will not have any obligations in connection with the Rights Agreement
or the Company Rights (including by redeeming the Company Rights immediately
prior to the Effective Time or by amending the Company Rights Agreement).
Except as otherwise provided in this Section 6.13 and Section 3.20, the Company
shall not, prior to the Effective Time, redeem the Company Rights or amend or
terminate the Company Rights Agreement unless (a) required to do so by order of
a court of competent jurisdiction or (b) required by the applicable fiduciary
duties of the Company's Board of Directors to the stockholders of the Company
(as determined in good faith by the Company's Board or Directors based upon the
advice of outside counsel).
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SECTION 6.14 Public Announcements. Unless otherwise required by
applicable Law or stock exchange requirements, IHK and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or any transaction contemplated
thereby and shall not issue any such press release or make any such public
statement prior to such consultation.
SECTION 6.15 Subsequent Financial Statements.
(a) As soon as practicable following filing, the Company shall deliver to
IHK a copy of each periodic report on Forms 10-Q or 10-K, so filed prior to the
Effective Time. The financial statements contained therein are referred to as
the "Company Subsequent Financial Statements." The Company Subsequent Financial
Statements (i) will be prepared from the books of account and other financial
records of the Company and the consolidated Company Subsidiaries, (ii) will be
prepared in accordance with U.S. GAAP applied on a consistent basis throughout
the periods indicated (except as may be indicated in the notes thereto) and
(iii) will present fairly, in all material respects, the consolidated financial
position of the Company and the consolidated Company Subsidiaries as at the
respective dates thereof and the results of their operations and cash flows for
the respective periods indicated therein except as otherwise noted therein
(subject in the case of unaudited statements, to normal and recurring year-end
adjustments which shall not be expected, individually or in the aggregate, to
have a Company Material Adverse Effect and the omission of footnotes).
(b) As soon as practicable following filing, IHK shall deliver to the
Company a copy of each periodic report on Forms 10-Q or 10-K, so filed prior to
the Effective Time. The financial statements contained therein are referred to
as the "IHK Subsequent Financial Statements." The IHK Subsequent Financial
Statements (i) will be prepared from the books of account and other financial
records of IHK and the consolidated IHK Subsidiaries, (ii) will be prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and (iii) will
present fairly, in all material respects, the consolidated financial position of
IHK and the consolidated IHK Subsidiaries as at the respective dates thereof and
the results of their operations and cash flows for the respective periods
indicated therein except as otherwise noted therein (subject in the case of
unaudited statements, to normal and recurring year-end adjustments which shall
not be expected, individually or in the aggregate, to have an IHK Material
Adverse Effect and the omission of footnotes).
ARTICLE VII
CONDITIONS TO THE MERGER
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SECTION 7.01 Conditions to Each Party's Obligation to Effect the
Merger. The obligations of the Company, IHK and Merger Sub to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have been
approved and adopted by the affirmative vote of the stockholders of the Company
in accordance with the DGCL and the Company's Certificate of Incorporation and
the issuance of the IHK Common Stock pursuant to the Merger shall have been
approved by the affirmative vote of the shareholders of IHK in accordance with
the applicable rules and regulations of the Listing Market;
(b) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated;
(c) no Governmental Entity (as defined in Section 9.12(g)) or court of
competent jurisdiction located or having jurisdiction in the United States shall
have enacted, issued, promulgated, enforced or entered any Law, rule,
regulation, executive order or Order which is then in effect and has the effect
of restraining or making the Merger illegal or otherwise prohibiting
consummation of the Merger;
(d) the Registration Statement shall have been declared effective, and no
stop order suspending the effectiveness of the Registration Statement shall be
in effect;
(e) the shares of IHK Common Stock to be issued in the Merger and pursuant
to Substitute Options shall have been authorized for listing on the Listing
Market, subject to official notice of issuance; and
(f) Merger Sub shall have purchased shares of Company Common Stock pursuant
to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite approval and adoption of this Agreement and the transactions
contemplated hereby, as follows:
(a) by mutual written consent of IHK and the Company;
(b) by either IHK or the Company, if the Effective Time shall not have
occurred on or before May 31, 1998 (the "Termination Date"); provided, however,
that the right to terminate this Agreement under this Section 8.01(b) shall not
be available to any party whose failure to fulfill any
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obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before the Termination Date;
(c) by either IHK or the Company, if any court of competent jurisdiction in
the United States or other Governmental Entity, based otherwise than on any
antitrust Law, (i) shall have issued an Order or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such Order or other action shall have become
final and nonappealable or (ii) shall have failed to issue an Order or to take
any other action necessary to fulfill the conditions to the Closing of the
Merger and such denial of a request to issue such Order or take such other
action shall have become final and nonappealable;
(d) (x) by either IHK or the Company, if this Agreement and the
transactions contemplated hereby shall fail to receive the requisite vote for
approval and adoption at the Company Stockholders' Meeting or (y) by the
Company, if the issuance of the IHK Common Stock as part of the Merger shall
fail to receive the requisite vote for approval at the IHK Shareholders'
Meeting;
(e) by IHK, if prior to the payment for shares of Company Common Stock
pursuant to the Offer (i) the Company's Board of Directors withdraws, modifies
or changes its approval or recommendation (including by amendment of the
Schedule 14D-9) of this Agreement, the Offer or the Merger in a manner adverse
to IHK or Merger Sub, (ii) the Company's Board of Directors shall, at a time
when there is an Acquisition Proposal with respect to the Company, fail to
reaffirm such approval or recommendation of this Agreement, the Offer or the
Merger upon the reasonable request of IHK and Merger Sub, (iii) the Company's
Board of Directors shall approve or recommend any acquisition of the Company or
a material portion of its assets or any tender offer for shares of its capital
stock, in each case, other than by the other parties hereto or an affiliate
thereof; (iv) a tender offer or exchange offer for 20% or more of the
outstanding shares of capital stock of the Company is commenced, and the
Company's Board of Directors fails to recommend against acceptance of such
tender offer or exchange offer by its stockholders (including by taking no
position with respect to the acceptance of such tender offer or exchange offer
by its stockholders); or (v) the Company's Board of Directors shall resolve to
take any of the actions specified in clauses (i) through (iv) of this Section
8.01(e);
(f) by the Company, prior to the payment for shares of Company Common Stock
pursuant to the Offer, upon five Business Days' prior notice to IHK and Merger
Sub (which notice shall be revocable by the Company), if, as a result of a
Superior Proposal received by the Company from a Person other than a party to
this Agreement or any of its affiliates, the Company's Board of Directors
determines in good faith that their fiduciary obligations under applicable Law
require that such Superior Proposal be accepted; provided, however, that (i) the
Company's Board of Directors shall have concluded in good faith, after
considering applicable provisions of Law and after giving effect to all
concessions which may be offered by IHK and Merger Sub pursuant to clause (ii)
below, on the basis of advice of counsel, that such action is necessary for the
Company's Board of Directors to act in a manner consistent with its fiduciary
duties under applicable laws and (ii) prior to the effective date of any such
termination, the Company shall provide IHK and Merger Sub with
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an opportunity to make such adjustments in the terms and conditions of this
Agreement, the Offer or the Merger as would enable the Company to proceed with
the transactions contemplated hereby; provided, however, that it shall be a
condition to the effectiveness of termination by the Company pursuant to this
Section 8.01(f) that the Company shall have made the payment of the Termination
Fee (as defined below) to IHK required by Section 8.05(b);
(g) by IHK, prior to the payment for shares of Company Common Stock
pursuant to the Offer, upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions to the Offer set forth in clauses (c) or (d) of
Annex A would be satisfied (a "Terminating Company Breach"); provided, however,
that, if such Terminating Company Breach is curable by the Company and for so
long as the Company continues to exercise all reasonable efforts to cure such
Terminating Company Breach, IHK may not terminate this Agreement under this
Section 8.01(g);
(h) by the Company, prior to the payment for shares of Company Common Stock
pursuant to the Offer, upon breach of any representation, warranty, covenant or
agreement on the part of IHK or Merger Sub set forth in this Agreement, or if
any representation or warranty of IHK and Merger Sub shall have become untrue,
in either case except for such breaches or failures (i) which, individually or
in the aggregate, would not have an IHK Material Adverse Effect and (ii) which,
individually or in the aggregate, would not materially impair or delay the
ability of Merger Sub to consummate the Offer or the ability of IHK, Merger Sub
and the Company to effect the Merger ("Terminating IHK Breach"); provided,
however, that, if such Terminating IHK Breach is curable by IHK and Merger Sub
and for so long as IHK and Merger Sub continue to exercise all reasonable
efforts to cure such Terminating IHK Breach, the Company may not terminate this
Agreement under this Section 8.01(h);
(i) by IHK, if the Offer is terminated or expires without the purchase of
any shares of Company Common Stock thereunder, unless such termination or
expiration has been caused by or resulted from the failure in any material
respect of IHK or Merger Sub to perform any of its covenants and agreements
contained in this Agreement or in the Offer;
(j) by the Company, if all of the conditions to the Offer set forth in
Annex A except for clause (2) have been satisfied and IHK fails to accept and
pay for shares of Company Common Stock in the Offer solely because of the
failure of LBCPI to fund its loan commitment contained in the Lehman Brothers
Commitment; and
(k) by the Company, if on May 29, 1998, the Effective Time shall not have
occurred because IHK and Merger Sub have not been permitted to consummate the
Offer and the Merger by reason of any antitrust Law.
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SECTION 8.02 Effect of Termination. In the event of termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void and, except as provided in Section 8.05, there shall be no liability under
this Agreement on the part of IHK, Merger Sub or the Company or any of their
respective officers or directors and all rights and obligations of each party
hereto shall cease, provided that nothing herein shall relieve any party from
liability for any breach of this Agreement (it being understood that IHK and
Merger Sub shall have no liability for failure to obtain financing of the Offer
and the Merger or to obtain expiration of all waiting periods under the HSR Act
or to avoid the entry or affirmation of any injunction under any antitrust Law
in respect of the Offer or the Merger, unless the Company elects to terminate
this Agreement under Section 8.01(j) or (k), respectively, and then only to the
extent provided in Section 8.05(c)).
SECTION 8.03 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that after the
approval and adoption of this Agreement and the transactions contemplated hereby
by the stockholders of the Company, no amendment may be made which would reduce
the amount or change the type of consideration into which each share of Company
Common Stock shall be converted upon consummation of the Merger. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
SECTION 8.04 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any agreement or condition contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
SECTION 8.05 Fees and Expenses.
(a) Except as set forth in this Section 8.05, all expenses incurred in
connection with this Agreement shall be paid by the party incurring such
expenses, whether or not the Merger is consummated, except that the Company and
IHK each shall pay one-half of all Expenses (as defined below) relating to
printing, filing and mailing the Registration Statement and the Proxy Statement
and all SEC and other regulatory filing fees incurred in connection with the
Registration Statement and the Proxy Statement. "Expenses" as used in this
Agreement shall include all reasonable out-of-pocket expenses (including,
without limitation, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates) incurred
by a party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the
preparation, printing, filing and mailing of the Registration Statement and the
Proxy Statement, the solicitation of stockholder approvals and all other matters
related to the closing of the Merger.
(b) The Company and IHK agree that
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(i) if IHK shall terminate this Agreement pursuant to Section 8.01(e) or
(ii) if the Company shall terminate this Agreement pursuant to Section
8.01(f) or
(iii) if (A) IHK or the Company shall terminate this Agreement pursuant
to Section 8.01(d) due to the failure of the Company's stockholders to approve
and adopt this Agreement and (B) at the time of such failure to so approve and
adopt this Agreement there shall exist an Acquisition Proposal with respect to
the Company and, within 12 months of the termination of this Agreement, the
Company enters into a definitive agreement with any third party with respect to
an Acquisition Proposal with respect to the Company,
then the Company shall pay to IHK an amount equal to $8,000,000 (the "Company
Termination Fee").
(c) The Company and IHK agree that if the Company shall terminate this
Agreement pursuant to Section 8.01(j) or (k), then IHK shall pay to the Company
an amount equal to $8,000,000 (the "IHK Termination Fee").
(d) The Company Termination Fee required to be paid pursuant to Section
8.05(b)(ii) shall be paid prior to, and shall be a pre-condition to
effectiveness of termination of this Agreement pursuant to Section 8.01(f) and
the Company Termination Fee required to be paid pursuant to Section 8.05(b)(iii)
shall be paid to IHK on the next Business Day after a definitive agreement is
entered into with a third party with respect to an Acquisition Proposal with
respect to the Company. Any payment of a Company Termination Fee otherwise
required to be made pursuant to Section 8.05(b) or an IHK Termination Fee
required to be made pursuant to Section 8.05(c) shall be made not later than two
Business Days after termination of this Agreement. All payments under this
Section 8.05 shall be made by wire transfer of immediately available funds to an
account designated by the payee.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that representations,
warranties and agreements set forth in Articles I and II and Sections 6.06, 6.07
and 6.12 and Article IX shall survive the Effective Time for the respective
periods set forth in such sections or, if no such period is specified,
indefinitely and those set forth in Sections 3.19, 4.19, 6.03(b), 8.02 and 8.05
and Article IX shall survive termination for the respective periods set forth in
such sections or, if no such period is specified, indefinitely.
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SECTION 9.02 Notices.
(a) All notices and other communications given or made pursuant to this
Agreement shall be in writing and shall be sent by an overnight courier service
that provides proof of receipt, mailed by registered or certified mail (postage
prepaid, return receipt requested) or telecopied to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to the Company:
Savannah Foods & Industries, Inc.
Two East Bryan Street
Savannah, Georgia 81401
Attention: Corporate Secretary
Telecopier No.: (912) 651-4905
with a copy to:
Skadden Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopier No.: (212) 735-2000
Attention: Stephen M Banker
if to IHK or Merger Sub:
Imperial Holly Corporation
One Imperial Square
P.O. Box 9
Sugar Land, Texas 77847
Attention: James C. Kempner
Telecopier No.: (281) 490-4895
with a copy to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: Robert V. Jewell
Telecopier No.: (713) 220-4285
(b) If this Agreement provides for a designated period after a notice
within which to perform an act, such period shall commence on the date of
receipt or refusal of the notice.
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(c) If this Agreement requires the exercise of a right by notice on or
before a certain date or within a designated period, such right shall be deemed
exercised on the date of delivery to the courier service, telecopying or mailing
of the notice pursuant to which such right is exercised.
(d) Notices of changes of address shall be effective only upon receipt.
SECTION 9.03 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Merger be consummated as originally contemplated to the fullest extent possible.
SECTION 9.04 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of Law or otherwise) without the prior written
consent of the other parties.
SECTION 9.05 Interpretation.
(a) When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents, glossary of
defined terms and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." The phrases "the date of this Agreement" and "the date
hereof" shall be deemed to refer to the date in the first paragraph of this
Agreement.
(b) The Parties hereto acknowledge that certain matters set forth in the
applicable Disclosure Schedule are included for informational purposes only,
notwithstanding the fact that, because they do not rise above applicable
materiality thresholds or otherwise, they would not be required to be set forth
therein by the terms of this Agreement and that disclosure of such matters shall
not be taken as an admission by the Company or IHK that such disclosure is
required to be made under the terms or any provision of this Agreement and in no
event shall the disclosure of such matters be deemed or interpreted to broaden
or otherwise amplify the representations and warranties contained in this
Agreement. Notwithstanding anything to the contrary in Articles III and IV,
each section of the Disclosure Schedule that includes an asterisk in its heading
is intended to be responsive to statements in the correspondingly numbered
representation or warranty requesting a listing of specified matters and does
not list exceptions to the correspondingly numbered representation and warranty.
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SECTION 9.06 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 9.07 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the state of Delaware applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any Delaware state or federal court.
SECTION 9.08 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Article II (which may be enforced by the
beneficiaries thereof), Sections 6.06 and 6.07 (which are intended to be for the
benefit of the persons covered thereby and may be enforced by such persons) and
Section 6.13.
SECTION 9.09 Counterparts. This Agreement may be executed in two or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 9.10 Waiver of Jury Trial. Each of IHK, the Company and Merger
Sub hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise),
arising out of or relating to this Agreement or the actions of IHK, the Company
or Merger Sub in the negotiation, administration, performance and enforcement
thereof.
SECTION 9.11 Entire Agreement. This Agreement (including the Annexes,
the Exhibits, the Company Disclosure Schedule and the IHK Disclosure Schedule)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and, except for the Confidentiality Agreements, supersedes all
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof.
SECTION 9.12 Certain Definitions.
For purposes of this Agreement:
(a) "Affiliate" of a specified Person means a Person who directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with, such specified Person;
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(b) "Beneficial Owner" with respect to any shares of Company Common Stock
means a Person who shall be deemed to be the beneficial owner of such shares (i)
which such Person or any of its Affiliates or associates (as such term is
defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such Person or any of its Affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding or
(iii) which are beneficially owned, directly or indirectly, by any other Persons
with whom such Person or any of its Affiliates or associates or Person with whom
such Person or any of its Affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares;
(c) "Business Day" means any day that is not a Saturday, Sunday or other
day on which banking institutions in New York, New York are authorized or
required by law or executive order to close;
(d) "Closing Price" means the volume weighted average of the trading prices
of IHK Common Stock, rounded to three decimal places, as reported by Bloomberg
Financial Markets, for each of the first 15 consecutive Trading Days in the
period commencing 20 Trading Days prior to the date of the Closing;
(e) "Company Specified Stockholders" means substantially all of the
directors and executive officers of the Company.
(f) "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(g) "Exchange Act" means the Securities Exchange Act of 1934, as amended or
in effect from time to time;
(h) "Governmental Entity" means any United States (federal, state or local)
or foreign government or governmental, regulatory or administrative authority,
agency or commission;
(i) "IHK Specified Stockholders" means P. C. Carrothers, John D. Curtin, D.
W. Ehrenkranz, E. O. Gaylord, Gerald Greinstein, Ann O. Hamilton, B. T.
Harrison, R. E. Henderson, Roger W. Hill, C. K. Jones, Harris L. Kempner, Jr.,
I. H. Kempner, James C. Kempner, R. L. Knecht, A. K. Lebsock, H. E. Lentz,
Robert L. K. Lynch, H. P. Mechler, K. L. Mercer, J. A. Richmond, Fayez Sarofim,
W. F. Schwer, R. W. Strickland, Daniel K. Thorne (individually, and as trustee
for certain trusts), Harris Weston (individually, and as trustee for certain
trusts), Greencore
65
<PAGE>
Group plc, H. Kempner Trust Association, Harris and Eliza Kempner Fund and U. S.
National Bank (as trustee for certain trusts).
(j) "Knowledge" or "Known" means, with respect to any matter in question,
in the case of IHK or the Company, as the case may be, if any of the executive
officers of IHK or the Company has actual knowledge of such matter after making
due inquiry of all Persons who directly report to such executive officers;
(k) "Law" means any United States (federal, state or local) or foreign law,
statute, ordinance, rule, regulation, order, judgment or decree;
(l) "Order" means any decree, judgment, injunction, ruling, writ or other
order (whether temporary, preliminary or permanent);
(m) "Person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government;
(n) "Securities Act" means the Securities Act of 1933, as amended and in
effect from time to time;
(o) "Stock Consideration" is (i) if the Closing Price of IHK Common Stock
is $13.25 or lower, a number of shares of IHK Common Stock equal to the quotient
of the Offer Price divided by $13.25, together with a corresponding number of
IHK Purchase Rights (as defined in Section 2.06(a)); (ii) if the Closing Price
of IHK Common Stock is $17.25 or greater, a number of shares of IHK Common Stock
equal to the quotient of the Offer Price divided by $17.25, together with a
corresponding number of IHK Purchase Rights; or (iii) if the Closing Price of
the IHK Common Stock is greater than $13.25 but less than $17.25, that portion
of a share of IHK Common Stock equal to the quotient of the Offer Price divided
by the Closing Price of the IHK Common Stock, together with a corresponding
number of IHK Purchase Rights;
(p) "Subsidiary" or "Subsidiaries" of any Person means any corporation,
partnership, joint venture or other legal entity of which such Person (either
alone or through or together with any other subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity interests, the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity;
(q) "Trading Day" means a day on which the New York Stock Exchange, Inc.
(the "NYSE") and the American Stock Exchange (the "AMEX") are both open for
trading.
66
<PAGE>
IN WITNESS WHEREOF, IHK, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
IMPERIAL HOLLY CORPORATION
By: /s/ James C. Kempner
---------------------------------------------------
Name: JAMES C. KEMPNER
--------------------
Title: President and Chief Executive Officer
-------------------------------------
IHK MERGER SUB CORPORATION
By: /s/ James C. Kempner
---------------------------------------------------
Name: JAMES C. KEMPNER
--------------------
Title: President and Chief Executive Officer
-------------------------------------
SAVANNAH FOODS & INDUSTRIES, INC.
By: /s/ William W. Sprague III
---------------------------------------------------
Name: WILLIAM W. SPRAGUE III
--------------------------
Title: President and CEO
-----------------
67
<PAGE>
ANNEX A TO THE
AGREEMENT AND PLAN OF MERGER
CONDITIONS TO THE OFFER
Capitalized terms used in this Annex A shall have the meanings assigned to
them in the Agreement to which it is attached (the "Merger Agreement").
Merger Sub shall not be required to accept for payment, purchase or,
subject to any applicable rules and regulations of the SEC, including Rule 14e-
l(c) under the Exchange Act, to pay for, any shares of Company Common Stock
tendered pursuant to the Offer until the expiration of any applicable waiting
period under the HSR Act and Merger Sub may, subject to the terms and conditions
of the Merger Agreement, terminate or amend the Offer as to any shares of
Company Common Stock not then accepted for payment, or may delay the acceptance
for payment of or (subject to such Merger Agreement, rules or regulations)
payment for shares of Company Common Stock tendered, if (1) at the expiration of
the Offer, the number of shares of Company Common Stock validly tendered and not
withdrawn, together with any other shares of Company Common Stock owned by IHK
or Merger Sub or their affiliates, shall not constitute at least 50.1% of the
outstanding shares of Company Common Stock on a fully diluted basis, (2) IHK
shall not have obtained financing sufficient to enable IHK (or cause Merger Sub)
to pay the amounts set forth in clauses (a), (b) and (c) of Section 4.21 of the
Merger Agreement or (3) at any time on or after the date of the Merger Agreement
and prior to the acceptance for payment of shares of Company Common Stock, any
of the following events shall have occurred and be continuing:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, administrative interpretation, Order or injunction
enacted, promulgated, entered, enforced or deemed applicable to the
Offer or the Merger (other than the application of the waiting period
provisions of the HSR Act) by any court of competent jurisdiction in the
United States or other Governmental Entity, which would (i) restrain,
prohibit or make illegal or otherwise prohibit (A) the acceptance for
payment of, or payment for or purchase of at least 50.1% of the shares
of Company Common Stock or (B) the consummation of the Merger, or (ii)
prohibiting IHK or any of its affiliates to exercise full rights of
ownership of the shares of Company Common Stock, including without
limitation the right to vote any shares of Company Common Stock
purchased by them on all matters properly presented to the stockholders
of the Company, including without limitation the adoption and approval
of this Agreement and the Merger;
(b) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii)
the declaration of any banking moratorium or any suspension of payments
in respect of banks or any material limitation (whether or not
mandatory) on the extension of credit by lending institutions in the
United States, (iii) the commencement of a war, material armed
hostilities or any other material international or national calamity
A-1
<PAGE>
involving the United States having a significant adverse effect on the
functioning of the financial markets in the United States, or (iv) in
the case of any of the foregoing existing at the time of the execution
of the Merger Agreement, a material acceleration or worsening thereof;
(c) the Company shall have breached or failed to comply with any of
its obligations under the Merger Agreement (other than as a result of a
breach by IHK or Merger Sub of any of their obligations under the Merger
Agreement) and such breach or failure shall continue unremedied for ten
(10) business days after the Company has received written notice from
IHK or Merger Sub of the occurrence of such breach or failure, except
such breaches or failures (i) which, individually and in the aggregate,
would not have a Company Material Adverse Effect and (ii) which,
individually and in the aggregate, would not materially impair or delay
the ability of Merger Sub to consummate the Offer or the ability of IHK,
Merger Sub and the Company to effect the Merger;
(d) any representation or warranty of the Company contained in the
Merger Agreement shall fail to be true and correct as of such expiration
or proposed termination of the Offer except for such failures (i) which,
individually and in the aggregate, would not have a Company Material
Adverse Effect and (ii) which, individually and in the aggregate, would
not materially impair or delay the ability of Merger Sub to consummate
the Offer or the ability of IHK, Merger Sub and the Company to effect
the Merger, provided that IHK shall have notified the Company promptly
upon learning of such failure;
(e) the Merger Agreement shall have been terminated pursuant to its
terms or amended pursuant to its terms to provide for such termination
or amendment of the Offer; or
(f) the Company's Board of Directors shall have (i) (including by
amendment of the Schedule 14D-9) withdrawn or modified in any manner
adverse to IHK or Merger Sub its approval or recommendation of the
Offer, the Merger or this Agreement or (ii) resolved to do any of the
foregoing;
which, in the good faith reasonable judgment of IHK and Merger Sub, makes it
inadvisable to proceed with acceptance for payment or payment for shares of
Company Common Stock.
Except as set forth in the Merger Agreement, the foregoing conditions are
for the sole benefit of IHK and Merger Sub and may be asserted regardless of the
circumstances (including any action or inaction by IHK or Merger Sub other than
a breach by IHK or Merger Sub of the Merger Agreement) giving rise to any such
condition or waived by IHK or Merger Sub, in whole or in part, at any time or
from time to time, in its discretion. The failure of IHK or Merger Sub at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
A-2
<PAGE>
ANNEX B TO THE
AGREEMENT AND PLAN OF MERGER
AGREEMENTS RESPECTING PLANS AND
OTHER EMPLOYEE BENEFIT MATTERS
1. (a) For a period of one year immediately following the Closing
Date, IHK shall provide or cause the Surviving Corporation to provide all
employees of the Company who continue to be employed by IHK or the Surviving
Corporation or any of their respective Affiliates as of the Effective Time
("Continuing Employees") with compensation and benefits on terms which are, in
the aggregate, not substantially less favorable than those provided to the
Continuing Employees immediately prior to the date hereof.
(b) IHK further agrees that, for purposes of all employee benefit
plans of IHK or the Surviving Corporation or any of their respective Affiliates
in which Continuing Employees participate from and after the Effective Time and
under which an employee's benefit depends, in whole or in part, on length of
service, credit will be given to Continuing Employees for service previously
credited with the Company or any Company Subsidiary prior to the Effective Time
to the extent that such crediting of service does not result in duplication of
benefits.
(c) IHK shall cause each employee benefit plan in which
Continuing Employees participate from and after the Effective Time to waive (i)
any preexisting condition restriction which was waived under the terms of any
analogous Company plan prior to the Effective Time and (ii) any waiting period
limitation which would otherwise be applicable to a Continuing Employee on or
after the Effective Time to the extent the Continuing Employee had satisfied any
similar waiting period under an analogous Company plan prior to the Effective
Time. IHK further agrees that it shall guarantee all obligations of the Company
under any Company Plan.
2. IHK and the Company acknowledge that the consummation of the
Offer shall constitute a "Change in Control" for purposes of the Company Stock
Option Plan.
3. (a) IHK will consent to the Company's entering into a new or
amended employment agreement with William W. Sprague III on the terms agreed to
by IHK, Merger Sub and the Company.
(b) IHK intends to consent to the Company's entering into new or
amended employment agreements as soon as practicable following the date hereof
with the Continuing Employees agreed to by IHK and the Company.
4. The Company will cause the following actions with respect to the
Company's Benefit Trust Agreement dated March 14, 1996 as amended (the "Benefit
Trust Agreement") to occur prior to the execution of this Agreement:
B-1
<PAGE>
(a) The Company will amend the Benefit Trust Agreement in the
following respects:
(i) provide for the corpus of the trust to be invested in IHK
Common Stock, rather than Company Common Stock;
(ii) provide for prepayment of the Note, at the Company's
direction, with corpus (cash or IHK Common Stock as directed);
(iii) clarify Section 3.2 of the Trust Agreement to ensure that a
release of pledged stock is not distributed to participants on release,
but held in trust to pay benefits when due;
(iv) provide that the Offer and the Merger will not constitute a
Proposed Change in Control under the Trust Agreement;
(v) provide that the Trustee can only sell IHK Common Stock after
giving IHK a right of first refusal;
(vi) provide that shares of IHK Common Stock held by the Trust will
be voted in proportion to all other outstanding IHK Common Stock; and
(vii) provide that the Trustee will tender or exchange of IHK
Common Stock held by the Trust as directed by the Company's Board of
Directors.
(b) The cash received by the Benefit Trust in the Offer and the Merger
will be used to repay the existing Note of the Benefit Trust to the Company and
to purchase additional shares of IHK Common Stock.
B-2
<PAGE>
EXHIBIT 6.09 TO THE
AGREEMENT AND PLAN OF MERGER
FORM OF AFFILIATE LETTER FOR
AFFILIATES OF THE COMPANY
[DATE]
IMPERIAL HOLLY CORPORATION
One Imperial Square, Suite 200
Sugar Land, Texas 77487
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Savannah Foods & Industries, Inc., a Delaware
corporation (the "Company"), as the term "Affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules And
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms
of the Agreement and Plan of Merger dated as of September , 1997 (the "Merger
Agreement") among Imperial Holly Corporation, a Texas corporation ("IHK"), IHK
Merger Sub Corporation, a Delaware corporation ("Merger Sub"), and the Company,
Merger Sub will be merged with and into the Company (the "Merger"). Capitalized
terms used in this letter without definition shall have the meanings assigned to
them in the Merger Agreement.
As a result of the Merger, I may receive shares of common stock, no
par value, of IHK ("IHK Common Stock"). I would receive such IHK Common Stock
(the "Shares") in exchange for shares (or upon exercise of options for shares)
owned by me of common stock, par value $.25 per share, of the Company ("Company
Common Stock").
1. I represent, warrant and covenant to IHK that in the event I receive
any Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable limitations
upon my ability to sell, transfer or otherwise dispose of the Shares, to the
extent I felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of the Shares to me
pursuant to the Merger has been registered with the Commission under the Act on
a Registration Statement on Form
1
<PAGE>
S-4. However, I have also been advised that, because at the time the Merger is
submitted for a vote of the stockholders of the Company, (a) I may be deemed to
be an affiliate of the Company and (b) distribution by me of the IHK Common
Stock has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the IHK Common Stock issued to me in the Merger unless (i)
such sale, transfer or other disposition is made in conformity with the volume
and other limitations of Rule 145 promulgated by the Commission under the Act,
(ii) such sale, transfer or other disposition has been registered under the Act,
the Company shall include the Shares in the Registration Statement and to
maintain the effectiveness of the Registration statement for a period of 100
days after the effective date hereof or (iii) in the opinion of counsel
reasonably acceptable to IHK, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
D. Except as provided in paragraph C, I understand that IHK is under
no obligation to register the sale, transfer or other disposition of the Shares
by me or on my behalf under the Act or, except as provided in paragraph 2(A)
below, to take any other action necessary in order to make compliance with an
exemption from such registration available.
E. I understand that there will be placed on the certificates for
the Shares issued to me, or any substitutions therefor, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED , 1997 BETWEEN THE REGISTERED HOLDER
HEREOF AND IMPERIAL HOLLY CORPORATION, A COPY OF WHICH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICES OF IMPERIAL HOLLY CORPORATION."
F. I understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement, IHK
reserves the right to put the following legend on the certificates issued to my
transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF
WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
2
<PAGE>
G. Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after the date of this letter.
2. By IHK's acceptance of this letter, IHK hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell
the Shares pursuant to Rule 145 and, to the extent applicable, Rule 144 under
the Act, IHK shall (a) use its reasonable efforts to (i) file, on a timely
basis, all reports and data required to be filed with the Commission by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and (ii) furnish to me upon request a written statement as to
whether IHK has complied with such reporting requirements during the 12 months
preceding any proposed sale of the IHK Common Stock by me under Rule 145, and (
b) otherwise use its reasonable efforts to permit such sales pursuant to Rule
145 and Rule 144. IHK hereby represents to me that it has filed all reports
required to be filed with the Commission under Section 13 of the 1934 Act during
the preceding 12 months.
B. It is understood and agreed that certificates with the legends
set forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from the
date the undersigned acquired the IHK Common Stock received in the Merger and
the provisions of Rule 145(d)(2) are then available to the undersigned, (ii) two
years shall have elapsed from the date the undersigned acquired the IHK Common
Stock received in the Merger and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, or (iii) IHK has received either an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to IHK, or a
"no action" letter obtained by the undersigned from the staff of the Commission,
to the effect that the restrictions imposed by Rule 145 under the Act no longer
apply to the undersigned.
Very truly yours,
-------------------------------------
Name:
Agreed and accepted this ____ day of
[_______________], 1997, by
IMPERIAL HOLLY CORPORATION
By:
--------------------------------
Name:
Title:
3
<PAGE>
STOCKHOLDERS AGREEMENT dated as of September , 1997, among
Imperial Holly Corporation, a Texas corporation ("IHK"), IHK Merger Sub
Corporation, a Delaware corporation and wholly owned subsidiary of IHK ("Merger
Sub"), and the other parties identified on Schedule A hereto (each, a
"Stockholder").
WHEREAS, each Stockholder desires that Savannah Foods & Industries,
Inc., a Delaware corporation (the "Company"), IHK and Merger Sub enter into an
Agreement and Plan of Merger dated as of the date hereof (as the same may be
amended or supplemented, the "Merger Agreement") with respect to the merger of
Merger Sub with and into the Company (the "Merger"); and
WHEREAS, such Stockholder is executing this Agreement as an inducement
to IHK and Merger Sub to enter into and execute the Merger Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by IHK
and Merger Sub of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein, the parties agree as follows:
SECTION 1. Representations and Warranties. Each Stockholder
severally, and not jointly, represents and warrants to IHK and Merger Sub as
follows:
(a) Such Stockholder is the record or beneficial owner of the number
of shares of Common Stock, par value $0.25 per share, of the Company (the
"Company Common Stock") and holds options for shares of Company Common
Stock, each as set forth opposite such Stockholders' name in Schedule A
hereto (as may be adjusted from time to time pursuant to Section 4, such
Stockholder's "Shares"). Except for such Stockholder's Shares, such
Stockholder is not the record or beneficial owner of any shares of Company
Common Stock. Any of such Shares which are described on Schedule A as
option shares shall be deemed "Option Shares" for the purposes of this
Agreement. All other shares shall be deemed "Owned Shares." Any Option
Shares which are exercised prior to the termination of this Agreement shall
be deemed to be "Owned Shares."
(b) This Agreement has been duly authorized, executed and delivered by
such Stockholder and constitutes the legal, valid and binding obligation of
such Stockholder, enforceable against such Stockholder in accordance with
its terms. Neither the execution and delivery of this Agreement nor the
consummation by such Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which such Stockholder is a party or bound or to
which such Stockholder's Shares are subject. The consummation by such
Stockholder of the transactions contemplated hereby
<PAGE>
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or regulation
applicable to such Stockholder or such Stockholder's Shares.
(c) Such Stockholder's Owned Shares and the certificates representing
such Owned Shares are now and at all times during the term hereof will be
held by such Stockholder, or by a nominee or custodian for the benefit of
such Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances arising
hereunder.
(d) Such Stockholder understands and acknowledges that IHK is entering
into, and causing Merger Sub to enter into, the Merger Agreement in
reliance upon such Stockholder's execution and delivery of this Agreement.
SECTION 2. Purchase and Sale of Shares. So long as the Per Share
Amount in the Offer is not less than $20.25 in cash (net to the seller), each
Stockholder hereby severally agrees that he shall tender his Owned Shares into
the Offer prior to the expiration of the Offer and that it shall not withdraw
any Shares so tendered (it being understood that the obligation contained in
this sentence is unconditional).
SECTION 3. Covenants. Each Stockholder severally, and not
jointly, agrees with, and covenants to, IHK and Merger Sub as follows: such
Stockholder shall not, except as contemplated by the terms of this Agreement,
during the term of this Agreement, (i) transfer (which term shall include,
without limitation, for the purposes of this Agreement, any sale, gift, pledge
or other disposition), or consent to any transfer of, any or all of such
Stockholder's Shares or any interest therein, (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer of any
or all of such Shares or any interest therein, (iii) grant any proxy, power-of-
attorney or other authorization or consent in or with respect to such Shares,
(iv) deposit such Shares into a voting trust or enter into a voting agreement or
arrangement with respect to such Shares or (v) take any action that would in any
way restrict, limit or interfere with the performance of its obligations
hereunder or the transactions contemplated hereby; provided that each
Stockholder shall be entitled to transfer all or any portion of such
Shareholder's Shares to any person or entity which agrees in writing to be bound
by the provisions of this Agreement.
SECTION 4. Certain Events. Each Stockholder agrees that this
Agreement and the obligations hereunder shall attach to such Stockholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law or
otherwise, including without limitation such Stockholder's heirs, guardians,
administrators or successors. In the event of any stock split, stock dividend,
merger, reorganization, recapitalization or other change in the capital
structure of the Company affecting the Company Common Stock, or the acquisition
of additional shares of Company Common Stock or other securities or rights of
the Company by any Stockholder, the number of Owned Shares and Option Shares
listed on Schedule A
-2-
<PAGE>
beside the name of such Stockholder shall be adjusted appropriately and this
Agreement and the obligations hereunder shall attach to any additional shares of
Company Common Stock or other securities or rights of the Company issued to or
acquired by such Stockholder.
SECTION 5. Transfer. Each Stockholder agrees with and covenants
to IHK that such Stockholder shall not request that the Company register the
transfer (booked as entry or otherwise) of any certificated or uncertificated
interest representing any of the securities of the Company, unless such transfer
is made in compliance with this Agreement.
SECTION 6. Stockholder Capacity. No person executing this Agreement
who is or becomes during the term hereof a director or officer of the Company
makes any agreement or understanding herein in his or her capacity as such
director or officer. Each Stockholder signs solely in his or her capacity as the
record holder and beneficial owner of such Stockholder's Shares and nothing
herein shall limit or affect any actions taken by a Stockholder in its capacity
as an officer or director for the Company to the extent specifically permitted
by the Merger Agreement.
SECTION 7. Further Assurances. Each Stockholder shall, upon request
of IHK or Merger Sub, execute and deliver any additional documents and take such
further actions as may reasonably be deemed by IHK or Merger Sub to be necessary
or desirable to carry out the provisions hereof.
SECTION 8. Termination. This Agreement, and all rights and
obligations of the parties hereunder, shall terminate upon the earlier of (a)
the date upon which the Merger Agreement is terminated by the Company, IHK or
Merger Sub for any reason in accordance with its terms or (b) the date that IHK
or Merger Sub shall have purchased and paid for the Shares of each Stockholder
pursuant to the Offer.
SECTION 9. Miscellaneous.
(a) Capitalized terms used and not otherwise defined in this Agreement
shall have the respective meanings assigned to such terms in the Merger
Agreement.
(b) All notices, requests, claims, demands and other communications
under this Agreement shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or such other address
for a party as shall be specified by like notice): (i) if to IHK or Merger
Sub, to the address set forth in Section 9.02 of the Merger Agreement; and
(ii) if to a Stockholder, to the address set forth on Schedule A hereto, or
such other address as may be specified in writing by such Stockholder.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
-3-
<PAGE>
(d) This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement, and shall become
effective (even without the signature of any other Stockholder) as to any
Stockholder when one or more counterparts have been signed by each of IHK,
Merger Sub and such Stockholder and delivered to IHK and such Stockholder.
(e) This Agreement (including the documents and instruments referred
to herein) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts or laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior
written consent of the other parties, except by laws of descent. Any
assignment in violation of the foregoing shall be void.
(h) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstances, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and
the application thereof to any other circumstances, shall remain in full
force and effect, shall not in any way be affected, impaired or
invalidated, and shall be enforced to the fullest extent permitted by law.
(i) Each Stockholder agrees that irreparable damage would occur and
that IHK and Merger Sub would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that IHK and Merger Sub shall be entitled to an
injunction or injunctions to prevent breaches by any Stockholder of this
Agreement and to enforce specifically the terms and provisions of this
Agreement.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and
signed by such party.
IN WITNESS WHEREOF, IHK, Merger Sub and the Stockholders have caused
this Agreement to be duly executed and delivered as of the date first written
above.
-4-
<PAGE>
IMPERIAL HOLLY CORPORATION
By:_________________________________
Name:
Title:
IHK MERGER SUB CORPORATION
By:_________________________________
Name:
Title:
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SCHEDULE A
NUMBER OF SHARES OF
NUMBER OF SHARES OF COMMON STOCK ISSUABLE
STOCKHOLDER (INCLUDING ADDRESS) COMMON STOCK OWNED UPON EXERCISE OF OPTIONS
- ------------------------------- ------------------- ------------------------
W. Waldo Bradley
John D. Carswell
R. Eugene Cartledge
Dale C. Critz
Lee B. Durham, Jr.
F. Sprague Exley
Arthur M. Gignilliat, Jr.
Robert L. Harrison
James M. Reed
William W. Sprague III
Hugh M. Tarbutton
Arnold Tenenbaum
D. Richard Donnelly
James M. Kelley
David H. Roche
Gregory H. Smith
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