As filed with the Securities and Exchange Commission
on May 28, 1998
Registration No. 333-______
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
Purina Mills, Inc.
(Exact name of registrant as specified in its charter)
Delaware 2048 43-1359249
(State or other (Primary standard (I.R.S. employer
jurisdiction of industrial identification
incorporation classification number)
or organization) code number)
1401 S. Hanley Road
St. Louis, Missouri 63144
(314) 768-4100
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
----------------
Arthur D. Jordan, Esq.
Purina Mills, Inc.
1401 S. Hanley Road
St. Louis, Missouri 63144
(314) 768-4100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of correspondence to:
Paul J. Shim, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
----------------
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the Registration Statement
becomes effective.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company and
there is compliance with General Instruction G, check the
following box: |_|
If this form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities act registration
statement number of the earlier effective registration statement
for the same offering. |_| ___________
If this form is a post-effective amendment filed pursuant
to Rule 462(d) under the Securities Act, check the following box
and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
|_| ___________
----------------
CALCULATION OF REGISTRATION FEE
=================================================================
Title of Proposed Proposed Amount
each class maximum maximum of
of securi- Amount offering aggregate regis-
ties to be to be price offering tration
registered registered per unit price(1) fee
- -----------------------------------------------------------------
9% Senior
Subordinated
Notes due
2010 $350,000,000 100% $350,000,000 $103,250
- -----------------------------------------------------------------
(1) Estimated solely for the purposes of calculating the
registration fee pursuant to Rule 457 under the Securities
Act of 1933, as amended.
=================================================================
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
*********************************************************************
* Information contained herein is subject to completion or *
* amendment. A registration statement relating to these securities *
* has been filed with the Securities and Exchange Commission. These *
* securities may not be sold nor may offers to buy be accepted *
* prior to the time the registration statement becomes effective. *
* This prospectus shall not constitute an offer to sell or the *
* solicitation of an offer to buy nor shall there be any sale of *
* these securities in any State in which such offer, solicitation *
* or sale would be unlawful prior to registration or qualification *
* under the securities laws of any such State. *
*********************************************************************
SUBJECT TO COMPLETION-DATED MAY 28, 1998
PROSPECTUS
Purina Mills, Inc.
Offer to Exchange 9% Senior Subordinated Notes due 2010,
which have been registered under the
Securities Act of 1933, as amended,
for any and all outstanding
9% Senior Subordinated Notes due 2010
The Exchange Offer will expire
at 5:00 p.m., New York City time,
on , 1998, unless extended.
Purina Mills, Inc., a Delaware corporation ("PMI" or the
"Company"), hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying
letter of transmittal (the "Letter of Transmittal" and such offer
being the "Exchange Offer"), to exchange 9% Senior Subordinated
Notes due 2010 (the "New Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which this
Prospectus is a part, for an equal principal amount of
outstanding 9% Senior Subordinated Notes due 2010 (the "Old
Notes"), of which $350,000,000 aggregate principal amount is
outstanding as of the date hereof. The New Notes and the Old
Notes are collectively referred to herein as the "Notes."
Any and all Old Notes that are validly tendered and not
withdrawn on or prior to 5:00 p.m., New York City time, on the
date the Exchange Offer expires, which will be , 1998 (30
calendar days following the commencement of the Exchange Offer)
unless the Exchange Offer is extended (such date, including as
extended, the "Expiration Date"), will be accepted for exchange.
Tenders of Old Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date. The Exchange
Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange. However, the Exchange Offer is
subject to certain customary conditions, which may be waived by
PMI, and to the terms of the Registration Rights Agreement, dated
as of March 12, 1998, by and among PMI, Credit Suisse First
Boston Corporation and Chase Securities Inc. (the "Initial
Purchasers") (the "Registration Rights Agreement"). Old Notes may
be tendered only in integral multiples of $1,000. See "The
Exchange Offer."
The New Notes will be entitled to the benefits of the same
Indenture (as defined herein) that governs the Old Notes and that
will govern the New Notes. The form and terms of the New Notes
are the same in all material respects as the form and terms of
the Old Notes, except that the New Notes have been registered
under the Securities Act and therefore will not bear legends
restricting the transfer thereof. See "The Exchange Offer" and
"Description of the New Notes."
The New Notes will be represented by permanent global notes
in fully registered form and will be deposited with, or on behalf
of, The Depository Trust Company ("DTC") and registered in the
name of a nominee of DTC. Beneficial interests in the permanent
global notes will be shown on, and transfers thereof will be
effected through, records maintained by DTC and its participants.
Based on interpretations by the staff of the Securities and
Exchange Commission (the "Commission"), as set forth in no-action
letters issued to third parties, including Exxon Capital Holdings
Corporation, SEC No-Action Letter (available May 13, 1988),
Morgan Stanley & Co. Incorporated, SEC No-Action Letter
(available June 5, 1991) and Shearman & Sterling, SEC No-Action
Letter (available July 2, 1993) (collectively, the "Exchange
Offer No-Action Letters"), PMI believes that the New Notes issued
pursuant to the Exchange Offer may be offered for resale, resold
or otherwise transferred by each holder (other than a
broker-dealer who acquires such New Notes directly from PMI for
resale pursuant to Rule 144A under the Securities Act or any
other available exemption under the Securities Act and other than
any holder that is an "affiliate" (as defined in Rule 405 under
the Securities Act) of PMI) without compliance with the
registration and prospectus delivery provisions of the Securities
Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and such holder is not engaged
in, and does not intend to engage in, a distribution of such New
Notes and has no arrangement with any person to participate in a
distribution of such New Notes. By tendering Old Notes in
exchange for New Notes, each holder, other than a broker-dealer,
will represent to PMI that: (i) it is not an affiliate (as
defined in Rule 405 under the Securities Act) of PMI; (ii) it is
not a broker-dealer tendering Old Notes acquired for its own
account directly from PMI; (iii) any New Notes to be received by
it will be acquired in the ordinary course of its business; and
(iv) it is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement or
understanding to participate in a distribution of New Notes. If a
holder of Old Notes is engaged in or intends to engage in a
distribution of New Notes or has any arrangement or understanding
with respect to the distribution of New Notes to be acquired
pursuant to the Exchange Offer, such holder may not rely on the
applicable interpretations of the staff of the Commission and
must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any
secondary resale transaction.
(continued on next page)
-------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER, SEE "RISK
FACTORS" BEGINNING ON PAGE 14 OF THIS PROSPECTUS.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------
The date of this Prospectus is , 1998
<PAGE>
(continued from cover page)
Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer (a "Participating
Broker-Dealer") must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The
Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter" within the meaning
of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making
activities or other trading activities. Pursuant to the
Registration Rights Agreement, the Company has agreed that, for a
period of time not to exceed 180 days after the Expiration Date,
or such shorter period which will terminate when such
Participating Broker-Dealers have completed all resales subject
to applicable prospectus delivery requirements, it will make this
Prospectus available to any Participating Broker-Dealer for use
in connection with any such resale. See "Plan of Distribution."
PMI will not receive any proceeds from this offering. PMI
has agreed to pay the expenses of the Exchange Offer. No
underwriter is being utilized in connection with the Exchange
Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL PMI
ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY
JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE
THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES AND BLUE
SKY LAWS OF SUCH JURISDICTION.
The Old Notes have been designated as eligible for trading
in The Portal Market sm ("PORTAL"), a subsidiary of The Nasdaq
Stock Market, Inc. ("The Nasdaq Stock Market"). Prior to this
Exchange Offer, there has been no public market for the New
Notes. If such a market were to develop, the New Notes could
trade at prices that may be higher or lower than their principal
amount. PMI does not intend to apply for listing of the New Notes
on any securities exchange or for quotation of the New Notes on
The Nasdaq Stock Market's National Market or otherwise. The
Initial Purchasers have previously made a market in the Old
Notes, and PMI has been advised that the Initial Purchasers
currently intend to make a market in the New Notes, as permitted
by applicable laws and regulations, after consummation of the
Exchange Offer. The Initial Purchasers are not obligated,
however, to make a market in the Old Notes or the New Notes and
any such market-making activity may be discontinued at any time
without notice at the sole discretion of the Initial Purchasers.
There can be no assurance as to the liquidity of the public
market for the New Notes or that any active public market for the
New Notes will develop or continue. If an active public market
does not develop or continue, the market price and liquidity of
the New Notes may be adversely affected. See "Risk Factors-Risk
Factors Relating to the Notes-Absence of a Public Market for the
New Notes."
<PAGE>
AVAILABLE INFORMATION
PMI is not currently subject to the periodic reporting and
other informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). PMI will become subject
to such requirements upon the effectiveness of the Registration
Statement (as defined herein). Pursuant to the indenture by and
between PMI (as issuer) and The First National Bank of Chicago
(as trustee), dated as of March 12, 1998 (the "Indenture"), PMI
has agreed to file with the Commission and provide to the holders
of the New Notes annual reports and the information, documents
and other reports which are required to be delivered pursuant to
Sections 13 and 15(d) of the Exchange Act.
This Prospectus constitutes a part of a registration
statement on Form S-4 (together with all amendments and exhibits,
the "Registration Statement") filed by PMI with the Commission,
through the Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR"), under the Securities Act, with respect to the
New Notes offered hereby. This Prospectus omits certain of the
information contained in the Registration Statement, and
reference is hereby made to the Registration Statement for
further information with respect to PMI and the securities
offered hereby. Although statements concerning and summaries of
certain documents are included herein, reference is made to the
copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. These documents
may be inspected without charge at the office of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the public reference facilities in the Commission's
regional offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048, and Citicorp Center, 500 WFC Madison
Street, Suite 1400, Chicago, IL 60661. Copies of such material
may be obtained at fees and charges prescribed by the Commission.
Copies of such materials may also be obtained from the Web site
that the Commission maintains at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and any definitive proxy or information
statements filed by PMI pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the
New Notes offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated herein by
reference, or contained in this Prospectus, shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
i
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information
and historical and unaudited pro forma financial statements
appearing elsewhere in this Prospectus. Unless the context
requires otherwise, references to (i) the "Company" or "PMI"
refer to Purina Mills, Inc., a Delaware corporation, (ii)
"Holdings" refer to PM Holdings Corporation, a Delaware
corporation and the parent of PMI, (iii) "Koch Agriculture" refer
to Koch Agriculture Company, a Nebraska corporation and the
parent of Holdings, (iv) "Koch Industries" refer to Koch
Industries, Inc., a Kansas corporation and the parent of Koch
Agriculture and (v) "Merger Sub" refer to Arch Acquisition
Corporation, a Delaware corporation and former wholly owned
subsidiary of Koch Agriculture, which was merged with and into
Holdings, with Holdings being the surviving corporation, on March
12, 1998 (the "Merger"). Except as otherwise set forth herein,
references herein to "pro forma" financial data of PMI are to
financial data of PMI which gives effect to the Transactions (as
defined herein), including the issuance of the Old Notes (the
"Offering"), the consummation of the Merger, the consummation of
the Tender Offers (as defined herein) and the incurrence of
indebtedness under the New Credit Facilities (as defined herein).
References to the Company's fiscal year refer to a December 31
fiscal year end.
The Company
The Company is the market leader in the United States in
developing, manufacturing and marketing differentiated animal
nutrition products and programs for dairy cattle, beef cattle,
hogs and horses. The Company also develops, manufactures and
sells poultry feeds as well as specialty feeds for rabbits, zoo
animals, laboratory animals, birds, fish and pets. In the United
States, the Company's products are generally marketed under the
widely recognized brand names Purina(R) and Chow(R), and the
"Checkerboard" Nine Square Logo(R) except with regard to dog and
cat food, which is marketed domestically under the PMI Nutrition
brand name. The Company also markets products under the Golden
Sun brand and its related trademarks. The Company's products are
sold as complete feeds or as concentrated nutritional additives
that customers mix with their own commodity ingredients. Over the
past 100 years, the Company believes that it has built and
maintained its industry leadership through innovative research
and development and by consistently providing high quality
products, programs and services that create value for its
customers. For the year ended December 31, 1997 and the
three-month period ended March 31, 1998, the Company generated
sales of approximately $1,128.4 million and $267.1 million,
respectively, and EBITDA of approximately $99.2 million and $23.5
million, respectively.
Because commercial animal feed represents 50% to 70% of the
total cost of producing milk, meat or eggs at the farm level, the
effective management of feed costs and the resulting yields are
among the most important economic components of animal raising.
The Company's products are designed to provide nutrients that
meet the needs of a particular species of animal at each phase of
its life cycle. In the commercial production of milk, meat and
eggs, the Company believes that its continued market leadership
reflects the attractive, cost-effective balance between weight
gain, feed efficiency, animal health and price which its products
and programs provide.
The Company also maintains a leadership position in the
horse and other retail specialty feed markets. As the U.S.
population has migrated to suburban and rural areas, the
incidence of hobby farmers, "ranchettes" and companion animal
ownership has increased. Consumers in this market segment are
typically less price sensitive than those in the commercial feed
market and buying decisions are driven more by brand awareness,
product quality, convenience and the retail environment. The
Company believes that its strong growth in this market segment
can be attributed to its brand recognition, broad product
offering and extensive retail distribution network. The Company
sees significant growth opportunities in these high margin market
segments as the "ruralpolitan" population continues to grow.
Industry Overview
In 1996, the U.S. animal feed industry produced
approximately 117 million tons of primary feed, and animal
producers utilized approximately $27 billion of animal nutrition
products. Of this total amount, the Company estimates that in
1996 the U.S. feed industry produced for the available potential
market (total volume of feed produced, except that used by
producers who have integrated feed operations or alignments with
other feed manufacturers) (the "Available Market") approximately
63 million tons of primary feed, and animal producers purchased
approximately $13 billion of animal nutrition products. The
industry is highly fragmented and although it includes several
large producers, it is comprised primarily of regional
competitors with several manufacturing facilities as well as a
large
1
<PAGE>
number of small, local manufacturers, many of whom operate only
one feed mill. In 1996, the top ten animal feed companies
produced approximately 30% of the total Available Market for
animal feed in the United States.
The Company competes in both the commercial feed business
and the retail specialty feed business. The Company defines the
commercial feed business as including nutrition products and
programs for dairy cattle, beef cattle, hogs and poultry and
believes the business is characterized by continued industry
consolidation and vertical integration of animal producers,
product price sensitivities and increasing customer
sophistication. In contrast, the Company believes that the retail
specialty feed business, which includes feed products for horses,
rabbits, zoo animals, birds, fish and pets, requires aggressive
marketing, customer brand awareness and strong national
distribution capabilities.
The feed industry generally prices its products on the
basis of Income Over Ingredient Cost ("IOIC"), a dollar based
margin which is added to aggregate ingredient cost. The Company
believes that total IOIC and gross profit dollars, rather than
sales dollars, are the key indicators of performance because of
distortions in sales dollars caused by changes in commodity
prices. Total IOIC less manufacturing costs equals gross profit.
Although feed producers are subject to fluctuations in ingredient
commodity prices, they are generally able to pass on price
increases in raw materials to customers through weekly
adjustments in product prices.
Business Strategy
The Company plans to further strengthen its position in the
animal nutrition industry by pursuing the following primary
strategies:
Continued Development of New and Differentiated Products,
Programs and Services. The Company will continue to develop its
differentiated feed products, programs and services by leveraging
its own extensive research and development efforts. Over the last
few years, the Company has introduced several patented products
and programs that have been demonstrated to enhance feed
efficiency and utilization by animals. These products, among
others, include the Proteus(R), Ultimate EXT(R), Impact(TM) and
Lean Generation(R) products and programs. Over 40% of sales in
1997 were from products and programs internally developed and
launched within the last five years.
Expand and Upgrade Dealer Distribution Network. The Company
has recently introduced its America's Country Stores initiative
designed to significantly upgrade its existing dealer network and
to recruit new dealers in priority retail markets. America's
Country Stores combines a new exterior and interior design
featuring an upscale atmosphere, merchandising programs, training
programs for in-store employees, a purchasing and support
relationship with a national hardware supplier and new
advertising and promotion programs. The initiative features a
"turn-key" package that provides dealers a standardized approach
that the Company believes will offer consumers a unique and
positive shopping experience. The Company presently plans that
more than 400 America's Country Stores will be constructed over
the next four years, strengthening its position in the profitable
"ruralpolitan" market. It is anticipated that all America's
Country Stores, with the exception of a few company-owned model
stores, will be privately owned and will require no capital
investment by the Company.
Capitalize on Koch Agriculture Ownership. As a result of
the acquisition of Holdings by Koch Agriculture, a subsidiary of
Koch Industries, the Company expects to realize certain immediate
and future benefits in areas of commodity purchasing, technology
and operations. These opportunities include:
- Leveraging of Koch Agriculture's Commodity Trading
Expertise: Following the Merger, the Company entered into
an exclusive commodity purchasing agreement with a
division of Koch Agriculture. Under the terms of the
agreement, Koch Agriculture's Nutrition Supply and
Trading division supplies the Company with all of its
requirements for feed ingredients, feed additives and
feed packaging materials. The contract provides that the
Company will purchase feed ingredients and feed additives
at a price equal to the spot market price less a discount
to be agreed upon between the Company and Koch
Agriculture. For the first year of the agreement, this
discount is $3.50 per ton. Koch Industries and its
subsidiaries have significant commodities trading
operations and the Company believes it will benefit from
lower overall commodity prices as a result of this
arrangement. In addition, the Company transferred all of
its commodity purchasing operations to Koch Agriculture.
2
<PAGE>
- Application of Dewatering Technology: Koch Feed
Technologies Company ("Koch Feed"), a subsidiary of Koch
Agriculture, has agreed to make available to selected
facilities of the Company its patented Jet-Pro(R)
dewatering technology. This processing system converts
high moisture nutrient streams that are by-products from
food processing, such as potato peels, cheese whey and
apple pumice, into feed ingredients. This technology is
expected to enable the Company to identify and create
potential new substitute or complementary feed
ingredients and thereby help to decrease total ingredient
costs for the Company. Koch Feed has also agreed, subject
to certain terms and conditions, that it will not license
the Jet-Pro(R) dewatering technology in the future to any
commercial feed producer in the United States that
competes directly with the Company.
Swine Integration. To capitalize on the consolidation of
the hog industry, the Company is implementing a strategy that is
expected to result in control over the feeding of approximately
six million market hogs over the next four years. The strategy
takes a systems approach to pork production and will leverage the
strengths of the Company's knowledge base, its commercial dealer
network and its relationship with many midwestern hog producers
and corn growers. The program is expected to provide a source of
high quality feeder pigs to independent hog producers and to gain
the related feed business for the Company. The strategy also is
expected to offer a marketing program linked with leading pork
processors, minimizing market risk to the producer. The Company's
direct ownership will be minimal and it believes that the
business generated through this initiative will more than offset
recent and future declines in traditional hog feed business due
to consolidation.
Actively Participate in Domestic Industry Consolidation.
The Company views the continuing consolidation of the domestic
animal nutrition industry as an important strategic growth
opportunity. The Company will look to acquire products and
technologies that complement its existing capabilities. The
Company will also attempt to add production and distribution
capabilities, particularly in the Northeast and West, to fill out
its geographic presence within the United States. In addition,
the Company believes that it is well positioned to provide the
growing number of integrated and increasingly sophisticated
commercial animal producers with customized nutritional programs
and feed ingredients, given the Company's technically superior
products, programs and services.
Selectively Expand Internationally. The Company intends to
leverage its extensive knowledge of animal nutrition products and
programs to pursue international expansion opportunities through
strategic affiliations, alliances, joint ventures or
acquisitions. The Company intends to build a material market
presence in targeted regions. An example of this strategy is the
Company's recent joint venture arrangement with Tyson Foods and
Aboitz Equity Ventures to construct a feed mill and develop a
large-scale hog operation in the Philippines. The feed mill is
expected to manufacture products for sale through a dealer
organization and also feed the hog operation. The Company owns
25% of the stock of the venture, with Tyson Foods and Aboitz
Equity Ventures, the local partner, owning 25% and 50%,
respectively.
The Transactions
The Merger
Pursuant to the Agreement and Plan of Merger among
Holdings, Koch Agriculture and Merger Sub, dated as of January 9,
1998 (the "Merger Agreement"), Merger Sub was merged with and
into Holdings, with Holdings being the surviving corporation. As
a result of the Merger, all of the shares of the common stock of
Holdings, par value $.01 per share (the "Holdings Common Stock")
outstanding immediately prior to March 12, 1998, the effective
date specified in the Certificate of Merger filed with the
Secretary of State of the State of Delaware on March 11, 1998
(the "Effective Time") were canceled and converted into the right
to receive cash consideration of $540 per share (the "Merger
Consideration"), all as set forth in the Merger Agreement. In
addition, pursuant to the Merger Agreement, each outstanding
option to purchase shares of Holdings Common Stock (each an
"Option" and collectively the "Options") and each stock rights
unit entitling the holder thereof to acquire Holdings Common
Stock (each a "Stock Unit" and collectively the "Stock Units")
became 100% vested. Option holders received the Merger
Consideration for each share of Holdings Common Stock into which
such Options were exercisable immediately prior to the Effective
Time, less the exercise price of such Options. Stock Unit holders
received the Merger Consideration for each share of Holdings
Common Stock into which such Stock Units were exercisable
immediately prior to the Effective Time. Such Options and Stock
Units issued and outstanding immediately prior to the Effective
Time were canceled and
3
<PAGE>
extinguished immediately prior to the Effective Time. As a result
of the Merger, Koch Agriculture owns 100% of Holdings, which owns
100% of the Company.
The Merger Agreement was approved and adopted by the
holders of a majority of the outstanding shares of Holdings
Common Stock at a stockholders meeting on March 2, 1998. In
connection with the Merger Agreement, holders of approximately
20% of the outstanding shares of Holdings Common Stock had prior
to such stockholders meeting executed a voting agreement agreeing
to vote in favor of the Merger (the "Voting Agreement"). For
further information concerning the Merger Agreement, see "The
Transactions-The Merger."
The Tender Offers
In connection with the Merger, (i) PMI offered to purchase
for cash any and all of PMI's outstanding 10 1/4% Senior
Subordinated Notes due September 1, 2003, guaranteed by Holdings
(the "Existing PMI Senior Subordinated Notes"), of which $190.0
million in aggregate principal amount was outstanding as of the
date of the Offering, and (ii) Holdings offered to purchase for
cash any and all of Holdings' outstanding 11 1/2% Series B
Subordinated Discount Debentures due September 1, 2005 (the
"Existing Holdings Discount Debentures" and, together with
Existing PMI Senior Subordinated Notes, the "Existing Debt
Securities"), of which $109.4 million in aggregate principal
amount at maturity was outstanding as of the date of the
Offering. In conjunction with these offers (together, the "Tender
Offers"), PMI and Holdings solicited consents of registered
holders of the applicable series of Existing Debt Securities (the
"Consent Solicitations") to certain proposed amendments (the
"Proposed Amendments") to the indentures under which the
applicable series of Existing Debt Securities were issued. The
Proposed Amendments became operative immediately following the
consummation of the Merger when all of the Existing Holdings
Discount Debentures and all except $15,000 of the Existing PMI
Senior Subordinated Notes were accepted for payment. The Tender
Offers were conditioned upon the receipt by the applicable issuer
of tenders from at least a majority in aggregate principal amount
outstanding of each of the series of Existing Debt Securities and
delivery of the related consents, the execution of supplemental
indentures with respect to the Proposed Amendments, the receipt
of necessary financing to close the Tender Offers (including
pursuant to the Offering) and the consummation of the Merger. For
further information concerning the Tender Offers, see "The
Transactions-The Tender Offers."
The Financing
In addition to the sale of the Notes, PMI satisfied the
cash funding requirements of the Merger and the Tender Offers,
additional working capital and other capital requirements through
the following: (i) a cash equity investment by Koch Agriculture
of $109.7 million (the "Equity Contribution") in the common stock
of Merger Sub and (ii) $9.9 million of senior secured borrowings
under a new revolving credit facility (the "New Revolving Credit
Facility") providing for up to $100.0 million in revolving loans,
up to $40.0 million of which may be used for letters of credit,
$100.0 million of borrowings under a new seven-year term loan
facility (the "Tranche A Term Loan") and $100.0 million of
borrowings under a new nine-year term loan facility (the "Tranche
B Term Loan" and, collectively with the Tranche A Term Loan, the
"Term Loans"; the New Revolving Credit Facility together with the
Term Loans are referred to collectively as the "New Credit
Facilities"). For a description of the New Credit Facilities, see
"The Transactions-The Financing" and "Description of Certain
Indebtedness."
The following table sets forth the estimated sources and
uses of funds in connection with the Transactions as they
occurred on March 12, 1998:
Amount
(In millions)
-------------
Sources of Funds:
New Credit Facilities:
New Revolving Credit Facility(a)............. $ 9.9
Term Loans(b)................................ 200.0
Notes offered hereby........................... 350.0
Equity Contribution to Holdings(c)............. 109.7
------
Total sources............................. $669.6
======
4
<PAGE>
Amount
(In millions)
-------------
Uses of Funds:
Purchase price for equity of Holdings(d)..... $258.7
Repayment of existing indebtedness(e)........ 385.5
Other payments, fees and expenses(f)......... 25.4
------
Total sources............................. $669.6
======
- -----------------
(a) The Company had $90.1 million of additional availability
under the New Revolving Credit Facility. See "Description of
Certain Indebtedness."
(b) Represents borrowing in full of the $100.0 million Tranche A
Term Loan and the $100.0 million Tranche B Term Loan. See
"Description of Certain Indebtedness."
(c) Reflects a contribution to the equity capital of Holdings by
Koch Agriculture.
(d) Includes $245.2 million of cash proceeds paid to holders of
Holdings Common Stock and $13.5 million of cash proceeds paid
to holders of Options to purchase Holdings Common Stock and
Stock Units exercisable for Holdings Common Stock.
(e) Includes approximately $90.5 million and approximately $203.0
million, respectively, required to fund the consummation of
the Tender Offers and the Consent Solicitations for the
Existing Holdings Discount Debentures and the Existing PMI
Senior Subordinated Notes, respectively. In addition,
includes approximately $92.0 million used to repay other
outstanding debt, consisting of approximately $17.4 million
of outstanding Industrial Revenue Bonds which were repaid
following the consummation of the Merger and approximately
$74.6 million used to repay an existing senior term loan. At
March 12, 1998, the Industrial Revenue Bonds had a weighted
average interest rate of 3.8% and were scheduled to mature in
part in 2020 and in full by 2022; the existing senior term
loan, with a 7.5% average interest rate, was scheduled to
mature in 2000.
(f) Fees and expenses include (i) the Initial Purchasers'
discount and other fees and expenses of the Offering, (ii)
financial consulting service fees to The Sterling Group, Inc.
("TSG") of $6.5 million, and reimbursement of expenses to TSG
and (iii) fees and expenses incurred in connection with the
Transactions, including bank fees, legal fees and accounting
fees. See "Certain Relationships and Related Transactions."
The Merger, the Offering, the New Credit Facilities, the
Tender Offers, the Equity Contribution and the application of the
net proceeds therefrom are hereinafter referred to as the
"Transactions." See "The Transactions."
Koch Agriculture
Koch Agriculture, the equity sponsor, is a wholly owned
subsidiary of Koch Industries, which is one of the largest
privately held corporations in the United States. Koch
Industries, based in Wichita, Kansas, has annual revenues in
excess of $35 billion and, together with its subsidiaries,
employs over 13,000 people worldwide. Koch Agriculture and its
affiliates are involved in many aspects of the agriculture
industry including cattle feeding and meat production, the
production and distribution of fertilizers, agricultural
commodity risk management and wheat production and flour milling.
Koch Beef Company, a division of Koch Agriculture, engages
in beef production on ranches and in feedyards. Encompassing over
450,000 acres, Koch Beef Company is one of the top ten calf
producers in the United States. In addition, Koch Beef Company is
the tenth largest cattle feeding operator in the United States,
with a one-time feeding capacity of 160,000 head.
Koch Nitrogen Company, an affiliate of Koch Agriculture,
participates in the production, trading and distribution of
fertilizer and other agriculture chemicals. Koch Nitrogen Company
produces over one million metric tons of ammonia per year (which
accounts for approximately 6.5% of total U.S. production) at its
production facility in Sterlington, Louisiana. Another subsidiary
of Koch Industries owns and operates the largest ammonia pipeline
in the United States, consisting of approximately 2,000 miles of
pipeline stretching from the Gulf Coast to the upper Midwest.
In addition to its agricultural operations, Koch
Industries, together with its subsidiaries, is involved in
virtually all phases of the oil and gas industry, as well as in
chemicals, chemical technology products, energy services, asphalt
products, metals and mineral services, real estate and financial
investments.
5
<PAGE>
The Exchange Offer
Registration Rights The Old Notes were issued on March 12,
Agreement............. 1998 to the Initial Purchasers. The
Initial Purchasers placed the Old Notes
with institutional investors. In
connection therewith, the Company and
the Initial Purchasers entered into the
Registration Rights Agreement,
providing, among other things, for the
Exchange Offer. See "The Exchange
Offer."
The Exchange Offer...... New Notes are being offered in exchange
for an equal principal amount of Old
Notes. As of the date hereof,
$350,000,000 aggregate principal amount
of Old Notes is outstanding. Old Notes
may be tendered only in integral
multiples of $1,000.
Resale of New Notes..... Based on interpretations by the staff of
the Commission, as set forth in no-
action letters issued to third parties,
including the Exchange Offer No-Action
Letters, the Company believes that the
New Notes issued pursuant to the
Exchange Offer may be offered for
resale, resold or otherwise transferred
by each holder thereof (other than a
broker-dealer who acquires such New
Notes directly from the Company for
resale pursuant to Rule 144A under the
Securities Act or any other available
exemption under the Securities Act and
other than any holder that is an
"affiliate" (as defined under Rule 405
of the Securities Act) of the Company)
without compliance with the registration
and prospectus delivery provisions of
the Securities Act, provided that such
New Notes are acquired in the ordinary
course of such holder's business and
such holder is not engaged in, and does
not intend to engage in, a distribution
of such New Notes and has no arrangement
with any person to participate in a
distribution of such New Notes. By
tendering the Old Notes in exchange for
New Notes, each holder, other than a
broker-dealer, will represent to the
Company that: (i) it is not an affiliate
(as defined in Rule 405 under the
Securities Act) of the Issuer; (ii) it
is not a broker-dealer tendering Old
Notes acquired for its own account
directly from the Company; (iii) any New
Notes to be received by it were acquired
in the ordinary course of its business;
and (iv) it is not engaged in, and does
not intend to engage in, a distribution
of such New Notes and has no arrangement
or understanding to participate in a
distribution of the New Notes. If a
holder of Old Notes is engaged in or
intends to engage in a distribution of
the New Notes or has any arrangement or
understanding with respect to the
distribution of the New Notes to be
acquired pursuant to the Exchange Offer,
such holder may not rely on the
applicable interpretations of the staff
of the Commission and must comply with
the registration and prospectus delivery
requirements of the Securities Act in
connection with any secondary resale
transaction. Each Participating
Broker-Dealer that receives New Notes
for its own account pursuant to the
Exchange Offer must acknowledge that it
will deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resale of such New
Notes. The Letter of Transmittal states
that by so acknowledging and by
delivering a prospectus, a Participating
Broker-Dealer will not be deemed to
admit that it is an "underwriter" within
the meaning of the Securities Act. This
Prospectus, as it may be amended or
supplemented from time to time, may be
used by a Participating Broker-Dealer in
connection with resales of New Notes
received in exchange for Old Notes where
such Old Notes were acquired by such
Participating Broker-Dealer as a result
of market-making activities or other
trading activities. The Company has
agreed
6
<PAGE>
that for a period of 180 days after the
Expiration Date, or such shorter period
which will terminate when such
Participating Broker-Dealers have
completed all resales subject to
applicable prospectus delivery
requirements, it will make this
Prospectus available to any
Participating Broker-Dealer for use in
connection with any such resale. See
"Plan of Distribution." To comply with
the securities laws of certain
jurisdictions, it may be necessary to
qualify for sale or register the New
Notes prior to offering or selling such
New Notes. The Company has agreed,
pursuant to the Registration Rights
Agreement and subject to certain
specified limitations therein, to
register or qualify the New Notes for
offer or sale under the securities or
"blue sky" laws of such jurisdictions as
may be necessary to permit consummation
of the Exchange Offer.
Consequences of
Failure to Exchange Upon consummation of the Exchange Offer,
Old Notes............. subject to certain exceptions, holders
of Old Notes who do not exchange their
Old Notes for New Notes in the Exchange
Offer will no longer be entitled to
registration rights and will not be able
to offer or sell their Old Notes, unless
such Old Notes are subsequently
registered under the Securities Act
(which, subject to certain limited
exceptions, the Company will have no
obligation to do), except pursuant to an
exemption from, or in a transaction not
subject to, the Securities Act and
applicable state securities laws. See
"Risk Factors-Risk Factors Relating to
the Notes-Consequences of Failure to
Exchange" and "The Exchange Offer-Terms
of the Exchange Offer."
Expiration Date........ 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is
extended, in which case the term
"Expiration Date" means the latest date
and time to which the Exchange Offer is
extended.
Interest on the New The New Notes will accrue interest at
Notes................ the applicable per annum rate set forth
on the cover page of this Prospectus,
from (i) the later of (A) the last
interest payment date on which interest
was paid on the Old Notes surrendered in
exchange therefor or (B) if the Old
Notes are surrendered for exchange on a
date subsequent to the record date for
an interest payment date to occur on or
after the date of such exchange and as
to which interest will be paid, the date
of such interest payment or (ii) if no
interest has been paid on the Old Notes,
from the Issue Date (as defined herein)
of such Old Notes. Interest on the New
Notes is payable on March 15 and
September 15 of each year, commencing
September 15, 1998.
Conditions to the The Exchange Offer is not conditioned
Exchange Offer........ upon any minimum principal amount of Old
Notes being tendered for exchange.
However, the Exchange Offer is subject
to certain customary conditions, which
may, under certain circumstances, be
waived by the Company. See "The Exchange
Offer-Conditions." Except for the
requirements of applicable federal and
state securities laws, there are no
federal or state regulatory requirements
to be complied with or obtained by the
Company in connection with the Exchange
Offer.
7
<PAGE>
Procedures for Each holder of Old Notes wishing to
Tendering Old Notes... accept the Exchange Offer must complete,
sign and date the Letter of Transmittal,
or a facsimile thereof, in accordance
with the instructions contained herein
and therein, and mail or otherwise
deliver such Letter of Transmittal, or
such facsimile, together with the Old
Notes to be exchanged and any other
required documentation to the Exchange
Agent (as defined herein) at the address
set forth herein or effect a tender of
Old Notes pursuant to the procedures for
book-entry transfer as provided for
herein. See "The Exchange Offer-
Procedures for Tendering" and "-Book
Entry Transfer."
Guaranteed Delivery Holders of Old Notes who wish to tender
Procedures............ their Old Notes and whose Old Notes are
not immediately available or who cannot
deliver their Old Notes and a properly
completed Letter of Transmittal or any
other documents required by the Letter
of Transmittal to the Exchange Agent
prior to the Expiration Date may tender
their Old Notes according to the
guaranteed delivery procedures set forth
in "The Exchange Offer-Guaranteed
Delivery Procedures."
Withdrawal Rights....... Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York
City time, on the Expiration Date. To
withdraw a tender of Old Notes, a
written or facsimile transmission notice
of withdrawal must be received by the
Exchange Agent at its address set forth
herein under "The Exchange
Offer-Exchange Agent" prior to 5:00
p.m., New York City time, on the
Expiration Date.
Acceptance of Old
Notes and Delivery Subject to certain conditions, any and
of New Notes.......... all Old Notes that are properly tendered
in the Exchange Offer prior to 5:00
p.m., New York City time, on the
Expiration Date will be accepted for
exchange. The New Notes issued pursuant
to the Exchange Offer will be delivered
promptly following the Expiration Date.
See "The Exchange Offer-Terms of the
Exchange Offer."
Certain Tax The exchange of New Notes for Old Notes
Considerations........ should not be considered a sale or
exchange or otherwise a taxable event
for Federal income tax purposes. See
"Certain U.S. Federal Income Tax
Considerations."
Exchange Agent.......... The First National Bank of Chicago is
serving as exchange agent (the "Exchange
Agent") in connection with the Exchange
Offer.
Fees and Expenses....... All expenses incident to consummation of
the Exchange Offer and compliance with
the Registration Rights Agreement will
be borne by the Company. See "The
Exchange Offer-Fees and Expenses."
Use of Proceeds......... There will be no cash proceeds payable
to the Company from the issuance of the
New Notes pursuant to the Exchange
Offer. See "Use of Proceeds."
8
<PAGE>
Summary of Terms of New Notes
The Exchange Offer relates to the exchange of up to
$350,000,000 aggregate principal amount of Old Notes for up to an
equal aggregate principal amount of New Notes. The New Notes will
be entitled to the benefits of the same Indenture that governs
the Old Notes and that will govern the New Notes. The form and
terms of the New Notes are the same in all material respects as
the form and terms of the Old Notes, except that the New Notes
have been registered under the Securities Act and therefore will
not bear legends restricting the transfer thereof. See
"Description of the New Notes."
Maturity Date........... March 15, 2010.
Interest Payment Dates.. March 15 and September 15 of each year,
commencing September 15, 1998.
Optional Redemption..... The New Notes will be redeemable at the
option of the Company, in whole or in
part, at any time on or after March 15,
2003 at the redemption prices set forth
herein, plus accrued and unpaid
interest, if any, to the date of
redemption. In addition, up to 35.0% of
the original aggregate amount of the New
Notes may be redeemed from time to time
prior to March 15, 2001 at the
redemption price set forth herein, plus
accrued and unpaid interest, if any, to
the date of redemption, with the net
proceeds of one or more Public Equity
Offerings (as defined), provided that at
least $227.5 million aggregate principal
amount of the New Notes remains
outstanding after each such redemption.
See "Description of the New
Notes-Optional Redemption."
Change of Control....... Upon a Change of Control (as defined),
each holder of New Notes may require the
Company to repurchase such holder's
outstanding Notes at 101% of the
principal amount thereof, plus accrued
and unpaid interest, if any, to the date
of repurchase. See "Description of the
New Notes-Change of Control."
Ranking................. The New Notes will be unsecured, will be
subordinated to all existing and future
Senior Indebtedness (as defined) of the
Company and will be structurally
subordinated to all obligations of the
subsidiaries of the Company. The New
Notes will rank pari passu with any
future senior subordinated indebtedness
of the Company and will rank senior to
all other subordinated indebtedness of
the Company. As of March 31, 1998, the
Company had approximately $206.9 million
of Senior Indebtedness, the Company's
subsidiaries had liabilities (including
trade payables but excluding guarantees
of the New Credit Facilities) of $0.3
million, and the Company had no other
senior subordinated indebtedness. The
Indenture governing the New Notes will
permit the Company to incur additional
indebtedness, subject to certain
limitations, and such indebtedness may
be Senior Indebtedness or indebtedness
of subsidiaries. See "Description of the
New Notes-Ranking" and "Unaudited Pro
Forma Financial Data."
9
<PAGE>
Restrictive Covenants... The Indenture under which the New Notes
will be issued will contain certain
covenants that limit (i) the issuance of
additional indebtedness by the Company,
(ii) the issuance of indebtedness and
preferred stock by the Company's
subsidiaries, (iii) the payment of
dividends on the capital stock of the
Company and its subsidiaries and the
purchase, redemption or retirement of
capital stock and certain indebtedness,
(iv) investments, (v) certain
transactions with affiliates, (vi) sales
of assets, including capital stock of
subsidiaries and (vii) certain
consolidations, mergers and transfers of
assets. The Indenture will also prohibit
certain restrictions on distributions
from subsidiaries. However, all of these
limitations are subject to a number of
important qualifications. See
"Description of the New Notes-Certain
Covenants."
Use of Proceeds
There will be no cash proceeds payable to the Company from
the issuance of the New Notes pursuant to the Exchange Offer. The
proceeds from the sale of the Old Notes were used to fund the
Transactions. See "Use of Proceeds" and "The Transactions."
Risk Factors
See "Risk Factors" for a discussion of certain factors that
should be considered in evaluating an investment in the Notes.
10
<PAGE>
Summary Historical Financial Data
The following table presents summary historical
consolidated financial data of the Company. The historical
unaudited financial data presented below for the three-month
period ended March 31, 1997, the seventy-one-day period ended
March 12, 1998 and the nineteen-day period ended March 31, 1998
were derived from interim consolidated financial statements of
the Company as of such dates which, in the opinion of management,
reflect all adjustments, consisting of only normal, recurring
adjustments, necessary for a fair presentation of such data and
which have been prepared in accordance with the same accounting
principles followed in the presentation of the Company's audited
financial statements for the fiscal year ended December 31, 1997.
Operating results for the three months ended March 31, 1998 are
not necessarily indicative of results to be expected for the full
fiscal year. The summary historical consolidated financial data
set forth below for the years ended December 31, 1995, 1996 and
1997 have been derived from the historical audited consolidated
financial statements of the Company for those years included
elsewhere herein (the "Consolidated Financial Statements"), which
have been audited by Deloitte & Touche LLP, independent auditors.
The summary historical consolidated financial data set forth
below for the year ended December 31, 1994 have been derived from
historical audited consolidated financial statements of the
Company not included in this Prospectus. Financial statements of
the Company for the year ended December 31, 1994 have been
audited by Deloitte & Touche LLP, independent auditors. The table
should be read in conjunction with, and is qualified by reference
to, the information set forth under "Selected Historical
Consolidated Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of the Company and the
related notes thereto, in each case included elsewhere in this
Prospectus.
The summary unaudited pro forma operating data of the
Company for the year ended December 31, 1997 and the three months
ended March 31, 1998 have been derived from the unaudited pro
forma financial statements included elsewhere herein, and give
effect to the Transactions as if they had occurred on January 1,
1997 and January 1, 1998, respectively.
The summary unaudited pro forma financial data do not
purport to represent what would actually have been included in
the Company's financial statements at such dates had the
Transactions occurred as of the dates assumed or to project the
Company's financial position or results of operations at any
future date or for any future period. The pro forma financial
data in this table should be read in conjunction with "Unaudited
Pro Forma Financial Data," "Selected Historical Consolidated
Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the
Consolidated Financial Statements of the Company and the notes
thereto, in each case appearing elsewhere in this Prospectus.
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Actual Pro Forma
Three Actual Three
Months --------------------- Months
Actual Ended Jan. 1 to March 13 to Ended
-------------------------------------------- Pro Forma March 31, March 12, March 31, March 31,
1994 1995 1996 1997 1997(a) 1997 1998 1998 1998(a)
------------------------------------------------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------------------------------------------------
(Dollars in millions except per ton data)
Operating
Data(b):
Net sales .......... $1,016.4 $1,047.2 $1,212.2 $1,128.4 $1,128.4 $284.5 $214.3 $52.8 $267.1
Cost of
products
sold ............... 843.9 863.2 1,035.9 938.5 939.7 238.0 176.7 42.8 219.8
------------------------------------------------------------------------------------------------------------
Gross profit ....... 172.5 184.0 176.3 189.9 188.7 46.5 37.6 10.0 47.3
Other costs
and expenses:
Marketing,
distribution ....... 74.2 83.8 84.7 87.3 86.5 20.2 17.5 4.8 22.3
General and
administrative ..... 29.2 30.2 31.4 30.2 45.1 6.9 22.1 0.9 23.1
Research and
development ........ 6.3 6.7 7.0 7.2 7.3 1.6 1.4 0.3 1.7
------------------------------------------------------------------------------------------------------------
109.7 120.7 123.1 124.7 138.9 28.7 41.0 6.0 47.1
Provision for
asset write-
offs(c) ............ -- -- 14.0 4.4 4.4 -- -- -- --
Other expense
(income) -net(d) ... 0.7 0.1 (10.6) (4.5) (4.5) (1.6) -- 0.1 0.1
Amortization
of intangibles ..... 17.1 18.6 19.5 20.6 20.5 4.7 4.0 0.9 5.1
------------------------------------------------------------------------------------------------------------
127.5 139.4 146.0 145.2 159.3 31.8 45.0 7.0 52.3
------------------------------------------------------------------------------------------------------------
Operating
income (loss) ...... 45.0 44.6 30.3 44.7 29.4 14.7 (7.4) 3.0 (5.0)
Interest
expense ............ 34.0 37.5 35.7 32.6 48.7 8.4 6.1 2.8 12.1
------------------------------------------------------------------------------------------------------------
Income (loss)
before income
taxes .............. 11.0 7.1 (5.4) 12.1 (19.3) 6.3 (13.5) 0.2 (17.1)
Provision
(benefit) for
income taxes ....... 4.9 4.0 (0.6) 5.2 (5.1) 3.2 (5.0) 0.1 (5.9)
------------------------------------------------------------------------------------------------------------
Net income
(loss) ............. $6.1 $3.1 $(4.8) $6.9 $(14.2) $3.1 $(8.5) $0.1 $(11.2)
=============================================================================================================
Other Data:
EBITDA(e) .......... $88.8 $95.0 $93.5 $99.2 $100.8 $26.2 $18.2 $5.3 $23.6
EBITDA/
Interest
Expense ........... 2.6x 2.5x 2.6x 3.0x 2.1x 3.1x 3.0x 1.9x 2.0x
Total deprec-
iation and
amortization(f) .... $44.4 $48.1 $50.4 $49.6 $50.8 $12.1 $10.1 $2.3 $12.8
Capital
expenditures(g) .... 21.7 25.5 23.9 29.7 29.7 3.6 3.7 0.6 4.3
Total feed
shipments
(thousands of
tons) .............. 5,024 5,080 4,984 4,706 4,706 1,186 959 238 1,197
Average feed
IOIC ($ per
ton)(h) ............ $56.29 $60.29 $60.23 $65.08 $65.08 $64.09 $63.28 $63.28 $63.28
------------------------------------------------------------------------------------------------------------
Total feed
IOIC
$ millions)(h) ..... $282.8 $306.3 $300.2 $306.3 $306.3 $76.0 $60.7 $15.1 $75.8
Selected Ratios:
Ratio of
earnings to
fixed charges(i) ... 1.31x 1.18x 1.36x 1.72x 1.07x
Deficiency of
earnings to
cover fixed
charges(i) ......... 5.4 19.3 13.5 17.1
Balance Sheet
Data (at end of
period):
Working capital .... $9.6 $4.0 $21.1 $28.8 $31.6 $37.8
Property, plant
and equipment,
net ................ 256.4 266.8 250.6 243.7 244.3 267.5
Total assets ....... 563.9 632.2 606.1 581.9 582.1 791.9
Total long-term
debt ............... 306.2 338.3 319.1 282.3 315.2 550.3
Stockholder's
equity ............. 86.6 79.2 68.7 50.4 72.0 109.4
</TABLE>
(a) See "Unaudited Pro Forma Financial Data."
(b) The Company's statement of operations data include the
operating results of Golden Sun Feeds, Inc. since March 15,
1995.
(c) Provision for asset write-offs represents the noncash
write-down of net book value of closed facilities and the
write-down of other assets to net realizable value. During
1996, the Company closed seven feed plants and recorded a
corresponding loss of $14.0 million. The 1997 charges relate
to the write-down of the value of a feed supply agreement.
(d) Other expense (income)-net includes profit or loss on
marketing agreements and the production of eggs, hogs and
turkeys, interest income on customer accounts, fee income
for various agricultural services, equity income of less
than 50% owned subsidiaries and other costs or revenues. The
marketing agreements and the production of eggs, hogs and
turkeys resulted in losses of $4.1 million, $2.6million,
$0.5 million and $1.1 million in the years 1994, 1995, 1996
and 1997, respectively, and $0.4 million profit, $0.7
million loss
12
<PAGE>
and $0.5 million loss in the three-month period ended March
31, 1997, the seventy-one-day period ended March 12, 1998
and the nineteen-day period ended March 31, 1998,
respectively. The 1996 amount also includes the proceeds
received in settlement of a claim for excess charges on raw
material purchases in prior years and the profit on the sale
of the Company's bromethaline inventory and related
trademark and other rights.
(e) EBITDA as used in this Prospectus consists of earnings
before interest, income taxes, depreciation, amortization,
gains or losses on fixed asset dispositions or write-downs
and noncash compensation expense related to Stock Units and
the increase in value over cost of Holdings Common Stock
allocated to participants in the ESOP. Detail regarding
calculation of EBITDA is presented in the following table:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Janu- Janu- March
ary 1 ary 1 13 Pro
to to to Forma
Pro March March March March
Forma 31, 12, 31, 31,
1994 1995 1996 1997 1997 1997 1998 1998 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
Operating
income ............ $45.0 $44.6 $30.3 $44.7 $29.4 $14.7 $(7.4) $3.0 $(5.0)
Depreciation
and
amortization ...... 44.4 48.1 50.4 49.6 50.8 12.1 10.1 2.3 12.8
Amortization
related to
deferred
financing
costs ............. (4.2) (3.7) (3.3) (2.9) (1.2) (0.8) (0.6) -- (0.3)
Losses
related to
asset
dispositions ...... 1.4 2.0 15.0 5.9 5.9 -- 0.2 -- 0.2
Noncash ESOP
valuation
charge and
Stock Units
expense ........... 2.2 4.0 1.1 1.9 -- 0.2 -- -- --
Nonrecurring
charge-
management
bonuse ............ 0.0 0.0 0.0 0.0 15.9 -- 15.9 -- 15.9
------ ------ ------ ------ ------ ------ ------ ------ ------
EBITDA ............ $88.8 $95.0 $93.5 $99.2 $100.8 $26.2 $18.2 $5.3 $23.6
</TABLE>
EBITDA is not a measure of financial performance determined
in accordance with generally accepted accounting principles,
should not be considered as an alternative to net income as
a measure of performance or to cash flow as a measure of
liquidity, and is not necessarily comparable to similarly
titled measures of other companies.
(f) Total depreciation and amortization includes $4.2 million,
$3.7 million, $3.3 million, $2.9 million and $1.2 million in
amortization related to deferred financing costs and is
included in interest expense for the years 1994, 1995, 1996,
1997 and 1997 on a pro forma basis, respectively, and $0.8
million, $0.6 million and $0.3 million for the three-month
period ended March 31, 1997, the seventy-one-day period
ended March 12, 1998 and the three-month period ended March
31, 1998 on a pro forma basis, respectively.
(g) Capital expenditures include expenditures for capital asset
replacement, cost reductions, regulatory compliance, and
quality and service projects and capital spending projects
designed to increase manufacturing, warehousing,
transportation or other capacity or otherwise increase sales
volume and excludes $0.7 million allocated to goodwill in
1997.
(h) IOIC, or total income over ingredient cost, is equal to net
sales minus cost of ingredients.
(i) For purposes of computing these ratios and amounts, earnings
consisted of income from continuing operations before income
taxes and fixed charges. Fixed charges consist of interest
expense on debt, amortization of financing costs and the
portion (approximately one-third) of rental expense that
management believes is representative of the interest
component of rental expenses.
13
<PAGE>
RISK FACTORS
Prospective purchasers of the New Notes should carefully
review the information contained and incorporated by reference in
this Prospectus and should particularly consider the following
matters:
Risk Factors Relating to the Company
Substantial Leverage
The Company is highly leveraged. In connection with the
Transactions, PMI incurred a significant amount of additional
indebtedness. As of March 31, 1998, PMI had approximately $557.2
million of consolidated indebtedness and its stockholders' equity
was approximately $109.4 million. Of the total $669.6 million
required to consummate the Transactions, $559.9 million (83.6%)
was supplied by indebtedness and $109.7 million (16.4%) was
supplied by equity contributions. In addition, subject to the
restrictions in the New Credit Facilities and the Indenture, PMI
may incur additional indebtedness from time to time to finance
acquisitions or capital expenditures or for other general
corporate purposes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and
Capital Resources."
The degree to which PMI is leveraged could have important
consequences to the holders of the New Notes, including, but not
limited to, the following: (i) PMI's ability to obtain additional
financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other
purposes may be impaired; (ii) a significant portion of PMI's
cash flow from operations must be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the
funds available to PMI for its operations; (iii) certain of PMI's
borrowings will be at variable rates of interest, which could
result in higher interest expense in the event of increases in
interest rates; (iv) the Indenture and the New Credit Facilities
contain financial and restrictive covenants, the failure to
comply with which may result in an event of default which, if not
cured or waived, could have a material adverse effect on PMI; (v)
the indebtedness outstanding under the New Credit Facilities will
mature prior to the maturity of the New Notes; (vi) PMI may be
substantially more leveraged than certain of its competitors,
which may place PMI at a competitive disadvantage; and (vii)
PMI's substantial degree of leverage may limit its flexibility to
adjust to changing market conditions, reduce its ability to
withstand competitive pressures and make it more vulnerable to a
downturn in general economic conditions or its business. See
"Description of Certain Indebtedness" and "Description of the New
Notes."
Ability to Service Indebtedness
PMI's ability to make scheduled payments on or to refinance
its debt obligations will depend upon its future financial and
operating performance, which will be affected by prevailing
economic conditions and financial, business and other factors,
certain of which are beyond its control. There can be no
assurance that PMI's operating results, cash flow and capital
resources will be sufficient for payment of its indebtedness in
the future. In the absence of such operating results and
resources, PMI could face substantial liquidity problems and
might be required to dispose of material assets or operations to
meet its debt service and other obligations, and there can be no
assurance as to the timing of such sales or the proceeds that PMI
could realize therefrom. In addition, because certain of PMI's
obligations bear interest at floating rates, an increase in
interest rates could adversely affect, among other things, PMI's
ability to meet its debt service obligations. PMI is required to
make scheduled principal payments under the New Credit Facilities
commencing on June 30, 1998. If PMI is unable to service its
indebtedness, it will be forced to adopt an alternative strategy
that may include actions such as reducing or delaying planned
expansion and capital expenditures, selling assets, restructuring
or refinancing its indebtedness or seeking additional equity
capital. There can be no assurance that any of these strategies
could be effected on satisfactory terms, if at all.
Competitive Industry Conditions
The commercial feed industry is highly competitive, and
there has been substantial excess capacity in the industry for
over 10 years. The excess capacity in the industry has led to
pressure on margins, particularly when the end-product prices of
animal producers and processors decline. The Company regularly
reevaluates its manufacturing facilities in light of changes in
market conditions and may incur restructuring charges if it needs
to rationalize and consolidate its manufacturing capacity further
in light of changes in industry demand.
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Both the feed production and animal production industries
are consolidating, and this trend is expected to continue. To
date, the Company has been successful at generating business
directly from several large producers of animals. However, as
producers of animals increase in size, they historically have
tended to integrate their business by acquiring or constructing
their own feed production facilities to meet some or all of their
requirements and, consequently, have relied less on outside
suppliers of feed. As the consolidation of animal producers
continues, the available market for commercial feeds may shrink
if producers integrate their operations, which could lead to
increased competition among feed producers.
Most of the Company's competitors compete principally on
the basis of price. Certain animal producers purchase feed on
that basis without regard to the performance qualities of the
products. Although many of the Company's products tend to be
priced higher than alternative feed for the same animal species,
the Company believes that its products are cost-effective to use.
In addition, the competition in the industry occasionally limits
the Company's ability to pass ingredient price increases on to
its customers; however, management believes that the Company's
knowledge of the nutritional value of ingredients and its
sophisticated least-cost formulation system enable the Company to
provide products that meet its nutritional standards and maintain
product quality while minimizing costs.
The competition in the industry also has led the Company
and some of its competitors to develop various market price risk
arrangements to promote sales. In some areas of the United
States, feed companies have increased the use of contracting for
livestock production to generate and control feed volume.
Although the Company does not enter into these arrangements as a
primary strategy, it enters into limited scale joint ventures for
animal production and marketing arrangements with animal
producers, which do expose the Company to limited risks
associated with the prices of those end products. In addition,
the Company offers various financing programs to its dealers and
direct customers. As of December 31, 1997, the Company's
promissory notes from and guaranties for the benefit of its
customers totaled approximately $22.1 million. There can be no
assurance that the Company will not be required to increase its
use of these or similar arrangements in response to competitive
pressures or that losses from these arrangements will not be
material. See "Business--Competition" and Note 12 of Notes to
Consolidated Financial Statements.
Seasonality
The Company's results of operations are seasonal, with a
higher percentage of its volume and earnings being generated
during the fourth and first quarters of the year. This
seasonality is driven largely by weather conditions affecting the
Company's cattle product lines. If the weather is particularly
warm during the winter, then sales of feed for cattle may
decrease as compared with normal seasonal patterns because the
cattle may be better able to graze under the warmer conditions.
Other product lines are affected marginally by seasonal
conditions but these conditions do not materially affect the
Company's overall quarter-by-quarter results of operations.
Consumer Trends
The demand for the Company's primary products is influenced
by the strength of the animal production and processing
industries. Although consumer health concerns about meat, milk
and eggs could adversely affect those industries, the Company
believes that it is well positioned to capitalize on the
opportunity to meet changing consumer demands. Through its
research programs, the Company has successfully developed
products and programs that assist in the production of leaner,
healthier food products. There can be no assurance, however, that
the Company will not be adversely affected by increasing consumer
health concerns or changes in consumer preferences. See
"Business--Product Lines" and "Business--Regulation."
Regulatory Compliance
The Company's operations are subject to regulation by
federal and state agencies that administer laws governing health,
safety and the protection of the environment, including the U.S.
Food and Drug Administration (the "FDA") and the United States
Department of Agriculture (the "USDA"). The Company believes the
procedures currently in effect at its facilities are consistent
with industry practice and are in general compliance with such
laws and regulations; however, future violations of such laws,
the enactment of stricter laws or regulations, or the
implementation of more aggressive enforcement policies could
adversely affect the Company's operations or financial condition.
See "Business--Regulation."
15
<PAGE>
In particular, the Company is subject to federal, state and
local environmental laws and regulations involving the management
and disposal of solid animal waste material resulting from the
production, processing and preparation of foods. The Company
cannot guarantee that it will not incur liability for the
investigation and remediation of spills and other releases of
hazardous substances or that it will not in the future incur
significant costs in connection with compliance with
environmental laws and regulations at its facilities. See
"Business--Environmental."
Business Strategy Risks
The Company's business strategy includes diversifying its
production and distribution capabilities and expanding its
geographic reach, both domestically and internationally. The
Company intends to implement this strategy in part by making
acquisitions and/or developing strategic alliances. There can be
no assurance that the Company will be successful in identifying
appropriate acquisition candidates or joint venture partners or
in consummating such transactions, or that any newly acquired
companies or partners will be successfully integrated into the
Company's existing business. The Company may incur additional
indebtedness (which may be long-term), expend cash or use a
combination thereof for all or part of the consideration to be
paid in future acquisitions or joint ventures. While the Company
regularly evaluates potential acquisition opportunities, it has
no present commitments or agreements with respect to any material
acquisition or joint venture. There can also be no assurance that
the Company's other business strategies, such as its America's
Country Stores initiative to broaden its distribution network,
will result in the expected benefits or any benefits at all. See
"Business."
Control of the Company; Related Party Transactions
As a result of the Transactions, Koch Agriculture, through
its ownership of 100% of the voting stock of Holdings, controls
the Company and has the power, subject to the conditions and
limitations in the New Credit Facilities and the Indenture, to
elect all directors of the Company, approve all amendments to the
Company's charter documents and effect fundamental corporate
transactions such as mergers and asset sales. Since the date of
the Offering, the Board of Directors has not included any
independent directors and there can be no assurance that the
interests of Koch Agriculture will not conflict with the
interests of the holders of the New Notes. In addition, the
Company expects to enter into arrangements from time to time with
Koch Agriculture and its affiliates, including those relating to
commodity supply agreements and Koch Agriculture's Jet-Pro(R)
dewatering technology, among others. See "Ownership of Capital
Stock" and "Certain Relationships and Related Transactions."
Risk Factors Relating to the Notes and the Old Note Offering
Ranking of the Notes
The New Notes will be subordinated in right of payment to
all existing and future Senior Indebtedness of PMI, including the
New Credit Facilities. In the event of bankruptcy, liquidation or
reorganization of PMI, the assets of PMI will be available to pay
obligations on the New Notes only after all Senior Indebtedness
has been paid in full in cash, and there may not be sufficient
assets remaining to pay amounts due on any or all of the New
Notes then outstanding. In addition, under certain circumstances,
no payments may be made with respect to principal of or interest
on the New Notes if certain defaults exist with respect to Senior
Indebtedness. In addition, indebtedness outstanding under the New
Credit Facilities is secured by substantially all of the assets
of PMI. As of March 31, 1998, PMI had approximately $206.9
million of Senior Indebtedness (exclusive of unused commitments
of $81.5 million). Additional Senior Indebtedness may be incurred
by PMI from time to time subject to certain restrictions
contained in the New Credit Facilities and the Indenture. See
"--Restrictive Debt Covenants," "Description of Certain
Indebtedness" and "Description of the New Notes."
The Notes will be also structurally subordinated to all
obligations of the subsidiaries of the Company. As of March 31,
1998, the Company's subsidiaries had liabilities (including trade
payables but excluding guarantees of the New Credit Facilities)
of $0.3 million. Each such subsidiary has agreed to guarantee
amounts borrowed by the Company under the New Credit Facilities
($206.9 million as of March 31, 1998, exclusive of unused
commitments of $81.5 million) and such guarantee obligations are
structurally senior to the obligations of the Company represented
by the Notes. The Indenture governing the New Notes will permit
the incurrence of additional indebtedness, subject to certain
limitations, and such indebtedness may be indebtedness of
subsidiaries.
16
<PAGE>
Restrictive Debt Covenants
The Indenture and the New Credit Facilities contain a
number of significant covenants that, among other things,
restrict the ability of PMI and its subsidiaries to dispose of
assets, incur additional indebtedness, incur guarantee
obligations, repay other indebtedness or amend other debt
instruments, pay dividends, create liens on assets, enter into
leases, make investments, loans or advances, make acquisitions,
engage in mergers or consolidations, make capital expenditures,
engage in certain transactions with subsidiaries and affiliates
and otherwise restrict corporate activities. In addition, under
the New Credit Facilities, PMI is required to comply with
specified financial ratios and tests, including minimum EBITDA,
minimum net worth, minimum fixed charge coverage ratio and
maximum leverage ratio. See "Description of Certain Indebtedness"
and "Description of the New Notes."
PMI's ability to comply with such agreements may be
affected by events beyond its control, including prevailing
economic, financial and industry conditions. The breach of any of
such covenants or restrictions could result in a default under
the New Credit Facilities and/or the Indenture, which would
permit the senior lenders, or the holders of the New Notes, or
both, as the case may be, to declare all amounts borrowed
thereunder to be due and payable, together with accrued and
unpaid interest, and the commitments of the senior lenders to
make further extensions of credit under the New Credit Facilities
could be terminated. If PMI were unable to repay its indebtedness
to its senior lenders, such lenders could proceed against the
collateral securing such indebtedness as described under
"Description of Certain Indebtedness." See "--Ranking of the
Notes."
Fraudulent Conveyance Risks; Insolvency
The proceeds from the Offering were used, in part, to fund
the purchase of Holdings Common Stock, and Options and Stock
Units to purchase Holdings Common Stock, from Holdings' existing
shareholders. If a court of competent jurisdiction, in a lawsuit
brought by an unpaid creditor or representative of creditors,
such as a trustee in bankruptcy or PMI as a debtor in possession,
were to find that, at the time PMI issued the Old Notes, either
(a) PMI incurred such indebtedness with the intent of hindering,
delaying or defrauding creditors or (b) PMI received less than a
reasonably equivalent value or fair consideration for incurring
such indebtedness, and PMI (i) was insolvent at the time of
incurrence or rendered insolvent by reason of such incurrence
(and the application of the proceeds thereof), (ii) was engaged,
or about to engage, in a business or transactions for which its
assets constituted unreasonably small capital or (iii) intended
to incur, or believed that it would incur, debts beyond its
ability to pay as they matured (as the foregoing terms are
defined in or interpreted under the applicable fraudulent
conveyance statutes), such court could, subject to applicable
statutes of limitation, subordinate the Old Notes to presently
existing and future indebtedness of PMI or take other action
detrimental to the holders of the Old Notes, including, in
certain circumstances, invalidating the Old Notes.
The measure of insolvency for purposes of the foregoing
considerations will vary depending upon the federal or state law
that is being applied in any such proceeding. Generally, however,
PMI would be considered insolvent if, at the time PMI incurred or
incurs the indebtedness constituting the Old Notes, either (i)
the fair market value (or fair saleable value) of the assets of
PMI was or is less than the amount required to pay the probable
liability on its total existing liabilities (including contingent
liabilities) as they become absolute and matured or (ii) PMI was
or is incurring obligations beyond its ability to pay as such
obligations mature.
PMI believes that the indebtedness evidenced by the Old
Notes was incurred for proper purposes and in good faith, that it
received reasonably equivalent value or fair consideration for
the Old Notes and that at the time of the incurrence of such
indebtedness, PMI was solvent, had sufficient capital to carry on
its business and did not intend to incur or believe that it would
incur debts beyond its ability to pay as they mature or become
due. In reaching the foregoing conclusions, PMI has relied upon
its analyses of internal cash flow projections and estimated
value of assets and liabilities of PMI. No assurance can be
given, however, that a court would concur with such beliefs.
A holder of the Old Notes cannot eliminate or reduce the
exposure to the fraudulent conveyance risks set forth above by
participating in the Exchange Offer. If a holder of Old Notes
participates in the Exchange Offer and receives New Notes in
exchange for Old Notes, a court could take action detrimental to
such holder of New Notes, based on the fraudulent conveyance
considerations set forth above, to the same extent that a court
could take action detrimental to any holder of Old Notes.
17
<PAGE>
Limitation on Change of Control
Upon a Change of Control (as defined), each holder of the
New Notes will have the right to require PMI to repurchase such
holder's New Notes at a price equal to 101% of the principal
amount thereof to the date of repurchase plus accrued and unpaid
interest, if any, to the date of repurchase. The Change of
Control purchase feature of the New Notes may in certain
circumstances discourage or make more difficult a sale or
takeover of PMI or Holdings. In addition, a Change of Control may
cause an acceleration of, or require an offer to repurchase
under, the New Credit Facilities and other indebtedness, if any,
of PMI and its subsidiaries, in which case such indebtedness
would be required to be repaid in full before repurchase of the
New Notes. See "Description of Certain Indebtedness" and
"Description of the New Notes--Change of Control." The inability
to repay such indebtedness, if accelerated, and to purchase all
of the tendered New Notes would constitute an event of default
under the Indenture. There can be no assurance that PMI will have
funds available to repurchase the New Notes upon the occurrence
of a Change of Control.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes
for New Notes pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Old Notes as set
forth in the legend thereon as a consequence of the issuance of
the Old Notes pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the
Securities Act and applicable state securities laws. The Company
does not currently anticipate that it will register the Old Notes
under the Securities Act. To the extent that the Old Notes are
tendered and accepted in the Exchange Offer, the trading market
for untendered and tendered but unaccepted Old Notes could be
adversely affected.
Absence of a Public Market for the New Notes
There is no existing market for the New Notes and, although
the Old Notes have been designated as eligible for trading in
PORTAL by "qualified institutional buyers" as defined in Rule
144A under the Securities Act, there can be no assurance as to
the liquidity of any markets that may develop for the New Notes,
the ability of holders of the New Notes to sell their New Notes,
or the price at which holders would be able to sell their New
Notes. Future trading prices of the New Notes will depend on many
factors, including, among other things, prevailing interest
rates, PMI's operating results and the market for similar
securities. The Initial Purchasers have previously made a market
in the Old Notes, and PMI has been advised that the Initial
Purchasers currently intend to make a market in the New Notes, as
permitted by applicable laws and regulations, after consummation
of the Exchange Offer. However, the Initial Purchasers are not
obligated to make a market in the Old Notes or the New Notes and
any market-making may be discontinued at any time without notice.
PMI does not intend to apply for listing of the New Notes on any
securities exchange. If an active public market does not develop
or continue, the market price and liquidity of the New Notes may
be adversely affected.
18
<PAGE>
THE TRANSACTIONS
The Merger
Pursuant to the Merger Agreement, and subject to the terms
and conditions thereof, immediately prior to the consummation of
the Offering and the New Credit Facilities, Merger Sub was merged
with and into Holdings, with Holdings being the surviving
corporation. As a result of the Merger, each share of Holdings
Common Stock outstanding immediately prior to the Effective Time
was canceled and converted into the right to receive an amount in
cash equal to $540 per share (the Merger Consideration), plus
interest calculated for a ten-day period for each Holdings Common
Stock certificate delivered less than two days prior to, but not
more than six months after, the consummation of the Merger. In
addition, pursuant to the Merger Agreement each outstanding
Option to purchase shares of Holdings Common Stock and each
outstanding Stock Unit (which entitled the holder thereof to
acquire Holdings Common Stock) became 100% vested. Option holders
received the Merger Consideration for each share of Holdings
Common Stock into which such Options were exercisable immediately
prior to the Effective Time, less the exercise price of such
Options. Stock Unit holders received the Merger Consideration for
each share of Holdings Common Stock into which such Stock Units
were exercisable immediately prior to the Effective Time. Such
Options and Stock Units issued and outstanding immediately prior
to the Effective Time were canceled and extinguished immediately
prior to the Effective Time. As a result of the Merger, Koch
Agriculture owns 100% of Holdings, which owns 100% of the
Company.
The total amount paid on consummation of the Merger was
approximately $258.7 million, consisting of approximately $245.2
million for the payment of the Merger Consideration to the
current holders of all shares of Holdings Common Stock and
approximately $13.5 million for the payment of the Merger
Consideration to the holders of Options and Stock Units.
Approximately $109.7 million of the total Merger Consideration
was funded by the Equity Contribution, with the remainder
(approximately $149.0 million) being funded from the proceeds of
the Offering and borrowings under the New Credit Facilities. See
"Use of Proceeds" and "--The Financing."
The Merger Agreement was approved and adopted by the
holders of a majority of the outstanding shares of Holdings
Common Stock at a stockholders meeting on March 2, 1998. In
connection with the Merger Agreement, holders of approximately
20% of the outstanding shares of Holdings Common Stock had prior
to such stockholders meeting executed the Voting Agreement
agreeing to vote in favor of the Merger.
The closing of the Offering was contingent upon the
consummation of the Merger and the New Credit Facilities. The
Existing Debt Securities tendered in the Tender Offers were
accepted for payment immediately after the consummation of the
Merger.
The Tender Offers
In connection with the Merger, (i) PMI offered to purchase
for cash any and all of the outstanding Existing PMI Senior
Subordinated Notes, guaranteed by Holdings, of which $190.0
million in aggregate principal amount was outstanding as of the
date of the Offering, and (ii) Holdings offered to purchase for
cash any and all of the outstanding Existing Holdings Discount
Debentures, of which $109.4 million in aggregate principal amount
at maturity was outstanding as of the date of the Offering.
Pursuant to an Offer to Purchase and Consent Solicitation
Statement (the "Statement"), the Tender Offers were commenced on
February 9, 1998 and expired on March 12, 1998, the date of the
consummation of the Merger.
In conjunction with the Tender Offers for the Existing Debt
Securities, PMI and Holdings solicited consents of registered
holders of the applicable series of Existing Debt Securities to
certain Proposed Amendments to eliminate substantially all of the
restrictive covenants in the indentures under which the
applicable series of Existing Debt Securities were issued, in
order to increase the financial flexibility of PMI and Holdings
after consummation of the Transactions. The Proposed Amendments
became operative immediately following the consummation of the
Merger when all of the Existing Holdings Discount Debentures and
all except $15,000 of the Existing PMI Senior Subordinated Notes
were accepted for payment.
The total consideration paid in connection with the Tender
Offers was approximately $293.5 million.
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The Tender Offers were conditioned upon the receipt by the
applicable issuer of tenders from at least a majority in
aggregate principal amount outstanding of each of the series of
Existing Debt Securities and delivery of the related consents,
the execution of supplemental indentures with respect to the
Proposed Amendments, the receipt of necessary financing to close
the Tender Offers (including pursuant to the Offering), the
consummation of the Merger and the satisfaction of certain
general conditions.
The Financing
In addition to the sale of the Notes, PMI satisfied the
cash funding requirements of the Merger and the Tender Offers,
additional working capital and other capital requirements through
the following: (i) the Equity Contribution by Koch Agriculture of
$109.7 million to Merger Sub and (ii) the New Credit Facilities,
consisting of $9.9 million of senior secured borrowings under the
New Revolving Credit Facility providing for up to $100.0 million
in revolving loans, $40.0 million of which may be used for
letters of credit, and borrowings of $200.0 million under the
Tranche A Term Loan and Tranche B Term Loan, each providing for
$100.0 million for a seven-year and nine-year period,
respectively. For a description of the New Revolving Credit
Facility and the Term Loans, see "Description of Certain
Indebtedness."
The following table sets forth the sources and uses of
funds in connection with the Transactions as they occurred on
March 12, 1998:
Amount
(In millions)
-------------
Sources of Funds:
New Credit Facilities:
New Revolving Credit Facility(a).............. $ 9.9
Term Loans(b)................................. 200.0
Notes offered hereby............................ 350.0
Equity Contribution to Holdings(c).............. 109.7
-------
Total sources.............................. $ 669.6
=======
Uses of Funds:
Purchase price for equity of Holdings(d)........ $258.7
Repayment of existing indebtedness(e)........... 385.5
Other payments, fees and expenses(f)............ 25.4
------
Total uses................................. $669.6
======
- -------------------
(a) The Company had $90.1 million of additional availability
under the New Revolving Credit Facility. See "Description of
Certain Indebtedness."
(b) Represents borrowing in full of the $100.0 million Tranche A
Term Loan and the $100.0 million Tranche B Term Loan. See
"Description of Certain Indebtedness."
(c) Reflects a contribution to the equity capital of Holdings by
Koch Agriculture.
(d) Includes $245.2 million of cash proceeds paid to holders of
Holdings Common Stock and $13.5 million of cash proceeds paid
to holders of Options to purchase Holdings Common Stock and
Stock Units exercisable for Holdings Common Stock.
(e) Includes approximately $90.5 million and approximately $203.0
million, respectively, required to fund the consummation of
the Tender Offers and the Consent Solicitations for the
Existing Holdings Discount Debentures and the Existing PMI
Senior Subordinated Notes, respectively. In addition,
includes approximately $92.0 million used to repay other
outstanding debt, consisting of approximately $17.4 million
of outstanding Industrial Revenue Bonds which were repaid
following the consummation of the Merger and approximately
$74.6 million used to repay an existing senior term loan. At
March 12, 1998, the Industrial Revenue Bonds had a weighted
average interest rate of 3.8% and were scheduled to mature in
part in 2020 and in full by 2022; the existing senior term
loan, with a 7.5% average interest rate, was scheduled to
mature in 2000.
(f) Fees and expenses include (i) the Initial Purchasers'
discount and other fees and expenses of the Offering, (ii)
financial consulting service fees to TSG of $6.5 million, and
reimbursement of expenses to TSG and (iii) fees and expenses
incurred in connection with the Transactions, including bank
fees, legal fees and accounting fees. See "Certain
Relationships and Related Transactions."
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USE OF PROCEEDS
There will be no cash proceeds payable to the Company from
the issuance of the New Notes pursuant to the Exchange Offer. In
consideration for issuing the New Notes as contemplated in this
Prospectus, the Company will receive in exchange Old Notes in
like principal amount, the terms of which are identical in all
material respects to the New Notes. The Old Notes surrendered in
exchange for the New Notes will be retired and canceled and
cannot be reissued. Accordingly, the issuance of the New Notes
will not result in any increase in the indebtedness of the
Company.
KOCH AGRICULTURE
Koch Agriculture, the equity sponsor, is a wholly owned
subsidiary of Koch Industries, which is one of the largest
privately held corporations in the United States. Koch
Industries, based in Wichita, Kansas, has annual revenues in
excess of $35 billion and, together with its subsidiaries,
employs over 13,000 people worldwide. Koch Agriculture and its
affiliates are involved in many aspects of the agriculture
industry including cattle feeding and meat production, the
production and distribution of fertilizers, agricultural
commodity risk management and wheat production and flour milling.
Koch Beef Company, a division of Koch Agriculture, engages
in beef production on ranches and in feedyards. Encompassing over
450,000 acres, Koch Beef Company is one of the top ten calf
producers in the United States. In addition, Koch Beef Company is
the tenth largest cattle feeding operator in the United States,
with a one-time feeding capacity of 160,000 head.
Koch Nitrogen Company, an affiliate of Koch Agriculture,
participates in the production, trading and distribution of
fertilizer and other agriculture chemicals. Koch Nitrogen Company
produces over one million metric tons of ammonia per year (which
accounts for approximately 6.5% of total U.S. production) at its
production facility in Sterlington, Louisiana. Another subsidiary
of Koch Industries owns and operates the largest ammonia pipeline
in the United States, consisting of approximately 2,000 miles of
pipeline stretching from the Gulf Coast to the upper Midwest.
In addition to its agricultural operations, Koch
Industries, together with its subsidiaries, is involved in
virtually all phases of the oil and gas industry, as well as in
chemicals, chemical technology products, energy services, asphalt
products, metals and mineral services, real estate and financial
investments.
None of Koch Agriculture, Koch Industries, Holdings or any
of their Affiliates (other than the Company) are parties to the
Indenture or responsible for any payments or other claims in
respect of the Notes or the Indenture.
The principal executive offices of Koch Agriculture and
Koch Industries are located at 4111 E. 37th Street North,
Wichita, Kansas 67220, and its telephone number is (316)
828-5500.
21
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1998 the
actual unaudited consolidated capitalization of the Company. See
"The Transactions," "Use of Proceeds," "Description of the New
Notes" and "Description of Certain Indebtedness." This table
should be read in conjunction with the "Unaudited Pro Forma
Financial Data," "Selected Historical Consolidated Financial
Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this
Prospectus.
As of
March 31, 1998
--------------
Actual
--------------
(In millions)
Total debt (including current portion):
New Revolving Credit Facility(a) ............... $ 6.9
Term Loans ..................................... 200.0
Existing PMI Senior Subordinated Notes(b) ...... --
The Notes ...................................... 350.0
Other debt ..................................... 0.3
------
Total debt ................................ 557.2
Stockholder's equity:
Common stock and paid-in capital ............... 109.3
Retained earnings .............................. 0.1
------
Total stockholder's equity ................ 109.4
------
Total capitalization ................... $ 666.6
======
- ---------------
(a) The Company has $81.5 million of additional availability
under the New Revolving Credit Facility. See "Selected
Historical Consolidated Financial Data" and "Description of
Certain Indebtedness."
(b) $15,000 of the Existing PMI Subordinated Notes were not
tendered for payment and remain outstanding.
22
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data (the "Pro
Forma Financial Data") present the pro forma consolidated
statement of operations of the Company for the year ended
December 31, 1997 and the three-month period ended March 31, 1998
as if the Transactions had been consummated on January 1, 1997
and January 1, 1998, respectively.
The Pro Forma Financial Data are based on the historical
financial statements of the Company and the assumptions and
adjustments described in the accompanying notes. The Company
believes that such assumptions are reasonable. The Pro Forma
Financial Data do not purport to represent what would actually
have been included in the Company's financial statements at such
dates had the Transactions occurred as of the dates assumed or to
project the Company's results of operations at any future date or
for any future period. The Pro Forma Financial Data should be
read in conjunction with "Capitalization," "Selected Historical
Consolidated Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of the Company and the
accompanying notes thereto appearing elsewhere in this
Prospectus.
23
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(Dollars in millions)
Net sales............................. $1,128.4 $1,128.4
Cost of products sold................. 938.5 $2.5 (a) 939.7
(0.5)(b)
(0.8)(c)
---------- ------------ ----------
Gross Profit............... 189.9 (1.2) 188.7
Other costs and expenses:
Marketing, distribution and
advertising.................. 87.3 0.2 (a) 86.5
(0.4)(b)
(0.6)(c)
General and administrative...... 30.2 0.2 (a) 45.1
(0.1)(b)
(0.2)(c)
15.0 (d)
Amortization of intangibles..... 20.6 (0.1)(e) 20.5
Research and development........ 7.2 0.1 (a) 7.3
Provision for plant closings
and asset impairments........ 4.4 4.4
Other (income) expenses-net..... (4.5) (4.5)
---------- ------------ ----------
Operating income........... 44.7 (15.3) 29.4
Interest expense...................... 32.6 16.1 (f) 48.7
---------- ------------ ----------
Income (loss) before
income taxes............ 12.1 (31.4) (19.3)
Provision (benefit) for income taxes.. 5.2 (10.3)(g) (5.1)
---------- ------------ ----------
Net income (loss).......... $ 6.9 $(21.1) $ (14.2)
========== ============ ==========
Other Data:
EBITDA................................ $ 99.2 $ 100.8
EBITDA/Interest expense............... 3.0x 2.1x
Total depreciation and amortization... $ 49.6 $50.8(h)
Capital expenditures.................. 29.7 29.7
Total feed shipments (thousands of
tons).............................. 4,706 4,706
Average feed IOIC ($ per ton)......... $ 65.08 $ 65.08
---------- ------------ ----------
Total feed IOIC ($ millions).......... $ 306.3 $ 306.3
Selected Ratios:
Ratio of earnings to fixed charges.... 1.36x
Deficiency of earnings to
cover fixed charges................ 19.3
See accompanying notes.
24
<PAGE>
<TABLE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1998
Historical
----------------------------------
<CAPTION>
Three
January 1 March 13 Months Pro
to to Ended Forma
March 12, March 31, March Adjust- Pro
1998 1998 31, 1998 ments Forma
--------- ---------- --------- ------- -----
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Net sales......................... $ 214.3 $ 52.8 $ 267.1 $ 267.1
Cost of products sold............. 176.7 42.9 219.6 $ 0.3 (a) 219.8
(0.1)(c)
--------- ------- --------- ---------- ----------
Gross Profit................. 37.6 9.9 47.5 (0.2) 47.3
Other costs and expenses:
Marketing, distribution and
advertising............... 17.5 4.8 22.3 22.3
General and administrative... 22.1 0.9 23.0 0.1 (a) 23.1
Amortization of intangibles.. 4.0 0.8 4.8 0.3 (e) 5.1
Research and development..... 1.4 0.3 1.7 1.7
Other (income) expenses-net.. -- 0.1 0.1 0.1
--------- ------- --------- ---------- ----------
Operating income (loss)...... (7.4) 3.0 (4.4) (0.6) (5.0)
Interest expense.................. 6.1 2.8 8.9 3.2 (f) 12.1
--------- ------- --------- ---------- ----------
Income (loss) before income
taxes..................... (13.5) 0.2 (13.3) (3.8) (17.1)
Provision (benefit) for income
taxes.......................... (5.0) 0.1 (4.9) (1.0)(g) (5.9)
--------- ------- --------- ---------- ----------
Net income (loss)............ $ (8.5) $ 0.1 $ (8.4) $(2.8) $ (11.2)
========= ======= ========= ========== ==========
Other Data:
EBITDA............................ $ 23.5 $ 23.6
EBITDA/Interest expense........... 2.6x 2.0x
Total depreciation and
amortization................... $ 12.4 $ 12.8 (h)
Capital expenditures.............. 4.3 4.3
Total feed shipments
(thousands of tons)............ 1,197 1,197
Average feed IOIC ($ per ton)..... $ 63.28 $ 63.28
--------- ------- --------- ---------- ----------
Total feed IOIC ($ millions) $ 75.8 $ 75.8
Selected Ratios:
Deficiency of earnings to
cover fixed charges............ 13.3 17.1
</TABLE>
See accompanying notes.
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions)
(a) Reflects the adjustment to depreciation resulting from
the preliminary purchase price allocation and the change in the
estimated useful lives of the corresponding property. Pro forma
depreciation is calculated based on estimated useful lives which
range from 3 to 30 years.
(b) Reflects the termination of the ESOP and the resulting
decrease in compensation expense for the increase in value over
cost of Holdings Common Stock allocated to participants in the
ESOP.
(c) Reflects the reduction in post-retirement health care
costs.
(d) Reflects the payment of management bonuses, payments to
holders of Options and Stock Units plus related payroll taxes in
connection with the Merger.
(e) Reflects the adjustment to intangible asset
amortization resulting from the preliminary purchase price
allocation based on the estimated useful lives of the related
assets. Pro forma amortization of identifiable intangible assets
is calculated based on estimated useful lives which range from 5
to 15 years and is $13.9 and $3.4 for the year ended December 31,
1997 and the three-month period ended March 31, 1998,
respectively. Amortization of goodwill is calculated based on an
estimated useful life of 40 years and is $6.6 and $1.7 for the
year ended December 31, 1997 and the three-month period ended
March 31, 1998, respectively.
(f) Reflects interest expense related to the borrowings
under the New Revolving Credit Facility, the Term Loans and the
issuance of the Notes.
The following table summarizes the pro forma adjustment to
interest expense.
Three Months
Year Ended Ended
December 31, March 31,
1997 1998
------------ ------------
Pro forma interest expense:
New Revolving Credit Facility ......... $ 0.7 $ 0.2
Term Loans ............................ 15.3 3.8
The Notes ............................. 31.5 7.9
Amortization of debt issuance costs 1.2 0.3
-------- --------
Pro forma interest expense ................... 48.7 12.2
Historical interest expense .................. 32.6 9.0
-------- --------
Net interest expense adjustment .............. $ 16.1 $ 3.2
-------- --------
For purposes of the pro forma statements of operations, the
effective annual interest rate on the New Revolving Credit
Facility is assumed to equal 7.5%.
For purposes of the pro forma statements of operations, the
effective annual interest rate on the Term Loans is assumed to
equal 7.625%.
For purposes of the pro forma statements of operations, the
effective annual interest rate on the Notes is 9.0%.
A 0.125% change in the interest rates payable on the
outstanding balance under the New Revolving Credit Facility and
the Term Loans would change annual interest expense by $0.3
before the effect of income taxes.
(g) Income tax adjustments have been calculated using a
combined state and federal statutory income tax rate of
approximately 39.2%.
26
<PAGE>
(h) Reflects the decrease in amortization of deferred
financing costs from $2.9 to $1.2 for the year ended December 31,
1997 and the decrease from $0.6 to $0.3 for the three-month
period ended March 31, 1998.
27
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical
consolidated financial data of the Company. The historical
unaudited financial data presented below as of and for the
three-month period ended March 31, 1997, the seventy-one-day
period ended March 12, 1998 and as of and for the nineteen-day
period ended March 31, 1998 were derived from interim
consolidated financial statements of the Company as of such dates
which, in the opinion of management, reflect all adjustments,
consisting of only normal, recurring adjustments, necessary for a
fair presentation of such data and which have been prepared in
accordance with the same accounting principles followed in the
presentation of the Company's audited financial statements for
the fiscal year ended December 31, 1997. Operating results for
the three months ended March 31, 1998 are not necessarily
indicative of results to be expected for the full fiscal year.
The selected historical consolidated financial data set forth
below for the years ended December 31, 1995, 1996 and 1997 have
been derived from the Consolidated Financial Statements of the
Company included elsewhere herein, which have been audited by
Deloitte & Touche LLP, independent auditors. The historical
consolidated financial data set forth below for the periods ended
August 31, 1993 and December 31, 1993 and for the year ended
December 31, 1994 have been derived from historical audited
consolidated financial statements of the Company not included in
this Prospectus. Financial statements of the Company for the four
months ended December 31, 1993 and for the year ended December
31, 1994 have been audited by Deloitte & Touche LLP, independent
auditors, and financial statements for the eight months ended
August 31, 1993 have been audited by other independent auditors.
The table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the
Company and related notes and other financial information
included elsewhere in this Prospectus.
28
<PAGE>
<TABLE>
<CAPTION>
Eight Four
Months Months
Ended Ended
August December
31, 31, Year Ended December 31,
1993 1993 1994 1995 1996 1997
-------- -------- ---- ---- ---- ----
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Operating Data(a):
Net sales ........................... $594.9 $368.7 $1,016.4 $1,047.2 $1,212.2 $1,128.4
Cost of products sold ............... 496.0 302.6 843.9 863.2 1,035.9 938.5
------ ------ -------- -------- --------- --------
Gross profit ............. 98.9 66.1 172.5 184.0 176.3 189.9
Other costs and expenses:
Marketing, distribution ............. 38.1 21.9 74.2 83.8 84.7 87.3
General and administrative .......... 25.9 13.9 29.2 30.2 31.4 30.2
Research and development ............ 3.8 2.4 6.3 6.7 7.0 7.2
------ ------ -------- -------- --------- --------
67.8 38.2 109.7 120.7 123.1 124.7
Provision for asset write-offs(b) ... -- -- -- -- 14.0 4.4
Other expense (income)-net(c) ....... (1.5) 0.3 0.7 0.1 (10.6) (4.5)
Amortization of intangibles ......... 4.4 7.1 17.1 18.6 19.5 20.6
------ ------ -------- -------- --------- --------
70.7 45.6 127.5 139.4 146.0 145.2
------ ------ -------- -------- --------- --------
Operating income (loss) ............. 28.2 20.5 45.0 44.6 30.3 44.7
Interest expense .................... 3.4 10.3 34.0 37.5 35.7 32.6
------ ------ -------- -------- --------- --------
Income (loss) before income taxes ... 24.8 10.2 11.0 7.1 (5.4) 12.1
Provision (benefit) for income taxes 10.0 4.0 4.9 4.0 (0.6) 5.2
------ ------ -------- -------- --------- --------
Net income (loss) ................... $14.8 $6.2 $6.1 $3.1 $(4.8) $6.9
====== ====== ======== ======== ========= ========
Other Data:
EBITDA(d) ........................... $51.4 $35.0 $88.8 $95.0 $93.5 $99.2
EBITDA/Interest expense(d) .......... 15.1x 3.4x 2.6x 2.5x 2.6x 3.0x
Total depreciation and
amortization(e) .................. $24.1 $15.1 $44.4 $48.1 $50.4 $49.6
Capital expenditures(f) ............. 14.7 5.8 21.7 25.5 23.9 29.7
Cash provided (used)-operations ..... 46.6 63.1 39.2 50.1 57.6 70.8
Cash provided (used)-investing ...... (6.0) (419.6) (22.1) (82.9) (22.1) (29.3)
Cash provided (used)-financing ...... (50.0) 390.5 (28.6) 31.6 (31.5) (39.3)
Selected Ratios:
Ratio of earnings to fixed
charges(g)........................ 6.90x 1.96x 1.31x 1.18x 1.36x
Deficiency of earnings to cover
fixed charges(g) ................. 5.4
Balance Sheet Data (at end of
period):
Working capital ..................... $53.5 $11.1 $9.6 $4.0 $21.1 $28.8
Property, plants and equipment,
net............................... 261.6 261.3 256.4 266.8 250.6 243.7
Total assets ........................ 494.6 591.3 563.9 632.2 606.1 581.9
Total long-term debt ................ 117.6 334.3 306.2 338.3 319.1 282.3
Stockholder's equity ................ 235.2 85.5 86.6 79.2 68.7 50.4
Three
Months January
Ended 1 to March 13
March 31, March 12, to March
1997 1998 31, 1998
-------- -------- --------
(Dollars in millions)
Operating Data(a):
Net sales ........................... $284.5 $214.3 $52.8
Cost of products sold ............... 238.0 176.7 42.8
------ ------- --------
Gross profit ............. 46.5 37.6 10.0
Other costs and expenses:
Marketing, distribution ............. 20.2 17.5 4.8
General and administrative .......... 6.9 22.1 0.9
Research and development ............ 1.6 1.4 0.3
------ ------- --------
28.7 41.0 6.0
Provision for asset write-offs(b) ... -- -- --
Other expense (income)-net(c) ....... (1.6) -- 0.1
Amortization of intangibles ......... 4.7 4.0 0.9
------ ------- --------
31.8 45.0 7.0
Operating income (loss) ............. 14.7 (7.4) 3.0
Interest expense .................... 8.4 6.1 2.8
------ ------- --------
Income (loss) before income taxes ... 6.3 (13.5) 0.2
Provision (benefit) for income taxes 3.2 (5.0) 0.1
------ ------- --------
Net income (loss) ................... $3.1 $(8.5) $0.1
------ ------- --------
Other Data:
EBITDA(d) ........................... $26.2 $18.2 $5.3
EBITDA/Interest expense(d) .......... 3.1x 3.0x 1.9x
Total depreciation and
amortization(e) .................. $12.1 $10.1 $2.3
Capital expenditures(f) ............. 3.6 3.7 0.6
Cash provided (used)-operations ..... 6.9 (37.4) 5.8
Cash provided (used)-investing ...... (3.4) (4.3) (1.0)
Cash provided (used)-financing ...... (3.9) 298.6 (287.3)
Selected Ratios:
Ratio of earnings to fixed
charges(g)........................ 1.72x 1.07
Deficiency of earnings to cover
fixed charges(g) ................. 13.5
Balance Sheet Data (at end of
period):
Working capital ..................... $31.6 $37.8
Property, plants and equipment,
net............................... 244.3 267.5
Total assets ........................ 582.1 791.9
Total long-term debt ................ 315.2 550.3
Stockholder's equity ................ 72.0 109.4
</TABLE>
- -----------------
(a) The Company's statement of operations data include the
operating results of Golden Sun Feeds, Inc. since
March 15, 1995.
(b) Provision for asset write-offs represents the noncash
write-down of net book value of closed facilities and the
write-down of other assets to net realizable value. During
1996, the Company closed seven feed plants and recorded a
corresponding loss of $14.0 million. The 1997 charges relate
to the write-down of the value of a feed supply agreement.
29
<PAGE>
(c) Other expense (income)-net includes profit or loss on
marketing agreements and the production of eggs, hogs and
turkeys, interest income on customer accounts, fee income for
various agricultural services, equity income of less than 50%
owned subsidiaries and other costs or revenues. The marketing
agreements and the production of eggs, hogs and turkeys
resulted in income of $0.8 million for the eight months ended
August 31, 1993 and losses of $1.1 million, $4.1 million,
$2.6 million, $0.5 million and $1.1 million in the four
months ended December 31, 1993 and the years, 1994, 1995,
1996 and 1997, respectively, and $0.4 million profit, $0.7
million loss and $0.5 million loss in the three-month period
ended March 31, 1997, the seventy-one-day period ended March
12, 1998 and the nineteen-day period ended March 31, 1998,
respectively. The 1996 amount also includes the proceeds
received in settlement of a claim for excess charges on raw
material purchases in prior years and the profit on the sale
of the Company's bromethaline inventory and related trademark
and other rights.
(d) EBITDA as used in this Prospectus consists of earnings before
interest, income taxes, depreciation, amortization, gains or
losses on fixed asset dispositions or write-downs and noncash
compensation expense related to Stock Units and the increase
in value over cost of Holdings Stock allocated to
participants in the ESOP. Detail regarding calculation of
EBITDA is presented in the following table:
<TABLE>
<CAPTION>
January January
1 to 1 to March 13 to
March 31, March 12, March 31,
1994 1995 1996 1997 1997 1998 1998
---- ---- ---- ---- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating income .................................... $45.0 $44.6 $30.3 $44.7 $14.7 $(7.4) $3.0
Depreciation and amortization ....................... 44.4 48.1 50.4 49.6 12.1 10.1 2.3
Amortization related to deferred
financing costs ..................................... (4.2) (3.7) (3.3) (2.9) (0.8) (0.6) --
Losses related to asset dispositions ................ 1.4 2.0 15.0 5.9 -- 0.2 --
Noncash ESOP valuation charge and
Stock Units expense.................................. 2.2 4.0 1.1 1.9 0.2 -- --
Nonrecurring charge-management bonuses .............. 0.0 0.0 0.0 0.0 -- 15.9 --
----- ----- ----- ----- ----- ----- -----
EBITDA .............................................. $88.8 $95.0 $93.5 $99.2 $26.2 $18.2 $5.3
</TABLE>
EBITDA is not a measure of financial performance determined
in accordance with generally accepted accounting principles,
should not be considered as an alternative to net income as
a measure of performance or to cash flow as a measure of
liquidity, and is not necessarily comparable to similarly
titled measures of other companies.
(e) Total depreciation and amortization includes $0.7
million, $4.2 million, $3.7 million, $3.3 million, $2.9
million and $1.2 million in amortization related to deferred
financing costs and is included in interest expense for the
four months ended December 31, 1993 and the years 1994,
1995, 1996 and 1997, respectively, and $0.8 million and $0.6
million for the three-month period ended March 31, 1997 and
the seventy-one-day period ended March 12, 1998,
respectively. No amortization related to deferred financing
costs existed for the eight months ended August 31, 1993 or
the nineteen-day period ended March 31, 1998.
(f) Capital expenditures includes expenditures for capital
asset replacement, cost reductions, regulatory compliance,
and quality and service projects and capital spending
projects designed to increase manufacturing, warehousing,
transportation or other capacity or otherwise increase sales
volume and excludes $0.7 million allocated to goodwill in
1997.
(g) For purposes of computing these ratios and amounts,
earnings consisted of income from continuing operations
before income taxes and fixed charges. Fixed charges consist
of interest expense on debt, amortization of financing costs
and the portion (approximately one-third) of rental expense
that management believes is representative of the interest
component of rental expenses.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion summarizes the significant factors
affecting the consolidated operating results, financial condition
and liquidity of the Company during the three-month periods ended
March 31, 1997 and 1998, and the three-year period ended December
31, 1997. This discussion should be read in conjunction with the
unaudited consolidated financial statements of the Company for
the three-month periods ended March 31, 1997 and 1998 and the
audited consolidated financial statements of the Company for the
three-year period ended December 31, 1997 and notes thereto
included elsewhere in this Prospectus.
Overview
The feed industry generally prices products on the basis of
aggregate ingredient cost plus a dollar based margin, rather than
a gross margin percentage. As ingredient prices fluctuate, the
changes are generally passed on to customers through weekly
changes in the Company's price lists. Feed tonnage, total income
over ingredient cost ("IOIC") (which is equal to net sales minus
cost of ingredients) and gross profit dollars (IOIC less
manufacturing costs), rather than sales dollars, are the key
indicators of performance because of the distortions in sales
dollars caused by changes in commodity prices, as well as changes
in product mix between complete feed and concentrate products, to
which customers add their own base ingredients such as corn and
other grains.
When the price of grains has been relatively high, more of
the Company's customers have tended to purchase complete rations
and the Company's sales volume has been higher. When the price of
grains has been relatively low, more of the Company's customers
have tended to use their own grains and mix them with the
Company's concentrate products, resulting in lower sales tonnage
volume but higher overall unit margins. While the mix of complete
and concentrate product sales varies from period to period
depending on grain prices, the offsetting effects of volume and
unit margins have tended to stabilize total IOIC and gross profit
dollars. Consequently, the Company's total IOIC and gross profit
have remained relatively stable over the past decade. The
Company's diversification across a broad range of different
animal species and geographic regions has also contributed to
this stability. When market prices for live animals and animal
products are low, animal producers may reduce production and
search for lower-cost feed alternatives. The Company maintains a
line of economy products while emphasizing the relative value of
its high-performance, value-added products.
The Company expects the U.S. feed industry to further
consolidate in the years ahead. Although the total volume of
processed feed sold into the commercial market segment may
decline, larger producers are tending to purchase products with
lower inclusion rates and higher margins. As they grow larger,
these producers are typically better able to measure performance
differences and make sound economic decisions regarding nutrition
and management programs. The Company believes that its strong
leadership position in research and technology will enable it to
grow its total IOIC from the commercial market segment more
effectively than others in the feed industry.
The outlook for the horse and retail specialty market is
positive. The Company believes that owners of horses, pets and
other companion animals make buying decisions based on different
criteria than commercial producers. Typically, brand awareness,
quality and convenience are important. As more people migrate to
"ruralpolitan" areas and disposable incomes increase, the Company
believes that its high margin horse and retail specialty product
lines will continue to grow. The Company believes that its brand
recognition, coupled with the most extensive retail dealer
network in the country, position the Company well to capitalize
on the anticipated growth in this market segment.
The Company regularly reviews the performance of its
facilities to attempt to optimize overall capacity and maximize
profits. As a result, in 1996 the Company made a decision to
discontinue all manufacturing operations at seven facilities and
recorded a loss provision for plant closings of $14.0 million.
Except for an estimated $0.8 million of demolition costs, the
loss represents a noncash cost that is estimated to reduce
overall cash operating costs by approximately $2.0 million
annually. See Note 4 of Notes to Consolidated Financial
Statements for a further discussion of the plant closings.
On March 15, 1995, the Company acquired all of the
outstanding capital stock of Golden Sun Acquisition Company
("Golden Sun"). Golden Sun is the parent company of Golden Sun
Feeds, Inc. and its wholly owned
31
<PAGE>
subsidiaries. The consideration for the acquisition, including
applicable fees, consisted of $62.0 million in cash; 15,000
shares of Holdings Common Stock; and additional payments to be
made to the Golden Sun shareholders during the five years
following closing. The additional payments are based on the
volume of sales, up to a specified cumulative maximum amount,
made pursuant to a supply agreement with a customer during the
five-year period. See Note 5 of Notes to Consolidated Financial
Statements for a further discussion of this feed supply
agreement. No additional payments were made in 1997 and none are
expected to be made in the future. All funds required to
consummate the acquisition were borrowed under the Company's
existing credit arrangements (the "Existing Credit Agreement").
The Company's statement of operations data reflect the operating
results of Golden Sun since March 15, 1995.
Results of Operations
Three Months Ended March 31, 1998 Compared to Three Months
Ended March 31, 1997
Due to overall lower commodity prices, net sales decreased
6.1% from the 1997 period. However, gross profit remained fairly
constant totaling $47.5 million for the three-month period ended
March 31, 1998, versus $46.5 million for the comparable 1997
period. Overall volume was 1.20 million tons during the first
quarter of 1998, a 1.0% increase from the 1997 period. Average
IOIC per ton was $63.28, a 1.2% decrease from the three-month
period ended March 31, 1997, primarily as a result of a decrease
in beef cattle IOIC.
Beef cattle tons increased 3.6% over the 1997 period due to
increased sales in the feedlot business. However, IOIC decreased
4.0% due to lower ingredient profits and intense competition for
the cattle feed business. Dairy cattle tons decreased 4.3% due to
some product mix switch to concentrates and excellent pasture
conditions. Dairy IOIC decreased 3.9% due primarily to the
decrease in volume. Hog volume was consistent with the 1997
period, however, IOIC increased 3.5% due to a product mix switch
to concentrates.
Horse volume and IOIC increased 9.0% and 8.3%, respectively
over the 1997 period. The success in growing this business was
the result of aggressive promotion of products. Laying chicken
and meatbird volume increased 4.5% over 1997 but IOIC decreased
4.6% due to increased sales of lower margin duck feed. Specialty
and other volume and IOIC decreased 1.1% and 0.3%, respectively,
from 1997.
Cost of products sold decreased $18.4 million, or 7.7% from
1997, due primarily to the $18.2 million decrease in ingredient
costs. Manufacturing expenses remained consistent with the 1997
period as overall volume remained constant. Marketing,
distribution and advertising costs increased $2.2 million from
1997 due primarily to an increase in the sales force and costs
associated with the roll out of the America's Country Stores.
General and administrative expenses increased $16.1 million due
primarily to the $15.9 million of compensation paid to management
and holders of Options and Stock Units as a part of the Merger.
Amortization of intangibles and research and development costs
remained consistent with the 1997 period.
Other income, net for the three-months ended March 31, 1998
related to service fees for swine and dairy management and
marketing arrangements and profit or loss on the production of
eggs, hogs and turkeys. The decrease in other income of $1.7
million was primarily attributed to a decrease of $1.6 million on
the production of eggs, hogs and turkeys. This decrease is due to
the decline in the market price for hogs and eggs.
Interest expense for 1998 increased $0.6 million as a
result of the increase in the outstanding debt due to the New
Credit Facility and the Senior Subordinated Notes due 2010. The
Company's effective income tax rate exceeded the statutory rate
in 1997 due to amortization of goodwill not being allowed as a
tax deduction. The deferred tax assets are fully realizable and
no allowance is deemed necessary based on the Company's analysis
and its history of significant operating profits.
Year Ended December 31, 1997 Compared to Year Ended
December 31, 1996
Due to overall lower commodity prices, net sales decreased
6.9% in 1997. However, gross profit increased $13.6 million in
1997, or 7.7% over 1996. Overall volume was 4.71 million tons for
the year ended December 31, 1997, a 5.6% decrease from 1996. The
decrease in volume was attributable to a decrease in animal
numbers, a switch to more concentrates and consolidation in the hog
industry. Average feed IOIC per ton was $65.08 for 1997,
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an 8.1% increase over the year ended December 31, 1996. The
increase in average feed IOIC per ton was attributable to a shift
to the purchase of concentrates and improved higher value
products.
For 1997, beef cattle tons decreased 6.7% from 1996 due
primarily to reduced animal numbers and excellent pasture
conditions. However, IOIC increased 2.7% as customers switched to
improved higher value products with higher margins. Dairy cattle
tons decreased 8.9% from 1996 to 1997, though IOIC actually
increased as a result of some product mix switch to concentrates.
Hog volume decreased 10.4% with IOIC also decreasing 4.3%. This
decrease in hog volume and IOIC was primarily attributable to a
former customer discontinuing its purchase of feed under a feed
supply agreement and continued consolidation in the hog industry.
Horse volume and IOIC increased 10.6% and 16.3%,
respectively, over 1996. The Company's success in continuing to
grow this business was the result of the aggressive promotion of
these products resulting in an increase in market share. Laying
chicken and meatbird volume increased 1.9% over 1996 but IOIC
decreased 6.4% due to increased sales of lower margin duck feed.
Specialty and other volume decreased 1.8% from 1996, but IOIC
increased 2.1% due to a shift in product mix.
Cost of products sold decreased $97.4 million in 1997, or
9.4% from 1996, due primarily to the $95.1 million decrease in
ingredient costs. Manufacturing expenses also decreased $2.3
million due to reduced volume and the cost savings realized as a
result of closing seven plants in late 1996. Marketing,
distribution and advertising costs increased $2.6 million from
1996 due primarily to an increase in field selling costs. General
and administrative expenses decreased $1.2 million due primarily
to reduced severance costs and continued emphasis on cost
control.
The increase in amortization of intangibles for 1997
reflected additional amortization related to a decrease in the
estimated value of a feed supply contract with a former customer,
for which the Company recorded a $4.4 million loss provision in
1997. See Note 5 of Notes to Consolidated Financial Statements
for a further discussion of the write-down of the feed supply
contract in 1997.
Research and development costs increased $0.2 million in
1997, or 2.6% from 1996, as the Company continued its emphasis on
research and enhancement of products.
Other income, net for 1997 related to service fees for
swine and dairy management and marketing arrangements and the
profit or loss on the production of eggs, hogs and turkeys. These
service fees, profits and losses for 1997 were comparable to the
1996 amounts except that other income for 1996 also reflected the
proceeds received in settlement of claims for excess charges on
raw material purchases in prior years and profit on the sale of
the Company's bromethaline inventory and related trademark and
other rights.
Interest expense for 1997 decreased as a result of the
decrease in outstanding debt, offset partially by the premium
paid on the extinguishment of $10.0 million of the Existing PMI
Senior Subordinated Notes.
The Company's effective income tax rate exceeded the
statutory rate in both 1996 and 1997 due to amortization of
goodwill not being allowed as a tax deduction. The deferred tax
assets are fully realizable and no valuation allowance is deemed
necessary based on the Company's analysis and its history of
significant operating profits.
Year Ended December 31, 1996 Compared to Year Ended
December 31, 1995
During 1996, the Company experienced extreme volatility in
commodity prices with some prices breaking all time record highs
before declining again later in the year. As a result, 1996 net
sales increased 15.8% even though volume decreased 1.9% from the
1995 level to just under 5.0 million tons. Gross profit equaled
$176.3 million in 1996, a decrease of 4.1% from the 1995 amount
of $183.9 million. Overall average IOIC per ton was $60.23, a
modest 0.4% increase over the 1995 amount. The high commodity
prices combined with the low market price of cattle resulted in
reduced animal numbers, margin pressures and declines in feeding
rates in 1996 as compared to 1995.
Beef cattle tons decreased 7.1% from the 1995 amount due
primarily to the reduced animal numbers, which severely impacted
third and fourth quarter 1996 volume. Hog volume increased 1.2%
over 1995 due
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primarily to the product mix shift toward complete products.
Dairy cattle and poultry tons remained constant as reduced
feeding rates were offset by the switch to more complete
products. Horse volume continued its recent growth trend with a
6.9% increase, the fifth consecutive year of increase and a new
record high in volume. Specialty and other volume decreased 5.7%
from 1995 due to reduced animal numbers and feeding rates.
Cost of products sold increased 20.0% in 1996 from the 1995
amount, reflecting the unusually large increase in commodity
prices in 1996. Manufacturing costs decreased 2.1% from the 1995
amount primarily due to the decreased volume. Marketing costs
increased $0.9 million due to the inclusion of the Golden Sun
sales force for the entire twelve months in 1996. General and
administrative expenses increased $1.2 million for 1996, as a
$2.8 million increase in bad debt and severance expense more than
offset the other overall reduction in administrative costs.
The increase in amortization of intangibles for 1996
reflected a full year of expense attributable to the intangible
assets recorded in the allocation of the purchase price
associated with the Golden Sun acquisition, versus only nine and
one-half months in 1995. Research and development costs increased
$0.2 million in 1996, or 3.5% from 1995, as the Company continued
its emphasis in this area for development or enhancement of
products.
Other income, net for 1996 reflected the $3.2 million
increase in income over 1995 related to service fees for swine
and dairy management, marketing arrangements and the profit or
loss on the production of eggs, hogs and turkeys. The increase
was attributable to higher prices for the livestock and eggs plus
expansion of the Company's service business. Other income, net
for 1996 also reflected the 35.1% increase in profitability in
the Company's equity in earnings of two joint venture feed
manufacturing operations. Finally, the 1996 amount reflected the
profit on the sale of the Company's inventory, trademark and
other rights associated with a discontinued product line,
bromethaline, and the proceeds received in settlement of a claim
for excess charges on raw material purchases in prior years.
Interest expense for 1996 decreased as the Company repaid
$27.0 million in term loans. Additionally, the average interest
rate on the Company's outstanding debt decreased 0.6% in 1996 as
compared to 1995. The Company's effective income tax rate
exceeded the statutory rate in both 1996 and 1995 due to the
amortization of goodwill not being deductible for tax purposes.
The deferred tax assets are fully realizable and no valuation
allowance is deemed necessary based on the Company's analysis and
its history of significant operating profits.
Seasonality
The Company's business is seasonal, with a higher
percentage of the feed volume sold and earnings generated during
the first and fourth quarters of the year. This seasonality is
driven largely by weather conditions affecting the Company's
cattle product lines. If the weather is particularly cold and wet
during the winter, sales of feed for cattle increase as compared
with normal seasonal patterns because the cattle are unable to
graze under those conditions and have higher nutritional
requirements. If the weather is relatively warm during the
winter, sales of feed for cattle may decrease as compared with
normal seasonal patterns because the cattle may be better able to
graze under such conditions. Other product lines are affected
marginally by seasonal conditions but these conditions do not
materially affect the Company's quarter-by-quarter results of
operations.
Liquidity and Capital Resources
Historical
For the year ended December 31, 1997, net cash provided by
operations before the effects of changes in operating assets and
liabilities was $67.4 million, compared to $60.5 million in 1996
and $61.0 million in 1995.
Net cash used in investing activities, excluding cash paid
for acquired businesses, was $29.3 million in 1997, $22.1 million
in 1996 and $25.8 million in 1995. These amounts consisted
primarily of purchases of property, plant and equipment, which
totaled $29.7 million in 1997, $23.9 million in 1996 and $25.5
million in 1995. In 1997, capital expenditures included
approximately $14.5 million for construction of new plants in
Lubbock, Texas and Hagerstown, Maryland. The 1997 increase in net
cash used in investing activities over the 1996 amount was also
attributable to costs incurred to date to purchase and implement
an enhanced accounting and
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information reporting system. The 1996 decrease from the 1995
amount reflected the decision to close seven facilities, thereby
reducing replacement capital.
Net cash used by financing activities in 1997 included the
repayment under the Existing Credit Agreement of $26.4 million in
term loans and the extinguishment of $10.0 million of the
Existing PMI Senior Subordinated Notes. Additionally, in 1997 the
Company loaned $1.2 million to the ESOP for the purchase of
shares of Holdings Common Stock from existing shareholders. In
1996, net cash used in financing included the repayment under the
Existing Credit Agreement of $27.0 million in term loans and $6.0
million under the revolving credit facility. Additionally, in
1996, the Company loaned $6.3 million to the ESOP for the
purchase of Holdings Common Stock and received proceeds of $8.3
million from the sale of industrial revenue bonds to finance the
construction of a new manufacturing facility in Hagerstown,
Maryland.
At December 31, 1997, the Company had $27.6 million in cash
and cash equivalents on hand, and approximately $27.9 million
(after giving effect to borrowing base limitations) was available
for borrowing under the Company's revolving credit facility under
the Existing Credit Agreement. The Company operates with a
relatively low working capital level because a majority of its
sales are made on terms whereby customers receive a 3% discount
if payment is received immediately upon shipment of feed products
(where approximately 62.8% of the Company's sales are made by
such arrangement), and raw ingredients are normally purchased
shortly prior to manufacturing and shipment.
The Company's cash flow generally increases at year end due
to seasonally higher volume and programs whereby certain
customers prepay feed purchases for the following year. The total
of these prepayments was $16.5 million and $17.5 million at
December 31, 1997 and 1996, respectively.
In 1995, net cash provided by financing activities included
additional borrowings under the Existing Credit Agreement of
$45.0 million in term loans and $15.0 million under the revolving
credit facility to finance a portion of the Golden Sun
acquisition. Additionally, the Company received proceeds of $9.1
million from the sale of industrial revenue bonds to finance
construction of the new manufacturing facility in Statesville,
North Carolina. In 1995, the Company also loaned the ESOP $4.0
million to purchase Holdings Common Stock and repaid $9.0 million
of the additional borrowings under the revolving credit facility.
After the Transactions
For the three months ended March 31, 1998, net cash
provided by operations before the effects of changes in operating
assets and liabilities was $13.1 million, compared to $13.7
million in the 1997 period. Net cash used in investing activities
for purchases of property, plant and equipment and intangible
assets was approximately $5.4 million and $3.5 million for the
three-month periods ended March 31, 1998 and 1997, respectively.
The increase was primarily attributed to an increase in costs
associated with the implementation of a new information system
and the construction of a new plant in Lubbock, Texas.
Net cash provided by financing activities in 1998 includes
the proceeds from the New Credit Facility of $200.0 million and
the proceeds from the Senior Subordinated Notes due 2010 of
$350.0 million less the repayment of the Old Senior Term Loan,
Senior Subordinated Notes due 2003 and the IRB Loans totaling
$294.2 million and the dividend paid to Holdings of $237.2
million. In 1997, net cash used in financing activities included
the repayment under the Old Credit Agreement of $3.8 million.
At March 31, 1998, the Company had $2.1 million in cash and
cash equivalents on hand, and approximately $81.5 million was
available for borrowing under the Company's New Revolving Credit
Facility. The Company operates with a relatively low working
capital level because a majority of its sales are made on terms
whereby customers receive a 3% discount if payment is received
immediately upon shipment of feed products, and raw ingredients
are normally purchased just prior to manufacturing and shipment.
As part of the consummation of the Transactions, the
Company entered into the New Credit Facilities. The New Credit
Facilities provide for term loans in the aggregate amount of
$200.0 million, consisting of a Tranche A Term Loan of $100.0
million and a Tranche B Term Loan of $100.0 million. The New
Revolving Credit Facility provides for revolving loans in an
aggregate amount of up to $100.0 million, with a $40.0 million
sub-limit for letters of credit. The New Revolving Credit
Facility will expire in fiscal 2005, the Tranche A Term Loan will
35
<PAGE>
mature in fiscal 2005 and the Tranche B Term Loan will mature in
fiscal 2007. The Tranche A Term Loan is subject to amortization
payments on a quarterly basis of $1.25 million per quarter during
the first year, $2.0 million per quarter during the second year,
$2.75 million per quarter during the third year, $3.5 million per
quarter during the fourth year, $4.25 million per quarter during
the fifth year, $5.00 million per quarter during the sixth year
and $6.25 million per quarter during the seventh year following
the first such payment, which will be due on June 30, 1998. The
last payment will be made on the seventh anniversary of the date
of the consummation of the Offering. The Tranche B Term Loan will
be subject to amortization payments on a quarterly basis of
$75,000 for each of the eight successive one-year periods
following the first such payment, which will be made on June 30,
1998. The remaining $97.6 million aggregate principal amount of
the Tranche B Term Loan is subject to four equal quarterly
amortization payments, with the first such payment to be made
eight years after June 30, 1998 and the last payment to be made
on the ninth anniversary of the date of the consummation of the
Offering.
The Company expects that capital expenditures during fiscal
1998 will be approximately $33.1 million, which includes $6.8
million related to the new accounting and information reporting
system. The Company may from time to time be required to make
additional capital expenditures in connection with the execution
of its business strategies, including expenditures related to its
swine integration strategy. The Company plans to fund capital
expenditures by using internally generated funds and, if
necessary, borrowing capacity under the New Revolving Credit
Facility.
The Company will incur substantially higher interest
expense in the future as a result of the issuance of the Notes
and borrowings under the New Credit Facilities. As set forth
under "Unaudited Pro Forma Financial Data", assuming consummation
of the Transactions on January 1, 1997, pro forma interest
expense would have been $48.7 million for the year ended December
31, 1997, representing an increase of $16.1 million over the
historical amount for the year ended December 31, 1997. Pro forma
amortization would have been $20.5 million for the year ended
December 31, 1997, representing a decrease of $0.1 million over
the historical amount for the year ended December 31, 1997. See
"Risk Factors--Substantial Leverage" and "Unaudited Pro Forma
Financial Data." The Company's ability to obtain additional
financing in the future for working capital, capital
expenditures, acquisitions, and general corporate purposes,
should the Company need to do so, may be affected by cash
requirements for debt service.
The agreements with respect to the Term Loans contain
restrictive covenants with respect to the operation of the
Company's business. See "Description of Certain Indebtedness."
Management believes that cash flow from operations and
availability under the Term Loans and the New Revolving Credit
Facility will provide adequate funds for the Company's
foreseeable working capital needs, planned capital expenditures
and debt service obligations. The Company's ability to fund its
operations and make planned capital expenditures, to make
scheduled debt payments, to refinance its indebtedness and to
remain in compliance with all of the financial covenants under
its debt agreements depends on its future operating performance
and cash flow, which, in turn, are subject to prevailing economic
conditions and to financial, business and other factors, some of
which are beyond its control.
Loan Guarantees
The Company has agreed to provide a guarantee of up to $7.5
million to Purina Ag Capital Corp. ("Purina Ag Capital"), a
non-stock membership corporation formed in 1995 to provide
funding for the growth, consolidation and expansion of the
Company's network of independently owned dealers and producers.
All dealers or producers who are members of Purina Ag Capital
must have arrangements with the Company for some purchase of the
Company's products. At December 31, 1996 and 1997, respectively,
the amount subject to such guarantee was $5.8 million and $5.9
million, respectively. The guarantee is expected to remain
outstanding for over five years. The Company is not a member of
Purina Ag Capital and thus does not have an equity interest in
the entity; however, the Company did make a loan of $2.0 million
to Purina Ag Capital in 1995 to provide funding for its growth.
The Company also provides loan guarantees to banks to assist the
Company's customers in obtaining bank financing. At December 31,
1997, the Company had $11.3 million of total guarantees
outstanding. See Note 12 of Notes to Consolidated Financial
Statements for a further discussion of the loan guarantees.
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BUSINESS
The Company is the market leader in the United States in
developing, manufacturing and marketing differentiated animal
nutrition products for dairy cattle, beef cattle, hogs and
horses. The Company also develops, manufactures and sells poultry
feeds as well as specialty feeds for rabbits, zoo animals,
laboratory animals, birds, fish and pets. In the United States,
the Company's products are and programs generally marketed under
the widely recognized brand names Purina(R) and Chow(R), and the
"Checkerboard" Nine Square Logo(R) except with regard to dog and
cat food, which is marketed domestically under the PMI Nutrition
brand name. The Company also markets products under the Golden
Sun brand and its related trademarks. The Company's products are
sold as complete feeds or as concentrated nutritional additives
that customers mix with their own commodity ingredients. Over the
past 100 years, the Company believes that it has built and
maintained its industry leadership through innovative research
and development and by consistently providing high quality
products, programs and services that create value for its
customers. For the year ended December 31, 1997 and the
three-month period ended March 31, 1998, the Company generated
sales of approximately $1,128.4 million and $267.1 million,
respectively, and EBITDA of approximately $99.2 million and $23.5
million, respectively.
Because commercial animal feed represents 50% to 70% of the
total cost of producing milk, meat or eggs at the farm level, the
effective management of feed costs and the resulting yields are
among the most important economic components of animal raising.
The Company's products are designed to provide nutrients that
meet the needs of a particular species of animal at each phase of
its life cycle. In the commercial production of milk, meat and
eggs, the Company believes that its continued market leadership
reflects the attractive, cost-effective balance between weight
gain, feed efficiency, animal health and price which its products
and programs provide.
The Company also maintains a leadership position in the
horse and other retail specialty feed markets. As the U.S.
population has migrated to suburban and rural areas, the
incidence of hobby farmers, "ranchettes" and companion animal
ownership has increased. Consumers in this market are typically
less price sensitive than those in the commercial feed market and
buying decisions are driven more by brand awareness, product
quality, convenience and the retail environment. The Company
believes that its strong growth in this market segment can be
attributed to its brand recognition, broad product offering and
extensive retail distribution network. The Company sees
significant growth opportunities in these high margin market
segments as the "ruralpolitan" population continues to grow.
Industry Overview
In 1996, the U.S. animal feed industry produced
approximately 117 million tons of primary feed, and animal
producers utilized approximately $27 billion of animal nutrition
products. Of this total amount, the Company estimates that in
1996 the U.S. feed industry produced for the Available Market
approximately 63 million tons of primary feed, and animal
producers purchased approximately $13 billion of animal nutrition
products. The industry is highly fragmented and although it
includes several large producers, it is comprised primarily of
regional competitors with several manufacturing facilities as
well as a large number of small, local manufacturers, many of
whom operate only one feed mill. In 1996, the top ten animal feed
companies produced approximately 30% of the total Available
Market for animal feed in the United States.
The Company competes in both the commercial feed business
and the retail specialty feed business. The Company defines the
commercial feed business as including nutrition products and
programs for dairy cattle, beef cattle, hogs and poultry and
believes the business is characterized by continued industry
consolidation and vertical integration of animal producers,
product price sensitivities and increasing customer
sophistication. In contrast, the Company believes that the retail
specialty feed business, which includes feed products for horses,
rabbits, zoo animals, birds, fish and pets, requires aggressive
marketing, customer brand awareness and strong national
distribution capabilities.
The feed industry generally prices its products on the
basis of Income Over Ingredient Cost ("IOIC"), a dollar based
margin which is added to aggregate ingredient cost. The Company
believes that total IOIC and gross profit dollars, rather than
sales dollars, are the key indicators of performance because of
distortions in sales dollars caused by changes in commodity
prices. Total IOIC less manufacturing costs equals gross profit.
Although feed producers are subject to fluctuations in ingredient
commodity prices, they are generally able to pass on price
increases in raw materials to customers through weekly
adjustments in product prices.
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The following chart sets forth information with respect to
the top ten producers of the seventy U.S. producers profiled,
based upon production capacity measured in tons for the year
ended December 31, 1997, as reported in the January 1998 edition
of Feed Management.
Mills Production Capacity
-------------------- ----------------------
Number % of Total Tons (000s) % of Total
------ ---------- ----------- ----------
Top 10 Producers:
Purina Mills, Inc. ...... 59(a) 11.3% 7,500(a) 16.7%
Cargill, Inc. ........... 73 14.0 7,000 15.6
PM Ag Products, Inc.(b).. 35 6.7 3,500 7.8
Consolidated Nutrition
LC................... 37 7.1 3,000 6.7
Land O'Lakes, Inc. ...... 23 4.4 2,500 5.6
Kent Feeds, Inc. ........ 23 4.4 2,000 4.5
Farmland Industries ..... 24 4.6 1,820 4.1
Continental Grain Co. ... 15 2.9 1,500 3.3
Southern States Co-op ... 10 1.9 1,290 2.9
Cactus Feeders, Inc. .... 5 1.0 1,200 2.7
--- ----- ------ ------
Total Top 10: ................. 304 58.3% 31,310 69.9%
Others: ....................... 219 41.7 13,488 30.1
Grand Total: .................. 523 100.0% 44,798 100.0%
______________________
(a) The Company's actual number of mills and production
capacity was 56 and 7,358 million tons, respectively, as of
December 31, 1997.
(b) PM Ag Products, Inc. is not affiliated with the Company.
Business Strategy
The Company plans to further strengthen its position in the
animal nutrition industry by pursuing the following primary
strategies:
Continued Development of New and Differentiated Products,
Programs and Services. The Company will continue to develop its
differentiated feed products, programs and services by leveraging
its own extensive research and development efforts. Over the last
few years, the Company has introduced several patented products
and programs that have been demonstrated to enhance feed
efficiency and utilization by animals. These products, among
others, include the Proteus(R), Ultimate EXT(R), Impact(TM) and
Lean Generation(R) products and programs. Over 40% of sales in
1997 were from products and programs internally developed and
launched within the last five years.
Expand and Upgrade Dealer Distribution Network. The Company
has recently introduced its America's Country Stores initiative
designed to significantly upgrade its existing dealer network and
to recruit new dealers in priority retail markets. America's
Country Stores combines a new exterior and interior design
featuring an upscale atmosphere, merchandising programs, training
programs for in-store employees, a purchasing and support
relationship with a national hardware supplier and new
advertising and promotion programs. The initiative features a
"turn-key" package that provides dealers a standardized approach
that the Company believes will offer consumers a unique and
positive shopping experience. The Company presently plans that
more than 400 America's Country Stores will be constructed over
the next four years, strengthening its position in the profitable
"ruralpolitan" market. It is anticipated that all America's
Country Stores, with the exception of a few company-owned model
stores, will be privately owned and will require no capital
investment by the Company.
Capitalize on Koch Agriculture Ownership. As a result of
the acquisition by Koch Agriculture, a subsidiary of Koch
Industries, the Company expects to realize certain immediate and
future benefits in areas of commodity purchasing, technology and
operations. These opportunities include:
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- Leveraging of Koch Agriculture's Commodity Trading
Expertise: Following the Merger the Company entered into
an exclusive commodity purchasing agreement with a
division of Koch Agriculture. Under the terms of the
agreement, Koch Agriculture's Nutrition Supply and
Trading division supplies the Company with all of its
requirements for feed ingredients, feed additives and
feed packaging materials. The contract provides that the
Company will purchase feed ingredients and feed additives
at a price equal to the spot market price less a discount
to be agreed upon between the Company and Koch
Agriculture. For the first year of the agreement, this
discount is $3.50 per ton. Koch Industries and its
subsidiaries have significant commodities trading
operations and the Company believes it will benefit from
lower overall commodity prices as a result of this
arrangement. In addition, the Company transferred all of
its commodity purchasing operations to Koch Agriculture.
- Application of Dewatering Technology: Koch Feed, a
subsidiary of Koch Agriculture, has agreed to make
available to selected facilities of the Company its
patented Jet-Pro(R) dewatering technology. This
processing system converts high moisture nutrient streams
that are by-products from food processing, such as potato
peels, cheese whey and apple pumice, into feed
ingredients. This technology is expected to enable the
Company to identify and create potential new substitute
or complementary feed ingredients and thereby help to
decrease total ingredient costs for the Company. Koch
Feed has also agreed, subject to certain terms and
conditions, that it will not license the Jet-Pro(R)
dewatering technology in the future to any commercial
feed producer in the United States that competes directly
with the Company.
Swine Integration. To capitalize on the consolidation of
the hog industry, the Company is implementing a strategy that is
expected to result in control over the feeding of approximately
six million market hogs over the next four years. The strategy
takes a systems approach to pork production, and will leverage
the strengths of the Company's knowledge base, its commercial
dealer network and its relationship with many midwestern hog
producers and corn growers. The program is expected to provide a
source of high quality feeder pigs to independent hog producers
and to gain the related feed business for the Company. The
strategy also is expected to offer a marketing program linked
with leading pork processors, minimizing market risk to the
producer. The Company's direct ownership will be minimal and it
believes that the business generated through this initiative will
more than offset recent and future declines in traditional hog
feed business due to consolidation.
Actively Participate in Domestic Industry Consolidation.
The Company views the continuing consolidation of the domestic
animal nutrition industry as an important strategic growth
opportunity. The Company will look to acquire products and
technologies that complement its existing capabilities. The
Company will also attempt to add production and distribution
capabilities, particularly in the Northeast and West, to fill out
its geographic presence within the United States. In addition,
the Company believes that it is well positioned to provide the
growing number of integrated and increasingly sophisticated
commercial animal producers with customized nutritional programs
and feed ingredients, given the Company's technically superior
products, programs and services.
Selectively Expand Internationally. The Company intends to
leverage its extensive knowledge of animal nutrition products and
programs to pursue international expansion opportunities through
strategic affiliations, alliances, joint ventures or
acquisitions. The Company intends to build a material market
presence in targeted regions. An example of this strategy is the
Company's recent joint venture arrangement with Tyson Foods and
Aboitz Equity Ventures to construct a feed mill and develop a
large-scale hog operation in the Philippines. The feed mill is
expected to manufacture products for sale through a dealer
organization and also feed the hog operation. The Company owns
25% of the stock of the venture, with Tyson Foods and Aboitz
Equity Ventures, the local partner, owning 25% and 50%,
respectively.
Products
The Company develops, manufactures and markets a
comprehensive line of animal nutrition products for dairy cattle,
beef cattle, hogs, horses and poultry, as well as specialty feeds
for rabbits, zoo animals, laboratory animals, birds, fish and
pets. The Company's product lines range from economy feeds to
high-performance, value-added products, and are sold in complete
rations or as concentrates to be mixed with grains. The Company
maintains a total of over 20,000 active feed formulas, which
encompass a wide range of animal species.
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Although products are the principal point of
differentiation, the Company develops and sells its products as
part of nutrition and management programs that address all
critical areas in the production of meat, milk and eggs. The
Company's nutrition programs include information and services
regarding the care of the animals and their facilities, as well
as nutritional, genetic and breeding counseling.
The demand for particular products is affected by a number
of factors, including the price of grains and the price of the
end-products of animal producers. When the price of grains has
been relatively high, more of the Company's customers have tended
to purchase complete rations and the Company's tonnage has been
correspondingly higher. During periods when commodity prices
(particularly for corn) have been relatively low, animal
producers have tended to purchase the Company's products as
concentrated nutritional additives with which the customers mix
their own commodity ingredients. This results in decreased sales
tonnage for the Company, because the commodity portion of the
product is provided by the customer. The Company's concentrates,
however, generally provide higher per-unit IOIC to the Company
than do complete feeds. In addition, the Company is diversified
across a broad range of different animal species and regions.
Consequently, the Company's total IOIC and gross profit have
historically been stable. Because the cost of feed typically
represents more than half of the cost of producing animals at the
farm level, higher ingredient prices over time can result in a
decline in animal production and a decline in the demand for the
Company's products. In addition, when market prices for live
animals and animal products are low, animal producers will also
cut back on production and search for lower-cost feed
alternatives. The Company maintains a line of economy products
while emphasizing the relative value of its high-performance,
value-added products.
Although ingredient prices influence producers' decisions
to use concentrate or complete feed products, producers tend to
continue with one of these alternatives until prices change
significantly or replacement investments in feed handling
equipment must be made. Using concentrates requires equipment on
the farm to grind commodity ingredients and mix them with the
concentrate components to produce finished feed. Once this
investment is in place, it may influence these producers'
decisions on feeding programs. Producers are generally unlikely
to alternate between complete feed and concentrates on a
short-term basis.
Although competitors may be able to determine the
ingredient components of a particular formulation of a feed
product, the Company believes that several factors prevent
competitors from effectively duplicating the performance of its
product lines. Management believes that competitors generally do
not have the extensive nutritional knowledge required to
understand the purpose of individual ingredients in a specific
feed product, or the ability to use substitute ingredients on a
cost-effective basis as prices change, particularly if those
substitutes are not available locally. In addition, the Company
markets its feeds as part of comprehensive feeding programs,
which include management and animal health, as well as the
specific feed products. Management believes that the effective
coordination of all of these related elements is critical to
achieving optimal feed performance. Finally, many of the
Company's products are manufactured using proprietary process
technology that provides cost or product attribute advantages
that the Company believes cannot be readily duplicated.
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Product Lines
The following table sets forth, by major product line, the
sales volume and gross sales for each year during the five-year
period ended December 31, 1997:
Year Ended December 31,
--------------------------------------------------
1993 1994 1995 1996 1997
------ ------- ------- ------- --------
(In thousands)
Product Lines:
Dairy Cattle
Tons sold............. 1,273 1,321 1,265 1,267 1,154
Gross sales........... $252,726 $256,934 $246,542 $301,260 $270,170
Beef Cattle
Tons sold............. 1,423 1,377 1,467 1,363 1,271
Gross sales........... $229,244 $224,851 $241,253 $261,693 $245,151
Hog
Tons sold............. 987 1,010 1,058 1,071 960
Gross sales........... $247,308 $241,899 $250,316 $306,441 $273,264
Horse
Tons sold............. 274 308 346 370 409
Gross sales........... $60,628 $69,216 $81,257 $103,513 $109,824
Poultry
Tons sold............. 511 548 418 417 425
Gross sales........... $106,862 $94,981 $74,296 $90,265 $88,797
Specialty and Other
Tons sold............. 374 460 526 496 487
Gross sales........... $96,088 $142,879 $164,792 $186,012 $202,657
------- -------- -------- -------- --------
Total tons sold.......... 4,842 5,024 5,080 4,984 4,706
Total gross sales........ $992,856 $1,030,76 $1,058,45 $1,249,184 $1,189,863
Set forth below is a description of each major product
line. The Company's estimates of its market share referred to
herein are based on the Company's estimates of its Available
Market (total volume of feed produced, except that used by
producers who have integrated feed operations or alignments with
other feed manufacturers).
Dairy Cattle. The Company markets dairy cattle products
ranging from economy to high performance. The Company estimates
that its 1997 volume of 1.2 million tons, or approximately 25% of
the Company's total feed tons, represented approximately a 9%
share of the Available Market. The Company regards dairy cattle
products as an attractive growth market.
Milk production per cow has increased by an aggregate of
approximately 31% from 1983 to 1997, largely driven by improved
genetics and feeding programs based on enhanced knowledge of
cows' nutritional requirements. Further increases in production
per cow are expected to be achieved through improved genetics,
biotechnology and feeding programs, which include
high-performance products such as the Company's Ultimate EXT(R)
product line. According to Company data, these products have
produced average increases of approximately five pounds of milk
per cow per day in high producing herds, a 5% to 7.5% increase,
due primarily to a proprietary extruded component in the product
that delivers nutrients more effectively than traditional
products. Extrusion is a relatively high cost process not
normally used in commercial animal feed production. In addition,
improvements in the efficiency of milk production are critical to
the profitability of dairy operations. The Company believes that
its patented Proteus(R) product line enhances the efficiency of
feed protein utilization by lactating dairy cows. The result is a
lowering of feed costs while maintaining the level of milk
production and milk component yield. An additional benefit of
Proteus(R) technology is reduced urinary nitrogen excretion by
dairy cows resulting in an environmentally favorable nutritional
program.
The dairy industry is continuing to experience gradual
consolidation. According to a February 1996 report by the United
States Department of Agriculture, the number of dairy operations
decreased by approximately 30% from 1991 to 1996; average dairy
herd size increased from approximately 55 head in 1991 to
approximately 74 head in 1996, while the average number of dairy
cows was approximately 6% lower in 1996 than in 1991. Many large
dairies require specialized products, programs and services from
their suppliers. The Company believes the
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success of its dairy cattle product line is largely due to its
value-added products and the development of a field staff of
Ph.D. nutritionists who work with dealers and directly with
customers to develop specialized products, programs and services
to meet their individual needs.
Beef Cattle. The Company offers a complete line of feed
products for beef cattle, ranging from economy to high
performance. The Company estimates that its 1997 volume of
approximately 1.3 million tons, or approximately 27% of the
Company's total feed tons, represented approximately a 13% share
of the Available Market.
Beef cattle operations can be broadly viewed as consisting
of cow-calf, farmer-feeder and feedlot operations. The feedlot
market is highly concentrated. In 1997, over 720 feedlots
accounted for 89% of U.S. beef production and the 45 largest
feedlots accounted for almost 26% of U.S. beef production. Such
consolidation has not occurred in cow-calf operations, which
produce calves for growing and finishing, and is not expected to
occur in that part of the market.
Historically, dry feedlot products have not been as
profitable as hog and dairy cattle products because there has
been less product differentiation. However, the Company does
offer proprietary, premium performance products in liquid form
primarily for feedlots and the farmer-feeder and in block form
for cow-calf operations. In addition, the Company's research
efforts have resulted in an innovative feeding management
program, Impact(TM), which is designed to significantly improve
feed efficiency and cost-per-pound gain, while maintaining
average daily gain. This feeding program is being used in major
feedlot markets and has recently been introduced for
farmer-feeder operations. Sales volume of this high performance,
value added product and program has grown rapidly.
Hogs. The Company offers a complete line of feed products
for hogs, ranging from economy to high performance. The Company
estimates that its 1997 volume of 1.0 million tons, or 20% of the
Company's total feed tons, represented approximately an 8% share
of the Available Market.
In early 1991, the Company introduced its Lean
Generation(R) line of products and feeding programs, which match
a hog's genetic potential and life stage with nutrient
requirements designed to increase its daily lean weight gain.
Lean Generation(R) programs have been demonstrated to lower feed
costs by improving feed efficiency and reducing the average
number of days to market, in addition to providing a higher
composition of lean meat. As consumers demand lower-fat meat
products and the hog packing industry moves further toward
establishing prices for live animals based on lean content rather
than weight, hog producers can improve both their product and
their profitability under these programs. The Company believes
that the Lean Generation(R) line of products offers clear
differentiation from competitive products. As a result, the line
became the Company's largest volume product within eight months
of its introduction.
The Company has historically been successful in selling to
medium-size producers in the hog industry through its traditional
dealer distribution channel. The Company has also been successful
in generating business directly with hog producers. As
consolidation in the hog production industry continues, the
Company expects to have opportunities for strategic business
alliances with producers, or to provide technology sharing or
consulting services. Nevertheless, consolidation and integration
in hog production over the last 20 years has been significant,
with a continuing trend toward fewer but larger operations.
According to the December 29, 1997 USDA Hogs and Pigs Report,
there were approximately 139,000 hog production operations in
November 1997, compared with approximately 870,000 in 1970. Based
on recent trends, the Company anticipates that this number may
drop to approximately 100,000 by the year 2000. Management
anticipates a gradual decline in volumes and margins in its
traditional hog business. However, the Company believes that
larger hog producers are better able to measure animal
performance and, as a result, better appreciate the Company's
premium products and more sophisticated feeding and management
programs.
To capitalize on the consolidation of the hog industry, the
Company is implementing a strategy that is expected to result in
control over the feeding of approximately six million market hogs
over the next four years. The initiative is expected to provide a
source of high quality feeder pigs to independent hog producers
and offers a marketing program linked with leading pork
processors, thereby minimizing market risk to the producer. The
Company believes that the contributions from this initiative will
more than offset the declines in traditional hog business in the
near term.
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Horse. The Company estimates that its 1997 volume of
409,000 tons, or approximately 9% of the Company's total feed
tons, represented approximately a 24% share of the Available
Market.
Volume in this product line has increased each of the past
six years. Following changes in distribution strategy, sales
focus and pricing policies, volume increased in 1992 for the
first time since 1982. Unlike cattle and hogs, most horses are
kept for pleasure or work. Horse owners, therefore, do not
generally have a commercial or economic measure of the value of
the Company's products. Since 1992, the Company has restricted
its efforts in the price-driven commodity portion of the business
and has instead focused on the quality-oriented end of the market
for horse feed, where the Company believes the value of its
Omolene(R) and other premium brands are more likely to be
recognized. The Company also introduced a series of pelleted and
extruded products that it believes will appeal to a wide range of
feeders, including its Equine Senior(TM), Equine Adult(TM) and
Equine Junior(TM) feeds, which are designed to meet the
nutritional needs of older, adult and younger horses,
respectively, and Strategy(TM), a performance product designed
for stables and more commercially oriented horse operations.
Aggressive marketing programs have been implemented to continue
the growth in this market. A traveling exhibit known as Horse
Country was launched in 1997 and proved to be so successful that
an additional version thereof was approved for 1998 to travel to
smaller local events.
Poultry (Laying Chickens and Meatbird). The Company's 1997
volume of 425,000 tons represented approximately 9% of the
Company's total feed volume. The egg production industry is
highly concentrated. Because the nutritional requirements of
poultry are relatively simple and widely known compared to those
of beef cattle, dairy cattle or hogs (and thus comparatively
little value can be added through feed) and significant numbers
of birds can be located in concentrated areas, these producers
generally have sufficient scale and nutritional knowledge to
manufacture their own feed. Accordingly, the available market for
feed sales is small relative to the amount of feed consumed in
the poultry industry.
The meatbird (broiler chickens, turkeys, ducks, etc.)
production industry is also highly concentrated with a relatively
small number of very large producers that generally manufacture
their own feed, again due to the relative simplicity of the diet
and large scale of operations in this market. Because there is no
significant opportunity for product differentiation in either
part of the poultry market, the Company is pursuing this market
less aggressively.
Specialty and Other. In addition to its core commercial
feed lines, the Company develops, manufactures and markets
mineral supplements for livestock and a wide variety of feed
products for other animals ranging from rabbits, birds,
commercial fish, dogs and cats to zoo and other exotic animals.
This group includes the expanding Mazuri(R) brand line of feeds,
which is widely recognized in the domestic and international
zoological community, as well as PMI Nutrition(TM) line of dog
and cat foods, which was introduced during 1992 and expanded in
1993 and 1994.
Many products within this group can be manufactured at most
of the Company's feed mills. Others are highly specialized and
incorporate unique ingredients designed to address particular
nutritional needs, or otherwise require manufacturing process
technology, including extrusion, not available at standard feed
plants. Those specialty items are manufactured at the Company's
Richmond, Indiana specialty plant.
The specialty and other product group has the highest
overall unit margins of all the Company's product groups. The
Company's 1997 volume of specialty feeds aggregated 487,000 tons,
representing approximately 10% of the Company's total feed
volume. The Company believes that these products have significant
potential for continued growth in volume and profit
contributions.
Research and Development
The Company's research efforts are focused on the
development of proprietary product forms and process technologies
designed to support new product development and increase
manufacturing efficiency while lowering processing costs. At its
research center in Gray Summit, Missouri, the Company conducts
extensive animal research to develop value-added products and
programs designed to optimize the genetic performance potential
of animals. Basic research is conducted by Ph.D. scientists and
technical staff who are dedicated to each specie served by the
Company's products. Each specie of animal is closely studied from
birth to maturity to enable scientists to understand the complex
nutritional needs and genetic capabilities at each stage in its
life cycle. By understanding the metabolic process of each
specie, the Company's scientists have identified which nutrients
are required by an
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animal at various stages in its development to maximize its
genetic potential. Further, researchers have gained extensive
knowledge of the nutritional composition and values of the
primary ingredients used in feed and a wide range of acceptable
substitute ingredients. In addition to the development of
high-performance feeds through its research efforts, the Company
is able to recommend specific feeding and management programs
that enhance the effectiveness of its feeding products.
Management believes that its research and development
capabilities enable the Company to develop high-performance,
value-added products that can be differentiated from other feed
alternatives. The Company believes that the continued market
leadership of its various products and programs will depend, in
part, upon maintaining an attractive, cost-effective balance
between weight gain, feed efficiency, yield, animal health and
price.
Over 40% of the Company's sales volume in 1997 was derived
from products introduced within the past five years. The
Company's research and development expense (net of revenues
realized at the Company's research facilities and manufacturing
expenses associated with the production of feed for the animals
at the research facilities) was $7.2 million, $7.0 million, $6.7
million and $6.3 million in 1997, 1996, 1995 and 1994,
respectively.
Source and Availability of Raw Materials
The basic feed manufacturing process consists of grinding
various grains and protein sources into a meal form that is then
mixed with certain nutritional additives, such as vitamins,
minerals, synthetic amino acids, and, in some cases, medications.
The resulting products are sold in a variety of forms, including
meal, pellets, blocks and liquids. The Company's feed formulas
are based upon the nutrient content as determined through
proprietary scientific research. When the price of certain raw
ingredients increases, the Company can generally adjust its feed
formulas by substituting lower-cost, alternative ingredients to
produce feeds with comparable nutritional value. By using its
sophisticated, least-cost product formulation system, the Company
can determine optimal formulations that meet its nutritional
standards and maintain product quality.
The raw materials used by the Company are generally
available from a number of different sources and the Company has
not experienced any significant interruption in the availability
of raw materials. The Company does not typically enter into
long-term contracts for the purchase of ingredients. However, the
prices of many of the Company's raw materials can be volatile.
Although the Company generally passes on these price changes to
its customers, the Company uses the futures markets, options and
other risk management tools in an attempt to protect its margins
on firm purchase contracts with customers and to lock in prices
to support promotions on various products. Management has
extensive experience in purchasing ingredients in the commodities
markets. Historically, from time to time, the Company has taken
positions in various ingredients to ensure supply and to protect
profits on anticipated sales volume. Although the Company has
used these risk management tools to hedge its risks, it does not
speculate in the commodities market and the Company has
maintained a relatively low dollar level of risk related to open
positions in the market. In connection with the Merger, the
Company has entered into an exclusive commodity purchasing
agreement with Koch Agriculture. After the consummation of the
Transactions, the Company will transfer all of its commodity
purchasing operations to Koch Agriculture's Nutrition Supply and
Trading division, which will supply the Company with all of its
requirements for feed ingredients going forward, charging the
Company a price equal to the spot market price less a margin to
be agreed upon between the Company and Koch Agriculture on an
annual basis. The Company believes it will benefit from lower
overall commodity prices and other cost savings as a result of
this arrangement.
Manufacturing Process
The Company currently operates 56 feed manufacturing plants
located in 26 states. The Company's total feed manufacturing
capacity is approximately 7.4 million tons per year based on a
two shift per day, five-day week, and individual plant capacity
ranges from 30,000 tons to 300,000 tons. Capacity utilization
varies by plant and by season, with higher utilization during the
first and fourth fiscal quarters.
Potential manufacturing economies of scale are generally
not sufficient in the feed industry to offset the cost of
shipping products over significant distances, as raw ingredients
make up a large percentage of the cost of finished products and
are often available locally. As a result, the Company operates
nationally with a network of manufacturing facilities with
sufficient capacity to meet the demands of the local markets in
which the facilities are located. The Company regularly reviews
its plant capacity and factors such as trends in animal
production in
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specific markets and changes in transportation costs. Based on
these factors, from time to time manufacturing capacity in
particular markets may be expanded, consolidated or eliminated.
In this regard, based on its evaluation of areas where its
operations could be consolidated or rationalized, the Company
closed seven feed manufacturing plants in late 1996. It has
recently built or is building new or replacement plants in
Hagerstown, Maryland, Statesville, North Carolina, and Lubbock,
Texas.
The Company has invested in highly sophisticated
computerized systems for mixing, pelleting, micro-ingredient
blending and packing. In addition, the Company has developed and
implemented a sophisticated computer program for feed formulation
that incorporates the nutritional value of substitute
ingredients, which is run on the Company's mainframe computer.
The Company believes that this program provides it with a
competitive advantage. Investments have also been made to
maintain the operating capability of the Company's manufacturing
facilities.
Sales and Marketing
The Company distributes its products through two primary
distribution channels: through dealers and directly to end-users.
During 1997, approximately 61% of the Company's sales were made
through its dealer network and 39% of sales were made directly to
animal producers. To support increasingly sophisticated
customers, the Company's mix of salespeople includes
approximately 85% "specialists" who focus on individual species
or distribution channels. Although sales volume through the
Company's dealer network has always been substantially higher
than the Company's direct sales volume, direct sales to customers
have accounted for an increasing proportion of the Company's
sales volume over the past 10 years and the Company expects this
trend to continue. This trend results from increasing
consolidation in the animal production and processing industries.
The Company believes that consolidation among its customers
generally results in a more sophisticated market for its products
and that these purchasers better appreciate the advantages of
high-performance nutrition products and nutritional programs.
As of December 31, 1997, the Company's dealer network
consisted of over 4,700 independent dealers located in 48 states,
with approximately 600 dealers representing 65% of total dealer
volume and 40% of total Company volume in 1997. The number of
direct customers in 1997 was in excess of 4,700.
During 1997, the Company's top 50 customers represented
approximately 18% of its total sales volume and its largest
customer accounted for approximately 1.0% of the Company's total
sales volume.
Seasonality
The Company's business is seasonal, with a higher
percentage of the feed volume sold and earnings being generated
during the first and fourth quarters of the year. This
seasonality is driven largely by weather conditions affecting the
Company's cattle product lines. If the weather is particularly
cold and wet during the winter, sales of feed for cattle increase
as compared with normal seasonal patterns because the cattle are
unable to graze under those conditions and have higher
nutritional requirements. If the weather is relatively warm
during the winter, sales of feed for cattle may decrease as
compared with normal seasonal patterns because the cattle may be
better able to graze under the warmer conditions. Other product
lines are affected marginally by seasonal conditions but these
conditions do not materially affect the Company's
quarter-by-quarter results of operations.
Patents and Trademarks
The Company markets its products under the highly
recognized brand names Purina(R) and Chow(R) and the
"Checkerboard" Nine Square Logo(R) pursuant to an exclusive,
perpetual, royalty-free license from Ralston (the "Ralston
License"). Under the Ralston License, the Company may not use
those trademarks outside the United States or in connection with
any dog, cat or human food within the United States, and Ralston
uses those trademarks in those markets. The Ralston License may
not be assigned to a major competitor of Ralston or otherwise
without the consent of Ralston. The Company has developed
trademarks for use in international and domestic markets and has
applied for a trademark for the "America's Country Stores" name.
The Company's operations do not depend to any significant extent
upon any single or related group of patents.
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Competition
The Company believes that its market share is approximately
4% to 5% of the total primary feed produced in the United States,
and approximately 9% of the estimated Available Market.
The feed industry, which has substantial excess capacity in
certain areas of the country, is highly competitive. Both the
feed production and animal production industries are
consolidating, and this trend is expected to continue. To date,
the Company has been successful at generating business directly
with some large producers of animals. However, as producers of
animals get larger, they historically have tended to integrate
their business by acquiring or constructing feed production
facilities to meet some or all of their requirements and,
consequently, have relied less on outside suppliers of feed. As
the consolidation of animal producers continues, the available
market for commercial feeds may shrink if producers integrate
into feed production and, if so, competition may increase.
Management expects consolidation in the commercial feed industry
itself, and acquisitions and other business combinations in
recent years indicate that this consolidation is occurring.
The industry is highly fragmented, with the bulk of the
industry consisting of regional competitors (including
cooperatives) with several manufacturing facilities and a large
number of small, local manufacturers, many of which operate only
one feed mill. Only one competitor's commercial business
approaches the scope of the Company's national distribution
network. The Company believes that it distinguishes itself from
its competitors through a competitive strategy of differentiation
using its high-performance, value-added products, which it
develops and sells on a national basis. Although the strength of
competitors varies by geographic area and product line, the
Company believes that no other competitor produces and markets
the breadth of products that the Company provides.
Much of the competition in the industry centers around
price due to the commodity-like aspects of the basic product
lines. However, the Company focuses its efforts on
high-performance, value-added products that are designed to be
cost effective on the basis of weight gain, feed efficiency,
animal health and price. The Company believes that its extensive
expertise in animal nutrition requirements and the nutritional
content of various ingredients, developed through research and
combined with its manufacturing expertise and ingredient
purchasing capabilities, allow the Company to use lower-cost
ingredients, as well as alternative ingredients, to a greater
extent than many of its competitors.
The Company also competes on the basis of service by
providing training programs for dealers, using species
specialists with advance technical qualifications to consult with
customers, developing and manufacturing customized products for
customers, and offering various financing assistance programs to
attract and retain dealers and direct customers. In some areas of
the United States, feed companies have increased the use of
contracting for livestock production to generate and control feed
volume. The Company does not offer these arrangements but does
enter into joint ventures for animal production and marketing
arrangements (such as market price risk sharing arrangements) on
a limited basis.
Regulation
The Company is subject to regulation by the FDA and the
USDA. The FDA regulates all ingredients that are part of animal
feed (feed additives) or that contact animal feed (feed contact
additives). It also regulates animal drugs that come in dosage
form for administration to animals, or that are added through
water or feed. The Company's production facilities are subject to
inspection at least once every two years by the FDA.
The USDA is responsible for assuring that products derived
from animals are wholesome, which includes inspection for any
drug residues that the animal might contain. The USDA monitors
residues and when violations occur, the USDA works in conjunction
with FDA to investigate and assign responsibility. Similar to
this federal regime, each state's Department of Agriculture also
regulates feed production facilities and feed products.
Environmental
The Company has an environmental policy designed to ensure
that it operates in material compliance with applicable
environmental regulations. The Company also has undertaken a
compliance audit program that addresses environmental and other
regulatory compliance. The Company makes expenditures that it
believes are
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necessary to fulfill its environmental compliance practices.
Capital expenditures for environmental control facilities to
maintain compliance with environmental regulations are included
in the Company's overall capital budget and were less than $1
million in 1997.
Legal Proceedings
From time to time the Company is involved in litigation
relating to claims arising out of its operations in the normal
course of business, including product liability claims. The
Company believes that it is not at present a party to any
litigation, the outcome of which would have a material adverse
effect on its business or operations.
Employees
The Company had approximately 2,600 full-time employees as
of December 31, 1997, approximately 12.3% of whom were union
members. Historically, the Company has had a satisfactory
relationship with its unionized workers. Eight of the Company's
19 collective bargaining agreements will expire in 1998. Although
the Company has not historically encountered problems in the
renegotiation of the various collective bargaining agreements to
which it is a party, nor does the Company anticipate such
problems in the future, there can be no assurance that such will
be the case.
Properties
The Company owns its corporate headquarters in St. Louis
and its 1,188 acre Research Center in Gray Summit, Missouri. The
Company operates 56 feed manufacturing plants located in 26
states, two of which are leased. In addition to on-site storage
at each of its manufacturing plants, the Company also stores its
products in 18 warehouses in 15 states. Thirteen of those
warehouses are leased. Following the Transactions, substantially
all of the Company's assets will be pledged to secure
indebtedness under the New Credit Facilities, as they are now
pledged under the Existing Credit Agreement. See "Description of
Certain Indebtedness."
Year 2000
Many computer systems and software applications, including
most of those used by the Company, identify dates using only the
last two digits of the year. These systems are unable to
distinguish between dates in the year 2000 and dates in the year
1900. That inability (referred to as the "Year 2000 issue"), if
not addressed, could cause certain systems or applications to
fail or provide incorrect information after December 31, 1999 or
when using dates after December 31, 1999. This in turn could have
an adverse effect on PMI, due to PMI's direct dependence on its
own systems and applications and indirect dependence on those of
other entities with whom PMI must interact.
The Company has implemented a process to either replace or
modify all of the Company's current computer systems and software
applications which will be year 2000 compliant. New software has
been configured and implemented at one feed mill, and the Company
expects to complete the entire project by mid-1999.
The Company currently estimates that its costs incurred in
1997 and through the year 2000 to enhance its information systems
may cost approximately $16 million. These costs include estimates
for employee compensation on the project team, consultants,
hardware and software. The Company does not anticipate incurring
any additional expenses in connection with the Year 2000 issue.
As a result of the implementation of the new information
system, PMI is not likely to initiate other major systems
projects in connection with the Year 2000 issue. There can be no
assurance that PMI will not experience cost overruns or delays in
connection with its plan for replacing or modifying systems.
47
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth the name, age and position
of individuals who are serving as directors and executive
officers of PMI. Each director will hold office until the next
annual meeting of shareholders or until his successor has been
elected and qualified. Officers of PMI are elected by its Board
of Directors and serve at the discretion of such Board.
Years
with
Purina
Name Age Position Mills
------ --- -------- ------
David L. Abbott......... 46 Director, President 24
and Chief Execu-
tive Officer
Darrell D. Swank........ 34 Chief Financial --
Officer
Rick L. Bowen........... 45 Vice President and 13
General Manager,
Western Region
Duncan M. Highmark...... 49 Vice President, 27
Research and
Marketing
David R. Hoogmoed....... 40 Assistant Vice Presi- 18
dent and General
Manager, Central
Region
Arthur D. Jordan........ 36 Assistant Secretary --
Perry L. Mooneyham...... 55 Vice President and 34
General Manager,
Southern Region
Nile D. Ramsbottom...... 53 Vice President, 31
Purchasing,
Transportation
and Formulation
Jeff A. Speer........... 31 Vice President, --
Operations
Arnie E. Sumner......... 49 Vice President and 26
Chief Operating
Officer
John T. Zerbe........... 58 Vice President and 31
General Manager,
Eastern Region
Scott E. Deeter......... 34 Director --
Dean E. Watson.......... 39 Director --
Paul R. Wheeler......... 39 Director --
Christopher M. Wilkins.. 40 Director --
Mr. Abbott has been President and Chief Executive Officer
of the Company since March 1996. He joined the Company in 1973
and has served in various positions, including Executive Vice
President and Chief Operating Officer from 1990 to 1996, Vice
President, Central Region from 1989 to 1990, and Vice President
and General Sales Manager from 1988 to 1989.
Mr. Swank has been Chief Financial Officer of the Company
since April 3, 1998. Prior to his appointment, Mr. Swank was
Chief Financial Officer of Koch Agriculture, a position he held
since January 1997. Before joining Koch Agriculture, he was a
management consultant with Deloitte & Touche Consulting.
Mr. Bowen has been Vice President and General Manager,
Western Region of the Company since October 1995. He joined the
Company in 1984 and has served in various positions including
Manager Financial Services, District Manager, Division Sales
Manager, Region Director of Pricing and Area General Manager.
Prior to joining the Company, he was employed in various
capacities by the Farm Credit System.
48
<PAGE>
Mr. Highmark has been Vice President, Research and
Marketing of the Company since March 1993. He joined the Company
in 1970 and has served in various management positions, including
Business Group Director, Dairy and Beef, Regional Sales Manager,
Regional Pricing Director and Division Sales Manager.
Mr. Hoogmoed has been Assistant Vice President and General
Manager, Central Region of the Company since January 1, 1998. He
joined the Company in 1979 and has served in various positions
including District Manager, Division Sales Manager, Regional
Director of Sales and Marketing and Area General Manager.
Mr. Jordan has been Assistant Secretary of the Company
and the head of its Legal Department since March 1998. Prior to
joining the Company, he was employed as Assistant General Counsel
and Assistant Secretary of The Boeing Company.
Mr. Mooneyham has been Vice President and General Manager,
Southern Region of the Company since October 1995. He joined the
Company in 1964 and has served in various positions including
Director of Operations at three locations and Area General
Manager.
Mr. Ramsbottom has been Vice President, Purchasing,
Transportation and Formulation of the Company since 1986. He
joined the Company in 1966 and has served in various positions,
including Region Purchasing Manager, Director of Soybean
Operations, Director of Chow Operations, and Region Vice
President. After the consummation of the Transactions, he joined
Koch's Nutrition Supply & Trading division.
Mr. Speer has been Vice President, Operations since
April 1998. Prior to his appointment, Mr. Speer held various
positions within Koch Industries including Vice President
Operations for its Canadian operations.
Mr. Sumner has been Executive Vice President and Chief
Operating Officer since January 1, 1998. He joined the Company in
1971 and has served in various positions, including Area
Controller, Regional Pricing Manager, Director of Operations,
Eastern Regional Vice President, Western Regional Vice President,
Vice President, Control, Vice President, National Region and Vice
President and General Manager, Central Region.
Mr. Zerbe has been Vice President and General Manager,
Eastern Region of the Company since October 1995. He joined the
Company in 1966 and has served in various positions including
District Manager, Division Sales Manager, Vice President Central
Region and Vice President and General Sales Manager.
Mr. Deeter has been Vice President of Koch Agriculture
since March 1996. Before joining Koch Agriculture, he was
employed in various positions by Cargill, Incorporated.
Mr. Watson has been Vice President-Agriculture of Koch
Industries since March 1997 and President of Koch Agriculture
since April 1995. He joined Koch Industries in 1982 and has
served in various management positions including President of
Koch Nitrogen Company.
Mr. Wheeler has been Vice President-Human Resources of Koch
Industries since March 1997, before which he was Director of
Human Resources since 1995. He joined Koch Industries in 1980 and
has served in various management positions including President
of Koch Oil Company and President of Koch Minerals Company.
Mr. Wilkins has been Vice President-Operations of Koch
Agriculture since September 1996. He joined Koch Industries in
1984 and has served in various management positions including
Director of Safety and Manager of Koch Industries' Pipeline
Control Center.
There are no family relationships between any of the above
named executive officers and directors.
Executive Compensation
The following table summarizes the compensation paid for
the years ended December 31, 1997, 1996 and 1995 to the Chief
Executive Officer and the four most highly compensated executive
officers of the Company (the "Named Executive Officers") for the
services rendered to the Company.
49
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Summary Compensation Table(a)
Long-Term
Compen-
sation
Annual Compensation Awards
----------------------------------- ----------
Number
of
Securi-
ties
Other Under- All
Annual lying Other
Compen- Options/ Compensa-
Name and Principal Position Year Salary Bonus sation SARs(#) tion(b)
- ---------------------------- ---- ------ ----- ------- ------- ---------
D. L. Abbott................ 1997 $303,750 $115,785 -- 470 $ 8,622
President and 1996 285,000 71,700 -- 485 9,124
Chief Executive 1995 214,225 69,219 -- 500 9,743
Officer
I. R. Alexander(c).......... 1997 $198,400 $42,455 -- 170 $ 8,622
Former Executive 1996 196,900 27,500 -- 175 9,124
Vice President and 1995 187,475 52,041 -- 275 9,743
Chief Financial
Officer
A. E. Sumner................ 1997 $162,400 $37,944 -- 155 $ 8,622
Executive Vice 1996 158,800 39,520 -- 160 9,124
President and Chief 1995 148,950 48,545 -- 250 9,743
Operating Officer
N. D. Ramsbottom............ 1997 $139,675 $32,736 -- 125 $ 8,622
Vice President, 1996 138,700 20,000 -- 130 9,124
Purchasing, 1995 133,725 40,242 -- 200 9,743
Transportation
and Formulation
D. M. Highmark.............. 1997 $134,325 $38,595 -- 155 $ 8,622
Vice President 1996 132,300 28,981 -- 160 9,124
Research and Marketing 1995 126,000 45,914 -- 250 8,955
</TABLE>
(a) Although the Named Executive Officers received limited
perquisites, such as reimbursement of deductible and
co-payment amounts under the Company's health plans and
costs of annual physical examinations, the value of such
perquisites received by any of the Named Executive Officers
does not exceed the lesser of $50,000 or 10% of the salary
and bonus reported.
(b) All Other Compensation represents matching payments made by
the Company under the Company's 401(k) Savings Investment
Plan plus discretionary contributions to the ESOP that were
allocated to the participants during the year.
(c) Ian R. Alexander, the former Chief Financial Officer of the
Company, resigned April 3, 1998.
PM Holdings Corporation Omnibus Stock and Incentive Plan.
In January 1995, the PM Holdings Corporation Omnibus Stock and
Incentive Plan was adopted. The plan provides for the issuance of
stock options or other incentive awards with a maximum of 39,500
shares of Holdings Common Stock available for grant. The
following table summarizes the options granted during the year
ended December 31, 1997 to the Named Executive Officers for the
services rendered to Holdings and the Company.
50
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Options/SAR Grants in Last Fiscal Year
Individual Grants
------------------------------------------------
Number of
Shares of % of Potential Realized
Holdings Total Value at
Common Options/ Assumed Annual
Stock SARs Rates of
Underlying Granted to Exercise Stock Price
Options/ Employees or Base Appreciation
SARs in Fiscal Price Per Expiration for Option Term
------ -------
Name Granted Year Share Date 5% 10%
------ ------- --------- --------- ---------- ------ -------
D. L. Abbott.......... 470 7.6% $320 3/13/07 $94,588 $239,700
I. R. Alexander....... 170 2.8 320 3/13/07 34,213 86,700
A. E. Sumner.......... 155 2.5 320 3/13/07 31,194 79,050
N. D. Ramsbottom...... 125 2.0 320 3/13/07 25,156 63,750
D. M. Highmark........ 155 2.5 320 3/13/07 31,194 79,050
</TABLE>
The above options were granted on March 14, 1997 in tandem
with an equal number of Stock Units. Both the Options and Stock
Units were scheduled to vest over a three-year period. Upon the
exercise of a Stock Unit, the participant was to receive the
number of shares or cash equal to such value, or a combination
thereof, with respect to which such Stock Unit was exercised as
outlined in the plan. As a result of the consummation of the
Merger, no holder of an Option or Stock Unit has any right
thereunder to acquire equity securities of Holdings, or Koch
Agriculture or its parent corporation or any of their
subsidiaries.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
The following table summarizes the value of the outstanding
options held by the Named Executive Officers as of December 31,
1997.
Number of Value of
Shares Unexercised
Number of Underlying In-the-
Shares of Unexercised Money
Holdings Options/ Options/
Common SARs at SARs at
Stock December December
Acquired 31, 1997 31, 1997
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
----- -------- -------- ------------- -------------
D. L. Abbott....... -- -- 495/960 $150,480/234,470
I. R. Alexander.... -- -- 242/378 75,900/92,250
A. E. Sumner....... -- -- 220/345 68,970/86,930
N. D. Ramsbottom... -- -- 177/278 55,450/69,950
D. M. Highmark..... -- -- 220/345 68,970/86,930
The value of in-the-money options at December 31, 1997 was
computed assuming a per share value of $540, the purchase price
provided for in the Merger Agreement.
As of the Effective Time, (x) each employee or director
Option to purchase shares of Holdings Common Stock granted under
any stock option or stock purchase plan, program or arrangement
of Holdings (collectively, the "Stock Plans") outstanding
immediately prior to the Effective Time has been canceled,
whether or not then exercisable, and (y) each Option having an
exercise price of less than the Merger Consideration (which
constitutes all outstanding Options) has been exchanged for a
payment from Holdings after the Merger (subject to any applicable
withholding taxes) equal to the product of (l) the total number
of shares of Holdings Common Stock subject to such Option and (2)
the excess of the Merger Consideration over the exercise price
per share of Holdings Common Stock subject to such Option,
payable in cash immediately following the Effective Time.
As of the Effective Time, (x) each Stock Unit to purchase
shares of Holdings Common Stock granted under any Stock Plan
outstanding immediately prior to the Effective Time has been
canceled, whether or not then exercisable, and (y) each Stock
Unit has been exchanged for a payment from Holdings after the
Merger (subject to any applicable
51
<PAGE>
withholding taxes) equal to the product of (1) the total number
of shares of Holdings Common Stock subject to such Stock Unit and
(2) the Merger Consideration payable in cash immediately
following the Effective Time.
The Stock Plans terminated as of the Effective Time, and
since the Effective Time no holder of an Option or a Stock Unit
nor any participant in any Stock Plan has had any right
thereunder to acquire equity securities of Holdings, or Koch
Agriculture or its parent corporation or any of their
subsidiaries following the Merger.
Board of Directors Compensation and Committees
The directors of Company, who are also employees of the
Company, do not receive any compensation for Board or Board
committee service. For 1997, directors of Company who were not
employees of the Company received a total annual retainer of
$20,000, plus $1,000 for each meeting of the Board attended and
$500 for each committee meeting attended. The Company's former
compensation committee, audit committee and executive committee,
ceased to exist upon consummation of the Transactions.
Employment Arrangements and Deferred Compensation Agreements
Koch Agriculture Employee Benefit Plans. Those employees of
PMI, Holdings, and their subsidiaries who as of the date of
consummation of the Merger were employed by Holdings, PMI or any
of their subsidiaries in positions that were not covered by a
collective bargaining agreement (the "Current Employees") are
participating in the employee benefit plans and programs of Koch
Agriculture and its subsidiaries available to similarly situated
employees of Koch Agriculture and its subsidiaries, have been
credited for their service with PMI, Holdings and their
subsidiaries and their predecessors, for purposes of eligibility
and vesting under the employee benefit plans maintained by Koch
Agriculture and its subsidiaries and that Koch Agriculture and
its subsidiaries have caused the health plans maintained by them
which cover Current Employees who immediately prior to the
Effective Time were covered under any health plan of PMI,
Holdings or their subsidiaries to waive any limitations regarding
pre-existing conditions of the Current Employees and their
eligible dependents (except to the extent such limitations would
have applied to any such individual under the group health plans
of PMI, Holdings or their subsidiaries).
Retiree Medical and Life Insurance. As of the Effective
Time, the employee benefit plans of PMI, Holdings or their
subsidiaries that provide to any person health and/or death
benefits after termination of employment (other than benefits
mandated by Section 4980 of the Internal Revenue Code of 1986, as
amended, death benefits for six employees or former employees who
are entitled to such death benefits under existing contracts and
death benefits payable under PMI's Capital Accumulation Plan (the
"CAP")), have been terminated as to such benefits payable after
termination of the employment.
Persons, who as of the Effective Time, were not Current
Employees and who were receiving health benefits under the health
plans of PMI, Holdings or their subsidiaries and Current
Employees who, if their employment were terminated as of the
Effective Time, would have been eligible to receive health
benefits under the health plans of PMI, Holdings or their
subsidiaries (the "Grandfathered Group"), beginning as of the
Effective Time, have been provided medical benefits under Koch
Agriculture's and its subsidiaries' medical plans. If certain
specified coverages are selected by such persons, such persons
will be entitled to a 25% reduction in the premiums otherwise
payable by retirees under the Koch Agriculture medical plans for
a period of three years. Koch Agriculture and its subsidiaries
reserve the right to amend or terminate any such plan or
arrangement at any time; provided, however, that during the
three-year period following the Effective Time, no such amendment
or termination will increase the percentage of premiums payable
by members of the Grandfathered Group or shall apply to members
of the Grandfathered Group and not to other similarly situated
retirees or employees of Koch Agriculture and its subsidiaries.
SIP Fund. As of the Effective Time, the "PM Holdings Common
Stock Fund" as an investment option under the Savings Investment
Plan (the "SIP") has been removed and the right of Participants
to receive Holdings Common Stock thereunder has been terminated.
ESOP. PMI terminated the ESOP a few days prior to the
Effective Time of the Merger. Each ESOP Participant received a
package of information regarding elections to be made under the
ESOP for distribution of that ESOP Participant's account. If an
ESOP Participant elected to receive a cash distribution, all
shares of Holdings Common Stock were exchanged for the Merger
Consideration of $540 in cash. The cash account in the ESOP was
available for distribution to the ESOP Participants or for
rollover to the SIP, another qualified plan or an individual
52
<PAGE>
retirement account. If the ESOP Participant elected to receive a
stock distribution, all shares of PM Holdings Common Stock held
in the ESOP account of that Participant were transferred to a
paying agent (the "Paying Agent"). The Paying Agent held the
shares of PM Holdings Common Stock in a custodial capacity on
behalf of the ESOP Participants who elected to receive a stock
distribution. The Paying Agent exchanged such shares for the
Merger Consideration of $540 in cash per share. The Paying Agent
then distributed the cash consideration to the ESOP Participants.
In the event an ESOP Participant failed to elect a method of
distribution, such Participant's account balances were
automatically transferred to the SIP.
Executive Severance Plan. Holdings and PMI have adopted a
Severance Program for Key Executives. See "Certain Relationships
and Related Transactions."
Abbott Employment Agreement. In November 1997, PMI and Mr.
Abbott entered into a three-year employment agreement (the
"Employment Agreement") pursuant to which Mr. Abbott was employed
as President and Chief Executive Officer of Holdings and PMI,
which automatically renews for successive additional two-year
terms unless either party gives written notice of termination at
least 90 days prior to the end of the primary term or any renewal
term then in effect.
Under the Employment Agreement, Mr. Abbott is entitled to
receive direct salary of $310,000 per annum, subject to such
increases as may be from time to time approved by the Board of
Directors of PMI, and to participate in certain employee benefit
and incentive plans, including the Annual Incentive Plan with a
target bonus of $150,000 per annum. Mr. Abbott's base salary and
target annual bonus is to be reviewed at least annually and may
be increased prospectively by the Board of Directors of PMI on
the basis of performance evaluation.
The Board of Directors of PMI has the right under the
Employment Agreement to terminate the employment of Mr. Abbott
prior to the expiration of the term without cause. Upon any such
termination of the employment of Mr. Abbott, PMI is obligated to
pay to Mr. Abbott his regular monthly salary until the date of
termination, vacation pay due and not taken and to pay an amount
equal to two full years of the annual base salary then being paid
to Mr. Abbott under the Employment Agreement, plus the target
bonus amount awarded for the year in which termination takes
place. In addition, PMI has certain obligations to Mr. Abbott
under certain medical, life insurance, disability and post
retirement death benefit programs.
As of the Effective Time, Mr. Abbott's Employment Agreement
was amended to (i) delete the references therein to certain
benefit plans of Holdings and PMI and substitute benefit plans of
Koch Agriculture and its subsidiaries, except that Mr. Abbott
continues to participate in the CAP; (ii) provide that Mr. Abbott
is eligible to receive certain benefits (other than the lump-sum
amounts based on annual salary) under the Severance Program if
his employment is terminated and such benefits are payable
thereunder; and (iii) to provide for the payment to Mr. Abbott of
additional amounts on termination of employment if certain excise
taxes are payable by Mr. Abbott as a result of payments to him
under the Employment Agreement.
Long Term Incentive Program. No Option or Stock Unit awards
under the Company's Long Term Incentive Program were made for
1997. In lieu thereof, Holdings paid cash bonuses which did not
exceed $1,000,000 in the aggregate.
Pension Plans
PMI Pension Plans. Prior to its acquisition from a
subsidiary of The British Petroleum Company p.l.c. by Holdings in
1993, the Company maintained a noncontributory, qualified Defined
Benefit Pension Plan in which generally all salaried employees of
the Company participated. The Company also maintains a
nonqualified, unfunded supplemental executive retirement plan
that provides highly paid employees with the portion of their
retirement benefits not permitted to be paid from the Defined
Benefit Pension Plan due to limitations imposed by the Internal
Revenue Code of 1986, as amended, and compensation deferral
elections. The following table sets forth the estimated annual
retirement benefits payable under the Defined Benefit Pension
Plan and the related supplemental executive retirement plan
(collectively, the "PMI Pension Plans") in the specified final
average pay and years of service classifications.
53
<PAGE>
Pension Plan Table
Years of Service
----------------------------------------------------
Final
Average
Pay 15 20 25 30 35
- -------- ------- ------- ------- ------- -------
$100,000 $19,728 $26,305 $32,881 $39,457 $46,033
150,000 30,228 40,305 50,381 60,457 70,533
200,000 40,728 54,305 67,881 81,457 95,033
250,000 51,228 68,305 85,381 102,457 119,533
300,000 61,728 82,305 102,881 123,457 144,033
350,000 72,228 96,305 120,381 144,457 168,533
400,000 82,728 110,305 137,881 165,457 193,033
Final average pay is an average of a participant's highest
five consecutive years of compensation earned during the last 10
years covered by the PMI Pension Plans. Compensation covered by
the PMI Pension Plans consists of base salary and bonuses.
Covered compensation for the Named Executive Officers is
generally the same as that shown in the "annual compensation"
columns of the Summary Compensation Table. The estimated credited
years of service for each of the Named Executive Officers under
the PMI Pension Plans is as follows: Mr. Abbott, 20 years; Mr.
Alexander, 3 years; Mr. Ramsbottom, 26 years; Mr. Sumner, 21
years; and Mr. Highmark, 23 years.
Benefits are computed on the basis of a five-year certain
and life annuity and reflect deductions for social security and
other offset amounts.
All benefit accruals under the PMI Pension Plans described
above ceased upon completion of the acquisition of the Company by
Holdings in 1993. The Company has no further liability in
connection with the funding of the Defined Benefit Pension Plan.
The previous owner has retained sponsorship of the Defined
Benefit Pension Plan and the responsibility to pay all benefits
that become due thereunder. The Company sponsors the supplemental
executive retirement plan and the responsibility to pay all
benefits that become due thereunder.
Koch Pension Plans. As of June 1, 1998, employees not
covered by a collective bargaining agreement are eligible to
participate in the Koch Industries Employees' Pension Plan, a
defined benefit pension plan. Koch Industries also maintains an
unfunded, supplemental executive retirement plan that provides
highly paid employees with the portion of their retirement
benefits not permitted to be paid from the Koch Industries
Employees' Pension Plan due to limitations imposed by the
Internal Revenue Code of 1986, as amended. Benefits under these
plans will accrue only with respect to service after March 1998.
However, eligible employees with five or more years of service
with PMI and Koch Industries will be vested in the benefits
accrued under the plan. The following table sets forth the
estimated annual retirement benefits payable under the Koch
Industries Employees' Pension Plan and the related supplemental
executive retirement plan (collectively, the "Koch Pension
Plans") in the specified final average pay and years of service
classifications.
Pension Plan Table
Years of Service
----------------------------------------------------
Final
Average
Pay 15 20 25 30 35
- ------- ------- ------- ------ ------- -------
$100,000 $18,750 $25,000 $31,250 $37,500 $43,750
150,000 28,125 37,500 46,875 56,250 65,625
200,000 37,500 50,000 62,500 75,000 87,500
250,000 46,875 62,500 78,125 93,750 109,375
300,000 56,250 75,000 93,750 112,500 131,250
350,000 65,625 87,500 109,375 131,250 153,125
400,000 75,000 100,000 125,000 150,000 175,000
Final average pay is an average of a participant's highest
three years of compensation earned during the last 10 years
covered by the Koch Pension Plans. Compensation covered by the
Koch Pension Plans consists of base salary. Covered compensation
for the Named Executive Officers is generally the same as that
shown in the "salary" column of
54
<PAGE>
the Summary Compensation Table. Years of service includes service
after March 1998. At this time the Named Executive Officers have
no credited years of service under the Koch Pension Plans.
Capital Accumulation Plan. The Company has maintained the
CAP for its key employees. Whether the CAP was offered in any
given year was decided annually. If it was determined to offer
the CAP, an employee relations committee chose those employees
eligible to participate in the CAP. Each selected key employee
could elect to defer all or a portion of the annual bonus that
participant was entitled to receive. The minimum amount of a
participant's deferral was $2,000, and the maximum amount was the
participant's annual bonus. The benefits payable under the CAP
are comprised of termination, death and retirement benefits. All
benefits are unfunded and the Company has purchased life
insurance on the lives of the participants. See Note 9 of Notes
to Consolidated Financial Statements.
The deferral option under the CAP has not been offered
since the acquisition of the Company by Holdings in 1993.
However, the Company has retained the CAP and the responsibility
to pay all benefits due thereunder. The amount of a participant's
"Annual Retirement Income Benefit" under the CAP is dependent
upon the amount of the participant's deferral, the participant's
age on the effective date of the deferral and the participant's
age at the time of termination of employment. The estimated
annual benefits payable under the CAP to the Named Executive
Officers upon retirement at the normal retirement age of 65 are
as follows: Mr. Abbott, $211,047; Mr. Alexander, $16,082; Mr.
Ramsbottom, $111,092; Mr. Sumner, $124,247 and Mr. Highmark,
$72,772.
Koch Agriculture and its subsidiaries are continuing to
maintain the CAP for the benefit of certain Current Employees and
former employees (subject to any rights of amendment and
termination with the consent of the Participants therein if
consent is required under any deferral agreement executed under
the CAP).
55
<PAGE>
OWNERSHIP OF CAPITAL STOCK
As a result of the Transactions, all of the Holdings Common
Stock is owned by Koch Agriculture. Holdings has no other capital
stock outstanding. PMI is a wholly owned subsidiary of Holdings.
Holdings does not have any material assets other than the stock
of PMI.
56
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Voting Agreement. Pursuant to the Voting Agreement, the
directors and executive officers of PMI and Holdings who own
Holdings Common Stock and certain other stockholders of Holdings,
including certain principals and employees of TSG, agreed to vote
their shares in favor of the Merger and not to solicit third
party acquisition proposals.
Executive Severance Program. Under the Purina Mills,
Inc./PM Holdings Corporation Severance Program for Executives, as
amended (the "Severance Program") Mr. Abbott (for certain
purposes only, see discussion of Mr. Abbott's Employment
Agreement in "-Employment Arrangements and Deferred Compensation
Agreements"), Ian R. Alexander, Duncan H. Highmark, Nile D.
Ramsbottom, Rick L. Bowen, Perry L. Mooneyham, Arnold E. Sumner,
Jr., John T. Zerbe and August F. Ottinger (the "Covered
Employees") are entitled to certain benefits as a result of the
Merger if the Covered Employee's employment with PMI, Holdings or
their subsidiaries is terminated under certain circumstances
within two years after the Effective Time of the Merger.
Effective April 3, 1998, Mr. Alexander resigned from the Company
and subsequently has received benefits under the Severance
Program.
For purposes of the Severance Program, the term
"Constructive Termination" means the occurrence after the Merger
of any one or more of the following events: (i) the assignment by
Holdings of the Covered Employee to a position that requires
skills that are substantially different than the skills required
for the position held by the Covered Employee at the time of the
Merger, without the Covered Employee's prior written consent; or
(ii) a reduction by Holdings or PMI in the amount of a Covered
Employee's total cash compensation compared to 1997; or (iii) the
relocation of the Covered Employee's office, without the Covered
Employee's prior written consent; or (iv) the requirement of the
Covered Employee to perform his duties outside the principal
executive offices of Holdings or PMI for a period of more than
sixty (60) consecutive days or more than 60% of his time during
the first and second year after the Effective Time, without the
prior written consent of the Covered Employee; or (v) the failure
of Holdings or PMI to offer the Covered Employee the opportunity
to participate in, or the removal of the Covered Employee from,
compensation programs and benefit plans generally offered and
available to similar level executives in Holdings or PMI who
perform at similar levels.
For purposes of the Severance Program, the term
"Non-Voluntary Termination" means the termination of employment,
other than by reason of death or disability, of a Covered
Employee by Holdings, PMI or any successor thereto without cause.
Under the Severance Program, a Covered Employee whose
employment was terminated on account of a Constructive
Termination or Non-Voluntary Termination within three months
prior to the Effective Time and such termination was in
anticipation of the Merger or whose employment is terminated on
account of a Constructive Termination or Non-Voluntary
Termination within one year after the Effective Time shall (i)
receive, within thirty (30) days after the latest to occur of the
date of the Effective Time, Constructive Termination or
Non-Voluntary Termination, cash from Holdings or PMI in one lump
sum in an amount equal to the sum of (a) two times the Covered
Employee's annual base salary effective immediately prior to the
Effective Time; and (b) two times the bonus payments made by
Holdings or PMI to the Covered Employee in 1997; and (ii) be paid
in one single lump sum payment, the net present value of the
premiums that would be charged for medical benefits coverage
during the forty-two month period commencing on the date of the
Constructive Termination or Non-Voluntary Termination under the
medical program of Holdings and PMI and be covered thereunder,
provided the Covered Employee pays for such coverage; and (iii)
during the period commencing on the latest of the date of the
Effective Time, Constructive Termination, or Non-Voluntary
Termination and ending on the second anniversary thereafter,
receive the use of office space and secretarial assistance for
the purpose of finding new employment, and such other
outplacement services as Holdings or PMI may provide.
Under the Severance Program, a Covered Employee whose
employment is terminated on account of a Constructive Termination
or Non-Voluntary Termination after one year has elapsed since the
Effective Time but before two years have elapsed since the
Effective Time shall: (i) receive, within thirty (30) days after
such Constructive Termination or Non-Voluntary Termination, cash
from Holdings, PMI or their subsidiaries in one lump sum in an
amount equal to the sum of (a) one times the Covered Employee's
annual base salary calculated based upon the annual base salary
effective immediately prior to the Effective Time; and (b) one
times the bonus payments made by Holdings or PMI to the Covered
Employee in 1997; and (ii) be paid in one single lump sum
payment, the net present value of the premiums that would be
charged for medical benefits coverage during the thirty month
period commencing on the date of the Constructive Termination or
Non-Voluntary Termination under the medical program of Holdings
and PMI and
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be covered thereunder, provided the Covered Employee pays for
such coverage and (iii) during the period commencing on the date
of the Constructive Termination of Non-Voluntary Termination and
ending on the first anniversary thereafter, receive the use of
office space and secretarial assistance for the purpose of
finding new employment, and such other outplacement services as
Holdings or PMI may provide.
The amounts payable to a Covered Employee as described
above shall be payable whether or not the Covered Employee
secures new employment, and shall not be reduced or offset in any
manner except by the amount of any severance or termination of
employment payments made by Holdings, PMI or their subsidiaries
to the Covered Employee otherwise than pursuant to the Severance
Program, but unemployment compensation benefits shall not be
considered to be payments made by Holdings, PMI or their
subsidiaries.
Certain Payments and Agreements. Certain members of PMI's
and Holdings' management shared a $3.2 million fee in recognition
of their past contributions to PMI and Holdings and their
contributions in connection with the consummation of the
Transactions and their agreement not to voluntarily terminate
their employment with PMI or Holdings for a specified period of
time. The fee was allocated by Holdings' Compensation Committee
and the allocation was approved by Holdings' Board of Directors.
For information concerning additional amounts payable to Mr.
Abbott in connection with the consummation of the Transactions,
see "--Employment Arrangements and Deferred Compensation
Agreements."
Shares of Holdings Common Stock held by all officers and
directors of PMI and Holdings have been converted into the right
to receive the same consideration as shares of Holdings Common
Stock held by other stockholders. Options and Stock Units held by
the officers and directors of PMI and Holdings were treated in
the same manner as Options and Stock Units held by others.
Pursuant to the Merger Agreement, Koch Agriculture has
agreed that Holdings and PMI will, for six years after the
Effective Time, indemnify all present directors and officers of
Holdings, PMI and their subsidiaries and will, subject to certain
limitations, maintain for six years directors' and officers'
insurance and indemnification policy.
Upon completion of the Merger, TSG received a fee for
financial consulting services of $6.5 million, plus reimbursement
of out-of-pocket expenses. Messrs. Oehmig and Hevrdejs, directors
of PMI and Holdings prior to the consummation of the
Transactions, are principals of TSG.
Holdings paid cash bonuses in the aggregate amount of $1.0
million to employees of PMI and Holdings including officers, who
were eligible for awards under Holdings' long-term incentive plan
based on 1997 performance in lieu of awards of Options or Stock
Units. The employees eligible for such bonuses and the amounts
payable to each were approved by Holdings' Board of Directors.
Tax Sharing Agreements. Koch Industries, Holdings and
Holdings' subsidiaries (including the Company) (together being
the "Holdings Sub-Group") entered into tax sharing agreements
(the "Tax Sharing Agreements") as of the effective date of the
Merger which set forth certain obligations for each entity with
respect to federal, state, foreign and local taxes. In general,
the Tax Sharing Agreements provide for (i) the payment of taxes
for periods during which Holdings and any of Holdings'
subsidiaries are included in the Koch Industries consolidated
group for federal income tax purposes, or a Koch Industries
combined return for state income tax purposes (the "Affiliated
Period"), (ii) the allocation of responsibility for the filing of
tax returns, (iii) the conduct of tax audits and the handling of
tax controversies and (iv) various related matters. During the
Affiliated Period, the Tax Sharing Agreements provide that (a)
each of Holdings' subsidiaries will be obligated to reimburse
Holdings for its share of federal, state, local and foreign
income taxes for all periods commencing with the taxable year
ending on December 31, 1998 determined as if such subsidiary
filed its tax returns separately from the Koch Industries
consolidated group and the Holdings Sub-Group and (b) Holdings
will be obligated to reimburse Koch Industries for the Holdings
Sub-Group's share of federal, state, local and foreign income
taxes for all periods commencing with the taxable year ending on
December 31, 1998 determined as if the Holdings Sub-Group were a
single entity which filed its tax returns separately from the
Koch Industries consolidated group.
Koch Agriculture Supply Agreement. Pursuant to a master
procurement agreement, dated as of the effective date of the
Merger (the "Supply Agreement"), between Nutrition Supply and
Trading, a division of Koch Agriculture ("S&T"), and the Company,
S&T supplies the Company with all of its requirements for feed
ingredients and feed additives ("Feed Ingredients") and feed
packaging materials ("Packaging") to be used at the Company's
feed milling
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facilities. The price of Feed Ingredients purchased by the
Company under the Supply Agreement is equal to Market Value (as
defined) for the particular Feed Ingredient less the Discount (as
defined). "Market Value," for purposes of the Supply Agreement,
means the price at which parties dealing at arm's-length would
purchase and sell the particular Feed Ingredient in the spot
market. For three specific Feed Ingredients (corn, wheat
middlings and soybean meal), which the Company expects will
comprise approximately half of the Feed Ingredients it will
purchase under the Supply Agreement, Market Value cannot exceed
an amount tied to a formula based on price quotations prevailing
in the market and reported in an industry publication. The
"Discount" applicable to the first year of the Supply Agreement
is $3.50 per ton and, hereafter, will be negotiated in good faith
by S&T and the Company. The price of Packaging purchased by the
Company under the Supply Agreement will be equal to S&T's cost.
The Supply Agreement commenced on May 1, 1998 and will have an
initial term of five years, after which it will renew
automatically for additional one-year terms until canceled by
either party. The Supply Agreement can be terminated by either
party (i) under certain circumstances relating to Koch Industries
and its affiliates no longer controlling a majority of the
Company's common stock, (ii) if the parties are unable to
negotiate the Discount or (iii) if the other party breaches its
obligations under the Supply Agreement.
Jet-Pro(R) License Agreement. Koch Feed, a wholly owned
subsidiary of Koch Agriculture, agreed to license its patented
Jet-Pro(R) dewatering technology to the Company pursuant to a
license agreement dated the effective date of the Merger (the
"License Agreement"). Pursuant to the terms of the License
Agreement, and in consideration of a one-time licensing fee of
$100 payable by the Company, Koch Feed granted to the Company a
nonexclusive and nonassignable perpetual license to use the
Jet-Pro(R) dewatering technology without any geographic
restriction, on any equipment, and to process any product,
subject only to a preexisting exclusive license granted to
another licensee relating to the processing of inedible eggs in
the United States. Notwithstanding the nonexclusive nature of the
license granted to the Company, Koch Feed agreed that, for so
long as Koch Industries and its affiliates own greater than 50%
of the Company's common stock, Koch Feed will not license the
Jet-Pro(R)dewatering technology to any commercial feed producer
in the United States which is a direct competitor of the Company.
The License Agreement is terminable only upon the Company's
bankruptcy or breach of the License Agreement. In addition to the
License Agreement, which covers a process patent relating to the
Jet-Pro(R)dewatering technology, Koch Feed agreed, subject to
certain terms and conditions, to sell its patented
Jet-Pro(R)dewatering equipment to the Company on terms no less
favorable to the Company than those offered to other unaffiliated
customers of Koch Feed.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of the New Credit Facilities
which became effective upon consummation of the Transactions. To
the extent this summary contains descriptions of the New Credit
Facilities, such descriptions do not purport to be complete and
are qualified in their entirety by reference to such documents,
which are available upon request from the Company.
New Credit Facilities
In connection with the Transactions, PMI entered into the
New Credit Facilities with a syndicate of financial institutions
(the "Lenders") for which Chase Bank of Texas, National
Association ("Chase Bank"), acted as administrative agent (the
"Administrative Agent") and Chase Securities Inc. acted as the
exclusive advisor and syndicate arranger. Although no firm
commitment was provided by the Lenders, the New Credit Facilities
provided the maximum aggregate principal amount of $300.0 million
of financing. The following is a summary of the material terms
and conditions of the New Credit Facilities and is subject to the
detailed provisions of the credit agreement (the "Credit
Agreement") and various related documents entered into in
connection with the New Credit Facilities.
General. The New Credit Facilities consist of (i) Term
Loans in an aggregate principal amount of $200.0 million,
comprised of two tranches: a $100.0 million Tranche A Term Loan
and a $100.0 million Tranche B Term Loan and (ii) a $100.0
million New Revolving Credit Facility, with a $40.0 million
sub-limit for letters of credit.
The proceeds of the Term Loans were borrowed in full on the
date of the consummation of the Offering, in addition to $10.5
million under the New Revolving Credit Facilities, and used to
finance the Transactions and related fees and expenses. Proceeds
of the New Revolving Credit Facility have also been used to
redeem the Company's Industrial Revenue Bonds and will be used to
finance the Company's ongoing general working capital
requirements. The New Revolving Credit Facility also may be used
in part for the issuance of letters of credit to be used solely
for ordinary course of business purposes of the Company and its
subsidiaries.
Interest Rates; Fees. The initial interest rates per annum
applicable to the amounts outstanding under the Tranche A Term
Loan and the New Revolving Credit Facility are, at the Company's
option, either (i) the base rate as defined in the Credit
Agreement (the "Base Rate") plus 1.00% per annum (the "Applicable
Base Rate Margin") or (ii) the eurodollar rate as defined in the
Credit Agreement (the "Eurodollar Rate") plus 2.00% per annum
(the "Applicable Eurodollar Rate Margin"). Upon attainment of
certain leverage ratios, as set forth in the Credit Agreement,
such Applicable Base Rate Margin and Applicable Eurodollar Rate
Margin, as well as the Commitment Fee (as defined), will be
adjusted.
Interest Rates on the Tranche B Term Loan are, at the
Company's option, (i) the Base Rate plus 1.25% per annum or (ii)
the Eurodollar Rate plus 2.25% per annum.
In addition, the Company is required to pay the Lenders
under the New Revolving Credit Facility an initial commitment fee
(the "Commitment Fee") of 0.50%, computed at a per annum rate for
each day and payable quarterly in arrears, on the unused portion
of such facility. The Company is also required to pay under the
New Revolving Credit Facility an additional fee in the amount of
0.25% per annum on the daily average amount available for drawing
under any letter of credit to the bank that has issued such
letter of credit.
Amortization; Prepayments. The Tranche A Term Loan is
scheduled to mature on the seventh anniversary of the date of
consummation of the Offering and is subject to amortization
payments on a quarterly basis of $1.25 million per quarter during
the first year, $2.0 million per quarter during the second year,
$2.75 million per quarter during the third year, $3.5 million per
quarter during the fourth year, $4.25 million per quarter during
the fifth year, $5.00 million per quarter during the sixth year
and $6.25 million per quarter during the seventh year following
the first such payment, which will be made on June 30, 1998. The
Tranche B Term Loan is scheduled to mature on the ninth
anniversary of the date of consummation of the Offering and is
subject to amortization payments on a quarterly basis of $75,000
for each of the eight successive one-year periods following the
first such payment, which will be made on June 30, 1998. The
remaining $97.6 million aggregate principal amount of the Tranche
B Term Loan shall be subject to four equal quarterly amortization
payments, with the first such payment to be made eight years
after June 30, 1998. The New Revolving Credit Facility will
mature seven years after the date of the consummation of the
Offering.
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Voluntary prepayments may be made in whole or in part
without premium or penalty (other than the payment of all
breakage costs and funding losses), in minimum principal amounts
to be agreed upon. Such payments will be applied to reduce the
scheduled amortization of all then-outstanding Term Loans on a
pro rata basis across the respective maturities thereof unless,
while the Tranche A Term Loan is outstanding, the Lenders of the
Tranche B Term Loan choose to decline certain prepayments, with
the result that the prepayment of the Tranche A Term Loan will be
increased in the amount of any such prepayment declined.
The Company is required to make mandatory repayments of the
Term Loans from (i) 50% of Excess Cash Flow (as defined in the
Credit Agreement); (ii) 100% of the net cash proceeds of all
non-ordinary-course permitted asset sales or other dispositions
of property by the Company and its subsidiaries (including
insurance and condemnation proceedings), except in certain
circumstances where such proceeds are used to replace property in
amounts to be agreed upon, subject to certain limited exceptions;
(iii) 100% of the net proceeds of any issuance of debt
obligations of Holdings, the Company and its subsidiaries; and
(iv) 50% of the net proceeds from the issuance of equity by
Holdings, the Company or its subsidiaries, subject to certain
exceptions. Applications of payments to the Term Loans will apply
to reduce the scheduled amortization of the then outstanding
Tranche A Term Loan and Tranche B Term Loan on a pro rata basis
across the respective maturities thereof unless, while the
Tranche A Term Loan is outstanding, the Lenders of the Tranche B
Term Loan choose to decline certain prepayments, with the result
that the prepayment of the Tranche A Term Loan will be increased
in the amount of any such prepayment declined.
Guarantees and Collateral. Holdings and all subsidiaries of
the Company, whether existing at the time of the consummation of
the Offering or thereafter, guaranteed the Company's obligations
under the Credit Agreement. All amounts owing under the New
Credit Facilities are secured by a first lien or first priority
security interest in (i) substantially all the tangible and
intangible personal property of the Company and its subsidiaries,
(ii) certain of the material real property of the Company and its
subsidiaries, (iii) all the common stock of the Company (to be
pledged by Holdings), (iv) all of the common stock of the
Company's subsidiaries and (v) the Company's equity interest in
certain nonsubsidiaries. The Company also provided a negative
pledge with respect to all of the other assets of the Company and
its subsidiaries.
Covenants. The obligations of the lenders under the New
Credit Facilities are subject to the satisfaction of certain
customary conditions precedent. The Company and its subsidiaries
are subject to certain affirmative and negative covenants
contained in the New Credit Facilities, including without
limitation covenants that limit (i) the incurrence of additional
indebtedness and other obligations and the granting of additional
liens; (ii) mergers, acquisitions, investments and acquisitions
and dispositions of assets; (iii) the incurrence of capitalized
lease obligations; (iv) payment of dividends; (v) prepayment or
repurchase of indebtedness, including the Notes; (vi) the sale or
discount of receivables; (vii) engaging in transactions with
affiliates (with the exception of certain feedstock arrangements)
and formation of subsidiaries; (viii) capital expenditures; and
(ix) changes of lines of business. There are also covenants
relating to compliance with ERISA and other laws, payment of
taxes, maintenance of corporate existence and rights, maintenance
of insurance and financial reporting. In addition, the New Credit
Facilities require the Company to maintain compliance with
certain specified financial covenants, including covenants
related to minimum interest coverage, minimum fixed charge
coverage and maximum leverage.
Events of Default. The New Credit Facilities contain
customary events of default, including without limitation,
payment defaults, breach of representations and warranties,
covenant defaults, cross-defaults, certain events of bankruptcy
and insolvency, certain ERISA events, judgment defaults, change
of control and failure of any guaranty or security agreement
supporting the Company's obligations under the Credit Agreement
to be in full force and effect.
Industrial Revenue Bonds
In July 1995 and October 1996, the Company entered into two
loan agreements to finance the construction of two new
manufacturing facilities in conjunction with the sale of $17.4
million in Industrial Revenue Bonds by local government units.
The Industrial Revenue Bonds were scheduled to mature in 2020 and
2022 and could be retired in whole or in part at any time. The
Industrial Revenue Bonds carried variable interest rates with a
maximum of 15% per annum. The weighted average rate at March 31,
1998 was 3.8%. The Company called the Industrial Revenue Bonds
for redemption and redeemed the Industrial Revenue Bonds within
thirty days after the consummation of the Merger.
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THE EXCHANGE OFFER
The summary herein of certain provisions of the
Registration Rights Agreement does not purport to be complete and
reference is made to the provisions of the Registration Rights
Agreement, which has been filed as an exhibit to the Registration
Statement and a copy of which is available as set forth under the
heading "Available Information."
Terms of the Exchange Offer
General
In connection with the issuance of the Old Notes pursuant
to a Purchase Agreement dated as of March 12, 1998, by and
between the Company and the Initial Purchasers, the Initial
Purchasers and their respective assignees became entitled to the
benefits of the Registration Rights Agreement.
Under the Registration Rights Agreement, the Company is
required to file within 90 days after March 12, 1998 (the date
the Old Notes were issued (the "Issue Date")) the Registration
Statement of which this Prospectus is a part for a registered
exchange offer with respect to an issue of New Notes identical in
all material respects to the Old Notes except that the New Notes
shall contain no restrictive legend thereon. Under the
Registration Rights Agreement, the Company is required to use its
best efforts to (i) cause the Registration Statement to become
effective within 150 days after the Issue Date, (ii) keep the
Exchange Offer open for at least 30 days (or longer if required
by applicable law) after the date that notice of the Exchange
Offer is mailed to holders of the Old Notes and (iii) consummate
the Exchange Offer on or prior to the 30th day following the date
on which the Registration Statement is declared effective by the
Commission. The Exchange Offer being made hereby, if commenced
and consummated within the time periods described in this
paragraph, will satisfy those requirements under the Registration
Rights Agreement.
Upon the terms and subject to the conditions set forth in
this Prospectus and in the Letter of Transmittal, all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date will be accepted for exchange.
New Notes of the same class will be issued in exchange for an
equal principal amount of outstanding Old Notes accepted in the
Exchange Offer. Old Notes may be tendered only in integral
multiples of $1,000. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders as of _____,
1998. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered in exchange.
However, the obligation to accept Old Notes for exchange pursuant
to the Exchange Offer is subject to certain conditions as set
forth herein under "--Conditions."
Old Notes shall be deemed to have been accepted as validly
tendered when, as and if the Trustee has given oral or written
notice thereof to the Exchange Agent. The Exchange Agent will act
as agent for the tendering holders of Old Notes for the purposes
of receiving the New Notes and delivering New Notes to such
holders.
Based on interpretations by the staff of the Commission, as
set forth in no-action letters issued to third parties, including
the Exchange Offer No-Action Letters, the Company believes that
the New Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred by each
holder thereof (other than a broker-dealer who acquires such New
Notes directly from the Company for resale pursuant to Rule 144A
under the Securities Act or any other available exemption under
the Securities Act and other than any holder that is an
"affiliate" (as defined in Rule 405 under the Securities Act) of
the Company) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such
holder's business and such holder is not engaged in, and does not
intend to engage in, a distribution of such New Notes and has no
arrangement with any person to participate in a distribution of
such New Notes. By tendering the Old Notes in exchange for New
Notes, each holder, other than a broker-dealer, will represent to
the Company that: (i) it is not an affiliate (as defined in Rule
405 under the Securities Act) of the Company; (ii) it is not a
broker-dealer tendering Old Notes acquired for its own account
directly from the Company; (iii) any New Notes to be received by
it will be acquired in the ordinary course of its business; and
(iv) it is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement or
understanding to participate in a distribution of the New Notes.
If a holder of Old Notes is engaged in or intends to engage in a
distribution of the New Notes or has any arrangement or
understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such holder may
not rely on the applicable
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interpretations of the staff of the Commission and must comply
with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale
transaction. Each Participating Broker-Dealer that receives New
Notes for its own account in exchange for Old Notes, where such
Old Notes were acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter" within the meaning
of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making
activities or other trading activities. The Company has agreed
that, for a period of time not to exceed 180 days after the
Expiration Date, or such shorter period which will terminate when
such Participating Broker-Dealers have completed all resales
subject to applicable prospectus delivery requirements, it will
make this Prospectus available to any Participating Broker-Dealer
for use in connection with any such resale. See "Plan of
Distribution."
In the event that applicable interpretations of the staff
of the Commission do not permit the Company to effect the
Exchange Offer, or if for any other reason the Exchange Offer is
not consummated within 180 days of the Issue Date, or if the
Initial Purchasers so request with respect to Old Notes not
eligible to be exchanged for New Notes in the registered Exchange
Offer, or if any holder of Old Notes (other than affiliates of
the Company) is not eligible to participate in the Exchange Offer
or does not receive freely tradeable New Notes in the Exchange
Offer, the Company, will, at its cost, (a) as promptly as
practicable, file a shelf registration statement (the "Shelf
Registration Statement") with the Commission covering resales of
the Old Notes or the New Notes, as the case may be, (b) use its
best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act and (c) keep the
Shelf Registration Statement effective (except as the result of a
Suspension Period (as defined below)) until the earlier of (i)
the time when the Old Notes covered by the Shelf Registration
Statement can be sold (by persons other than affiliates of the
Company) pursuant to Rule 144 without any limitations under
clauses (c), (e), (f) and (h) of Rule 144 and (ii) two years from
the Issue Date. The Company will, in the event a Shelf
Registration Statement is filed, among other things, provide to
each holder for whom such Shelf Registration Statement was filed
copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf
Registration Statement has become effective and take certain
other actions as are required to permit unrestricted resales of
the Old Notes or the New Notes, as the case may be. A holder
selling such Old Notes or New Notes pursuant to the Shelf
Registration Statement generally would be required to be named as
a selling security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain of
the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of
the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations).
If (i) by June 10, 1998, neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has
been filed with the Commission; (ii) by September 8, 1998,
neither the Exchange Offer is consummated nor the Shelf
Registration Statement is declared effective; or (iii) after
either the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such Registration
Statement thereafter ceases to be effective or usable (subject to
certain exceptions, including an exception for a period not to
exceed 60 days in any twelve-month period during which the
Company effects a material corporate transaction (a "Suspension
Period" as further defined in the Registration Rights Agreement))
in connection with resales of Old Notes or New Notes in
accordance with and during the periods specified in the
Registration Rights Agreement (each such event referred to in
clause (i) through (iii) being herein called a "Registration
Default"), additional cash interest will accrue on the Old Notes
and the New Notes at the rate of 0.50% per annum (increasing by
0.50% per annum at the end of each 90-day period thereafter) from
and including the date on which any such Registration Default
shall occur to but excluding the date on which all Registration
Defaults have been cured, calculated on the principal amount of
the Old Notes as of the date on which such interest is payable;
provided, however, that in no event shall the aggregate amount of
such additional interest exceed 1.00% per annum. Such interest is
payable in addition to any other interest payable from time to
time with respect to the Old Notes.
Upon consummation of the Exchange Offer, subject to certain
exceptions, holders of Old Notes who do not exchange their Old
Notes for New Notes in the Exchange Offer will no longer be
entitled to registration rights and will not be able to offer or
sell their Old Notes, unless such Old Notes are subsequently
registered under the Securities Act (which, subject to certain
limited exceptions, the Company will have no obligation to do),
except
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pursuant to an exemption from, or in a transaction not subject
to, the Securities Act and applicable state securities laws. See
"Risk Factors-Risk Factors Relating to the Notes-Consequences of
Failure to Exchange."
Expiration Date; Extensions; Amendments; Termination
The term "Expiration Date" shall mean ______________, 1998
(30 calendar days following the commencement of the Exchange
Offer), unless the Exchange Offer is extended if and as required
by applicable law, in which case the term "Expiration Date" shall
mean the latest date to which the Exchange Offer is extended.
In order to extend the Expiration Date, the Company will
notify the Exchange Agent of any extension by oral or written
notice and will notify the holders of the Old Notes by means of a
press release or other public announcement prior to 9:00 a.m.,
New York City time, on the next business day after the previously
scheduled Expiration Date.
The Company reserves the right (i) to delay acceptance of
any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer and not permit acceptance of Old Notes not
previously accepted if any of the conditions set forth herein
under "--Conditions" shall have occurred and shall not have been
waived by the Company, by giving oral or written notice of such
delay, extension or termination to the Exchange Agent, or (ii) to
amend the terms of the Exchange Offer in any manner deemed by it
to be advantageous to the holders of the Old Notes. Any such
delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice
thereof to the Exchange Agent. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment in a
manner reasonably calculated to inform the holders of the Old
Notes of such amendment.
Without limiting the manner in which the Company may choose
to make public announcement of any delay, extension, amendment or
termination of the Exchange Offer, the Company shall have no
obligation to publish, advertise, or otherwise communicate any
such public announcement.
Interest on the New Notes
The New Notes will accrue interest at the applicable per
annum rate set forth on the cover page of this Prospectus, from
(A) the later of (i) the last interest payment date on which
interest was paid on the Old Notes surrendered in exchange
therefor or (ii) if the Old Notes are surrendered for exchange on
a date subsequent to the record date for an interest payment date
to occur on or after the date of such exchange and as to which
interest will be paid, the date of such interest payment or (B)
if no interest has been paid on the Old Notes, from the Issue
Date of such Old Notes. Interest on the New Notes is payable on
March 15 and September 15 of each year.
Procedures for Tendering
To tender in the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter
of Transmittal, and mail or otherwise deliver such Letter of
Transmittal or such facsimile, together with any other required
documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange
Agent along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure
for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder
must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION
AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS
RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL
OR OLD NOTES SHOULD BE SENT TO THE COMPANY. Delivery of all
documents must be made to the Exchange Agent at its address set
forth below. Holders may also request their respective brokers,
dealers, commercial banks, trust companies or nominees to effect
such tender for such holders.
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The tender by a holder of Old Notes will constitute an
agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the
Exchange Offer. The term "holder" with respect to the Exchange
Offer means any person in whose name Old Notes are registered on
the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder.
Any beneficial owner whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other
nominee and who wishes to tender should contact such registered
holder promptly and instruct such registered holder to tender on
his behalf. If such beneficial owner wishes to tender on his own
behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes,
either make appropriate arrangements to register ownership of the
Old Notes in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed by any member
firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial
bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the
meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible
Institution") unless the Old Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other
than the registered holder of any Old Notes listed therein, such
Old Notes must be endorsed or accompanied by bond powers and a
proxy which authorizes such person to tender the Old Notes on
behalf of the registered holder, in each case as the name of the
registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond
powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons
should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority
to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility
(including time of receipt) and withdrawal of the tendered Old
Notes will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company
reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes which, if accepted, would, in
the opinion of counsel for the Company, be unlawful. The Company
also reserves the absolute right to waive any irregularities or
conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. Neither
the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such
irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived
will be returned without cost to such holder by the Exchange
Agent to the tendering holders of Old Notes, unless otherwise
provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole
discretion, subject to the provisions of the Indenture, to (i)
purchase or make offers for any Old Notes that remain outstanding
subsequent to the Expiration Date or, as set forth under
"--Conditions", to terminate the Exchange Offer in accordance with
the terms of the Registration Rights Agreement and (ii) to the
extent permitted by applicable law, purchase Old Notes in the
open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
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Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, all Old Notes properly tendered will be accepted,
promptly after the Expiration Date, and the New Notes will be
issued promptly after acceptance of the Old Notes. See
"--Conditions" below. For purposes of the Exchange Offer, Old
Notes shall be deemed to have been accepted as validly tendered
for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are
accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of certificates
for such Old Notes or a timely Book-Entry Confirmation of such
Old Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility, a properly completed and duly executed Letter
of Transmittal and all other required documents. If any tendered
Old Notes are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Old Notes are
submitted for a greater principal amount than the holder desires
to exchange, such unaccepted or nonexchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in
the case of Old Notes tendered by book-entry transfer procedures
described below, such nonexchanged Old Notes will be credited to
an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of
the Exchange Offer.
Book-Entry Transfer
The Exchange Agent will make a request to establish an
account with respect to the Old Notes at the Book-Entry Transfer
Facility for purposes of the Exchange Offer within two business
days after the date of this Prospectus. Any financial institution
that is a participant in the Book-Entry Transfer Facility's
systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures
for transfer. However, although delivery of Old Notes may be
effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal or facsimile thereof with any
required signature guarantees and any other required documents
must, in any case, be transmitted to and received by the Exchange
Agent at one of the addresses set forth below under "--Exchange
Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
Guaranteed Delivery Procedures
If a registered holder of the Old Notes desires to tender
such Old Notes, and the Old Notes are not immediately available,
or time will not permit such holder's Old Notes or other required
documents to reach the Exchange Agent before the Expiration Date,
or the procedures for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the
name and address of the holder of Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered
Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents
required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent and (iii) the
certificates for all physically tendered Old Notes, in proper
form for transfer, or a Book-Entry Confirmation, as the case may
be, and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within three NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
Withdrawal of Tenders
Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date at one of the
addresses set forth below under "--
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Exchange Agent." Any such notice of withdrawal must specify the
name of the person having tendered the Old Notes to be withdrawn,
identify the Old Notes to be withdrawn (including the principal
amount of such Old Notes) and (where certificates for Old Notes
have been transmitted) specify the name in which such Old Notes
are registered, if different from that of the withdrawing holder.
If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of
such certificates, the withdrawing holder must also submit the
serial numbers of the particular certificates to be withdrawn and
a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible
Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn
Old Notes and otherwise comply with the procedures of such
facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or,
in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above,
such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as
practicable after withdrawal, rejection of tender or termination
of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under
"--Procedures for Tendering" and "--Book-Entry Transfer" above at
any time on or prior to the Expiration Date.
Conditions
Notwithstanding any other term of the Exchange Offer, Old
Notes will not be required to be accepted for exchange, nor will
New Notes be issued in exchange for any Old Notes, and the
Company may terminate or amend the Exchange Offer as provided
herein before the acceptance of such Old Notes, if because of any
change in law, or applicable interpretations thereof by the
Commission, the Company determines that it is not permitted to
effect the Exchange Offer. The Company has no obligation to, and
will not knowingly, permit acceptance of tenders of Old Notes
from affiliates of the Company (within the meaning of Rule 405
under the Securities Act) or from any other holder or holders who
are not eligible to participate in the Exchange Offer under
applicable law or interpretations thereof by the Commission, or
if the New Notes to be received by such holder or holders of Old
Notes in the Exchange Offer, upon receipt, will not be tradable
by such holder without restriction under the Securities Act and
the Exchange Act and without material restrictions under the
"blue sky" or securities laws of substantially all of the states
of the United States.
Exchange Agent
The First National Bank of Chicago has been appointed as
Exchange Agent for the Exchange Offer. Questions and requests for
assistance and requests for additional copies of this Prospectus
or of the Letter of Transmittal should be directed to the
Exchange Agent addressed as follows:
By Mail: Facsimile By Hand or
Transmissions: Overnight
(Registered or Delivery:
Certified Mail (Eligible
Recommended) Institutions
The First National Only) The First National
Bank of Chicago (212) 240-8938 Bank of Chicago
c/o First Chicago c/o First Chicago
Trust Company Trust Company
of New York of New York
14 Wall Street To Confirm by 14 Wall Street
8th Floor, Telephone 8th Floor,
Window 2 or for Infor- Window 2
New York, mation Call: New York,
New York 10005 (212) 240-8801 New York 10005
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Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange
Offer will be borne by the Company. The principal solicitation
for tenders pursuant to the Exchange Offer is being made by mail;
however, additional solicitations may be made by telegraph,
telephone, telecopy or in person by officers and regular
employees of the Company.
The Company will not make any payments to brokers, dealers
or other persons soliciting acceptances of the Exchange Offer.
The Company, however, will pay the Exchange Agent reasonable and
customary fees for its services and will reimburse the Exchange
Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of the Prospectus
and related documents to the beneficial owners of the Old Notes,
and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange
Offer will be paid by the Company, including fees and expenses of
the Exchange Agent and Trustee and accounting, legal, printing
and related fees and expenses.
The Company will pay all transfer taxes, if any, applicable
to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for
principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be registered or issued in the name of,
any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of
any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by
the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
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DESCRIPTION OF THE NEW NOTES
General
The Old Notes were issued, and the New Notes offered hereby
will be issued, under an Indenture, dated as of March 12, 1998
(the "Indenture"), between the Company and The First National
Bank of Chicago, as Trustee (the "Trustee"). The terms of the New
Notes will include those stated in the Indenture and those made
part of the Indenture by reference to the TIA. The New Notes will
be subject to all such terms, and prospective holders of New
Notes are referred to the Indenture and the TIA for a statement
thereof.
The following is a summary of certain provisions of the
Indenture, a copy of which Indenture and Registration Rights
Agreement is available upon request to the Company at the address
set forth under "Available Information." The following summary of
certain provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part
thereof by the TIA. Capitalized terms used herein and not
otherwise defined have the meanings set forth under "--Certain
Definitions." For purposes of this summary, the term "Company"
refers only to Purina Mills, Inc. and not to Holdings or any
Subsidiary of the Company. None of Koch Agriculture, Koch
Industries, Holdings or any of their Affiliates (other than the
Company) are parties to the Indenture or responsible for any
payments or other claims in respect of the New Notes or the
Indenture.
Principal of, premium, if any, and interest on the New
Notes will be payable, and the New Notes may be exchanged or
transferred, at the office or agency of the Company in the
Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee, at 14 Wall Street,
New York, New York 10005), except that, at the option of the
Company, payment of interest may be made by check mailed to the
registered holders of the New Notes at their registered
addresses.
The New Notes will be issued only in fully registered form,
without coupons, in denominations of $1,000 and any integral
multiple of $1,000. No service charge will be made for any
registration of transfer or exchange of New Notes, but the
Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in
connection therewith.
Terms of the New Notes
The New Notes will be unsecured, senior subordinated
obligations of the Company, limited to $500.0 million aggregate
principal amount, of which $350.0 million aggregate principal
amount will be issued in the Exchange Offer. The New Notes will
mature on March 15, 2010.
Each New Note will bear interest at a rate per annum shown
on the front cover of this Prospectus from March 12, 1998 or from
the most recent date to which interest has been paid or provided
for, payable semiannually to Holders of record at the close of
business on the March 1 or September 1 immediately preceding the
interest payment date on March 15 and September 15 of each year,
commencing September 15, 1998. Interest on the New Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
The interest rate on the Old Notes is subject to increase
in certain circumstances if the Company does not file an Exchange
Offer Registration Statement or if the Exchange Offer
Registration Statement is not declared effective on a timely
basis or if certain other conditions are not satisfied, all as
further described under "--Registered Exchange Offer; Registration
Rights."
Optional Redemption
Except as set forth in the following paragraph, the New
Notes will not be redeemable at the option of the Company prior
to March 15, 2003. Thereafter, the New Notes will be redeemable,
at the Company's option, in whole or in part, at any time or from
time to time, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's registered
address, at the following redemption prices (expressed as a
percentage of principal amount), plus accrued interest, if any,
to the redemption date (subject to the right of Holders of record
on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month
period commencing on March 15 of the years set forth below:
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Redemption
Period Price
- ------ ----------
2003............................................. 104.500%
2004............................................. 103.000%
2005............................................. 101.500%
2006 and thereafter.............................. 100.000%
In addition, at any time and from time to time prior to
March 15, 2001, the Company may redeem in the aggregate up to 35%
of the original aggregate principal amount of the New Notes with
the net cash proceeds of one or more Public Equity Offerings of
the Company following which there is a Public Market or, in the
case of a Public Equity Offering of Holdings following which
there is a Public Market, with the net cash proceeds thereof that
are contributed to the equity capital of the Company, at a
redemption price (expressed as a percentage of principal amount
thereof) of 109.000% plus accrued interest, if any, to the
redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant
interest payment date); provided, however, that at least $227.5
million principal amount of the New Notes must remain outstanding
after each such redemption.
In the case of any partial redemption, selection of the New
Notes for redemption will be made by the Trustee on a pro rata
basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate, although no
Note of $1,000 in original principal amount or less will be
redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the
portion of the principal amount thereof to be redeemed. A New
Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon
cancellation of the original Note.
Ranking
The indebtedness evidenced by the New Notes will be
unsecured senior subordinated obligations of the Company. The
payment of the principal of, premium (if any) and interest on,
the New Notes is subordinate in right of payment, as set forth in
the Indenture, to the prior payment in full in cash or cash
equivalents of all Senior Indebtedness, whether outstanding on
the Issue Date or thereafter incurred, including the Company's
obligations under the Credit Agreement. The New Notes will also
be structurally subordinated to all existing and future
Indebtedness of any Subsidiary of the Company.
As of March 31, 1998, the Company's Senior Indebtedness was
approximately $206.9 million. Although the Indenture contains
limitations on the amount of additional Indebtedness which the
Company may Incur, under certain circumstances the amount of such
Indebtedness could be substantial and, in any case, such
Indebtedness may be Senior Indebtedness. See "--Certain
Covenants-Limitation on Indebtedness."
Only Indebtedness of the Company that is Senior
Indebtedness will rank senior to the New Notes in accordance with
the provisions of the Indenture. The New Notes will in all
respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the
Indenture that it will not Incur, directly or indirectly, any
Indebtedness that is subordinate or junior in ranking in right of
payment to its Senior Indebtedness unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in
right of payment to the Senior Subordinated Indebtedness.
Unsecured Indebtedness is not deemed to be subordinated or junior
to Secured Indebtedness merely because it is unsecured.
The Company may not pay principal of, premium (if any) or
interest on, the New Notes or make any deposit pursuant to the
provisions described under "Defeasance" below and may not
repurchase, redeem or otherwise retire any New Notes
(collectively, "pay the New Notes") if (i) any Designated Senior
Indebtedness is not paid in full in cash or cash equivalents when
due or (ii) any other default on Designated Senior Indebtedness
occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms unless, in either case,
the default has been cured or waived and any such acceleration
has been rescinded or such Designated Senior Indebtedness has
been paid in full in cash or cash equivalents. However, the
Company may pay the New Notes without regard to the foregoing if
the Company and the Trustee receive written notice approving such
payment from the Representative of the Designated Senior
Indebtedness with respect to which either of the events set forth
in clause (i) or (ii) of the immediately preceding sentence has
occurred and is continuing. During the continuance of any default
(other than a default described in clause (i) or (ii) of the
second preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the
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maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods,
the Company may not pay the New Notes for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee
(with a copy to the Company) of written notice (a "Blockage
Notice") of such default from the Representative of the holders
of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter
(or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or
Persons who gave such Blockage Notice, (ii) because the default
giving rise to such Blockage Notice is no longer continuing or
(iii) because such Designated Senior Indebtedness has been repaid
in full). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions
described in the first sentence of this paragraph), unless the
holders of such Designated Senior Indebtedness or the
Representative of such holders have accelerated the maturity of
such Designated Senior Indebtedness, the Company may resume
payments on the New Notes after the end of such Payment Blockage
Period. Subject to the provisions described in the first sentence
of this paragraph, the New Notes shall not be subject to more
than one Payment Blockage Period in any consecutive 360-day
period, irrespective of the number of defaults with respect to
Designated Senior Indebtedness during such period.
Upon any payment or distribution of the assets of the
Company upon a total or partial liquidation or dissolution or
reorganization of or similar proceeding relating to the Company
or its property, the holders of Senior Indebtedness will be
entitled to receive payment in full in cash or cash equivalents
of such Senior Indebtedness before the Noteholders are entitled
to receive any payment, and until the Senior Indebtedness is paid
in full in cash or cash equivalents, any payment or distribution
to which Noteholders would be entitled but for the subordination
provisions of the Indenture will be made to holders of such
Senior Indebtedness as their interests may appear. If a
distribution is made to Noteholders that, due to the
subordination provisions, should not have been made to them, such
Noteholders are required to hold it in trust for the holders of
Senior Indebtedness and pay it over to them as their interests
may appear.
If payment of the New Notes is accelerated because of an
Event of Default, the Company or the Trustee shall promptly
notify the holders of Designated Senior Indebtedness or the
Representative of such holders of such acceleration.
By reason of the subordination provisions contained in the
Indenture, in the event of insolvency, creditors of the Company
who are holders of Senior Indebtedness may recover more, ratably,
than the Noteholders, and creditors of the Company who are not
holders of Senior Indebtedness may recover less, ratably, than
holders of Senior Indebtedness and may recover more, ratably,
than the Noteholders.
The terms of the subordination provisions described above
will not apply to payments from money or the proceeds of U.S.
Government Obligations held in trust by the Trustee for the
payment of principal of and interest on the New Notes pursuant to
the provisions described under "--Defeasance."
Book-Entry; Delivery and Form
The New Notes will be issued in the form of a Global Note.
The Global Note will be deposited with, or on behalf of, the
Depository and registered in the name of the Depository or its
nominee. Except as set forth below, the Global Note may be
transferred, in whole and not in part, only to the Depository or
another nominee of the Depository. Investors may hold their
beneficial interests in the Global Note directly through the
Depository if they have an account with the Depository or
indirectly through organizations which have accounts with the
Depository.
New Notes that are issued as described below under
"--Certificated New Notes" will be issued in definitive form. Upon
the transfer of a Note in definitive form, such Note will, unless
the Global Note has previously been exchanged for New Notes in
definitive form, be exchanged for an interest in the Global Note
representing the principal amount of New Notes being transferred.
The Depository has advised the Company as follows: The
Depository is a limited-purpose trust company organized under the
laws of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act.
The Depository was created to hold securities of institutions
that have accounts with the Depository ("participants") and to
facilitate the clearance and settlement of securities
transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants,
thereby
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eliminating the need for physical movement of securities
certificates. The Depository's participants include securities
brokers and dealers (which may include the Initial Purchasers),
banks, trust companies, clearing corporations and certain other
organizations. Access to the Depository's book-entry system is
also available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Upon the issuance of the Global Note, the Depository will
credit, on its book-entry registration and transfer system, the
principal amount of the New Notes represented by such Global Note
to the accounts of participants. The accounts to be credited
shall be designated by the Initial Purchasers of the New Notes.
Ownership of beneficial interests in the Global Note will be
limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in the
Global Note will be shown on, and the transfer of those ownership
interests will be effected only through, records maintained by
the Depository (with respect to participants' interest) and such
participants (with respect to the owners of beneficial interests
in the Global Note other than participants). The laws of some
jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form.
Such limits and laws may impair the ability to transfer or pledge
beneficial interests in the Global Note.
So long as the Depository, or its nominee, is the
registered holder and owner of the Global Note, the Depository or
such nominee, as the case may be, will be considered the sole
legal owner and holder of the related New Notes for all purposes
of such New Notes and the Indenture. Except as set forth below,
owners of beneficial interests in the Global Note will not be
entitled to have the New Notes represented by the Global Note
registered in their names, will not receive or be entitled to
receive physical delivery of certificated New Notes in definitive
form and will not be considered to be the owners or holders of
any New Notes under the Global Note. The Company understands that
under existing industry practice, in the event an owner of a
beneficial interest in the Global Note desires to take any action
that the Depository, as the holder of the Global Note, is
entitled to take, the Depository would authorize the participants
to take such action, and that the participants would authorize
beneficial owners owning through such participants to take such
action or would otherwise act upon the instructions of beneficial
owners owning through them.
Payment of principal of and interest on New Notes
represented by the Global Note registered in the name of and held
by the Depository or its nominee will be made to the Depository
or its nominee, as the case may be, as the registered owner and
holder of the Global Note.
The Company expects that the Depository or its nominee,
upon receipt of any payment of principal of or interest on the
Global Note, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in
the principal amount of the Global Note as shown on the records
of the Depository or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in the
Global Note held through such participants will be governed by
standing instructions and customary practices and will be the
responsibility of such participants. The Company will not have
any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership
interests in the Global Note for any Note or for maintaining,
supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship
between the Depository and its participants or the relationship
between such participants and the owners of beneficial interests
in the Global Note owning through such participants.
Unless and until it is exchanged in whole or in part for
certificated New Notes in definitive form, the Global Note may
not be transferred except as a whole by the Depository to a
nominee of such Depository or by a nominee of such Depository to
such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing
procedures in order to facilitate transfers of interests in the
Global Note among participants of the Depository, it is under no
obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the
performance by the Depository or its participants or indirect
participants of their respective obligations under the rules and
procedures governing their operations.
Certificated New Notes
The New Notes represented by the Global Note are
exchangeable for certificated New Notes in definitive form of
like tenor as such New Notes in denominations of U.S. $1,000 and
integral multiples thereof if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository
of the Global Note or if at any time the
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Depository ceases to be a clearing agency registered under the
Exchange Act and a successor Depository is not appointed by the
Company within 90 days, (ii) the Company in its discretion at any
time determines not to have all of the New Notes represented by
the Global Note or (iii) an Event of Default has occurred and is
continuing. Any Note that is exchangeable pursuant to the
preceding sentence is exchangeable for certificated New Notes
issuable in authorized denominations and registered in such names
as the Depository shall direct. Subject to the foregoing, the
Global Note is not exchangeable, except for a Global Note of the
same aggregate denomination to be registered in the name of the
Depository or its nominee. In addition, such certificates will
bear the legend referred to under "--Transfer Restrictions"
(unless the Company determines otherwise in accordance with
applicable law) subject, with respect to such New Notes, to the
provisions of such legend.
Registered Exchange Offer; Registration Rights
The Company agreed pursuant to the Registration Rights
Agreement with the Initial Purchasers, for the benefit of the
holders of the New Notes, to, at its cost, (i) within 90 days
after the Issue Date, file the Exchange Offer Registration
Statement with the SEC with respect to the Exchange Offer to
exchange the Old Notes for New Notes, with terms substantially
identical in all material respects to the Old Notes except that
such New Notes will not contain terms with respect to transfer
restrictions and (ii) use its best efforts to cause the Exchange
Offer Registration Statement to be declared effective under the
Securities Act within 150 days after the Issue Date. Upon the
effectiveness of the Exchange Offer Registration Statement, the
Company will offer the New Notes in exchange for surrender of the
Old Notes. The Company will keep the Exchange Offer open for not
less than 30 days (or longer if required by applicable law) after
the date notice of the Exchange Offer is mailed to the holders of
the Old Notes. For each Old Note surrendered to the Company
pursuant to the Exchange Offer, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to
that of the surrendered Note at maturity. Interest on each New
Note will accrue from the last interest payment date on which
interest was paid on the Note surrendered in exchange thereof or,
if no interest has been paid on such Note, from the date interest
began to accrue on such Note. Under existing SEC interpretations,
the New Notes will be freely transferable by holders other than
affiliates of the Company after the Exchange Offer without
further registration under the Securities Act if the holder of
the New Notes represents that it is acquiring the New Notes in
the ordinary course of its business, that it has no arrangement
or understanding with any person to participate in the
distribution of the New Notes and that it is not an affiliate of
the Company, as such terms are interpreted by the SEC; provided,
however, that Participating Broker-Dealers receiving New Notes in
the Exchange Offer will have a prospectus delivery requirement
with respect to resales of such New Notes. The SEC has taken the
position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to New Notes (other
than a resale of an unsold allotment from the original sale of
the Notes) with the prospectus contained in the Exchange Offer
Registration Statement. Under the Registration Rights Agreement,
the Company is required to allow Participating Broker-Dealers and
other persons, if any, with similar prospectus delivery
requirements to use the prospectus contained in the Exchange
Offer Registration Statement in connection with the resale of
such New Notes.
A holder of Old Notes (other than certain specified
holders) who wishes to exchange such Old Notes for New Notes in
the Exchange Offer will be required to represent that any New
Notes to be received by it will be acquired in the ordinary
course of its business and that at the time of the commencement
of the Exchange Offer it has no arrangement or understanding with
any person to participate in the distribution (within the meaning
of the Securities Act) of the New Notes and that it is not an
"affiliate" of the Company, as defined in Rule 405 of the
Securities Act, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
In the event that applicable interpretations of the staff
of the SEC do not permit the Company to effect the Exchange
Offer, or if for any other reason the Exchange Offer is not
consummated within 180 days of the Issue Date, or if the Initial
Purchasers so request with respect to Old Notes not eligible to
be exchanged for New Notes in the registered Exchange Offer, or
if any holder of Old Notes (other than affiliates of the Company)
is not eligible to participate in the Exchange Offer or does not
receive freely tradeable New Notes in the Exchange Offer, the
Company, will, at its cost, (a) as promptly as practicable, file
a Shelf Registration Statement with the SEC covering resales of
the Old Notes or the New Notes, as the case may be, (b) use its
best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act and (c) keep the
Shelf Registration Statement effective (except as the result of a
Suspension Period (as defined below)) until the earlier of (i)
the time when the Old Notes covered by the Shelf Registration
Statement can be sold (by persons other than affiliates of the
Company) pursuant to Rule 144 without any limitations under
clauses (c), (e), (f) and (h) of Rule 144 and (ii) two years from
the Issue Date. The Company will, in the event a Shelf
Registration Statement is filed, among other things, provide to
each holder for whom such Shelf
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Registration Statement was filed copies of the prospectus which
is a part of the Shelf Registration Statement, notify each such
holder when the Shelf Registration Statement has become effective
and take certain other actions as are required to permit
unrestricted resales of the Old Notes or the New Notes, as the
case may be. A holder selling such Old Notes or New Notes
pursuant to the Shelf Registration Statement generally would be
required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and will be bound by
the provisions of the Registration Rights Agreement which are
applicable to such holder (including certain indemnification
obligations).
If (i) by June 10, 1998, neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has
been filed with the SEC; (ii) by September 8, 1998, neither the
Exchange Offer is consummated nor the Shelf Registration
Statement is declared effective; or (iii) after either the
Exchange Offer Registration Statement or the Shelf Registration
Statement is declared effective, such Registration Statement
thereafter ceases to be effective or usable (subject to certain
exceptions, including an exception for a period not to exceed 60
days in any twelve-month period during which the Company effects
a material corporate transaction (a Suspension Period as further
defined in the Registration Rights Agreement)) in connection with
resales of Old Notes or New Notes in accordance with and during
the periods specified in the Registration Rights Agreement (each
such event referred to in clause (i) through (iii) being herein
called a Registration Default), additional cash interest will
accrue on the Old Notes and the New Notes at the rate of 0.50%
per annum (increasing by 0.50% per annum at the end of each
90-day period thereafter) from and including the date on which
any such Registration Default shall occur to but excluding the
date on which all Registration Defaults have been cured,
calculated on the principal amount of the Old Notes as of the
date on which such interest is payable; provided, however, that
in no event shall the aggregate amount of such additional
interest exceed 1.00% per annum. Such interest is payable in
addition to any other interest payable from time to time with
respect to the Old Notes.
If the Company effects the Exchange Offer, it will be
entitled to close the Exchange Offer 30 business days after the
commencement thereof provided that it has accepted all Old Notes
theretofore validly tendered in accordance with the terms of the
Exchange Offer.
The summary herein of certain provisions of the
Registration Rights Agreement does not purport to be complete and
is subject to, and is qualified in its entirety by reference to,
all the provisions of the Registration Rights Agreement, a copy
of which is available upon request to the Company.
Change of Control
Upon the occurrence of any of the following events (each a
"Change of Control"), each Holder will have the right to require
the Company to repurchase all or any part of such Holder's New
Notes at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the
date of repurchase (subject to the right of Holders of record on
the relevant record date to receive interest due on the related
interest payment date):
(i) Prior to the earlier to occur of (A) the first
public offering of common stock of the Company or (B) the
first public offering of common stock of Holdings, the
Permitted Holders cease to be the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of a majority in the aggregate of
the total voting power of the Voting Stock of the Company,
whether as a result of issuance of securities of Holdings
or the Company, any merger, consolidation, liquidation or
dissolution of Holdings or the Company, any direct or
indirect transfer of securities by Holdings or the Company
or otherwise (for purposes of this clause (i) and clause
(ii) below, the Permitted Holders shall be deemed to
beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the
"parent corporation") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly,
in the aggregate a majority of the voting power of the
Voting Stock of the parent corporation);
(ii) subsequent to the first public offering of common
stock of the Company or Holdings, (A) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange
Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in clause (i)
above, except that for purposes of this clause (ii) such
person shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than
40% of the total voting power of the Voting Stock of
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the Company and (B) the Permitted Holders "beneficially
own" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the
total voting power of the Voting Stock of the Company than
such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate
for election a majority of the Board of Directors (for the
purposes of this clause (ii), such other person shall be
deemed to beneficially own any Voting Stock of a specified
corporation held by a parent corporation, if such other
person is the beneficial owner (as defined in this clause
(ii)), directly or indirectly, of more than 40% of the
voting power of the Voting Stock of such parent corporation
and the Permitted Holders "beneficially own" (as defined in
clause (i) above), directly or indirectly, in the aggregate
a lesser percentage of the voting power of the Voting Stock
of such parent corporation and do not have the right or
ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors
of such parent corporation);
(iii) during any period of two consecutive years (or,
in the case this event occurs within the first two years
after the Issue Date, such shorter period as shall have
begun on the Issue Date), individuals who at the beginning
of such period constituted the Board of Directors of
Holdings or the Company (together with any new directors
whose election by such Board of Directors or whose
nomination for election by the shareholders of Holdings or
the Company was approved by a vote of a majority of the
directors of Holdings or the Company then still in office
who were either directors at the beginning of such period
or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority
of the Board of Directors of Holdings or the Company then
in office; or
(iv) the merger or consolidation of Holdings or the
Company with or into another Person or the merger of
another Person with or into Holdings or the Company, or the
sale of all or substantially all the assets of Holdings or
the Company to another Person (in each case other than a
Person that is controlled by the Permitted Holders), and,
in the case of any such merger or consolidation, the
securities of Holdings or the Company that are outstanding
immediately prior to such transaction and which represent
100% of the aggregate voting power of the Voting Stock of
Holdings or the Company are changed into or exchanged for
cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged
for, in addition to any other consideration, securities of
the surviving corporation that represent immediately after
such transaction, at least a majority of the aggregate
voting power of the Voting Stock of the surviving
corporation.
Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder at its registered address with
a copy to the Trustee stating: (1) that a Change of Control has
occurred and that such Holder has the right to require the
Company to purchase such Holder's New Notes at a purchase price
in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase
(subject to the right of Holders of record on the relevant record
date to receive interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma
historical income, cash flow and capitalization after giving
effect to such Change of Control); (3) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the
date such notice is mailed); and (4) the instructions determined
by the Company, consistent with this covenant, that a Holder must
follow in order to have its New Notes purchased.
The phrase "all or substantially all," as used with respect
to a sale of assets in the definition in the Indenture of "Change
of Control," varies according to the facts and circumstances of
the subject transaction, has no clearly established meaning under
New York law (the law governing the Indenture) and is subject to
judicial interpretation. Accordingly, in certain circumstances,
there may be a degree of uncertainty in ascertaining whether a
particular transaction would involve a disposition of "all or
substantially all" of the assets of a Person and therefore it may
be unclear whether a Change of Control has occurred.
The Company will not be required to make a Change of
Control Offer upon a Change of Control Offer if a third party
makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by the
Company and purchases all New Notes validly tendered and not
withdrawn under such Change of Control Offer.
The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase
of New Notes pursuant to this
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covenant. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this covenant,
the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its
obligations under this paragraph by virtue thereof.
The Change of Control purchase feature is a result of
negotiations between the Company and the Initial Purchasers.
Management has no present intention to engage in a transaction
involving a Change of Control, although it is possible that the
Company would decide to do so in the future. Subject to the
limitations discussed below, the Company could, in the future,
enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not
constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such
time or otherwise affect the Company's capital structure or
credit rating. Restrictions on the ability of the Company to
incur additional Indebtedness are contained in the covenants
described under "--Certain Covenants-Limitation on Indebtedness"
and "--Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries." Such restrictions can only be waived
with the consent of the holders of a majority in principal amount
of the New Notes then outstanding. Except for the limitations
contained in such covenants, however, the Indenture will not
contain any covenants or provisions that may afford holders of
the New Notes protection in the event of a highly leveraged
transaction.
The Credit Agreement generally prohibits the Company from
purchasing any New Notes and also provides that the occurrence of
certain change of control events (as defined therein) with
respect to Holdings or the Company would constitute a default
thereunder. In the event a Change of Control occurs at a time
when the Company is prohibited from purchasing New Notes, the
Company could seek the consent of its lenders to the purchase of
New Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company will remain
prohibited from purchasing New Notes. In such case, the Company's
failure to purchase tendered New Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a
default under the Credit Agreement.
Future Indebtedness of the Company may contain prohibitions
on the occurrence of certain events which would constitute a
Change of Control or require such Indebtedness to be repurchased
upon a change of control (as defined in the instruments governing
such Indebtedness). Moreover, the exercise by the Holders of
their right to require the Company to repurchase the New Notes
could cause a default under such indebtedness, even if the Change
of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay
cash to the Holders following the occurrence of a Change of
Control may be limited by the Company's then existing financial
resources. There can be no assurance that sufficient funds will
be available when necessary to make any required repurchases. The
provisions under the Indenture relative to the Company's
obligation to make an offer to repurchase the New Notes as a
result of a Change of Control may be waived or modified with the
written consent of the holders of a majority in principal amount
of the New Notes.
Certain Covenants
The Indenture contains covenants including, among others,
the following:
Limitation on Indebtedness. (a) The Company will not Incur,
directly or indirectly, any Indebtedness unless, on the date of
such Incurrence and after giving effect to such Incurrence and
the application of the net proceeds therefrom, the Consolidated
Coverage Ratio would exceed 2.00:1.
(b) Notwithstanding the foregoing paragraph (a), the
Company may Incur any or all of the following Indebtedness: (i)
Indebtedness of the Company Incurred under the revolving credit
provisions of the Credit Agreement in an aggregate principal
amount outstanding at any time not to exceed the greater of (A)
$100.0 million and (B) the sum of (1) 85% of the gross book value
of the accounts receivable of the Company and its Restricted
Subsidiaries and (2) 50% of the gross book value of the inventory
of the Company and its Restricted Subsidiaries; provided that the
amount in clause (A) shall be reduced by the aggregate amount of
all proceeds from all Asset Dispositions that have been applied
since the Issue Date to permanently reduce the outstanding amount
of such Indebtedness pursuant to "--Certain Covenants-Limitation
on Sale of Assets and Subsidiary Stock"; (ii) Indebtedness of the
Company Incurred under the term loan provisions of the Credit
Agreement in an aggregate principal amount outstanding at any
time not to exceed $200.0 million, less the aggregate amount of
all proceeds from all Asset Dispositions that have been applied
since the Issue Date to permanently reduce the outstanding amount
of such Indebtedness pursuant to "--Certain Covenants--Limitation
on Sale of Assets and Subsidiary Stock" and less the aggregate
amount of any mandatory
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prepayments of principal of term loans thereunder that have been
made since the Issue Date; (iii) Indebtedness of the Company
owing to and held by any Restricted Subsidiary; provided,
however, that (A) any subsequent issuance or transfer of any
Capital Stock or any other event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any subsequent transfer of any such Indebtedness (except to
another Restricted Subsidiary) will be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the Company and
(B) such Indebtedness (if held other than by a Wholly Owned
Subsidiary) is expressly subordinated to the prior payment in
full in cash of all obligations with respect to the New Notes;
(iv) Indebtedness represented by the New Notes and the New Notes
in an aggregate principal amount not to exceed $350.0 million;
(v) Indebtedness of the Company (other than the Indebtedness
described in clauses (i), (ii), (iii) or (iv) above) outstanding
on the Issue Date; provided that any Existing PMI Senior
Subordinated Notes accepted for payment in the Tender Offers
shall be deemed to be Indebtedness outstanding on the Issue Date
except to the extent they remain outstanding at the close of
business on the second Business Day following the Issue Date (in
which event the existence of such Existing PMI Senior
Subordinated Notes shall be deemed to constitute an Incurrence of
Indebtedness by the Company under the Indenture); (vi)
Indebtedness (including Capitalized Lease Obligations) of the
Company Incurred to finance the acquisition, construction or
improvement of fixed or capital assets in an aggregate principal
amount at any one time outstanding not to exceed $50.0 million,
provided that such Indebtedness is Incurred within 180 days after
the date of such acquisition, construction or improvement and
does not exceed the fair market value of such acquired,
constructed or improved assets, as determined in good faith by
the Board of Directors of the Company; (vii) Refinancing
Indebtedness Incurred in respect of any Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clauses (ii), (iv), (v)
(other than any Existing PMI Senior Subordinated Notes described
in such clause (v)) or this clause (vii); (viii) Indebtedness (A)
in respect of performance bonds, bankers' acceptances, letters of
credit and surety or appeal bonds provided by the Company in the
ordinary course of its business and which do not secure
Indebtedness other than the Indebtedness and the obligations with
respect to which such instruments were issued and (B) under
Currency Agreements and Interest Rate Agreements Incurred which,
at the time of Incurrence, is in the ordinary course of business;
provided, however, that, in the case of Currency Agreements which
relate to Indebtedness and Interest Rate Agreements, such
Currency Agreements and Interest Rate Agreements are directly
related to Indebtedness permitted to be Incurred by the Company
pursuant to the Indenture; (ix) Indebtedness represented by
Guarantees by the Company of Indebtedness otherwise permitted to
be Incurred pursuant to this covenant or "Certain
Covenants-Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries"; (x) (A) Permitted Customer Financing
and (B) Guarantees permitted to be Incurred pursuant to clause
(xii)(B) of the definition of "Permitted Investment"; (xi)
Indebtedness of the Company arising from the honoring by a bank
or other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary
course of business; provided that such Indebtedness is
extinguished within five business days of Incurrence; (xii)
Indebtedness of the Company arising from agreements providing for
indemnification, adjustment of purchase price or similar
obligations Incurred in connection with the acquisition or
disposition of any assets of the Company or a Restricted
Subsidiary (whether evidenced by a note, backed by a letter of
credit or otherwise) in a principal amount not to exceed (in the
case of a disposition) the gross proceeds actually received by
the Company or any Restricted Subsidiary in connection with such
disposition; (xiii) Indebtedness of the Company representing
obligations in respect of self-insured retention amounts, amounts
required in connection with workers' compensation and other
insurance coverage Incurred in the ordinary course of business or
reimbursement obligations in respect of amounts Incurred or paid
by an insurance company under any insurance program in the
ordinary course of business; (xiv) Standard Securitization
Undertakings; and (xv) other Indebtedness in an aggregate
principal amount outstanding at any time not to exceed $25.0
million.
(c) Notwithstanding the foregoing, the Company shall not
Incur any Indebtedness pursuant to the foregoing paragraph (b) if
the proceeds thereof are used, directly or indirectly, to
Refinance any Subordinated Obligations unless such new
Indebtedness shall be subordinated to the New Notes to at least
the same extent as such Subordinated Obligations being
Refinanced.
(d) For purposes of determining compliance with the
foregoing covenant, (i) in the event that an item of Indebtedness
meets the criteria of more than one of the types of Indebtedness
described above, the Company, in its sole discretion, will
classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the
above clauses and (ii) an item of Indebtedness may be divided and
classified in more than one of the types of Indebtedness
described above.
(e) Notwithstanding paragraphs (a) and (b) above, the
Company shall not Incur (i) any Indebtedness if such Indebtedness
is subordinate or junior in ranking in any respect to any Senior
Indebtedness, unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to
the Senior
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Subordinated Indebtedness or (ii) any Secured Indebtedness that
is not Senior Indebtedness (other than Secured Indebtedness
secured by a Permitted Lien) unless contemporaneously therewith
effective provision is made to secure the New Notes equally and
ratably with such Secured Indebtedness for so long as such
Secured Indebtedness is secured by a Lien.
Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries. The Company shall not permit any
Restricted Subsidiary to Incur, directly or indirectly, any
Indebtedness or Preferred Stock except: (a) Indebtedness or
Preferred Stock of a Restricted Subsidiary issued to and held by
the Company or a Restricted Subsidiary; provided, however, that
any subsequent issuance or transfer of any Capital Stock which
results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of such
Indebtedness or Preferred Stock (other than to the Company or a
Restricted Subsidiary) shall be deemed, in each case, to
constitute the issuance of such Indebtedness or Preferred Stock
by the issuer thereof; (b) Indebtedness or Preferred Stock of a
Restricted Subsidiary Incurred and outstanding on or prior to the
date on which such Restricted Subsidiary was acquired by the
Company (other than Indebtedness or Preferred Stock Incurred in
connection with, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the
Company); provided, however, that on the date of such acquisition
and after giving effect thereto, the Company would have been able
to Incur at least $1.00 of additional Indebtedness pursuant to
clause (a) of the covenant described under "Certain
Covenants--Limitation on Indebtedness"; (c) Indebtedness or
Preferred Stock outstanding on the Issue Date (other than
Indebtedness or Preferred Stock described in clauses (a) and (b)
of this paragraph); (d) Refinancing Indebtedness Incurred in
respect of Indebtedness or Preferred Stock referred to in clauses
(b) or (c) of this paragraph or this clause (d); provided,
however, that to the extent such Refinancing Indebtedness
directly or indirectly Refinances Indebtedness or Preferred Stock
of a Subsidiary described in clause (c), such Refinancing
Indebtedness shall be Incurred only by such Subsidiary; (e)
Indebtedness of Restricted Subsidiaries organized under laws
other than the United States of America or any state thereof in
amount not to exceed $25.0 million in the aggregate at any one
time; (f) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds
provided by a Restricted Subsidiary in the ordinary course of its
business and which do not secure Indebtedness other than the
Indebtedness and the obligations with respect to which such
instruments were issued; (g) Indebtedness of a Restricted
Subsidiary arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided
that such Indebtedness is extinguished within five business days
of Incurrence; (h) Guarantees of the Indebtedness specified in
clause (i) and (ii) of the "Limitation on Indebtedness" covenant;
and (i) Indebtedness of a Special Purpose Vehicle which is
Non-Recourse Debt (other than Standard Securitization
Undertakings), including Indebtedness represented by the issuance
of participations of interest in such Special Purpose Vehicle in
connection with a Permitted Securitization.
The Company will not permit any Unrestricted Subsidiary to
Incur any Indebtedness other than Non-Recourse Debt (except that
an Unrestricted Subsidiary may Incur Indebtedness Guaranteed by
the Company to the extent an Investment represented by such
Guarantee is permitted to be made in accordance with the
"Limitation on Restricted Payments" covenant), provided, however,
that if any such Indebtedness ceases to be Non-Recourse Debt,
such event shall be deemed to constitute an Incurrence of
Indebtedness by the Company or such Restricted Subsidiary.
Limitation on Restricted Payments. (a) The Company will
not, and will not permit any Restricted Subsidiary, directly or
indirectly, to make any Restricted Payment if at the time of such
Restricted Payment: (1) a Default or Event of Default will have
occurred and be continuing (or would result therefrom); (2) the
Company could not Incur at least $1.00 of additional Indebtedness
under paragraph (a) of the covenant described under "--Limitation
on Indebtedness;" or (3) the aggregate amount of such Restricted
Payment and all other Restricted Payments (the amount so
expended, if other than in cash, to be determined in good faith
by the Board of Directors of the Company, whose determination (in
the case of amounts in excess of $5.0 million) will be evidenced
by a resolution of such Board of Directors) declared or made
subsequent to the Issue Date would exceed the sum of: (A) 15% of
the Consolidated NIDA accrued during the period (treated as one
accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Issue
Date occurs to the end of the most recent fiscal quarter ending
at least 45 days prior to the date of such Restricted Payment
(or, in case such Consolidated NIDA will be a deficit, minus 100%
of such deficit) (except that if the New Notes have been rated
Investment Grade as of the end of any fiscal quarter, then the
amount to be calculated pursuant to this clause (A) for the
succeeding fiscal quarter and for any other succeeding quarter
where the New Notes have been rated Investment Grade on the first
day of such fiscal quarter shall be 25% of Consolidated NIDA,
provided that the New Notes are also rated Investment Grade at
the time such Restricted Payment is declared or made, as the case
may be); (B) the aggregate Net Cash Proceeds received by the
Company from the issue or sale of
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Capital Stock (other than Disqualified Stock) or other cash
contributions from Holdings to the Company's capital subsequent
to the Issue Date (other than an issuance or sale to a Subsidiary
of the Company and other than an issuance or sale to an employee
stock ownership plan or to a trust established by the Company, or
any of its Subsidiaries for the benefit of their employees to the
extent that such plan or trust Incurs any Indebtedness Guaranteed
by the Company or its Restricted Subsidiaries to finance the
acquisition of such Capital Stock); (C) the amount by which
Indebtedness of the Company is reduced on the Company's balance
sheet upon the conversion or exchange (other than by a
Subsidiary) subsequent to the Issue Date of any Indebtedness of
the Company convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount of any
cash, or the fair market value of any other property, distributed
by the Company upon such conversion or exchange); (D) an amount
equal to the sum of (i) the net reduction in Investments
resulting from repayments of loans or advances or other transfers
of assets, terminations of Guarantees or proceeds received by the
Company or the relevant Restricted Subsidiary from the sale of
all or part of such Investment, in each case to the Company or
any Restricted Subsidiary and (ii) the portion (proportionate to
the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of an Unrestricted Subsidiary at
the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary (or is merged into the Company or a Restricted
Subsidiary); provided, that the foregoing sum shall not exceed
the amount of such Investments previously made by the Company or
any Restricted Subsidiary in such Unrestricted Subsidiary or in
such other Person, which amount was included in the calculation
of the amount of Restricted Payments; and (E) $5.0 million.
(b) The provisions of the foregoing paragraph (a) will not
prohibit: (i) any purchase, redemption, defeasance or other
acquisition of Capital Stock of the Company or Subordinated
Obligations made by exchange for, or out of the net proceeds of
the substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their
employees to the extent that such plan or trust Incurs any
Indebtedness Guaranteed by the Company or its Restricted
Subsidiaries to finance the acquisition of such Capital Stock);
provided, however, that (A) such purchase, redemption, defeasance
or other acquisition will be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from
such sale will be excluded from the calculation of amounts under
clause (3)(B) of paragraph (a) above; (ii) any purchase,
redemption, defeasance or other acquisition of Subordinated
Obligations made by exchange for, or out of the net proceeds of
the substantially concurrent sale of, Subordinated Obligations of
the Company which are permitted to be Incurred pursuant to the
covenant described under "--Limitation on Indebtedness";
provided, however, that (A) the principal amount of such new
Indebtedness does not exceed the principal amount of the
Subordinated Obligations being so redeemed, repurchased, acquired
or retired for value (plus the amount of any premium required to
be paid under the terms of the instrument governing the
Subordinated Obligations being so redeemed, repurchased, acquired
or retired), (B) such new Indebtedness is subordinated to the New
Notes at least to the same extent as such Subordinated
Obligations so purchased, exchanged, redeemed, repurchased,
acquired or retired for value, (C) such new Indebtedness has a
final scheduled maturity date later than the earlier of the final
scheduled maturity date of the Subordinated Obligations being so
redeemed and the final scheduled maturity date of the New Notes
and (D) such new Indebtedness has an Average Life equal to or
greater than the Average Life of the New Notes; provided further,
however, that such purchase, redemption, defeasance or other
acquisition will be excluded in the calculation of the amount of
Restricted Payments; (iii) the repurchase or other acquisition of
shares of, or options to purchase shares of, common stock of the
Company or Holdings from employees, former employees, directors
or former directors of the Company or Holdings (or permitted
transferees of such employees, former employees, directors or
former directors), pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to
purchase or sell, shares of such common stock; provided, however,
that the aggregate amount of such repurchases and other
acquisitions shall not exceed $2.0 million in any calendar year;
provided further, however, that such repurchases and other
acquisitions shall be included in the calculation of the amount
of Restricted Payments; (iv) any dividend paid to Holdings (or
any successor parent corporation with which the Company is part
of a consolidated tax group) in respect of overhead expenses, tax
liabilities and legal, accounting and other professional fees and
expenses that are directly attributable to the operations of the
Company and its Restricted Subsidiaries, provided that the amount
of any such dividends will be excluded in the calculation of the
amount of Restricted Payments; (v) dividends paid within 60 days
after the date of declaration thereof if at such date of
declaration such dividend would have complied with this covenant;
provided, however, that the amount of such dividend will be
included (without duplication for the declaration thereof) in the
calculation of the amount of Restricted Payments; and (vi) the
Merger and Tender Offer Payments; provided, however, that such
payments will be excluded in the calculation of the amount of
Restricted Payments; and provided further that, at the time of,
and after giving effect to, any Restricted Payment permitted by
clauses (i), (ii), (iii) and (v) no Default or Event of Default
shall have occurred and be continuing.
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Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any
Restricted Subsidiary to, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)
pay dividends or make any other distributions on its Capital
Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness or other obligation owed to the Company, (ii) make
any loans or advances to the Company or (iii) transfer any of its
property or assets to the Company or any Restricted Subsidiary,
except: (1) any encumbrance or restriction pursuant to an
agreement in effect at or entered into on the Issue Date
(including the Credit Agreement); (2) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to
an agreement relating to any Indebtedness Incurred by such
Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company or a Restricted
Subsidiary (other than Indebtedness Incurred as consideration in,
or to provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became
a Subsidiary or was acquired by the Company or a Restricted
Subsidiary) and outstanding on such date; (3) any encumbrance or
restriction pursuant to an agreement effecting a Refinancing of
Indebtedness Incurred pursuant to an agreement referred to in
clause (1) or (2) of this covenant or contained in any amendment
to an agreement referred to in clause (1) or (2) of this
covenant; provided, however, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained
in any such refinancing agreement or amendment are no less
favorable (taken as a whole) to the Noteholders than the
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such predecessor agreement, as determined
in good faith by the Company and evidenced by an Officers'
Certificate; (4) any encumbrance or restriction in any agreement
entered into pursuant to clause (e) of the "Limitation on
Indebtedness and Preferred Stock of Restricted Subsidiaries"
covenant; (5) in the case of clause (iii), any encumbrance or
restriction that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject
to a lease, license or similar contract; (6) in the case of
clause (iii), restrictions contained in security agreements or
mortgages securing Indebtedness of a Restricted Subsidiary to the
extent such encumbrance or restrictions restrict the transfer of
the property subject to such security agreements or mortgages;
(7) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or
assets of such Restricted Subsidiary pending the closing of such
sale or disposition; (8) any such restriction imposed by
applicable law; and (9) customary encumbrances or restrictions
contained in agreements of a Special Purpose Vehicle created in
connection with a Permitted Securitization that in the good faith
of the Board of Directors of the Company are necessary to effect
such Permitted Securitization.
Limitation on Sales of Assets and Subsidiary Stock. (a) The
Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, consummate any Asset Disposition
unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least
equal to the fair market value of the shares and assets subject
to such Asset Disposition (including as to the value of all non
cash consideration), as determined in good faith by the Board of
Directors of the Company in the case of values in excess of $2.5
million or by the Company otherwise, (ii) at least 75% of the
consideration thereof received by the Company or such Restricted
Subsidiary is in the form of cash or cash equivalents (except in
the case of Asset Dispositions of a Closed Facility) and (iii) an
amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company or such Restricted
Subsidiary, as the case may be, (A) first, to the extent the
Company or any Restricted Subsidiary, as the case may be, elects
(or is required by the terms of any Senior Indebtedness), to
prepay, repay, redeem or purchase Senior Indebtedness of the
Company or Indebtedness (other than Disqualified Stock) of a
Wholly Owned Subsidiary (in each case other than Indebtedness
owed to the Company or an Affiliate of the Company) within 360
days from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; (B) second, to the extent of
the balance of Net Available Cash after application in accordance
with clause (A), to the extent the Company or such Restricted
Subsidiary, as the case may be, elects, to the investment by the
Company or any Wholly Owned Subsidiary in Additional Assets
within 360 days from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; (C) third,
to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an
Offer (as defined below) to Holders of the New Notes (and to
holders of other Senior Subordinated Indebtedness designated by
the Company) to purchase New Notes and such other Senior
Subordinated Indebtedness pursuant to and subject to the
conditions set forth in paragraph (b) of this covenant; and (D)
fourth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B) and (C) to
any other application or use not prohibited by the Indenture;
provided, however that in connection with any prepayment,
repayment or purchase of Indebtedness pursuant to clause (A) or
(C) above, the Company or such Restricted Subsidiary will
permanently retire such Indebtedness and will cause the related
loan commitment or availability (if any) to be permanently
reduced in an amount equal to the principal amount so prepaid,
repaid or purchased.
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Notwithstanding the foregoing provisions, the Company and
its Restricted Subsidiaries shall not be required to apply any
Net Available Cash in accordance herewith except to the extent
that the aggregate Net Available Cash from all Asset Dispositions
which are not applied in accordance with this covenant exceeds
$10.0 million. Pending application of Net Available Cash pursuant
to this covenant, such Net Available Cash shall be invested in
Permitted Investments or to reduce outstanding loans under any
working capital facility.
For the purposes of this covenant, the following are deemed
to be cash: (x) the assumption by the transferee of Indebtedness
of the Company (other than Disqualified Stock of the Company and
other than Indebtedness that is subordinated to the New Notes) or
Indebtedness of any Restricted Subsidiary and the release of the
Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition and (y)
securities received by the Company or any Restricted Subsidiary
from the transferee that are promptly converted by the Company or
such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the
purchase of New Notes (and other Senior Subordinated
Indebtedness) pursuant to clause (a)(iii)(C) of this covenant,
the Company will be required to purchase New Notes tendered
pursuant to an offer by the Company for the New Notes (and other
Senior Subordinated Indebtedness) (the "Offer") at a purchase
price of 100% of their principal amount (without premium) plus
accrued interest to the date of purchase (or, in respect of such
other Senior Subordinated Indebtedness, such lesser price, if
any, as may be provided for by the terms of such Senior
Subordinated Indebtedness) in accordance with the procedures
(including prorating in the event of oversubscription) set forth
in the Indenture. If the aggregate purchase price of New Notes
tendered pursuant to the Offer is less than the Net Available
Cash allotted to the purchase thereof, the Company will apply the
remaining Net Available Cash in accordance with clause
(a)(iii)(D) above. The Company shall not be required to make an
Offer for New Notes (and other Senior Subordinated Indebtedness)
pursuant to this covenant if the Net Available Cash available
therefor (after application of the proceeds as provided in
clauses (A) and (B)) are less than $10.0 million for all Asset
Dispositions (which lesser amount shall be carried forward for
purposes of determining whether an Offer is required with respect
to the Net Available Cash from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any
other securities laws or regulations in connection with the
repurchase of New Notes pursuant to this covenant. To the extent
that the provisions of any securities laws or regulations
conflict with provisions of this covenant, the Company will
comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under this
covenant by virtue thereof.
Limitation on Transactions with Affiliates. (a) The Company
will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or conduct any transaction or
series of related transactions (including the purchase, sale,
lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with any Affiliate
of the Company (an "Affiliate Transaction") unless (i) the terms
of such transaction are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than those that could
be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate; (ii) in the
event such Affiliate Transaction involves an aggregate amount in
excess of $2.5 million, the terms of such transaction are set
forth in writing and shall have been approved by a majority of
those members of the Board of Directors having no personal stake
in such Affiliate Transaction (and such majority determines that
such Affiliate Transaction satisfies the criteria in clause (i)
above) and (iii) in the event such Affiliate Transaction involves
an aggregate amount in excess of $10.0 million, the Company has
received a written opinion from a nationally recognized
independent investment banking firm that such Affiliate
Transaction is fair to the Company and its Restricted
Subsidiaries from a financial point of view.
(b) The provisions of the foregoing paragraph (a) shall not
apply to (i) any Restricted Payment or Permitted Investment
permitted to be made pursuant to "Certain Covenants-Limitation on
Restricted Payments," (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of
Directors, (iii) the grant of stock options or similar rights to
employees and directors of the Company pursuant to plans approved
by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business in accordance with the past
practices of the Company or its Restricted Subsidiaries, but in
any event not to exceed $5.0 million in the aggregate outstanding
at any one time, (v) the payment of reasonable fees and
indemnities to directors of the Company and its Restricted
Subsidiaries who are not employees of the Company or its
Restricted Subsidiaries, (vi) any transaction between the Company
and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries, (vii) the issuance or sale of any Capital Stock
(other than Disqualified Stock) of the Company, (viii) (A) sales
or other transfers or
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dispositions of customer loans and related assets customarily
transferred to a Special Purpose Vehicle in connection with a
Permitted Securitization and (B) Investments in a Special Purpose
Vehicle customarily made in connection with a Permitted
Securitization which are permitted by the "Limitation on
Restricted Payments" covenant; (ix) the Tax Sharing Agreement and
the Commodity Supply Agreement; and (x) any Jet Pro Sales
Transactions with Koch Agriculture or its affiliates which are on
terms no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those that could be obtained
at the time of any such transaction in arm's-length dealings with
a Person who is not an Affiliate.
Limitation on Sale or Issuance of Capital Stock of
Restricted Subsidiaries. The Company shall not sell or otherwise
dispose of any Capital Stock of a Restricted Subsidiary, and
shall not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell or otherwise dispose of any of its
Capital Stock except (i) to the Company or a Wholly Owned
Subsidiary, (ii) if, immediately after giving effect to such
issuance, sale or other disposition, neither the Company nor any
of its Restricted Subsidiaries own any Capital Stock of such
Restricted Subsidiary, (iii) if, immediately after giving effect
to such issuance, sale or other disposition, such Restricted
Subsidiary continues to constitute a Restricted Subsidiary or
(iv) if, immediately after giving effect to such issuance, sale
or other disposition, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any Investment in such
Person remaining after giving effect thereto would have been
permitted to be made under the covenant described under
"--Limitation on Restricted Payments" if made on the date of such
issuance, sale or other disposition.
SEC Reports. Notwithstanding that the Company may not be
required to remain subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company will file
with the SEC and provide the Trustee and Noteholders with the
annual reports and such information, documents and other reports
which are specified in Sections 13 and 15(d) of the Exchange Act
and applicable to a U.S. corporation subject to such Sections,
such information, documents and other reports to be so filed and
provided at the times specified for the filing of such
information, documents and reports under such Sections, except
that prior to the 150th day after the Issue Date, such
requirements shall be deemed satisfied by the filing with the SEC
and delivering to the Holders on or prior to such date a
registration statement under the Securities Act that contains the
information that would be required in a Form 10-K for the year
ended December 31, 1997 and a Form 10-Q for the quarter ended
March 31, 1998. The Company also will comply with the other
applicable provisions of TIA ss. 314(a).
Merger and Consolidation
The Company will not consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a
series of transactions, all or substantially all its assets to,
any Person, unless: (i) the resulting, surviving or transferee
Person (the "Successor Company") will be a Person organized and
existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor
Company (if not the Company) will expressly assume, by
supplemental indenture, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the
Company under the New Notes and the Indenture; (ii) immediately
after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company
or any Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Subsidiary at the time
of such transaction), no Default or Event of Default will have
occurred and be continuing; (iii) immediately after giving effect
to such transaction, the Successor Company would be able to Incur
an additional $1.00 of Indebtedness under paragraph (a) of the
covenant described under "Certain Covenants--Limitation on
Indebtedness;" and (iv) the Company will have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with the Indenture, as set
forth in the Indenture.
The Successor Company will succeed to, and be substituted
for, and may exercise every right and power of, the Company under
the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease of all or substantially all its
assets will not be released from the obligation to pay the
principal of and interest on the New Notes.
Defaults
An Event of Default is defined in the Indenture as (i) a
default in any payment of interest on any Note when due,
continued for 30 days, (ii) a default in the payment of principal
of any Note when due at its Stated Maturity, upon optional
redemption, upon required repurchase, upon declaration or
otherwise, (iii) the failure by the Company to comply with its
obligations under "-Merger and Consolidation," (iv) the failure
by the Company to comply for 30 days
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after notice with any of its obligations under the covenants
described under "--Change of Control" or "--Certain Covenants"
(in each case, other than a failure to purchase New Notes), (v)
the failure by the Company to comply for 60 days after notice
with its other agreements contained in the Indenture, (vi) the
failure by the Company or any Restricted Subsidiary of the
Company to pay any Indebtedness within any applicable grace
period after final maturity or the acceleration of any such
Indebtedness by the holders thereof because of a default if the
total amount of such Indebtedness unpaid or accelerated exceeds
$10.0 million or its foreign currency equivalent (the "cross
acceleration provision"), (vii) certain events of bankruptcy,
insolvency or reorganization of Holdings, the Company or any
Significant Subsidiary of the Company (the "bankruptcy
provisions") or (viii) any final, non-appealable judgment or
decree for the payment of money in excess of $10.0 million (net
of any amounts with respect to which a creditworthy insurance
company has acknowledged full liability in writing) is rendered
against the Company or any Restricted Subsidiary of the Company
remains outstanding for a period of 60 days after such judgment
and is not discharged, waived or stayed within 10 days after
notice (the "judgment default provision").
The foregoing will constitute Events of Default whatever
the reason for any such Event of Default and whether it is
voluntary or involuntary or is effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body.
However, a default under clauses (iv), (v) and (viii) will
not constitute an Event of Default until the Trustee or the
Holders of 25% in aggregate principal amount of the outstanding
New Notes notify the Company as provided in the Indenture of the
default and the Company does not cure such default within the
time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the
Trustee shall, at the request of Holders of at least 25% in
aggregate principal amount of the outstanding New Notes by notice
to the Company declare the principal of and accrued but unpaid
interest on all the New Notes to be due and payable. Upon such a
declaration, such principal and interest will be due and payable
immediately; provided, however, that if upon such declaration
there are any amounts outstanding under the Credit Agreement and
the amounts thereunder have not been accelerated, such principal
and interest shall be due and payable upon the earlier of the
time such amounts under the Credit Agreement are accelerated or
five Business Days after receipt by the Company and the
Representative under the Credit Agreement of such declaration. If
an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of the Company occurs and is
continuing, the principal of and accrued interest on all the New
Notes will ipso facto become immediately due and payable without
any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority
in aggregate principal amount of the outstanding New Notes may
rescind any such acceleration with respect to the New Notes and
its consequences.
Subject to the provisions of the Indenture relating to the
duties of the Trustee, in case an Event of Default occurs and is
continuing, the Trustee will be under no obligation to exercise
any of the rights or powers under the Indenture at the request or
direction of any of the Holders unless such Holders shall have
offered to the Trustee reasonable indemnity or security against
any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium (if any) or interest when
due, no Holder may pursue any remedy with respect to the
Indenture or the New Notes unless (i) such Holder shall have
previously given the Trustee notice that an Event of Default is
continuing, (ii) Holders of at least 25% in aggregate principal
amount of the outstanding New Notes shall have requested the
Trustee to pursue the remedy, (iii) such Holders shall have
offered the Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Trustee shall not have
complied with such request within 60 days after the receipt of
the request and the offer of security or indemnity and (v) the
Holders of a majority in principal amount of the outstanding New
Notes shall not have given the Trustee a direction inconsistent
with such request within such 60-day period. Subject to certain
restrictions, the Holders of a majority in principal amount of
the outstanding New Notes are given the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power
conferred on the Trustee. The Trustee, however, may refuse to
follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights
of any other Holder or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is
continuing and is known to the Trustee, the Trustee must mail to
each Holder notice of the Default within 30 days after it is
known to a Trust Officer or written notice of it is received by
the Trustee. Except in the case of a Default in the payment of
principal of, premium (if any) or interest on any Note, the
Trustee may withhold notice if and so long as a committee of its
Trust Officers in good faith determines that withholding notice
is not opposed to the interests of the Noteholders. In addition,
the Company is required to
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deliver to the Trustee, within 120 days after the end of each
fiscal year, a certificate indicating whether the signers thereof
know of any Default that occurred during the previous year. The
Company also is required to deliver to the Trustee, within 30
days after the occurrence thereof, written notice of any event
which would constitute certain Defaults, their status and what
action the Company is taking or proposes to take in respect
thereof.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended
with the consent of the Holders of a majority in principal amount
of the New Notes then outstanding (including consents obtained in
connection with a tender offer or exchange for the New Notes) and
any past default or compliance with any provisions may be waived
with the consent of the Holders of a majority in principal amount
of the New Notes then outstanding. However, without the consent
of each Holder of an outstanding Note affected, no amendment may
(i) reduce the amount of New Notes whose Holders must consent to
an amendment, (ii) reduce the rate of or extend the time for
payment of interest on any Note, (iii) reduce the principal of or
extend the Stated Maturity of any Note, (iv) reduce the premium
payable upon the redemption of any Note or change the time at
which any Note may be redeemed as described under "--Optional
Redemption," (v) make any Note payable in money other than that
stated in the Note, (vi) impair the right of any Holder to
receive payment of principal of and interest on such Holder's New
Notes on or after the due dates therefor or to institute suit for
the enforcement of any payment on or with respect to such
Holder's New Notes, (vii) make any change in the amendment
provisions which require each Holder's consent or in the waiver
provisions or (viii) make any change to the subordination
provisions of the Indenture that would adversely affect the
Noteholders.
Without the consent of any Holder, the Company and the
Trustee may amend the Indenture to cure any ambiguity, omission,
defect or inconsistency, to provide for the assumption by a
successor corporation of the obligations the Company under the
Indenture, to provide for uncertificated New Notes in addition to
or in place of certificated New Notes (provided that the
uncertificated New Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that
the uncertificated New Notes are as described in Section
163(f)(2)(B) of the Code), to add Guarantees with respect to the
New Notes, to secure the New Notes, to add to the covenants of
the Company for the benefit of the Noteholders or to surrender
any right or power conferred upon the Company, to make any change
that does not adversely affect the rights of any Holder and to
comply with any requirement of the SEC in connection with the
qualification of the Indenture under the TIA. However, no
amendment may be made to the subordination provisions of the
Indenture that adversely affects the rights of any holder of
Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or their Representative) consent to such
change.
The consent of the Noteholders is not necessary under the
Indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the
substance of the proposed amendment.
After an amendment under the Indenture becomes effective,
the Company is required to mail to Noteholders a notice briefly
describing such amendment. However, the failure to give such
notice to all Noteholders, or any defect therein, will not impair
or affect the validity of the amendment.
Transfer and Exchange
A Noteholder may transfer or exchange New Notes in
accordance with the Indenture. Upon any transfer or exchange, the
registrar and the Trustee may require a Noteholder, among other
things, to furnish appropriate endorsements and transfer
documents and the Company may require a Noteholder to pay any
taxes required by law or permitted by the Indenture, including
any transfer tax or other similar governmental charge payable in
connection therewith. The Company is not required to transfer or
exchange any New Note selected for redemption or to transfer or
exchange any New Note for a period of 15 days prior to a
selection of New Notes to be redeemed. The New Notes will be
issued in registered form and the registered holder of a New Note
will be treated as the owner of such New Note for all purposes.
Defeasance
The Company at any time may terminate all its obligations
under the New Notes and the Indenture ("legal defeasance"),
except for certain obligations, including those respecting the
defeasance trust and obligations to register the transfer or
exchange of the New Notes, to replace mutilated, destroyed, lost
or stolen New Notes and to maintain a
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registrar and paying agent in respect of the New Notes. The
Company at any time may terminate its obligations under the
covenants described under "Certain Covenants (other than the
covenant described under "-Merger and Consolidation")," the
operation of the cross acceleration provision, the bankruptcy
provisions with respect to Significant Subsidiaries and the
judgment default provision described under "--Defaults" and the
limitations contained in clause (iii) under "--Merger and
Consolidation" ("covenant defeasance").
The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance
option. If the Company exercises its legal defeasance option,
payment of the New Notes may not be accelerated because of an
Event of Default with respect thereto. If the Company exercises
its covenant defeasance option, payment of the New Notes may not
be accelerated because of an Event of Default specified in clause
(iv), (v), (vi), (vii) (with respect only to Significant
Subsidiaries) or (viii) under "--Defaults" above or because of
the failure of the Company to comply with clause (iii) under
"--Merger and Consolidation."
In order to exercise either defeasance option, the Company
must irrevocably deposit or cause to be deposited in trust (the
"defeasance trust") with the Trustee money or U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide cash at such times and in such amounts as will be
sufficient to pay principal and interest when due on all the New
Notes (except lost, stolen or destroyed New Notes which have been
replaced or repaid) to maturity or redemption, as the case may
be, and must comply with certain other conditions, including
delivery to the Trustee of an Opinion of Counsel to the effect
that holders of the New Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit
and defeasance and will be subject to federal income tax on the
same amounts and in the same manner and at the same times as
would have been the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such Opinion
of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable federal income tax law).
Concerning the Trustee
The First National Bank of Chicago is the Trustee under the
Indenture and has been appointed by the Company as Registrar and
Paying Agent with regard to the Notes.
The Indenture contains certain limitations on the rights of
the Trustee, should it become a creditor of the Company, to
obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as
security or otherwise. The Trustee will be permitted to engage in
other transactions; provided, however, if it acquires any
conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue or resign.
The Holders of a majority in principal amount of the
outstanding New Notes will have the right to direct the time,
method and place of conducting any proceeding for exercising any
remedy available to the Trustee, subject to certain exceptions.
The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will
be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any Holder of New Notes,
unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or
expense and then only to the extent required by the terms of the
Indenture.
Governing Law
The Indenture provides that it and the New Notes will be
governed by, and construed in accordance with, the laws of the
State of New York without giving effect to applicable principles
of conflicts of law to the extent that the application of the law
of another jurisdiction would be required thereby.
Certain Definitions
"Additional Assets" means (i) any property or assets (other
than Indebtedness and Capital Stock) in a Related Business; (ii)
the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock
by the Company or another Restricted Subsidiary (or, in the case
of an Asset Disposition of the Capital Stock of a Wholly Owned
Subsidiary or tangible assets of a Wholly Owned Subsidiary, the
Capital Stock of a Person
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that becomes a Wholly Owned Subsidiary); or (iii) Capital Stock
constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however, that, in the case
of clauses (ii) or (iii), such Restricted Subsidiary is primarily
engaged in a Related Business.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under
direct or indirect common control with such specified Person. For
the purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of the provisions
described under "--Certain Covenants--Limitation on Restricted
Payments", "--Certain Covenants-Limitation on Affiliate
Transactions" and "Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock" only, "Affiliate" shall also mean
any beneficial owner of Capital Stock representing 10% or more of
the total voting power of the Voting Stock (on a fully diluted
basis) of the Company or of rights or warrants to purchase such
Voting Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner
pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or
other disposition (or series of related sales, leases, transfers
or dispositions) by the Company or any Restricted Subsidiary,
including any disposition by means of a merger, consolidation or
similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors'
qualifying shares or shares required by applicable law to be held
by a Person other than the Company or a Restricted Subsidiary),
(ii) all or substantially all the assets of any division or line
of business of the Company or any Restricted Subsidiary or (iii)
any other assets not constituting Capital Stock of the Company or
any Restricted Subsidiary outside of the ordinary course of
business of the Company or such Restricted Subsidiary (other
than, in the case of (i), (ii) and (iii) above, (w) a disposition
of obsolete or worn-out assets, (x) a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted
Subsidiary to another Restricted Subsidiary, (y) for purposes of
the covenant described under "--Certain Covenants--Limitation on
Sales of Assets and Subsidiary Stock" only, a disposition that
constitutes a Restricted Payment or Permitted Investment
permitted by the covenant described under "-Certain
Covenants-Limitation on Restricted Payments" and (z) disposition
of assets with a fair market value of less than $1.0 million).
"Attributable Indebtedness" in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present
value (discounted at the interest rate borne by the Notes,
compounded annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient
obtained by dividing (i) the sum of the product of the numbers of
years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred
Stock multiplied by the amount of such payment by (ii) the sum of
all such payments.
"Bank Indebtedness" means all Obligations pursuant to the
Credit Agreement.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf
of such Board.
"Business Day" means a day other than a Saturday, Sunday or
other day on which banking institutions in New York City are
authorized or required by law to close.
"Capitalized Lease Obligation" means an obligation that is
required to be classified and accounted for as a capitalized
lease for financial reporting purposes in accordance with GAAP,
and the amount of Indebtedness represented by such obligation
shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participation
or other equivalents of or interests in (however designated)
equity of such Person, including any Preferred Stock, but
excluding any debt securities convertible into such equity.
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"Closed Facility" means (a) a plant, mill or other facility
of the Company or any of its Restricted Subsidiaries no longer
operating on the Issue Date or (b) any plant, mill or other
facility (provided that the aggregate book value of all such
plants, mills or other facilities covered by this clause (b)
shall not exceed $10.0 million) at which the Board of Directors
of the Company elects to cease operations after the Issue Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodity Supply Agreement" means the Master Procurement
Agreement, to be dated as of the effective date of the Merger,
between Nutrition Supply and Trading, a division of Koch
Agriculture, and the Company.
"Consolidated Coverage Ratio" as of any date of
determination means the ratio of (i) the aggregate amount of
EBITDA for the period of the most recent four consecutive fiscal
quarters ending at least 45 days prior to the date of such
determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (1) if the Company or
any Restricted Subsidiary has Incurred any Indebtedness (other
than for working capital under the Credit Agreement) since the
beginning of such period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA
and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the
first day of such period, (2) if the Company or any Restricted
Subsidiary has repaid, repurchased, defeased or otherwise
discharged any Indebtedness since the beginning of such period or
if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Indebtedness
Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been
replaced) on the date of the transaction giving rise to the need
to calculate the Consolidated Coverage Ratio, EBITDA and
Consolidated Interest Expense for such period shall be calculated
on a pro forma basis as if such discharge had occurred on the
first day of such period and as if the Company or such Restricted
Subsidiary has not earned the interest income actually earned
during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise
discharge such Indebtedness, (3) if since the beginning of such
period the Company or any Restricted Subsidiary shall have made
any Asset Disposition or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Asset
Disposition, the EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by
an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged
with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is
sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to
the extent the Company and its continuing Restricted Subsidiaries
are no longer liable for such Indebtedness after such sale), (4)
if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person which
becomes a Restricted Subsidiary) or an acquisition of assets,
including any acquisition of assets occurring in connection with
a transaction requiring a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such
period and (5) if since the beginning of such period any Person
(that subsequently became a Restricted Subsidiary or was merged
with or into the Company or any Restricted Subsidiary since the
beginning of such period) shall have made any Asset Disposition,
any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (3) or (4) above if made by the
Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition of assets occurred on the
first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible
financial or accounting officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall
be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period
(taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months).
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"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated
Restricted Subsidiaries, plus, to the extent not included in such
total interest expense, and to the extent Incurred by the Company
or its Restricted Subsidiaries, without duplication, (i) interest
expense attributable to Capitalized Lease Obligations and
one-third of the rental expense attributable to leases
constituting part of a Sale/Leaseback Transaction, (ii)
amortization of debt discount and debt issuance cost (other than
the amortization of debt issuance cost in respect of the Notes
and the Credit Agreement entered into on the Issue Date), (iii)
capitalized interest, (iv) non-cash interest expense, (v)
commissions and discounts owed with respect to letters of credit
and bankers' acceptance financing, (vi) net costs associated with
Interest Rate Agreements or Currency Agreements entered into with
respect to Indebtedness of the Company or its Restricted
Subsidiaries (including amortization of fees), (vii) Preferred
Stock dividends in respect of all Preferred Stock of the Company
and its Restricted Subsidiaries held by Persons other than the
Company or a Wholly Owned Subsidiary, (viii) interest incurred in
connection with Investments in discontinued operations (but only
if the relevant obligations remain as of the relevant calculation
date), (ix) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by (or
secured by the assets of) the Company or any Restricted
Subsidiary and to the extent that such interest has not been paid
when due (after giving effect to any grace period) and (x) the
cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such
plan or trust to pay interest or fees to any Person (other than
the Company) in connection with Indebtedness Incurred by such
plan or trust.
"Consolidated Net Income" means, for any period, the net
income (loss) of the Company and its consolidated Subsidiaries;
provided, however, (i) any net income (or loss) of any Person
(other than the Company) if such Person is not a Restricted
Subsidiary, except that (A) subject to the exclusion contained in
(iv) below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by
such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to a Restricted
Subsidiary, to the limitations contained in clause (iii) below)
and (B) the Company's equity in a net loss of any such Person for
such period shall be included in determining such Consolidated
Net Income to the extent of any cash actually contributed by the
Company or a Restricted Subsidiary to such Person during such
period, (ii) any net income of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition, (iii) any net
income of any Restricted Subsidiary if such Restricted Subsidiary
is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company,
except that (A) subject to the exclusion contained in (iv) below,
the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually
distributed by such Restricted Subsidiary during such period to
the Company or another Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other
distribution paid to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) the Company's equity
in a net loss of any such Restricted Subsidiary for such period
shall be included in determining such Consolidated Net Income,
(iv) any gain (or loss) realized upon the sale or other
disposition of any assets of the Company, its consolidated
Subsidiaries or any other Person (including pursuant to any
Sale/Leaseback Transaction) which is not sold or otherwise
disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any Capital
Stock of any Person, (v) any extraordinary gain or loss, (vi) the
amortization of debt issuance cost in respect of the Notes and
the Credit Agreement entered into on the Issue Date and (vii) the
cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant
described under "Certain Covenants-Limitation on Restricted
Payments" only, there shall be excluded from Consolidated Net
Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to the Company
or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause
(a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts
shown on the balance sheet of the Company and its consolidated
Subsidiaries, determined on a consolidated basis in accordance
with GAAP, as of the end of the most recent fiscal quarter of the
Company ending prior to the taking of any action for the purpose
of which the determination is being made for which financial
statements are available, as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any
accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Consolidated NIDA" means, for any period, the Consolidated
Net Income for such period plus (to the extent deducted in
calculating Consolidated Net Income) (a) depreciation expense of
the Company and its consolidated Restricted Subsidiaries, (b)
amortization expense of the Company and its consolidated
Restricted Subsidiaries
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(excluding amortization expense attributable to a prepaid cash
item that was paid in a prior period) and (c) all other non-cash
charges of the Company and its consolidated Restricted
Subsidiaries (excluding any such non-cash charge to the extent
that it represents an accrual of or reserve for cash expenditures
in any future period), in each case for such period.
"Credit Agreement" means that certain credit facility among
the Company, Chase Bank of Texas, National Association, and the
lenders from time to time party thereto, including any collateral
documents, instruments and agreements executed in connection
therewith, and the term Credit Agreement shall also include any
amendments, supplements, modifications, extensions, renewals,
restatements or refundings thereof and any credit facilities that
replace, refund or refinance any part of the loans, other credit
facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility that increases the
amount borrowable thereunder or alters the maturity thereof.
"Currency Agreement" means in respect of a Person any
foreign exchange contract, currency swap agreement or other
similar agreement designed to protect such Person against
fluctuations in currency values as to which such Person is a
party or a beneficiary.
"Default" means any event which is, or after notice or
passage of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank
Indebtedness and (ii) any other Senior Indebtedness of the
Company which, at the date of determination, has an aggregate
principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to,
at least $25.0 million and is specifically designated by the
Company in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of
the Indenture.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable) or
upon the happening of any event (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable (other than for Capital
Stock of the Company (other than Disqualified Stock)) at the
option of the holder thereof, in whole or in part, in each case
on or prior to the first anniversary of the Stated Maturity of
the Notes; provided, however, that any Capital Stock that would
not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the first
anniversary of the Stated Maturity of the Notes shall not
constitute Disqualified Stock if (x) the "asset sale" or "change
of control" provisions applicable to such Capital Stock are not
more favorable to the holders of such Capital Stock than the
provisions described under "-Change of Control" and "-Certain
Covenants-Limitation on Sales of Assets and Subsidiary Stock" and
(y) any such requirement only becomes operative after compliance
with such terms applicable to the Notes, including the purchase
of any Notes tendered pursuant thereto.
"EBITDA" for any period means the sum of Consolidated Net
Income, plus the following to the extent deducted in calculating
such Consolidated Net Income: (a) Consolidated Interest Expense,
(b) all income tax expense of the Company and its consolidated
Restricted Subsidiaries, (c) depreciation expense of the Company
and its consolidated Restricted Subsidiaries, (d) amortization
expense of the Company and its consolidated Restricted
Subsidiaries (excluding amortization expense attributable to a
prepaid cash item that was paid in a prior period), (e) all other
non-cash charges of the Company and its consolidated Restricted
Subsidiaries (excluding any such non-cash charge to the extent
that it represents an accrual of or reserve for cash expenditures
in any future period), in each case for such period and (f) $3.2
million of management bonuses payable in connection with the
Merger. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and
amortization and non-cash charges of, a Restricted Subsidiary
shall be added to Consolidated Net Income to compute EBITDA only
to the extent (and in the same proportion) that the net income of
such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would
be permitted at the date of determination to be dividended to the
Company by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable
to such Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
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"GAAP" means generally accepted accounting principles in
the United States of America as in effect as of the Issue Date,
including those set forth in (i) the opinions and pronouncements
of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (ii) statements and pronouncements
of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant
segment of the accounting profession and (iv) the rules and
regulations of the SEC governing the inclusion of financial
statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the
Exchange Act, including opinions and pronouncements in staff
accounting bulletins and similar written statements from the
accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any
Indebtedness of any Person and any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase
or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements
to keep-well, to purchase assets, goods, securities or services,
to take-or-pay or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations
of such Person pursuant to any Interest Rate Agreement or
Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a
Note is registered on the Registrar's books.
"Holdings" means PM Holdings Corporation, the Company's
parent corporation.
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or
Capital Stock of a Person existing at the time such Person
becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative
meaning.
"Indebtedness" means, with respect to any Person on any
date of determination (without duplication):
(i) the principal in respect of (A) indebtedness of
such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium
on such indebtedness to the extent such premium has become
due and payable;
(ii) all Capitalized Lease Obligations of such Person
and all Attributable Indebtedness in respect of
Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed
as the deferred purchase price of property, all conditional
sale obligations of such Person and all obligations of such
Person under any title retention agreement (but excluding
Trade Payables arising in the ordinary course of business);
(iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other
than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses
(i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such
letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than
the tenth Business Day following receipt by such Person of
a demand for reimbursement following a payment on the
letter of credit);
(v) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of
any Disqualified Stock or, with respect to any Subsidiary
of such Person, the liquidation preference with respect to,
any Preferred Stock (but excluding, in each case, any
accrued dividends);
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(vi) all obligations of the type referred to in
clauses (i) through (v) of other Persons and all dividends
of other Persons for the payment of which, in either case,
such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including
by means of any Guarantee;
(vii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons secured by any
Lien on any property or asset of such Person (whether or
not such obligation is assumed by such Person), the amount
of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the
obligation so secured; and
(viii) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall
be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon
the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date.
"Interest Rate Agreement" means with respect to any Person
any interest rate protection agreement, interest rate future
agreement, interest rate option agreement, interest rate swap
agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar
agreement or arrangement designed to protect such Person against
fluctuations in interest rates as to which such Person is party
or a beneficiary.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary
course of business that are recorded as accounts receivable on
the balance sheet of such Person) or other extension of credit
(including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the definitions of "Unrestricted
Subsidiary" and "Restricted Payment" and "Certain
Covenants-Limitation on Restricted Payments", (i) "Investment"
shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net
assets of any Subsidiary of the Company at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary equal
to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation
less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net
assets of such Subsidiary at the time that such Subsidiary is so
re-designated a Restricted Subsidiary; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued
at its fair market value at the time of such transfer, in each
case as determined in good faith by the Board of Directors and
evidenced by a resolution of such Board of Directors.
"Investment Grade" means a rating of BBB- (or its
equivalent) or higher by Standard & Poor's Ratings Group (or its
successor) and Baa3 (or its equivalent) or higher by Moody's
Investors Service, Inc. (or its successor).
"Issue Date" means the date on which the Notes are
originally issued.
"Jet Pro Sales Transactions" means sales of Jet-Pro(R)
dewatering equipment to the Company by Koch Feed Technology
Company.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in
the nature thereof).
"Merger and Tender Offer Payments" means (i) all payments
made by the Company in connection with the Tender Offer with
respect to the Existing PMI Senior Subordinated Notes, (ii) all
payments made by the Company to Holdings of amounts required to
be paid by Holdings in connection with the Tender Offer with
respect to the Existing Holdings Discount Debentures and (iii)
payments made by the Company to Holdings from the net proceeds of
the Offering and borrowings under the Credit Agreement remaining
subsequent to the payments made under (i) and (ii) above to be
paid by Holdings in connection with the Merger.
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"Net Available Cash" from an Asset Disposition means cash
payments received (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment
receivable or otherwise and proceeds from the sale or other
disposition of any securities received as consideration, but only
as and when received, but excluding any other consideration
received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to such properties or
assets or received in any other non cash form) therefrom, in each
case net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all
Federal, state, provincial, foreign and local taxes required to
be paid or accrued as a liability under GAAP, as a consequence of
such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or
other security arrangement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable
law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries or joint
ventures as a result of such Asset Disposition and (iv) the
deduction of appropriate amounts to be provided by the seller as
a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition
and retained by the Company or any Restricted Subsidiary after
such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale
of Capital Stock, means the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage,
consultant and other fees actually incurred in connection with
such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Debt" means Indebtedness as to which neither
the Company nor any Restricted Subsidiary (other than Standard
Securitization Undertakings in respect of Indebtedness permitted
pursuant to clause (i) of the "Limitation on Indebtedness and
Preferred Stock of Restricted Subsidiaries" covenant) (a)
provides any Guarantee or credit support of any kind (including
any undertaking, Guarantee, indemnity, agreement or instrument
that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise).
"Obligations" means with respect to any Indebtedness all
obligations for principal, premium, interest, penalties, fees,
indemnifications, reimbursements, and other amounts payable
pursuant to the documentation governing such Indebtedness.
"Permitted Customer Financing" means the Incurrence by the
Company of obligations (including Guarantees of indebtedness,
standby letters of credit (and reimbursement obligations in
respect thereof) for the repayment of indebtedness, product
repurchase agreements and other obligations) owed to any lender
of a customer of the Company or any of its Restricted
Subsidiaries Incurred in the ordinary course of business;
provided that (A) any such lender's loans are used to finance the
purchase price to be paid to the Company for animal feed products
and programs sold by the Company to such customer and (B) the
amount of any such obligation of the Company shall not exceed the
purchase price to be paid to the Company for such animal feed
products and programs sold by the Company to such customer which
are financed by such lender.
"Permitted Holders" means Koch Agriculture Company and its
Affiliates.
"Permitted Investment" means an Investment by the Company
or any Restricted Subsidiary in (i) the Company, a Restricted
Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary; provided, however,
that the primary business of such Restricted Subsidiary is a
Related Business; (ii) another Person if as a result of such
Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets
to, the Company or a Restricted Subsidiary; provided, however,
that such Person's primary business is a Related Business; (iii)
Temporary Cash Investments; (iv) receivables owing to the Company
or any Restricted Subsidiary, if created or acquired in the
ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as
the Company or any such Restricted Subsidiary deems reasonable
under the circumstances; (v) payroll, travel and similar advances
to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business
consistent with past practice of the Company or such Restricted
Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business
and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments; (viii) any Person to the extent such
investment represents the non-cash portion of the consideration
received in
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connection with the sale or other disposition of an asset to the
extent not prohibited pursuant to the covenant described under
"--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock"; (ix) joint ventures and Unrestricted
Subsidiaries in an aggregate amount at any one time outstanding
not to exceed $10.0 million, provided that such joint ventures
and Unrestricted Subsidiaries are engaged in a Related Business;
(x) Investments received in exchange for Capital Stock (other
than Disqualified Stock) of the Company; (xi) Investments
existing on the Issue Date in an amount not to exceed the amount
of such Investments on the Issue Date; (xii) (A) Permitted
Customer Financing and (B) loans and/or Guarantees made by the
Company in the ordinary course of its business to or on behalf of
any customer of the Company or its Restricted Subsidiaries to
assist such customer to increase its operations, provided that
the aggregate amount of all obligations and loans outstanding
pursuant to this clause (B) (other than Investments represented
by any such loans and/or Guarantees existing on the Issue Date
pursuant to clause (xi) hereof) shall not exceed $25.0 million at
any one time; (xiii) Investments in connection with Hedging
Obligations or agreements designed to protect the Company and its
Restricted Subsidiaries against fluctuations in commodity prices
entered into in the ordinary course of business; (xiv) prepaid
expenses, negotiable instruments held for collection and lease,
performance deposits and similar deposits, in each case entered
into in the ordinary course of business of the Company and its
Restricted Subsidiaries; and (xv) Investments customarily made in
a Special Purpose Vehicle in connection with a Permitted
Securitization in an amount not to exceed $10.0 million.
"Permitted Liens" means (i) statutory Liens of landlords
and Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other Liens incurred in the ordinary
course of business for sums not yet delinquent for a period of
more than 60 days or being contested in good faith, if any
reserve or other appropriate provision (if any) has been made in
accordance with GAAP, (ii) Liens incurred or deposits made in the
ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security or similar obligations, including any Lien securing
letters of credit issued in the ordinary course of business, or
to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the repayment of
borrowed money), (iii) any interest or title of a lessor under
any lease; provided that such Liens do not extend to any property
or assets which is not leased property subject to such lease,
(iv) Liens securing Capitalized Lease Obligations and purchase
money Indebtedness Incurred in accordance with the covenant
"Limitation on Indebtedness"; provided that such Capitalized
Lease Obligations and purchase money Indebtedness are not
subordinated to any other Indebtedness, (v) Liens upon specified
items of inventory or other goods and proceeds of any Person
securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or
goods, (vi) Liens securing reimbursement obligations with respect
to letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds
thereof, (vii) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual or
warranty requirements of the Company and its Restricted
Subsidiaries, (viii) customary Liens securing Hedging Obligations
Incurred in accordance with the Indenture or agreements designed
to protect the Company and its Restricted Subsidiaries against
fluctuations in commodity prices entered into in the ordinary
course of business, (ix) Liens securing Acquired Indebtedness
Incurred pursuant to the "Limitation on Indebtedness" covenant of
a Person merged with or consolidated into the Company; provided
that (a) such Liens secured such Acquired Indebtedness prior to
such merger or consolidation, (b) were not granted in connection
with, or in anticipation of, such merger or consolidation and (c)
do not extend to or cover any property or assets of the Company
other than the property or assets that secured the Acquired
Indebtedness prior to the merger or consolidation; and (x)
customary Liens on the customer loans and related assets
transferred to a Special Purpose Vehicle in connection with a
Permitted Securitization.
"Permitted Securitization" means a securitization in
accordance with customary terms of customer loans described in
clause (xii)(B) of the definition of "Permitted Investment."
"Person" means any individual, corporation, partnership
joint venture, limited liability company, association,
joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any
Person, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such
Person.
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"Principal" of a Note means the principal of the Note plus
the premium, if any, payable on the Note which is due or overdue
or is to become due at the relevant time; provided, however, that
for purposes of calculating any such premium, the term
"principal" shall not include the premium with respect to which
such calculation is being made.
"Public Equity Offering" means an underwritten primary
public offering of common stock of Holdings or the Company
pursuant to an effective registration statement under the
Securities Act.
"Public Market" means any time after (x) a Public Equity
Offering has been consummated and (y) at least 15% of the total
issued and outstanding common stock of the Company or Holdings
has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144
under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease
or retire, or to issue other Indebtedness in exchange or
replacement for, such Indebtedness, and shall include the
Refinancing of multiple facilities with a single facility and the
Refinancing of a single facility with multiple facilities.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that
Refinances any Indebtedness of the Company or any Restricted
Subsidiary existing on the Issue Date or Incurred in compliance
with the Indenture (including Indebtedness of the Company that
Refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that Refinances
Indebtedness of another Restricted Subsidiary) including
Indebtedness that Refinances Refinancing Indebtedness; provided,
however, that (i) the Refinancing Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of the Indebtedness
being Refinanced, (ii) the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the
Indebtedness being Refinanced and (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue price)
that is equal to or less than the sum of the aggregate principal
amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding or committed (plus fees and
expenses, including any premium and defeasance costs) under the
Indebtedness being Refinanced; provided further, however, that
Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y)
Indebtedness of the Company or a Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means the businesses of the Company or
any Restricted Subsidiary on the date of the Indenture and any
business related, ancillary or complementary thereto.
"Representative" means (i) with respect to the Bank
Indebtedness, Chase Bank of Texas, National Association, as
Administrative Agent, or any successor or replacement thereof or
any agent acting in a similar capacity in connection with the
Credit Agreement and (ii) any trustee, agent or representative
(if any) for an issue of Senior Indebtedness (other than the Bank
Indebtedness) of the Company.
"Restricted Payment" with respect to any Person means (i)
the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock
(including any payment by the Company or its Restricted
Subsidiaries in respect of such Person's Capital Stock in
connection with any merger or consolidation involving such
Person) or similar payment to the direct or indirect holders of
its Capital Stock (other than dividends or distributions payable
solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a
Restricted Subsidiary, and other than pro rata dividends or other
distributions made by a Subsidiary that is not a Wholly Owned
Subsidiary to minority stockholders (or owners of an equivalent
interest in the case of a Subsidiary that is an entity other than
a corporation)), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the
Company held by any Person or of any Capital Stock of a
Restricted Subsidiary held by any Person (other than Capital
Stock of the Company held by a Restricted Subsidiary or Capital
Stock of a Restricted Subsidiary held by the Company or by
another Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the
purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated
Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation
of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of
acquisition) or (iv) the making of any Investment in any Person
(other than a Permitted Investment).
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"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating
to property now owned or hereafter acquired whereby the Company
or a Restricted Subsidiary transfers such property to a Person
and the Company or a Restricted Subsidiary leases such property
from such Person.
"SEC" means the U.S. Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the
Company secured by a Lien.
"Senior Indebtedness" means (i) Bank Indebtedness of, or
guaranteed by, the Company, whether outstanding on the Issue Date
or thereafter Incurred and (ii) Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter Incurred,
including accrued and unpaid interest in respect of (A)
indebtedness of the Company for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which the Company is
responsible or liable unless, in the case of clauses (i) and
(ii), in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that
such obligations are subordinate in right of payment to the
Notes; provided, however, that Senior Indebtedness shall not
include (1) any obligation of the Company to any Subsidiary, (2)
any liability for Federal, state, local or other taxes owed or
owing by the Company, (3) any Trade Payables arising in the
ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities), (4) any Indebtedness of
the Company (and any accrued and unpaid interest respect thereof)
which by the express terms of the agreement or instrument
creating, evidencing or governing such Indebtedness is
subordinate or junior in any respect to any other Indebtedness or
other obligation of the Company, (5) that portion of any
Indebtedness which at the time of Incurrence is Incurred in
violation of the Indenture.
"Senior Subordinated Indebtedness" means the Notes and any
other Indebtedness of the Company that specifically provides that
such Indebtedness is to rank pari passu with the Notes in right
of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Company
which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary
that would be a "Significant Subsidiary" of the Company within
the meaning of Rule 1-02 under Regulation S-X promulgated by the
SEC.
"Special Purpose Vehicle" means a trust, partnership or
other special purpose Person established by the Company and/or
any of its Subsidiaries to implement a Permitted Securitization,
which incurs no liabilities and engages in no operations other
than one or Permitted Securitizations and whose assets are
limited to the customer loans described in clause (xii)(B) of the
definition of "Permitted Investment" and related assets necessary
to carry out a Permitted Securitization.
"Standard Securitization Undertakings" means
representations, warranties, covenants and indemnities entered
into by the Company or any Restricted Subsidiary which are
customary in a securitization transaction similar to a Permitted
Securitization.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the
payment of principal of such security is due and payable,
including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening
of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter
Incurred) which is expressly subordinate or junior in right of
payment to the Notes pursuant to a written agreement.
"Subsidiary" of any Person means any corporation,
association, partnership, limited liability company or other
business entity of which more than 50% of the total voting power
of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence
of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and
one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person, but excluding, in the case of the
Company, Oceanview Farms L.P.
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"Tax Sharing Agreement" means the tax sharing agreements to
be entered into among Koch Industries, Holdings and Holdings'
subsidiaries (including the Company).
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United States of
America or any agency thereof or obligations Guaranteed by the
United States of America or any agency thereof, (ii) investments
in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any
state thereof or any foreign country recognized by the United
States of America having capital, surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency
equivalent thereof) and whose long-term debt is rated "A" (or
such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) or any money market fund
sponsored by a registered broker dealer or mutual fund
distribution, (iii) repurchase obligations with a term of not
more than 30 days for underlying securities of the types
described in clause (i) above entered into with a bank meeting
the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other
than an Affiliate of an Company) organized and in existence under
the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard & Poor's Ratings Group, (v)
investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America,
or by any political subdivision or taxing authority thereof, and
rated at least "A" by Standard & Poor's Ratings Group or "A" by
Moody's Investors Service, Inc.; and (vi) investments in mutual
funds, whose investment guidelines restrict such funds'
investments to investments which are substantially similar to
those described in clauses (i)-(v).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture.
"Trade Payables" means, with respect to any Person, any
accounts payable or any indebtedness or monetary obligation to
trade creditors created, assumed or Guaranteed by such Person
arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors in the manner
provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. In addition, Bio Kingdom, L.L.C. has been designated
as an Unrestricted Subsidiary on the Issue Date. The amount of
the Company's investments in Bio Kingdom, L.L.C., which are
principally in the form of loans, is approximately $3.5 million
and the Company's results of operations do not reflect any EBITDA
attributable to the operations of Bio Kingdom, L.L.C. The Board
of Directors may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary
or any of its Subsidiaries owns any Capital Stock or Indebtedness
of, or owns or holds any Lien on any property of, the Company or
any other Subsidiary of the Company that is not a Subsidiary of
the Subsidiary to be so designated; provided, however, that
either (A) the Subsidiary to be so designated has total
consolidated assets of $1,000 or less or (B) if such Subsidiary
has consolidated assets greater than $1,000, then such
designation would be permitted under "Certain
Covenants-Limitation on Restricted Payments." The Board of
Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after
giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under clause (a) of "Certain
Covenants--Limitation on Indebtedness" and (y) no Default shall
have occurred and be continuing. Any such designation by the
Board of Directors shall be evidenced to the Trustee by promptly
filing with the Trustee a copy of the Board Resolution giving
effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such
obligations) of the United States of America (including any
agency or instrumentality thereof) for the payment of which the
full faith and credit of the United States of America is pledged
and which are not callable or redeemable at the issuer's option.
96
<PAGE>
"Voting Stock" of a Person means all classes of Capital
Stock or other interests (including partnership interests) of
such Person then outstanding and normally entitled (without
regard to the occurrence of any contingency) to vote in the
election of directors, managers, or trustee thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of
the Company all the Capital Stock of which (other than directors'
qualifying shares or similar shares) is owned by the Company or
one or more other Wholly Owned Subsidiaries.
97
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
Exchange of Old Notes for New Notes
The following summary describes the principal U.S. federal
income tax consequences of the exchange of the Old Notes for New
Notes (the "Exchange") that may be relevant to a beneficial owner
of Notes that is a citizen or resident of the United States, or
that is a corporation, partnership or other entity created or
organized in or under the laws of the United States or any
political subdivision thereof, an estate the income of which is
subject to U.S. federal income taxation regardless of its source
or a trust if (i) a U.S. court is able to exercise primary
supervision over the trust's administration and (ii) one or more
U.S. fiduciaries have the authority to control all of the trust's
substantial decisions (a "U.S. holder"). This summary is based on
laws, regulations, rulings and decisions now in effect, all of
which are subject to change. This summary deals only with U.S.
holders that hold the Old Notes as capital assets, and does not
address tax considerations applicable to investors that may be
subject to special tax rules, such as, but not limited to, banks,
tax-exempt entities, insurance companies or dealers in securities
or currencies, persons that hold the Old Notes as a position in a
"straddle" or conversion transaction, or as part of a "synthetic
security" or other integrated financial transaction or persons
that have a "functional currency" other than the U.S. dollar.
The Exchange pursuant to the Exchange Offer will not be a
taxable event for U.S. federal income tax purposes. As a result,
a U.S. holder of an Old Note whose Old Note is accepted in an
Exchange Offer will not recognize gain on the Exchange. A
tendering U.S. holder's tax basis in the New Notes will be the
same as such U.S. holder's tax basis in its Old Notes. A
tendering U.S. holder's holding period for the New Notes received
pursuant to the Exchange Offer will include its holding period
for the Old Notes surrendered therefor.
Investors should consult their own tax advisors in
determining the tax consequences to them of the exchange of the
Old Notes for the New Notes and of the ownership and disposition
of New Notes received in the Exchange Offer, including the
application to their particular situation of the U.S. federal
income tax considerations discussed above, as well as the
application of state, local, foreign or other tax laws.
98
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
New Notes. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed
that, for a period of time not to exceed 180 days after the
Expiration Date, or such shorter period which will terminate when
such Participating Broker-Dealers have completed all resales
subject to applicable prospectus delivery requirements, it will
make this Prospectus, as amended or supplemented, available to
any Participating Broker-Dealer for use in connection with any
such resale. In addition, until ______, 1998, all broker-dealers
effecting transactions in the New Notes may be required to
deliver a prospectus.
The Company will not receive any proceeds from any sale of
New Notes by broker-dealers. New Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the
writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of
resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for
its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such New Notes may
be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and
any commissions or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, or such
shorter period which will terminate when such broker-dealers have
completed all resales subject to applicable prospectus delivery
requirements, the Company will promptly send additional copies of
this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such documents in
the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses
of one counsel for the holders of the Notes) other than
commissions or concessions of any brokers or dealers and will
indemnify the holders of the New Notes (including any
broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
99
<PAGE>
LEGAL MATTERS
The validity of the New Notes has been passed upon for the
Company by Cleary, Gottlieb, Steen & Hamilton, New York, New
York.
EXPERTS
The financial statements as of December 31, 1996 and 1997
and for the three years ended December 31, 1997 included in this
Prospectus and the financial statements from which the Summary
Historical Financial Data and Selected Historical Consolidated
Financial Data (except for the eight months ended August 31,
1993) included in this Prospectus have been derived, have been
audited by Deloitte & Touche LLP, independent auditors, as stated
in their report appearing herein. Such financial statements,
Summary Historical Financial Data and Selected Historical
Consolidated Financial Data have been included herein in reliance
upon the report of such firm given upon their authority as
experts in accounting and auditing.
100
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Audited Financial Statements
INDEPENDENT AUDITORS' REPORT.................................... F-2
Consolidated Balance Sheets as of
December 31, 1996 and 1997...................................... F-3
Consolidated Statements of Operations for the years
ended December 31, 1995, 1996 and 1997.......................... F-4
Consolidated Statements of Stockholder's Equity
for the years ended December 31, 1995, 1996 and 1997............ F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1996 and 1997.................... F-6
Notes to Consolidated Financial Statements...................... F-7
Unaudited Financial Statements
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997............................................ F-19
Consolidated Statements of Operations for the nineteen
days ended March 31, 1998, seventy-one days ended
March 12, 1998 and the three months ended March 31, 1997......... F-20
Consolidated Statements of Cash Flows for the nineteen
days ended March 31, 1998, seventy-one days ended March 12,
1998 and the three months ended March 31, 1997................... F-21
Notes to Consolidated Financial Statements....................... F-22
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Purina Mills, Inc.
We have audited the accompanying consolidated balance
sheets of Purina Mills, Inc. and Subsidiaries as of December 31,
1996 and 1997, and the related consolidated statements of
operations, stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position
of Purina Mills, Inc. and Subsidiaries at December 31, 1996 and
1997, and the results of their operations and their cash flows
for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE LLP
Saint Louis, Missouri
February 9, 1998 (March 16, 1998 as to Note 14)
F-2
<PAGE>
PURINA MILLS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
--------------------
1996 1997
------- -------
(Dollars in Thousands,
Except Share Amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....................... $ 25,462 $ 27,620
Accounts receivable-trade, net of allowances
for doubtful accounts of $7,871 and
$6,539 at December 31, 1996 and 1997,
respectively ................................ 55,816 51,208
Inventories ..................................... 61,364 66,800
Prepaid expenses, deferred and other assets ..... 12,859 13,037
Deferred income taxes ........................... 8,563 8,746
--------- ---------
TOTAL CURRENT ASSETS ............................ 164,064 167,411
Property, plant and equipment, net .............. 250,600 243,718
Intangible assets, net .......................... 138,129 122,403
Deferred income taxes ........................... 7,340 7,881
Notes receivable ................................ 10,957 10,775
Deferred financing costs, net ................... 12,693 9,813
Other assets .................................... 22,292 19,942
TOTAL ASSETS .................................... $ 606,075 $ 581,943
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................ $ 70,913 $ 76,078
Customer advance payments ....................... 17,474 16,503
Accrued expenses ................................ 23,400 20,101
Interest payable ................................ 8,038 6,771
Current portion of long-term debt ............... 23,136 19,170
--------- ---------
TOTAL CURRENT LIABILITIES ....................... 142,961 138,623
Retirement obligations .......................... 26,457 28,768
Accrued post retirement benefit costs ........... 36,643 37,470
Long-term debt .................................. 295,956 263,119
Other liabilities ............................... 641 831
Commitments and contingencies (Notes 12 and 13)
Common stock held by ESOP ....................... 36,895 62,736
Less unearned ESOP compensation ............... (2,141) --
STOCKHOLDER'S EQUITY:
Common stock, $0.01 par value; ................ -- --
1,000 shares authorized, issued and outstanding
Additional paid-in capital .................... 79,439 79,687
Retained deficit .............................. (9,535) (27,192)
Accumulated other comprehensive income......... (1,241) (2,099)
--------- ---------
Total Stockholder's Equity ............... 68,663 50,396
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ...... $ 606,075 $ 581,943
--------- ---------
See accompanying notes.
F-3
<PAGE>
PURINA MILLS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
---------------------------------------
1995 1996 1997
---------- ---------- ----------
(Dollars in Thousands)
NET SALES .................. $ 1,047,169 $ 1,212,197 $ 1,128,390
COSTS AND EXPENSES:
Cost of products sold ...... 863,223 1,035,855 938,480
Marketing, distribution and
advertising .............. 83,840 84,751 87,333
General and administrative . 30,151 31,391 30,201
Amortization of intangibles 18,551 19,487 20,572
Research and development ... 6,744 6,982 7,166
Provision for plant closings
and asset impairments .... -- 14,042 4,402
Other (income) expense-net . 129 (10,575) (4,523)
----------- ----------- -----------
1,002,638 1,181,933 1,083,631
----------- ----------- -----------
OPERATING INCOME ........... 44,531 30,264 44,759
Interest expense ........... 37,514 35,703 32,632
----------- ----------- -----------
Income (loss) before income
taxes .................... 7,017 (5,439) 12,127
Provision (benefit) for
income taxes ............. 3,955 (646) 5,193
----------- ----------- -----------
NET INCOME (LOSS) .......... $ 3,062 $ (4,793) $ 6,934
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PURINA MILLS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholder's Equity
Accumulated
Additional Retained Other
Common Paid-In Earnings Comprehensive
Stock Capital (Deficit) Income Total
----- ------- --------- ------------- -----
(Dollars in Thousands)
Balance, January 1, 1995 ........... $ -- $ 80,490 $ 6,080 $ -- $ 86,570
Additional capital contribution for
acquisition ...................... -- 3,750 -- -- 3,750
Released ESOP shares ............... -- 2,100 -- -- 2,100
Appreciation in value of earned
ESOP shares ...................... -- -- (12,271) -- (12,271)
Purchase of shares by the ESOP ..... -- (4,000) -- -- (4,000)
Net income ......................... -- -- 3,062 -- 3,062
-------- -------- -------- -------- --------
Balance, December 31, 1995 ......... -- 82,340 (3,129) -- 79,211
Released ESOP shares ............... -- 320 -- -- 320
Appreciation in value of earned
ESOP shares ...................... -- -- (1,613) -- (1,613)
Purchase of shares for the ESOP, net -- (4,587) -- -- (4,587)
Activity under stock plans ......... -- 1,366 -- -- 1,366
Adjustment for minimum supplemental
retirement liabilities (net of
$802 tax benefit) ................ -- -- -- (1,241) (1,241)
Net loss ........................... -- -- (4,793) -- (4,793)
-------- -------- -------- -------- --------
Balance, December 31, 1996 ......... -- 79,439 (9,535) (1,241) 68,663
Released ESOP shares ............... -- 616 -- -- 616
Appreciation in value of earned
ESOP shares ...................... -- -- (24,591) -- (24,591)
Purchase of shares for the ESOP, net -- (1,316) -- -- (1,316)
Activity under stock plans ......... -- 948 -- -- 948
Adjustment for minimum supplemental
retirement liabilities (net of
$552 tax benefit) ................ -- -- -- (858) (858)
Net income ......................... -- -- 6,934 -- 6,934
-------- -------- -------- -------- --------
Balance, December 31, 1997 ......... $ -- $ 79,687 $(27,192) $ (2,099) $ 50,396
-------- -------- -------- -------- --------
See accompanying notes.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
PURINA MILLS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
1995 1996 1997
------ ------ ------
Year Ended December 31,
-------------------------------
(Dollars in Thousands)
OPERATING ACTIVITIES
Net income (loss) ........................... $ 3,062 $ (4,793) $ 6,934
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization .......... 48,128 50,350 49,569
Compensation under ESOP ................ 8,156 5,726 5,625
Provision for deferred income taxes .... (386) (5,855) (171)
Loss on disposal of property, plant
and equipment .......................... 1,992 999 1,028
Provision for loss on plant closings
and asset impairments .................. -- 14,042 4,402
Net changes in continuing operating assets
and liabilities:
Accounts receivable-trade ................. (6,068) (317) 4,608
Inventories ............................... (2,792) 73 (5,436)
Prepaid expenses and other assets ......... (12,440) (5,288) 2,172
Accounts payable and other liabilities .... 10,478 2,712 2,049
-------- -------- --------
Net cash provided by operating activities ... 50,130 57,649 70,780
INVESTING ACTIVITIES
Cash paid for Golden Sun Acquisition Company (57,049) -- --
Purchase of property, plant, equipment and
other assets ................................ (25,463) (23,915) (30,429)
Proceeds from sale of property, plant and
equipment ................................... 547 1,097 941
Net change in notes receivable .............. (892) 673 182
-------- -------- --------
Net cash used in investing activities ....... (82,857) (22,145) (29,306)
FINANCING ACTIVITIES
Proceeds from Term Loans .................... 45,000 -- --
Proceeds (repayment) of Revolving Credit
Facility, net ............................... 6,000 (6,000) --
Proceeds from Industrial Revenue Bonds ...... 9,100 8,300 --
Loan to ESOP ................................ (4,000) (6,318) (1,208)
Payment of financing costs .................. (1,280) (105) (23)
Repayment of Term Loans and Senior
Subordinated Notes .......................... (23,208) (26,962) (36,409)
Other ....................................... (3) (436) (1,676)
-------- -------- --------
Net cash provided by (used in) financing
activities .................................. 31,609 (31,521) (39,316)
-------- -------- --------
Increase (decrease) in cash and cash
equivalents ................................. (1,118) 3,983 2,158
Cash and cash equivalents at beginning
of period ................................... 22,597 21,479 25,462
-------- -------- --------
Cash and cash equivalents at end of
period ...................................... $ 21,479 $ 25,462 $ 27,620
-------- -------- --------
SUPPLEMENTAL CASH FLOW STATEMENT
INFORMATION
Interest paid ............................... $ 33,650 $ 32,417 $ 30,942
Income taxes paid ........................... 6,047 5,565 7,892
See accompanying notes.
</TABLE>
F-6
<PAGE>
PURINA MILLS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In September, 1993, Purina Mills, Inc. ("Purina Mills" or
the "Company") was acquired by PM Holdings Corporation
("Holdings"), a corporation formed in July 1993 by an investor
group led by The Sterling Group, Inc., a private financial
organization. PMI Acquisition Corporation ("PMI"), a wholly owned
subsidiary of Holdings, acquired all of the outstanding capital
stock of the Company (the "Acquisition") and was merged into the
Company. As used herein the term "Company" refers to Purina
Mills, Inc. and its subsidiaries and the term "Holdings" refers
to PM Holdings Corporation and its subsidiaries.
Purina Mills develops, manufactures and markets animal
nutrition products for dairy cattle, beef cattle, hogs and
horses. The Company also develops, manufactures and sells poultry
feeds and specialty feeds for rabbits, zoo animals, birds, fish
and pets. The Company's products are sold as complete feeds or as
concentrates that are mixed with the customer's base ingredients.
The Company distributes its products through two primary
distribution channels, dealers and directly to end-users. The
Company's 4,700 independent dealers are located in 48 states. The
number of direct customers is in excess of 4,700. The Company
operates 56 feed manufacturing plants located in 26 states.
On March 15, 1995 the Company acquired all of the
outstanding capital stock of Golden Sun Acquisition Company
("Golden Sun"). Golden Sun is the parent company of Golden Sun
Feeds, Inc. and its wholly owned subsidiaries. Consideration,
including applicable fees, consisted of $62.0 million in cash;
15,000 shares of Holdings common stock; and additional payments
to be made to the Golden Sun shareholders during the five years
following closing. The additional payments will be recorded as
goodwill and are based on the volume of sales, up to a specified
cumulative maximum amount, made pursuant to a supply agreement
with a customer and per-unit amounts that decline during the
five-year period. No additional payments were made in 1997 and
none are anticipated in the future (see Note 5). All funds
required to consummate the transaction were borrowed under the
Company's existing credit arrangements.
The Golden Sun acquisition has been accounted for as a
purchase transaction in accordance with Accounting Principles
Board Opinion No. 16. The purchase price was allocated to
tangible and intangible assets acquired and liabilities assumed
based on their estimated fair values as of March 15, 1995. The
accompanying consolidated statements of operations reflect the
operating results of Golden Sun since March 15, 1995.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial
statements include the accounts of the Company and its majority
owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Investments in affiliated
companies, 20% through 50% owned, are carried at equity.
Use of Estimates: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosures of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Inventories: Inventories are valued at the lower of average
cost or market. The Company hedges certain of its grain and
commodity purchases as considered necessary to reduce the risk
associated with market price fluctuation. Gains and losses on
futures contracts used to hedge grain and commodity purchases are
recognized in the same period as the related inventory is sold.
Open futures contracts for purchases and sales of grains and
commodities are stated at market value, with gains or losses on
the hedging transaction being deferred.
Property, Plant and Equipment: Property, plant and
equipment are stated at cost. Expenditures for new facilities and
those which substantially increase the useful lives of property
are capitalized. Maintenance, repairs and minor renewals are
expensed as incurred. When properties are retired or otherwise
disposed of, the related cost and accumulated depreciation are
removed from the accounts and gains or losses on the dispositions
are reflected in
F-7
<PAGE>
earnings. Depreciation is generally provided on the straight-line
basis by charges to costs or expenses at rates based upon the
following estimated useful lives:
Buildings and improvements.............. 15 to 30 years
Machinery and equipment................. 5 to 15 years
Office furniture and equipment.......... 3 to 15 years
Intangible Assets (including Goodwill): Intangible assets
represent the excess of cost over the net tangible assets of the
business at the time of acquisition and are amortized over their
estimated period of related benefit. Intangible assets other than
goodwill are amortized over 1 to 20 years. Goodwill is amortized
on a straight-line basis over 40 years.
Management periodically reviews the value of its intangible
assets to determine if an impairment has occurred or whether
changes have occurred that would require a revision to the
remaining useful life. In making such determination, management
evaluates the performance, on an undiscounted basis, of the
underlying operations or assets which give rise to such amount.
Based on this review, management does not believe that any such
impairment has occurred, except as noted in Note 4 and Note 5.
Deferred Financing Costs: Deferred financing costs are
stated at cost and amortized over the life of the related debt
using the effective interest method. Amortization of deferred
financing costs is included in interest expense.
Income Taxes: Deferred income taxes are recognized for the
effect of temporary differences between the financial reporting
basis and the tax basis of the assets and liabilities at enacted
tax rates expected to be in effect when such amounts are realized
or settled. The results of operations of the Company are included
in the U.S. consolidated income tax return of Holdings.
Cash Equivalents: For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid
investments with a maturity of three months or less to be cash
equivalents. Cash includes currency on hand and demand deposits
with financial institutions. The carrying amount reported in the
consolidated balance sheets for cash and cash equivalents
approximates their fair value.
Fair Value of Financial Instruments: The carrying amounts
of cash and cash equivalents and short-term borrowings
approximate fair value because of the short-term maturity of
these instruments. Notes receivable carry current market interest
rates, so that discounted future cash flows approximate their
carrying value. As of December 31, 1996 and 1997, the fair value
of debt, including current maturities, was $323.2 million and
$295.1 million, respectively, compared to its carrying value of
$319.1 million and $282.3 million, respectively. The fair value
of debt instruments as of December 31, 1996 and 1997 was
determined based on quoted market prices and management's
estimate for instruments without quoted market prices.
3. INVENTORIES
Inventories consist of the following (in thousands):
December 31,
------------------
1996 1997
---- ----
Finished goods ...... $19,969 $17,739
Raw materials ....... 41,395 49,061
------- -------
$61,364 $66,800
------- -------
F-8
<PAGE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in
thousands):
December 31,
-------------------
1996 1997
------ ------
Land ........................ $ 12,931 $ 13,327
Buildings ................... 68,865 73,965
Machinery and equipment ..... 235,792 245,145
Construction in progress .... 12,677 13,674
--------- ---------
330,265 346,111
Accumulated depreciation .... (79,665) (102,393)
--------- ---------
$ 250,600 $ 243,718
--------- ---------
Total depreciation expense was $25.9 million, $27.6 million
and $26.6 million for the years ended December 31, 1995, 1996 and
1997, respectively.
During 1996 the Company made the decision to discontinue
all manufacturing operations at seven of its facilities. Products
for distribution to customers of the closed facilities are being
manufactured at the Company's other facilities. In connection
with these plant closures, the Company recorded a loss of $9.3
million in 1996 on manufacturing assets, representing the amount
by which the book value exceeded the estimated net realizable
value. The value of the assets awaiting disposition was based on
estimates of Company management. Demolition costs of $.8 million
and a write-off of $3.9 million for related goodwill was also
recorded.
5. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
December 31,
-------------------
1996 1997
------ ------
Distribution network ........ $ 45,300 $ 45,300
Product specifications ...... 23,600 23,600
Technology .................. 19,110 19,110
Covenant not to compete ..... 25,000 25,000
Feed supply agreement ....... 15,000 10,598
Goodwill .................... 56,844 57,662
Other intangibles ........... 15,597 24,027
--------- ---------
200,451 205,297
Accumulated amortization .... (62,322) (82,894)
--------- ---------
$ 138,129 $ 122,403
--------- ---------
During 1996 the Company filed a breach of contract suit
against a former customer for lack of performance under a feed
supply agreement executed by the customer for future feed
purchases. The feed supply agreement was entered into in
conjunction with the Golden Sun acquisition. In 1997 the Company
recorded a loss of $4.4 million to reduce the net book value to
management's estimate of the net realizable value of the
contract.
F-9
<PAGE>
6. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
December 31,
-------------------
1996 1997
------ ------
The Company:
Senior Term Loan . $ 100,996 $ 74,622
Notes ............ 200,000 189,965
IRB Loan ......... 17,400 17,400
Other ............ 696 302
--------- ---------
319,092 282,289
Less current portion (23,136) (19,170)
--------- ---------
Consolidated total . $ 295,956 $ 263,119
--------- ---------
The annual amortization of the Senior Term Loan (defined
below), including the 1998 estimated $3.3 million supplemental
repayment (described below) is $18.9 million in 1998, $20.3
million in 1999, and $35.4 million in 2000. The Notes (defined
below) are due in their entirety in 2003. The Discount Debentures
(defined below) are due in 2005 at their then-principal balance
of $109.4 million.
Credit Facility: In September 1993, the Company entered
into a Credit Agreement (the "Credit Agreement"), which provides
for secured borrowings from a syndicate of lenders consisting of
(i) a seven-year revolving credit facility providing for up to
$65.0 million in revolving loans (subject to borrowing base
limitations), $25.0 million of which may be used for letters of
credit (the "Revolving Credit Facility"), and (ii) a term loan
facility providing for up to $138.0 million in term loans,
consisting of a $130.0 million seven-year term loan (the "Senior
Term Loan") and a $8.0 million three-year term loan to the ESOP
(the "ESOP Term Loan") (collectively, the "Term Loans"). On March
15, 1995 the Company borrowed an additional $45.0 million under
its Senior Term Loan and $15.0 million under its Revolving Credit
Facility to finance the purchase of Golden Sun. At December 31,
1997, no balance was outstanding under the Revolving Credit
Facility and approximately $27.9 million was available for future
borrowings after giving effect to borrowing base limitations. The
Company is charged an annual fee of .5% for amounts available but
unused under the Revolving Credit Facility. Loans under the
Credit Agreement bear interest at floating rates, which are, at
the Company's option, based either upon bank prime or Eurodollar
rates. Rates on outstanding borrowings averaged 7.5% at December
31, 1996 and 1997.
The Company is required to make annual supplemental
repayments under its $130.0 million seven-year term loan (the
"Senior Term Loan") in amounts equal to 50% of Excess Cash Flow,
as defined in the Credit Agreement between the Company and the
group of lending banks (the "Credit Agreement"). Based on Excess
Cash Flow for 1995, a supplemental repayment of $9.8 million was
made in April 1996. Another supplemental repayment of $10.5
million for the year 1996 was originally due on April 30, 1997;
however, the Company received a waiver from making this payment
from the participants in the Credit Agreement and instead used
these funds to extinguish $10 million of its Senior Subordinated
Notes due 2003 during the third quarter of 1997. Based on Excess
Cash Flow for 1997, a supplemental repayment of $14.5 million is
required. In December 1997, the Company made a prepayment of the
annual supplemental repayment in the amount of $11.2 million.
Notes: The Company sold $200.0 million aggregate principal
amount of its 10 1/4% Senior Subordinated Notes due 2003 (the
"Notes") generating gross proceeds of $200.0 million. The Notes
are senior subordinated, unsecured obligations of the Company.
The Notes are not redeemable at the Company's option prior
to September 1, 1998; however, the Company received a consent
from the participants in the Credit Agreement and redeemed $10.0
million of the Notes during the third quarter. The Company may
also be obligated to purchase, at the holders' option, all or a
portion of the Notes upon a change of control or asset sale, as
defined in the Notes Indenture. From and after September 1, 1998,
the Notes will
F-10
<PAGE>
be subject to redemption at the option of the Company, in whole
or in part, at various redemption prices, declining from 104.556%
of the principal amount to par on and after September 1, 2002.
IRBs: In July 1995 and October 1996, the Company entered
into two loan agreements to finance the construction of two new
manufacturing facilities in conjunction with the sale of $17.4
million in industrial revenue bonds (IRBs) by local government
units. Proceeds of the IRBs were deposited in construction funds
and released as the Company incurs the costs to construct and
equip the facilities. At December 31, 1996 and 1997, $13.3
million and $16.9 million, respectively, had been released.
Unreleased funds of $4.1 million and $.5 million are shown as an
other asset on the December 31, 1996 and 1997, respectively,
consolidated balance sheets. The IRBs mature in 2020 and 2022 and
may be retired in whole or in part at any time. The IRBs carry
variable interest rates with a maximum of 15% per annum. The
weighted average rate at December 31, 1996 and 1997 was 4.3% and
3.8%, respectively.
Covenants: The Credit Agreement and the Indenture related
to the Notes (the "Notes Indenture") contain restrictive
covenants that, among other things and under certain conditions,
limit the ability of the Company to incur additional indebtedness
or issue preferred stock, to acquire (including a limitation on
capital expenditures) or dispose of assets or operations and to
pay dividends. The Term Loans and Revolving Credit Facility also
require the Company to satisfy certain financial covenants and
tests. The Credit Agreement and the Notes Indenture contain cross
default provisions.
Holdings has guaranteed the Notes and the Term Loans.
Borrowings under the Credit Agreement are also secured by a first
priority lien on the capital stock of the Company and its
subsidiaries and substantially all assets of the Company and its
subsidiaries.
The Credit Agreement and the Notes Indenture contain
provisions which restrict the payment of advances, loans and
dividends from the Company to Holdings. As of December 31, 1997,
the Company was allowed to pay a dividend to Holdings of an
amount not to exceed $6.0 million. Restricted net assets of the
Company were approximately $50.4 million at December 31, 1997.
7. STOCKHOLDERS' EQUITY
Common stock held by the ESOP (115,296 shares at December
31, 1996 and 119,497 shares at December 31, 1997) and valued at
its fair market value has been classified outside of permanent
equity as, under certain conditions, participants may require the
Company to purchase for cash common stock distributed to them by
the ESOP. The Company engages an independent valuation firm to
value the Holdings stock held by the ESOP each year end. Such
valuation was $320 and $525 per share at December 31, 1996 and
1997, respectively. The unearned compensation, being the fair
market value of Unreleased Shares of approximately $2.1 million
at December 31, 1996 is presented in the consolidated balance
sheet as a reduction to common stock held by the ESOP.
8. STOCK OPTION PLANS
The Company currently has three stock option plans: the
1993 Stock Option Plan ("1993 Plan"), the PM Holdings Corporation
Omnibus Stock and Incentive Plan ("1995 Plan"), and the PM
Holdings Corporation Non-Employee Directors Stock Option Plan
("Directors Plan"). The 1993 Plan provides for the issuance of
both incentive stock options and non-qualified options. Under the
plan, a maximum of 20,000 shares may be granted at prices not
less than 100% and 85% of the fair market value of a share of
common stock on the date the option is granted, for incentive
stock options and non-qualified options, respectively. The terms
of all options granted may not exceed ten years from the date of
grant. This plan was replaced by the 1995 Plan and no additional
awards will be granted under the 1993 Plan which will continue in
existence until granted awards are exercised or terminated. The
1995 Plan provides for the issuance of stock options, stock
rights units, stock appreciation rights, restricted stock and
common stock to key employees of the Company. Under the plan the
13,500 shares not previously granted under the 1993 Plan plus an
additional 26,000 shares may be granted. Upon the exercise of a
stock rights unit, a participant receives the equivalent number
of shares of common stock. The Directors Plan provides for each
non-employee director to receive an option to purchase 500
shares at fair market value on the date of grant. Under the plan
a maximum of 15,000 shares may be granted. All options and rights
granted under the three plans vest over a three-year period and
have a term of ten years.
F-11
<PAGE>
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation." The new
standard establishes a fair value based method of accounting for
the issuance of stock options and similar equity instruments to
employees. Under the fair value based method, compensation cost
is measured at the grant date based on the fair value of the
award and is recognized over the service period, which is usually
the vesting period. SFAS 123 allows companies to elect fair value
based accounting for stock compensation or continue using the
intrinsic value method of accounting as required by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25). The Company has elected to continue to apply
APB 25 in its consolidated financial statements. Under APB 25, no
compensation cost has been recognized for stock options granted
under the Company's three plans. Compensation expense is
recognized over the three-year vesting period for the fair market
value of the stock rights units at the date of grant.
Pro forma information regarding net income and earnings per
share is required by SFAS 123, and has been determined as if the
Company had accounted for its employee stock options and stock
rights under the fair value based method. The estimated fair
value of options and rights granted during 1995, 1996 and 1997 is
as follows (per share):
Year Ended December 31,
--------------------------
1995 1996 1997
------ ------ ------
Stock Options .... $102.05 $143.30 $152.70
Stock Rights Units $200.00 $310.00 $320.00
The fair value for the options and rights was estimated at
the date of grant under the minimum value method. The minimum
value was estimated to be the excess of the fair market value of
the stock at the date of grant over the present value of the
exercise price, discounted at the risk-free rate, over the
expected exercise life of the options, with the following
weighted-average assumptions for 1995, 1996 and 1997,
respectively; risk-free interest rates of 7.4%, 6.4% and 6.7%, no
dividend yield, and a weighted-average expected life of ten
years.
For purposes of pro forma disclosures, the estimated fair
value of the options and rights is amortized to expense over the
options vesting period. The Company's pro forma information
follows:
Year Ended December 31,
----------------------------
1995 1996 1997
------ ------ ------
(Dollars in Thousands
Except Per Share Amounts)
Net income (loss)
per Consolidated
Statements of
Operations:
As reported........ $3,062 $(4,793) $6,934
Pro forma.......... $2,881 $(5,139) $6,412
A summary of the status of stock options as of December 31,
1995, 1996 and 1997 and activity during the years then ended is
as follows:
1995 1996 1997
--------------- --------------- ---------------
Wtd. Wtd. Wgt.
Avg. Avg. Avg.
Exer. Exer. Exer.
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
Outstanding at
beginning of year .... 6,500 $113 15,250 $163 20,935 $208
Granted ................ 9,000 200 6,385 310 6,155 320
Exercised .............. -- -- 100 108 434 139
Forfeited .............. 250 200 600 186 531 247
------ ---- ------ ---- ------ ----
Outstanding at end of
year ................. 15,250 $163 20,935 $208 26,125 $235
------ ---- ------ ---- ------ ----
Options exercisable
at year end........... 4,485 $136 9,758 $153 13,523 $179
------ ---- ------ ---- ------ ----
F-12
<PAGE>
Exercise prices for options outstanding at December 31,
1997 ranged from $100 to $320 per share. The weighted-average
remaining contractual life of those options is 7.7 years.
As of December 31, 1996 and 1997, there were 7,385 and
10,257 stock rights units outstanding, respectively, under the
1995 Plan. Such stock rights units are exercisable over a
three-year period and 3,635 units were exercisable at December
31, 1997.
9. EMPLOYEE BENEFIT PLANS
The Company has established an ESOP covering substantially
all employees exclusive of those covered by a collective
bargaining agreement. Since the Acquisition the Company has made
contributions to the ESOP in an amount equal to 50% of employee
contributions to the Company's 401(k) plan, up to a maximum of 4%
of an individual employee's compensation. These contributions to
the ESOP are allocated to each participant based on their
contributions to the 401(k) plan. The Company may make additional
discretionary contributions to the ESOP as determined by the
Board of Directors. Participants vest in matching contributions
at the time they are made while they vest in discretionary
contributions at the rate of 20 percent per year. Contributions
received by the ESOP are used to pay principal and interest on
the loan from the Company.
Shares held by the ESOP are released and allocated to
specific accounts as the principal on the loan to the ESOP is
repaid. Based on the estimated fair market value per share at the
date of release, compensation expense is recognized. As of
December 31, 1996 and 1997, approximately 108,700 shares and
119,500 shares, respectively, have been released. The remaining
6,600 shares held by the ESOP at December 31, 1996 were
unallocated. All shares held by the ESOP at December 31, 1997
were allocated.
Contributions to the ESOP and compensation expense
attributable to released shares for the years ended December 31,
1995, 1996 and 1997 are as follows (in thousands):
Year Ended December 31,
----------------------
1995 1996 1997
---- ---- ----
Matching contributions ....... $2,385 $2,546 $2,652
Discretionary contributions .. 2,454 2,654 2,631
------ ------ ------
Total ...................... $4,839 $5,200 $5,283
------ ------ ------
Compensation expense ......... $8,156 $5,726 $6,305
------ ------ ------
In the event of retirement, death or disability, the entire
balance of a participant's ESOP account will become distributable
without regard to the ordinary vesting schedule. In the event of
termination of employment for any other reason, the vested
portion of a participant's ESOP account will become
distributable. If Holdings common stock is distributed to a
participant, the participant may, within two, sixty-day periods,
require the Company to purchase all or a portion of such common
stock at the fair market value of the common stock as determined
under the ESOP as of the immediate preceding December 31.
During 1997 the Company maintained two defined benefit
plans which covered those employees whose employment is governed
by the terms of a collective bargaining agreement. Benefits for
all other employees previously covered under the plans have been
frozen. The Company made annual contributions to the plans which
at least equal the amounts required by law. Contribution amounts
are determined by independent actuaries using an actuarial cost
method that has an objective of providing an adequate fund to
meet pension obligations as they mature over the long-term
future. Effective December 31, 1997 the two plans were merged. At
December 31, 1996 and 1997, the assets were held in equity and
fixed securities.
F-13
<PAGE>
The following table sets forth the funded status of these
plans at December 31, 1996 and 1997, and the amounts recognized
in the Company's consolidated balance sheets at those dates (in
thousands):
December 31,
----------------
1996 1997
------ ------
Actuarial present value
of vested benefit obligation ....... $20,441 $21,276
Actuarial present value of
accumulated benefit obligation ..... 21,978 22,805
------- -------
Plan assets at fair value ............ 20,652 22,050
Actuarial present value of
projected benefit obligation ....... 22,075 23,856
------- -------
Projected benefit obligation
in excess of plan assets ........... 1,423 1,806
Unrecognized net gain from past
experience different from that
assumed and effects of changes
in assumptions ..................... 3,513 3,411
------- -------
Accrued pension cost ................. $ 4,936 $ 5,217
------- -------
The projected benefit obligation is based on a weighted
average discount rate of 7.0 percent in 1995, 1996 and 1997, and
a projected long-term compensation growth rate of 4.0 percent in
all years. The expected long-term rate of return on plan assets
is 8.0 percent in 1995, 1996 and 1997.
The components of net periodic pension costs related to the
above plans for the years ended December 31, 1995, 1996 and 1997
are as follows (in thousands):
Year Ended December 31,
----------------------------
1995 1996 1997
------ ------ ------
Service cost-benefits
earned during the year ..... $ 280 $ 308 $ 293
Interest cost on projected
benefit obligation ......... 1,417 1,455 1,508
Actual return on plan
assets ..................... (1,482) (1,441) (1,500)
Net amortization and
deferral ................... (120) -- --
------- ------- -------
$ 95 $ 322 $ 301
------- ------- -------
The Company sponsors a voluntary defined contribution
401(k) plan which is available to substantially all employees.
After the Acquisition, Company contributions to the 401(k) plan
have ceased and are now being contributed to the ESOP as
discussed above.
The Company has a nonqualified, unfunded supplemental
executive retirement plan for executives whose benefits under a
prior salaried retirement plan sponsored by the former owner were
reduced because of compensation under deferral elections or
limitations under federal tax laws. In conjunction with the
Acquisition, all benefit accruals under the supplemental employee
retirement plan ceased subsequent to August 31, 1993. The Company
has retained sponsorship of this plan, as well as the
responsibility for all benefit payments thereunder.
The Company also has a nonqualified, unfunded capital
accumulation plan for which it has purchased life insurance on
the lives of the participants. A grantor trust is the sole owner
and beneficiary of such policies. The amount of coverage is
designed to provide sufficient revenues to recover all costs of
the plan if assumptions made as to mortality experience, policy
earnings and other factors are realized.
F-14
<PAGE>
The following table sets forth the status of the
non-qualified plans at December 31, 1996 and 1997, and the
amounts recognized in the Company's consolidated balance sheets
at those dates (in thousands):
December 31,
------------------
1996 1997
------ ------
Actuarial present value of
vested benefit obligation ........... $ 15,133 $ 18,203
-------- --------
Actuarial present value of
accumulated benefit obligation ...... 21,521 23,551
-------- --------
Plan assets at fair value ............. -- --
Actuarial present value of
projected benefit obligation ........ 21,521 23,551
-------- --------
Projected benefit obligation
in excess of plan assets ............ 21,521 23,551
Unrecognized net loss from past
experience different from that
assumed and effects of changes
in assumptions ...................... (2,043) (3,453)
Minimum liability adjustment .......... 2,043 3,453
-------- --------
Accrued pension cost .................. $ 21,521 $ 23,551
-------- --------
The projected benefit obligation is based on a weighted
average discount rate of 7.0 percent in 1995, 1996 and 1997.
Expenses related to the non-qualified plans for the years ended
December 31, 1995, 1996 and 1997 were $1.3 million, $1.4 million
and $1.5 million, respectively. The minimum liability adjustment,
net of tax benefit, is reflected as a reduction of stockholders'
equity.
10. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS/POSTEMPLOYMENT
BENEFITS
The Company provides certain health care and life insurance
benefits to retired employees who meet specified age and years of
service requirements. The life insurance plan provides a $5,000
benefit and is available on a noncontributory basis. The health
care plans pay a stated percentage of most medical expenses
reduced for any deductible and co-payment, payments made by
government programs and other group coverage. The cost of
providing these health care benefits is shared with retirees. All
plans are unfunded.
The following table sets forth the accrued postretirement
benefit cost recognized in the Company's balance sheet at
December 31, 1996 and 1997 (in thousands):
December 31,
----------------
1996 1997
------ ------
Retirees ................................. $ 6,927 $ 4,170
Fully eligible active plan
participants ........................... 8,239 5,874
Other active plan participants ........... 13,131 8,666
------- -------
Projected benefit obligation ............. 28,297 18,710
Unrecognized net gain from past
experience different from that
assumed and effects of changes
in assumptions .......................... 7,469 15,246
Unrecognized prior service credit ........ 877 3,514
------- -------
Accrued postretirement benefit cost ...... $36,643 $37,470
------- -------
Net periodic postretirement benefit cost for the years
ended December 31, 1995, 1996, and 1997 are as follows (in
thousands):
Year Ended December 31,
----------------------------
1995 1996 1997
------ ------ ------
Service cost of benefits
earned ........................ $ 1,050 $ 1,182 $ 837
Interest cost on accumulated
postretirement benefit
obligation .................... 2,227 2,353 1,809
Net amortization and deferral ... (111) (111) (542)
------- ------- -------
$ 3,166 $ 3,424 $ 2,104
------- ------- -------
F-15
<PAGE>
Actuarial assumptions used for the Company's retiree health
care and life insurance plans were as follows (dollars in
thousands):
Year Ended December 31,
--------------------------
1995 1996 1997
---- ---- ----
Projected health care cost
trend rate .................... 10.0% 9.0% 8.0%
Ultimate trend rate ............. 4.50% 4.50% 4.25%
Year ultimate trend rate
is achieved ................... 2002 2001 2002
Effect of a 1% increase in
the health care cost trend
rate on the APBO .............. $5,803 $3,202 $1,949
Effect of a 1% increase in
the health care cost trend
rate on the aggregate of
service and interest cost ..... $ 669 $ 398 $ 236
Discount rate ................... 7.0% 7.0% 7.0%
11. INCOME TAXES
The components of the provision for income taxes are as
follows (in thousands):
Year Ended December 31,
--------------------------
1995 1996 1997
---- ---- ----
Current:
Federal ....... $ 3,105 $ 5,154 $ 4,159
State ......... 1,236 54 1,205
Deferred:
Federal ....... (714) (4,967) 129
State ......... 328 (887) (300)
------- ------- -------
$ 3,955 $ (646) $ 5,193
------- ------- -------
The provision for income taxes is different from the
amounts computed by applying the U.S. federal statutory income
tax rate. The reasons for these differences are as follows (in
thousands):
Year Ended December 31,
--------------------------
1995 1996 1997
---- ---- ----
Income taxes at
statutory rate ........ $ 2,456 $(1,903) $ 4,245
State income taxes,
net of federal
benefit ............... 1,017 (541) 587
Amortization of
intangible assets ..... 502 1,917 548
Meals and entertainment
disallowance .......... 310 303 148
Life insurance expense,
net ................... (80) (54) (463)
Research tax credit ..... (249) (81) (64)
Other, net .............. (1) (287) 192
------- ------- -------
$ 3,955 $ (646) $ 5,193
------- ------- -------
F-16
<PAGE>
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Temporary differences which gave rise to
deferred tax assets and liabilities at December 31, 1996 and 1997
are as follows (in thousands):
December 31,
---------------
1996 1997
---- ----
Deferred Tax Assets:
Accrued postretirement
benefits ...................... $14,373 $14,698
Accrued supplemental
retirement benefits ........... 11,247 12,230
Reserve for loss on
asset disposals ............... 5,244 5,188
Accrued vacation expense ........ 2,575 2,470
Other accruals not
currently deductible
for tax ....................... 4,166 4,796
Alternative minimum
tax credit .................... 7,818 6,736
Bad debt reserve ................ 2,185 2,560
Tax over book basis
of inventory .................. 534 273
------- -------
Total deferred tax
assets ........................ 48,142 48,951
Deferred Tax Liabilities:
Book over tax basis
of assets acquired ............ 3,327 3,882
Tax over book
depreciation .................. 18,640 19,497
Book over tax basis
of intangible assets .......... 10,184 8,945
Other ........................... 88 --
------- -------
Total deferred tax
liabilities ................... 32,239 32,324
------- -------
Net Deferred Tax
Assets ........................ $15,903 $16,627
------- -------
Management has reviewed the realization of the deferred tax
assets and believes it is more likely than not that they will be
realized through future taxable earnings.
12. LOAN GUARANTEES AND CONCENTRATION OF CREDIT RISK
Loan Guarantees: The Company has agreed to provide a
guarantee of up to $7.5 million to a new entity formed in 1995 to
provide funding for the growth, consolidation and expansion of
the Company's network of independently-owned dealers and
producers. All dealers or producers who are members of the entity
must have arrangements with the Company for some purchase of its
products. At December 31, 1996 and 1997, the amount subject to
such guarantee was $5.8 million and $5.9 million, respectively.
The guarantee is expected to remain outstanding for over five
years. The Company is not a member of this non-stock membership
corporation and thus does not have an equity interest in the new
entity; however, the Company did make a loan of $2.0 million to
the entity to provide funding for its growth.
Loan guarantees are also made to banks to assist the
Company's customers in obtaining bank loans for working capital,
lines of credit, and additions to property, plant and equipment.
The guarantee arrangements essentially have the same credit risk
as that involved in extending loans to customers and are subject
to the Company's normal credit policies. Collateral (e.g., farm
animals, property, personal guarantees) is usually obtained based
on management's assessment of the specific customer's credit
risk. The Company had guarantees of approximately $12.8 million
and $11.3 million at December 31, 1996 and 1997, respectively,
under these type of arrangements. The maturities of these
guarantees extend through December 2006 with most significant
maturities, excluding the $5.9 million discussed above, occurring
prior to 2003.
Concentration of Credit Risk: Financial instruments which
potentially subject the Company to concentration of credit risk
consist principally of trade receivables. Substantially all of
the Company's accounts receivable are due from companies in
agriculture-related businesses located throughout the United
States.
F-17
<PAGE>
13. COMMITMENTS AND CONTINGENCIES
Operating Leases: The Company rents certain transportation
vehicles, warehouses and operating facilities under various
operating leases, many of which contain renewal or purchase
options. Rent expense for all operating leases was $3.1 million,
$3.3 million and $4.0 million for the years ended December 31,
1995, 1996 and 1997, respectively.
Future minimum lease payments for all noncancelable
operating leases having a remaining term in excess of one year
consist of the following at December 31, 1997 (in thousands):
Operating
Leases
---------
1998.......................................... $3,672
1999.......................................... 3,479
2000.......................................... 2,812
2001.......................................... 2,258
2002.......................................... 1,840
Thereafter.................................... 5,242
Total minimum lease payments................ $19,303
Litigation: The Company, in the ordinary course of
business, is engaged in various litigation and other proceedings
principally relating to product claims. The ultimate liability
with respect to such litigation and proceedings cannot be
determined at this time. The Company is of the opinion that the
aggregate amount of any such liabilities will not have a material
impact on its financial position or results of operations.
14. SUBSEQUENT EVENTS
Pursuant to the Agreement and Plan of Merger among
Holdings, Koch Agriculture Company ("Koch Agriculture") and Arch
Acquisition Corporation, dated as of January 9, 1998 (the "Merger
Agreement"), Arch Acquisition Corporation was merged with and
into Holdings, with Holdings being the surviving corporation. As
a result of the Merger, all of the shares of the common stock of
Holdings, par value $.01 per share outstanding immediately prior
to March 12, 1998, were canceled and converted into the right to
receive cash consideration of $540 per share (the "Merger
Consideration.") In addition, pursuant to the Merger Agreement,
each outstanding stock option and stock rights unit became 100%
vested. Option holders and stock rights unit holders received the
Merger Consideration, less the exercise price of the stock
options, for each share of Holdings Common Stock into which such
stock options and stock rights units were exercisable immediately
prior to March 12, 1998. As a result of the Merger, Koch
Agriculture owns 100% of Holdings, which owns 100% of the
Company.
In connection with the Merger, the Company made a tender
offer to redeem the outstanding existing Purina Mills Senior
Subordinated Notes of which $190.0 million in aggregate principal
was outstanding. The Company also entered into a new Credit
Agreement which provided for secured borrowings from a syndicate
of lenders. The credit facility consists of a term loan in the
amount of $200.0 million and a $100.0 million revolving credit
facility. The proceeds of the term loan were borrowed in full on
the date of the consummation of the Merger, in addition to $9.9
million under the revolving credit facility.
On March 12, 1998, the Company sold $350.0 million
aggregate principal amount of 9% Senior Subordinated Notes due
2010 generating proceeds of $350.0 million. On March 16, 1998,
the Company used the proceeds of the new indebtedness to redeem
the existing Purina Mills Senior Subordinated Notes as well as
Industrial Revenue Bonds.
----------
F-18
<PAGE>
PURINA MILLS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, 1998 and December 31, 1997
(Dollars in thousands except per share data)
December 31,
1997
(Derived
from Audited
March 31, Financial
1998 Statements)
-------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 2,145 $ 27,620
Accounts receivable, net 41,568 51,208
Inventories 64,571 66,800
Income tax refund receivable 4,030 --
Deferred income taxes 9,901 8,746
Prepaid expenses and other current assets 11,148 13,037
--------------------
Total Current Assets 133,363 167,411
Property, plant and equipment, net 267,468 243,718
Intangible assets, net 346,041 122,403
Other assets 45,047 48,411
--------------------
Total Assets $ 791,919 $ 581,943
--------------------
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 46,112 $ 76,078
Current portion of long-term debt 5,576 19,170
Customer advance payments 9,930 16,503
Other current liabilities 33,901 26,872
--------------------
Total Current Liabilities 95,519 138,623
Retirement obligations 25,614 28,768
Accrued post-retirement benefit costs 5,302 37,470
Deferred income taxes 10,475 --
Other liabilities 900 831
Long-term debt 544,695 263,119
Common stock held by ESOP -- 62,736
Stockholder's Equity:
Common stock, $0.01 par value: 1,000 shares
authorized, issued and outstanding -- --
Additional paid-in capital 109,290 79,687
Retained earnings (deficit) 124 (27,192)
Adjustment for minimum supplemental retirement
liabilities -- (2,099)
--------------------
Total Stockholder's Equity 109,414 50,396
--------------------
Total Liabilities & Stockholder's Equity $ 791,919 $ 581,943
--------------------
(See accompanying notes)
F-19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PURINA MILLS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands)
POST-MERGER PRE-MERGER
------------------ ---------------------------------
Period Period Three Months
March 13, 1998 January 1, 1998 Ended
to March 31, 1998 to March 12, 1998 March 31, 1997
------------------ ----------------- --------------
NET SALES $ 52,807 $ 214,272 $ 284,450
COSTS AND EXPENSES:
Cost of products sold 42,848 176,682 237,966
Marketing, distribution and advertising 4,809 17,543 20,185
General and administrative (Note 11) 908 22,124 6,944
Amortization of intangibles 841 3,956 4,730
Research and development 300 1,376 1,636
Other (income) expense, net 57 (9) (1,662)
-------------------------------------------------
49,763 221,672 269,799
-------------------------------------------------
OPERATING INCOME (LOSS) 3,044 (7,400) 14,651
Interest expense 2,836 6,144 8,399
-------------------------------------------------
Income (loss) before income taxes 208 (13,544) 6,252
Provision (benefit) for income taxes 84 (5,050) 3,159
-------------------------------------------------
NET INCOME (LOSS) $ 124 $ (8,494) $ 3,093
-------------------------------------------------
(See accompanying notes)
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PURINA MILLS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
POST-MERGER PRE-MERGER
-------------- -------------------------
Period Period Three
March 13, January 1, Months
1998 to 1998 to Ended
March 31, March 12, March 31,
1998 1998 1997
------------------------------------------
Operating Activities:
Net income (loss) $ 124 $ (8,494) $ 3,093
Adjustment to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation & amortization 2,342 9,908 11,977
Provision for loss on asset disposition -- 169 60
Compensation under ESOP -- -- 1,386
Provision for deferred taxes 84 (108) (2,826)
Other 3,259 (38,826) (6,762)
------------------------------------------
Net cash provided by (used in) operating activities $ 5,809 $ (37,351) $ 6,928
Investing Activities:
Purchase of property, plant and equipment (913) (4,486) (3,553)
Other (72) 156 122
------------------------------------------
Net cash used in investing activities $ (985) $ (4,330) $ (3,431)
Financing Activities:
Proceeds from Senior Subordinated Notes -- 350,000 --
Proceeds from Term Loans -- 200,000 --
Proceeds of Revolving Credit Facility, net 6,909 -- --
Repayment of Term Loans, Senior Sub. Notes and IRBs (294,161) -- (3,791)
Payment of dividends to PM Holdings Corporation -- (237,172) --
Payment of Financing Costs -- (11,894) --
Other -- (2,300) (78)
------------------------------------------
Net cash provided by (used in) financing activities $(287,252) $ 298,634 $ (3,869)
Increase (decrease) in cash and cash equivalents (282,428) 256,953 (372)
Cash and cash equivalents at beginning of period 284,573 27,620 25,462
------------------------------------------
Cash and cash equivalents at end of period $ 2,145 $ 284,573 $ 25,090
------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 1,632 $ 11,267 $ 12,581
Income taxes -- 43 344
(See accompanying notes)
F-21
<PAGE>
PURINA MILLS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Pursuant to the Agreement and Plan of Merger among PM Holdings
Corporation ("Holdings"), Koch Agriculture Company ("Koch
Agriculture") and Arch Acquisition Corporation, dated as of
January 9, 1998 (the "Merger Agreement"), Arch Acquisition
Corporation was merged with and into Holdings, with Holdings
being the surviving corporation. As a result of the Merger, all
of the shares of the common stock of Holdings ("Holdings Common
Stock"), par value $.01 per share outstanding immediately prior
to March 12, 1998, were canceled and converted into the right to
receive cash consideration of $540 per share (the "Merger
Consideration.") In addition, pursuant to the Merger Agreement,
each outstanding stock option and stock rights unit became 100%
vested. Option holders and stock rights unit holders received the
Merger Consideration, less the exercise price of the stock
options, for each share of Holdings Common Stock into which such
stock options and stock rights units were exercisable immediately
prior to March 12, 1998. As a result of the Merger, Koch
Agriculture owns 100% of Holdings, which owns 100% of Purina
Mills, Inc. ("PMI" or the "Company.")
The Acquisition closed on March 12, 1998. The Acquisition has
been accounted for as a purchase transaction in accordance with
Accounting Principles Board Opinion No. 16 ("APB 16") and,
accordingly, the consolidated financial statements for periods
subsequent to March 12, 1998 reflect the purchase price,
including transaction costs, allocated to tangible and intangible
assets acquired and liabilities assumed, based on their estimated
fair values as of March 12, 1998. The allocation of the purchase
price is preliminary, as valuation and other studies have not
been finalized. It is not expected that the final allocation of
purchase price will produce materially different results from
those presented herein. The consolidated financial statements for
periods prior to March 12, 1998 have been prepared on the
historical cost basis. The consolidated balance sheet at March
31, 1998 is not comparable with the historical balance sheets
presented. Operating results subsequent to the Acquisition are
comparable to the operating results prior to the Acquisition
except for depreciation expense, amortization of intangible
assets, interest expense and post-retirement health care costs.
The preliminary allocation of $109.3 million purchase price for
the Company is summarized as follows (in millions):
Current assets $ 130.8
Property, plant and equipment 268.2
Intangible assets 346.7
Other noncurrent assets 45.1
Liabilities assumed (681.5)
-------------
Total $ 109.3
-------------
The consolidated balance sheet at March 31, 1998 and the
consolidated statements of operations and cash flows for all
periods presented are unaudited and reflect all adjustments,
consisting of normal recurring items, which management considers
necessary for a fair presentation. Operating results for fiscal
1998 interim periods are not necessarily indicative of results to
be expected for the fiscal year ending December 31, 1998. The
consolidated balance sheet at
F-22
<PAGE>
December 31, 1997 was derived from the Company's December 31,
1997 audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
The following unaudited pro forma financial data for the three
months ended March 31, 1997 and March 31, 1998 has been prepared
assuming that the Transactions and related financings were
consummated on January 1, 1997 and January 1, 1998 (in millions):
Three Months Ended
March 31,
-----------------------------------
1997 1998
-------- -------
Net sales $ 284.5 $ 267.1
Net income (loss) $ 0.2 $ (11.2)
These pro forma results have been prepared for comparative
purposes only and include certain adjustments such as additional
amortization on intangible assets and increased interest expense
on the related acquisition debt. They do not purport to be
indicative of the results had the combination been in effect on
January 1, 1997 and January 1, 1998, or of future results of
operation of the consolidated entities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Investments in affiliated companies, 20% through 50% owned, are
carried at equity.
Comprehensive Income
The Financial Accounting Standards Board recently issued
Statement of Financial Accounting Standards No, 130, Reporting of
Comprehensive Income ("SFAS 130"), which is effective for periods
ended after December 15, 1997. SFAS 130 establishes standards for
reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. The
Company adopted the standard effective January 1, 1998. The
adoption of the standard did not effect the Financial Statements.
Income Taxes
The Company has entered into a tax sharing agreement with
Holdings effective as of the date of the Merger. The agreement
provides that the Company is liable to Holdings for all taxes as
if the Company filed its annual tax returns on a separate Company
basis. The Company's tax provision for the period March 13 to
March 31, 1998 is computed on this basis. The results of
operations of the Company after March 12, 1998 will be included
in the consolidated U.S. corporation income tax return of Koch
Industries, Inc. The results of operations of the Company for the
period January 1 to March 12, 1998 will be included in the
consolidated U.S. corporation income tax return of Holdings.
F-23
<PAGE>
3. INVENTORIES
Inventories consist of the following (in thousands):
March 31, December 31,
1998 1997
--------- -----------
Finished goods $ 16,831 $ 17,739
Raw materials 47,740 49,061
----------------------------
Total $ 64,571 $ 66,800
----------------------------
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in
thousands):
March 31, December 31,
1998 1997
--------- -----------
Land $ 12,546 $ 13,327
Buildings 68,136 73,965
Machinery and equipment 170,524 245,145
Construction in progress 17,597 13,674
--------------------------
268,803 346,111
Accumulated depreciation (1,335) (102,393)
--------------------------
Total $ 267,468 $ 243,718
--------------------------
F-25
<PAGE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
March 31, December 31,
1998 1997
--------- -----------
Distribution network $ 40,000 $ 45,300
Product specifications 10,000 23,600
Technology 15,000 19,110
Covenant not to compete 2,083 25,000
Feed supply agreement -- 10,598
Goodwill 265,880 57,662
Other intangibles 14,037 24,027
--------------------------
347,000 205,297
Accumulated amortization (959) (82,894)
--------------------------
Total $ 346,041 $ 122,403
--------------------------
6. OTHER ASSETS
Other assets consist of the following (in thousands):
March 31, December 31,
1998 1997
--------- -----------
Deferred financing $11,847 $ 9,813
costs, net
Deferred income taxes -- 7,881
Other 33,200 30,717
-------------------------
Total $45,047 $48,411
-------------------------
F-24
<PAGE>
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
March 31, December 31,
1998 1997
---------- ----------
Term Loan $ 200,000 $ --
Senior Term Loan -- 74,622
Senior Subordinated Notes due 2010 350,000 --
Senior Subordinated Notes due 2003 -- 189,965
IRB Loans -- 17,400
Other 271 302
------------------------
550,271 282,289
Less current portion (5,576) (19,170)
------------------------
Total $ 544,695 $ 263,119
------------------------
The annual amortization schedule of the Term Loan (defined below)
is $4.0 million in 1998, $7.6 million in 1999, $10.6 million in
2000, $13.6 million 2001, $16.6 million in 2002 and $147.6
million thereafter. The Company is required to make mandatory
repayments of the Term Loan in amounts equal to 50% of Excess
Cash Flow (as defined in the Credit Agreement). The Notes
(defined below) are due in their entirety in 2010.
Tender Offer: In connection with the Merger, the Company offered
to purchase for cash any and all of the outstanding existing
Purina Mills, Inc. Senior Subordinated Notes of which $190.0
million in aggregate principal amount was outstanding as of the
date of the Offering. The Tender Offer was commenced on February
9, 1998 and expired on March 12, 1998. In conjunction with the
Tender Offers for the existing Debt Securities, the Company
solicited consents of registered holders of the applicable series
of existing Debt Securities to certain Proposed Amendments to
eliminate substantially all of the restrictive covenants in the
indentures under which the applicable series of existing Debt
Securities were issued, in order to increase the financial
flexibility of the Company after the consummation of the
Transaction. The Proposed Amendments became operative immediately
following the consummation of the Merger when all except $15,000
of the existing Senior Subordinated Notes were accepted for
payment.
Credit Facility: In connection with the Transaction, the Company
entered into a New Credit Agreement (the "Credit Agreement"),
which provides for secured borrowings from a syndicate of lenders
consisting of (i) a term loan facility providing for an aggregate
amount of $200.0 million (the "Term Loan") and (ii) a $100.0
million Revolving Credit Facility, with a $40.0 million sub-limit
for letters of credit. The proceeds of the Term Loan were
borrowed in full on the date of the consummation of the Offering,
in addition to $9.9 million under the Revolving Credit Facility,
and used to finance the Transaction and related fees and
expenses. Proceeds of the Revolving Credit Facility have also
been used to redeem the Company's Industrial Revenue Bonds and
are available to finance the Company's ongoing working capital
requirements. At March 31, 1998, $6.9 million was outstanding
under the Revolving Credit Facility and is classified as a
current liability on the consolidated balance sheet. The
Revolving Credit Facility also may be used in part for the
issuance of letters of credit to be used solely for ordinary
course of business purposes of the Company and its subsidiaries.
The Company is charged an annual fee of .50% for amounts
available but unused under the Revolving Credit Facility. In
addition, the Company is charged a fee of .25% per annum on the
daily average amount available for
F-25
<PAGE>
drawing under any letter of credit to the bank that has issued
such letter of credit. Loans under the Credit Agreement bear
interest at floating rates, which are, at the Company's option
based either upon bank prime or Eurodollar rates. Rates on
outstanding borrowings averaged 7.8% at March 31, 1998.
Notes: The Company sold $350.0 million aggregate principal amount
of its 9% Senior Subordinated Notes due 2010 (the "Notes")
generating gross proceeds of $350.0 million. The Notes are senior
subordinated, unsecured obligations of the Company.
The Notes will not be redeemable at the option of the Company
prior to March 15, 2003. The Company may be obligated, however,
to purchase at the holders' option all or a portion of the Notes
upon a change of control or asset sale, as defined in the Notes
Indenture. From and after March 15, 2003, the Notes will be
subject to redemption at the option of the Company, in whole or
in part, at various redemption prices, declining from 104.5% of
the principal amount to par on and after March 15, 2006. Also, at
any time prior to March 15, 2001, under certain conditions the
Company may redeem up to 35% of the initial principal amount of
the Notes originally issued with the net proceeds of a public
offering of the Common Stock of Holdings, at a redemption price
equal to 109% of the principal amount.
Covenants: The Credit Agreement and the Indenture related to the
Notes (the "Notes Indenture") contain restrictive covenants that,
among other things and under certain conditions, limit the
ability of the Company to incur additional indebtedness or issue
preferred stock, to acquire (including a limitation on capital
expenditures) or dispose of assets or operations and to pay
dividends. The most restrictive of the covenants precludes
(except for $1.0 million annually for operating and
administrative expenses and amounts to cover income tax expenses)
any payment of dividends prior to 1999. As of March 31, 1998,
restricted net assets of the Company were approximately $109.4
million. The Term Loan and Revolving Credit Facility also require
the Company to satisfy certain financial covenants and tests. The
Credit Agreement and Notes Indenture contain cross default
provisions.
Holdings and all subsidiaries of the Company guarantee the
Company's obligations under the Credit Agreement. Borrowings
under the Credit Agreement are also secured by a first priority
lien on the capital stock of the Company (pledged by Holdings)
and its subsidiaries and substantially all assets of the Company
and its subsidiaries.
8. STOCKHOLDER'S EQUITY
The Company's authorized capital consists of 1,000 shares of
common stock. All common stock of the Company is owned by
Holdings. As a result of the Merger, the Company terminated the
ESOP. Upon termination each ESOP participant had the right to
receive a distribution of Holdings Common Stock or exchange all
their shares of Holdings stock for the Merger Consideration.
F-26
<PAGE>
9. POST-RETIREMENT BENEFITS OTHER THAN
PENSIONS/POST-EMPLOYMENT BENEFITS
As a result of the Merger, the employee benefit plans of the
Company that provide health care and life insurance benefits to
retired employees were terminated. Retirees currently receiving
health benefits under the health plans of the Company have been
provided medical benefits under Koch Agriculture's medical plans.
For any current employees or retirees who were 100% vested at the
time of the Merger, the Company will share a portion of their
post-retirement health care cost for the three years following
the date of Merger. The accrued post-retirement benefit
obligations decreased significantly as a result of the
termination of the plans.
10. DEFERRED INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities far financial reporting purposes and the amounts used
for income tax purposes. Temporary differences which gave rise to
deferred tax assets and liabilities are as follows (in
thousands).
March 31, December 31,
1998 1997
-----------------------
Deferred tax assets:
Accrued postretirement benefits 2,078 14,373
Accrued supplemental retirement benefits 10,293 11,247
Reserve for loss on asset disposals 5,987 5,244
Accrued vacation expense 1,490 2,575
Other accruals not currently deductible for tax 5,412 4,166
Alternative minimum tax credit 8,916 7,818
Bad debt reserve 2,576 2,185
Tax over book basis of inventory 534
Net operating loss carryforward 9,037
-----------------------
Total deferred tax assets 45,789 48,142
-----------------------
Deferred tax liabilities:
Book over tax basis of assets acquired 1,271 3,327
Tax over book depreciation 32,042 18,640
Book over tax basis of intangible assets 13,050 10,184
Other 88
-----------------------
Total deferred tax liabilities 46,383 32,239
-----------------------
Net deferred tax assets (liabilities) (574) 15,903
-----------------------
As a result of the Merger and the allocation of the purchase
price under APB 16, the deferred tax assets and deferred tax
liabilities were adjusted.
11. ACQUISITION EXPENSES
Included in general and administrative expenses are $15.9 million
in non-recurring expenses related to the Merger. These costs
relate to compensation paid to management of the Company and the
$13.5 million in Merger consideration paid to holders of Options
and Stock Units.
F-27
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
====================================================== ===========================================================
No person has been authorized to give any
information or to make any representations
other than those contained or incorporated by
reference in this Prospectus and the
accompanying Letter of Transmittal and, if
given or made, such information or
representations must not be relied upon as
having been authorized by the Company or the
Exchange Agent. Neither this Prospectus nor
the accompanying Letter of Transmittal, or
both together, constitute an offer to sell or Purina Mills, Inc.
the solicitation of an offer to buy
securities in any jurisdiciton to any person Offer to Exchange
to whom it is unlawful to make such offer of
solicitation. Neither the delivery of this 9% Senior Subordinated Notes due 2010,
Prospectus, nor the accompanying Letter of
Transmittal, or both together, nor any sale which have been registered under the
made hereunder shall, under any Securities Act of 1933, as amended,
circumstances, create an implication that
there has been no change in the affairs of for any and all outstanding
the Company since the date hereof or thereof 9% Senior Subordinated Notes due 2010
or that the information contained herein is
correct at any time subsequent to the date
hereof or thereof.
Until ________, 1998 (90 days after the date
of this Prospectus), all dealers effecting
transactions in the New Notes, whether or not
participating in this distribution, may be
required to deliver a Prospectus. This is in
addition to the obligation of the dealers to
deliver a Prospectus when acting as
underwriters and with respect to their unsold
allotments or subscriptions.
TABLE OF CONTENTS
Page
Available Information............................i
Incorporation of Certain Documents
by Reference................................i PROSPECTUS
Prospectus Summary...............................1
Risk Factors....................................14
The Transactions................................19
Use of Proceeds.................................21
Koch Agriculture................................21 , 1998
Capitalization..................................22
Unaudited Pro Forma Financial Data..............23
Selected Historical Consolidated
Financial Data.............................28
Management's Discussion and Analysis of
Financial Condition and Results
of Operations..............................31
Business........................................37
Management......................................48
Ownership of Capital Stock......................56
Certain Relationships and Related
Transactions...............................57
Description of Certain Indebtedness.............60
The Exchange Offer..............................62
Description of the New Notes....................69
Certain U.S. Federal Income Tax
Considerations.............................98
Plan of Distribution............................99
Legal Matters..................................100
Experts........................................100
====================================================== ===========================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The Company's Certificate of Incorporation provides that
the Company shall indemnify its directors and officers, and may
indemnify its employees and agents, to the fullest extent
permitted by the Delaware General Corporation Law (the "DGCL");
provided, however, that, pursuant to the Bylaws, the Company may
not indemnify any person in connection with any proceeding
initiated by such person, unless such proceeding is authorized by
a majority of the Company's directors.
Section 145 of the DGCL provides:
145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS; INSURANCE.--(a) A corporation shall have power to
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith
and in a manner which the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable
cause to believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by the person in connection with
the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless
and only to the extent that the court of Chancery or the court in
which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or
officer of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b) of this section, or in defense of
any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of
this section (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the present or former
director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard
of conduct set forth in subsections (a) and (b) of this section.
Such determination shall be made, with respect to a person who is
a director or officer at the time of such determination, (1) by a
majority vote of the
II-1
<PAGE>
directors who are not parties to such action, suit or proceeding,
even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors,
or if such directors so direct, by independent legal counsel in a
written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be
paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in
this section. Such expenses (including attorneys' fees) incurred
by former directors and officers or other employees and agents
may be so paid upon such terms and conditions, if any, as the
corporation deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of
this section shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another
capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against such person in any such capacity or arising out of such
person's status as such whether or not the corporation would have
the power to indemnify such person against such liability under
this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall
stand in the same position under this section with respect to the
resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence
had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted
in good faith and in a manner such person reasonably believed to
be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner
"not opposed to the best interests of the corporation" as
referred to in this section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall, unless
otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under
any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses
(including attorneys' fees).
II-2
<PAGE>
The Company maintains directors' and officers' liability
insurance.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. A list of exhibits included as part of this
Registration Statement is set forth in the Exhibit Index which
immediately precedes such exhibits and is hereby incorporated by
reference herein.
(b) Financial Statement Schedules. Schedules have been
omitted since the required information is not applicable, or not
applicable in amounts sufficient to require submission of the
schedule, or because the information is included in the financial
statements or notes thereto.
Item 22. Undertakings.
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plans
annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant, pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by any such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether or not such indemnification is against public policy as
expressed in the Securities Act of 1933 and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into
the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form,
within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration
statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
each registrant has duly caused this registration statement to be
signed on its behalf, thereunto duly authorized, in the City of
St. Louis, State of Missouri, on May 28, 1998.
PURINA MILLS, INC.
By: /s/ David L. Abbott
----------------------------
Title: Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below on this
Registration Statement hereby constitutes and appoints David L.
Abbott, Darrell D. Swank and Scott E. Deeter and each of them,
with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities (unless revoked in writing) to sign any and
all amendments (including post-effective amendments thereto) to
this Registration Statement to which this power of attorney is
attached, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting to such attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in connection therewith, as full to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following
persons in the capacities indicated, on May 28, 1998.
Signature Title
--------- -----
/s/ David L. Abbott Chief Executive Officer (Principal
- -------------------------- Executive Officer), President
David L. Abbott and Director
/s/ Darrell D. Swank Chief Financial Officer (Principal
- -------------------------- Financial Officer)
Darrell D. Swank
/s/ Del G. Meinz Chief Accounting Officer
- --------------------------
Del G. Meinz
/s/ Scott E. Deeter Director
- --------------------------
Scott E. Deeter
/s/ Dean E. Watson Director
- --------------------------
Dean E. Watson
/s/ Paul R. Wheeler Director
- --------------------------
Paul R. Wheeler
/s/ Christopher M. Wilkins Director
- --------------------------
Christopher M. Wilkins
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
-- -----------
3.1 Certificate of Incorporation of Purina Mills, Inc.
3.2 Bylaws of Purina Mills, Inc.
4.1 Indenture, dated as of March 12, 1998, between
Purina Mills, Inc., as issuer, and The First
National Bank of Chicago, as trustee, relating
to the Notes (the "Indenture")
4.2 Form of 9% Senior Subordinated Note due 2010 of
Purina Mills, Inc. (the "New Notes") (included as
Exhibit A of the Indenture filed as Exhibit 4.1)
4.3 Credit Agreement, dated as of March 12, 1998,
among Purina Mills, Inc., Chase Bank of Texas,
National Association, as Administrative Agent,
and the other financial institutions parties
thereto
4.4 Form of Guarantee and Collateral Agreement,
dated March 12, 1998, among Purina Mills, Inc.,
the subsidiary guarantors of Purina Mills, Inc.
that are signatories thereto and Chase Bank of
Texas, National Association
4.5 PM Holdings Security Agreement, dated March 12,
1998, between PM Holdings Corporation and Chase Bank
of Texas, National Association
4.6 PM Holdings Guaranty, dated March 12, 1998, between
PM Holdings Corporation and Chase Bank of Texas,
National Association
4.7 Registration Rights Agreement, dated as of March
12, 1998, by and among Purina Mills, Inc. and
the Initial Purchasers listed therein, relating
to the Notes NOTE: Pursuant to the provisions of
paragraph (b)(4)(iii) of Item 601 of Regulation
S-K, the Registrant hereby undertakes to furnish
to the Commission upon request copies of the
instruments pursuant to which various entities
hold long-term debt of the Company or its parent
or subsidiaries, none of which instruments
govern indebtedness exceeding 10 percent of the
total assets of the Company and its parent or
subsidiaries on a consolidated basis.
5.1 Opinion of Cleary, Gottlieb, Steen & Hamilton
regarding legality of the New Notes
10.1 Employment Agreement, dated as of November 18, 1997,
between Purina Mills, Inc. and David L. Abbott, and
amendment thereto, dated as of March 11, 1998
10.2 Form of Purina Mills, Inc. Discretionary Capital
Accumulation Plan for Key Employees
10.3 Purina Mills, Inc./PM Holdings Corporation Severance
Program for Key Employees, as amended and restated
effective January 9, 1998
10.4 Purina Mills, Inc. Supplemental Executive Retirement
Plan, effective as of January 1, 1988
10.5 Koch Industries, Inc. Supplemental Executive
Retirement Plan, effective as of May 9, 1994
X-1
<PAGE>
10.6 Sub-Group Tax Sharing Agreement, dated March 12,
1998, between PM Holdings Corporation and each of
its subsidiaries listed therein
10.7 Parent Tax Sharing Agreement, dated March 12, 1998,
between Koch Industries, Inc. and PM Holdings
Corporation
10.8 Jet-Pro License Agreement between Purina Mills, Inc.
and Koch Feed Company, dated March 12, 1998
10.9 Koch Agriculture Supply Agreement between Purina
Mills, Inc. and Nutrition Supply and Trading, a
division of Koch Agriculture Company, dated March
12, 1998
10.10 License Agreement dated October 1, 1986 between
Ralston Purina Company and Purina Mills, Inc.
12.1 Computation of ratio of earnings to fixed charges
21.1 Subsidiaries of Purina Mills, Inc.
23.1 Consent of Deloitte & Touche LLP, Independent
Auditors
23.2 Consent of Cleary, Gottlieb, Steen & Hamilton
(included in its opinion filed as Exhibit 5.1)
25.1 Form T-1 with respect to the eligibility of The
First National Bank of Chicago with respect to
the Indenture
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees
99.4 Form of Letter to Clients
X-2
CERTIFICATE OF INCORPORATION
OF
PURINA MILLS, INC.
ARTICLE I
The name of the corporation is Purina Mills, Inc.
ARTICLE II
The address of the corporation's registered office in the
State of Delaware is 32 Loockerman Square, Suite L-100, Dover,
County of Kent, Delaware 19901. The name of its registered agent
at such address is The Prentice-Hall Corporation System, Inc.
ARTICLE III
The nature of the business or purposes to be conducted or
promoted by the corporation is to engage in any lawful business,
act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of stock which the corporation
shall have authority to issue is one thousand (1,000) shares of
common stock of the par value of $.01 each.
The exclusive voting power of the corporation shall be vested
in the common stock of the corporation. Each share of common
stock shall entitle the holder thereof to one vote at all
meetings of the stockholders of the corporation.
ARTICLE V
The corporation shall indemnify its directors and officers,
and may indemnify its employees and agents, to the fullest extent
permitted by the General Corporation Law of the State of Delaware
if any such person is made a party to an action or a proceeding,
whether criminal, civil, administrative or investigative, by
reason of the fact that he, his testator or intestate is or was a
director, officer or employee of the corporation or any
predecessor of the corporation or served any other enterprise as
a director, officer or employee at the request of the corporation
or any predecessor of the corporation.
<PAGE>
ARTICLE VI
A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the General Corporation Law of the State of Delaware as the
same exists or may hereafter be amended. Any repeal or
modification of the foregoing sentence shall not adversely affect
any right or protection of a director of the corporation existing
hereunder with respect to any act or omission occurring prior to
such repeal or modification.
ARTICLE VII
The number of directors which shall constitute the whole
board of directors shall be fixed from time to time by the bylaws
of the corporation.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized to
adopt, alter or repeal the bylaws of the corporation.
ARTICLE IX
Elections of directors need not be by written ballot unless
the bylaws of the corporation shall so provide.
Meetings of stockholders may be held at such place, either
within or without the State of Delaware, as may be designated by
or in the manner provided in the bylaws. The books of the
corporation may be kept (subject to any provision contained in
the statutes of the State of Delaware) outside the State of
Delaware at such place or places as may be designated from time
to time by the board of directors or in the bylaws of the
corporation.
ARTICLE X
The corporation may amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the laws of the State of
Delaware and may add additional provisions authorized by such
laws as are then in force. All rights conferred upon the
directors or stockholders of the corporation herein or in any
amendment hereof are granted subject to this reservation.
<PAGE>
ARTICLE XI
The name and mailing address of the incorporator is S. J.
Nischwitz, Checkerboard Square, St. Louis, Missouri 63164.
ARTICLE XII
The name and mailing address of each person who is to serve
as a director until the first annual meeting of stockholders or
until a successor is elected and qualified, is as follows:
W. P. Stiritz Checkerboard Square
St. Louis, MO 63164
F. J. Cornwell, Jr. Checkerboard Square
St. Louis, MO 63164
J. P. Mulcahy Checkerboard Square
St. Louis, MO 63164
BY-LAWS
of
PURINA MILLS, INC.
* * *
ARTICLE I - SHAREHOLDERS
Section 1. ANNUAL MEETING The annual meeting of
shareholders shall be held at the principal office of the
Company, or at such other place either within or without the
State of Delaware as the Directors may from time to time
determine, at 10:00 a.m. on the second Thursday in January, or if
said day be a legal holiday, then on the next succeeding business
day, to elect Directors and transact such other business as may
properly come before the meeting.
Section 2. SPECIAL MEETINGS: Special meetings of the
shareholders may be called by the Board of Directors, the
President or the Secretary, or in any other manner permitted by
law; and each such meeting shall be held at such time, and at
such place either within or without the State of Delaware as may
be specified in the notice thereof.
Section 3. QUORUM: At any meeting of shareholders, the
holders of a majority of the outstanding shares entitled to vote
thereat, and present in person or represented by proxy, shall
constitute a quorum for all purposes. A majority in interest of
the shareholders, present and entitled to vote at any meeting may
adjourn the same from time to time without notice other than
announcement at the meeting, and any business may be transacted
at such meeting as originally notified.
Section 4. NOTICE: Written notice stating the place, date
and hour of the meeting and, in case of a special meeting the
purpose or purposes for which the meeting is called, shall be
delivered, either personally or by mail, to each shareholder
entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 5. WAIVER OF NOTICE: Whenever notice is required to
be given, a written waiver thereof, signed by the person entitled
to notice, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a shareholder at a
special meeting shall constitute a waiver of notice of such
meeting, except where a shareholder attends for the express
purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. Neither the
business to be transacted, nor the purpose of any regular or
special meeting need be specified in any written waiver of notice
of such meeting.
Section 6. ACTION WITHOUT MEETING: Any action required or
permitted to be taken at a meeting of shareholders, may be taken
without a meeting if authorized by the written consent of all
shareholders entitled to vote. Such consent shall have the same
effect as a unanimous vote.
ARTICLE II - DIRECTORS
Section 1. ELECTION: The number of Directors which shall
constitute the whole Board shall be three. The Directors shall be
elected at the annual meeting of shareholders except as provided
in Section 2 of this Article, and each Director elected shall
hold office until his successor is elected and qualified or until
his earlier removal or resignation. Directors need not be
shareholders.
<PAGE>
2
Section 2. TENURE; VACANCIES: Any vacancy occurring in the
Board of Directors may be filled by an affirmative vote of a
majority of the remaining Directors though less than a quorum of
the Board of Directors. A Director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in
office. Any directorship to be filled by reason of an increase in
the number of Directors may be filled by the Board of Directors
for a term of office continuing only until the next election
Directors by the shareholders.
Section 3. POWERS: The business of the corporation shall be
managed by the Board of Directors which may exercise all such
powers and do all such lawful acts which they may deem necessary
and appropriate for the expedient conduct and furtherance of the
Company's business.
Section 4. MEETINGS: Meetings of the Board of directors,
regular or special, may be held either within or without the
State or Delaware. Regular meetings of the Board may be held
without notice at such time and place as shall from time to time
be determined by the Board. Special meetings may be held upon
notice of each Director, either personally or by mail or by
telegram.
Section 5. QUORUM: A majority of the total number of
Directors shall constitute a quorum at all meetings of the Board,
and the act of the majority of the Directors present at any
meeting at which a quorum is present shall be the act of the
Board of Directors. At any meeting of Directors, whether or not a
quorum is present, the Directors present thereat may adjourn the
same from time to time without notice other than announcement at
the meeting.
Section 6. COMMITTEES: The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one
or more committees, each committee to consist of one or more
Directors. Each such committee shall have the functions and
powers as the Board may designate in accordance with the laws of
Delaware. The Board shall have the power at any time to fill
vacancies in, to change the size of membership of, or to
dissolve, any one or more of such committees. Each such committee
shall have such name as may be determined by the Board, and shall
keep regular minutes of its proceedings and report the same to
the Board of Directors for approval as required.
Section 7. WAIVER OF NOTICE: Whenever notice is required to
be given, a written waiver thereof, signed by the person entitled
to notice, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a Director at a
special meeting shall constitute a waiver of notice of such
meeting, except where a Director attends for the express purpose
of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business
to be transacted, nor the purpose of any regular or special
meeting need be specified in the waiver of notice of such
meeting.
Section 8. ACTION WITHOUT MEETING: Any action required or
permitted to be taken at a meeting of the Board of Directors or
of a committee of the Board of Directors, may be taken without a
meeting if a consent in writing shall be signed by all of the
members of the Board or of such committee. Such consent shall
have the same effect as a unanimous vote.
Section 9. COMPENSATION: The Directors may be paid their
expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each
meeting or a stated salary as Director. No such payment shall
preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special
or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE III - OFFICERS
Section 1. ELECTION: The officers of the corporation shall
be chosen by the Board of Directors and shall be a President, a
Secretary and a Treasurer. The Board of Directors may also choose
additional or assistant officers. Any number of offices may be
held by the same person.
<PAGE>
3
Section 2. TENURE; VACANCIES: The officers of the
corporation shall hold office until their successors are chosen
and qualified. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a
majority of the Board. Any vacancy occurring in any office shall
be filled by the Board of Directors.
Section 3. DUTIES; COMPENSATION: The duties and salaries of
each officer shall be established by resolution of the Board of
Directors.
ARTICLE IV - CAPITAL STOCK
Section 1. STOCK CERTIFICATES: All certificates of stock of
the Company shall be signed by the Chairman or Vice Chairman of
the Board of Directors, or the President or a Vice President and
the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer of the Company and shall bear the corporate
seal of the Company. To the extent permitted by law, the
signatures of such officers, and the corporate seal, appearing on
certificates of stock, may be facsimile, engraved or printed. In
case any such officer who signed or whose facsimile signature
appears on any such certificate shall have ceased to be such
officer before the certificate is issued, such certificate may
nevertheless be issued by the Company with the same effect as if
such officer had not ceased to be such officer at the date of its
issue.
The Company shall not issue a certificate for a fractional
share; however, the Board of Directors may issue, in lieu of any
fractional share, scrip or other evidence of ownership upon such
terms and conditions as it may deem advisable.
All certificates of stock of each class and series shall be
numbered appropriately.
Section 2. RECORD OWNERSHIP: The corporation shall maintain
a record of the name and address of the holder of each
certificate, the number of shares represented thereby, and the
date of issue and the number thereof. The Company shall be
entitled to treat the holder of record of any share of stock as
the holder in fact thereof, and accordingly it will not be bound
to recognize any equitable or other claim of interest in such
share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise
provided by the laws of Delaware.
Section 3. TRANSFERS: Transfers of stock shall be made on
the books of the Company only by direction of the person named in
the certificate, or by an attorney lawfully constituted in
writing, and upon the surrender of the certificate therefor.
Section 4. TRANSFER AGENTS: REGISTRARS: The Board of
Directors may, by resolution, from time to time appoint one or
more Transfer Agents, that may be officers or employees of the
Company, to make transfers of shares of stock of the Company, and
one or more Registrars to register shares of stock issued by or
on behalf of the Company. The Board of Directors may adopt such
rules as it may deem expedient concerning the issue, transfer and
registration of stock certificates of the Company.
Section 5. LOST CERTIFICATES: Each person whose certificate
of stock has been lost, stolen or destroyed shall be entitled to
have a replacement certificate issued in the same name and for
the same number of shares as the original certificate, provided
that such person has first filed with such officers of the
Company, Transfer Agents or Registrars, as the Board of Directors
may designate, an affidavit stating that such certificate was
lost, stolen or destroyed and a bond of indemnity, each in the
form and with such provisions as such officers, Transfers Agents
or Registrars may reasonably deem satisfactory.
Section 6. TRANSFER BOOKS; RECORD DATES: The Board of
Directors shall have power to close the stock transfer books of
the Company as permitted by law; provided, however, that in lieu
of closing the said books, the Board of Directors may fix in
advance a date, not exceeding sixty days preceding the date of
any meeting of shareholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date
when
<PAGE>
4
any change or conversion or exchange of shares shall go into
effect, as a record date when any determination of the
shareholders entitled to notice of, and to vote at, any such
meetings, and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights,
or to exercise the rights in respect of any such change,
conversion or exchange of shares, and in such case such
shareholders and only such shareholders as shall be shareholders
of record on the date of closing the transfer books or on the
record date so fixed shall be entitled to notice of, and to vote
at, such meeting, and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights,
or to exercise such rights, as the case may be, notwithstanding
any transfer of any shares on the books of the Company after such
date of closing of the transfer books or such record date fixed
as aforesaid.
ARTICLE V - INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
The Company may indemnify any person who is or was a
Director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a Director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses actually and
reasonably incurred by him in connection with any civil,
criminal, administrative or investigative action, suit,
proceeding or claim, to the full extent and in the manner
permitted by law.
ARTICLE VI - MISCELLANEOUS PROVISIONS
Section 1. SEAL: The corporate seal of the Company shall be
circular and have inscribed thereon the words "Corporate Seal
Delaware" and may also have inscribed thereon the name of the
corporation and the date of incorporation; an impression of the
same is set forth hereon.
Section 2. FISCAL YEAR: The fiscal year of the Company
shall begin with the first day of October and end on the
thirtieth day of September in each year.
Section 3. AMENDMENTS: These Bylaws may be restated,
amended or repealed by a majority vote of the Board of Directors.
INDENTURE, dated as of March 12, 1998, between PURINA
MILLS, INC., a Delaware corporation (as further defined below,
the "Company") and THE FIRST NATIONAL BANK OF CHICAGO, a national
banking association, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the
Holders of the Company's 9% Senior Subordinated Notes Due 2010
(the "Initial Notes") and, if and when issued in exchange for
Initial Notes as provided in the Registration Rights Agreement
(as hereinafter defined), the Company's Series B 9% Senior
Subordinated Notes Due 2010 (the "Exchange Notes") and, if and
when issued pursuant to a private exchange for Initial Notes, the
Company's Series C 9% Senior Subordinated Notes Due 2010 (the
"Private Exchange Notes") and, if and when issued, any Subsequent
Add-on Notes (as defined herein; such Subsequent Add-on Notes,
together with the Initial Notes, the Exchange Notes and the
Private Exchange Notes, the "Notes"):
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.1. Definitions.
"Additional Assets" means (i) any property or assets
(other than Indebtedness and Capital Stock) in a Related
Business; (ii) the Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition of such
Capital Stock by the Company or another Restricted Subsidiary
(or, in the case of an Asset Disposition of the Capital Stock of
a Wholly Owned Subsidiary or tangible assets of a Wholly Owned
Subsidiary, the Capital Stock of a Person that becomes a Wholly
Owned Subsidiary); or (iii) Capital Stock constituting a minority
interest in any Person that at such time is a Restricted
Subsidiary; provided, however, that, in the case of clauses (ii)
or (iii), such Restricted Subsidiary is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other
Person, directly or indirectly, controlling or controlled by or
under direct or indirect common control with such specified
Person. For the purposes of this definition, "control" when used
with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of the
provisions described under Section 4.5, Section 4.7 and Section
4.8 only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power
of the Voting Stock (on a fully diluted basis) of the Company or
of rights or warrants to purchase such Voting Stock (whether or
not currently exercisable) and any Person who would be an
<PAGE>
2
Affiliate of any such beneficial owner pursuant to the first
sentence hereof.
"Asset Disposition" means any sale, lease, transfer or
other disposition (or series of related sales, leases, transfers
or dispositions) by the Company or any Restricted Subsidiary,
including any disposition by means of a merger, consolidation or
similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors'
qualifying shares or shares required by applicable law to be held
by a Person other than the Company or a Restricted Subsidiary),
(ii) all or substantially all the assets of any division or line
of business of the Company or any Restricted Subsidiary or (iii)
any other assets not constituting Capital Stock of the Company or
any Restricted Subsidiary outside of the ordinary course of
business of the Company or such Restricted Subsidiary (other
than, in the case of (i), (ii) and (iii) above, (w) a disposition
of obsolete or worn-out assets, (x) a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted
Subsidiary to another Restricted Subsidiary, (y) for purposes of
Section 4.7 only, a disposition that constitutes a Restricted
Payment or Permitted Investment permitted by Section 4.5 and (z)
disposition of assets with a fair market value of less than $1.0
million).
"Attributable Indebtedness" in respect of a Sale/
Leaseback Transaction means, as at the time of determination,
the present value (discounted at the interest rate borne by the
Notes, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including
any period for which such lease has been extended).
"Average Life" means, as of the date of determination,
with respect to any Indebtedness or Preferred Stock, the quotient
obtained by dividing (i) the sum of the product of the numbers of
years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred
Stock multiplied by the amount of such payment by (ii) the sum of
all such payments.
"Bank Indebtedness" means all Obligations pursuant to
the Credit Agreement.
"Board of Directors" means the Board of Directors of
the Company or any committee thereof duly authorized to act on
behalf of such Board.
"Business Day" means a day other than a Saturday,
Sunday or other day on which banking institutions in New York
City are authorized or required by law to close.
<PAGE>
3
"Capitalized Lease Obligation" means an obligation
that is required to be classified and accounted for as a
capitalized lease for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP; and the Stated Maturity
thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment
of a penalty.
"Capital Stock" of any Person means any and all
shares, interests, rights to purchase, warrants, options,
participation or other equivalents of or interests in (however
designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the
following events:
(i) Prior to the earlier to occur of (A) the first
public offering of common stock of the Company or (B) the
first public offering of common stock of Holdings, the
Permitted Holders cease to be the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of a majority in the aggregate of
the total voting power of the Voting Stock of the Company,
whether as a result of issuance of securities of Holdings
or the Company, any merger, consolidation, liquidation or
dissolution of Holdings or the Company, any direct or
indirect transfer of securities by Holdings or the Company
or otherwise (for purposes of this clause (i) and clause
(ii) below, the Permitted Holders shall be deemed to
beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the
"parent corporation") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly,
in the aggregate a majority of the voting power of the
Voting Stock of the parent corporation);
(ii) subsequent to the first public offering of
common stock of the Company or Holdings, (A) any "person"
(as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is
or becomes the beneficial owner (as defined in clause (i)
above, except that for purposes of this clause (ii) such
person shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than
40% of the total voting power of the Voting Stock of the
Company and (B) the Permitted Holders "beneficially own"
(as defined in clause (i) above), directly or indirectly,
in the aggregate a lesser percentage of the total voting
power of the Voting Stock of the Company than such other
person and
<PAGE>
4
do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority
of the Board of Directors (for the purposes of this clause
(ii), such other person shall be deemed to beneficially own
any Voting Stock of a specified corporation held by a
parent corporation, if such other person is the beneficial
owner (as defined in this clause (ii)), directly or
indirectly, of more than 40% of the voting power of the
Voting Stock of such parent corporation and the Permitted
Holders "beneficially own" (as defined in clause (i)
above), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such
parent corporation and do not have the right or ability by
voting power, contract or otherwise to elect or designate
for election a majority of the board of directors of such
parent corporation);
(iii) during any period of two consecutive years (or,
in the case this event occurs within the first two years
after the Issue Date, such shorter period as shall have
begun on the Issue Date), individuals who at the beginning
of such period constituted the Board of Directors of
Holdings or the Company (together with any new directors
whose election by such Board of Directors or whose
nomination for election by the shareholders of Holdings or
the Company was approved by a vote of a majority of the
directors of Holdings or the Company then still in office
who were either directors at the beginning of such period
or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority
of the Board of Directors of Holdings or the Company then
in office; or
(iv) the merger or consolidation of Holdings or the
Company with or into another Person or the merger of
another Person with or into Holdings or the Company, or the
sale of all or substantially all the assets of Holdings or
the Company to another Person (in each case other than a
Person that is controlled by the Permitted Holders), and,
in the case of any such merger or consolidation, the
securities of Holdings or the Company that are outstanding
immediately prior to such transaction and which represent
100% of the aggregate voting power of the Voting Stock of
Holdings or the Company are changed into or exchanged for
cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged
for, in addition to any other consideration, securities of
the surviving corporation that represent immediately after
such transaction, at least a majority of the aggregate
voting power of the Voting Stock of the surviving
corporation.
"Closed Facility" means (a) a plant, mill or other
facility of the Company or any of its Restricted Subsidiaries no
longer operating on the Issue Date or (b) any plant, mill or
other facility (provided that the aggregate book value of all
<PAGE>
5
such plants, mills or other facilities covered by this clause (b)
shall not exceed $10.0 million) at which the Board of Directors
of the Company elects to cease operations after the Issue Date.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commodity Supply Agreement" means the Master
Procurement Agreement, to be dated as of the effective date of
the Merger, between Nutrition Supply and Trading, a division of
Koch Agriculture, and the Company.
"Consolidated Coverage Ratio" as of any date of
determination means the ratio of (i) the aggregate amount of
EBITDA for the period of the most recent four consecutive fiscal
quarters ending at least 45 days prior to the date of such
determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (1) if the Company or
any Restricted Subsidiary has Incurred any Indebtedness (other
than for working capital under the Credit Agreement) since the
beginning of such period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA
and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the
first day of such period, (2) if the Company or any Restricted
Subsidiary has repaid, repurchased, defeased or otherwise
discharged any Indebtedness since the beginning of such period or
if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Indebtedness
Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been
replaced) on the date of the transaction giving rise to the need
to calculate the Consolidated Coverage Ratio, EBITDA and
Consolidated Interest Expense for such period shall be calculated
on a pro forma basis as if such discharge had occurred on the
first day of such period and as if the Company or such Restricted
Subsidiary has not earned the interest income actually earned
during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise
discharge such Indebtedness, (3) if since the beginning of such
period the Company or any Restricted Subsidiary shall have made
any Asset Disposition or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Asset
Disposition, the EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by
an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted
<PAGE>
6
Subsidiary repaid, repurchased, defeased or otherwise discharged
with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is
sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to
the extent the Company and its continuing Restricted Subsidiaries
are no longer liable for such Indebtedness after such sale), (4)
if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person which
becomes a Restricted Subsidiary) or an acquisition of assets,
including any acquisition of assets occurring in connection with
a transaction requiring a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such
period and (5) if since the beginning of such period any Person
(that subsequently became a Restricted Subsidiary or was merged
with or into the Company or any Restricted Subsidiary since the
beginning of such period) shall have made any Asset Disposition,
any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (3) or (4) above if made by the
Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition of assets occurred on the
first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible
financial or accounting officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall
be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period
(taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months).
"Consolidated Interest Expense" means, for any period,
the total interest expense of the Company and its consolidated
Restricted Subsidiaries, plus, to the extent not included in such
total interest expense, and to the extent Incurred by the Company
or its Restricted Subsidiaries, without duplication, (i) interest
expense attributable to Capitalized Lease Obligations and
one-third of the rental expense attributable to leases
constituting part of a Sale/Leaseback Transaction, (ii)
amortization of debt discount and debt issuance cost (other than
the amortization of debt issuance cost in respect of the
<PAGE>
7
Notes and the Credit Agreement entered into on the Issue Date),
(iii) capitalized interest, (iv) non-cash interest expense, (v)
commissions and discounts owed with respect to letters of credit
and bankers' acceptance financing, (vi) net costs associated with
Interest Rate Agreements or Currency Agreements entered into with
respect to Indebtedness of the Company or its Restricted
Subsidiaries (including amortization of fees), (vii) Preferred
Stock dividends in respect of all Preferred Stock of the Company
and its Restricted Subsidiaries held by Persons other than the
Company or a Wholly Owned Subsidiary, (viii) interest incurred in
connection with Investments in discontinued operations (but only
if the relevant obligations remain as of the relevant calculation
date), (ix) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by (or
secured by the assets of) the Company or any Restricted
Subsidiary and to the extent that such interest has not been paid
when due (after giving effect to any grace period) and (x) the
cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such
plan or trust to pay interest or fees to any Person (other than
the Company) in connection with Indebtedness Incurred by such
plan or trust.
"Consolidated Net Income" means, for any period, the
net income (loss) of the Company and its consolidated
Subsidiaries; provided, however, (i) any net income (or loss) of
any Person (other than the Company) if such Person is not a
Restricted Subsidiary, except that (A) subject to the exclusion
contained in (iv) below, the Company's equity in the net income
of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (B) the Company's equity in
a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income to the extent of any
cash actually contributed by the Company or a Restricted
Subsidiary to such Person during such period, (ii) any net income
of any Person acquired by the Company or a Subsidiary in a
pooling of interests transaction for any period prior to the date
of such acquisition, (iii) any net income of any Restricted
Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends
or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to the Company, except that (A) subject
to the exclusion contained in (iv) below, the Company's equity in
the net income of any such Restricted Subsidiary for such period
shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Restricted
Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to
<PAGE>
8
another Restricted Subsidiary, to the limitation contained in
this clause) and (B) the Company's equity in a net loss of any
such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income, (iv) any gain (or loss)
realized upon the sale or other disposition of any assets of the
Company, its consolidated Subsidiaries or any other Person
(including pursuant to any Sale/Leaseback Transaction) which is
not sold or otherwise disposed of in the ordinary course of
business and any gain or loss realized upon the sale or other
disposition of any Capital Stock of any Person, (v) any
extraordinary gain or loss, (vi) the amortization of debt
issuance cost in respect of the Notes and the Credit Agreement
entered into on the Issue Date and (vii) the cumulative effect of
a change in accounting principles. Notwithstanding the foregoing,
for the purposes of Section 4.5 only, there shall be excluded
from Consolidated Net Income any dividends, repayments of loans
or advances or other transfers of assets from Unrestricted
Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the
amount of Restricted Payments permitted under Section 4.5
pursuant to clause (3)(D) of paragraph (a) thereof.
"Consolidated Net Worth" means the total of the
amounts shown on the balance sheet of the Company and its
consolidated Subsidiaries, determined on a consolidated basis in
accordance with GAAP, as of the end of the most recent fiscal
quarter of the Company ending prior to the taking of any action
for the purpose of which the determination is being made for
which financial statements are available, as (i) the par or
stated value of all outstanding Capital Stock of the Company plus
(ii) paid-in capital or capital surplus relating to such Capital
Stock plus (iii) any retained earnings or earned surplus less (A)
any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Consolidated NIDA" means, for any period, the
Consolidated Net Income for such period plus (to the extent
deducted in calculating Consolidated Net Income) (a) depreciation
expense of the Company and its consolidated Restricted
Subsidiaries, (b) amortization expense of the Company and its
consolidated Restricted Subsidiaries (excluding amortization
expense attributable to a prepaid cash item that was paid in a
prior period) and (c) all other non-cash charges of the Company
and its consolidated Restricted Subsidiaries (excluding any such
non-cash charge to the extent that it represents an accrual of or
reserve for cash expenditures in any future period), in each case
for such period.
"Credit Agreement" means that certain credit facility
among the Company, Chase Bank of Texas, National Association, and
the lenders from time to time party thereto, including any
collateral documents, instruments and agreements executed in
connection therewith, and the term Credit Agreement shall also
include any amendments, supplements, modifications, extensions,
<PAGE>
9
renewals, restatements or refundings thereof and any credit
facilities that replace, refund or refinance any part of the
loans, other credit facilities or commitments thereunder,
including any such replacement, refunding or refinancing facility
that increases the amount borrowable thereunder or alters the
maturity thereof.
"Currency Agreement" means in respect of a Person any
foreign exchange contract, currency swap agreement or other
similar agreement designed to protect such Person against
fluctuations in currency values as to which such Person is a
party or a beneficiary.
"Default" means any event which is, or after notice or
passage of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank
Indebtedness and (ii) any other Senior Indebtedness of the
Company which, at the date of determination, has an aggregate
principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to,
at least $25.0 million and is specifically designated by the
Company in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of
this Indenture.
"Disqualified Stock" means, with respect to any
Person, any Capital Stock which by its terms (or by the terms of
any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event (i) matures or
is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable (other
than for Capital Stock of the Company (other than Disqualified
Stock)) at the option of the holder thereof, in whole or in part,
in each case on or prior to the first anniversary of the Stated
Maturity of the Notes; provided, however, that any Capital Stock
that would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of
an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not
constitute Disqualified Stock if (x) the "asset sale" or "change
of control" provisions applicable to such Capital Stock are not
more favorable to the holders of such Capital Stock than the
provisions described under Section 4.7 and Section 4.9 and (y)
any such requirement only becomes operative after compliance with
such terms applicable to the Notes, including the purchase of any
Notes tendered pursuant thereto.
"EBITDA" for any period means the sum of Consolidated
Net Income, plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) Consolidated
Interest Expense, (b) all income tax expense of the Company and
<PAGE>
10
its consolidated Restricted Subsidiaries, (c) depreciation
expense of the Company and its consolidated Restricted
Subsidiaries, (d) amortization expense of the Company and its
consolidated Restricted Subsidiaries (excluding amortization
expense attributable to a prepaid cash item that was paid in a
prior period), (e) all other non-cash charges of the Company and
its consolidated Restricted Subsidiaries (excluding any such
non-cash charge to the extent that it represents an accrual of or
reserve for cash expenditures in any future period), in each case
for such period and (f) $3.2 million of management bonuses
payable in connection with the Merger. Notwithstanding the
foregoing, the provision for taxes based on the income or profits
of, and the depreciation and amortization and non-cash charges
of, a Restricted Subsidiary shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was
included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary
or its stockholders.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Existing Debt Securities" means the Existing PMI
Senior Subordinated Notes together with the Existing Holdings
Discount Debentures.
"Existing Holdings Discount Debentures" means Holdings'
outstanding 11 1/2% Series B Subordinated Discount Debentures due
September 1, 2005.
"Existing PMI Senior Subordinated Notes" means the
Company's outstanding 10 1/4% Senior Subordinated Notes due
September 1, 2003, guaranteed by Holdings.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect as of the Issue
Date, including those set forth in (i) the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii)
such other statements by such other entity as approved by a
significant segment of the accounting profession and (iv) the
rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13
of the Exchange Act, including opinions and pronouncements in
staff accounting bulletins and similar written statements from
the accounting staff of the SEC.
<PAGE>
11
"Guarantee" means any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness of any Person and any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase
or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements
to keep-well, to purchase assets, goods, securities or services,
to take-or-pay or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the
obligations of such Person pursuant to any Interest Rate
Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose
name a Note is registered on the Registrar's books.
"Holdings" means PM Holdings Corporation, the Company's
parent corporation.
"Incur" means issue, assume, Guarantee, incur or
otherwise become liable for; provided, however, that any
Indebtedness or Capital Stock of a Person existing at the time
such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary.
The term "Incurrence" when used as a noun shall have a
correlative meaning.
"Indebtedness" means, with respect to any Person on any
date of determination (without duplication):
(i) the principal in respect of (A) indebtedness of
such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium
on such indebtedness to the extent such premium has become
due and payable;
(ii) all Capitalized Lease Obligations of such
Person and all Attributable Indebtedness in respect of
Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or
assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all
obligations of such
<PAGE>
12
Person under any title retention agreement (but excluding
Trade Payables arising in the ordinary course of business);
(iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other
than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses
(i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such
letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than
the tenth Business Day following receipt by such Person of
a demand for reimbursement following a payment on the
letter of credit);
(v) the amount of all obligations of such Person
with respect to the redemption, repayment or other
repurchase of any Disqualified Stock or, with respect to
any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in
each case, any accrued dividends);
(vi) all obligations of the type referred to in
clauses (i) through (v) of other Persons and all dividends
of other Persons for the payment of which, in either case,
such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including
by means of any Guarantee;
(vii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons secured by any
Lien on any property or asset of such Person (whether or
not such obligation is assumed by such Person), the amount
of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the
obligation so secured; and
(viii) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date.
"Indenture" means this Indenture, as amended or
supplemented from time to time.
"Interest Rate Agreement" means with respect to any
Person any interest rate protection agreement, interest rate
future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar
<PAGE>
13
agreement or arrangement designed to protect such Person against
fluctuations in interest rates as to which such Person is party
or a beneficiary.
"Investment" in any Person means any direct or
indirect advance, loan (other than advances to customers in the
ordinary course of business that are recorded as accounts
receivable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. For purposes of the
definitions of "Unrestricted Subsidiary" and "Restricted Payment"
and Section 4.5, (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that
upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so re-designated a
Restricted Subsidiary; and (ii) any property transferred to or
from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as
determined in good faith by the Board of Directors and evidenced
by a resolution of such Board of Directors.
"Investment Grade" means a rating of BBB- (or its
equivalent) or higher by Standard & Poor's Ratings Group (or its
successor) and Baa3 (or its equivalent) or higher by Moody's
Investors Service, Inc. (or its successor).
"Issue Date" means the date on which the Initial Notes
are originally issued.
"Jet Pro Sales Transactions" means sales of Jet-Pro(R)
dewatering equipment to the Company by Koch Feed Technology
Company.
"Koch Agriculture" means Koch Agriculture Company, a
Nebraska corporation, a wholly owned subsidiary of Koch
Industries.
"Koch Industries" means Koch Industries, Inc., a Kansas
corporation.
<PAGE>
14
"Legal Holiday" has the meaning ascribed in
Section 11.8.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in
the nature thereof).
"Merger" means the merger of Merger Sub with and into
Holdings on the morning of the Offering.
"Merger and Tender Offer Payments" means (i) all
payments made by the Company in connection with the Tender Offer
with respect to the Existing PMI Senior Subordinated Notes, (ii)
all payments made by the Company to Holdings of amounts required
to be paid by Holdings in connection with the Tender Offer with
respect to the Existing Holdings Discount Debentures and (iii)
payments made by the Company to Holdings from the net proceeds of
the Offering and borrowings under the Credit Agreement remaining
subsequent to the payments made under (i) and (ii) above to be
paid by Holdings in connection with the Merger.
"Merger Sub" means Arch Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of Koch
Agriculture.
"Net Available Cash" from an Asset Disposition means
cash payments received (including any cash payments received by
way of deferred payment of principal pursuant to a note or
installment receivable or otherwise and proceeds from the sale or
other disposition of any securities received as consideration,
but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring
Person of Indebtedness or other obligations relating to such
properties or assets or received in any other non cash form)
therefrom, in each case net of (i) all legal, title and recording
tax expenses, commissions and other fees and expenses incurred,
and all Federal, state, provincial, foreign and local taxes
required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on
any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon
or other security arrangement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable
law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries or joint
ventures as a result of such Asset Disposition and (iv) the
deduction of appropriate amounts to be provided by the seller as
a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition
and retained by the Company or any Restricted Subsidiary after
such Asset Disposition.
<PAGE>
15
"Net Cash Proceeds", with respect to any issuance or
sale of Capital Stock, means the cash proceeds of such issuance
or sale net of attorneys' fees, accountants' fees, underwriters'
or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Non-Recourse Debt" means Indebtedness as to which
neither the Company nor any Restricted Subsidiary (other than
Standard Securitization Undertakings in respect of Indebtedness
permitted pursuant to clause (i) of Section 4.4) (a) provides any
Guarantee or credit support of any kind (including any
undertaking, Guarantee, indemnity, agreement or instrument that
would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor or otherwise).
"Obligations" means with respect to any Indebtedness
all obligations for principal, premium, interest, penalties,
fees, indemnifications, reimbursements, and other amounts payable
pursuant to the documentation governing such Indebtedness.
"Offering" means the offering of the Notes pursuant to
the Offering Circular.
"Offering Circular" means the Offering Circular dated
March 6, 1998 relating to the Initial Notes; provided that after
the issuance of Exchange Notes, all references herein to
"Offering Circular" shall be deemed references to the prospectus
contained in the registration statement relating to the Exchange
Notes.
"Officer" means the Chairman of the Board, the
President, any Vice President, the Treasurer or the Secretary of
the Company, as applicable.
"Officers' Certificate" means a certificate signed by
any two Officers.
"Opinion of Counsel" means a written opinion from
Cleary, Gottlieb, Steen & Hamilton, August F. Ottinger, Esq. or
any other legal counsel who is reasonably acceptable to the
Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Customer Financing" means the Incurrence by
the Company of obligations (including Guarantees of indebtedness,
standby letters of credit (and reimbursement obligations in
respect thereof) for the repayment of indebtedness, product
repurchase agreements and other obligations) owed to any lender
of a customer of the Company or any of its Restricted
Subsidiaries Incurred in the ordinary course of business;
provided that (A) any such lender's loans are used to finance the
purchase price to be paid to the Company for animal feed products
<PAGE>
16
and programs sold by the Company to such customer and (B) the
amount of any such obligation of the Company shall not exceed the
purchase price to be paid to the Company for such animal feed
products and programs sold by the Company to such customer which
are financed by such lender.
"Permitted Holders" means Koch Agriculture Company and
its Affiliates.
"Permitted Investment" means an Investment by the
Company or any Restricted Subsidiary in (i) the Company, a
Restricted Subsidiary or a Person which will, upon the making of
such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary
is a Related Business; (ii) another Person if as a result of such
Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets
to, the Company or a Restricted Subsidiary; provided, however,
that such Person's primary business is a Related Business; (iii)
Temporary Cash Investments; (iv) receivables owing to the Company
or any Restricted Subsidiary, if created or acquired in the
ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as
the Company or any such Restricted Subsidiary deems reasonable
under the circumstances; (v) payroll, travel and similar advances
to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business
consistent with past practice of the Company or such Restricted
Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business
and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments; (viii) any Person to the extent such
investment represents the non-cash portion of the consideration
received in connection with the sale or other disposition of an
asset to the extent not prohibited pursuant to Section 4.7; (ix)
joint ventures and Unrestricted Subsidiaries in an aggregate
amount at any one time outstanding not to exceed $10.0 million,
provided that such joint ventures and Unrestricted Subsidiaries
are engaged in a Related Business; (x) Investments received in
exchange for Capital Stock (other than Disqualified Stock) of the
Company; (xi) Investments existing on the Issue Date in an amount
not to exceed the amount of such Investments on the Issue Date;
(xii) (A) Permitted Customer Financing and (B) loans and/or
Guarantees made by the Company in the ordinary course of its
business to or on behalf of any customer of the Company or its
Restricted Subsidiaries to assist such customer to increase its
operations, provided that the aggregate amount of all obligations
and loans outstanding pursuant to this clause (B) (other than
Investments represented by any such loans and/or Guarantees
existing on the Issue Date pursuant to clause (xi) hereof) shall
not exceed $25.0 million at any one time; (xiii) Investments in
<PAGE>
17
connection with Hedging Obligations or agreements designed to
protect the Company and its Restricted Subsidiaries against
fluctuations in commodity prices entered into in the ordinary
course of business; (xiv) prepaid expenses, negotiable
instruments held for collection and lease, performance deposits
and similar deposits, in each case entered into in the ordinary
course of business of the Company and its Restricted
Subsidiaries; and (xv) Investments customarily made in a Special
Purpose Vehicle in connection with a Permitted Securitization in
an amount not to exceed $10.0 million.
"Permitted Liens" means (i) statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other Liens incurred in the
ordinary course of business for sums not yet delinquent for a
period of more than 60 days or being contested in good faith, if
any reserve or other appropriate provision (if any) has been made
in accordance with GAAP, (ii) Liens incurred or deposits made in
the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security or similar obligations, including any Lien securing
letters of credit issued in the ordinary course of business, or
to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the repayment of
borrowed money), (iii) any interest or title of a lessor under
any lease; provided that such Liens do not extend to any property
or assets which is not leased property subject to such lease,
(iv) Liens securing Capitalized Lease Obligations and purchase
money Indebtedness Incurred in accordance with Section 4.3;
provided that such Capitalized Lease Obligations and purchase
money Indebtedness are not subordinated to any other
Indebtedness, (v) Liens upon specified items of inventory or
other goods and proceeds of any Person securing such Person's
obligations in respect of bankers' acceptances issued or created
for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or goods, (vi) Liens
securing reimbursement obligations with respect to letters of
credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof, (vii)
Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements
of the Company and its Restricted Subsidiaries, (viii) customary
Liens securing Hedging Obligations Incurred in accordance with
this Indenture or agreements designed to protect the Company and
its Restricted Subsidiaries against fluctuations in commodity
prices entered into in the ordinary course of business, (ix)
Liens securing Acquired Indebtedness Incurred pursuant to Section
4.3 of a Person merged with or consolidated into the Company;
provided that (a) such Liens secured such Acquired Indebtedness
prior to such merger or consolidation, (b) were not granted in
connection with, or in anticipation of, such merger or
consolidation and (c) do not extend to or cover
<PAGE>
18
any property or assets of the Company other than the property or
assets that secured the Acquired Indebtedness prior to the merger
or consolidation; and (x) customary Liens on the customer loans
and related assets transferred to a Special Purpose Vehicle in
connection with a Permitted Securitization.
"Permitted Securitization" means a securitization in
accordance with customary terms of customer loans described in
clause (xii)(B) of the definition of "Permitted Investment."
"Person" means any individual, corporation,
partnership joint venture, limited liability company,
association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of
any Person, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such
Person.
"Principal" of a Note means the principal of the Note
plus the premium, if any, payable on the Note which is due or
overdue or is to become due at the relevant time; provided,
however, that for purposes of calculating any such premium, the
term "principal" shall not include the premium with respect to
which such calculation is being made.
"Public Equity Offering" means an underwritten primary
public offering of common stock of Holdings or the Company
pursuant to an effective registration statement under the
Securities Act.
"Public Market" means any time after (x) a Public
Equity Offering has been consummated and (y) at least 15% of the
total issued and outstanding common stock of the Company or
Holdings has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant
to Rule 144 under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease
or retire, or to issue other Indebtedness in exchange or
replacement for, such Indebtedness, and shall include the
Refinancing of multiple facilities with a single facility and the
Refinancing of a single facility with multiple facilities.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that
Refinances any Indebtedness of the Company or any Restricted
Subsidiary existing on the Issue Date or Incurred in compliance
<PAGE>
19
with this Indenture (including Indebtedness of the Company that
Refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that Refinances
Indebtedness of another Restricted Subsidiary) including
Indebtedness that Refinances Refinancing Indebtedness; provided,
however, that (i) the Refinancing Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of the Indebtedness
being Refinanced, (ii) the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the
Indebtedness being Refinanced and (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue price)
that is equal to or less than the sum of the aggregate principal
amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding or committed (plus fees and
expenses, including any premium and defeasance costs) under the
Indebtedness being Refinanced; provided further, however, that
Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y)
Indebtedness of the Company or a Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means the businesses of the Company
or any Restricted Subsidiary on the date of this Indenture and
any business related, ancillary or complementary thereto.
"Representative" means (i) with respect to the Bank
Indebtedness, Chase Bank of Texas, National Association, as
Administrative Agent, or any successor or replacement thereof or
any agent acting in a similar capacity in connection with the
Credit Agreement and (ii) any trustee, agent or representative
(if any) for an issue of Senior Indebtedness (other than the Bank
Indebtedness) of the Company.
"Restricted Payment" with respect to any Person means
(i) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock
(including any payment by the Company or its Restricted
Subsidiaries in respect of such Person's Capital Stock in
connection with any merger or consolidation involving such
Person) or similar payment to the direct or indirect holders of
its Capital Stock (other than dividends or distributions payable
solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a
Restricted Subsidiary, and other than pro rata dividends or other
distributions made by a Subsidiary that is not a Wholly Owned
Subsidiary to minority stockholders (or owners of an equivalent
interest in the case of a Subsidiary that is an entity other than
a corporation)), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the
Company held by any Person or of any Capital Stock of a
Restricted Subsidiary held by any Person (other than Capital
Stock of the Company held by a Restricted Subsidiary or Capital
<PAGE>
20
Stock of a Restricted Subsidiary held by the Company or by
another Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the
purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated
Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation
of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of
acquisition) or (iv) the making of any Investment in any Person
(other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the
Company other than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement
relating to property now owned or hereafter acquired whereby the
Company or a Restricted Subsidiary transfers such property to a
Person and the Company or a Restricted Subsidiary leases such
property from such Person.
"SEC" means the U.S. Securities and Exchange
Commission.
"Secured Indebtedness" means any Indebtedness of the
Company secured by a Lien.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Indebtedness" means (i) Bank Indebtedness of,
or guaranteed by, the Company, whether outstanding on the Issue
Date or thereafter Incurred and (ii) Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter Incurred,
including accrued and unpaid interest in respect of (A)
indebtedness of the Company for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which the Company is
responsible or liable unless, in the case of clauses (i) and
(ii), in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that
such obligations are subordinate in right of payment to the
Notes; provided, however, that Senior Indebtedness shall not
include (1) any obligation of the Company to any Subsidiary, (2)
any liability for Federal, state, local or other taxes owed or
owing by the Company, (3) any Trade Payables arising in the
ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities), (4) any Indebtedness of
the Company (and any accrued and unpaid interest respect thereof)
which by the express terms of the agreement or instrument
creating, evidencing or governing such Indebtedness is
subordinate or junior in any respect to any other Indebtedness or
<PAGE>
21
other obligation of the Company, (5) that portion of any
Indebtedness which at the time of Incurrence is Incurred in
violation of this Indenture.
"Senior Subordinated Indebtedness" means the Notes and
any other Indebtedness of the Company that specifically provides
that such Indebtedness is to rank pari passu with the Notes in
right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Company
which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted
Subsidiary that would be a "Significant Subsidiary" of the
Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the SEC.
"Special Purpose Vehicle" means a trust, partnership
or other special purpose Person established by the Company and/or
any of its Subsidiaries to implement a Permitted Securitization,
which incurs no liabilities and engages in no operations other
than one or Permitted Securitizations and whose assets are
limited to the customer loans described in clause (xii)(B) of the
definition of "Permitted Investment" and related assets necessary
to carry out a Permitted Securitization.
"Standard Securitization Undertakings" means
representations, warranties, covenants and indemnities entered
into by the Company or any Restricted Subsidiary which are
customary in a securitization transaction similar to a Permitted
Securitization.
"Stated Maturity" means, with respect to any security,
the date specified in such security as the fixed date on which
the payment of principal of such security is due and payable,
including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening
of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of
the Company (whether outstanding on the Issue Date or thereafter
Incurred) which is expressly subordinate or junior in right of
payment to the Notes pursuant to a written agreement.
"Subsequent Add-on Notes" has the meaning ascribed in
paragraph 4 of the Notes (Exhibit 1 to Appendix).
"Subsidiary" of any Person means any corporation,
association, partnership, limited liability company or other
business entity of which more than 50% of the total voting power
of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence
of any contingency) to vote in the election of directors,
<PAGE>
22
managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and
one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person, but excluding, in the case of the
Company, Oceanview Farms L.P.
"Tax Sharing Agreement" means the tax sharing
agreements to be entered into among Koch Industries, Holdings and
Holdings' subsidiaries (including the Company).
"Temporary Cash Investments" means any of the
following: (i) any investment in direct obligations of the United
States of America or any agency thereof or obligations Guaranteed
by the United States of America or any agency thereof, (ii)
investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any
state thereof or any foreign country recognized by the United
States of America having capital, surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency
equivalent thereof) and whose long-term debt is rated "A" (or
such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) or any money market fund
sponsored by a registered broker dealer or mutual fund
distribution, (iii) repurchase obligations with a term of not
more than 30 days for underlying securities of the types
described in clause (i) above entered into with a bank meeting
the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other
than an Affiliate of a Company) organized and in existence under
the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard & Poor's Ratings Group, (v)
investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America,
or by any political subdivision or taxing authority thereof, and
rated at least "A" by Standard & Poor's Ratings Group or "A" by
Moody's Investors Service, Inc.; and (vi) investments in mutual
funds, whose investment guidelines restrict such funds'
investments to investments which are substantially similar to
those described in clauses (i)-(v).
"Tender Offers" means the offer (i) by the Company to
purchase for cash any and all of the Existing PMI Senior
Subordinated Notes and (ii) by Holdings to purchase for cash any
and all of the Existing Holdings Discount Debentures.
<PAGE>
23
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbbb) as in effect on the date of this Indenture.
"Trade Payables" means, with respect to any Person,
any accounts payable or any indebtedness or monetary obligation
to trade creditors created, assumed or Guaranteed by such Person
arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Trustee" means the party named as such in this
Indenture until a successor replaces it and, thereafter, means
such successor.
"Trust Officer" means any trust officer, assistant
vice president, or vice president of the Trustee assigned by the
Trustee to administer this Indenture.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of
the Company that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors in the
manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. In addition, Bio Kingdom, L.L.C. has been designated
as an Unrestricted Subsidiary on the Issue Date. The Board of
Directors may designate any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary of the Company) to
be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries owns any Capital Stock or Indebtedness of, or
owns or holds any Lien on any property of, the Company or any
other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either
(A) the Subsidiary to be so designated has total consolidated
assets of $1,000 or less or (B) if such Subsidiary has
consolidated assets greater than $1,000, then such designation
would be permitted under Section 4.5. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving
effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of Section 4.3 and
(y) no Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations
(or certificates representing an ownership interest in such
obligations) of the United States of America (including any
agency or instrumentality thereof) for the payment of which the
full faith and credit of the United States of America is pledged
and which are not callable or redeemable at the issuer's option.
<PAGE>
24
"Voting Stock" of a Person means all classes of
Capital Stock or other interests (including partnership
interests) of such Person then outstanding and normally entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers, or trustee thereof.
"Wholly Owned Subsidiary" means a Restricted
Subsidiary of the Company all the Capital Stock of which (other
than directors' qualifying shares or similar shares) is owned by
the Company or one or more other Wholly Owned Subsidiaries.
SECTION 1.2. Other Definitions.
Defined in
Term Section
---- ----------
"Affiliate Transaction"......................... 4.8
"Appendix"...................................... 2.1
"Authenticating Agent".......................... 2.2
"Bankruptcy Law"................................ 6.1
"covenant defeasance option".................... 8.1(b)
"Custodian"..................................... 6.1
"Event of Default".............................. 6.1
"legal defeasance option"....................... 8.1(b)
"Offer" ........................................ 4.7(b)
"Offer Amount".................................. 4.7(c)
"Offer Period".................................. 4.7(c)
"Paying Agent".................................. 2.3
"Purchase Date.................................. 4.7(c)
"Registrar"..................................... 2.3
"Successor Company"............................. 5.1
SECTION 1.3. Incorporation by Reference of Trust
Indenture Act. The mandatory provisions of the TIA are
incorporated by reference in and made a part of this Indenture.
The following TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Company
and any other obligor on the Notes.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
<PAGE>
25
or defined by SEC rule have the meanings assigned to them by such
definitions.
SECTION 1.4. Rules of Construction. Unless the
context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words
in the plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by
virtue of its nature as unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or
other discount security at any date shall be the principal
amount thereof that would be shown on a balance sheet of
the issuer dated such date prepared in accordance with
GAAP;
(8) the principal amount of any Preferred Stock shall
be (i) the maximum liquidation preference of such Preferred
Stock or (ii) the maximum mandatory redemption or mandatory
repurchase price with respect to such Preferred Stock,
whichever is greater;
(9) all references to the date the Notes were
originally issued shall refer to the date the Initial Notes
were originally issued;
(10) provisions apply to events and transactions
taking place after the Issue Date;
(11) references to sections of or rules under the
Securities Act shall be deemed to include substitute,
replacement or successor sections or rules adopted by the
Commission from time to time; and
(12) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
SECTION 1.5. One Class of Notes. The Initial Notes,
the Private Exchange Notes, the Exchange Notes and the Subsequent
Add-on Notes shall vote and consent together on all matters as
one class and none of the Initial Notes, the Private Exchange
<PAGE>
26
Notes or the Exchange Notes shall have the right to vote or
consent as a separate class on any matter.
ARTICLE II
The Notes
---------
SECTION 2.1. Form and Dating. Certain provisions
relating to the Initial Notes, the Subsequent Add-on Notes, the
Private Exchange Notes and the Exchange Notes are set forth in
the Rule 144A Appendix attached hereto (the "Appendix"), which is
hereby incorporated in and expressly made a part of this
Indenture. The Initial Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to
the Appendix, which is hereby incorporated in and expressly made
a part of this Indenture. The Exchange Notes, the Private
Exchange Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A, which is hereby
incorporated by reference and expressly made a part of this
Indenture. The Notes may have notations, legends or endorsements
required by law, rule of any securities exchange or
over-the-counter market on which such Notes are then listed or
quoted, or usage, in addition to those set forth on the Appendix
and Exhibit A. The Company and the Trustee shall approve the
forms of the Notes and any notation, endorsement or legend on
them. Each Note shall be dated the date of its authentication.
The terms of the Notes set forth in the Appendix and Exhibit A
are part of the terms of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to be bound by such
terms.
SECTION 2.2. Execution and Authentication. Two
Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer
holds that office at the time the Trustee authenticates the Note,
the Note shall be valid nevertheless.
A Note shall not be valid until an authorized
signatory of the Trustee manually authenticates the Note. The
signature of the Trustee on a Note shall be conclusive evidence
that such Note has been duly and validly authenticated and issued
under this Indenture.
The Trustee may appoint an agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate the
Notes. Unless limited by the terms of such appointment, any such
Authenticating Agent may authenticate Notes whenever the Trustee
may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent.
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27
SECTION 2.3. Registrar and Paying Agent. The Company
shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange (the "Registrar")
and an office or agency where Notes may be presented for payment
(the "Paying Agent"). The Registrar shall keep a register of the
Notes and of their transfer and exchange. The Company may have
one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any such additional
paying agent.
In the event the Company shall retain any Person not a
party to this Indenture as an agent hereunder, the Company shall
enter into an appropriate agency agreement with any Registrar,
Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall
implement the provisions of this Indenture that relate to such
agent. The Company shall notify the Trustee of the name and
address of each such agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant
to Section 7.7. The Company or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent.
The Company initially appoints the Trustee as
Registrar and Paying Agent for the Notes.
SECTION 2.4. Paying Agent To Hold Money in Trust. By
at least 11:00 a.m. (New York City time) on the date on which any
Principal, interest or Additional Interest, if any, on any Note
is due and payable, the Company shall deposit with the Paying
Agent a sum sufficient to pay such Principal, interest or
Additional Interest, if any, when due. The Company shall require
each Paying Agent (other than the Trustee) to agree in writing
that such Paying Agent shall hold in trust for the benefit of
Noteholders or the Trustee all money held by such Paying Agent
for the payment of Principal of or interest or Additional
Interest, if any, on the Notes and shall notify the Trustee of
any default by the Company in making any such payment. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate
trust fund. The Company at any time may require a Paying Agent
(other than the Trustee) to pay all money held by it to the
Trustee and to account for any funds disbursed by such Paying
Agent. Upon complying with this Section, the Paying Agent (if
other than the Company or a Subsidiary) shall have no further
liability for the money delivered to the Trustee. Upon any
bankruptcy, reorganization or similar proceeding with respect to
the Company, the Trustee shall serve as Paying Agent for the
Notes.
SECTION 2.5. Noteholder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of
Noteholders. If the Trustee or any Paying Agent is not the
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28
Registrar, the Company shall cause the Registrar to furnish to
the Trustee or any such Paying Agent, in writing at least five
Business Days before each interest payment date and at such other
times as the Trustee or any such Paying Agent may request in
writing, a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Noteholders.
SECTION 2.6. [Intentionally Omitted]
SECTION 2.7. Replacement Notes. If a mutilated Note is
surrendered to the Registrar or if the Holder of a Note shall
provide the Company and the Trustee with evidence to their
satisfaction that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate
a replacement Note if the Registrar's requirements are met and
the Holder satisfies any other reasonable requirements of the
Trustee. If required by the Trustee or the Company, such Holder
shall furnish an indemnity bond sufficient in the judgment of the
Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss
which any of them may suffer if a Note is replaced. The Company
and the Trustee may charge the Holder for their expenses in
replacing a Note, including reasonable fees and expenses of
counsel. Every replacement Note is an additional obligation of
the Company.
SECTION 2.8. Outstanding Notes. Notes outstanding at
any time are all Notes authenticated by the Trustee except for
those canceled, those delivered for cancellation and those
described in this Section 2.8 as not outstanding. A Note does not
cease to be outstanding because the Company or an Affiliate of
the Company holds the Note.
If a Note is replaced pursuant to Section 2.7, it
ceases to be outstanding unless the Trustee and the Company
receive proof satisfactory to them that the replaced Note is held
by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity
date money sufficient to pay all Principal and interest payable
on that date with respect to the Notes (or portions thereof) to
be redeemed or maturing, as the case may be, and the Paying Agent
is not prohibited from paying such money to the Noteholders on
that date pursuant to the terms of this Indenture, then on and
after that date such Notes (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.9. Temporary Notes. Until definitive Notes
are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have
variations that the Company considers appropriate for temporary
Notes. Without unreasonable delay, the Company shall prepare and
<PAGE>
29
the Trustee shall authenticate definitive Notes. After the
preparation of definitive Notes, the temporary Notes shall be
exchangeable for definitive Notes upon surrender of the temporary
Notes at any office or agency maintained by the Company for that
purpose and such exchange shall be without charge to the Holder.
Upon surrender for cancellation of any one or more temporary
Notes, the Company shall execute, and the Trustee shall
authenticate and deliver in exchange therefor, one or more
definitive Notes representing an equal principal amount of Notes.
Until so exchanged, the Holder of temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as
a Holder of definitive Notes.
SECTION 2.10. Cancellation. The Company at any time
may deliver Notes to the Trustee for cancellation. The Registrar
and the Paying Agent shall forward to the Trustee for
cancellation any Notes surrendered to them for registration of
transfer or exchange or payment. The Trustee and no one else
shall cancel and destroy (subject to the record retention
requirements of the Exchange Act) all Notes surrendered for
registration of transfer or exchange, payment or cancellation
and, upon request by the Company, deliver a certificate of such
destruction to the Company unless the Company directs the Trustee
to deliver canceled Notes to the Company. The Company may not
issue new Notes to replace Notes it has redeemed, paid or
delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Company
defaults in a payment of interest on the Notes, the Company shall
pay defaulted interest (plus interest on such defaulted interest
to the extent lawful) in any lawful manner. The Company may pay
the defaulted interest to the Persons who are Noteholders on a
subsequent special record date. The Company shall fix or cause to
be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee which specified record
date shall not be less than 10 days prior to the payment date for
such defaulted interest and shall promptly mail or cause to be
mailed to each Noteholder a notice that states the special record
date, the payment date and the amount of defaulted interest to be
paid. The Company shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such
defaulted interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed
payment, such money when so deposited to be held in trust for the
benefit of the Person entitled to such defaulted interest as
provided in this Section 2.11.
SECTION 2.12. CUSIP Numbers. The Company in issuing
the Notes may use "CUSIP" numbers (if then generally in use) and,
if so, the Trustee shall use "CUSIP" numbers in notices of
redemption as a convenience to Holders, provided, however, that
<PAGE>
30
any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the Notes or
as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any
defect in or omission of such numbers.
In the event that the Company shall issue and the
Trustee shall authenticate any Subsequent Add-on Notes, the
Company shall use its best efforts to obtain the same CUSIP
number for such Subsequent Add-on Notes as is printed on the
Notes outstanding at such time; provided, however, that if any
series of Subsequent Add-on Notes is determined, pursuant to an
Opinion of Counsel, to be a different class of security than the
Notes outstanding at such time for federal income tax purposes,
the Company may obtain a CUSIP number for such series of
Subsequent Add-on Notes that is different from the CUSIP number
printed on the Notes then outstanding.
ARTICLE III
Redemption
----------
SECTION 3.1. Notices to Trustee. If the Company elects
to redeem Notes pursuant to paragraph 5 of the Notes (Exhibit 1
to the Appendix), it shall notify the Trustee and the Paying
Agent in writing of the redemption date, the principal amount of
Notes to be redeemed and the redemption price.
The Company shall give each notice to the Trustee and
the Paying Agent provided for in this Section at least 45 days
before the redemption date unless the Trustee and the Paying
Agent consent to a shorter period. Such notice shall be
accompanied by an Officers' Certificate from the Company to the
effect that such redemption will comply with the conditions
herein. The record date relating to such redemption shall be
selected by the Company and set forth in the related notice given
to the Trustee and the Paying Agent, which record date shall be
not less than 15 days prior to the date selected for redemption
by the Company.
SECTION 3.2. Selection of Notes To Be Redeemed. If
fewer than all the Notes then outstanding are to be redeemed, the
Trustee shall select the Notes to be redeemed pro rata or by lot
or by a method that complies with applicable legal and securities
exchange requirements, if any, and that the Trustee in its sole
discretion considers to be fair and appropriate. The Trustee
shall make the selection from outstanding Notes not previously
called for redemption. The Trustee may select for redemption
portions of the principal of Notes that have denominations larger
than $1,000. Notes and portions of them the Trustee selects shall
be in amounts of $1,000 or a whole multiple of $1,000. Provisions
of this Indenture that apply to Notes called for
<PAGE>
31
redemption also apply to portions of Notes called for redemption.
The Trustee shall promptly notify the Company and the Paying
Agent of the Notes or portions of Notes to be redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days
but not more than 45 days before a date for redemption of Notes,
the Trustee at the expense of the Company shall mail a notice of
redemption by first-class mail to each Holder of Notes to be
redeemed.
The notice shall identify the Notes to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price and the amount of accrued
interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption
price plus accrued and unpaid interest, if any;
(5) if fewer than all the outstanding Notes are to be
redeemed, the identification and principal amounts of the
particular Notes to be redeemed and the aggregate principal
amount of Notes to be outstanding after the redemption;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from
making such payment pursuant to the terms of this
Indenture, interest on Notes (or portion thereof) called
for redemption ceases to accrue on and after the redemption
date;
(7) the CUSIP number, if any, printed on the Notes
being redeemed; and
(8) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed
in such notice or printed on the Notes.
The Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. In such event, the
Company shall provide the Trustee with the information required
by this Section 3.3.
SECTION 3.4. Effect of Notice of Redemption. Once
notice of redemption is mailed, Notes called for redemption shall
become due and payable on the redemption date and at the
redemption price stated in the notice. Upon surrender to the
Paying Agent, such Notes shall be paid at the redemption price
stated in the notice, plus accrued and unpaid interest to the
redemption date; provided that the Company shall have deposited
<PAGE>
32
the redemption price with the Paying Agent or the Trustee on or
before 11:00 a.m. (New York City time) on the date of redemption;
provided, further, that if the redemption date is after a regular
record date and on or prior to the interest payment date, the
accrued and unpaid interest shall be payable to the Noteholder of
the redeemed Notes registered on the relevant record date.
Failure to give notice or any defect in the notice to any Holder
shall not affect the validity of the notice to any other Holder.
SECTION 3.5. Deposit of Redemption Price. By at least
11:00 a.m. (New York City time) on the date on which any
Principal of or interest on any Note is due and payable, the
Company shall deposit with the Paying Agent (or, if the Company
or a Subsidiary is the Paying Agent, shall segregate and hold in
trust) money sufficient to pay the redemption price of and
accrued and unpaid interest on all Notes to be redeemed on that
date other than Notes or portions of Notes called for redemption
which are owned by the Company or a Subsidiary and have been
delivered by the Company or such Subsidiary to the Trustee for
cancellation.
If the Company complies with the preceding paragraph,
then, unless the Company defaults in the payment of such
redemption price, interest on the Notes to be redeemed will cease
to accrue on and after the applicable redemption date, whether or
not such Notes are presented for payment.
SECTION 3.6. Notes Redeemed in Part. Upon surrender of
a Note that is redeemed in part, the Company shall execute and
the Trustee shall authenticate for the Holder (at the Company's
expense) a new Note equal in a principal amount to the unredeemed
portion of the Note surrendered.
ARTICLE IV
Covenants
---------
SECTION 4.1. Payment of Notes. The Company shall
promptly pay the Principal of and interest on the Notes on the
dates and in the manner provided in the Notes and in this
Indenture. Principal and interest shall be considered paid on the
date due if on or before 11:00 a.m. (New York City time) on such
date the Trustee or the Paying Agent holds (or, if the Company or
a Subsidiary is the Paying Agent, the segregated account or
separate trust fund maintained by the Company or such Subsidiary
pursuant to Section 2.4) in accordance with this Indenture money
sufficient to pay all Principal and interest then due and the
Trustee or the Paying Agent (or, if the Company or a Subsidiary
is the Paying Agent, the Company or such Subsidiary), as the case
may be, is not prohibited from paying such money to the
Noteholders on that date pursuant to the terms of this Indenture.
<PAGE>
33
The Company shall pay interest on overdue principal at
the rate specified therefor in the Notes, and it shall pay
interest on overdue installments of interest at the same rate to
the extent lawful as provided in Section 2.11.
Notwithstanding anything to the contrary contained in
this Indenture, the Company or the Paying Agent may, to the
extent it is required to do so by law, deduct or withhold income
or other similar taxes imposed by the United States of America or
other domestic or foreign taxing authorities from Principal or
interest payments hereunder.
SECTION 4.2. SEC Reports. Notwithstanding that the
Company may not be required to remain subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the
Company will file with the SEC and provide the Trustee and
Noteholders with the annual reports and such information,
documents and other reports which are specified in Sections 13
and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, such information, documents
and other reports to be so filed and provided at the times
specified for the filing of such information, documents and
reports under such Sections, except that prior to the 150th day
after the Issue Date, such requirements shall be deemed satisfied
by the filing with the SEC and delivering to the Holders on or
prior to such date a registration statement under the Securities
Act that contains the information that would be required in a
Form 10-K for the year ended December 31, 1997 and a Form 10-Q
for the quarter ended March 31, 1998. The Company also will
comply with the other applicable provisions of TIA ss. 314(a).
SECTION 4.3. Limitation on Indebtedness. (a) The
Company will not Incur, directly or indirectly, any Indebtedness
unless, on the date of such Incurrence and after giving effect to
such Incurrence and the application of the net proceeds
therefrom, the Consolidated Coverage Ratio would exceed 2.00:1.
(b) Notwithstanding the foregoing paragraph (a), the
Company may Incur any or all of the following Indebtedness: (i)
Indebtedness of the Company Incurred under the revolving credit
provisions of the Credit Agreement in an aggregate principal
amount outstanding at any time not to exceed the greater of (A)
$100.0 million and (B) the sum of (1) 85% of the gross book value
of the accounts receivable of the Company and its Restricted
Subsidiaries and (2) 50% of the gross book value of the inventory
of the Company and its Restricted Subsidiaries; provided that the
amount in clause (A) shall be reduced by the aggregate amount of
all proceeds from all Asset Dispositions that have been applied
since the Issue Date to permanently reduce the outstanding amount
of such Indebtedness pursuant to Section 4.7; (ii) Indebtedness
of the Company Incurred under the term loan provisions of the
Credit Agreement in an aggregate principal amount outstanding at
any time not to exceed $200.0 million, less the aggregate amount
of all proceeds from all Asset Dispositions
<PAGE>
34
that have been applied since the Issue Date to permanently reduce
the outstanding amount of such Indebtedness pursuant to Section
4.7 and less the aggregate amount of any mandatory prepayments of
principal of term loans thereunder that have been made since the
Issue Date; (iii) Indebtedness of the Company owing to and held
by any Restricted Subsidiary; provided, however, that (A) any
subsequent issuance or transfer of any Capital Stock or any other
event which results in any such Restricted Subsidiary ceasing to
be a Restricted Subsidiary or any subsequent transfer of any such
Indebtedness (except to another Restricted Subsidiary) will be
deemed, in each case, to constitute the Incurrence of such
Indebtedness by the Company and (B) such Indebtedness (if held
other than by a Wholly Owned Subsidiary) is expressly
subordinated to the prior payment in full in cash of all
obligations with respect to the Notes; (iv) Indebtedness
represented by the Notes and the Exchange Notes in an aggregate
principal amount not to exceed $350.0 million; (v) Indebtedness
of the Company (other than the Indebtedness described in clauses
(i), (ii), (iii) or (iv) above) outstanding on the Issue Date;
provided that any Existing PMI Senior Subordinated Notes accepted
for payment in the Tender Offers shall be deemed to be
Indebtedness outstanding on the Issue Date except to the extent
they remain outstanding at the close of business on the second
Business Day following the Issue Date (in which event the
existence of such Existing PMI Senior Subordinated Notes shall be
deemed to constitute an Incurrence of Indebtedness by the Company
under this Indenture); (vi) Indebtedness (including Capitalized
Lease Obligations) of the Company Incurred to finance the
acquisition, construction or improvement of fixed or capital
assets in an aggregate principal amount at any one time
outstanding not to exceed $50.0 million, provided that such
Indebtedness is Incurred within 180 days after the date of such
acquisition, construction or improvement and does not exceed the
fair market value of such acquired, constructed or improved
assets, as determined in good faith by the Board of Directors of
the Company; (vii) Refinancing Indebtedness Incurred in respect
of any Indebtedness Incurred pursuant to paragraph (a) or
pursuant to clauses (ii), (iv), (v) (other than any Existing PMI
Senior Subordinated Notes described in such clause (v)) or this
clause (vii); (viii) Indebtedness (A) in respect of performance
bonds, bankers' acceptances, letters of credit and surety or
appeal bonds provided by the Company in the ordinary course of
its business and which do not secure Indebtedness other than the
Indebtedness and the obligations with respect to which such
instruments were issued and (B) under Currency Agreements and
Interest Rate Agreements Incurred which, at the time of
Incurrence, is in the ordinary course of business; provided,
however, that, in the case of Currency Agreements which relate to
Indebtedness and Interest Rate Agreements, such Currency
Agreements and Interest Rate Agreements are directly related to
Indebtedness permitted to be Incurred by the Company pursuant to
this Indenture; (ix) Indebtedness represented by Guarantees by
the Company of Indebtedness otherwise permitted to be Incurred
pursuant to this covenant or Section 4.4; (x) (A) Permitted
<PAGE>
35
Customer Financing and (B) Guarantees permitted to be Incurred
pursuant to clause (xii)(B) of the definition of "Permitted
Investment"; (xi) Indebtedness of the Company arising from the
honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided that such Indebtedness is
extinguished within five business days of Incurrence; (xii)
Indebtedness of the Company arising from agreements providing for
indemnification, adjustment of purchase price or similar
obligations Incurred in connection with the acquisition or
disposition of any assets of the Company or a Restricted
Subsidiary (whether evidenced by a note, backed by a letter of
credit or otherwise) in a principal amount not to exceed (in the
case of a disposition) the gross proceeds actually received by
the Company or any Restricted Subsidiary in connection with such
disposition; (xiii) Indebtedness of the Company representing
obligations in respect of self-insured retention amounts, amounts
required in connection with workers' compensation and other
insurance coverage Incurred in the ordinary course of business or
reimbursement obligations in respect of amounts Incurred or paid
by an insurance company under any insurance program in the
ordinary course of business; (xiv) Standard Securitization
Undertakings; and (xv) other Indebtedness in an aggregate
principal amount outstanding at any time not to exceed $25.0
million.
(c) Notwithstanding the foregoing, the Company shall
not Incur any Indebtedness pursuant to the foregoing paragraph
(b) if the proceeds thereof are used, directly or indirectly, to
Refinance any Subordinated Obligations unless such new
Indebtedness shall be subordinated to the Notes to at least the
same extent as such Subordinated Obligations being Refinanced.
(c) For purposes of determining compliance with the
foregoing covenant, (i) in the event that an item of Indebtedness
meets the criteria of more than one of the types of Indebtedness
described above, the Company, in its sole discretion, will
classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the
above clauses and (ii) an item of Indebtedness may be divided and
classified in more than one of the types of Indebtedness
described above.
(d) Notwithstanding paragraphs (a) and (b) above, the
Company shall not Incur (i) any Indebtedness if such Indebtedness
is subordinate or junior in ranking in any respect to any Senior
Indebtedness, unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to
the Senior Subordinated Indebtedness or (ii) any Secured
Indebtedness that is not Senior Indebtedness (other than Secured
Indebtedness secured by a Permitted Lien) unless
contemporaneously therewith effective provision is made to secure
<PAGE>
36
the Notes equally and ratably with such Secured Indebtedness for
so long as such Secured Indebtedness is secured by a Lien.
SECTION 4.4. Limitation on Indebtedness and Preferred
Stock of Restricted Subsidiaries. The Company shall not permit
any Restricted Subsidiary to Incur, directly or indirectly, any
Indebtedness or Preferred Stock except: (a) Indebtedness or
Preferred Stock of a Restricted Subsidiary issued to and held by
the Company or a Restricted Subsidiary; provided, however, that
any subsequent issuance or transfer of any Capital Stock which
results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of such
Indebtedness or Preferred Stock (other than to the Company or a
Restricted Subsidiary) shall be deemed, in each case, to
constitute the issuance of such Indebtedness or Preferred Stock
by the issuer thereof; (b) Indebtedness or Preferred Stock of a
Restricted Subsidiary Incurred and outstanding on or prior to the
date on which such Restricted Subsidiary was acquired by the
Company (other than Indebtedness or Preferred Stock Incurred in
connection with, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the
Company); provided, however, that on the date of such acquisition
and after giving effect thereto, the Company would have been able
to Incur at least $1.00 of additional Indebtedness pursuant to
paragraph (a) of the covenant described under Section 4.3; (c)
Indebtedness or Preferred Stock outstanding on the Issue Date
(other than Indebtedness or Preferred Stock described in clauses
(a) and (b) of this paragraph); (d) Refinancing Indebtedness
Incurred in respect of Indebtedness or Preferred Stock referred
to in clauses (b) or (c) of this paragraph or this clause (d);
provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness or
Preferred Stock of a Subsidiary described in clause (c), such
Refinancing Indebtedness shall be Incurred only by such
Subsidiary; (e) Indebtedness of Restricted Subsidiaries organized
under laws other than the United States of America or any state
thereof in amount not to exceed $25.0 million in the aggregate at
any one time; (f) Indebtedness in respect of performance bonds,
bankers' acceptances, letters of credit and surety or appeal
bonds provided by a Restricted Subsidiary in the ordinary course
of its business and which do not secure Indebtedness other than
the Indebtedness and the obligations with respect to which such
instruments were issued; (g) Indebtedness of a Restricted
Subsidiary arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided
that such Indebtedness is extinguished within five business days
of Incurrence; (h) Guarantees of the Indebtedness specified in
clause (i) and (ii) of Section 4.3; and (i) Indebtedness of a
Special Purpose Vehicle which is Non-Recourse Debt (other than
Standard Securitization Undertakings), including Indebtedness
<PAGE>
37
represented by the issuance of participations of interest in such
Special Purpose Vehicle in connection with a Permitted
Securitization.
The Company will not permit any Unrestricted
Subsidiary to Incur any Indebtedness other than Non-Recourse Debt
(except that an Unrestricted Subsidiary may Incur Indebtedness
Guaranteed by the Company to the extent an Investment represented
by such Guarantee is permitted to be made in accordance with
Section 4.5), provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt, such event shall be deemed to
constitute an Incurrence of Indebtedness by the Company or such
Restricted Subsidiary.
SECTION 4.5. Limitation on Restricted Payments. (a)
The Company will not, and will not permit any Restricted
Subsidiary, directly or indirectly, to make any Restricted
Payment if at the time of such Restricted Payment: (1) a Default
or Event of Default shall have occurred and be continuing (or
would result therefrom); (2) the Company could not Incur at least
$1.00 of additional Indebtedness under paragraph (a) of Section
4.3; or (3) the aggregate amount of such Restricted Payment and
all other Restricted Payments (the amount so expended, if other
than in cash, to be determined in good faith by the Board of
Directors of the Company, whose determination (in the case of
amounts in excess of $5.0 million) will be evidenced by a
resolution of such Board of Directors) declared or made
subsequent to the Issue Date would exceed the sum of: (A) 15% of
the Consolidated NIDA accrued during the period (treated as one
accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Issue
Date occurs to the end of the most recent fiscal quarter ending
at least 45 days prior to the date of such Restricted Payment
(or, in case such Consolidated NIDA will be a deficit, minus 100%
of such deficit) (except that if the Notes have been rated
Investment Grade as of the end of any fiscal quarter, then the
amount to be calculated pursuant to this clause (A) for the
succeeding fiscal quarter and for any other succeeding quarter
where the Notes have been rated Investment Grade on the first day
of such fiscal quarter shall be 25% of Consolidated NIDA,
provided that the Notes are also rated Investment Grade at the
time such Restricted Payment is declared or made, as the case may
be); (B) the aggregate Net Cash Proceeds received by the Company
from the issue or sale of Capital Stock (other than Disqualified
Stock) or other cash contributions from Holdings to the Company's
capital subsequent to the Issue Date (other than an issuance or
sale to a Subsidiary of the Company and other than an issuance or
sale to an employee stock ownership plan or to a trust
established by the Company, or any of its Subsidiaries for the
benefit of their employees to the extent that such plan or trust
Incurs any Indebtedness Guaranteed by the Company or its
Restricted Subsidiaries to finance the acquisition of such
Capital Stock); (C) the amount by which Indebtedness of the
Company is reduced on the Company's balance sheet upon the
<PAGE>
38
conversion or exchange (other than by a Subsidiary) subsequent to
the Issue Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of
the Company (less the amount of any cash, or the fair market
value of any other property, distributed by the Company upon such
conversion or exchange); (D) an amount equal to the sum of (i)
the net reduction in Investments resulting from repayments of
loans or advances or other transfers of assets, terminations of
Guarantees or proceeds received by the Company or the relevant
Restricted Subsidiary from the sale of all or part of such
Investments in each case to the Company or any Restricted
Subsidiary and (ii) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of
the net assets of an Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is designated a Restricted Subsidiary (or
is merged into the Company or a Restricted Subsidiary); provided,
that the foregoing sum shall not exceed the amount of such
Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary or in such other
Person, which amount was included in the calculation of the
amount of Restricted Payments; and (E) $5.0 million.
(b) The provisions of the foregoing paragraph (a) will
not prohibit: (i) any purchase, redemption, defeasance or other
acquisition of Capital Stock of the Company or Subordinated
Obligations made by exchange for, or out of the net proceeds of
the substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their
employees to the extent that such plan or trust Incurs any
Indebtedness Guaranteed by the Company or its Restricted
Subsidiaries to finance the acquisition of such Capital Stock);
provided, however, that (A) such purchase, redemption, defeasance
or other acquisition will be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from
such sale will be excluded from the calculation of amounts under
clause (3)(B) of paragraph (a) above; (ii) any purchase,
redemption, defeasance or other acquisition of Subordinated
Obligations made by exchange for, or out of the net proceeds of
the substantially concurrent sale of, Subordinated Obligations of
the Company which are permitted to be Incurred pursuant to the
covenant described under Section 4.3; provided, however, that (A)
the principal amount of such new Indebtedness does not exceed the
principal amount of the Subordinated Obligations being so
redeemed, repurchased, acquired or retired for value (plus the
amount of any premium required to be paid under the terms of the
instrument governing the Subordinated Obligations being so
redeemed, repurchased, acquired or retired), (B) such new
Indebtedness is subordinated to the Notes at least to the same
extent as such Subordinated Obligations so purchased, exchanged,
redeemed, repurchased, acquired or retired for value, (C) such
new Indebtedness has a final scheduled maturity date later than
<PAGE>
39
the earlier of the final scheduled maturity date of the
Subordinated Obligations being so redeemed and the final
scheduled maturity date of the Notes and (D) such new
Indebtedness has an Average Life equal to or greater than the
Average Life of the Notes; provided further, however, that such
purchase, redemption, defeasance or other acquisition will be
excluded in the calculation of the amount of Restricted Payments;
(iii) the repurchase or other acquisition of shares of, or
options to purchase shares of, common stock of the Company or
Holdings from employees, former employees, directors or former
directors of the Company or Holdings (or permitted transferees of
such employees, former employees, directors or former directors),
pursuant to the terms of the agreements (including employment
agreements) or plans (or amendments thereto) approved by the
Board of Directors under which such individuals purchase or sell
or are granted the option to purchase or sell, shares of such
common stock; provided, however, that the aggregate amount of
such repurchases and other acquisitions shall not exceed $2.0
million in any calendar year; provided further, however, that
such repurchases and other acquisitions shall be included in the
calculation of the amount of Restricted Payments; (iv) any
dividend paid to Holdings (or any successor parent corporation
with which the Company is part of a consolidated tax group) in
respect of overhead expenses, tax liabilities and legal,
accounting and other professional fees and expenses that are
directly attributable to the operations of the Company and its
Restricted Subsidiaries, provided that the amount of any such
dividends will be excluded in the calculation of the amount of
Restricted Payments; (v) dividends paid within 60 days after the
date of declaration thereof if at such date of declaration such
dividend would have complied with this covenant; provided,
however, that the amount of such dividend will be included
(without duplication for the declaration thereof) in the
calculation of the amount of Restricted Payments; and (vi) the
Merger and Tender Offer Payments; provided, however, that such
payments will be excluded in the calculation of the amount of
Restricted Payments; and provided further that, at the time of,
and after giving effect to, any Restricted Payment permitted by
clauses (i), (ii), (iii) and (v) no Default or Event of Default
shall have occurred and be continuing.
SECTION 4.6. Limitation on Restrictions on
Distributions from Restricted Subsidiaries. The Company will not,
and will not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock to the Company or a Restricted
Subsidiary or pay any Indebtedness or other obligation owed to
the Company, (ii) make any loans or advances to the Company or
(iii) transfer any of its property or assets to the Company or
any Restricted Subsidiary, except: (1) any encumbrance or
restriction pursuant to an agreement in effect at or entered into
on the Issue Date (including the Credit Agreement); (2) any
<PAGE>
40
encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary on or prior to the date on
which such Restricted Subsidiary was acquired by the Company or a
Restricted Subsidiary (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted
Subsidiary became a Subsidiary or was acquired by the Company or
a Restricted Subsidiary) and outstanding on such date; (3) any
encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (1) or (2) of this covenant or contained in
any amendment to an agreement referred to in clause (1) or (2) of
this covenant; provided, however, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained
in any such refinancing agreement or amendment are no less
favorable (taken as a whole) to the Noteholders than the
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such predecessor agreement, as determined
in good faith by the Company and evidenced by an Officers'
Certificate; (4) any encumbrance or restriction in any agreement
entered into pursuant to clause (e) of Section 4.4; (5) in the
case of clause (iii), any encumbrance or restriction that
restricts in a customary manner the subletting, assignment or
transfer of any property or asset that is subject to a lease,
license or similar contract; (6) in the case of clause (iii),
restrictions contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent
such encumbrance or restrictions restrict the transfer of the
property subject to such security agreements or mortgages; (7)
any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition
of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or
disposition; (8) any such restriction imposed by applicable law;
and (9) customary encumbrances or restrictions contained in
agreements of a Special Purpose Vehicle created in connection
with a Permitted Securitization that in the good faith of the
Board of Directors of the Company are necessary to effect such
Permitted Securitization.
SECTION 4.7. Limitation on Sale of Assets and
Subsidiary Stock. (a) The Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, consummate
any Asset Disposition unless (i) the Company or such Restricted
Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value of the shares
and assets subject to such Asset Disposition (including as to the
value of all non cash consideration), as determined in good faith
by the Board of Directors of the Company in the case of values in
excess of $2.5 million or by the Company otherwise, (ii) at least
75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents
<PAGE>
41
(except in the case of Asset Dispositions of a Closed Facility)
and (iii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company or such
Restricted Subsidiary, as the case may be, (A) first, to the
extent the Company or any Restricted Subsidiary, as the case may
be, elects (or is required by the terms of any Senior
Indebtedness), to prepay, repay, redeem or purchase Senior
Indebtedness of the Company or Indebtedness (other than
Disqualified Stock) of a Wholly Owned Subsidiary (in each case
other than Indebtedness owed to the Company or an Affiliate of
the Company) within 360 days from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (B)
second, to the extent of the balance of Net Available Cash after
application in accordance with clause (A), to the extent the
Company or such Restricted Subsidiary, as the case may be,
elects, to the investment by the Company or any Wholly Owned
Subsidiary in Additional Assets within 360 days from the later of
the date of such Asset Disposition or the receipt of such Net
Available Cash; (C) third, to the extent of the balance of such
Net Available Cash after application in accordance with clauses
(A) and (B), to make an Offer (as defined below) to Holders of
the Notes (and to holders of other Senior Subordinated
Indebtedness designated by the Company) to purchase Notes and
such other Senior Subordinated Indebtedness pursuant to and
subject to the conditions set forth in paragraph (b) of this
covenant; and (D) fourth, to the extent of the balance of such
Net Available Cash after application in accordance with clauses
(A), (B) and (C) to any other application or use not prohibited
by this Indenture; provided, however that in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to
clause (A) or (C) above, the Company or such Restricted
Subsidiary will permanently retire such Indebtedness and will
cause the related loan commitment or availability (if any) to be
permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased.
Notwithstanding the foregoing provisions, the Company
and its Restricted Subsidiaries shall not be required to apply
any Net Available Cash in accordance herewith except to the
extent that the aggregate Net Available Cash from all Asset
Dispositions which are not applied in accordance with this
covenant exceeds $10.0 million. Pending application of Net
Available Cash pursuant to this covenant, such Net Available Cash
shall be invested in Permitted Investments or to reduce
outstanding loans under any working capital facility.
For the purposes of this covenant, the following are
deemed to be cash: (x) the assumption by the transferee of
Indebtedness of the Company (other than Disqualified Stock of the
Company and other than Indebtedness that is subordinated to the
Notes) or Indebtedness of any Restricted Subsidiary and the
release of the Company or such Restricted Subsidiary from all
liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company or any
<PAGE>
42
Restricted Subsidiary from the transferee that are promptly
converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires
the purchase of Notes (and other Senior Subordinated
Indebtedness) pursuant to clause (a)(iii)(C) of this covenant,
the Company will be required to purchase Notes tendered pursuant
to an offer by the Company for the Notes (and other Senior
Subordinated Indebtedness) (the "Offer") at a purchase price of
100% of their principal amount (without premium) plus accrued
interest to the date of purchase (or, in respect of such other
Senior Subordinated Indebtedness, such lesser price, if any, as
may be provided for by the terms of such Senior Subordinated
Indebtedness) in accordance with the procedures (including
prorating in the event of oversubscription) set forth in this
Indenture. If the aggregate purchase price of Notes tendered
pursuant to the Offer is less than the Net Available Cash
allotted to the purchase thereof, the Company will apply the
remaining Net Available Cash in accordance with clause (iii)(D)
of paragraph (a) above. The Company shall not be required to make
an Offer for Notes (and other Senior Subordinated Indebtedness)
pursuant to this covenant if the Net Available Cash available
therefor (after application of the proceeds as provided in
clauses (A) and (B)) are less than $10.0 million for all Asset
Dispositions (which lesser amount shall be carried forward for
purposes of determining whether an Offer is required with respect
to the Net Available Cash from any subsequent Asset Disposition).
(c)(1) Promptly, and in any event within 30 days after
the Company becomes obligated to make an Offer, the Company shall
be obligated to deliver to the Trustee and send, by first-class
mail to each Holder, at the address appearing in the security
register, a written notice stating that the Holder may elect to
have his Notes purchased by the Company either in whole or in
part (subject to prorationing as hereinafter described in the
event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The
notice shall specify a purchase date not less than 30 days nor
more than 60 days after the date of such notice (the "Purchase
Date") and shall contain all instructions and materials necessary
to tender Notes pursuant to the Offer.
(2) Not later than the date upon which written notice
of an Offer is delivered to the Trustee as provided below,
the Company shall deliver to the Trustee an Officers'
Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash
from the Asset Dispositions pursuant to which such Offer is
being made and (iii) the compliance of such allocation with
the provisions of Section 4.7(a). Upon the expiration of
the period for which the Offer remains open (the "Offer
Period"), the Company shall deliver to the Trustee for
cancellation the Notes or portions thereof which have been
properly tendered to and are to be accepted by the Company.
<PAGE>
43
Not later than 11:00 a.m. (New York City time) on the
Purchase Date, the Company shall irrevocably deposit with
the Trustee or with a paying agent (or, if the Company is
acting as Paying Agent, segregate and hold in trust) an
amount in cash sufficient to pay the Offer Amount for all
Notes properly tendered to and accepted by the Company. The
Trustee shall, on the Purchase Date, mail or deliver
payment to each tendering Holder in the amount of the
purchase price.
(3) Holders electing to have a Note purchased will be
required to surrender the Note, together with all necessary
endorsements and other appropriate materials duly
completed, to the Company at the address specified in the
notice at least three Business Days prior to the Purchase
Date. Holders will be entitled to withdraw their election
in whole or in part if the Trustee or the Company receives
not later than one Business Day prior to the Purchase Date,
a facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Note (which
shall be $1,000 or an integral multiple thereof) which was
delivered for purchase by the Holder, the aggregate
principal amount of such Note (if any) that remains subject
to the original notice of the Offer and that has been or
will be delivered for purchase by the Company and a
statement that such Holder is withdrawing his election to
have such Note purchased. If at the expiration of the Offer
Period the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Company shall
select the Notes to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the
Company so that only securities in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders
whose Notes are purchased only in part will be issued new
Notes equal in principal amount to the unpurchased portion
of the Notes surrendered.
(4) A Note shall be deemed to have been accepted for
purchase at the time the Trustee, directly or through an
agent, mails or delivers payment therefor to the
surrendering Holder.
(d) The Company will comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and
any other securities laws or regulations in connection with the
repurchase of Notes pursuant to this covenant. To the extent that
the provisions of any securities laws or regulations conflict
with provisions of this covenant, the Company will comply with
the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this covenant by
virtue thereof.
SECTION 4.8. Limitation on Transactions With
Affiliates. (a) The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, enter into or
<PAGE>
44
conduct any transaction or series of related transactions
(including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any
service) with any Affiliate of the Company (an "Affiliate
Transaction") unless (i) the terms of such transaction are no
less favorable to the Company or such Restricted Subsidiary, as
the case may be, than those that could be obtained at the time of
such transaction in arm's-length dealings with a Person who is
not such an Affiliate; (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $2.5
million, the terms of such transaction are set forth in writing
and shall have been approved by a majority of those members of
the Board of Directors having no personal stake in such Affiliate
Transaction (and such majority determines that such Affiliate
Transaction satisfies the criteria in clause (i) above) and (iii)
in the event such Affiliate Transaction involves an aggregate
amount in excess of $10.0 million, the Company has received a
written opinion from a nationally recognized independent
investment banking firm that such Affiliate Transaction is fair
to the Company and its Restricted Subsidiaries from a financial
point of view.
(b) The provisions of the foregoing paragraph (a)
shall not apply to (i) any Restricted Payment or Permitted
Investment permitted to be made pursuant to Section 4.5, (ii) any
issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans
approved by the Board of Directors, (iii) the grant of stock
options or similar rights to employees and directors of the
Company pursuant to plans approved by the Board of Directors,
(iv) loans or advances to employees in the ordinary course of
business in accordance with the past practices of the Company or
its Restricted Subsidiaries, but in any event not to exceed $5.0
million in the aggregate outstanding at any one time, (v) the
payment of reasonable fees and indemnities to directors of the
Company and its Restricted Subsidiaries who are not employees of
the Company or its Restricted Subsidiaries, (vi) any transaction
between the Company and a Wholly Owned Subsidiary or between
Wholly Owned Subsidiaries, (vii) the issuance or sale of any
Capital Stock (other than Disqualified Stock) of the Company,
(viii) (A) sales or other transfers or dispositions of customer
loans and related assets customarily transferred to a Special
Purpose Vehicle in connection with a Permitted Securitization and
(B) Investments in a Special Purpose Vehicle customarily made in
connection with a Permitted Securitization which are permitted by
Section 4.5; (ix) the Tax Sharing Agreement and the Commodity
Supply Agreement; and (x) any Jet Pro Sales Transactions with
Koch Agriculture or its affiliates which are on terms no less
favorable to the Company or such Restricted Subsidiary, as the
case may be, than those that could be obtained at the time of any
such transaction in arm's-length dealings with a Person who is
not an Affiliate.
<PAGE>
45
SECTION 4.9. Change of Control. (a) Upon the
occurrence of a Change of Control, each Holder will have the
right to require the Company to repurchase all or any part of
such Holder's Notes at a purchase price in cash equal to 101% of
the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest
due on the related interest payment date), in accordance with the
terms contemplated in Section 4.9(b).
(b) (i) Within 30 days following any Change of
Control, the Company shall mail a notice to each Holder at its
registered address with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that
such Holder has the right to require the Company to
purchase any or all of such Holder's Notes at a purchase
price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the
date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest on
the relevant interest payment date);
(2) the circumstances and relevant facts regarding
such Change of Control (including information with respect
to pro forma historical income, cash flow and
capitalization after giving effect to such Change of
Control);
(3) the repurchase date (which shall be no earlier
than 30 days nor later than 60 days from the date such
notice is mailed); and
(4) the instructions determined by the Company,
consistent with this covenant, that a Holder must follow in
order to have its Notes purchased.
(c) Holders electing to have a Note purchased will be
required to surrender the Note, together with all necessary
endorsements and other appropriate materials duly completed, to
the Company at the address specified in the notice at least three
Business Days prior to the purchase date. Holders will be
entitled to withdraw their election if the Trustee or the Company
receives not later than three Business Days prior to the purchase
date, a facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Note which was
delivered for purchase by the Holder as to which such notice of
withdrawal is being submitted and a statement that such Holder is
withdrawing his election to have such Note purchased.
(d) On the purchase date, all Notes purchased by the
Company under this Section shall be delivered to the Trustee for
cancellation, and the Company shall pay the purchase price,
including premium, if any, plus accrued and unpaid interest, if
any, to the Holders entitled thereto.
<PAGE>
46
(e) The Company will comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and
any other securities laws or regulations in connection with the
repurchase of Notes pursuant to this Section 4.9. To the extent
that the provisions of any securities laws or regulations
conflict with provisions of this Section 4.9, the Company will
comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under this
Section 4.9 by virtue thereof.
(f) Notwithstanding the occurrence of a Change of
Control, the Company shall not be obligated to repurchase the
Notes or otherwise comply with this Section if the Company has
irrevocably elected to redeem all the Notes in accordance with
Article III; provided that the Company does not default in its
redemption obligations pursuant to such election.
SECTION 4.10. Limitation on Sale or Issuance of
Capital Stock of Restricted Subsidiaries. The Company shall not
sell or otherwise dispose of any Capital Stock of a Restricted
Subsidiary, and shall not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell or otherwise dispose of
any of its Capital Stock except (i) to the Company or a Wholly
Owned Subsidiary, (ii) if, immediately after giving effect to
such issuance, sale or other disposition, neither the Company nor
any of its Restricted Subsidiaries own any Capital Stock of such
Restricted Subsidiary, (iii) if, immediately after giving effect
to such issuance, sale or other disposition, such Restricted
Subsidiary continues to constitute a Restricted Subsidiary or
(iv) if, immediately after giving effect to such issuance, sale
or other disposition, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any Investment in such
Person remaining after giving effect thereto would have been
permitted to be made under the covenant described under Section
4.5 if made on the date of such issuance, sale or other
disposition.
SECTION 4.11. Compliance with Laws. The Company shall
comply, and shall cause each of its Subsidiaries to comply, with
all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and
municipalities thereof, and of any governmental department,
commission, board, regulatory authority, bureau, agency and
instrumentality of the foregoing, in respect of the conduct of
their respective businesses and the ownership of their respective
properties, except for such noncompliances as are not in the
aggregate reasonably likely to have a material adverse effect on
the financial condition or results of operations of the Company
and its Subsidiaries, taken as a whole.
SECTION 4.12. Compliance Certificate. The Company
shall deliver to the Trustee within 120 days after the end of
each fiscal year of the Company an Officers' Certificate signed
by the chief executive officer, the chief financial officer or
<PAGE>
47
the chief accounting officer stating that in the course of the
performance by the signers of their duties as Officers of the
Company they would normally have knowledge of any Default or
Event of Default and whether or not the signers know of any
Default or Event of Default that occurred during such period. If
they do, the certificate shall describe the Default or Event of
Default, its status and what action the Company is taking or
proposes to take with respect thereto. The Company also shall
comply with TIA ss. 314(a)(4).
SECTION 4.13. Further Instruments and Acts. Upon
reasonable request of the Trustee, the Company will execute and
deliver such further instruments and do such further acts as may
be reasonably necessary or proper to carry out more effectively
the purpose of this Indenture.
SECTION 4.14. Maintenance of Office or Agency. The
Company shall maintain the office or agency required under
Section 2.3. The Company shall give prior written notice to the
Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.2.
SECTION 4.15. Corporate Existence. Except as otherwise
permitted by Article V and Section 4.9, the Company shall do or
cause to be done, at its own cost and expense, all things
necessary to preserve and keep in full force and effect its
corporate existence and the corporate existence of each of its
Subsidiaries in accordance with the respective organizational
documents of each such Subsidiary and the material rights
(charter and statutory) and franchises of the Company and each
such Subsidiary; provided, however, that the Company shall not be
required to preserve, with respect to itself, any material right
or franchise and, with respect to any of its Subsidiaries, any
such existence, material right or franchise, if the Board of
Directors of the Company shall determine in good faith (such
determination to be evidenced by a board resolution certified by
the Secretary of the Company and furnished to the Trustee), that
the preservation thereof is no longer desirable in the conduct of
the business of the Company and the Subsidiaries, taken as a
whole.
SECTION 4.16. Payment of Taxes and Other Claims. The
Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes
and any penalties, interest and additions to taxes) levied or
imposed upon it or any of its Subsidiaries or properties of it or
any of its Subsidiaries and (ii) all lawful claims for labor,
materials and supplies that, if unpaid, might by law become a
Lien upon the property of it or any of its Subsidiaries;
<PAGE>
48
provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate
proceedings properly instituted and diligently conducted for
which adequate reserves, to the extent required under GAAP, have
been taken.
SECTION 4.17. Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of its Subsidiaries
to, maintain its material properties in good working order and
condition (subject to ordinary wear and tear) and make or cause
to be made all necessary repairs, renewals, replacements,
additions, betterments and improvements thereto and actively
conduct and carry on its business, all as in the reasonable
judgment of the Company as is necessary so that the business
carried on by Company and its Subsidiaries may be actively
conducted; provided, however, that nothing in this Section 4.17
shall prevent the Company or any of its Subsidiaries from
discontinuing the operation and maintenance of any of its
properties, if such discontinuance is, in the good faith judgment
of the Board of Directors of the Company or the Subsidiary, as
the case may be (such judgment to be evidenced by a board
resolution certified by the Secretary of the Company and
furnished to the Trustee), desirable in the conduct of their
respective businesses and is not disadvantageous in any material
respect to the Holders.
(b) The Company shall provide or cause to be provided,
for itself and each of its Subsidiaries, insurance (including
appropriate self-insurance) against loss or damage of the kinds
that, in the good faith judgment of the Board of Directors of the
Company, are adequate and appropriate for the conduct of the
business of the Company and such Subsidiaries in a prudent
manner, with reputable insurers or with the government of the
United States of America, any state thereof or any agency or
instrumentality of such governments, in such amounts, with such
deductibles, and by such methods as shall be customary, in the
good faith judgment of the Board of Directors of the Company, for
companies similarly situated in the industry.
ARTICLE V
Successor Company
-----------------
SECTION 5.1. When the Company May Merge or Transfer
Assets. The Company will not consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a
series of transactions, all or substantially all its assets to,
any Person, unless:
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49
(i) the resulting, surviving or transferee Person (the
"Successor Company") will be a Person organized and
existing under the laws of the United States of America,
any State thereof or the District of Columbia and the
Successor Company (if not the Company) will expressly
assume, by supplemental indenture, executed and delivered
to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and this
Indenture;
(ii) immediately after giving effect to such
transaction (and treating any Indebtedness which becomes an
obligation of the Successor Company or any Subsidiary as a
result of such transaction as having been Incurred by the
Successor Company or such Subsidiary at the time of such
transaction), no Default or Event of Default will have
occurred and be continuing;
(iii) immediately after giving effect to such
transaction, the Successor Company would be able to Incur
an additional $1.00 of Indebtedness under Section 4.3(a);
and
(iv) the Company will have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with this
Indenture, as set forth in this Indenture.
The Successor Company will succeed to, and be
substituted for, and may exercise every right and power of, the
Company under this Indenture, but the predecessor Company in the
case of a conveyance, transfer or lease of all or substantially
all its assets will not be released from the obligation to pay
the Principal of and interest on the Notes.
ARTICLE VI
Defaults and Remedies
---------------------
SECTION 6.1. Events of Default. An "Event of Default"
occurs if:
(1) the Company defaults in any payment of interest on
any Note when the same becomes due and payable, and such
default continues for a period of 30 days;
(2) the Company defaults in the payment of the
principal of any Note when the same becomes due and payable
at its Stated Maturity, upon optional redemption, upon
required repurchase, upon declaration or otherwise;
(3) the Company fails to comply with its obligations
under Article V;
<PAGE>
50
(4) the Company fails to comply with its obligations
under Section 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 or
4.10 (other than a failure to purchase Notes when required
pursuant to Section 4.7 or 4.9, which failure shall
constitute an Event of Default under Section 6.1(2)) and
such failure continues for 30 days after the notice
specified below;
(5) the Company fails to comply with any of its
agreements in the Notes or this Indenture (other than those
referred to in (1), (2), (3) or (4) above) and such failure
continues for 60 days after the notice specified below;
(6) the Company or any Restricted Subsidiary of the
Company fails to pay any Indebtedness within any applicable
grace period provided in such Indebtedness after final
maturity or the acceleration of any such Indebtedness by
the holders thereof because of a default if the total
amount of such Indebtedness unpaid or accelerated exceeds
$10.0 million or its foreign currency equivalent at the
time;
(7) the Company, Holdings or a Significant Subsidiary
of the Company pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case in which it is the
debtor;
(C) consents to the appointment of a Custodian of
it or for any substantial part of its property; or
(D) makes a general assignment for the benefit of
its creditors;
or takes any comparable action under any foreign laws
relating to insolvency;
(8) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(A) is for relief against the Company, Holdings
or any Significant Subsidiary of the Company in an
involuntary case;
(B) appoints a Custodian of the Company, Holdings
or any Significant Subsidiary or for any substantial
part of its property of the Company, Holdings or any
Significant Subsidiary; or
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51
(C) orders the winding up or liquidation of the
Company, Holdings or any Significant Subsidiary of the
Company;
(or any similar relief is granted under any foreign laws)
and the order, decree or relief remains unstayed and in
effect for 60 days); or
(9) any final, non-appealable judgment or decree for
the payment of money in excess of $10.0 million (net of any
amounts with respect to which a creditworthy insurance
company has acknowledged full liability in writing) is
rendered against the Company or any Restricted Subsidiary
of the Company remains outstanding for a period of 60 days
after such judgment and is not discharged, waived or stayed
within 10 days after notice.
The foregoing will constitute Events of Default
whatever the reason for any such Event of Default and whether it
is voluntary or involuntary or is effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United
States Code, or any similar Federal or state law for the relief
of debtors. The term "Custodian" means any receiver, trustee,
assignee, liquidator, custodian or similar official under any
Bankruptcy Law.
A Default under clause (4), (5) and (9) of this
Section 6.1 is not an Event of Default until the Trustee by
notice to the Company or the Holders of at least 25% in aggregate
principal amount of the outstanding Notes by notice to the
Company gives notice of the Default and the Company does not cure
such Default within the time specified in said clause (4), (5) or
(9) after receipt of such notice. Such notice must specify the
Default, demand that it be remedied and state that such notice is
a "Notice of Default".
The Company shall deliver to the Trustee, within 30
days after the occurrence thereof, written notice in the form of
an Officers' Certificate of any Event of Default under clause (6)
of this Section 6.1 and any event which with the giving of notice
or the lapse of time would become an Event of Default under
clause (4), (5) or (9) of this Section 6.1 and what action the
Company is taking or proposes to take with respect thereto. In
addition, the Company is required to deliver to the Trustee,
within 120 days after the end of each fiscal year a certificate
indicating whether the signers thereof know of any Default that
occurred during the previous year.
SECTION 6.2. Acceleration. If an Event of Default
(other than an Event of Default specified in Section 6.1(7) or
<PAGE>
52
(8) with respect to the Company) occurs and is continuing and has
not been waived pursuant to Section 6.4, the Trustee may or, at
the request of Holders of at least 25% in aggregate principal
amount of the outstanding Notes shall, by notice to the Company
declare the Principal of and accrued but unpaid interest on all
the Notes to be due and payable. Upon such a declaration, such
Principal and interest shall be due and payable immediately;
provided, however, that if upon such declaration there are any
amounts outstanding under the Credit Agreement and the amounts
thereunder have not been accelerated, such principal and interest
shall be due and payable upon the earlier of the time such
amounts under the Credit Agreement are accelerated or five
Business Days after receipt by the Company and the Representative
under the Credit Agreement of such declaration, but only if such
Event of Default is then continuing. If an Event of Default
specified in Section 6.1(7) or (8) with respect to the Company
occurs and is continuing, the Principal of and accrued interest
on all the Notes will ipso facto become immediately due and
payable without any declaration or other act on the part of the
Trustee or any Holders. The Holders of a majority in aggregate
principal amount of the outstanding Notes by notice to the
Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if
all existing Events of Default have been cured or waived except
nonpayment of Principal or interest that has become due solely
because of acceleration and the Trustee has been paid all amounts
due to it pursuant to Section 7.7. No such rescission shall
affect any subsequent Default or impair any right consequent
thereto.
SECTION 6.3. Other Remedies. If an Event of Default
occurs and is continuing, the Trustee may pursue any available
remedy to collect the payment of Principal of or interest on the
Notes or to enforce the performance of any provision of the Notes
or this Indenture.
The Trustee may maintain a proceeding even if it does
not possess any of the Notes or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any
Noteholder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default.
No remedy is exclusive of any other remedy. All available
remedies are, to the extent permitted by law, cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a
majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may waive any past or
existing Default and its consequences except (i) a Default in the
payment of the Principal of or interest on a Note or (ii) a
Default in respect of a provision that under Section 9.2 cannot
be amended without the consent of each Noteholder affected. When
a Default is waived, it is deemed cured and ceases and any Event
of Default arising therefrom shall be deemed to have been cured
<PAGE>
53
and to have ceased but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
SECTION 6.5. Control by Majority. Upon provision of
reasonable indemnity to the Trustee satisfactory to the Trustee,
the Holders of a majority in aggregate principal amount of the
Notes then outstanding may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee.
However, the Trustee, which may rely on opinions of counsel, may
refuse to follow any direction that conflicts with law or this
Indenture or, subject to Section 7.1, that the Trustee determines
is unduly prejudicial to the rights of other Noteholders or would
involve the Trustee in personal liability; provided, however,
that the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction.
SECTION 6.6. Limitation on Suits. A Holder may not
pursue any remedy with respect to this Indenture or the Notes
unless:
(i) the Holder gives to the Trustee previous written
notice stating that an Event of Default is continuing;
(ii) the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding make a
written request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer to the Trustee
reasonable security or indemnity against any loss, liability
or expense;
(iv) the Trustee does not comply with such request
within 60 days after receipt of the request and the offer
of security or indemnity; and
(v) the Holders of a majority in principal amount of
the outstanding Notes do not give the Trustee a direction
inconsistent with such request within such 60-day period.
A Noteholder may not use this Indenture to prejudice
the rights of another Noteholder or to obtain a preference or
priority over another Noteholder.
SECTION 6.7. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of Principal of and interest on
the Notes held by such Holder, on or after the respective due
dates expressed in the Notes, or to bring suit for the
enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of
such Holder.
<PAGE>
54
SECTION 6.8. Collection Suit by Trustee. If an Event
of Default specified in Section 6.1(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company for the whole
amount then due and owing (together with interest on any unpaid
interest to the extent lawful) and the amounts provided for in
Section 7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The
Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the
claims of the Trustee and the Noteholders allowed in any judicial
proceedings relative to the Company, its creditors or its
property and shall be entitled and empowered to collect, receive
and distribute any money or other securities or property payable
or deliverable on any such claims and to distribute the same,
and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by
each Holder to make payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it
for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any
other amounts due the Trustee under Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any
money or property pursuant to this Article VI, it shall pay out
the money or property in the following order:
FIRST: to the Trustee for amounts due under Section
7.7;
SECOND: to holders of Senior Indebtedness to the
extent required by Article X;
THIRD: to Noteholders for amounts due and unpaid on
the Notes for Principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Notes for Principal and interest,
respectively; and
FOURTH: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee, upon prior notice to the Company, may fix
a record date and payment date for any payment to Noteholders
pursuant to this Section 6.10. At least 15 days before such
record date, the Company shall mail to each Noteholder and the
Trustee a notice that states the record date, the payment date
and amount to be paid.
<PAGE>
55
SECTION 6.11. Undertaking for Costs. In any suit for
the enforcement of any right or remedy under this Indenture or in
any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing
by any party litigant in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess
reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.7
or a suit by Holders of more than 10% in aggregate principal
amount of the outstanding Notes.
SECTION 6.12. Waiver of Stay or Extension Laws. The
Company (to the extent it may lawfully do so) shall not at any
time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and
shall not hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been
enacted.
ARTICLE VII
Trustee
-------
SECTION 7.1. Duties of Trustee. (a) If an Event of
Default has occurred and is continuing, the Trustee shall
exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in
the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of
Default:
(i) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this
Indenture and the TIA and no covenants or obligations shall
be implied in this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall
<PAGE>
56
examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its
own wilful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section 7.1;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.5.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b) and (c)
of this Section.
(e) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree in
writing with the Company. Money held in trust by the Trustee need
not be segregated from other funds except to the extent required
by law.
(f) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if
it shall have reasonable grounds to believe that repayment of
such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(g) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section
7.1 and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. (a) The Trustee may
rely on any document believed by it to be genuine and to have
been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of Counsel.
The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel.
<PAGE>
57
(c) The Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be
authorized or within its rights or powers; provided, however,
that the Trustee's conduct does not constitute wilful misconduct
or negligence.
(e) The Trustee may consult with counsel of its
selection, and the written advice or opinion of counsel with
respect to legal matters relating to this Indenture and the Notes
shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in reliance on, and accordance
with, the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders
pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction.
(g) The Trustee shall not be charged with knowledge of
any Default or Event of Default with respect to the Notes unless
either (1) a Trust Officer shall have actual knowledge of such
Default or Event of Default or (2) written notice of such Default
or Event of Default shall have been given to the Trustee by the
Company or any other obligor on the Notes or by any Holder of the
Notes.
SECTION 7.3. Individual Rights of Trustee. The Trustee
in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or its
respective Affiliates with the same rights it would have if it
were not Trustee. Any Paying Agent, Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall
not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Notes, it shall not
be accountable for the Company's use of the proceeds from the
Notes, and it shall not be responsible for any statement of the
Company in this Indenture or in any document issued in connection
with the sale of the Notes or in the Notes other than the
Trustee's certificate of authentication.
SECTION 7.5. Notice of Defaults. If a Default occurs
and is continuing and if it is known to the Trustee, the Trustee
must mail to each Noteholder notice of the Default within 30 days
<PAGE>
58
after it is known to a Trust Officer or written notice of it is
received by the Trustee. Except in the case of a Default in
payment of the principal of, premium (if any) or interest on any
Note, the Trustee may withhold notice if and so long as a
committee of its Trust Officers in good faith determines that
withholding the notice is not opposed to the interests of
Noteholders.
SECTION 7.6. Reports by Trustee to Holders. As
promptly as practicable after each May 15 beginning with the May
15 following the date of this Indenture, and in any event prior
to July 15 in each year, the Trustee shall mail to each
Noteholder a brief report dated as of such May 15 that complies
with TIA ss. 313(a). The Trustee also shall comply with TIA ss.
313(b). The Trustee shall promptly deliver to the Company a copy
of any report it delivers to Holders pursuant to this Section
7.6.
A copy of each report at the time of its mailing to
Noteholders shall be filed by the Trustee with the SEC and each
stock exchange (if any) on which the Notes are listed. The
Company agrees to notify promptly the Trustee whenever the Notes
become listed on any stock exchange and of any delisting thereof.
SECTION 7.7. Compensation and Indemnity. The Company
shall pay to the Trustee from time to time such compensation for
its services as the Company and the Trustee shall from time to
time agree in writing. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for
all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to such compensation
for its services, except any such expense, disbursement or
advance as may arise from its negligence, wilful misconduct or
bad faith, unless the Trustee shall have complied with the
applicable standard of care required by the TIA. Such expenses
shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel,
accountants and experts. The Trustee shall provide the Company
reasonable notice of any expenditure not in the ordinary course
of business; provided that prior approval by the Company of any
such expenditure shall not be a requirement for the making of
such expenditure nor for reimbursement by the Company thereof.
The Company shall indemnify each of the Trustee and any
predecessor Trustees against any and all loss, damage, claim,
liability or expense (including attorneys' fees and expenses)
(other than taxes applicable to the Trustee's compensation
hereunder) incurred by it in connection with the acceptance or
administration of this trust and the performance of its duties
hereunder. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have
<PAGE>
59
separate counsel, and the Company will pay the reasonable fees
and expenses of such counsel. The Company need not reimburse any
expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own wilful
misconduct, negligence or bad faith, unless the Trustee shall
have complied with the applicable standard of care required by
the TIA. The Company need not pay for any settlement made without
its consent, which consent shall not be unreasonably withheld.
To secure the Company's payment obligations in this
Section 7.7, the Trustee shall have a lien prior to the Notes on
all money or property held or collected by the Trustee other than
money or property held in trust to pay Principal of and interest
on particular Notes.
The Company's payment obligations pursuant to this
Section 7.7 shall survive the resignation or removal of the
Trustee and discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section
6.1(7) or (8) with respect to the Company, the expenses are
intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may
resign at any time with 30 days notice to the Company. The
Holders of a majority in principal amount of the Notes then
outstanding, may remove the Trustee with 30 days written notice
to the Trustee and the Company and may appoint a successor
Trustee reasonably acceptable to the Company. The Company may
remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes charge
of the Trustee or its property; or
(iv) the Trustee otherwise becomes incapable of
acting.
If the Trustee resigns, is removed by the Company or
by the Holders of a majority in principal amount of the Notes and
such Holders do not reasonably promptly appoint a successor
Trustee, or if a vacancy exists in the office of Trustee for any
reason (the Trustee in such event being referred to herein as the
retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company.
Thereupon the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all
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60
the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its
succession to Noteholders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor
Trustee, subject to the lien provided for in Section 7.7.
If a successor Trustee does not take office within 30
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of 10% in principal
amount of the Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Noteholder may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding the replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under
Section 7.7 shall continue for the benefit of the retiring
Trustee.
SECTION 7.9. Successor Trustee by Merger. If the
Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets
to, another corporation or banking association, the resulting,
surviving or transferee corporation without any further act shall
be the successor Trustee, provided that such corporation shall be
eligible under this Article VII and TIA Section 3.10(a).
In case at the time such successor or successors by
merger, conversion or consolidation to the Trustee shall succeed
to the trusts created by this Indenture any of the Notes shall
have been authenticated but not delivered, any such successor to
the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and
in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the
name of the successor to the Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in
the Notes or in this Indenture provided that the certificate of
the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The
Trustee shall at all times satisfy the requirements of TIA ss.
310(a). The Trustee shall have a combined capital and surplus of
at least $250,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA ss.
310(b); provided, however, that there shall be excluded from the
operation of TIA ss. 310(b)(1) any indenture or indentures under
which other securities or certificates of interest or
participation in other securities of the Company are outstanding
if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
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61
SECTION 7.11. Preferential Collection of Claims
Against Company. The Trustee shall comply with ss. TIA 311(a),
excluding any creditor relationship listed in TIA ss. 311(b). A
Trustee who has resigned or been removed shall be subject to TIA
ss. 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.1. Discharge of Liability on Notes;
Defeasance. (a) When (i) the Company delivers to the Trustee all
outstanding Notes (other than Notes replaced pursuant to Section
2.7) for cancellation or (ii) all outstanding Notes have become
due and payable, whether at maturity or as a result of the
mailing of a notice of redemption pursuant to Article III hereof
or the Notes will become due and payable at their Maturity within
91 days, or the Notes are to be called for redemption within 91
days under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at
the expense, of the Company, and, in each case of this clause
(ii), the Company irrevocably deposits or causes to be deposited
with the Trustee funds sufficient to pay at maturity or upon
redemption all outstanding Notes, including interest thereon to
maturity or such redemption date (other than Notes replaced
pursuant to Section 2.7), and if in either case the Company pays
all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 8.1(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and
discharge of this Indenture on demand of the Company accompanied
by an Officers' Certificate and an Opinion of Counsel from the
Company that all conditions precedent provided herein for
relating to satisfaction and discharge of this Indenture have
been complied with and at the cost and expense of the Company.
(b) Subject to Sections 8.1(c) and 8.2, the Company at
any time may terminate (i) all of its obligations under the Notes
and this Indenture ("legal defeasance option") or (ii) its
obligations under Sections 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9
and 4.10 and the operation of Sections 6.1(4), 6.1(5), 6.1(6),
6.1(7) (but only with respect to a Significant Subsidiary),
6.1(8) (but only with respect to a Significant Subsidiary),
6.1(9), 5.1(iii) ("covenant defeasance option"). For this
purpose, such covenant defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation
set forth in any such covenant, whether directly or indirectly,
by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to
comply shall not constitute a default or an Event of Default
under Section 5.1(iii) or Section 6.1(4) or (5). The Company may
<PAGE>
62
exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option,
payment of the Notes may not be accelerated because of an Event
of Default. If the Company exercises its covenant defeasance
option, payment of the Notes may not be accelerated because of an
Event of Default specified in Section 6.1(4), 6.1(5), 6.1(6),
6.1(7) (but only with respect to a Significant Subsidiary),
6.1(8) (but only with respect to a Significant Subsidiary) or
6.1(9) or because of the failure of the Company to comply with
Section 5.1(iii).
Upon satisfaction of the conditions set forth herein
and upon request of the Company, the Trustee shall acknowledge in
writing the discharge of those obligations that the Company
terminates.
(c) Notwithstanding clauses (a) and (b) above, the
Company's obligations in Sections 2.3, 2.4, 2.5, 2.7, 4.1, 4.11,
4.14, 4.15, 4.16, 4.17, 7.7, 7.8, 8.4, 8.5 and 8.6 shall survive
until the Notes have been paid in full. Thereafter, the Company's
obligations in Sections 7.7, 8.4 and 8.5 shall survive.
SECTION 8.2. Conditions to Defeasance. The Company
may exercise its legal defeasance option or its covenant
defeasance option only if:
(i) the Company irrevocably deposits or causes to be
deposited in trust with the Trustee money or U.S.
Government Obligations which through the scheduled payment
of Principal and interest in respect thereof in accordance
with their terms will provide cash at such times and in
such amounts as will be sufficient to pay Principal and
interest when due on all outstanding Notes (except Notes
replaced pursuant to Section 2.7) to maturity or
redemption, as the case may be;
(ii) the Company delivers to the Trustee a certificate
from a nationally recognized firm of independent
accountants expressing their opinion that the payments of
Principal and interest when due and without reinvestment on
the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at
such times and in such amounts as will be sufficient to pay
Principal and interest when due on all outstanding Notes
(except Notes replaced pursuant to Section 2.7) to maturity
or redemption, as the case may be;
(iii) 91 days pass after the deposit is made and
during the 91-day period no Default specified in Section
6.1(7) or (8) with respect to the Company occurs which is
continuing at the end of the period;
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63
(iv) the deposit does not constitute a default under
any other material agreement binding on the Company;
(v) the Company delivers to the Trustee an Opinion of
Counsel to the effect that the trust resulting from the
deposit does not constitute, or is qualified as, a
regulated investment company under the Investment Company
Act of 1940;
(vi) in the case of the legal defeasance option, the
Company shall have delivered to the Trustee an Opinion of
Counsel stating that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of this Indenture there has
been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Noteholders will
not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and defeasance and
will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred;
(vii) in the case of the covenant defeasance option,
the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that the Noteholders will not
recognize income, gain or loss for federal income tax
purposes as a result of such deposit and defeasance and
will be subject to federal income tax on the same amounts
and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not
occurred; and
(viii) the Company delivers to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent to the defeasance and
discharge of the Notes as contemplated by this Article VIII
have been complied with.
Before or after a deposit, the Company may make
arrangements satisfactory to the Trustee for the redemption of
Notes at a future date in accordance with Article III.
SECTION 8.3. Application of Trust Money. The Trustee
shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article VIII. It shall apply
the deposited money and the money from U.S. Government
Obligations either directly or through the Paying Agent as the
Trustee may determine and in accordance with this Indenture to
the payment of Principal of and interest on the Notes.
SECTION 8.4. Repayment to Company. The Trustee and the
Paying Agent shall promptly turn over to the Company upon request
any excess money or securities held by them at any time.
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64
Subject to any applicable abandoned property law, the
Trustee and the Paying Agent shall pay to the Company upon
written request any money held by them for the payment of
Principal or interest or Additional Interest, if any, that
remains unclaimed for one year after such Principal and interest
and Additional Interest, if any, have become due and payable,
and, thereafter, Noteholders entitled to the money must look to
the Company for payment as general creditors.
SECTION 8.5. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against deposited
U.S. Government Obligations or the Principal and interest
received on such U.S. Government Obligations other than any such
tax, fee or other charge which by law is for the account of the
Holders of the defeased Notes; provided that the Trustee shall be
entitled to charge any such tax, fee or other charge to such
Holder's account.
SECTION 8.6. Reinstatement. If the Trustee or Paying
Agent is unable to apply any money or U.S. Government Obligations
in accordance with this Article VIII by reason of any legal
proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under
this Indenture and the Notes shall be revived and reinstated as
though no deposit had occurred pursuant to this Article VIII
until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance
with this Article VIII; provided, however, that, (a) if the
Company has made any payment of interest on or Principal of any
Notes following the reinstatement of their obligations, the
Company shall be subrogated to the rights of the Holders of such
Notes to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent and (b) unless
otherwise required by any legal proceeding or any order or
judgment of any court or governmental authority, the Trustee or
Paying Agent shall return all such money and U.S. Government
Obligations to the Company promptly after receiving a written
request therefor at any time, if such reinstatement of the
Company's obligations has occurred and continues to be in effect.
ARTICLE IX
Amendments
----------
SECTION 9.1. Without Consent of Holders. The Company
and the Trustee may amend this Indenture or the Notes without
notice to or consent of any Noteholder:
(i) to cure any ambiguity, omission, defect or
inconsistency;
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65
(ii) to comply with Article V;
(iii) to provide for uncertificated Notes in addition
to or in place of certificated Notes (provided, that the
uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code or in a manner such
that the uncertificated Notes are as described in Section
163(f)(2)(B) of the Code);
(iv) to add Guarantees with respect to the Notes;
(v) to secure the Notes;
(vi) to add to the covenants of the Company for the
benefit of the Holders or to surrender any right or power
herein conferred upon the Company;
(vii) to make any change that does not adversely
affect the rights of any Noteholder (including changes to
effect the issuance of Subsequent Add-on Notes and to
effect the provisions of Section 1.5); and
(viii) to comply with any requirements of the SEC in
connection with the qualification of this Indenture under
the TIA.
An amendment under this Section may not make any change that
adversely affects the rights under Article X of any holder of
Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or their Representative) consent to such
change.
After an amendment under this Section 9.1 becomes
effective, the Company shall mail to Noteholders a notice briefly
describing such amendment. The failure to give such notice to all
Noteholders, or any defect therein, shall not impair or affect
the validity of an amendment under this Section 9.1.
SECTION 9.2. With Consent of Holders. The Company and
the Trustee may amend this Indenture or the Notes without notice
to any Noteholder but with the written consent of the Holders of
at least a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a
tender offer or exchange for Notes) and any past default or
compliance with any provision may be waived with the consent of
the Holders of the majority in principal amount of the Notes then
outstanding. However, without the consent of each Noteholder
affected, an amendment may not:
(i) reduce the amount of Notes whose Holders must
consent to an amendment;
(ii) reduce the rate of or extend the time for payment
of interest on any Note;
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66
(iii) reduce the principal of or extend the Stated
Maturity of any Note;
(iv) reduce the premium payable upon the redemption of
any Note or change the time at which any Note may be
redeemed in accordance with Article III;
(v) make any Note payable in money other than that
stated in the Note;
(vi) impair the right of any Holder to receive payment
of Principal of and interest on such Holder's Notes on or
after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such
Holder's Notes;
(vii) make any change in the second sentence of this
Section 9.2; or
(viii) make any change to the subordination provisions
of Article X that would adversely affect the Noteholders.
It shall not be necessary for the consent of the
Holders under this Section 9.2 to approve the particular form of
any proposed amendment, but it shall be sufficient if such
consent approves the substance thereof.
An amendment under this section may not make any
change that adversely affects the rights under Article X of any
holder of Senior Indebtedness then outstanding unless the holders
of such Senior Indebtedness (or their Representatives) consent to
such change.
After an amendment under this Section 9.2 becomes
effective, the Company shall mail to Noteholders a notice briefly
describing such amendment. The failure to give such notice to all
Noteholders, or any defect therein, shall not impair or affect
the validity of an amendment under this Section 9.2.
SECTION 9.3. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Notes shall comply with
the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and
Waivers. Until an amendment or waiver becomes effective, consent
to it by a Holder of a Note is a continuing consent by the Holder
and every subsequent Holder of that Note or portion of the Note
that evidences the same debt as the consenting Holder's Note,
even if notation of the consent or waiver is not made on the
Note. However, any such Holder or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee or the Company
receives written notice of revocation before the date on which
the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Notes have
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67
consented (and not theretofore revoked such consent) to the
amendment or waiver. After an amendment or waiver becomes
effective, it shall bind every Noteholder.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Noteholders
entitled to give their consent or take any other action described
above or required or permitted to be taken pursuant to this
Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were
Noteholders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to give such
consent or to revoke any consent previously given or to take any
such action, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or
effective for more than 90 days after such record date.
SECTION 9.5. Notation on or Exchange of Notes. If an
amendment changes the terms of a Note, the Trustee may require
the Holder of the Note to deliver it to the Trustee. The Trustee
may place an appropriate notation on the Note regarding the
changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determine, the Company in exchange for
the Note shall issue and the Trustee shall authenticate a new
Note that reflects the changed terms. Failure to make the
appropriate notation or to issue a new Note shall not affect the
validity of such amendment.
SECTION 9.6. Trustee To Sign Amendments. The Trustee
shall sign any amendment authorized pursuant to this Article IX
if the amendment does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee
may but need not sign it. In signing such amendment the Trustee
shall be entitled to receive indemnity reasonably satisfactory to
it and to receive, and (subject to Section 7.1) shall be fully
protected in relying upon, in addition to the documents required
by Section 11.4, an Officers' Certificate and an Opinion of
Counsel stating that such amendment complies with the provisions
of this Article IX.
SECTION 9.7. Payment for Consent. Neither the Company
nor any affiliate of the Company shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for, or as an
inducement to any consent, waiver or amendment of any of the
terms or provisions of this Indenture or the Notes unless such
consideration is offered to be paid to all Holders that so
consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or
agreement.
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68
ARTICLE X
Subordination of the Notes
--------------------------
SECTION 10.1. Agreement To Subordinate. The Company
agrees, and each Noteholder by accepting a Note agrees, that the
Indebtedness evidenced by the Notes is subordinated in right of
payment, to the extent and in the manner provided in this Article
X, to the prior payment in full in cash or cash equivalents of
all Senior Indebtedness of the Company whether outstanding on the
Issue Date or thereafter incurred, including the Company's
obligations under the Credit Agreement, and that the
subordination is for the benefit of and enforceable by the
holders of such Senior Indebtedness. The Notes shall in all
respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company and only (i) Indebtedness of the
Company and (ii) all existing and future Indebtedness of any
Subsidiary of the Company in each case which is Senior
Indebtedness shall rank senior to the Notes in accordance with
the provisions set forth herein. All provisions of this Article X
shall be subject to Section 10.12.
SECTION 10.2. Liquidation, Dissolution, Bankruptcy.
Upon any payment or distribution of the assets of the Company to
creditors upon a total or partial liquidation or a total or
partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness of the Company
will be entitled to receive payment in full in
cash or cash equivalents of such Senior
Indebtedness before Noteholders are entitled to
receive any payment of Principal of or interest
on the Notes; and
(2) until such Senior Indebtedness is paid in full in
cash or cash equivalents, any payment or
distribution to which Noteholders would be
entitled but for this Article X will be made to
holders of such Senior Indebtedness as their
interests may appear, except that Noteholders may
receive shares of stock and any debt securities
that are subordinated to such Senior
Indebtedness, and to any debt securities received
by holders of such Senior Indebtedness, in each
case to at least the same extent as the Notes are
subordinated to Senior Indebtedness of the
Company.
SECTION 10.3. Default on Senior Indebtedness of the
Company. The Company may not pay principal of, premium (if any)
or interest on, the Notes or make any deposit pursuant to Section
8.1 and may not repurchase, redeem or otherwise retire any Notes
<PAGE>
69
(collectively, "pay the Notes") if (i) any Designated Senior
Indebtedness is not paid in full in cash or cash equivalents when
due or (ii) any other default on Designated Senior Indebtedness
occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms unless, in either case,
(x) the default has been cured or waived and any such
acceleration has been rescinded or (y) such Designated Senior
Indebtedness has been paid in full in cash or cash equivalents.
However, the Company may pay the Notes without regard to the
foregoing if the Company and the Trustee receive written notice
approving such payment from the Representative of the Designated
Senior Indebtedness with respect to which either of the events
set forth in clause (i) or (ii) of the immediately preceding
sentence has occurred and is continuing. During the continuance
of any default (other than a default described in clause (i) or
(ii) of the second preceding sentence) with respect to any
Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods,
the Company may not pay the Notes for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee
(with a copy to the Company) of written notice (a "Blockage
Notice") of such default from the Representative of the holders
of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter
(or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or
Persons who gave such Blockage Notice, (ii) because the default
giving rise to such Blockage Notice is no longer continuing or
(iii) because such Designated Senior Indebtedness has been repaid
in full). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions
described in the first sentence of this Section), unless the
holders of such Designated Senior Indebtedness or the
Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, the Company may
resume payments on the Notes after the end of such Payment
Blockage Period. Subject to the provisions described in the first
sentence of this Section 10.3, the Notes shall not be subject to
more than one Payment Blockage Period in any consecutive 360-day
period, irrespective of the number of defaults with respect to
Designated Senior Indebtedness during such period. For purposes
of this Section, no default or event of default which existed or
was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior
Indebtedness initiating such Payment Blockage Period shall be, or
be made, the basis of the commencement of a subsequent Payment
Blockage Period by the Representative of such Designated Senior
Indebtedness, whether or not within a period of 360 consecutive
days, unless such default or event of default shall have been
cured or waived for a period of not less than 90 consecutive
days.
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70
SECTION 10.4. Acceleration of Payment of Notes. If
payment of the Notes is accelerated because of an Event of
Default, the Company or the Trustee shall promptly notify the
holders of the Designated Senior Indebtedness or the
Representative of such holders by written notice to the address
specified in writing to the Trustee from time to time.
SECTION 10.5. When Distribution Must Be Paid Over. If
a distribution is made to Noteholders that because of this
Article X should not have been made to them, the Noteholders who
receive the distribution shall hold it in trust for holders of
Senior Indebtedness of the Company and pay it over to them or
their Representative as their interests may appear.
SECTION 10.6. Subrogation. After all Senior
Indebtedness of the Company is paid in full and until the Notes
are paid in full, Noteholders shall be subrogated to the rights
of holders of such Senior Indebtedness to receive distributions
applicable to such Senior Indebtedness to the extent that
distributions otherwise payable to the Holders of the Notes have
been applied to the payment of Senior Indebtedness. A
distribution made under this Article X to holders of such Senior
Indebtedness which otherwise would have been made to Noteholders
is not, as between the Company and Noteholders, a payment by the
Company on such Senior Indebtedness.
SECTION 10.7. Relative Rights. This Article X defines
the relative rights of Noteholders and holders of Senior
Indebtedness of the Company. Nothing in this Indenture shall:
(1) impair, as between the Company and Noteholders,
the obligation of the Company, which is absolute and
unconditional, to pay principal of premium, if any, and
interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of the Notes
and creditors of the Company other than their rights in
relation to holders of Senior Indebtedness; or
(3) prevent the Trustee or any Noteholder from
exercising its available remedies upon a Default, subject
to the rights of holders of Senior Indebtedness of the
Company to receive distributions otherwise payable to
Noteholders.
SECTION 10.8. Subordination May Not Be Impaired by
Company. No right of any holder of Senior Indebtedness of the
Company to enforce the subordination of the Indebtedness
evidenced by the Notes shall be impaired by any act or failure to
act by the Company or by its failure to comply with this
Indenture.
SECTION 10.9. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.3, the Trustee or Paying Agent may
continue to make payments on the Notes and shall not be charged
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71
with knowledge of the existence of facts that would prohibit the
making of any such payments unless, not less than two Business
Days prior to the date of such payment, a Trust Officer of the
Trustee receives written notice satisfactory to it that payments
may not be made under this Article X. The Company, the Registrar
or co-registrar, the Paying Agent, a Representative or a holder
of Senior Indebtedness of the Company may give the notice;
provided, however, that, if an issue of Senior Indebtedness of
the Company has a Representative, only the Representative may
give the notice.
The Trustee in its individual or any other capacity
may hold Senior Indebtedness of the Company with the same rights
it would have if it were not Trustee. The Registrar and
co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth
in this Article X with respect to any such Senior Indebtedness
which may at any time be held by it, to the same extent as any
other holder of such Senior Indebtedness; and nothing in Article
VII shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article X shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.7.
SECTION 10.10. Distribution or Notice to
Representative. Whenever a distribution is to be made or a notice
given to holders of Senior Indebtedness of the Company, the
distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article X Not To Prevent Events of
Default or Limit Right To Accelerate. The failure to make a
payment pursuant to the Notes by reason of any provision in this
Article X shall not be construed as preventing the occurrence of
a Default or an Event of Default. Nothing in this Article X shall
have any effect on the right of the Noteholders or the Trustee to
accelerate the maturity of the Notes.
SECTION 10.12. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary,
payments from money or the proceeds of U.S. Government
Obligations held in trust under Article VIII by the Trustee for
the payment of Principal of and interest on the Notes and which
were deposited in accordance with the terms and conditions of
Article VIII and not in violation of Section 10.3 hereof shall
not be subordinated to the prior payment of any Senior
Indebtedness of the Company or subject to the restrictions set
forth in this Article X, and none of the Noteholders shall be
obligated to pay over any such amount to the Company or any
holder of Senior Indebtedness of the Company or any other
creditor of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any
payment or distribution pursuant to this Article X, the Trustee
and the Noteholders shall be entitled to rely (i) upon any order
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72
or decree of a court of competent jurisdiction in which any
proceedings of the nature referred to in Section 10.2 are
pending, (ii) upon a certificate of the liquidating trustee or
agent or other Person making such payment or distribution to the
Trustee or to the Noteholders or (iii) upon the Representatives
for the holders of Senior Indebtedness of the Company for the
purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of such Senior
Indebtedness and other Indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this Article X. In the event that the Trustee determines, in good
faith, that evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness of the Company to
participate in any payment or distribution pursuant to this
Article X, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the
amount of such Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights
of such Person under this Article X, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to
receive such payment. The provisions of Sections 7.1 and 7.2
shall be applicable to all actions or omissions of actions by the
Trustee pursuant to this Article X.
SECTION 10.14. Trustee To Effectuate Subordination.
Each Noteholder by accepting a Note authorizes and directs the
Trustee on his behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination
between the Noteholders and the holders of Senior Indebtedness of
the Company as provided in this Article X and appoints the
Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of
Senior Indebtedness. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of the
Company and shall not be liable to any such holders if it shall
mistakenly pay over or distribute to Noteholders or the Company
or any other Person, money or assets to which any holders of such
Senior Indebtedness shall be entitled by virtue of this Article X
or otherwise.
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination Provisions. Each Noteholder by
accepting a Note acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior
Indebtedness of the Company, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Notes, to
acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of such Senior Indebtedness shall be
deemed conclusively to have relied on such subordination
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73
provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.1. Trust Indenture Act Controls. If any
provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this
Indenture by the TIA, the provision required by the TIA shall
control.
SECTION 11.2. Notices. Any notice or communication
shall be in writing and delivered in person or mailed by
first-class mail, telecopier or overnight air courier
guaranteeing next day delivery addressed as follows:
if to the Company:
Purina Mills, Inc.
1401 South Hanley Road
St.Louis, Missouri 63144
Attention: Secretary
with a copy to:
Clearly, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
Attention: Paul J. Shim, Esq.
if to the Trustee:
The First National Bank of Chicago
One North State Street
Ninth Floor, Suite 0126
Chicago, Illinois 60670-0126
Attention: Leland Hansen
Corporate Trust Administration
The Company or the Trustee by notice to the others may
designate additional or different addresses for subsequent
notices or communications.
Any notice or communication (other than those sent to
Holders) shall be deemed to have been given or made as of the
date so delivered if personally delivered; when receipt is
confirmed if delivered by overnight air courier; when receipt is
<PAGE>
74
acknowledged, if faxed; and five (5) Business Days after mailing
if sent by first class mail.
Any notice or communication mailed to a Noteholder
shall be mailed to the Noteholder at the Noteholder's address as
it appears on the registration books of the Registrar and shall
be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a
Noteholder or any defect in it shall not affect its sufficiency
with respect to other Noteholders. If a notice or communication
is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 11.3. Communication by Holders with other
Holders. Noteholders may communicate pursuant to TIA ss. 312(b)
with other Noteholders with respect to their rights under this
Indenture or the Notes. The Company, the Trustee, the Registrar
and anyone else shall have the protection of TIA ss. 312(c).
SECTION 11.4. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the
Trustee to take or refrain from taking any action under this
Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed
action have been complied with; and
(ii) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of such counsel, all such conditions precedent, if
any, provided for in this Indenture relating to the
proposed action have been complied with.
SECTION 11.5. Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance
with a covenant or condition provided for in this Indenture shall
include:
(i) a statement that the individual making such
certificate or opinion has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
<PAGE>
75
(iii) a statement that, in the opinion of such individual,
he has made such examination or investigation as is
reasonably necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(iv) a statement as to whether or not, in the opinion of
such individual, such covenant or condition has been
complied with.
SECTION 11.6. When Notes Disregarded. In determining
whether the Holders of the required principal amount of Notes
have concurred in any direction, waiver or consent, Notes owned
by the Company or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common
control with the Company shall be disregarded and deemed not to
be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Trust Officer of
the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Notes outstanding at the time
shall be considered in any such determination.
SECTION 11.7. Rules by Trustee, Paying Agent and
Registrar. The Trustee may make reasonable rules in accordance
with the Trustee's customary practices for action by or at a
meeting of Noteholders. The Registrar and the Paying Agent may
make reasonable rules in accordance with customary practices for
their functions.
SECTION 11.8. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not
required to be open in the State of New York. If a payment date
is a Legal Holiday, payment shall be made on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period. If a regular record date
is a Legal Holiday, the record date shall not be affected.
SECTION 11.9. GOVERNING LAW. THIS INDENTURE AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
SECTION 11.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under
the Notes or this Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. None of
Koch Agriculture, Koch Industries, Holdings or any of their
Affiliates (other than the Company) will be parties to this
Indenture or responsible for any payments or other claims in
respect of the Notes or this Indenture. By accepting a Note,
<PAGE>
76
each Noteholder shall waive and release all such liability. The
waiver and release shall be part of the consideration for the
issue of the Notes.
SECTION 11.11. Successors. All agreements of the
Company in this Indenture and the Notes shall bind its
successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 11.12. Severability. In case any provision in
this Indenture or in the Notes shall be invalid, illegal or
unenforceable, in any respect for any reason, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.13. Multiple Originals. The parties may
sign any number of copies of this Indenture. Each signed copy
shall be an original, but all of them together represent the same
agreement. One signed copy is enough to prove this Indenture.
SECTION 11.14. Variable Provisions. The Company
initially appoints the Trustee as Paying Agent and Registrar and
custodian with respect to any Global Notes.
SECTION 11.15. Qualification of Indenture. The Company
shall qualify this Indenture under the TIA in accordance with the
terms and conditions of the Registration Rights Agreement and
shall pay all reasonable costs and expenses (including attorneys'
fees for the Company, the Trustee and the Holders) incurred in
connection therewith, including, but not limited to, costs and
expenses of qualification of this Indenture and the Notes and
printing this Indenture and the Notes. The Trustee shall be
entitled to receive from the Company any such Officers'
Certificates, Opinions of Counsel or other documentation as it
may reasonably request in connection with any such qualification
of this Indenture under the TIA.
SECTION 11.16. Table of Contents; Headings. The table
of contents, cross-reference sheet and headings of the Articles
and Sections of this Indenture have been inserted for convenience
of reference only, are not intended to be considered a part
hereof and shall not modify or restrict any of the terms or
provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Indenture to be duly executed as of the date first written above.
PURINA MILLS, INC.
By: /s/ August F.Ottinger
---------------------------
Name: August F. Ottinger
Title: Vice President,
General Counsel and
Secretary
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By: /s/ Steve Husbands
---------------------------
Name: Steve Husbands
Title: Assistant Vice
President
<PAGE>
RULE 144A APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS
PURSUANT TO RULE 144A
PROVISIONS RELATING TO INITIAL NOTES,
-------------------------------------
PRIVATE EXCHANGE NOTES, EXCHANGE NOTES
--------------------------------------
AND SUBSEQUENT ADD-ON NOTES
---------------------------
1. Definitions.
1.1 Definitions.
For the purposes of this Appendix the following
terms shall have the meanings indicated below:
"Depositary" means The Depository Trust Company, its
nominees and their respective successors and assigns.
"Exchange Notes" means the 9% Senior Subordinated
Notes Due 2010 to be issued pursuant to this Indenture in
connection with a Registered Exchange Offer pursuant to the
Registration Rights Agreement.
"Initial Purchasers" means Credit Suisse First Boston
Corporation and Chase Securities Inc.
"Initial Notes" means the 9% Senior Subordinated Notes
Due 2010, issued under this Indenture on or about the date
hereof.
"Private Exchange" means the offer by the Company,
pursuant to the Registration Rights Agreement, to the Initial
Purchasers to issue and deliver to each Initial Purchaser, in
exchange for the Initial Notes held by the Initial Purchaser as
part of its initial distribution, a like aggregate principal
amount of Private Exchange Notes.
"Private Exchange Notes" means the 9% Senior
Subordinated Notes Due 2010, if any, to be issued pursuant to
this Indenture to the Initial Purchasers in a Private Exchange.
"Purchase Agreement" means the Purchase Agreement
dated March 9, 1998, between the Company and the Initial
Purchasers.
"QIB" means a "qualified institutional buyer" as
defined in Rule 144A.
"Registered Exchange Offer" means the offer by the
Company, pursuant to the Registration Rights Agreement, to
certain Holders of Initial Notes, to issue and deliver to such
Holders, in exchange for the Initial Notes, a like aggregate
<PAGE>
2
principal amount of Exchange Notes registered under the
Securities Act.
"Registration Rights Agreement" means the Registration
Rights Agreement dated as of March 9, 1998 between the Company
and the Initial Purchasers.
"Rule 144A" means Rule 144A under the Securities Act.
"Notes" means the Initial Notes, the Subsequent Add-on
Notes, the Exchange Notes and the Private Exchange Notes, treated
as a single class.
"Securities Act" means the Securities Act of 1933, as
amended.
"Notes Custodian" means the custodian with respect to
a Global Note or Global Notes (as appointed by the Depositary),
or any successor person thereto and shall initially be the
Trustee.
"Shelf Registration Statement" means the registration
statement issued by the Company, in connection with the offer and
sale of Initial Notes or Private Exchange Notes, pursuant to the
Registration Rights Agreement.
"Transfer Restricted Notes" means Notes that bear or
are required to bear the legend set forth in Section 2.3(d)
hereto.
1.2 Other Definitions
Defined in
----------
Term Section:
---- -------
"Agent Members" .............................................2.1(b)
"Global Note"................................................2.1(a)
"Rule 144A" .................................................2.1(a)
2. The Notes.
2.1 Form and Dating.
The Initial Notes are being offered and sold by
the Company pursuant to the Purchase Agreement.
(a) Global Notes. Initial Notes offered and sold
as provided in the Purchase Agreement shall be issued initially
in the form of one or more permanent global Notes in definitive,
fully registered form without interest coupons with the global
securities legend and restricted securities legend set forth in
Exhibit 1 hereto (each, a "Global Note"), which shall be
deposited on behalf of the purchasers of the Initial Notes
represented thereby with the Trustee as custodian for the
Depositary (or with such other custodian as the Depositary may
<PAGE>
3
direct), and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Global Notes may from time to
time be increased or decreased by adjustments made on the records
of the Trustee and the Depositary or its nominee as hereinafter
provided.
(b) Book-Entry Provisions. This Section 2.1(b)
shall apply only to a Global Note deposited with or on behalf of
the Depositary.
The Company shall execute and the Trustee shall,
in accordance with this Section 2.1(b), authenticate and deliver
initially one or more Global Notes that (a) shall be registered
in the name of the Depositary for such Global Note or Global
Notes or the nominee of such Depositary and (b) shall be
delivered by the Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Trustee as custodian for
the Depositary.
Members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Indenture with
respect to any Global Note held on their behalf by the Depositary
or by the Trustee as the custodian of the Depositary or under
such Global Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of such Global Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Agent Members, the
operation of customary practices of such Depositary governing the
exercise of the rights of a holder of a beneficial interest in
any Global Note.
(c) Certificated Notes. Except as provided in
this Section 2.1 or Section 2.3 or 2.4, owners of beneficial
interests in Global Notes will not be entitled to receive
physical delivery of certificated Notes.
2.2 Authentication. The Trustee shall authenticate and
deliver: (1) Initial Notes for original issue in an aggregate
principal amount of U.S. $350 million, (2) Exchange Notes or
Private Exchange Notes for issue only in a Registered Exchange
Offer or a Private Exchange, respectively, pursuant to the
Registration Rights Agreement, for a like principal amount of
Initial Notes and (3) Subsequent Add-on Notes as may be offered
subsequent to the Issue Date in an aggregate principal amount not
to exceed U.S. $150 million (provided, however, that no Note
representing Subsequent Add-on Notes may be authenticated in an
aggregate principal amount of less than U.S. $25 million), in
each case upon a written order of the Company signed by two
<PAGE>
4
Officers or by an Officer and either an Assistant Treasurer or an
Assistant Secretary of the Company. Such order shall specify the
amount of the Notes to be authenticated and the date on which the
original issue of Notes is to be authenticated and whether the
Notes are to be Initial Notes, Exchange Notes, Private Exchange
Notes or Subsequent Add-on Notes. The aggregate principal amount
of all Notes outstanding at any time may not exceed U.S. $500
million except as provided in Section 2.7 of this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange
of Global Notes. (i) The transfer and exchange of Global Notes or
beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and
the procedures of the Depositary therefor. A transferor of a
beneficial interest in a Global Note shall deliver to the
Registrar a written order given in accordance with the
Depositary's procedures containing information regarding the
participant account of the Depositary to be credited with a
beneficial interest in the Global Note. The Registrar shall, in
accordance with such instructions instruct the Depositary to
credit to the account of the Person specified in such
instructions a beneficial interest in the Global Note and to
debit the account of the Person making the transfer the
beneficial interest in the Global Note being transferred.
(ii) Notwithstanding any other provisions of this
Appendix (other than the provisions set forth in Section
2.4), a Global Note may not be transferred as a whole
except by the Depositary to a nominee of the Depositary or
by a nominee of the Depositary to the Depositary of another
nominee of the Depositary or by the Depositary or any such
nominee to a successor Depositary or a nominee of such
successor Depositary.
(iii) In the event that a Global Note is exchanged for
Notes in definitive registered form pursuant to Section 2.4
of this Appendix or Section 2.9 of this Indenture prior to
the consummation of a Registered Exchange Offer or the
effectiveness of a Shelf Registration Statement with
respect to such Notes, such Notes may be exchanged only in
accordance with such procedures as are substantially
consistent with the provisions of this Section 2.3
(including the certification requirements set forth on the
reverse of the Initial Notes intended to ensure that such
transfers comply with Rule 144A or Regulation S, as the
case may be) and such other procedures as may from time to
time be adopted by the Company.
(b) Legend.
(i) Except as permitted by the following paragraphs
(ii), (iii) and (iv), each Note certificate evidencing the
Global Notes (and all Notes issued in exchange therefor or
<PAGE>
5
in substitution thereof) shall bear a legend in
substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES
ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT
THE SELLER OF THIS NOTE MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE
ISSUER THAT (A) THIS NOTE MAY BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) INSIDE THE
UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(ii) OUTSIDE THE UNITED STATES IN A TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN
(A) ABOVE."
(ii) Upon any sale or transfer of a Transfer
Restricted Note (including any Transfer Restricted Note
represented by a Global Note) pursuant to Rule 144 under
the Securities Act, in the case of any Transfer Restricted
Note that is represented by a Global Note, the Registrar
shall permit the Holder thereof to exchange such Transfer
Restricted Note for a certificated Note that does not bear
the legend set forth above and rescind any restriction on
the transfer of such Transfer Restricted Note, if the
Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144
(such certification to be in the form set forth on the
reverse side of the Note).
(iii) After a transfer of any Initial Notes or Private
Exchange Notes during the period of the effectiveness of a
Shelf Registration Statement with respect to such Initial
Notes or Private Exchange Notes, as the case may be, all
requirements pertaining to legends on such Initial Notes or
such Private Exchange Notes will cease to apply, but the
requirements requiring such Initial Notes or such Private
<PAGE>
6
Exchange Notes issued to certain Holders be issued in
global form will continue to apply, and Initial Notes or
Private Exchange Notes in global form without legends will
be available to the transferee of the Holder of such
Initial Notes or Private Exchange Notes upon exchange of
such transferring Holder's Initial Notes or Private
Exchange Notes or directions to transfer such Holder's
interest in the Global Note, as applicable.
(iv) Upon the consummation of a Registered Exchange
Offer with respect to the Initial Notes pursuant to which
Holders of such Initial Notes are offered Exchange Notes in
exchange for their Initial Notes, all requirements
pertaining to such Initial Notes that Initial Notes issued
to certain Holders be issued in global form will continue
to apply and Initial Notes in global form with the
restricted Notes legend set forth in Exhibit 1 hereto will
be available to Holders of such Initial Notes that do not
exchange their Initial Notes, and Exchange Notes in global
form without the restriction securities legend will be
available to Holders that exchange such Initial Notes in
such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with
respect to the Initial Notes pursuant to which Holders of
such Initial Notes are offered Private Exchange Notes in
exchange for their Initial Notes, all requirements
pertaining to such Initial Notes that Initial Notes issued
to certain Holders be issued in global form will still
apply, and Private Exchange Notes in global form with the
restricted securities legend set forth in Exhibit 1 hereto
will be available to Holders that exchange such Initial
Notes in such Private Exchange.
(c) Cancellation or Adjustment of Global Note. At such
time as all beneficial interests in a Global Note have either
been exchanged for certificated Notes, redeemed, repurchased or
canceled, such Global Note shall be returned to the Depositary
for cancellation or retained and canceled by the Trustee. At any
time prior to such cancellation, if any beneficial interest in a
Global Note is exchanged for certificated Notes, redeemed,
repurchased or canceled, the principal amount of Notes
represented by such Global Note shall be reduced and an
adjustment shall be made on the books and records of the Trustee
(if it is then the Notes Custodian for such Global Note) with
respect to such Global Note, by the Trustee or the Notes
Custodian, to reflect such reduction.
(d) Obligations with Respect to Transfers and
Exchanges of Notes.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall
<PAGE>
7
authenticate certificated Notes and Global Notes at the
Registrar's or any co-registrar's request.
(ii) No service charge shall be made for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer
tax, assessments, or similar governmental charge payable in
connection therewith (other than any such transfer taxes,
assessments or similar governmental charge payable upon
exchange or transfer pursuant to Sections 3.6, 4.7, 4.9 and
Section 9.5 of the Indenture.
(iii) The Registrar or any co-registrar shall not be
required to register the transfer of or exchange of (a) any
certificated Note selected for redemption in whole or in
part pursuant to Article III of this Indenture, except the
unredeemed portion of any certificated Note being redeemed
in part, or (b) any Note for a period beginning 15 Business
Days before the mailing of a notice of an offer to
repurchase or redeem Notes or 15 Business Days before an
interest payment date.
(iv) Prior to the due presentation for registration
of transfer of any Note, the Company, the Trustee, the
Paying Agent, the Registrar or any co-registrar may deem
and treat the person in whose name a Note is registered as
the absolute owner of such Note for the purpose of
receiving payment of Principal of and interest on such Note
and for all other purposes whatsoever, whether or not such
Note is overdue, and none of the Company, the Trustee, the
Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
(v) All Notes issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the
same debt and shall be entitled to the same benefits under
this Indenture as the Notes surrendered upon such transfer
or exchange.
(e) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Note, a
member of, or a participant in the Depositary or other
Person with respect to the accuracy of the records of the
Depositary or its nominee or of any participant or member
thereof, with respect to any ownership interest in the
Notes or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the
Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with
respect to such Notes. All notices and communications to be
given to the Holders and all payments to be made to Holders
under the Notes shall be given or made only to or upon the
<PAGE>
8
order of the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Note).
The rights of beneficial owners in any Global Note shall be
exercised only through the Depositary subject to the
applicable rules and procedures of the Depositary. The
Trustee may rely and shall be fully protected in relying
upon information furnished by the Depositary with respect
to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or
under applicable law with respect to any transfer of any
interest in any Note (including any transfers between or
among Depositary participants, members or beneficial owners
in any Global Note) other than to require delivery of such
certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly
required by, the terms of this Indenture, and to examine
the same to determine substantial compliance as to form
with the express requirements hereof.
2.4 Certificated Notes.
(a) A Global Note deposited with the Depositary or
with the Trustee as custodian for the Depositary pursuant to
Section 2.1 shall be transferred to the beneficial owners thereof
in the form of certificated Notes in an aggregate principal
amount equal to the principal amount of such Global Note, in
exchange for such Global Note, only if such transfer complies
with Section 2.3 and (i) the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary for such
Global Note or if at any time such Depositary ceases to be a
"clearing agency" registered under the Exchange Act and a
successor depositary is not appointed by the Company within 90
days of such notice, (ii) an Event of Default has occurred and is
continuing or (iii) the Company, in its sole discretion, notifies
the Trustee in writing that it elects to cause the issuance of
certificated Notes under this Indenture.
(b) Any Global Note that is transferable to the
beneficial owners thereof pursuant to this Section shall be
surrendered by the Depositary to the Trustee, to be so
transferred, in whole or from time to time in part, without
charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Note, an equal aggregate
principal amount of certificated Initial Notes of authorized
denominations. Any portion of a Global Note transferred pursuant
to this Section shall be executed, authenticated and delivered
only in denominations of $1,000 and any integral multiple thereof
and registered in such names as the Depositary shall direct. Any
certificated Initial Note delivered in exchange for an interest
in the Global Note shall, except as otherwise provided by Section
<PAGE>
9
2.3(d), bear the restricted securities legend set forth in
Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this
Indenture or the Notes.
(d) In the event of the occurrence of either of the
events specified in Section 2.4(a), the Company will promptly
make available to the Trustee a reasonable supply of certificated
Notes in definitive, fully registered form without interest
coupons.
<PAGE>
EXHIBIT 1
TO RULE 144A
APPENDIX
[FORM OF FACE OF INITIAL NOTE]
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THIS INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT
THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (i) INSIDE THE UNITED STATES TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE
THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904
UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES
(i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN
(A) ABOVE.
<PAGE>
2
PURINA MILLS, INC.
No. __ Principal Amount $_____________
CUSIP NO. _________
9% Senior Subordinated Notes Due 2010
Purina Mills, Inc., a Delaware corporation, promises
to pay to __________, or registered assigns, the principal sum of
________________________ Dollars on March 15, 2010.
Interest Payment Dates: March 15 and September 15.
Record Dates: March 1 and September 1.
Additional provisions of this Note are set forth on
the other side of this Note.
Dated: March 12, 1998 PURINA MILLS, INC.
By___________________________________
By___________________________________
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Notes
referred to in the Indenture.
The First National Bank of Chicago
as Trustee
By____________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL NOTE]
(Reverse of Note)
9% Senior Subordinated Notes Due 2010
1. Interest
Purina Mills, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"),
promises to pay interest on the principal amount of this Note at
the rate per annum shown above; provided, however, that if a
Registration Default (as defined in the Registration Rights
Agreement) occurs, additional cash interest will accrue on this
Note at a rate of 0.50% per annum (increasing by 0.50% per annum
at the end of each 90-day period thereafter) from and including
the date on which any such Registration Default shall occur to
but excluding the date on which all Registration Defaults have
been cured, calculated on the principal amount of this Note as of
the date on which such interest is payable; provided, however,
that in no event shall the aggregate amount of such additional
interest exceed 1.00% per annum. Such interest is payable in
addition to any other interest payable from time to time with
respect to this Note. The Trustee will not be deemed to have
notice of a Registration Default until it shall have received
actual notice of such Registration Default.
The Company will pay interest semiannually on March 15
and September 15 of each year, commencing September 15, 1998.
Interest on the Notes will accrue from the most recent date to
which interest has been paid on the Notes or, if no interest has
been paid, from March 12, 1998. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment
By at least 11:00 a.m. (New York City time) on the
date on which any Principal of or interest on any Note is due and
payable, the Company shall irrevocably deposit with the Trustee
or the Paying Agent money sufficient to pay such Principal and/or
interest. The Company will pay interest (except defaulted
interest) to the Persons who are registered Holders of Notes at
the close of business on the March 1 or September 1 next
preceding the interest payment date even if Notes are cancelled,
repurchased or redeemed after the record date and on or before
the interest payment date. Holders must surrender Notes to a
Paying Agent to collect principal payments. The Company will pay
Principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private
debts. However, the Company may pay Principal and interest by
<PAGE>
2
check payable in such money. It may mail an interest check to a
Holder's registered address.
3. Paying Agent and Registrar
Initially, The First National Bank of Chicago, a
national banking association (the "Trustee"), will act as Paying
Agent and Registrar. The Company may appoint and change any
Paying Agent, Registrar or co-registrar without notice to any
Noteholder. The Company or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent.
4. Indenture
The Company issued the Notes under an Indenture dated
as of March 12, 1998 (as it may be amended or supplemented from
time to time in accordance with the terms thereof, the
"Indenture"), between the Company and the Trustee. The terms of
the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of
the Indenture (the "Act"). Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in the
Indenture. The Notes are subject to all such terms, and
Noteholders are referred to the Indenture and the Act for a
statement of those terms.
The Notes are unsecured senior obligations of the
Company limited to $500,000,000 aggregate principal amount
(subject to Section 2.7 of the Indenture) including (a)
$350,000,000 in aggregate principal amount of Initial Notes being
offered on the Issuance Date and (b) additional "add-on" notes
which may be offered subsequent to the Issue Date (the
"Subsequent Add-on Notes") in an aggregate principal amount not
to exceed $150,000,000; provided, however, that no Subsequent
Add-on Notes may be authenticated and delivered in an aggregate
principal amount of less than $25,000,000. All Notes issued on
the Issue Date and all Subsequent Add-on Notes shall be identical
in all respects other than issuance dates, the date from which
interest accrues and any changes relating thereto, and shall vote
together as one class of securities pursuant to Section 1.5 of
the Indenture.
This Note is one of the Initial Notes referred to in
the Indenture. The Notes include the Initial Notes and any
Private Exchange Notes and Exchange Notes issued in exchange for
the Initial Notes pursuant to the Indenture and the Registration
Rights Agreement and any Subsequent Add-on Notes. The Initial
Notes, the Private Exchange Notes and the Exchange Notes and any
Subsequent Add-on Notes are treated as a single class of
securities under the Indenture.
<PAGE>
3
The Indenture imposes certain limitations on the
Incurrence of Indebtedness by the Company and its Restricted
Subsidiaries, the payment of dividends and other distributions on
the Capital Stock of the Company and its Restricted Subsidiaries,
the purchase or redemption of Capital Stock of the Company and
Capital Stock of such Restricted Subsidiaries, certain purchases
or redemptions of Subordinated Obligations, the sale or transfer
of assets and Capital Stock of Restricted Subsidiaries, the
issuance or sale of Capital Stock of Restricted Subsidiaries, the
investments of the Company and its Subsidiaries and transactions
with Affiliates. In addition, the Indenture limits the ability of
the Company and its Restricted Subsidiaries to restrict
distributions and dividends from Restricted Subsidiaries.
5. Optional Redemption
Except as set forth in the following paragraph, the
Notes will not be redeemable at the option of the Company prior
to March 15, 2003. Thereafter, the Notes will be redeemable, at
the Company's option, in whole or in part, at any time or from
time to time, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's registered
address, at the following redemption prices (expressed as a
percentage of principal amount), plus accrued interest, if any,
to the redemption date (subject to the right of Holders of record
on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month
period commencing on March 15 of the years set forth below:
Redemption
Period Price
------ ----------
2003..................................... 104.500%
2004..................................... 103.000%
2005..................................... 101.500%
2006 and thereafter...................... 100.000%
In addition, at any time and from time to time prior
to March 15, 2001, the Company may redeem in the aggregate up to
35% of the original aggregate principal amount of the Notes with
the net cash proceeds of one or more Public Equity Offerings of
the Company following which there is a Public Market or, in the
case of a Public Equity Offering of Holdings following which
there is a Public Market, with the net cash proceeds thereof that
are contributed to the equity capital of the Company, at a
redemption price (expressed as a percentage of principal amount
thereof) of 109.00% plus accrued interest, if any, to the
redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant
interest payment date); provided, however, that at least $227.5
million principal amount of the Notes must remain outstanding
after each such redemption.
<PAGE>
4
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days
but not more than 60 days before the redemption date by
first-class mail to each Holder of Notes to be redeemed at his
registered address. Notes in denominations of principal amount
larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption
price of and accrued and unpaid interest on all Notes (or
portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date
and certain other conditions are satisfied, on and after such
date interest ceases to accrue on such Notes (or such portions
thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder of Notes will
have the right to cause the Company to repurchase all or any part
of the Notes of such Holder at a repurchase price equal to 101%
of the principal amount thereof, plus accrued and unpaid
interest, to the date of repurchase as provided in, and subject
to the terms of, the Indenture.
8. Registration Rights
The Company is party to a Registration Rights
Agreement, dated as of March 12, 1998, among the Company, Credit
Suisse First Boston Corporation and Chase Securities Inc.
pursuant to which it is obligated to pay Additional Interest (as
defined therein) upon the occurrence of certain Registration
Defaults (as defined therein).
9. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples
of $1,000. A Holder may register, transfer or exchange Notes in
accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements
or transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange (i) any Notes selected for
redemption (except, in the case of a Note to be redeemed in part,
the portion of the Note not to be redeemed) for a period
beginning 15 days before a selection of Notes to be redeemed and
ending on the date of such selection or (ii) any Notes for a
period beginning 15 days before an interest payment date and
ending on such interest payment date.
<PAGE>
5
10. Persons Deemed Owners
The registered holder of this Note may be treated as
the owner of it for all purposes.
11. Unclaimed Money
If money for the payment of Principal or interest or
Additional Interest, if any, remains unclaimed for one year after
the date of payment of Principal and interest and Additional
Interest, if any, the Trustee or Paying Agent shall pay the money
back to the Company at its request. After any such payment,
Holders entitled to the money must look only to the Company and
not to the Trustee for payment.
12. Defeasance
Subject to certain conditions set forth in the
Indenture, the Company at any time may terminate some or all of
its obligations under the Notes and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations
for the payment of Principal of and interest on the Notes to
redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Notes may be amended with the
written consent of the Holders of at least a majority in
principal amount of the outstanding Notes and (ii) any default or
noncompliance with any provision may be waived with the written
consent of the Holders of a majority in principal amount of the
outstanding Notes. Subject to certain exceptions set forth in the
Indenture, without the consent of any Noteholder, the Company and
the Trustee may amend the Indenture or the Notes to cure any
ambiguity, omission, defect or inconsistency, or to comply with
Article V of the Indenture, or to provide for uncertificated
Notes in addition to or in place of certificated Notes, or to add
guarantees with respect to the Notes or to secure the Notes, or
to add additional covenants of or surrender rights and powers
conferred on the Company, or to make any change that does not
adversely affect the rights of any Noteholder (including changes
to effect the issuance of Subsequent Add-on Notes and to effect
the provisions of Section 1.5), or to comply with any request of
the SEC in connection with the qualification of the Indenture
under the Act. However, no amendment may be made to the
subordination provisions of the Indenture that adversely affects
the rights of any holder of Senior Indebtedness then outstanding
unless the holders of such Senior Indebtedness (or their
Representative) consent to such change.
<PAGE>
6
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) a
default in any payment of interest on any Note when due,
continued for 30 days, (ii) a default in the payment of principal
of any Note when due at its Stated Maturity, upon optional
redemption, upon required repurchase, upon declaration or
otherwise, (iii) the failure by the Company to comply with its
obligations under Article V of the Indenture, (iv) the failure by
the Company to comply for 30 days after notice with any of its
obligations under the covenants described under Section 4.2, 4.3,
4.4, 4.5, 4.6, 4.7, 4.8, 4.9 or 4.10 of the Indenture (in each
case, other than a failure to purchase Notes), (v) the failure by
the Company to comply for 60 days after notice with its other
agreements contained in the Indenture, (vi) the failure by the
Company or any Restricted Subsidiary of the Company to pay any
Indebtedness within any applicable grace period after final
maturity or the acceleration of any such Indebtedness by the
holders thereof because of a default if the total amount of such
Indebtedness unpaid or accelerated exceeds $10.0 million or its
foreign currency equivalent, (vii) certain events of bankruptcy,
insolvency or reorganization of Holdings, the Company or any
Significant Subsidiary of the Company or (viii) any final,
non-appealable judgment or decree for the payment of money in
excess of $10.0 million (net of any amounts with respect to which
a creditworthy insurance company has acknowledged full liability
in writing) is rendered against the Company or any Restricted
Subsidiary of the Company remains outstanding for a period of 60
days after such judgment and is not discharged, waived or stayed
within 10 days after notice. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes may declare all the Notes
to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the
Notes being due and payable immediately upon the occurrence of
such Events of Default.
Noteholders may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Notes unless it receives reasonable
indemnity or security. Subject to certain limitations, Holders of
a majority in principal amount of the Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may
withhold from Noteholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment
of Principal or interest) if it determines that withholding
notice is not opposed to their interest.
15. Trustee Dealings with the Company
Subject to certain limitations set forth in the
Indenture, the Trustee under the Indenture, in its individual or
any other capacity, may become the owner or pledgee of Notes and
<PAGE>
7
may otherwise deal with and collect obligations owed to it by the
Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such,
of the Company shall not have any liability for any obligations
of the Company under the Notes or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their
creation. None of Koch Agriculture, Koch Industries, Holdings or
any of their Affiliates (other than the Company) will be parties
to this Indenture or responsible for any payments or other claims
in respect of the Notes or this Indenture. By accepting a Note,
each Noteholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of
the Notes.
17. Authentication
This Note shall not be valid until an authorized
signatory of the Trustee (or an authenticating agent acting on
its behalf) manually signs the certificate of authentication on
the other side of this Note.
18. Abbreviations
Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as TEN COM (=tenants in common),
TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with
rights of survivorship and not as tenants in common), CUST
(=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures the
Company has caused CUSIP numbers to be printed on the Notes and
has directed the Trustee to use CUSIP numbers in notices of
redemption as a convenience to Noteholders. No representation is
made as to the accuracy of such numbers either as printed on the
Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed
thereon.
<PAGE>
8
20. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.
The Company will furnish to any Noteholder upon written
request and without charge to the Noteholder a copy of the
Indenture which has in it the text of this Note in larger type.
Requests may be made to: Purina Mills, Inc., 1401 South Hanley
Road, St. Louis, Missouri 63144, Attention: Chief Financial
Officer.
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Note on the books of the Company. The agent may
substitute another to act for him.
_____________________________________________________________________
Date: __________________ Your Signature: ________________________
Sign exactly as your
name appears on the
other side of this Note.
Signature Guarantee: ______________________________
(Signature must be guaranteed by a participant in a recognized Signature
Guarantee Medallion Program or other signature guarantor program reasonably
acceptable to the Trustee)
In connection with any transfer or exchange of any of the Notes
evidenced by this certificate occurring prior to the date that is
two years after the later of the date of original issuance of
such Notes and the last date, if any, on which such Notes were
owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Notes are being transferred:
CHECK ONE BOX BELOW:
__
(1) __ to the Company; or
__
(2) __ pursuant to an effective registration statement
under the Securities Act of 1933; or
__
(3) __ inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A under
the Securities Act of 1933) that purchases for its
own account or for the account of a qualified
institutional buyer to whom notice is given that
such transfer is being made in reliance on Rule
144A, in each case pursuant to and in compliance
with Rule 144A under the Securities Act of 1933; or
<PAGE>
2
__
(4) __ outside the United States in an offshore
transaction within the meaning of Regulation S
under the Securities Act in compliance with Rule
904 under the Securities Act of 1933; or
__
(5) __ pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the
name of any Person other than the registered holder thereof;
provided, however, that if box (4) or (5) is checked, the Trustee
may require, prior to registering any such transfer of the Notes,
such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is
being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act
of 1933, such as the exemption provided by Rule 144 under such
Act.
Date: __________ Your Signature _________________________________
Sign exactly as your name appears
on the other side of this Note.
Signature Guarantee: __________________________________________
(Signature must be guaranteed by a participant in a recognized
Signature Guarantee Medallion Program or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
____________________________________________________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with
respect to which it exercises sole investment discretion and that
it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933,
and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant
to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by an
executive officer
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by
the Company pursuant to Section 4.7 or 4.9 of the Indenture,
check the appropriate box:
__
Section 4.7 __
__
Section 4.9 __
If you want to elect to have only part of this Note
purchased by the Company pursuant to Section 4.7 or 4.9 of the
Indenture, state the amount you elect to have purchased (must be
integral multiple of $1,000): $
<PAGE>
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global
Note have been made:
Amount of decrease Amount of increase
Date of in Principal Amount in Principal Amount
Exchange of this Global Note of this Global Note
Principal Amount of Signature of
this Global Note authorized officer
following such of Trustee or Notes
decrease or increase Custodian
<PAGE>
EXHIBIT A
[FORM OF FACE OF EXCHANGE NOTE [OR PRIVATE
EXCHANGE NOTE]]
*/
**/
PURINA MILLS, INC.
No. __ Principal Amount $_____________
CUSIP NO. _________
9% Senior Subordinated Notes Due 2010
Purina Mills Inc., a Delaware corporation, promises to
pay to __________, or registered assigns, the principal sum of
___________________________ Dollars on March 15, 2010.
Interest Payment Dates: March 15 and September 15.
Record Dates: March 1 and September 1.
Additional provisions of this Note are set forth on
the other side of this Note.
Dated: __________ PURINA MILLS, INC.
by_________________________________
by_________________________________
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Notes
referred to in this Indenture.
The First National Bank of Chicago
as Trustee
by________________________
Authorized Signatory
__________________________
*/ [If the Note is to be issued in global form add the Global
Notes Legend from Exhibit 1 to Appendix A and the
attachment from such Exhibit 1 captioned "[TO BE ATTACHED
TO GLOBAL NOTES] - SCHEDULE OF INCREASES OR DECREASES IN
GLOBAL NOTE".]
**/ [If the Note is a Private Exchange Note issued in a Private
Exchange to an Initial Purchaser holding an unsold portion
of its initial allotment, add the Restricted Notes Legend
from Exhibit 1 to Appendix A and replace the Assignment
Form included in such Exhibit 1.]
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE NOTE [OR
PRIVATE EXCHANGE NOTE]]
9% Senior Subordinated Notes Due 2010
1. Interest
Purina Mills, Inc., a Delaware corporation (such
corporation, and its successors and assigns under this Indenture
hereinafter referred to, being herein called the "Company"),
promises to pay interest on the principal amount of this Note at
the rate per annum shown above[; provided, however, that if a
Registration Default (as defined in the Registration Rights
Agreement) occurs, additional cash interest will accrue on this
Note at a rate of 0.50% per annum (increasing by 0.5% per annum
at the end of each 90-day period thereafter) from and including
the date on which any such Registration Default shall occur to
but excluding the date on which all Registration Defaults have
been cured, calculated on the principal amount of this Note as of
the date on which such interest is payable; provided, however,
that in no event shall the aggregate amount of such additional
interest exceed 1.00% per annum. Such interest is payable in
addition to any other interest payable from time to time with
respect to this Note. The Trustee will not be deemed to have
notice of a Registration Default until it shall have received
actual notice of such Registration Default].***
The Company will pay interest semiannually on March 15
and September 15 of each year, commencing September 15, 1998.
Interest on the Notes will accrue from the most recent date to
which interest has been paid on the Notes or, if no interest has
been paid, from March 12, 1998. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment
By at least 11:00 a.m. (New York City time) on the
date on which any Principal of or interest on any Note is due and
payable, the Company shall irrevocably deposit with the Trustee
or the Paying Agent money sufficient to pay such Principal and/or
interest. The Company will pay interest (except defaulted
interest) to the Persons who are registered Holders of Notes at
the close of business on the March 1 or September 1 next
preceding the interest payment date even if Notes are cancelled,
repurchased or redeemed after the record date and on or before
_______________
*** Insert if at the time of issuance of the Exchange Note or
Private Exchange Note (as the case may be) neither the
Registered Exchange Offer has been consummated nor a Shelf
Registration Statement has been declared effective in
accordance with the Registration Rights Agreement.
<PAGE>
2
the interest payment date. Holders must surrender Notes to a
Paying Agent to collect principal payments. The Company will pay
Principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private
debts. However, the Company may pay Principal and interest by
check payable in such money. It may mail an interest check to a
Holder's registered address.
3. Paying Agent and Registrar
Initially, The First National Bank of Chicago, a
national banking association (the "Trustee"), will act as Paying
Agent and Registrar. The Company may appoint and change any
Paying Agent, Registrar or co-registrar without notice to any
Noteholder. The Company or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent.
4. Indenture
The Company issued the Notes under an Indenture dated
as of March 12, 1998 (as it may be amended or supplemented from
time to time in accordance with the terms thereof, the
"Indenture"), between the Company and the Trustee. The terms of
the Notes include those stated in this Indenture and those made
part of this Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of
this Indenture (the "Act"). Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in this
Indenture. The Notes are subject to all such terms, and
Noteholders are referred to this Indenture and the Act for a
statement of those terms.
The Notes are unsecured senior subordinated
obligations of the Company limited to $500,000,000 aggregate
principal amount (subject to Section 2.7 of the Indenture)
including (a) $350,000,000 in aggregate principal amount of
Initial Notes being offered on the Issuance Date and (b)
additional "add-on" notes which may be offered subsequent to the
Issue Date (the "Subsequent Add-on Notes") in an aggregate
principal amount not to exceed $150,000,000; provided, however,
that no Subsequent Add-on Notes may be authenticated and
delivered in an aggregate principal amount of less than
$25,000,000. All Notes issued on the Issue Date and all
Subsequent Add-on Notes shall be identical in all respects other
than issuance dates, the date from which interest accrues and any
changes relating thereto, and shall vote together as one class of
securities pursuant to Section 1.5 of the Indenture.
The Note is one of the Exchange Notes referred to in
the Indenture. The Notes include the Initial Notes and any
Private Exchange Notes and Exchange Notes issued in exchange for
the Initial Notes pursuant to the Indenture and the Registration
<PAGE>
3
Rights Agreement and any Subsequent Add-on Notes. The Initial
Notes, the Private Exchange Notes and the Exchange Notes and any
Subsequent Add-on Notes are treated as a single class of
securities under the Indenture.
The Indenture imposes certain limitations on the
Incurrence of Indebtedness by the Company and its Restricted
Subsidiaries, the payment of dividends and other distributions on
the Capital Stock of the Company and its Restricted Subsidiaries,
the purchase or redemption of Capital Stock of the Company and
Capital Stock of such Restricted Subsidiaries, certain purchases
or redemptions of Subordinated Obligations, the sale or transfer
of assets and Capital Stock of Restricted Subsidiaries, the
issuance or sale of Capital Stock of Restricted Subsidiaries, the
investments of the Company and its Subsidiaries and transactions
with Affiliates. In addition, the Indenture limits the ability of
the Company and its Restricted Subsidiaries to restrict
distributions and dividends from Restricted Subsidiaries.
5. Optional Redemption
Except as set forth in the following paragraph, the
Notes will not be redeemable at the option of the Company prior
to March 15, 2003. Thereafter, the Notes will be redeemable, at
the Company's option, in whole or in part, at any time or from
time to time, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's registered
address, at the following redemption prices (expressed as a
percentage of principal amount), plus accrued interest, if any,
to the redemption date (subject to the right of Holders of record
on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month
period commencing on March 15 of the years set forth below:
Redemption
Period Price
------ ----------
2003..................................... 104.500%
2004..................................... 103.000%
2005..................................... 101.500%
2006 and thereafter...................... 100.000%
In addition, at any time and from time to time prior
to March 15, 2001, the Company may redeem in the aggregate up to
35% of the original aggregate principal amount of the Notes with
the net cash proceeds of one or more Public Equity Offerings of
the Company following which there is a Public Market or, in the
case of a Public Equity Offering of Holdings following which
there is a Public Market, with the net cash proceeds thereof that
are contributed to the equity capital of the Company, at a
redemption price (expressed as a percentage of principal amount
thereof) of
<PAGE>
4
109.00% plus accrued interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment
date); provided, however, that at least $227.5 million principal
amount of the Notes must remain outstanding after each such
redemption.
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days
but not more than 60 days before the redemption date by
first-class mail to each Holder of Notes to be redeemed at his
registered address. Notes in denominations of principal amount
larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption
price of and accrued and unpaid interest on all Notes (or
portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date
and certain other conditions are satisfied, on and after such
date interest ceases to accrue on such Notes (or such portions
thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder of Notes will
have the right to cause the Company to repurchase all or any part
of the Notes of such Holder at a repurchase price equal to 101%
of the principal amount thereof, plus accrued and unpaid
interest, to the date of repurchase as provided in, and subject
to the terms of, the Indenture.
8. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples
of $1,000. A Holder may register transfer or exchange Notes in
accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements
or transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange (i) any Notes selected for
redemption (except, in the case of a Note to be redeemed in part,
the portion of the Note not to be redeemed) for a period
beginning 15 days before a selection of Notes to be redeemed and
ending on the date of such selection or (ii) any Notes for a
period beginning 15 days before an interest payment date and
ending on such interest payment date.
<PAGE>
5
9. Persons Deemed Owners
The registered holder of this Note may be treated as
the owner of it for all purposes.
10. Unclaimed Money
If money for the payment of Principal or interest or
Additional Interest, if any, remains unclaimed for one year after
the date of payment of Principal and interest and Additional
Interest, if any, the Trustee or Paying Agent shall pay the money
back to the Company at its request. After any such payment,
Holders entitled to the money must look only to the Company and
not to the Trustee for payment.
11. Defeasance
Subject to certain conditions set forth in the
Indenture, the Company at any time may terminate some or all of
its obligations under the Notes and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations
for the payment of Principal of and interest on the Notes to
redemption or maturity, as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Notes may be amended with the
written consent of the Holders of at least a majority in
principal amount of the outstanding Notes and (ii) any default or
noncompliance with any provision may be waived with the written
consent of the Holders of a majority in principal amount of the
outstanding Notes. Subject to certain exceptions set forth in the
Indenture, without the consent of any Noteholder, the Company and
the Trustee may amend the Indenture or the Notes to cure any
ambiguity, omission, defect or inconsistency, or to comply with
Article V of the Indenture, or to provide for uncertificated
Notes in addition to or in place of certificated Notes, or to add
guarantees with respect to the Notes or to secure the Notes, or
to add additional covenants of or surrender rights and powers
conferred on the Company, or to make any change that does not
adversely affect the rights of any Noteholder (including changes
to effect the issuance of Subsequent Add-on Notes and to effect
the provisions of Section 1.5), or to comply with any request of
the SEC in connection with the qualification of the Indenture
under the Act. However, no amendment may be made to the
subordination provisions of the Indenture that adversely affects
the rights of any holder of Senior Indebtedness then outstanding
unless the holders of such Senior Indebtedness (or their
Representative) consent to such change
<PAGE>
6
13. Defaults and Remedies
Under the Indenture, Events of Default include (i) a
default in any payment of interest on any Note when due,
continued for 30 days, (ii) a default in the payment of principal
of any Note when due at its Stated Maturity, upon optional
redemption, upon required repurchase, upon declaration or
otherwise, (iii) the failure by the Company to comply with its
obligations under Article V of the Indenture, (iv) the failure by
the Company to comply for 30 days after notice with any of its
obligations under the covenants described under Section 4.2, 4.3,
4.4, 4.5, 4.6, 4.7, 4.8, 4.9 or 4.10 of the Indenture (in each
case, other than a failure to purchase Notes), (v) the failure by
the Company to comply for 60 days after notice with its other
agreements contained in the Indenture, (vi) the failure by the
Company or any Restricted Subsidiary of the Company to pay any
Indebtedness within any applicable grace period after final
maturity or the acceleration of any such Indebtedness by the
holders thereof because of a default if the total amount of such
Indebtedness unpaid or accelerated exceeds $10.0 million or its
foreign currency equivalent, (vii) certain events of bankruptcy,
insolvency or reorganization of Holdings, the Company or any
Significant Subsidiary of the Company or (viii) any final,
non-appealable judgment or decree for the payment of money in
excess of $10.0 million (net of any amounts with respect to which
a creditworthy insurance company has acknowledged full liability
in writing) is rendered against the Company or any Restricted
Subsidiary of the Company remains outstanding for a period of 60
days after such judgment and is not discharged, waived or stayed
within 10 days after notice. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes may declare all the Notes
to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the
Notes being due and payable immediately upon the occurrence of
such Events of Default.
Noteholders may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Notes unless it receives reasonable
indemnity or security. Subject to certain limitations, Holders of
a majority in principal amount of the Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may
withhold from Noteholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment
of Principal or interest) if it determines that withholding
notice is not opposed to their interest.
14. Trustee Dealings with the Company
Subject to certain limitations set forth in this
Indenture, the Trustee under the Indenture, in its individual or
any other capacity, may become the owner or pledgee of Notes and
<PAGE>
7
may otherwise deal with and collect obligations owed to it by the
Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were
not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such,
of the Company shall not have any liability for any obligations
of the Company under the Notes or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their
creation. None of Koch Agriculture, Koch Industries, Holdings or
any of their Affiliates (other than the Company) will be parties
to this Indenture or responsible for any payments or other claims
in respect of the Notes or this Indenture. By accepting a Note,
each Noteholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of
the Notes.
16. Authentication
This Note shall not be valid until an authorized
signatory of the Trustee (or an authenticating agent acting on
its behalf) manually signs the certificate of authentication on
the other side of this Note.
17. Abbreviations
Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as TEN COM (=tenants in common),
TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with
rights of survivorship and not as tenants in common), CUST
(=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures the
Company has caused CUSIP numbers to be printed on the Notes and
has directed the Trustee to use CUSIP numbers in notices of
redemption as a convenience to Noteholders. No representation is
made as to the accuracy of such numbers either as printed on the
Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed
thereon.
<PAGE>
8
19. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.
The Company will furnish to any Noteholder upon written
request and without charge to the Noteholder a copy of the
Indenture which has in it the text of this Note in larger type.
Requests may be made to: Purina Mills, Inc., 1401 South Hanley
Road, St. Louis, Missouri 63144, Attention: Chief Financial
Officer.
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Note on the books of the Company. The agent may
substitute another to act for him.
___________________________________________________________________
Date: ______________ Your Signature: __________________________
Sign exactly as your name
appears on the other side
of this Note.
Signature Guarantee: _____________________________________________
(Signature must be guaranteed by a participant in a recognized
Signature Guarantee Medallion Program or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by
the Company pursuant to Section 4.7 or 4.9 of the Indenture,
check the appropriate box:
__
Section 4.7 __
__
Section 4.9 __
If you want to elect to have only part of this Note
purchased by the Company pursuant to Section 4.7 or 4.9 of the
Indenture, state the amount you elect to have purchased (must be
integral multiple of $1,000): $
Date: __________ Your Signature ___________________________________
Sign exactly as your name appears
on the other side of this Note.
Signature Guarantee: ______________________________________________
(Signature must be guaranteed by a participant in a recognized
Signature Guarantee Medallion Program or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
EXECUTION COPY
====================================================================
PURINA MILLS, INC.,
Issuer
9% Senior Subordinated Notes Due 2010
==================
INDENTURE
Dated as of March 12, 1998
==================
The First National Bank of Chicago,
Trustee
====================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1) .............................. 7.10
(a)(2) .............................. 7.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(b) .............................. 7.8; 7.10
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 2.5
(b) .............................. 11.3
(c) .............................. 11.3
313(a) .............................. 7.6
(b)(1) .............................. N.A.
(b)(2) .............................. 7.6
(c) .............................. 7.6
(d) .............................. 7.6
314(a) .............................. 4.2
4.15; 11.2
(b) .............................. N.A.
(c)(1) .............................. 11.4
(c)(2) .............................. 11.4
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 11.5
(f) .............................. 4.13
315(a) .............................. 7.1
(b) .............................. 7.5; 11.2
(c) .............................. 7.1
(d) .............................. 7.1
(e) .............................. 6.11
316(a)(last sentence)........................ 11.6
(a)(1)(A) .............................. 6.5
(a)(1)(B) .............................. 6.4
(a)(2) .............................. N.A.
(b) .............................. 6.7
317(a)(1) .............................. 6.8
(a)(2) .............................. 6.9
(b) .............................. 2.4
318(a) .............................. 11.1
N.A. means Not Applicable.
_________________________
Note: This Cross-Reference Table shall not, for any purpose,
be deemed to be part of this Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
Definitions and Incorporation by Reference.......... 1
SECTION 1.1. Definitions................................. 1
SECTION 1.2. Other Definitions........................... 24
SECTION 1.3. Incorporation by Reference of Trust
Indenture Act........................................ 24
SECTION 1.4. Rules of Construction....................... 25
SECTION 1.5. One Class of Notes.......................... 25
ARTICLE II
The Notes.......................... 26
SECTION 2.1. Form and Dating............................. 26
SECTION 2.2. Execution and Authentication................ 26
SECTION 2.3. Registrar and Paying Agent.................. 27
SECTION 2.4. Paying Agent To Hold Money in Trust......... 27
SECTION 2.5. Noteholder Lists............................ 27
SECTION 2.6. [Intentionally Omitted]..................... 28
SECTION 2.7. Replacement Notes........................... 28
SECTION 2.8. Outstanding Notes........................... 28
SECTION 2.9. Temporary Notes............................. 28
SECTION 2.10. Cancellation............................... 29
SECTION 2.11. Defaulted Interest......................... 29
SECTION 2.12. CUSIP Numbers.............................. 29
ARTICLE III
Redemption.......................... 30
SECTION 3.1. Notices to Trustee.......................... 30
SECTION 3.2. Selection of Notes To Be Redeemed........... 30
SECTION 3.3. Notice of Redemption........................ 31
SECTION 3.4. Effect of Notice of Redemption.............. 31
SECTION 3.5. Deposit of Redemption Price................. 32
SECTION 3.6. Notes Redeemed in Part...................... 32
ARTICLE IV
Covenants.......................... 32
SECTION 4.1. Payment of Notes............................ 32
SECTION 4.2. SEC Reports................................. 33
SECTION 4.3. Limitation on Indebtedness.................. 33
SECTION 4.4. Limitation on Indebtedness and Preferred
Stock of Restricted Subsidiaries..................... 36
SECTION 4.5. Limitation on Restricted Payments........... 37
SECTION 4.6. Limitation on Restrictions on
Distributions from Restricted Subsidiaries........... 39
SECTION 4.7. Limitation on Sale of Assets and
Subsidiary Stock..................................... 40
-i-
<PAGE>
Page
----
SECTION 4.8. Limitation on Transactions With
Affiliates........................................... 43
SECTION 4.9. Change of Control........................... 45
SECTION 4.10. Limitation on Sale or Issuance of
Capital Stock of Restricted Subsidiaries............. 46
SECTION 4.11. Compliance with Laws....................... 46
SECTION 4.12. Compliance Certificate..................... 46
SECTION 4.13. Further Instruments and Acts............... 47
SECTION 4.14. Maintenance of Office or Agency............ 47
SECTION 4.15. Corporate Existence........................ 47
SECTION 4.16. Payment of Taxes and Other Claims.......... 47
SECTION 4.17. Maintenance of Properties and Insurance.... 48
ARTICLE V
Successor Company...................... 48
SECTION 5.1. When the Company May Merge or Transfer
Assets............................................... 48
ARTICLE VI
Defaults and Remedies.................... 49
SECTION 6.1. Events of Default........................... 49
SECTION 6.2. Acceleration................................ 51
SECTION 6.3. Other Remedies.............................. 52
SECTION 6.4. Waiver of Past Defaults..................... 52
SECTION 6.5. Control by Majority......................... 53
SECTION 6.6. Limitation on Suits......................... 53
SECTION 6.7. Rights of Holders To Receive Payment........ 53
SECTION 6.8. Collection Suit by Trustee.................. 54
SECTION 6.9. Trustee May File Proofs of Claim............ 54
SECTION 6.10. Priorities................................. 54
SECTION 6.11. Undertaking for Costs...................... 55
SECTION 6.12. Waiver of Stay or Extension Laws........... 55
ARTICLE VII
Trustee........................... 55
SECTION 7.1. Duties of Trustee........................... 55
SECTION 7.2. Rights of Trustee........................... 56
SECTION 7.3. Individual Rights of Trustee................ 57
SECTION 7.4. Trustee's Disclaimer........................ 57
SECTION 7.5. Notice of Defaults.......................... 57
SECTION 7.6. Reports by Trustee to Holders............... 58
SECTION 7.7. Compensation and Indemnity.................. 58
SECTION 7.8. Replacement of Trustee...................... 59
SECTION 7.9. Successor Trustee by Merger................. 60
SECTION 7.10. Eligibility; Disqualification.............. 60
SECTION 7.11. Preferential Collection of Claims
Against Company...................................... 61
ARTICLE VIII
-ii-
<PAGE>
Page
----
Discharge of Indenture; Defeasance.............. 61
SECTION 8.1. Discharge of Liability on Notes;
Defeasance........................................... 61
SECTION 8.2. Conditions to Defeasance.................... 62
SECTION 8.3. Application of Trust Money.................. 63
SECTION 8.4. Repayment to Company........................ 63
SECTION 8.5. Indemnity for Government Obligations........ 64
SECTION 8.6. Reinstatement............................... 64
ARTICLE IX
Amendments.......................... 64
SECTION 9.1. Without Consent of Holders.................. 64
SECTION 9.2. With Consent of Holders..................... 65
SECTION 9.3. Compliance with Trust Indenture Act......... 66
SECTION 9.4. Revocation and Effect of Consents and
Waivers.............................................. 66
SECTION 9.5. Notation on or Exchange of Notes............ 67
SECTION 9.6. Trustee To Sign Amendments.................. 67
SECTION 9.7. Payment for Consent......................... 67
ARTICLE X
Subordination of the Notes.................. 68
SECTION 10.1. Agreement To Subordinate................... 68
SECTION 10.2. Liquidation, Dissolution, Bankruptcy. .... 68
SECTION 10.3. Default on Senior Indebtedness of the
Company.............................................. 68
SECTION 10.4. Acceleration of Payment of Notes........... 70
SECTION 10.5. When Distribution Must Be Paid Over........ 70
SECTION 10.6. Subrogation................................ 70
SECTION 10.7. Relative Rights............................ 70
SECTION 10.8. Subordination May Not Be Impaired
by Company. ......................................... 70
SECTION 10.9. Rights of Trustee and Paying Agent......... 70
SECTION 10.10. Distribution or Notice to Repre-
sentative............................................ 71
SECTION 10.11. Article X Not To Prevent Events of
Default or Limit Right To Accelerate................. 71
SECTION 10.12. Trust Moneys Not Subordinated............. 71
SECTION 10.13. Trustee Entitled To Rely.................. 71
SECTION 10.14. Trustee To Effectuate Subordination....... 72
SECTION 10.15. Trustee Not Fiduciary for Holders of
Senior Indebtedness.................................. 72
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination Provisions............. 72
ARTICLE XI
Miscellaneous........................ 73
SECTION 11.1. Trust Indenture Act Controls............... 73
SECTION 11.2. Notices.................................... 73
-iii-
<PAGE>
Page
----
SECTION 11.3. Communication by Holders with other
Holders.............................................. 74
SECTION 11.4. Certificate and Opinion as to Conditions
Precedent............................................ 74
SECTION 11.5. Statements Required in Certificate or
Opinion.............................................. 74
SECTION 11.6. When Notes Disregarded..................... 75
SECTION 11.7. Rules by Trustee, Paying Agent and
Registrar............................................ 75
SECTION 11.8. Legal Holidays............................. 75
SECTION 11.9. GOVERNING LAW.............................. 75
SECTION 11.10. No Recourse Against Others................ 75
SECTION 11.11. Successors................................ 75
SECTION 11.12. Severability.............................. 76
SECTION 11.13. Multiple Originals........................ 76
SECTION 11.14. Variable Provisions....................... 76
SECTION 11.15. Qualification of Indenture................ 76
SECTION 11.16. Table of Contents; Headings............... 76
Rule 144A Appendix
Exhibit 1 to Rule 144A Appendix - Form of Initial Note
Exhibit A - Form of Exchange Note or Private Exchange Note
-iv-
- ----------------------------------------------------------------
CREDIT AGREEMENT
among
PURINA MILLS, INC.,
as the Company
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
Individually, as an Issuing Bank and as Administrative Agent
and
FINANCIAL INSTITUTIONS,
NOW OR HEREAFTER PARTIES HERETO
$100,000,000 Revolving Credit Facility
$100,000,000 Tranche A Term Loans
$100,000,000 Tranche B Term Loans
March 12, 1998
- ----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page No.
--------
ARTICLE 1
DEFINITIONS; CONSTRUCTION...........................2
Section 1.1 Definitions..........................2
Section 1.2 Accounting Terms and
Determinations......................22
Section 1.3 Other Definitional Terms............22
ARTICLE 2
AMOUNT AND TERMS OF LOANS..........................22
Section 2.1 Loans and Commitments...............22
Section 2.2 Borrowing Requests..................24
Section 2.3 Letters of Credit...................24
Section 2.4 Disbursement of Funds...............28
Section 2.5 Notes and Amortization..............29
Section 2.6 Interest............................30
Section 2.7 Interest Periods....................31
Section 2.8 Repayment of Loans..................32
Section 2.9 Termination or Reduction of
Commitments.........................33
Section 2.10 Prepayments.........................33
Section 2.11 Continuation and Conversion
Options.............................36
Section 2.12 Fees................................37
Section 2.13 Payments, etc.......................37
Section 2.14 Interest Rate Not Ascertainable,
etc.................................38
Section 2.15 Illegality..........................38
Section 2.16 Increased Costs.....................39
Section 2.17 Change of Lending Office............40
Section 2.18 Funding Losses......................40
Section 2.19 Sharing of Payments, etc............41
Section 2.20 Taxes...............................41
Section 2.21 Pro Rata Treatment..................43
Section 2.22 Replacement of Lenders..............44
ARTICLE 3
CONDITIONS TO BORROWINGS...........................44
Section 3.1 Conditions Precedent to
Initial Loan and Letter of Credit...44
Section 3.2 Conditions Precedent to All
Loans and Letters of Credit.........48
ARTICLE 4
REPRESENTATIONS AND WARRANTIES.....................48
Section 4.1 Corporate Existence.................48
Section 4.2 Corporate Power and Authorization...48
Section 4.3 Binding Obligations.................49
Section 4.4 No Legal Bar or Resultant Lien......49
Section 4.5 No Consent..........................49
i
<PAGE>
Section 4.6 Financial Information...............49
Section 4.7 Investments and Guaranties..........49
Section 4.8 Litigation..........................50
Section 4.9 Use of Proceeds.....................50
Section 4.10 Employee Benefits...................50
Section 4.11 Taxes; Governmental Charges.........51
Section 4.12 Titles, etc.........................51
Section 4.13 Defaults............................51
Section 4.14 Compliance with the Law.............51
Section 4.15 Patents, Licenses,
Franchises and Formulas.............52
Section 4.16 No Material Misstatements...........52
Section 4.17 Investment Company Act..............52
Section 4.18 Public Utility Holding
Company Act.........................52
Section 4.19 Subsidiaries........................52
Section 4.20 Insurance...........................52
Section 4.21 Environmental Matters...............53
Section 4.22 Solvency............................54
Section 4.23 Material Contracts..................54
Section 4.24 Employee Matters....................54
Section 4.25 Mortgaged Property..................54
Section 4.26 Senior Indebtedness.................54
Section 4.27 Sales Enhancement Loans and
Sales Enhancement Guarantees........54
Section 4.28 PMI Holding Company.................55
ARTICLE 5
AFFIRMATIVE COVENANTS..............................55
Section 5.1 Certain Affirmative Covenants.......55
(a) Maintenance and Compliance, etc..........55
(b) Payment of Taxes and Claims, etc.........55
(c) Further Assurances.......................55
(d) Performance of Obligations...............55
(e) Insurance................................55
(f) Accounts and Records.....................56
(g) Right of Inspection......................56
(h) Operation and Maintenance of Property....56
(i) Additional Subsidiaries; Additional
Liens....................................56
(j) Non-Consolidation of Unrestricted
Subsidiaries.............................57
(k) Limited Liability Interests..............58
(l) Dissolution of PMI Holding Company.......58
(m) Year 2000 Compatibility..................58
(n) Real Estate Post Closing Items...........58
Section 5.2 Reporting Covenants.................58
ARTICLE 6
NEGATIVE COVENANTS.................................61
Section 6.1 Financial Covenants.................61
Section 6.2 Indebtedness........................63
Section 6.3 Liens...............................64
<PAGE>
Section 6.4 Mergers, Sales, etc.................66
Section 6.5 Dividends, etc......................67
Section 6.6 Investments, Loans, etc.............67
Section 6.7 Sales and Leasebacks................69
Section 6.8 Nature of Business..................69
Section 6.9 ERISA Compliance....................70
Section 6.10 Sale or Discount of Receivables.....71
Section 6.11 Negative Pledge Agreements..........71
Section 6.12 Transactions with Affiliates........71
Section 6.13 Unconditional Purchase Obligations..71
Section 6.14 Stock...............................71
Section 6.15 Modifications to Senior
Subordinated Notes; No Voluntary
Prepayments.........................72
Section 6.16 Intercompany Transactions...........72
Section 6.17 Reverse Designation of
Unrestricted Subsidiaries...........72
Section 6.18 Rabobank Limited Guaranty. .........73
ARTICLE 7
EVENTS OF DEFAULT..................................73
Section 7.1 Payments............................73
Section 7.2 Covenants Without Notice............73
Section 7.3 Other Covenants.....................73
Section 7.4 Other Financing Document
Obligations.........................73
Section 7.5 Representations.....................73
Section 7.6 Non-Payments of Other
Indebtedness........................73
Section 7.7 Defaults Under Other Agreements.....74
Section 7.8 Bankruptcy..........................74
Section 7.9 Money Judgment......................74
Section 7.10 Financing Documents.................74
Section 7.11 Change of Control...................75
Section 7.12 Merger Agreement Representations
and Warranties......................75
Section 7.13 Default Under Senior Subordinated
Notes...............................75
Section 7.14 Senior Indebtedness.................75
Section 7.15 BP Indemnity........................75
Section 7.16 Ralston Indemnity...................75
ARTICLE 8
THE AGENTS.........................................76
Section 8.1 Appointment of Administrative
Agent...............................76
Section 8.2 Limitation of Duties of
Administrative Agent................76
Section 8.3 Lack of Reliance on the
Administrative Agent................76
Section 8.4 Certain Rights of the
Administrative Agent................77
Section 8.5 Reliance by Administrative
Agent...............................77
Section 8.6 INDEMNIFICATION OF ADMINISTRATIVE
AGENT...............................77
Section 8.7 The Administrative Agent in its
Individual Capacity.................77
Section 8.8 May Treat Lender as Owner...........77
Section 8.9 Successor Administrative Agent......78
Section 8.10 Co-Agents...........................78
iii
<PAGE>
ARTICLE 9
MISCELLANEOUS......................................78
Section 9.1 Notices.............................78
Section 9.2 Amendments and Waivers..............78
Section 9.3 No Waiver; Remedies Cumulative......79
Section 9.4 Payment of Expenses,
Indemnities, etc....................80
Section 9.5 Right of Setoff.....................82
Section 9.6 Benefit of Agreement................82
Section 9.7 Successors and Assigns;
Participations and Assignments......82
Section 9.8 GOVERNING LAW; SUBMISSION TO
JURISDICTION; ETC...................85
Section 9.9 Independent Nature of Lenders'
Rights..............................85
Section 9.10 Invalidity..........................86
Section 9.11 Renewal, Extension or
Rearrangement.......................86
Section 9.12 Interest............................86
Section 9.13 Confidential Information............87
Section 9.14 WAIVER OF JURY TRIAL................87
Section 9.15 ENTIRE AGREEMENT....................87
Section 9.16 Attachments.........................88
Section 9.17 Counterparts........................88
Section 9.18 Survival of Indemnities.............88
Section 9.19 Headings Descriptive................88
Section 9.20 Satisfaction Requirement............88
Section 9.21 EXCULPATION PROVISIONS..............88
Section 9.22 Secured Affiliate...................89
Section 9.23 Issuing Banks.......................89
iv
<PAGE>
ANNEXES
- -------
Annex I - Loans and Commitments
SCHEDULES
- ---------
Schedule 1.1A - Outstanding Letters of Credit
Schedule 4.19 - Subsidiaries
Schedule 4.23 - Material Contracts
Schedule 4.24 - Employment Contracts
Schedule 4.25 - Mortgaged Real Property
Schedule 4.27 - Sales Enhancement Loans and Sales
Enhancement Guarantees
Schedule 6.2(b)- Existing Indebtedness
Schedule 6.3(a) - Liens
Schedule 6.4(a) - Closed Plants
Schedule 6.6(a) - Existing Investments
EXHIBITS
Exhibit A - Form of Revolving Note
Exhibit B-1 - Form of Tranche A Term Note
Exhibit B-2 - Form of Tranche B Term Note
Exhibit C - Form of Tax Sharing Agreements
Exhibit D - Form of Borrowing Request
Exhibit E-1 - Form of Opinion of August F. Ottinger
Exhibit E-2 - Form of Opinion of Cleary, Gottlieb,
Steen & Hamilton
Exhibit E-3 - Form of Opinion of Local Counsel
Exhibit F-1 - Form of Guarantee and Collateral Agreement
Exhibit F-2 - Form of PM Holdings Pledge Agreement
Exhibit F-3 - Form of Deed of Trust
Exhibit F-4 - Form of PM Holdings Guaranty
Exhibit F-5 - Form of Cash Collateral Account Agreement
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of U.S. Tax Compliance Certificate
v
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is made and
entered into as of this 12th day of March, 1998, among PURINA
MILLS, INC., a Delaware corporation (the "Company"), CHASE BANK
OF TEXAS, NATIONAL ASSOCIATION, individually, as a Lender, as an
Issuing Bank and as the Administrative Agent, and each of the
lenders that is a signatory hereto or which becomes a party
hereto as provided in Section 9.7 (individually, a "Lender" and,
collectively, the "Lenders").
INTRODUCTORY STATEMENT:
PM Holdings Corporation, a Delaware Corporation ("PM
Holdings"), owns all of the issued and outstanding capital stock
of the Company.
Koch Agriculture Company, a Nebraska corporation ("KAC"),
owns all of the issued and outstanding shares of capital stock of
Arch Acquisition Corporation, a Delaware corporation
("Acquisition Co.").
KAC, through a merger (the "Merger") of Acquisition Co.
with and into PM Holdings, will acquire all of the issued and
outstanding shares of capital stock of PM Holdings. By virtue of
the Merger, all of the shares of PM Holdings' common stock ("PM
Holdings Common Stock") outstanding immediately prior to the time
and date when the certificate of merger relating to the Merger is
accepted for record by the Secretary of State of the State of
Delaware (or such later time and date as is specified in such
certificate of merger) (the "Effective Time"), shall be canceled
and converted into the right to receive consideration of $540 per
share (the "Merger Consideration"), all as set forth in, and
subject to the terms and conditions of, the Merger Agreement.
Each share of the common stock of Acquisition Co., issued and
outstanding immediately prior to the Effective Time, shall, at
the Effective Time, be converted into one fully paid and
nonassessable share of common stock of PM Holdings. In addition,
the Merger Agreement provides that each outstanding option to
purchase shares of PM Holdings Common Stock (collectively, the
"Options") and each stock rights unit which entitles the holder
thereof to acquire PM Holdings Common Stock (collectively, the
"Stock Units") will be 100% vested prior to the Effective Time.
Such Options and Stock Units will be canceled and extinguished
immediately prior to the Effective Time. Option holders will be
entitled to receive the Merger Consideration for each share of PM
Holdings Common Stock into which such Options were exercisable
immediately prior to the Effective Time, less the exercise price
of such Options. Stock Unit holders will be entitled to receive
the Merger Consideration for each share of PM Holdings Common
Stock into which such Stock Options were exercisable immediately
prior to the Effective Time.
The Company and its Subsidiaries desire that the Lenders
extend (a) certain term credit facilities to the Company to,
among other things, provide a portion of the funds to refinance
Indebtedness of the Company under the Existing Credit Agreement
(as defined below) and the Existing Senior Subordinated Notes (as
defined below) and to pay expenses in connection therewith, and
(b) a revolving credit facility to the Company to provide working
capital financing for the Company and its Subsidiaries, to
provide funds for acquisitions and for other general corporate
purposes of the Borrower and its Subsidiaries, and to redeem the
IRBs (as defined below).
AGREEMENT:
In consideration of the mutual covenants and agreements
herein contained, the Company, the Administrative Agent (as
defined below), the Issuing Bank (as defined below) and the
Lenders agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS; CONSTRUCTION
Section 1.1 Definitions. As used herein, the following
terms shall have the meanings herein specified (to be equally
applicable to both the singular and plural forms of the terms
defined). Reference to any party to a Financing Document means
that party and its successors and assigns.
"Acquisition Co." shall have the meaning provided in
the Introductory Statement.
"Administrative Agent" shall mean Chase Bank of Texas,
National Association, acting in the manner and to the extent
described in Article 8.
"Advance Notice" shall mean written or telecopy notice
(with telephonic confirmation in the case of telecopy notice),
which in each case shall be irrevocable, from the Company to be
received by the Administrative Agent before 11:00 a.m. (Houston
time), by the number of Business Days in advance of any
Borrowing, conversion, continuation or prepayment of any Loan or
Loans pursuant to this Agreement as respectively indicated below:
(a) Eurodollar Loans - 3 Business Days; and
(b) Base Rate Loans - Same Business Day.
For the purpose of determining the respectively applicable Loans
in the case of the conversion from one Type of Loan into another,
the Loans into which there is to be a conversion shall control.
The Administrative Agent, each Issuing Bank and each Lender are
entitled to rely upon and act upon telecopy notice made or
purportedly made by the Company, and the Company hereby waives
the right to dispute the authenticity and validity of any such
transaction once the Administrative Agent or any Lender has
advanced funds or any Issuing Bank has issued Letters of Credit,
absent manifest error.
"Affiliate" shall mean any Person controlling,
controlled by or under common control with any other Person
(excluding any trustee under, or any committee with
responsibility for administering, any Plan or any welfare plan
(as defined under Section 3(1) of ERISA)). For purposes of this
definition, "control" (including "controlled by" and "under
common control with") means the possession, directly or
indirectly, of the power to either (a) vote 10% or more of the
securities having ordinary voting power for election of directors
of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether through the
ownership of voting securities or otherwise.
"Agents" shall mean, collectively, the Administrative
Agent and the Co-Agents.
"Aggregate Revolving Credit Exposure" shall mean the
sum of all of the Revolving Credit Lenders' Revolving Credit
Exposures.
"Agreement" shall mean this Credit Agreement, as
amended, modified or supplemented from time to time.
"Applicable Commitment Fee Percentage" shall mean, on
any day, the applicable per annum percentage set forth at the
appropriate intersection in the table shown below, based on the
Consolidated
2
<PAGE>
Leverage Ratio for the Rolling Period ending on the most recent
Quarterly Date with respect to which the Company is
required to deliver the Current Information:
- ------------------------------------------------------------
Leverage Ratio Commitment Fee Percentage
- ------------------------------------------------------------
Greater than or equal to 4.00 .500%
- ------------------------------------------------------------
Greater than or equal to 2.00 but .375%
less than 4.00
- ------------------------------------------------------------
Less than 2.00 .300%
- ------------------------------------------------------------
Each change in the Applicable Commitment Fee Percentage based on
a change in the Current Information shall be effective on the
date on which the Current Information is received by the
Administrative Agent and shall remain in effect until the next
change to be effected pursuant to this paragraph. Notwithstanding
the foregoing, (a) the initial Applicable Commitment Fee
Percentage will be .500% from the Closing Date through the date
the Current Information for the second full Fiscal Quarter after
the Closing Date is received by the Administrative Agent, and (b)
if at any time the Company fails to deliver Current Information
on or before the date required pursuant to Section 5.2 (without
regard to grace periods), the Applicable Commitment Fee
Percentage will be .500% from the date such Current Information
is due pursuant to Section 5.2 (without regard to grace periods)
through the date the Administrative Agent receives all Current
Information then due pursuant to Section 5.2.
"Applicable Lender" shall mean, with respect to any
Borrowing of Revolving Credit Loans, each Revolving Credit
Lender, with respect to any Borrowing of Tranche A Term Loans,
each Tranche A Term Loan Lender, and with respect to any
Borrowing of Tranche B Term Loans, each Tranche B Term Loan
Lender.
"Applicable Margin" shall mean, on any day and with
respect to any (a) Tranche B Term Loan, for Base Rate Loans,
1.25% per annum and for Eurodollar Loans, 2.25% per annum, and
(b) Revolving Credit Loan or Tranche A Term Loan, the applicable
per annum percentage set forth at the appropriate intersection in
the table shown below, based on the Consolidated Leverage Ratio
for the Rolling Period ending on the most recent Quarterly Date
with respect to which the Company is required to deliver the
Current Information:
3
<PAGE>
- --------------------------------------------------------------
Leverage Ratio Eurodollar Loan Base Rate Loan
Applicable Margin Applicable Margin
Percentage Percentage
- --------------------------------------------------------------
Greater than or equal 2.00% 1.00%
to 5.00
- --------------------------------------------------------------
Greater than or equal
to 4.00 but less than 5.00 1.75% 0.75%
- --------------------------------------------------------------
Greater than or equal
to 3.00 but less than 4.00 1.50% 0.50%
- --------------------------------------------------------------
Greater than or equal
to 2.00 but less than 3.00 1.25% 0.25%
- --------------------------------------------------------------
Less than 2.00 1.00% 0.00%
- --------------------------------------------------------------
Each change in the Applicable Margin based on a change in the
Current Information shall be effective on the date on which the
Current Information is received by the Administrative Agent and
shall remain in effect until the next change to be effected
pursuant to this paragraph. Notwithstanding the foregoing, (A)
for the period from the Closing Date through the date the Current
Information for the second full Fiscal Quarter after the Closing
Date is received by the Administrative Agent, the initial
Eurodollar Loan Applicable Margin for the Revolving Credit Loans
and Tranche A Term Loans will be 2.00% and the initial Base Rate
Loan Applicable Margin for the Revolving Credit Loans and Tranche
A Term Loans will be 1.00% and (B) if at any time the Company
fails to deliver Current Information on or before the date
required pursuant to Section 5.2 (without regard to grace
periods), the Eurodollar Loan Applicable Margin for the Revolving
Credit Loans and the Tranche A Term Loans will be 2.00% and the
Base Rate Loan Applicable Margin for the Revolving Credit Loans
and the Tranche A Term Loans will be 1.00% from the date such
Current Information is due pursuant to Section 5.2 (without
regard to grace periods) through the date the Administrative
Agent receives all Current Information then due pursuant to
Section 5.2.
"Applicable Percentage" shall mean, with respect to
any Revolving Credit Lender, such Lender's Revolving Credit
Percentage, with respect to any Tranche A Term Loan Lender, such
Lender's Tranche A Term Loan Percentage and with respect to any
Tranche B Term Loan Lender, such Lender's Tranche B Term Loan
Percentage.
"Application" shall mean an "Application and Agreement
for Letters of Credit," or similar instruments or agreements,
entered into between the Company and an Issuing Bank in
connection with any Letter of Credit.
"Approved Fund" shall mean with respect to any Lender
that is a fund that invests in commercial loans, any other fund
that invests in commercial loans and is managed by the same
investment advisor as such Lender or by an Affiliate of such
investment advisor.
"Assignment and Acceptance" shall have the meaning
provided in Section 9.7(c).
"Asset Sale" shall mean any Disposition of Property
other than (a) Dispositions permitted by Subsections 6.4(a)(1)
and 6.4(a)(2), (b) any Disposition (excluding the HQ
Sale/Leaseback and Permitted Securitizations) which, together
with any related Disposition of Property, yields gross proceeds
to the
4
<PAGE>
Company or any of its Subsidiaries (valued at the initial
amount thereof in the case of non-cash proceeds consisting of
notes or other debt securities and valued at fair market value in
the case of other non-cash proceeds) of less than $350,000,
provided, that the aggregate gross proceeds of Dispositions of
Property excluded from the definition of Asset Sale pursuant to
this clause (b) shall not exceed $1,000,000 in any fiscal year of
the Company, (c) Permitted Securitizations, and (d) the HQ
Sale/Leaseback.
"Bankruptcy Code" shall have the meaning provided in
Section 7.8.
"Base CD Rate" shall mean a rate per annum equal to
the sum of (a) the product of (1) the Three-Month Secondary CD
Rate and (2) a fraction, whose numerator is one and whose
denominator is one minus the C\D Reserve Percentage and (b) the
C\D Assessment Rate.
"Base Rate" shall have the meaning provided in
Section 2.6(a).
"Base Rate Loan" shall mean a Revolving Credit Loan, a
Tranche A Term Loan or a Tranche B Term Loan bearing interest at
the rate provided in Section 2.6(a).
"Benefit Plan" shall mean any employee pension benefit
plan, as defined in section 3(2) of ERISA (other than a
Multiemployer Plan), which (a) is currently or hereafter
sponsored, maintained or contributed to by the Company, a
Subsidiary of the Company or an ERISA Affiliate or (b) was at any
time during the six preceding calendar years, sponsored,
maintained or contributed to by the Company, a Subsidiary of the
Company or an ERISA Affiliate.
"Borrowing" shall mean a borrowing pursuant to a
Borrowing Request or a continuation or a conversion pursuant to
Section 2.11 consisting, in each case, of the same Type of Loans
having, in the case of Eurodollar Loans, the same Interest Period
(except as otherwise provided in Sections 2.14 and 2.15) and made
previously or being made concurrently, with respect to Revolving
Credit Loans, by all of the Revolving Credit Lenders, with
respect to Tranche A Term Loans, by all of the Tranche A Term
Loan Lenders, and with respect to Tranche B Term Loans, by all of
the Tranche B Term Loan Lenders.
"Borrowing Request" shall mean a request for a
Borrowing pursuant to Section 2.2, substantially in the form
attached as Exhibit D.
"BP Indemnity" shall mean the indemnification
obligations of the BP Parties in favor of PMI Acquisition
Corporation (now known as the Company) as set forth in that
certain Stock Purchase Agreement dated as of June 22, 1993, among
PMI Acquisition Corporation and the BP Parties.
"BP Parties" shall mean, collectively, BP America
Inc., a Delaware corporation, BP Nutrition Inc., a Delaware
corporation, and The Standard Oil Company, an Ohio corporation.
"Business Day" shall mean any day excluding Saturday,
Sunday and any other day on which banks are required or
authorized to close in New York, New York or Houston, Texas and,
if the applicable Business Day relates to Eurodollar Loans, on
which trading is carried on by and between banks in Dollar
deposits in the applicable interbank Eurodollar market.
"Capital Expenditures" shall mean, for any period,
without duplication, all expenditures (whether paid in cash or
accrued as a liability, including the portion of Capital Lease
Obligations originally incurred during such period that are
capitalized for the consolidated balance sheet of the Company) by
the
5
<PAGE>
Company and the Subsidiary Guarantors during such period, that,
in conformity with GAAP, are included in "capital expenditures,"
"additions to property, plant or equipment" or comparable items
in the consolidated financial statements of the Company, but
excluding expenditures for the restoration, repair or replacement
of any fixed or capital asset that was destroyed or damaged, in
whole or in part, in an amount not in excess of any insurance
proceeds received in connection with such destruction or damage.
"Capital Lease Obligations" shall mean, as to any
Person, the obligations of such Person to pay rent or other
amounts under a lease of (or other agreement conveying the right
to use) real and/or personal property which obligations are
required to be classified and accounted for as a liability for a
capital lease on a balance sheet of such Person and, for purposes
of this Agreement, the amount of such obligations shall be the
capitalized amount thereof.
"Cash Collateral Account Agreement" shall mean the
Cash Collateral Account Agreement executed by the Company,
substantially in the form of Exhibit F-5.
"C\D Assessment Rate" shall mean for any day as
applied to any Base Rate Loan, the annual assessment rate in
effect on such date that is payable by a member of the Bank
Insurance Fund classified as "well-capitalized" and within
supervisory subgroup "B" (or a comparable risk classification)
within the meaning of 12 C.F.R. Part 327 (or any successor
provision) to the Federal Deposit Insurance Corporation (the
"FDIC") for the FDIC (or any successor thereto) to insure time
deposits at offices of such member in the United States,
provided, that if, as a result of any change in any law, rule or
regulation, it is no longer possible to determine the C\D
Assessment Rate as aforesaid, then the C\D Assessment Rate shall
be such annual rate as shall be determined by the Administrative
Agent to be representative of the cost of such insurance to the
Lenders.
"C\D Reserve Percentage" shall mean for any day as
applied to any Base Rate Loan, that percentage (expressed as a
decimal) that is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any
successor thereto) for determining the then current reserve
requirement for the Administrative Agent in respect of new
negotiable non-personal time deposits in Dollars of over $100,000
with maturities approximately equal to three months.
"Change of Control" shall mean either (a) a "Change in
Control", as defined in the Senior Subordinated Notes Indenture,
or (b) Koch Industries' failure to own, directly or indirectly,
of record, at least 51% of the Voting Stock of the Company.
"Chase" shall mean Chase Bank of Texas, National
Association, in its individual capacity or as the Issuing Bank,
as the case may be, and not as Administrative Agent.
"Closing Date" shall mean the "as of" date of this
Agreement set forth in the first paragraph hereof.
"Co-Agents" shall mean Lenders designated as
"Co-Agents" on the signature pages hereof.
"Code" shall mean the Internal Revenue Code of 1986,
as amended, and any successor statute.
6
<PAGE>
"Collateral" shall mean the Company's, PM Holdings's
and the Subsidiary Guarantors' Properties described in and
subject to the Liens, privileges, priorities and security
interests purported to be created by any Security Instrument.
"Commitments" shall mean, for any Lender, such
Lender's Revolving Credit Commitment and Term Loan Commitments.
"Commodity Swap Agreement" shall mean any contract for
sale for future delivery of commodities (whether or not the
subject commodities are to be delivered), hedging contract,
forward contract, swap agreement, futures contract or other
commodity pricing protection agreement or option with respect to
any such transaction, designed to hedge against fluctuations in
prices of the subject commodities.
"Company" shall mean Purina Mills, Inc., a Delaware
corporation.
"Consolidated EBITDA" shall mean, as to the Company
and the Subsidiary Guarantors on a consolidated basis, for any
period, without duplication, the amount equal to net income,
less, to the extent included in net income, any non-cash income,
extraordinary gains and gains on the disposition of assets other
than those incurred in the ordinary course of business, and plus,
to the extent deducted from net income, Consolidated Interest
Expense, depreciation, depletion and impairment, amortization of
leasehold and intangibles, other non-cash expenses, income tax
expenses (including amounts payable under the Tax Sharing
Agreements), extraordinary losses and losses on the disposition
of assets other than those incurred in the ordinary course of
business, in each case for such period.
"Consolidated Excess Cash Flow" shall mean (a)
Consolidated EBITDA for any Fiscal Year, minus (b) for each such
Fiscal Year and for the Company and the Subsidiary Guarantors on
a consolidated basis, the sum of (1) scheduled payments of
principal pursuant to Sections 2.5(b) and 2.5(c), plus (2) the
principal portion of scheduled payments under Capital Lease
Obligations, plus (3) Consolidated Interest Expense, plus (4)
cash taxes applicable to such Fiscal Year and paid prior to the
date of determination by or on behalf of the Company and the
Subsidiary Guarantors, plus (5) any dividends to PM Holdings
permitted by Section 6.5 (other than Sections 6.5(d) and (e)) and
actually paid by the Company, and plus (6) the lesser of actual
Capital Expenditures and $40,000,000. Notwithstanding the
foregoing, for the purpose of calculating Consolidated Excess
Cash Flow for the Fiscal Year ending December 31, 1998, such
Fiscal Year shall be deemed to commence on the Closing Date and
end on December 31, 1998.
"Consolidated Fixed Charge Coverage Ratio" shall mean,
as to the Company and the Subsidiary Guarantors on a consolidated
basis, for any day, the ratio of (a) Consolidated EBITDA for the
Rolling Period ending on the most recent Quarterly Date, less
cash income taxes actually paid during the Rolling Period ending
on the most recent Quarterly Date net of cash income tax refunds
actually received during such Rolling Period to (b) the sum of
(1) Scheduled Principal Payments made during the Rolling Period
ending on the most recent Quarterly Date, plus (2) Consolidated
Interest Expense, plus (3) actual Capital Expenditures (excluding
Capital Lease Obligations incurred during such period) made
during the Rolling Period ending on the most recent Quarterly
Date, plus (4) all dividends permitted by Section 6.5 and paid
during the Rolling Period ending on the most recent Quarterly
Date.
"Consolidated Interest Coverage Ratio" shall mean, as
to the Company and the Subsidiary Guarantors on a consolidated
basis, on any day, the ratio of (a) Consolidated EBITDA for the
Rolling Period ending on the then most recent Quarterly Date to
(b) Consolidated Interest Expense for such Rolling Period.
7
<PAGE>
"Consolidated Interest Expense" shall mean, for any
period, total cash interest expense (including that attributable
to Capital Lease Obligations) of the Company and the Subsidiary
Guarantors for such period with respect to all outstanding
Indebtedness of the Borrower and the Subsidiary Guarantors
(including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and
bankers' acceptance financings and net costs under Interest Rate
Swap Agreements to the extent such costs are allocable to such
period in accordance with GAAP), provided, that for the Rolling
Periods ending on June 30, 1998, September 30, 1998 and December
31, 1998, Consolidated Interest Expense for the relevant Rolling
Period shall be calculated using Consolidated Interest Expense
for the number of full Fiscal Quarters of the Company subsequent
to the Closing Date multiplied by 4, 2 and 4/3, respectively.
"Consolidated Leverage Ratio" shall mean, as to the
Company and the Subsidiary Guarantors on a consolidated basis, on
any day, the ratio of (a) Funded Indebtedness as of the date of
determination to (b) Consolidated EBITDA for the Rolling Period
ending on the most recent Quarterly Date as of the date of
determination.
"Cover", when required by this Agreement for Letter of
Credit Liabilities, shall be effected by paying to the
Administrative Agent in immediately available funds, to be held
by the Administrative Agent in a collateral account maintained by
the Administrative Agent at its Payment Office and collaterally
assigned as security pursuant to the Cash Collateral Account
Agreement, an amount equal to the maximum amount of each
applicable Letter of Credit available for drawing at any time.
Such amount shall be retained by the Administrative Agent in such
collateral account until such time as the applicable Letter of
Credit shall have expired and the Reimbursement Obligations, if
any, with respect thereto shall have been fully satisfied.
"Current Information" shall mean, as of any day, the
financial statements and other related information for any
applicable period most recently required to be delivered to the
Administrative Agent pursuant to Sections 5.2(a), 5.2(b) and
5.2(c).
"Deed of Trust" shall mean any Mortgage, Deed of
Trust, Assignment, Security Agreement and Financing Statement
(including, without limitation, any such mortgage or deed of
trust covering a leasehold interest to the extent required
hereby) executed by the Company or any Subsidiary Guarantor
pursuant to the terms hereof as security for the payment and
performance of the Lender Indebtedness, substantially in the form
of Exhibit F-3.
"Default" shall mean an Event of Default or any
condition or event which, with notice or lapse of time or both,
would constitute an Event of Default.
"Disposition" shall mean, with respect to any
Property, any sale, lease, assignment, conveyance, transfer, or
other disposition thereof; and the terms "Dispose" and "Disposed
of" shall have correlative meanings.
"Dollar" and the sign "$" shall mean lawful money of
the United States of America.
"EBITDA Value" shall mean, with respect to any
manufacturing facility owned by the Company or any Subsidiary
Guarantor, the amount of Consolidated EBITDA attributable to such
facility for the Fiscal Year ended December 31, 1997.
8
<PAGE>
"Environmental Laws" shall mean any and all laws,
statutes, ordinances, rules, regulations, orders, or
determinations of any Governmental Authority pertaining to health
or the environment in effect in any and all jurisdictions in
which the Company or its Subsidiaries are conducting or at any
time have conducted business, or where any Property of the
Company or its Subsidiaries is located, or where any hazardous
substances generated by or disposed of by the Company or its
Subsidiaries are located, including but not limited to the Oil
Pollution Act of 1990 ("OPA"), the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 ("CERCLA"), as amended, the Federal Water
Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and
Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, and other environmental conservation or
protection laws. The term "oil" shall have the meaning specified
in OPA; the terms "hazardous substance," "release" and
"threatened release" have the meanings specified in CERCLA, and
the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA; provided, however, in the event
either CERCLA or RCRA is amended so as to change the meaning of
any term defined thereby, such changed meaning shall apply
subsequent to the effective date of such amendment, and provided,
further, that to the extent the laws of the state in which any
Property of the Company or its Subsidiaries is located establish
a meaning for "oil," "hazardous substance," "release," "solid
waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"Equity" shall mean shares of capital stock or a
partnership, profits, capital or member interest, or options,
warrants or any other right to substitute for or otherwise
acquire the capital stock or a partnership, profits, capital or
member interest of any Person.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and any successor statute.
"ERISA Affiliate" shall mean each trade or business
(whether or not incorporated) which together with the Company or
a Subsidiary of the Company would be deemed to be a "single
employer" within the meaning of Section 4001(b)(1) of ERISA or
Subsections 414(b), (c), (m) or (o) of the Code.
"ERISA Event" shall mean (a) a "Reportable Event"
described in Section 4043 of ERISA and the regulations issued
thereunder (other than a "Reportable Event" not subject to the
provision for 30-day notice to the PBGC under Subsections .14,
.18, .19 or .20 of Part 2615 of the PBGC regulations), (b) the
withdrawal of the Company, a Subsidiary of the Company or any
ERISA Affiliate from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA,
(c) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section
4041(c) of ERISA, (d) the institution of proceedings to terminate
a Plan by the PBGC, (e) any other event or condition which could
reasonably be expected to constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan, or (f) the partial or complete
withdrawal of the Company, a Subsidiary of the Company or any
ERISA Affiliate from a Multiemployer Plan.
"Eurodollar Loan" shall mean a Revolving Credit Loan,
a Tranche A Term Loan or a Tranche B Term Loan bearing interest
at the rate provided in Section 2.6(b).
"Eurodollar Rate" shall mean, with respect to any
Borrowing of Eurodollar Loans for any Interest Period, the
product of (a) (1) the interest rate per annum shown on page 3750
of the Dow Jones &
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Company Telerate screen or any successor page as the composite
offered rate for London interbank deposits with a period
comparable to the Interest Period for such Eurodollar Loan, as
shown under the heading "USD" at 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period or
(2) if the rate in clause (1) of this definition is not shown for
any particular day, the average interest rate per annum (rounded
upwards, if necessary, to the next 1/16th of 1%) offered to the
Administrative Agent in the interbank Eurodollar market for
Dollar deposits of amounts in funds comparable to the principal
amount of the Eurodollar Loan to which such Eurodollar Rate is to
be applicable with maturities comparable to the Interest Period
for which such Eurodollar Rate will apply as of approximately
10:00 a.m. (Houston time) two Business Days prior to the
commencement of such Interest Period, times (b) Statutory
Reserves.
"Event of Default" shall have the meaning provided
in Article 7.
"Exchange Rate Swap Agreement" shall mean any contract
for sale, purchase, or exchange or for future delivery of foreign
currency (whether or not the subject currency is to be delivered
or exchanged), hedging contract, forward contract, swap
agreement, futures contract, or other foreign exchange protection
agreement or option with respect to any such transaction,
designed to hedge against fluctuations in foreign exchange rates.
"Excluded Taxes" shall mean with respect to the
Administrative Agent, any Lender, any Issuing Bank or any other
recipient of any payment to be made by or on account of any
obligation of the Company hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income, gains, receipts
or excess profits by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized
or in which its principal office is located or, in the case of
any Lender, in which its applicable lending office is located,
(b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in
which the Company is located, and (c) in the case of a Foreign
Lender any withholding tax that is imposed on amounts payable to
such Foreign Lender at the time such Foreign Lender becomes a
party to this Agreement (or designates a new lending office) or
is attributable to such Foreign Lender's failure to comply with
Section 2.20(f), provided, that Excluded Taxes shall not include
withholding taxes to which (x) an existing Foreign Lender was
entitled at the time of designation of a new lending office, or
(y) the assignor of a new Foreign Lender was entitled at the time
of assignment to such Foreign Lender.
"Existing Credit Agreement" shall mean the credit
agreement dated as of September 27, 1993, among PMI Acquisition
Corporation, Texas Commerce Bank National Association,
individually and as administrative agent, The CIT Group/Business
Credit, Inc., individually and as collateral agent, and the
lenders party thereto, as amended from time to time.
"Existing PM Holdings Discount Notes" shall mean the
11 1/2% Subordinated Discount Debentures due September 1, 2005,
of PM Holdings issued pursuant to that certain Indenture, dated
as of September 27, 1993, between PM Holdings and The Bank of New
York, as Trustee.
"Existing Senior Subordinated Notes" shall mean the 10
1/4% Senior Subordinated Notes due September 1, 2003, of the
Company issued pursuant to that certain Indenture, dated as of
September 27, 1993, between PMI Acquisition Corporation and IBJ
Schroder Bank & Trust Company, as Trustee.
"Federal Funds Effective Rate" shall mean, for any
day, the per annum rate equal to the weighted average of the
interest rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a
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Business Day, for the next preceding 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 such day on such transactions received by the
Administrative Agent from three Federal funds brokers of
recognized standing selected by it.
"Fee Letter" shall mean the letter agreement dated
February 2, 1998, regarding fees, executed by Chase Securities
Inc. and accepted and agreed to by the Company.
"Financial Statements" shall mean the audited
consolidated financial statements of the Company for the Fiscal
Years ended December 31, 1996 and December 31, 1997.
"Financing Documents" shall mean this Agreement, the
Notes, the PM Holdings Guaranty, the Security Instruments, the
Applications, the Borrowing Requests and the Fee Letter, together
with any other document, instrument or agreement (other than
participation, agency or similar agreements among the Lenders or
between any Lender and any other bank or creditor with respect to
any indebtedness or obligations of PM Holdings or the Company or
its Subsidiaries hereunder or thereunder) now or hereafter
entered into in connection with the Loans, the Lender
Indebtedness or the Collateral, as such documents, instruments or
agreements may be amended, modified or supplemented from time to
time.
"Fiscal Quarter" shall mean the fiscal quarter of the
Company, ending on the last day of each March, June, September
and December in each year.
"Fiscal Year" shall mean the fiscal year of the
Company, ending on December 31 of each year.
"Foreign Lender" shall mean any Lender that is
organized under the laws of a jurisdiction other than that in
which the Company is located. For purposes of this definition,
the United States of America, each State thereof and the District
of Columbia shall be deemed to constitute a single jurisdiction.
"Funded Indebtedness" shall mean, as to any Person,
without duplication, all Indebtedness for borrowed money, all
obligations evidenced by bonds, debentures, notes, or other
similar instruments, all Capital Lease Obligations, all Guarantee
Obligations with respect to Funded Indebtedness for which demand
has been made for payment and all Letter of Credit Liabilities.
"GAAP" shall mean generally accepted accounting
principles as applied in accordance with Section 1.2.
"Governmental Authority" shall mean any (domestic or
foreign) federal, state, province, county, city, municipal or
other political subdivision or government, department,
commission, board, bureau, court, central bank, agency or any
other instrumentality of any of them (including, but not limited
to, the United States Food and Drug Administration and the
Department of Agriculture).
"Governmental Requirement" shall mean any law,
statute, code, ordinance, order, rule, regulation, judgment,
decree, injunction, franchise, permit, certificate, license,
authorization or other direction or requirement (including, but
not limited to, any of the foregoing which relate to
Environmental Laws and occupational, safety and health standards
or controls) of any Governmental Authority.
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"Guarantee and Collateral Agreement" shall mean the
Guarantee and Collateral Agreement executed by the Company and
each Subsidiary Guarantor pursuant to the terms hereof securing
(and, with respect to each Subsidiary Guarantor, guaranteeing)
the payment and performance of the Lender Indebtedness,
substantially in the form of Exhibit F-1.
"Guarantee Obligation" shall mean, 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, (1) to purchase any such primary obligation or
any property constituting direct or indirect security therefor,
(2) to advance or supply funds (A) for the purchase or payment of
any such primary obligation or (B) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain
the net worth or solvency of the primary obligor, (3) 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 (4) 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. 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.
"Hedge Agreement" shall mean (a) any Commodity Swap
Agreement, (b) any Interest Rate Swap Agreement, or (c) any
Exchange Rate Swap Agreement.
"Highest Lawful Rate" shall mean, with respect to each
Lender, the maximum nonusurious interest rate, if any, that at
any time or from time to time may be contracted for, taken,
reserved, charged or received on the Notes or on other Lender
Indebtedness, as the case may be, owed to it under the law of any
jurisdiction whose laws may be mandatorily applicable to such
Lender notwithstanding other provisions of this Agreement, or law
of the United States of America applicable to such Lender and the
Transactions, which would permit such Lender to contract for,
charge, take, reserve or receive a greater amount of interest
than under such jurisdiction's law.
"HQ Sale" shall mean the sale of the Company's
headquarters building located at 1401 South Hanley Road, St.
Louis Missouri other than a sale in connection with an HQ
Sale/Leaseback.
"HQ Sale/Leaseback" shall mean the sale for fair
market value of the Company's headquarters building located at
1401 South Hanley Road, St. Louis, Missouri in connection with a
transaction whereby the Company or any of its Subsidiaries then
or thereafter leases, as lessee, all or any part of such
Property.
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"Indebtedness" of any Person shall mean:
(a) all obligations of such Person for borrowed money
and obligations evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations of such Person (whether contingent
or otherwise) in respect of bankers' acceptances, letters
of credit, surety or other bonds and similar instruments;
(c) all obligations of such Person to pay the deferred
purchase price of Property or services (other than for
borrowed money);
(d) all Capital Lease Obligations of such Person;
(e) all Guarantee Obligations of such Person;
(f) Indebtedness of others secured by any Lien upon
Property owned by such Person, whether or not assumed;
(g) obligations to deliver goods or services in
consideration of advance payments, excluding such
obligations incurred in the ordinary course of business as
conducted by the Company and its Subsidiaries as of the
Closing Date; and
(h) the net amount of obligations of such Person under
agreements of the types described in the definitions of
Commodity Swap Agreements, Exchange Rate Swap Agreements
and Interest Rate Swap Agreements.
"Indemnified Taxes" shall mean Taxes other than
Excluded Taxes.
"Interest Period" shall mean, with respect to each
Borrowing of Eurodollar Loans, an interest period complying with
the terms and provisions of Section 2.7.
"Interest Rate Swap Agreement" shall mean any rate
swap, rate cap, rate floor, rate collar, forward rate agreement,
futures or other rate protection agreement or option with respect
to any such transaction, designed to hedge against fluctuations
in interest rates.
"IRBs" shall mean (a) the $8,300,000 Washington
County, Maryland Economic Development Revenue Bonds, Series 1996
(Purina Mills, Inc. Project), and (b) the $9,100,000 Iredell
County Industrial Facilities and Pollution Control Financing
Authority Industrial Development Revenue Bonds, Series 1995
(Purina Mills, Inc. Project).
"Issuing Bank" shall mean, for each Letter of Credit,
Chase or any of its affiliates (or not more than one other Lender
designated by the Company and approved by the Administrative
Agent, such approval not to be unreasonably withheld), as the
issuing bank for such Letter of Credit, at the option of the
Company.
"KAC" shall have the meaning provided in the
Introductory Statement.
"Koch Industries" shall mean Koch Industries, Inc., a
Kansas corporation.
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"Lender" shall have the meaning provided in the
opening paragraph of this Agreement.
"Lender Indebtedness" shall mean any and all amounts
owing or to be owing by the Company to the Administrative Agent,
the Issuing Banks or the Lenders with respect to or in connection
with the Loans, any Letter of Credit Liabilities, the Notes, any
Hedge Agreement, this Agreement, or any other Financing Document
and, as to Hedge Agreements, any and all amounts owing or to be
owing by the Company thereunder to any Secured Affiliate.
"Lending Office" shall mean for each Lender the office
specified opposite such Lender's name on the signature pages
hereof, or in the Assignment and Acceptance pursuant to which it
became a Lender, with respect to each Type of Loan, or such other
office as such Lender may designate in writing from time to time
to the Company and the Administrative Agent with respect to such
Type of Loan.
"Letters of Credit" shall have the meaning assigned
such term in Section 2.3(a) and shall include the Outstanding
Letters of Credit, which are hereby deemed to be issued under
this Agreement.
"Letter of Credit Liabilities" shall mean, at any time
and in respect of any Letter of Credit, the sum of (a) the amount
available for drawings under such Letter of Credit as of the date
of determination plus (b) the aggregate unpaid amount of all
Reimbursement Obligations due and payable as of the date of
determination in respect of previous drawings made under such
Letter of Credit.
"Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner
of the Property, whether such interest is based on contract or
constitutional, common law, or statutory law, and including but
not limited to the lien or security interest arising from a
mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, liens and other statutory,
constitutional, or common law rights of landlords, leases and
other title exceptions and encumbrances affecting Property. For
the purposes of this Agreement, the Company or any Subsidiary of
the Company shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement,
financing lease or other arrangement pursuant to which title to
the Property has been retained by or vested in some other Person
for security purposes.
"Limited Liability Interests" shall mean any ownership
interest in capital stock of a corporation, any Equity in another
Person, or any Indebtedness of a corporation or other Person, the
ownership of which stock, other interest or Indebtedness, as a
matter of applicable law, can impose no personal liability on the
owner thereof for any debts, obligations or liabilities
whatsoever of such corporation or Person.
"Loan" shall mean a Revolving Credit Loan or a Term
Loan and "Loans" shall mean collectively the Revolving Credit
Loans or the Term Loans or one or more of them as provided
herein.
"Margin Stock" shall have the meaning provided in
Regulations G, U and X.
"Material Adverse Effect" shall mean any material and
adverse effect on (a) the business operations, assets,
liabilities, condition (financial or otherwise), prospects or
results of operations of the Company and its Subsidiaries, or the
Company and the Subsidiary Guarantors, taken as a whole, or (b)
the ability of the Company to perform its obligations under this
Agreement.
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"Material Contract" shall mean each contract, license
and agreement listed on Schedule 4.23.
"Maximum Available Amount" shall mean, at any date, an
amount equal to the aggregate Revolving Credit Commitments as of
such date.
"Merger" shall have the meaning provided in
Introductory Statement.
"Merger Agreement" shall mean the Agreement and Plan
of Merger, among KAC, Acquisition Co. and PM Holdings, dated as
of January 9, 1998.
"Multiemployer Plan" shall mean a multiemployer plan
as defined in section 3(37) or 4001(a)(3) of ERISA which is, or
within the six preceding calendar years was, contributed to by
the Company, a Subsidiary of the Company or an ERISA Affiliate.
"Net Proceeds" shall mean, (a) in connection with any
Asset Sale, the HQ Sale/Leaseback or any Recovery Event, the
proceeds thereof in the form of cash and investments of the type
listed in Subsections 6.6(b) through 6.6(e) (including any such
proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when
received) of such Asset Sale, HQ Sale/Leaseback or Recovery
Event, net of attorneys' fees, accountants' fees, investment
banking fees, survey costs, title insurance premiums, amounts
required to be applied to the repayment of the Indebtedness
secured by a Lien expressly permitted hereunder on any asset
which is the subject of such Asset Sale, HQ Sale/Leaseback or
Recovery Event (other than any Lien pursuant to a Security
Instrument) and other customary fees and expenses actually
incurred in connection therewith, net of taxes paid or reasonably
estimated to be payable as a result thereof (after taking into
account any available tax credits or deductions and any tax
sharing arrangements) and that of purchase price adjustments
reasonably expected to be payable in connection therewith, and
(b) in connection with any issuance or sale of equity securities
or debt securities or instruments or the incurrence of loans, the
cash proceeds receipts from such issuance or incurrence, net of
attorneys' fees, investment banking fees, accountants' fees,
underwriting discounts and commissions and other customary fees
and expenses actually incurred in connection therewith.
"Non-Recourse Debt" shall mean Indebtedness or that
portion of Indebtedness as to which neither the Company nor any
of the Subsidiary Guarantors (a) provides credit support pursuant
to any undertaking, agreement or instrument, except for Standard
Securitization Undertakings that would constitute Indebtedness
and Sales Enhancement Guarantees to the extent permitted by
Section 6.2, (b) is directly or indirectly liable, or (c)
constitutes the lender.
"Notes" shall mean the Revolving Credit Notes and the
Term Notes.
"Other Sales Enhancement Loans" shall mean Sales
Enhancement Loans in excess of the amount of such loans permitted
pursuant to Section 6.6(k)(1) and not to exceed the amount
permitted pursuant to Section 6.2(m).
"Other Taxes" shall mean 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.
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"Outstanding Letter of Credit" shall mean any of the
outstanding letters of credit issued for the account of the
Company, and identified on Schedule 1.1A.
"Payment Office" shall mean the Administrative Agent's
office located at 1111 Fannin Street, 9th Floor, Mail Station 46,
Houston, Texas 77002; Attention: Gale Manning (or such other
office or individual as the Administrative Agent may hereafter
designate in writing to the other parties hereto).
"PBGC" shall mean the Pension Benefit Guaranty
Corporation, or any successor thereto.
"Permitted Securitization" shall mean securitizations
by the Company or the Subsidiary Guarantors of Sales Enhancement
Loans on a non-recourse basis pursuant to which (a) the
Disposition of such Sales Enhancement Loans by the Company or the
Subsidiary Guarantors shall constitute a "sale," both legally and
for accounting purposes, and (b) any Indebtedness incurred in
connection therewith constitutes Non-Recourse Debt.
"Person" shall mean any individual, partnership, firm,
corporation (including, but not limited to the Company), limited
liability company, association, joint venture, trust or other
entity, or any government or political subdivision or agency,
department or instrumentality thereof; provided, however, for the
purpose of the definition of "Change of Control," "Person" shall
mean a "person" or group of persons within the meaning of
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended.
"Plan" shall mean each Benefit Plan and Multiemployer
Plan.
"PM Holdings" shall have the meaning provided in the
Introductory Statement.
"PM Holdings Guaranty" shall mean the PM Holdings
Guaranty executed by PM Holdings pursuant to the terms hereof
guaranteeing the payment and performance of the Lender
Indebtedness, substantially in the form of Exhibit E-4.
"PM Holdings Pledge Agreement" shall mean the PM
Holdings Pledge Agreement executed by PM Holdings pursuant to the
terms hereof securing its obligations under the PM Holdings
Guaranty, substantially in the form of Exhibit F-2.
"Prime Rate" shall mean the rate which the
Administrative Agent announces from time to time as its prime
rate, effective as of the date announced as the effective date of
any change in such prime rate. Without notice to the Company or
any other Person, the Prime Rate shall change automatically from
time to time as and in the amount by which such prime rate shall
fluctuate. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to
any customer. The Administrative Agent may make commercial loans
or other loans at rates of interest at, above or below the Prime
Rate.
"Property" shall mean any interest in any kind of
property or asset, whether real, personal or mixed, or tangible
or intangible.
"Quarterly Dates" shall mean the last day of each
March, June, September and December in each year.
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"Rabobank Cash Collateral Account" shall mean that
certain cash collateral account established as security for the
Rabobank Limited Guaranty.
"Rabobank Limited Guaranty" shall mean that certain
Limited Guaranty dated as of August 1, 1995, by and between the
Company and Rabobank Nederland, whereby the Company has
guaranteed the obligations of Purina Ag Capital pursuant to a
Letter of Credit Reimbursement Agreement between Purina Ag
Capital and Rabobank Nederland, subject to certain limitations
set forth therein, together with any amendments thereto copies of
which have been provided to the Lenders prior to the Closing Date
and any other amendments approved by the Required Lenders in
accordance with, or otherwise permitted by, Section 6.18.
"Rabobank Nederland" shall mean Cooperative Centrale
Raiffeisen--Boerleenbank B.A., New York Branch.
"Ralston Indemnity" shall mean the indemnification
obligations of the Ralston Parties in favor of BP North America
Inc., BP Nutrition Inc. and BP Nutrition (Intermediate Holdings)
Inc. as set forth in that certain Stock Purchase Agreement dated
as of October 1, 1986, among BP North America Inc., BP Nutrition
Inc., BP Nutrition (Intermediate Holdings) Inc. and the Ralston
Parties.
"Ralston Parties" shall mean collectively, Ralston
Purina Company, a Missouri corporation, and Ralston Purina
International, Inc., a Delaware corporation.
"Recovery Event" shall mean any settlement of or
payment in respect of any property insurance or casualty
insurance claim or any condemnation proceeding relating to any
Property of the Company or any of its Subsidiaries, excluding any
such settlement or payment which, together with any related
settlement or payment, yields gross proceeds to the Company or
any of its Subsidiaries of less than $350,000.
"Register" shall have the meaning provided in Section
9.7(d).
"Regulation D", "Regulations G, U and X" shall mean,
respectively, Regulation D under the Securities Act of 1933, as
amended or modified from time to time, and Regulation G,
Regulation U and Regulation X of the Board of Governors of the
Federal Reserve System, as such regulations are from time to time
in effect and any successor regulations thereto.
"Reimbursement Obligations" shall mean, at any date,
the obligations of the Company then outstanding in respect of the
Letters of Credit to reimburse the Administrative Agent for the
account of the Issuing Bank for the amount paid by the Issuing
Bank in respect of any drawings under the Letters of Credit.
"Reinvestment Deferred Amount" shall mean, with
respect to any Reinvestment Event, the aggregate Net Proceeds
received by the Company or any of its Subsidiaries in connection
therewith which are not applied to prepay the Term Loans pursuant
to Section 2.10(b) as a result of the delivery of a Reinvestment
Notice.
"Reinvestment Event" shall mean any Asset Sale or
Recovery Event in respect of which the Company has delivered a
Reinvestment Notice.
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"Reinvestment Notice" shall mean a written notice
executed by a Responsible Officer stating that no Event of
Default has occurred and is continuing and that the Company
(directly or indirectly through a Subsidiary) intends and expects
to use all or a specified portion of the Net Proceeds of an Asset
Sale or Recovery Event to acquire or construct assets useful in
its business.
"Reinvestment Prepayment Amount" shall mean with
respect to any Reinvestment Event, the Reinvestment Deferred
Amount relating thereto less any amount expended prior to the
relevant Reinvestment Prepayment Date to acquire or construct
assets useful in the Company's business.
"Reinvestment Prepayment Date" shall mean with respect
to any Reinvestment Event, the earlier of (a) the date occurring
nine months after the Reinvestment Event and (b) the date on
which the Company shall have determined not to, or shall have
otherwise ceased to, acquire or construct assets useful in the
Company's business with all or any portion of the relevant
Reimbursement Deferred Amount.
"Required Lenders" shall mean at any time, Lenders the
Total Credit Percentages of which aggregate 50% or more.
"Responsible Officer" shall mean, with respect to any
corporation, the chairman of the board, the president, any vice
president, the chief executive officer or the chief operating
officer, or any equivalent officer (regardless of his or her
title), and, in respect of financial or accounting matters, the
chief financial officer, the vice president of finance, the
treasurer, the controller, or any equivalent officer (regardless
of his or her title). Unless otherwise specified, all references
to a Responsible Officer herein shall mean a Responsible Officer
of the Company.
"Revolving Credit Commitment" shall have the meaning
provided in Section 2.1(c).
"Revolving Credit Exposure" shall mean, at any time
and as to each Lender, the sum of (a) the aggregate principal
amount of the Revolving Credit Loans made by such Lender
outstanding as of such date plus (b) such Lender's Revolving
Credit Percentage of the aggregate amount of all Letter of Credit
Liabilities as of such date.
"Revolving Credit Lender" shall mean any Lender having
a Revolving Credit Commitment or Revolving Credit Exposure
hereunder.
"Revolving Credit Loan" shall have the meaning
provided in Section 2.1(a)(3); the Revolving Credit Loans shall
not include any Letter of Credit Liabilities.
"Revolving Credit Maturity Date" shall mean March 12,
2005, or such earlier date on which the Revolving Credit Loans
become due and payable pursuant to Section 2.9 or Article 7.
"Revolving Credit Note" shall mean a promissory note
of the Company described in Section 2.5(a) payable to any Lender
and being substantially in the form of Exhibit A, evidencing the
aggregate Indebtedness of the Company to such Lender resulting
from Revolving Credit Loans made by such Lender.
"Revolving Credit Percentage" shall mean as to any
Revolving Credit Lender, the percentage of the aggregate
Revolving Credit Commitments constituted by its Revolving Credit
Commitment (or, if the
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Revolving Credit Commitments have terminated or expired, the
percentage which such Lender's Revolving Credit Exposure at
such time constitutes of the Aggregate Revolving Credit Exposure
at such time).
"Rolling Period" shall mean for each Fiscal Quarter
commencing with the first full Fiscal Quarter after the Closing
Date, such quarter and the three preceding Fiscal Quarters.
"Sales Enhancement Guarantees" shall mean any
Guarantee Obligations of the Company or the Subsidiary Guarantors
(a) of Indebtedness of (i) their customers, including, without
limitation, animal feed and nutrition products dealers and animal
producers, which Indebtedness was incurred to finance capital
expenditures of such customers for fixed assets or to provide
working capital to such customers, or (ii) any Unrestricted
Subsidiary, and (b) incurred in the ordinary course of business
and in connection with the Company's business strategy to
increase sales of animal feed and nutrition products.
"Sales Enhancement Loans" shall mean loans made by the
Company or any Subsidiary Guarantor (a) to (i) their customers,
including, without limitation, animal feed and nutrition products
dealers and animal producers, to finance capital expenditures of
such customers for fixed assets or to provide working capital to
such customers, (ii) any Unrestricted Subsidiary, and (b) in the
ordinary course of business and in connection with the Company's
business strategy to increase sales of animal feed and nutrition
products.
"Scheduled Principal Payments" shall mean, for any
period, the amounts of scheduled principal payments made during
such period (with respect to the Term Loans, as such scheduled
principal payments may be reduced by prepayments from time to
time pursuant to Section 2.10) with respect to Funded
Indebtedness (including the principal portion of all Capital
Lease Obligations) not including any principal payments of
Revolving Credit Loans.
"Secured Affiliate" shall mean any Affiliate of any
Lender that has entered into a Hedge Agreement with the Company
or any of its Subsidiaries with the obligations of the Company or
such Subsidiary thereunder being secured by one or more Security
Instruments.
"Security Instruments" shall mean the Guarantee and
Collateral Agreement, the PM Holdings Pledge Agreement, the Deeds
of Trust, the Cash Collateral Account Agreement, and any and all
other agreements or instruments now or hereafter executed and
delivered by PM Holdings, the Company, any Subsidiary of the
Company or any other Person as security for the payment or
performance of the Lender Indebtedness, as any of the foregoing
may be amended, modified or supplemented.
"Senior Subordinated Notes" shall mean the senior
subordinated notes issued pursuant to the Senior Subordinated
Notes Indenture in an amount of up to $350,000,000 issued by the
Company in connection with the debt financing for the Merger.
"Senior Subordinated Notes Indenture" shall mean the
Indenture, dated as of March 12, 1998, between the Company and
The First National Bank of Chicago, as Trustee, relating to the
Company's 9.0% Senior Subordinated Notes Due 2010.
"Solvent" shall mean with respect to any Person on a
particular date, the condition that, on such date, (a) the fair
value of the Property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value
of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such
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Person on its debts as they become absolute and matured, (c) such
Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature, and (d) such Person is not
engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's Property
would constitute an unreasonably small amount of capital.
"Special Purpose Vehicle" shall mean a trust,
partnership or other special purpose Person established solely to
implement a Permitted Securitization.
"Standard Securitization Undertakings" shall mean any
representations, warranties, covenants and indemnities entered
into by the Company or a Subsidiary Guarantor in connection with
a Permitted Securitization which are customary in securitization
transactions similar to a Permitted Securitization.
"Statutory Reserves" shall mean a fraction (expressed
as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the
maximum applicable reserve percentages, including any marginal,
special, emergency or supplemental reserves (expressed as a
decimal) established by the Board of Governors of the Federal
Reserve System and any other banking authority to which the
Lenders are subject for Eurocurrency Liabilities (as defined in
Regulation D) or any other category of deposits or liabilities by
reference to which the Eurodollar Rate is determined. Such
reserve percentages shall include those imposed pursuant to
Regulation D. Eurodollar Loans shall be deemed to constitute
Eurocurrency Liabilities and to be subject to such reserve
requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to
any Lender under such Regulation D. Statutory Reserves shall be
adjusted automatically on and as of the effective date of any
change in any reserve percentage.
"Subsidiary" shall mean, with respect to any Person,
(a) any corporation or any other Person 50% or more of the Equity
of which is at the time directly or indirectly owned by such
Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person, (b)
any partnership or joint venture 50% or more of the Equity of
which is at the time directly or indirectly owned by such Person,
such Person and one or more other Subsidiaries of such Person, or
one or more other Subsidiaries of such Person, and (c) any
limited liability company of which such Person, such Person and
one or more other Subsidiaries of such Person, or one or more
other Subsidiaries of such Person (1) is a managing member or (2)
directly or indirectly owns 50% or more of the Equity.
"Subsidiary Guarantors" shall mean any wholly-owned
Subsidiary of the Company other than an Unrestricted Subsidiary,
including, without limitation, those Subsidiaries designated as
Subsidiary Guarantors on Schedule 4.19 as of the Closing Date,
and any other wholly-owned Subsidiaries of the Company that
become Subsidiary Guarantors pursuant to Section 5.1(i).
"Tax Sharing Agreements" shall mean the Tax Sharing
Agreements substantially in the form of Exhibit C, dated as of
the Closing Date, executed (a) between PM Holdings, the Company
and the Company's Subsidiaries, and (b) between PM Holdings and
Koch Industries.
"Taxes" shall mean any and all present or future
taxes, levies, imposts, duties, deductions, charges or
withholdings imposed by any Governmental Authority.
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"Term Loan" shall mean a Tranche A Term Loan or a
Tranche B Term Loan, as the context shall require; collectively,
the "Term Loans".
"Term Loan Commitments" shall mean as to any Lender,
its Tranche A Term Loan Commitment and Tranche B Term Loan
Commitment.
"Term Loan Lender" shall mean any Tranche A Term Loan
Lender or Tranche B Term Loan Lender.
"Term Note" shall mean a Tranche A Term Note or a
Tranche B Term Note, as the context shall require; collectively
the "Term Notes".
"Three-Month Secondary CD Rate" shall mean, for any
day, the secondary rate (adjusted to the basis of a year of 365
or 366 days, as the case may be) 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 of Governors of the Federal Reserve System (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 the 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 Day)
by the Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by
the Administrative Agent.
"Total Credit Percentage" shall mean, as to any Lender
at any time, the percentage of the aggregate Revolving Credit
Commitments, aggregate Tranche A Term Loan Commitments and
aggregate Tranche B Term Loan Commitments then constituted by
such Lender's Revolving Credit Commitment, Tranche A Term Loan
Commitment and Tranche B Term Loan Commitment (it being agreed
that upon termination or expiration of the Revolving Credit
Commitments, or, as to the Tranche A Term Loan Commitments and
the Tranche B Term Loan Commitments, after the Closing Date, the
Total Credit Percentage of any Lenders shall be determined, (i)
in the case of the termination or expiration of the Revolving
Credit Commitments, by reference to the Aggregate Revolving
Credit Exposure of the Revolving Credit Lenders and such Lender's
Revolving Credit Exposure; and (ii) as to the Tranche A Term
Loans or the Tranche B Term Loans, by reference to the aggregate
principal amount of the Tranche A Term Loans or the Tranche B
Term Loans of the Lenders, as the case may be, and the aggregate
principal amount of such Lender's Tranche A Term Loans or Tranche
B Term Loans, as the case may be).
"Tranche A Term Loan" shall have the meaning provided
in Section 2.1(a)(1).
"Tranche A Term Loan Commitment" shall have the
meaning provided in Section 2.1(d).
"Tranche A Term Loan Lender" shall mean any Lender
having a Tranche A Term Loan Commitment hereunder and/or a
Tranche A Term Loan outstanding hereunder.
"Tranche A Term Loan Maturity Date" shall mean March
12, 2005.
"Tranche A Term Loan Percentage" shall mean as to any
Tranche A Term Loan Lender, (a) on the Closing Date, the
percentage which such Lender's Tranche A Term Loan Commitment
then outstanding constitutes of the aggregate Tranche A Term Loan
Commitments then outstanding or, (b) at any
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time after the Closing Date, the percentage which such Lender's
Tranche A Term Loans then outstanding constitutes of the
aggregate Tranche A Term Loans then outstanding.
"Tranche A Term Note" shall mean a promissory note of
the Company described in Section 2.5(b) payable to a Tranche A
Term Loan Lender and being substantially in the form of Exhibit
B-1, evidencing the aggregate indebtedness of the Company to such
Lender for Tranche A Term Loans.
"Tranche B Term Loan" shall have the meaning provided
in Section 2.1(a)(2).
"Tranche B Term Loan Commitment" shall have the
meaning in Section 2.1(e).
"Tranche B Term Loan Lender" shall mean any Lender
having a Tranche B Term Loan Commitment hereunder and/or a
Tranche B Term Loan outstanding hereunder.
"Tranche B Term Loan Maturity Date" shall mean March
12, 2007.
"Tranche B Term Loan Percentage" shall mean as to any
Tranche B Term Loan Lender, (a) on the Closing Date, the
percentage which such Lender's Tranche B Term Loan Commitment
then outstanding constitutes of the aggregate Tranche B Term Loan
Commitments then outstanding or, (b) at any time after the
Closing Date, the percentage which such Lender's Tranche B Term
Loans then outstanding constitutes of the aggregate Tranche B
Term Loans then outstanding.
"Tranche B Term Note" shall mean a promissory note of
the Company described in Section 2.5(c) payable to a Tranche B
Term Loan Lender and being substantially in the form of Exhibit
B-2, evidencing the aggregate indebtedness of the Company to such
Lender for Tranche B Term Loans.
"Transactions" shall mean the transactions provided
for in and contemplated by this Agreement and the other Financing
Documents.
"Type" of Loan shall mean a Base Rate Loan or
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from
time to time in effect in the State of New York or, where
applicable as to specific Collateral, any other relevant state.
"Unrestricted Subsidiary" shall mean any Subsidiary of
the Company that meets one or more of the following criteria: (a)
at the time of creation it is designated as an Unrestricted
Subsidiary by the Company (which designation is approved by its
Board of Directors), (b) any Subsidiary which is not wholly-owned
directly by the Company or directly by a Subsidiary Guarantor,
(c) any Subsidiary created or acquired by another Unrestricted
Subsidiary, (d) any Special Purpose Vehicle constituting a
Subsidiary of the Company, provided, that in each case, such
Unrestricted Subsidiary (1) has not acquired any Property from
the Company or any Subsidiary Guarantors, except as specifically
permitted by this Agreement, (2) has no Indebtedness other than
Non-Recourse Debt, (3) does not at any time own any capital
stock, or any warrants, options or other rights to acquire
capital stock, of the Company or any Subsidiary Guarantor and (4)
is not a Subsidiary Guarantor. Notice of any such designation by
the Company shall be delivered by the Company to the
Administrative Agent by promptly filing with the Administrative
Agent a copy of the resolutions of the Board of Directors of the
Company approving such designation and a certificate of a
Responsible Officer certifying that such designation complies
with the requirements of this definition. Such designation shall
become effective upon receipt by the Administrative Agent of the
foregoing. Each
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Unrestricted Subsidiary designated hereunder shall continue to
be treated as an Unrestricted Subsidiary for purposes of this
Agreement until the Company shall deliver notice to the
Administrative Agent pursuant to and in compliance with
Section 6.17.
"U.S. Subsidiary" shall mean all Subsidiaries of the
Company organized under the laws of any state, territory or
subdivision of the United States.
"Voting Stock" of any Person shall mean the Equity of
such Person which ordinarily has voting power for the election of
directors (or persons performing similar functions) of such
Person, whether at all times or only so long as no senior class
of securities has such voting power by reason of any contingency.
Section 1.2 Accounting Terms and Determinations. Unless
otherwise defined or specified herein, all accounting terms shall
be construed herein, all accounting determinations hereunder
shall be made, all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP applied on a
basis consistent with the Financial Statements, except for
changes concurred with by the Company's independent public
accountants, provided, that if such changes affect the results of
the calculations of the financial ratios required under Section
6.1 (as compared to the results obtained by applying GAAP in
effect on the Closing Date), the Company and the Administrative
Agent (acting on behalf and at the direction of the Required
Lenders) agree to negotiate in good faith to adjust such
financial ratios in order to make them comparable after giving
effect to such change in GAAP.
Section 1.3 Other Definitional Terms. 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 article,
section, schedule, exhibit and like references are to this
Agreement unless otherwise specified.
ARTICLE 2
AMOUNT AND TERMS OF LOANS
Section 2.1 Loans and Commitments.
(a) Loans. Subject to the terms and conditions and
relying on the representations and warranties contained herein,
(1) each Tranche A Term Loan Lender severally agrees to make, on
the Closing Date, term loans pursuant to its Tranche A Term Loan
Commitment (each a "Tranche A Term Loan") to the Company; (2)
each Tranche B Term Loan Lender severally agrees to make, on the
Closing Date, term loans pursuant to its Tranche B Term Loan
Commitment (each a "Tranche B Term Loan") to the Company; and (3)
on any Business Day from and after the Closing Date, but prior to
the Revolving Credit Maturity Date, each Revolving Credit Lender
severally agrees to make revolving credit loans (each a
"Revolving Credit Loan") to the Company. Except in connection
with a continuation or conversion pursuant to Section 2.11, any
Term Loan that is repaid or prepaid may not be reborrowed.
(b) Types of Loans. The Revolving Credit Loans and the
Term Loans made pursuant hereto by each Lender shall, at the
option of the Company, be either Base Rate Loans or Eurodollar
Loans and may be continued or converted pursuant to Section 2.11,
provided, that except as otherwise specifically provided herein,
all Loans made pursuant to the same Borrowing shall be of the
same Type.
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(c) Revolving Credit Commitments. Each Revolving
Credit Lender's Revolving Credit Exposure shall not exceed at any
time the amount set forth opposite such Lender's name on Annex I
under the caption "Revolving Credit Commitment" (as the same may
be reduced pursuant to Section 2.9 or otherwise from time to time
modified pursuant to Section 9.7, its "Revolving Credit
Commitment," and collectively for all Revolving Credit Lenders,
the "Revolving Credit Commitments"); provided, however, that the
Aggregate Revolving Credit Exposure at any one time outstanding
shall not exceed the Maximum Available Amount in effect at such
time; and, provided, further, the aggregate principal amount of
all Revolving Credit Loans at any one time outstanding shall not
exceed the difference between (1) the Maximum Available Amount in
effect at such time and (2) the aggregate amount of all Letter of
Credit Liabilities at such time. There may be more than one
Borrowing with respect to Revolving Credit Loans on any day.
Within the foregoing limits and subject to the conditions set out
in Article III, the Company may obtain Borrowings of Revolving
Credit Loans, repay or prepay such Revolving Credit Loans, and
reborrow such Revolving Credit Loans.
(d) Tranche A Term Loan Commitments. The Tranche A
Term Loans made hereunder by each Tranche A Term Loan Lender
shall not exceed in aggregate principal amount outstanding the
amount set forth opposite such Lender's name on Annex I under the
caption "Tranche A Term Loan Commitment" (as the same may be from
time to time modified pursuant to Section 9.7), and the aggregate
principal amount of Tranche A Term Loans outstanding for all
Tranche A Term Loan Lenders shall not exceed the amount set forth
on Annex I under the caption "Tranche A Term Loan Commitments".
Any portion of each such Lender's Tranche A Term Loan Commitment
not utilized on the Closing Date shall be permanently canceled.
(e) Tranche B Term Loan Commitments. The Tranche B
Term Loans made hereunder by each Tranche B Term Loan Lender
shall not exceed in aggregate principal amount outstanding the
amount set forth opposite such Lender's name on Annex I under the
caption "Tranche B Term Loan Commitment" (as the same may be from
time to time modified pursuant to Section 9.7), and the aggregate
principal amount of Tranche B Term Loans outstanding for all
Tranche B Term Loan Lenders shall not exceed the amount set forth
on Annex I under the caption "Tranche B Term Loan Commitments".
Any portion of each such Lender's Tranche B Term Loan Commitment
not utilized on the Closing Date shall be permanently canceled.
(f) Amounts of Borrowings, etc. The aggregate
principal amount of each Borrowing (1) of Eurodollar Loans shall
be not less than $3,000,000 and shall be in an integral multiple
of $100,000, and (2) of Base Rate Loans hereunder shall be not
less than $1,000,000 and shall be in an integral multiple of
$100,000, except that any Borrowing of Revolving Credit Loans
that are Base Rate Loans may be in the aggregate amount of the
unused Maximum Available Amount in effect at such time.
Borrowings of more than one Type may be outstanding at the same
time; provided, however, that the Company shall not be entitled
to request any Borrowing that, if made, would result in an
aggregate of more than eight separate Borrowings of Eurodollar
Loans being outstanding at any one time. For purposes of the
foregoing, Borrowings having different Interest Periods,
regardless of whether they commence on the same date, shall be
considered separate Borrowings.
Section 2.2 Borrowing Requests.
(a) Borrowing Requests. Whenever the Company desires
to make a Borrowing hereunder, it shall give Advance Notice in
the form of a Borrowing Request, specifying, subject to the
provisions hereof, (1) if, but only if, such Borrowing Request is
regarding Loans to be made on the Closing Date, whether such
Borrowing will be Revolving Credit Loans, Tranche A Term Loans or
Tranche B Term
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Loans, (2) the aggregate principal amount of the Loans to be made
pursuant to such Borrowing, (3) the date of Borrowing (which
shall be a Business Day), (4) whether the Loans being made
pursuant to such Borrowing are to be Base Rate Loans or
Eurodollar Loans, and (5) in the case of Eurodollar Loans, the
Interest Period to be applicable thereto. After the Closing Date,
the Company may deliver Borrowing Requests only for the purpose
of requesting Revolving Credit Loans.
(b) Notice by Administrative Agent. The Administrative
Agent shall promptly give each Applicable Lender telecopy or
telephonic notice (and, in the case of telephonic notices,
confirmed by telecopy or otherwise in writing) of the proposed
Borrowing, of such Lender's Applicable Percentage thereof and of
the other matters covered by the Advance Notice. The Company
hereby waives the right to dispute the Administrative Agent's
record of the terms of such telephonic notice, absent manifest
error.
Section 2.3 Letters of Credit.
(a) Issuance of Letters of Credit. Subject to the
terms and conditions hereof, the Company shall have the right, in
addition to Revolving Credit Loans provided for in Section 2.1,
to utilize the Revolving Credit Commitments from time to time
prior to the Revolving Credit Maturity Date by obtaining the
issuance of letters of credit for the account of the Company by
an Issuing Bank if the Company shall so request in the notice
referred to in Section 2.3(b)(1) (such letters of credit being
collectively referred to as the "Letters of Credit"); provided,
however, that the Aggregate Revolving Credit Exposure at any one
time outstanding shall not exceed the Maximum Available Amount in
effect at such time and the aggregate of all Letter of Credit
Liabilities at any one time outstanding shall not exceed
$40,000,000. The Letters of Credit shall be denominated in
Dollars and may be issued to support the obligations of the
Company or any of the Subsidiary Guarantors. Upon the date of the
issuance of a Letter of Credit, the applicable Issuing Bank shall
be deemed, without further action by any party hereto, to have
sold to each Revolving Credit Lender, and each Revolving Credit
Lender shall be deemed, without further action by any party
hereto, to have purchased from such Issuing Bank, a
participation, to the extent of such Lender's Revolving Credit
Percentage, in such Letter of Credit and the related Letter of
Credit Liabilities. No Letter of Credit issued pursuant to this
Agreement shall have an expiry date that exceeds the date which
is five Business Days prior to the Revolving Credit Maturity
Date. Any Letter of Credit may give the beneficiary thereof the
right to draw upon the Letter of Credit upon its expiry date. The
Company and the Lenders agree that, as of the Closing Date, the
Outstanding Letters of Credit shall for all purposes of this
Agreement be deemed to be Letters of Credit issued under and
pursuant to the terms of this Agreement.
(b) Additional Letter of Credit Provisions. The
following additional provisions shall apply to each Letter of
Credit:
(1) The Company shall give the Administrative
Agent and the Issuing Bank at least five Business Days'
prior notice (effective upon receipt), or in each case,
such shorter period as may be agreed to by the
Administrative Agent and such Issuing Bank, specifying the
date such Letter of Credit is to be issued (which shall be
a Business Day) and the Issuing Bank and describing: (A)
the face amount of the Letter of Credit, (B) the expiration
date of the Letter of Credit, (C) the name and address of
the beneficiary, (D) information concerning the transaction
proposed to be supported by such Letter of Credit as the
Administrative Agent or such Issuing Bank may reasonably
request, (E) such other information and documents relating
to the Letter of Credit as the Administrative Agent or such
Issuing Bank may reasonably request, and (F) a precise
description of documents and the verbatim text of any
certificate to be presented by the beneficiary, which, if
presented prior to the expiry date of the Letter of Credit,
would require such Issuing Bank to make
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payment under the Letter of Credit, provided, that such
Issuing Bank, in its reasonable judgment, may require
changes in such documents and certificates; and, provided,
further, that no Issuing Bank shall be required to issue
any Letter of Credit that on its terms requires payment
thereunder prior to the next Business Day following receipt
by such Issuing Bank of such documents and certificates.
Each such notice shall be accompanied by the applicable
Issuing Bank's Application and by a certificate executed by
a Responsible Officer setting forth calculations evidencing
availability for such Letter of Credit pursuant to Section
2.3(b)(2) and stating that all conditions precedent to such
issuance have been satisfied. Each Letter of Credit shall,
to the extent not inconsistent with the express terms
hereof or the applicable Application, be subject to the
Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication
No. 500 (together with any subsequent revisions thereof
approved by a Congress of the International Chamber of
Commerce, the "UCP"), and shall, as to matters not governed
by the UCP, be governed by, and construed and interpreted
in accordance with, the laws of the State of New York.
(2) No Letter of Credit may be issued if after
giving effect thereto the Aggregate Revolving Credit
Exposure would exceed the Maximum Available Amount. On each
day during the period commencing with the issuance of any
Letter of Credit and until such Letter of Credit shall have
expired or have been terminated, the Revolving Credit
Commitment of each Revolving Credit Lender shall be deemed
to be utilized for all purposes hereof in an amount equal
to such Lender's Revolving Credit Percentage of the amount
of the Letter of Credit Liabilities related to such Letter
of Credit.
(3) Upon receipt from the beneficiary of any
Letter of Credit of any demand for payment thereunder, the
Issuing Bank shall promptly notify the Company and the
Administrative Agent of such demand (provided that the
failure of an Issuing Bank to give such notice shall not
affect the Reimbursement Obligations of the Company
hereunder) and the Company shall immediately, and in any
event no later than 11:00 a.m. (Houston, Texas time) on the
date of such drawing, reimburse the Administrative Agent
for the account of the applicable Issuing Bank for any
amount paid by the Issuing Bank upon any drawing under any
Letter of Credit, without presentment, demand, protest or
other formalities of any kind in an amount, in same day
funds, equal to the amount of such drawing. Unless prior to
11:00 a.m. (Houston, Texas time) on the date of such
drawing, the Company shall have either notified the Issuing
Bank and the Administrative Agent that the Company intends
to reimburse the Administrative Agent for the account of
the applicable Issuing Bank for the amount of such drawing
with funds other than the proceeds of Revolving Credit
Loans or delivered to the Administrative Agent a Borrowing
Request for Revolving Credit Loans in an amount equal to
such drawing, the Company will be deemed to have given a
Borrowing Request to the Administrative Agent requesting
that the Revolving Credit Lenders make Revolving Credit
Loans which shall be Base Rate Loans on the date on which
such drawing is honored in an amount equal to the amount of
such drawing, provided, that such Loans shall be subject to
(A) the satisfaction of the conditions in Article 3 and (B)
the existence of Revolving Credit Loan availability
pursuant to Section 2.1(c) hereof (after giving effect to
repayment of the applicable Reimbursement Obligations with
the proceeds of the proposed Revolving Credit Loans).
Subject to the preceding sentence, if so requested by the
Administrative Agent, each of the Revolving Credit Lenders
shall, on the date of such drawing, make such Revolving
Credit Loans in an amount equal to such Lender's Revolving
Credit Percentage of such drawing or the full amount of the
unused Revolving Credit Loan available pursuant to
Section 2.1(c), as applicable, the proceeds of which shall
be applied directly by the Administrative Agent to
reimburse the applicable Issuing Bank to the extent of such
proceeds.
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(4) If the Company fails to reimburse the
applicable Issuing Bank as provided in clause (3) above for
any reason, including, but not limited to, failure to
satisfy the conditions in Article 3 or insufficient unused
Revolving Credit Loan availability pursuant to Section
2.1(c), such Issuing Bank shall promptly notify the
Administrative Agent and the Administrative Agent shall
notify each Revolving Credit Lender of the unreimbursed
amount of such drawing and of such Lender's respective
participation therein based on such Lender's Revolving
Credit Percentage. Each Revolving Credit Lender will pay to
the Administrative Agent for the account of the applicable
Issuing Bank on the date of such notice an amount equal to
such Lender's Revolving Credit Percentage of such
unreimbursed drawing (or, if such notice is made after 1:00
p.m. (Houston, Texas time) on such date, on the next
succeeding Business Day). If any Revolving Credit Lender
fails to make available to such Issuing Bank the amount of
such Lender's participation in such Letter of Credit as
provided in this clause (4), such Issuing Bank shall be
entitled to recover such amount on demand from such Lender
together with interest at the Federal Funds Effective Rate
for three Business Days and thereafter at the Base Rate.
Nothing in this clause (4) shall be deemed to prejudice the
right of any Revolving Credit Lender to recover from such
Issuing Bank any amounts made available by such Lender to
such Issuing Bank pursuant to this clause (4) if it is
finally judicially determined by a court of competent
jurisdiction that the payment with respect to a Letter of
Credit by such Issuing Bank was wrongful and such wrongful
payment was the result of gross negligence or willful
misconduct on the part of such Issuing Bank. The applicable
Issuing Bank shall promptly pay to the Administrative Agent
and the Administrative Agent to each Revolving Credit
Lender such Lender's Revolving Credit Percentage of all
amounts received from the Company for payment, in whole or
in part, of the Reimbursement Obligation in respect of any
Letter of Credit, but only to the extent such Lender has
made payment to such Issuing Bank in respect of such Letter
of Credit pursuant to this clause (4).
(5) The issuance by the applicable Issuing Bank
of each Letter of Credit shall, in addition to the
conditions precedent set forth in Article 3, be subject to
the conditions precedent that such Letter of Credit shall
be in such form and contain such terms as shall be
reasonably satisfactory to such Issuing Bank, and that the
Company shall have executed and delivered such other
instruments and agreements relating to such Letter of
Credit as such Issuing Bank shall have reasonably requested
and that are not inconsistent with the terms of this
Agreement including the applicable Issuing Bank's
Application therefor. In the event of a conflict between
the terms of this Agreement and the terms of any
Application, the terms of this Agreement shall control.
(6) AS BETWEEN THE COMPANY AND ANY ISSUING BANK,
THE COMPANY ASSUMES ALL RISKS OF THE ACTS AND OMISSIONS OF
OR MISUSE OF THE LETTERS OF CREDIT ISSUED BY SUCH ISSUING
BANK BY THE RESPECTIVE BENEFICIARIES OF SUCH LETTERS OF
CREDIT. IN FURTHERANCE AND NOT IN LIMITATION OF THE
FOREGOING, SUCH ISSUING BANK SHALL NOT BE RESPONSIBLE: (A)
FOR THE FORM, VALIDITY, SUFFICIENCY, ACCURACY, GENUINENESS
OR LEGAL EFFECT OF ANY DOCUMENT SUBMITTED BY ANY PERSON IN
CONNECTION WITH THE APPLICATION FOR OR ISSUANCE OF SUCH
LETTERS OF CREDIT, EVEN IF IT SHOULD IN FACT PROVE TO BE IN
ANY OR ALL RESPECTS INVALID, INSUFFICIENT, INACCURATE,
FRAUDULENT OR FORGED; (B) FOR THE VALIDITY OR SUFFICIENCY
OF ANY INSTRUMENT TRANSFERRING OR ASSIGNING OR PURPORTING
TO TRANSFER OR ASSIGN ANY SUCH LETTER OF CREDIT OR THE
RIGHTS OR BENEFITS THEREUNDER OR PROCEEDS THEREOF, IN WHOLE
OR IN PART, WHICH MAY PROVE TO BE INVALID OR INEFFECTIVE
FOR ANY REASON; (C) FOR ERRORS, OMISSIONS, INTERRUPTIONS OR
DELAYS IN TRANSMISSION OR DELIVERY OF ANY MESSAGES, BY
MAIL, CABLE, TELEGRAPH, TELEX OR OTHERWISE, WHETHER OR
NOT THEY ARE IN CIPHER; (D) FOR ERRORS IN INTERPRETATION OF
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TECHNICAL TERMS; (E) FOR ANY LOSS OR DELAY IN THE
TRANSMISSION OR OTHERWISE OF ANY DOCUMENT REQUIRED IN ORDER
TO MAKE A DRAWING UNDER ANY SUCH LETTER OF CREDIT OR OF THE
PROCEEDS THEREOF; (F) FOR THE MISAPPLICATION BY THE
BENEFICIARY OF ANY SUCH LETTER OF CREDIT OF THE PROCEEDS OF
ANY DRAWING UNDER SUCH LETTER OF CREDIT; AND (G) FOR ANY
CONSEQUENCES ARISING FROM CAUSES BEYOND THE CONTROL OF SUCH
ISSUING BANK, INCLUDING, WITHOUT LIMITATION, THE ACTIONS OF
ANY GOVERNMENTAL AUTHORITY. NONE OF THE ABOVE SHALL AFFECT,
IMPAIR, OR PREVENT THE VESTING OF ANY OF SUCH ISSUING
BANK'S RIGHTS OR POWERS HEREUNDER. NOTWITHSTANDING ANYTHING
TO THE CONTRARY CONTAINED IN THIS CLAUSE (6), THE COMPANY
SHALL NOT ASSUME ANY RISK, AND SHALL HAVE NO OBLIGATION TO
INDEMNIFY AN ISSUING BANK, IN RESPECT OF ANY LIABILITY
INCURRED BY SUCH ISSUING BANK ARISING PRIMARILY OUT OF THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH ISSUING
BANK, AS FINALLY JUDICIALLY DETERMINED BY A COURT OF
COMPETENT JURISDICTION.
(7) Each Issuing Bank will send to the Company
and the Administrative Agent immediately upon issuance of
any Letter of Credit, or an amendment thereto, a true and
complete copy of such Letter of Credit, or such amendment
thereto. Upon issuance of any Letter of Credit or an
amendment thereto, the Administrative Agent shall promptly
notify each Revolving Credit Lender of the terms of such
Letter of Credit or amendment thereto, the Issuing Bank for
such Letter of Credit or amendment thereto, and of such
Lender's Revolving Credit Percentage of the amount of such
Letter of Credit or amendment thereto, and the Administrative
Agent shall provide to each Revolving Credit Lender a copy
of such Letter of Credit or such amendment thereto. Upon
cancellation or termination of any Letter of Credit, the
Issuing Bank shall promptly notify the Administrative
Agent and the Company, and the Administrative Agent will
then promptly notify each Revolving Credit Lender, of
such cancellation or termination.
(8) The obligation of the Company to reimburse
each Issuing Bank for Reimbursement Obligations with regard
to the Letters of Credit issued by it and the obligations
of the Revolving Credit Lenders under clause (4) shall be
unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement and under all
circumstances including, without limitation, the following
circumstances:
(A) any lack of validity or enforceability
of any Letter of Credit;
(B) the existence of any claim, set-off,
defense or other right that the Company
may have at any time against a
beneficiary or any transferee of any
Letter of Credit (or any Persons for
whom any such transferee may be
acting), any Lender or any other
Person, whether in connection with this
Agreement, the transactions
contemplated herein or any unrelated
transaction (including any underlying
transaction between the Company or one
of its Subsidiaries and the beneficiary
for which the Letter of Credit was
procured) other than a defense based on
the gross negligence (AS OPPOSED TO
ORDINARY NEGLIGENCE) or willful
misconduct of such Issuing Bank, as
finally judicially determined by a
court of competent jurisdiction;
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(C) any draft, demand, certificate or any
other document presented under any
Letter of Credit is proved to be
forged, fraudulent, invalid or
insufficient in any respect or any
statement therein is untrue or
inaccurate in any respect;
(D) any adverse change in the condition
(financial or otherwise) of the
Company;
(E) any breach of this Agreement or any
other Financing Document by the
Company, Administrative Agent or any
Lender (other than the applicable
Issuing Bank);
(F) any other circumstance or happening
whatsoever which is similar to any of
the foregoing, provided, that such
other occurrence or happening is not
the result of the gross negligence (AS
OPPOSED TO ORDINARY NEGLIGENCE) or
willful misconduct of such Issuing
Bank, as finally judicially determined
by a court of competent jurisdiction;
or
(G) the fact that a Default shall have
occurred and be continuing.
Section 2.4 Disbursement of Funds.
(a) Availability. No later than 1:00 p.m. (Houston
time) on the date of each Borrowing of a Base Rate Loan, and
11:00 a.m. (Houston time) on the date of each Borrowing of a
Eurodollar Loan, each Lender will make available to the
Administrative Agent such Lender's Applicable Percentage of the
amount (if any) by which the principal amount of the Borrowing
requested to be made on such date by such Lender exceeds the
principal amount of Loans (if any) of such Lender maturing on
such date, in Dollars and in immediately available funds at the
Payment Office. The Administrative Agent will make available to
the Company at the Payment Office the aggregate of the amounts
(if any) so made available by the Lenders by depositing such
amounts, in immediately available funds, to an account of the
Company at the Administrative Agent designated by the Company for
such purpose. To the extent that Revolving Credit Loans mature or
Reimbursement Obligations are due and owing on the date of a
requested Borrowing of Revolving Credit Loans, the Revolving
Credit Lenders shall apply the proceeds of the Revolving Credit
Loans then being made, to the extent thereof, to the repayment of
such maturing Revolving Credit Loans or Reimbursement
Obligations, such Revolving Credit Loans or Reimbursement
Obligations and repayments intended to be a contemporaneous
exchange.
(b) Funds to the Administrative Agent. Unless the
Administrative Agent shall have been notified by any Applicable
Lender prior to the date of a Borrowing that such Lender does not
intend to make available to the Administrative Agent such
Lender's Applicable Percentage of the Borrowing to be made on
such date, the Administrative Agent may assume that such Lender
has made such amount available to the Administrative Agent on
such date, and the Administrative Agent may make available to the
Company a corresponding amount. If such corresponding amount is
not in fact made available to the Administrative Agent by such
Lender on the date of a Borrowing, the Administrative Agent shall
be entitled to recover such corresponding amount on demand from
such Lender together with interest at the Federal Funds Effective
Rate. If such Lender does not pay such corresponding amount
forthwith upon the Administrative Agent's demand therefor, the
Administrative Agent shall promptly notify the Company, and the
Company shall
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immediately pay such corresponding amount to the Administrative
Agent together with interest at the rate specified for the
Borrowing which includes such amount paid. Nothing in
this Section shall be deemed to relieve any Lender
from its obligation to fulfill its Commitments hereunder or to
prejudice any rights which the Company may have against any
Lender as a result of any default by such Lender hereunder.
(c) Lenders' Responsibilities. No Lender shall be
responsible for any default by any other Lender in its obligation
to make Loans hereunder, and each Lender shall be obligated to
make only such Loans provided to be made by it hereunder,
regardless of the failure of any other Lender to fulfill its
Commitment hereunder.
Section 2.5 Notes and Amortization.
(a) Revolving Credit Notes. If requested by any
Revolving Credit Lender, the Company's obligation to pay the
principal of, and interest on, the Revolving Credit Loans made by
each such Revolving Credit Lender shall be further evidenced by
the Company's issuance, execution and delivery of a Revolving
Credit Note payable to the order of each such Lender in the
amount of such Lender's Revolving Credit Commitment and shall be
dated as of the date of issuance of such Revolving Credit Note.
The principal amount of each Revolving Credit Note shall be
payable on or before the Revolving Credit Maturity Date.
(b) Tranche A Term Notes and Amortization. If
requested by any Tranche A Term Loan Lender, the Company's
obligation to pay the principal of, and interest on, the Tranche
A Term Loans made by each such Tranche A Term Loan Lender shall
be further evidenced by the Company's issuance, execution and
delivery of a Tranche A Term Note payable to the order of each
such Lender in the principal amount of such Lender's Tranche A
Term Loan Commitment (if issued on the Closing Date) or in the
principal amount of such Lender's Tranche A Term Loans (if issued
after the Closing Date), and dated as of the date of issuance of
such Tranche A Term Note. The aggregate principal amount of the
Tranche A Term Loans of all Tranche A Term Loan Lenders shall be
payable in quarterly installments of the amounts set forth below
(in each case, as reduced by the application of any prepayments
pursuant to Section 2.10):
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Quarterly Date Amount Quarterly Date Amount
-------------- ------ -------------- ------
June 30,1998 $1,250,000.00 March 31, 2002 $3,500,000.00
September 30, 1998 $1,250,000.00 June 30, 2002 $4,250,000.00
December 31, 1998 $1,250,000.00 September 30, 2002 $4,250,000.00
March 31, 1999 $1,250,000.00 December 31, 2002 $4,250,000.00
June 30, 1999 $2,000,000.00 March 31, 2003 $4,250,000.00
September 30, 1999 $2,000,000.00 June 30, 2003 $5,000,000.00
December 31, 1999 $2,000,000.00 September 30, 2003 $5,000,000.00
March 31, 2000 $2,000,000.00 December 31, 2003 $5,000,000.00
June 30, 2000 $2,750,000.00 March 31, 2004 $5,000,000.00
September 30, 2000 $2,750,000.00 June 30, 2004 $6,250,000.00
December 31, 2000 $2,750,000.00 September 30, 2004 $6,250,000.00
March 31, 2001 $2,750,000.00 December 31, 2004 $6,250,000.00
June 30, 2001 $3,500,000.00 March 12, 2005 $6,250,000.00
September 30, 2001 $3,500,000.00
December 31, 2001 $3,500,000.00
The first such quarterly installments shall be payable on June
30, 1998 and the remaining quarterly installments shall be
payable on each Quarterly Date thereafter, with the final
installment in the amount of the aggregate unpaid principal
balance then owing being payable on or before the Tranche A Term
Loan Maturity Date.
(c) Tranche B Term Notes and Amortization. If
requested by any Tranche B Term Loan Lender, the Company's
obligation to pay the principal of, and interest on, the Tranche
B Term Loans made by each such Tranche B Term Loan Lender shall
be further evidenced by the Company's issuance, execution and
delivery of a Tranche B Term Note payable to the order of each
such Lender in the principal amount of such Lender's Tranche B
Term Loan Commitment (if issued on the Closing Date) or in the
principal amount of such Lender's Tranche B Term Loans (if issued
after the Closing Date), and dated as of the date of issuance of
such Tranche B Term Note. The aggregate principal amount of the
Tranche B Term Loans of all Tranche B Term Loan Lenders shall be
payable in quarterly installments in the amounts set forth below
(in each case, as reduced by the application of any prepayments
pursuant to Section 2.10):
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Quarterly Date Amount Quarterly Date Amount
-------------- ------ -------------- ------
June 30, 1998 $75,000 March 31, 2003 $75,000
September 30, 1998 $75,000 June 30, 2003 $75,000
December 31, 1998 $75,000 September 30, 2003 $75,000
March 31, 1999 $75,000 December 31, 2003 $75,000
June 30, 1999 $75,000 March 30, 2004 $75,000
September 30, 1999 $75,000 June 30, 2004 $75,000
December 31, 1999 $75,000 September 30, 2004 $75,000
March 30, 2000 $75,000 December 31, 2004 $75,000
June 30, 2000 $75,000 March 30, 2005 $75,000
September 30, 2000 $75,000 June 30, 2005 $75,000
December 31, 2000 $75,000 September 30, 2005 $75,000
March 30, 2001 $75,000 December 31, 2005 $75,000
June 30, 2001 $75,000 March 30, 2006 $75,000
September 30, 2001 $75,000 June 30, 2006 $24,400,000
December 31, 2001 $75,000 September 30, 2006 $24,400,000
March 30, 2002 $75,000 December 31, 2006 $24,400,000
June 30, 2002 $75,000 March 12, 2007 $24,400,000
September 30, 2002 $75,000
December 31, 2002 $75,000
The first such quarterly installment shall be payable on June 30,
1998, and the remaining quarterly installments shall be payable
on each Quarterly Date thereafter, with the final installment in
the amount of the aggregate unpaid principal balance then owing
being payable on or before the Tranche B Term Loan Maturity Date.
Section 2.6 Interest. In all cases subject to
Section 9.12:
(a) Base Rate Loans. Subject to Section 2.6(c), the
Company agrees to pay interest in respect of the unpaid principal
amount of each Base Rate Loan from the date thereof until payment
in full thereof at a rate per annum which shall be, for any day,
equal to the sum of the Applicable Margin plus the Base Rate in
effect on such day, but in no event to exceed the Highest Lawful
Rate. The term "Base Rate" shall mean, for any day, the highest
of (1) the Prime Rate in effect on such day, (2) one-half of one
percent (1/2%) plus the Federal Funds Effective Rate in effect
for such day (rounded upwards, if necessary, to the nearest
1/16th of 1%), and (3) one percent (1%) plus the Base CD Rate in
effect on such day, but in no event to exceed the Highest Lawful
Rate. For purposes of this Agreement, any change in the Base Rate
due to a change in the Three-Month Secondary CD Rate, the Federal
Funds Effective Rate, or the Prime Rate shall be effective as of
the opening of business on the effective date of such change in
the Three-Month Secondary CD Rate, the Federal Funds Effective
Rate, or the Prime Rate, as the case may be. If for any reason
the Administrative Agent shall have determined (which
determination shall be conclusive and binding, absent manifest
error) that it is unable to ascertain the Federal Funds Effective
Rate and the Three-Month Secondary CD Rate for any reason,
including but not limited to the inability of the Administrative
Agent to obtain sufficient bids or publications in accordance
with the terms hereof, the Base Rate shall be the Prime Rate
until the circumstances giving rise to such inability no longer
exist.
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(b) Eurodollar Loans. Subject to Section 2.6(c), the
Company agrees to pay interest in respect of the unpaid principal
amount of each Eurodollar Loan from the date thereof until
payment in full thereof at a rate per annum which shall be the
sum of the relevant Applicable Margin plus the Eurodollar Rate,
but in no event to exceed the Highest Lawful Rate.
(c) Default Interest. If the Company shall default in
the payment of the principal of or interest on any Loan or any
other amount becoming due hereunder or under any Financing
Document, by acceleration or otherwise, the Company shall on
demand from time to time pay interest, to the extent permitted by
law, on such defaulted amount to but excluding the date of actual
payment (after as well as before judgment) at a rate per annum
equal to (1) in the case of any Eurodollar Loan, the rate that
would be applicable under Section 2.6(b) to such Eurodollar Loan,
plus 2% per annum, and (2) in the case of any other amount, the
rate that would be applicable under Section 2.6(a) to a Base Rate
Loan, plus 2% per annum.
(d) Interest Payment Dates. Interest on each Loan
shall accrue from and including the date of such Loan to but
excluding the date of payment in full thereof. Interest on each
Eurodollar Loan shall be payable on the last day of each Interest
Period applicable thereto and, in the case of an Interest Period
in excess of three months, on each day which occurs every three
months after the initial date of such Interest Period, and on any
prepayment (on the amount prepaid), at maturity (whether by
acceleration or otherwise) and, after maturity, on demand.
Interest on each Base Rate Loan shall be payable on each
Quarterly Date, commencing on the first of such days to occur
after such Loan is made, at maturity (whether by acceleration or
otherwise) and, after maturity, on demand.
(e) Notice by the Administrative Agent. The
Administrative Agent, upon determining the Eurodollar Rate for
any Interest Period, shall promptly notify by telecopy or
telephone (in the case of telephonic notices, confirmed by
telecopy or otherwise in writing) or in writing the Company and
the Applicable Lenders.
Section 2.7 Interest Periods. In connection with each
Borrowing of Eurodollar Loans, the Company shall elect an
Interest Period to be applicable to such Borrowing, which
Interest Period shall begin on and include, as the case may be,
the date selected by the Company pursuant to Section 2.2(a), the
conversion date or the date of expiration of the then current
Interest Period applicable thereto, and end on but exclude the
date which is either one, two, three or six months thereafter, as
selected by the Company, provided, that:
(a) Business Days. If any Interest Period would
otherwise expire on a day which is not a Business Day, such
Interest Period shall expire on the next succeeding Business Day,
provided, further, that if any Interest Period (other than in
respect of a Borrowing of Eurodollar Loans the Interest Period of
which is expiring pursuant to Section 2.15(b) hereof) would
otherwise expire on a day which is not a Business Day but is a
day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next
preceding Business Day;
(b) Month End. Any Interest Period which 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, subject to Section
2.7(c) below, end on the last Business Day of a calendar month;
(c) Payment Limitations. No Interest Period shall
extend beyond any date that any principal payment or prepayment
is scheduled to be due unless the aggregate principal amount of
Borrowings which are Borrowings of Base Rate Loans or which have
Interest Periods which will expire on or before such
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date, less the aggregate amount of any other principal payments
or prepayments due during such Interest Period, is equal to or in
excess of the amount of such principal payment or prepayment; and
(d) Maturity Dates. No Interest Period with regard to
Revolving Credit Loans shall extend beyond the Revolving Credit
Maturity Date, no Interest Period with regard to Tranche A Loans
shall extend beyond the Tranche A Term Loan Maturity Date and no
Interest Period with regard to Tranche B Term Loans shall extend
beyond the Tranche B Term Loan Maturity Date.
Section 2.8 Repayment of Loans.
(a) The Company hereby unconditionally and without
set-off, deduction or counterclaim promises to pay to the
Administrative Agent for the account of (1) each Revolving Credit
Lender, the then unpaid principal amount of each Revolving Credit
Loan of such Lender on the Revolving Credit Maturity Date; (2)
each Tranche A Term Loan Lender, the amounts specified in
Sections 2.5(b) and 2.10(b), respectively, on the dates specified
in Sections 2.5(b) and 2.10(b), respectively (or such earlier
date on which the Tranche A Term Loans become due and payable
pursuant to Article 7); and (3) each Tranche B Term Loan Lender,
the amounts specified in Sections 2.5(c) and 2.10(b),
respectively, on the dates specified in Sections 2.5(c) and
2.10(b), respectively (or such earlier date on which the Tranche
B Term Loans become due and payable pursuant to Article 7). The
Company hereby further agrees to pay, without set-off, deduction
or counterclaim, 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 2.6.
(b) Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of
the Company to such Lender resulting from each Loan of such
Lender from time to time, including, without limitation, the
amounts of principal and interest payable and paid to such Lender
from time to time under this Agreement.
(c) The Administrative Agent shall maintain the
Register pursuant to Section 9.7(d), and a subaccount therein for
each Lender, in which shall be recorded (1) the amount of each
Loan made hereunder, the Type thereof and each Interest Period,
if any, applicable thereto, (2) the amount of any principal or
interest due and payable or to become due and payable from the
Company to each Lender hereunder, and (3) both the amount of any
sum received by the Administrative Agent hereunder from the
Company and each Lender's Applicable Percentage thereof.
(d) The entries made in the Register and the accounts
of each Lender maintained pursuant to Section 2.8(b) shall, to
the extent permitted by applicable law, be prima facie evidence
of the existence and amounts of the obligations of the Company
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 Company to repay (with applicable
interest) the Loans made to the Company by such Lender in
accordance with the terms of this Agreement.
Section 2.9 Termination or Reduction of Commitments.
(a) Voluntary Termination or Reduction of Revolving
Credit Commitments. The Company may, upon at least three Business
Days' notice to the Administrative Agent, terminate entirely at
any time, or partially reduce from time to time by an aggregate
amount of $5,000,000 or any larger multiple of $1,000,000, the
unused portions of the Revolving Credit Commitments, provided,
that any such reduction
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<PAGE>
shall apply proportionately to the Revolving Credit Commitment of
each Revolving Credit Lender. If the Revolving Credit Commitments
are terminated in their entirety, all accrued commitment fees
with respect thereto shall be payable on the effective date of
such termination.
(b) Mandatory Termination of Revolving Credit
Commitments. At any time the Company becomes obligated to prepay
all or part of the Senior Subordinated Notes, the Revolving
Credit Commitments shall, prior to any prepayment of the Senior
Subordinated Notes, automatically and without notice, terminate,
and the Company shall, prior to any prepayment of the Senior
Subordinated Notes, make any mandatory prepayments required
pursuant to Section 2.10(a).
(c) Term Loan Commitments. Any or all of the Term Loan
Commitments remaining unused shall automatically terminate at
5:00 p.m. (Houston time) on the Closing Date.
Section 2.10 Prepayments.
(a) Mandatory Revolving Credit Prepayments. If at any
time the Aggregate Revolving Credit Exposure is in excess of the
Maximum Available Amount, the Company shall immediately pay to
the Administrative Agent, for the account of the Revolving Credit
Lenders, the amount of such excess to be applied (1) as a
prepayment of the Revolving Credit Loans and Reimbursement
Obligations outstanding and (2) after payment in full of the
Revolving Credit Loans and Reimbursement Obligations outstanding,
as Cover for the Letter of Credit Liabilities in an amount of
such remaining excess. Any such prepayment or Cover shall be
payable or provided in full on the date on which the reduction or
termination of the Commitments pursuant to Section 2.9 becomes
effective.
(b) Mandatory Term Loan Prepayments.
(1) On or before each April 15th, commencing on
April 15, 1999, the Company shall deliver to the
Administrative Agent the Company's calculation of its
Consolidated Excess Cash Flow for the Fiscal Year ended on
the previous December 31st. On the third day after delivery
of the notice provided above, but in no event later than
April 18th, the Company shall prepay (by payment to the
Administrative Agent for distribution to the Term Loan
Lenders as provided below) an aggregate principal amount of
Term Loans equal to 50% of Consolidated Excess Cash Flow
for any Fiscal Year (or other applicable period as provided
above) less the amount of any voluntary prepayments of Term
Loans made by the Company as permitted in Section 2.10(c)
during such Fiscal Year (or other applicable period)
(provided, that other Indebtedness of the Company and its
Subsidiaries has not been used to effect such repayment of
Term Loans).
(2) At any time the Company elects to defease the
Senior Subordinated Notes pursuant to Article VIII of the
Senior Subordinated Notes Indenture or becomes obligated to
prepay all or part of the Senior Subordinated Notes, the
Company shall, prior to any such defeasment or prepayment
of the Senior Subordinated Notes, prepay the Term Loans in
full.
(3) At any time the Company or any Subsidiary
Guarantor shall receive Net Proceeds from a Recovery Event
or Asset Sale then, unless a Reinvestment Notice shall be
delivered in respect thereof, 100% of such Net Proceeds
shall be applied on such date toward the prepayment of Term
Loans, provided, that notwithstanding the foregoing, on
each Reinvestment Prepayment Date, an amount equal to the
Reinvestment Prepayment Amount with respect to the relevant
Recovery Event or Asset Sale shall be applied toward the
prepayment of Term Loans.
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(4) At any time the Company shall receive Net
Proceeds from an HQ Sale/Leaseback, 100% of such Net
Proceeds shall be applied on such date toward the
prepayment of Term Loans.
(5) At any time PM Holdings shall receive Net
Proceeds from any issuance or sale of debt securities or
instruments, 100% of such Net Proceeds shall be applied on
such date toward the prepayment of the Term Loans.
(6) At any time (i) PM Holdings, the Company or
any Subsidiary Guarantor shall receive Net Proceeds from
any issuance or sale of Equity securities to a Person other
than Koch Industries or a wholly-owned Subsidiary of Koch
Industries, or (ii) any Unrestricted Subsidiary shall
receive Net Proceeds from any issuance or sale of Equity
securities pursuant to a 144A or public offering, 50% of
such Net Proceeds shall be applied on such date toward the
prepayment of Term Loans.
(7) Prepayments of the Term Loans pursuant to
this Section 2.10(b) shall be applied to the Tranche A Term
Loans and the Tranche B Term Loans (i) pro rata based on
outstanding principal amount thereof at the time of such
prepayment and (ii) pro rata to the respective installments
of principal thereof. Notwithstanding the foregoing, in
respect of any partial prepayment of Term Loans (until such
time as the Tranche A Term Loans have been repaid in full)
pursuant to this Section 2.10(b), any Tranche B Term Loan
Lender may, at its option, irrevocably decline receipt of
its Tranche B Term Loan share of any such prepayment, and,
if such Lender so declines, such share shall be applied as
an additional prepayment of the Tranche A Term Loans and
the other Tranche B Term Loans in accordance with the
immediately preceding sentence, as further adjusted
pursuant to the balance of this Section 2.10(b). In the
case of any prepayment pursuant to clauses (1,) (2), (3),
(4), (5) or (6), the Company shall provide to the
Administrative Agent written notice of such prepayment at
least five Business Days prior to the date such prepayment
is to be made. Any Tranche B Term Loan Lender may notify
the Administrative Agent and the Company of its election to
decline its Tranche B Term Loan share of all such
prepayments, in which event such notice shall be effective
until such Lender notifies the Administrative Agent and the
Company to the contrary. Any Tranche B Term Loan Lender
that wishes to decline receipt of its share of any given
prepayment pursuant to this Section 2.10(b), shall
promptly, and in any event no later than 10:00 a.m.
(Houston, Texas time) on the date following its receipt of
the notice of such prepayment, notify the Company and the
Administrative Agent of such election. Any Tranche B Term
Loan Lender that has not provided notice pursuant to one of
the two preceding sentences prior to such 10:00 a.m.
deadline shall be deemed to have elected to accept such
prepayment. The Administrative Agent shall promptly
provide, to all such accepting Tranche B Term Loan Lenders,
notice of the principal amount of the Tranche B Term Loans
that such Lenders have elected to decline. Any such
accepting Lender may, at its option, irrevocably decline
receipt of its share of any such declined shares of such
prepayment (and shall indicate in such notice whether it
elects to accept or decline receipt of its share of such
prepayment declined by other Lenders pursuant to this
sentence), and, if such Lender so declines, such share
shall be applied as an additional prepayment of the Tranche
A Term Loans and the other Tranche B Term Loans in
accordance with this Section 2.10(b). Any Tranche B Term
Loan Lender that wishes to decline receipt of its share of
such declined shares, shall promptly, and in any event no
later than 10:00 a.m. (Houston, Texas time) on the date
following receipt of the notice from the Administrative
Agent regarding such declined shares, notify the Company
and the Administrative Agent of such election. Any such
accepting Lender that has not
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provided such notice prior to such 10:00 a.m. deadline
shall be deemed to have elected to accept the full amount
of its share of such prepayment.
(c) Voluntary Prepayments. The Company may, at its
option, at any time and from time to time, prepay the Loans and
the Reimbursement Obligations, in whole or in part, upon giving,
in the case of any Revolving Credit Loan that is a Eurodollar
Loan, or any Term Loan, three Business Days' prior written notice
to the Administrative Agent, and, in the case of any Revolving
Credit Loan that is a Base Rate Loan, prior written notice on the
same Business Day to the Administrative Agent. Such notice shall
specify (1) in the case of any prepayment of Loans, the date and
amount of prepayment and whether the prepayment is (A) of Term
Loans or Revolving Credit Loans, or a combination thereof and (B)
of Eurodollar Loans, Base Rate Loans or a combination thereof,
and, in each case if a combination thereof, the principal amount
allocable to each; and (2) in the case of any prepayment of
Reimbursement Obligations, the date and amount of prepayment, the
identity of the applicable Letter of Credit or Letters of Credit
and the amount allocable to each of such Reimbursement
Obligations. Upon receipt of such notice, the Administrative
Agent shall promptly notify each Applicable Lender of the
contents thereof and of such Lender's Applicable Percentage of
such prepayment. If any such notice is given, the amount
specified in such notice shall be due and payable on the date
specified therein, together with (if a Eurodollar Loan is prepaid
other than at the end of the Interest Period applicable thereto)
any amounts payable pursuant to Section 2.18 and, in the case of
prepayments of the Term Loans only, accrued interest to such date
on the amount prepaid. Prepayments of (i) the Term Loans pursuant
to this Section 2.10(c) shall be applied, first, to the Tranche A
Term Loans and the Tranche B Term Loans (A) pro rata based on
outstanding principal amount thereof at the time of such
prepayment and (B) pro rata to the respective installments of
principal thereof, and (ii) the Revolving Credit Loans and the
Reimbursement Obligations pursuant this Section shall be applied,
first, to payment of the Revolving Credit Loans then outstanding,
second, to payment of any Reimbursement Obligations then
outstanding and, last, to Cover any outstanding Letter of Credit
Liability. Notwithstanding the foregoing, in respect of any
partial prepayment of Term Loans (until such time as the Tranche
A Term Loans have been repaid in full) pursuant to this Section
2.10(c), any Tranche B Term Loan Lender may, at its option,
irrevocably decline receipt of its Tranche B Term Loan share of
any such prepayment, and, if such Lender so declines, such share
shall be applied as an additional prepayment of the Tranche A
Term Loans and the other Tranche B Term Loans in accordance with
the immediately preceding sentence, as further adjusted pursuant
to balance of this Section 2.10(c). Any Tranche B Term Loan
Lender may notify the Administrative Agent and the Company of its
election to decline its Tranche B Term Loan share of all such
prepayments, in which event such notice shall be effective until
such Lender notifies the Administrative Agent and the Company to
the contrary. Any Tranche B Term Loan Lender that wishes to
decline receipt of its share of any given prepayment pursuant to
this Section 2.10(c), shall promptly, and in any event no later
than 10:00 a.m. (Houston, Texas time) on the date following
receipt of its notice of such prepayment, notify the Company and
the Administrative Agent of such election. Any Tranche B Term
Loan Lender that has not provided notice pursuant to one of the
two preceding sentences prior to such 10:00 a.m. deadline shall
be deemed to have elected to accept such prepayment. The
Administrative Agent shall promptly provide, to all such
accepting Tranche B Term Loan Lenders, notice of the principal
amount of the Tranche B Term Loans that such Lenders have elected
to decline. Any such accepting Lender may, at its option,
irrevocably decline receipt of its share of any such declined
shares of such prepayment (and shall indicate in such notice
whether it elects to accept or decline receipt of its share of
such prepayment declined by such other Lenders pursuant to this
sentence), and, if such Lender so declines, such share shall be
applied as an additional prepayment of the Tranche A Term Loans
and the other Tranche B Term Loans in accordance with this
Section 2.10(c). Any Tranche B Term Loan Lender that wishes to
decline receipt of its share of the reallocation of such declined
shares, shall promptly, and in any event no later than 10:00 a.m.
(Houston, Texas time) on the date following receipt of the notice
from the Administrative Agent regarding such
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declined shares, notify the Company and the Administrative Agent
of such election. Any such accepting Lender that has not provided
such notice prior to such 10:00 a.m. deadline shall be deemed to
have elected to accept the full amount of its share of such
prepayment. Each prepayment of Base Rate Loans shall be in the
minimum principal amount of $1,000,000 and in integral multiples
of $100,000 and each prepayment of Eurodollar Loans shall be in
the minimum principal amount of $3,000,000 and in integral
multiples of $100,000 or, in the case of either Base Rate Loans
or Eurodollar Loans, the aggregate principal balance outstanding
on the Term Loans or on the Revolving Credit Loans and the
Reimbursement Obligations, as applicable.
(d) Notice by Administrative Agent. Upon receipt of a
notice of prepayment pursuant to this Section, the Administrative
Agent shall promptly notify each Applicable Lender of the
contents thereof and of such Lender's ratable share of such
prepayment.
Section 2.11 Continuation and Conversion Options.
(a) Continuation. The Company may elect to continue
all or any part of any Borrowing of Eurodollar Loans beyond the
expiration of the then current Interest Period relating thereto
by giving Advance Notice (which shall be irrevocable) to the
Administrative Agent of such election, specifying the Eurodollar
Loans or portion thereof to be continued and the Interest Period
therefor. In the absence of such a timely and proper election
with regard to Eurodollar Loans, the Company shall be deemed to
have elected to convert such Eurodollar Loans to Base Rate Loans
pursuant to Subsection 2.11(d).
(b) Amount of Continuations. All or part of any
Eurodollar Loans may be continued as provided herein, provided,
that any continuation of such Loans shall not be (as to each
Borrowing of such Loans as continued for an applicable Interest
Period) less than $3,000,000 and shall be in an integral multiple
of $100,000.
(c) Continuation or Conversion Upon Default. If no
Default shall have occurred and be continuing, each Eurodollar
Loan may be continued or converted as provided in this Section.
If a Default shall have occurred and be continuing, the Company
shall not have the option to elect to continue any such
Eurodollar Loan pursuant to Subsection 2.11(a) or to convert Base
Rate Loans to Eurodollar Loans pursuant to Subsection 2.11(e).
(d) Conversion to Base Rate. The Company may elect to
convert any Eurodollar Loan on the last day of the then current
Interest Period relating thereto to a Base Rate Loan by giving
Advance Notice to the Administrative Agent of such election.
(e) Conversion to Eurodollar Rate. The Company may
elect to convert any Base Rate Loan at any time or from time to
time to a Eurodollar Loan by giving Advance Notice (which shall
be irrevocable) to the Administrative Agent of such election,
specifying each Interest Period therefor.
(f) Amounts of Conversions. All or any part of the
outstanding Loans may be converted as provided herein, provided,
that any conversion of such Loans shall not result in a Borrowing
of Eurodollar Loans in an amount less than $1,000,000 and in
integral multiples of $100,000.
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Section 2.12 Fees.
(a) Revolving Credit Commitments. The Company shall
pay to the Administrative Agent for the account of and
distribution to each Revolving Credit Lender in accordance with
its Revolving Credit Percentage a commitment fee for the period
commencing on the Closing Date, to and including the Revolving
Credit Maturity Date (or such earlier date as the Revolving
Credit Commitments shall have been terminated entirely) computed
at the rate per annum equal to the Applicable Commitment Fee
Percentage on the average daily excess amount of the Revolving
Credit Commitments over the Revolving Credit Exposure. The
commitment fees on the Revolving Credit Commitments shall be
payable in arrears on each Quarterly Date, commencing on the
first Quarterly Date to occur after the Closing Date and on the
Revolving Credit Maturity Date.
(b) Letters of Credit.
(1) As consideration for acting as the Issuing
Bank with respect to any Letter of Credit, the Company will
pay to the applicable Issuing Bank a fee to be agreed upon
between the Company and the applicable Issuing Bank not to
exceed .25% per annum on the daily average amount available
for drawing on the applicable Letter of Credit, payable in
arrears on each Quarterly Date. The Company shall also pay
to the Issuing Bank, with respect to any issuance,
amendment, transfer, or cancellation prior to expiration of
any Letter of Credit and for each drawing made thereunder,
documentary and processing charges in accordance with the
Issuing Bank's standard schedule for such charges in effect
at the time of, and payable at the time of, such issuance,
amendment, transfer, cancellation or drawing, as the case
may be. All fees payable pursuant to this clause (1) shall
be retained by the applicable Issuing Bank.
(2) The Company will pay to the Administrative
Agent for the account of and pro rata distribution to each
Revolving Credit Lender a fee on the daily average amount
available for drawings under each Letter of Credit, in each
case for the period from and including the date of issuance
of such Letter of Credit to and excluding the date of
expiration or termination thereof computed at a per annum
rate for each day equal to the Applicable Margin for
Revolving Credit Loans that are Eurodollar Loans in effect
on such day, payable in arrears on each Quarterly Date.
(c) Administrative Agent Fees. The Company shall pay
to the Administrative Agent such fees as are set forth in the Fee
Letter as the same has been or may be hereafter amended or
supplemented, on the dates and in the manner specified therein.
Section 2.13 Payments, etc.
(a) Without Setoff, etc. Except as otherwise
specifically provided herein, all payments under this Agreement
shall be made to the Administrative Agent on behalf of the
Applicable Lenders without defense, set-off or counterclaim to
the Administrative Agent not later than 11:00 a.m. Houston time
on the date when due and shall be made in Dollars in immediately
available funds at the Payment Office. The Administrative Agent
will promptly thereafter distribute funds in the form received
relating to the payment of principal or interest or commitment
fees ratably to the Applicable Lenders for the account of their
respective Lending Offices, and funds in the form received
relating to the payment of any other amount payable to any Lender
to such Lender for the account of its Lending Office.
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(b) Non-Business Days. Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (except as otherwise
provided in Section 2.7 hereof) and, with respect to payments of
principal, interest thereon shall be payable at the applicable
rate during such extension.
(c) Computations. All computations of interest shall
be made on the basis of a year of 360 days (unless such
calculation would result in a usurious rate, in which case
interest shall be calculated on the basis of a year of 365 or 366
days, as the case may be) in the case of Eurodollar Loans or Base
Rate Loans that are based upon the Federal Funds Effective Rate
or the Base CD Rate, and 365 or 366 days (as the case may be) in
the case of Base Rate Loans that are based upon the Prime Rate,
and all computations of fees shall be made on the basis of a year
of 360 days (unless such calculation would result in a usurious
rate, in which case interest shall be calculated on the basis of
a year of 365 or 366 days, as the case may be), in each case for
the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest or
fees are payable. Each determination by the Administrative Agent
of an interest rate or fee hereunder shall, except for manifest
error, be final, conclusive and binding for all purposes,
provided, that such determination shall be made in good faith in
a manner generally consistent with the Administrative Agent's
standard practice. If the Administrative Agent and the Company
determine that manifest error exists, said parties shall correct
such error by way of an adjustment to the payment due on the next
Quarterly Date.
Section 2.14 Interest Rate Not Ascertainable, etc. In the
event that the Administrative Agent shall have determined (which
determination shall be reasonably exercised and shall, absent
manifest error, be final, conclusive and binding upon all
parties) that on any date for determining the Eurodollar Rate for
any Interest Period, by reason of any changes arising after the
date of this Agreement affecting the interbank Eurodollar market,
or any Lender's position in such market, adequate and fair means
do not exist for ascertaining the applicable interest rate on the
basis provided for in the definition of Eurodollar Rate, then,
and in any such event, the Administrative Agent shall forthwith
give notice (by telephone confirmed in writing) to the Company
and to the Lenders of such determination. Until the
Administrative Agent notifies the Company that the circumstances
giving rise to the suspension described herein no longer exist,
the obligations of the Lenders to make Eurodollar Loans shall be
immediately suspended; any Borrowing of Eurodollar Loans that is
requested (by continuation, conversion or otherwise) shall
instead be made as a Borrowing of Base Rate Loans, and any
outstanding Eurodollar Loan shall be converted, on the last day
of the then current Interest Period applicable thereto, to a Base
Rate Loan.
Section 2.15 Illegality.
(a) Determinations of Illegality. In the event that
any Lender shall have determined (which determination shall be
reasonably exercised and shall, absent manifest error, be final,
conclusive and binding upon all parties) at any time that the
making or continuance of any Eurodollar Loan has become unlawful
as a result of compliance by such Lender in good faith with any
applicable law, governmental rule, regulation, guideline or order
(whether or not having the force of law and whether or not
failure to comply therewith would be unlawful), then, in any such
event, the Lender shall give prompt notice (by telephone
confirmed in writing) to the Company and to the Administrative
Agent of such determination (which notice the Administrative
Agent shall promptly transmit to the other Lenders).
(b) Eurodollar Loans Suspended. Upon the giving of the
notice to the Company referred to in Subsection (a) above, (1)
the Company's right to request (by continuation, conversion or
otherwise) and such Lender's obligation to make Eurodollar Loans
shall be immediately suspended, and thereafter, any
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requested Borrowing of Eurodollar Loans shall, as to such Lender
only, be deemed to be a request for a Base Rate Loan, and (2) if
the affected Eurodollar Loan or Loans are then outstanding, the
Company shall immediately, or if permitted by applicable law, no
later than the date permitted thereby, upon at least one Business
Day's written notice to the Administrative Agent and the affected
Lender, convert each such Eurodollar Loan into a Base Rate Loan,
provided, that if more than one Lender is affected at any time,
then all affected Lenders must be treated the same pursuant to
this Subsection.
Section 2.16 Increased Costs.
(a) Eurodollar Regulations, etc. If, by reason of (x)
after the date hereof, the introduction of or any change
(including, but not limited to, any change by way of imposition
or increase of reserve requirements) in or in the interpretation
of any law or regulation, or (y) the compliance with any
guideline or request issued by any central bank or other
Governmental Authority exercising control over banks or financial
institutions generally (whether or not having the force of law):
(1) any Lender (or its applicable Lending Office)
shall be subject to any tax, duty or other charge with
respect to its Eurodollar Loans or its obligation to make
Eurodollar Loans, or shall change the basis of taxation of
payments to any Lender of the principal of or interest on
its Eurodollar Loans or its obligation to make Eurodollar
Loans (except for changes in the rate of tax on the overall
net income or gross receipts of such Lender or its
applicable Lending Office imposed by the jurisdiction in
which such Lender's principal executive office or
applicable Lending Office is located); or
(2) any reserve (including, but not limited to,
any imposed by the Board of Governors of the Federal
Reserve System, but excluding any such reserve requirement
that is reflected in the Eurodollar Rate), special deposit
or similar requirement against assets of, deposits with or
for the account of, or credit extended by, any Lender or
its applicable Lending Office shall be imposed or deemed
applicable or any other condition affecting its Eurodollar
Loans or its obligations to make Eurodollar Loans shall be
imposed on any Lender or its applicable Lending Office or
the interbank Eurodollar market or the secondary
certificate of deposit market;
and as a result thereof there shall be any increase in the cost
to such Lender of agreeing to make or making, funding or
maintaining Eurodollar Loans (except to the extent already
included in the determination of the applicable Eurodollar Rate)
or there shall be a reduction in the amount received or
receivable by such Lender or its applicable Lending Office, then
the Company shall from time to time, upon written notice from and
demand by such Lender (with a copy of such notice and demand to
the Administrative Agent), pay to such Lender on demand,
additional amounts determined by such Lender in a reasonable
manner to be sufficient to indemnify such Lender against such
increased cost. A certificate as to the amount of such increased
cost and the calculation thereof, submitted to the Company and
the Administrative Agent by such Lender, shall, except for
manifest error, be final, conclusive and binding for all
purposes.
(b) Costs. If any Lender shall advise the
Administrative Agent that at any time, because of the
circumstances described in clauses (x) or (y) in Subsection
2.16(a) or any other circumstances affecting such Lender or the
interbank Eurodollar market or such Lender's position in such
market, the Eurodollar Rate, as determined in good faith by the
Administrative Agent, will not adequately and fairly reflect the
cost to such Lender of funding its Eurodollar Loans, then, and in
any such event:
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(1) the Administrative Agent shall forthwith give
notice (by telephone confirmed in writing) to the Company
and to the Lenders of such advice;
(2) the Company's right to request a Borrowing of
Eurodollar Loans from such Lender and such Lender's
obligation to make Eurodollar Loans shall be immediately
suspended, any such Borrowing of Eurodollar Loans that is
requested (by continuation, conversion or otherwise)
shall, as to such Lender only, be deemed to be a request
for a Base Rate Loan, and any such outstanding Eurodollar
Loan from such Lender shall be converted, on the last day
of the then current Interest Period applicable thereto, to
a Base Rate Loan.
(c) Capital Adequacy. If, by reason of (1) after the
date hereof, the introduction of or any change (including, but
not limited to, any change by way of imposition or increase of
reserve requirements) in or in the interpretation of any law or
regulation, or (2) the compliance with any guideline or request
issued by any central bank or other Governmental Authority
exercising control over banks or financial institutions generally
(whether or not having the force of law), affects or would affect
the amount of capital required to be maintained by any Lender or
any corporation controlling such Lender, and the amount of such
capital is increased by or based upon the existence of such
Lender's Loans or such Lender's Commitment to lend hereunder and
other commitments of this type or of the Letters of Credit (or
similar contingent obligations), then, upon request therefor by
such Lender (with a copy of such request to the Administrative
Agent), the Company shall pay to such Lender, from time to time
as specified by such Lender, additional amounts sufficient to
compensate such Lender for the increased cost of such additional
capital in light of such circumstances, to the extent that such
Lender reasonably determines such increase in capital to be
allocable to the existence of such Lender's Loans or such
Lender's Commitment to lend hereunder or to the issuance or
maintenance of the Letters of Credit. A certificate as to such
amounts and the calculation thereof, submitted to the Company and
the Administrative Agent by such Lender, shall be conclusive and
binding for all purposes, absent manifest error.
(d) Issuing Bank. The rights and benefits of the
Lenders under this Section 2.16 shall also apply to any Issuing
Bank in its capacity as such.
Section 2.17 Change of Lending Office. Each Lender agrees
that it will use reasonable efforts to designate an alternate
Lending Office with respect to any of its Eurodollar Loans
affected by the matters or circumstances described in Sections
2.14, 2.15 or 2.16 to reduce the liability of the Company or
avoid the results provided thereunder, so long as such
designation is not disadvantageous to such Lender as determined
by such Lender in its discretion, provided, that such Lender
shall have no obligation to so designate an alternate Lending
Office located in the United States.
Section 2.18 Funding Losses. The Company shall compensate
each Lender, upon its written request (which request shall set
forth the basis for requesting such amounts and shall, absent
manifest error, be final, conclusive and binding upon all of the
parties hereto), for all losses, expenses and liabilities
(including, but not limited to, any interest paid by such Lender
to lenders of funds borrowed by it to make or carry its
Eurodollar Loans to the extent not recovered by the Lender in
connection with the re-employment of such funds and excluding
loss of anticipated profits), which the Lender may sustain: (a)
if for any reason (other than a default by such Lender) a
Borrowing of Eurodollar Loans does not occur on the date
specified therefor in a Borrowing Request (whether or not
withdrawn), including, but not limited to a failure by the
Company to fulfill on the date of any Borrowing of Eurodollar
Loans the conditions set forth in Article 3, or to convert or
continue any Eurodollar Loan hereunder after irrevocable notice
of such conversion or continuation has been given pursuant to
Section 2.11(b), (b) if any payment, prepayment or conversion of
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any of its Eurodollar Loans required or permitted by any other
provision of this Agreement or otherwise, or any assignment of a
Eurodollar Loan pursuant to Section 2.22, in each case is made or
deemed made on a date which is not the last day of the Interest
Period applicable thereto, or (c) if, for any reason, the Company
defaults in its obligation to repay its Eurodollar Loans or
interest accrued thereon as and when due and payable (at the due
date thereof, whether at scheduled maturity, by acceleration,
irrevocable notice of prepayment or otherwise).
Section 2.19 Sharing of Payments, etc. If any Lender shall
obtain any payment or reduction (including, but not limited to,
any amounts received as adequate protection of a deposit treated
as cash collateral under the Bankruptcy Code) of any obligation
of the Company hereunder (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) in excess of
its ratable share (determined in accordance with the applicable
provisions hereof) of payments or reductions on account of such
obligations obtained by all the Lenders, such Lender shall
forthwith (a) notify each of the other Lenders and the
Administrative Agent of such receipt, and (b) purchase from the
other Lenders such participations in the affected obligations as
shall be necessary to cause such purchasing Lender to share the
excess payment or reduction, net of costs incurred in connection
therewith, ratably with each of them, provided, that if all or
any portion of such excess payment or reduction is thereafter
recovered from such purchasing Lender or additional costs are
incurred, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery or such additional costs,
but without interest. The Company agrees that any Lender so
purchasing a participation from another Lender pursuant to this
Section may, to the fullest extent permitted by law, exercise all
its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the
direct creditor of the Company in the amount of such
participation.
Section 2.20 Taxes.
(a) Payments Free and Clear. Any and all payments by
or on account of any obligation of the Company hereunder shall be
made free and clear of and without deduction for any Indemnified
Taxes or Other Taxes, provided, that if the Company shall be
required to deduct any Indemnified Taxes or Other Taxes from such
payments, then (1) the sum payable shall be increased as
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this
Section) the Administrative Agent, Lender or Issuing Bank (as the
case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (2) the Company shall
make such deductions, and (3) the Company shall pay the full
amount deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) Other Taxes. In addition, the Company shall pay
any Other Taxes to the relevant Governmental Authority in
accordance with applicable law.
(c) Indemnification. The Company shall indemnify the
Administrative Agent, each Lender and each Issuing Bank, upon
written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by the Administrative Agent, such
Lender or such Issuing Bank, as the case may be, on or with
respect to any payment by or on account of any obligation of the
Company hereunder (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under
this Section) and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability
delivered to the Company by a Lender or an Issuing Bank, or by
the Administrative Agent on its own behalf or on behalf of a
Lender or an Issuing Bank, shall be conclusive absent manifest
error.
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(d) Receipts. As soon as practicable after any payment
of Indemnified Taxes or Other Taxes by the Company to a
Governmental Authority, the Company shall deliver to the
Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other
evidence of such payment reasonably satisfactory to the
Administrative Agent.
(e) Survival. Without prejudice to the survival of any
other agreement contained herein, the agreements and obligations
contained in this Section 2.20 shall survive the payment in full
of principal and interest hereunder.
(f) Lender Representations and Agreements. As of the
date on which any Lender becomes a party hereto, such Lender
represents that it is either (1) a corporation organized under
the laws of the United States of America or any state thereof,
(2) entitled to complete exemption from United States withholding
tax imposed on or with respect to any payments, including fees,
to be made to it pursuant to this Agreement, or (3) entitled to
complete exemption from United States withholding tax on interest
imposed on or with respect to any payments of interest to be made
pursuant to this Agreement (A) under an applicable provision of a
tax convention to which the United States of America is a party,
(B) because it is acting through a branch, agency or office in
the United States of America and any payment to be received by it
hereunder is effectively connected with a trade or business in
the United States of America, or (C) because it is a recipient of
portfolio interest within the meaning of Section 871(h) or 881(c)
of the Code. Each Lender that is not a corporation organized
under the laws of the United States of America or any state
thereof shall:
(x) provide to the Company and the Administrative
Agent on or before the date of any payment by the
Company hereunder, or on the date of its delivery of
the Assignment and Acceptance pursuant to which it
becomes a Lender, and at such other times as required
by United States law or as the Company or the
Administrative Agent shall reasonably request, two
accurate and complete original signed copies of either
(A) Internal Revenue Service Form 4224 (or successor
form) certifying that all payments to be made to it
hereunder will be effectively connected to a United
States trade or business (the "Form 4224
Certification"), or (B) Internal Revenue Service Form
1001 (or successor form) certifying that it is
entitled to the benefit of a provision of a tax
convention to which the United States of America is a
party which completely exempts from United States
withholding tax all payments to be made to it
hereunder (the "Form 1001 Certification"). In
addition, each Lender agrees that if it previously
filed a Form 4224 Certification it will deliver to the
Company and the Administrative Agent a new Form 4224
Certification prior to the first payment date
occurring in each of its subsequent taxable years (or
such other date as may be required in compliance with
applicable law); and if it previously filed a Form
1001 Certification, it will deliver to the Company and
the Administrative Agent a new certification prior to
the first payment date falling in the third year
following the previous filing of such certification
(or such other date as may be required in compliance
with applicable law); or
(y) in the case of any such Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of
the Code, (i) furnish to the Company on or before the
date of any payment by the Company, with a copy to the
Administrative Agent, (A) a certificate substantially
in the form of Exhibit I (any such certificate a "U.S.
Tax Compliance Certificate") and (B) two accurate and
complete original signed copies of Internal Revenue
Service Form W-8, or successor applicable form
certifying to such Lender's legal
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entitlement at the date of such certificate to an
exemption from U.S. withholding tax under the
provisions of Section 881(c) of the Code with respect
to payments of interest to be made under this
Agreement, any Notes or other Financing Documents (and
to deliver to the Company and the Administrative Agent
two further copies of such form on or before the date
it expires or becomes obsolete and after the
occurrence of any event requiring a change in the most
recently provided form and, if necessary, obtain any
extensions of time reasonably requested by the Company
or the Administrative Agent for filing and completing
such forms) and (ii) agree, to the extent legally
entitled to do so, upon reasonable request by the
Company, to provide to the Company (for the benefit of
the Company and the Administrative Agent) such other
forms as may be reasonably required in order to
establish the legal entitlement of such Lender to an
exemption from withholding with respect to payments of
interest under this Agreement, any Notes or other
Financing Documents, provided that in determining the
reasonableness of a request under this clause (ii)
such Lender shall be entitled to consider the cost (to
the extent unreimbursed by the Company) which would be
imposed on such Lender of complying with such request.
Each Lender also agrees to deliver to the Company and the
Administrative Agent such other or supplemental forms as
may at any time be required as a result of changes in
applicable law or regulation in order to confirm or
maintain in effect its entitlement to exemption from United
States withholding tax on any payments hereunder, provided
that the circumstances of the Lender at the relevant time
and applicable laws permit it to do so. Except as provided
immediately below, if a Lender is organized under the laws
of a jurisdiction outside the United States of America,
unless the Company and the Administrative Agent have
received a Form 1001 Certification, Form 4224
Certification, or an Internal Revenue Service Form W-8 and
a U.S. Tax Compliance Certificate, as applicable,
satisfactory to them indicating that all payments, or in
the case of a Lender providing such forms as are required
under Section 2.20(f)(y) hereof, all payments of interest,
to be made to such Lender hereunder are not subject to
United States withholding tax, the Company shall be
entitled to withhold taxes from such payments at the
applicable statutory rate, provided that such withholding
shall not increase the amount of payments for the account
of such Lender to be made by the Company pursuant to
Subsection 2.20(a). If a Lender determines, as a result of
any change in either (i) applicable law, regulation or
treaty, or in any official application thereof or (ii) its
circumstances, that it is unable to submit any form or
certificate that it is obligated to submit pursuant to this
Section, or that it is required to withdraw or cancel any
such form or certificate previously submitted, it shall
promptly notify the Company and the Administrative Agent of
such fact and the Company shall be entitled to withhold
taxes from such payments at the applicable statutory rate,
it being understood that such withholding shall increase
the amount of payments for the account of such Lender to be
made by the Company pursuant to Section 2.20(a). Each
Lender agrees to indemnify and hold the Administrative
Agent harmless from any United States taxes, penalties,
interest and other expenses, costs and losses incurred or
payable by the Administrative Agent (i) as a result of such
Lender's failure to submit any form or certificate that it
is required to provide pursuant to this Section or (ii) as
a result of the Administrative Agent's reliance on any such
form or certificate which such Lender has provided to it
pursuant to this Section. Each Person that shall become a
Lender or a Participant pursuant to Section 9.7 shall, upon
the effectiveness of the related transfer, be required to
provide all of the forms, certifications and statements
required pursuant to this Section, provided that in the
case of a Participant the obligations of such Participant
were it a Lender except that such Participant shall furnish
all such required forms, certifications and statements to
the Lender from which the related participation shall have
been purchased.
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Section 2.21 Pro Rata Treatment. Subject to Section 2.4(b),
each Borrowing of Revolving Credit Loans shall be made, each
payment on account of any commitment fee in respect of the
Revolving Credit Commitments hereunder shall be allocated by the
Administrative Agent, and any reduction of the Revolving Credit
Commitments of the Lenders shall be allocated by the
Administrative Agent, pro rata according to the relevant
Revolving Credit Percentages of the Lenders. Subject to Section
2.4(b), each payment (including each prepayment) on account of
principal of and interest on any Revolving Credit Loans shall be
allocated by the Administrative Agent pro rata according to the
respective outstanding principal amounts of such Revolving Credit
Loans then held by the Revolving Credit Lenders. Except as
otherwise provided in Sections 2.10(b) and 2.10(c), each payment
on account of principal of and interest on any Term Loans shall
be allocated by the Administrative Agent pro rata according to
the respective outstanding principal amounts of such Term Loans
then held by the Term Loan Lenders. All proceeds (including
proceeds from the realization upon the Collateral) received after
acceleration of the maturity of the Loans, shall be applied first
to reimbursement of expenses and indemnities provided for in this
Agreement and the Financing Documents; second, to other Lender
Indebtedness (including, without limitation, Letter of Credit
Liabilities) until repaid in full pro rata to each Lender in
accordance with its Total Credit Percentage; and, third, to any
other Person entitled to receive such proceeds in accordance with
applicable law.
Section 2.22 Replacement of Lenders. If any Lender does not
make a Eurodollar Loan pursuant to Section 2.15, is subject to
increased costs pursuant to Section 2.16, fails to designate an
alternate Lending Office pursuant to Section 2.17, or is owed or
reasonably anticipates being owed additional amounts pursuant to
Section 2.20 and fails to take action required under Subsection
2.20(f) to avoid or reduce any such additional amounts, the
Company shall have the right, if no Default then exists, to
replace such Lender with another bank or financial institution
with the consent of the Administrative Agent, which consent shall
not be unreasonably withheld, provided, that (a) all obligations
of the Company owing to the Lender being replaced (including such
increased costs) that are not being assigned to the replacement
lender shall be paid in full to the Lender being replaced
concurrently with such replacement, (b) the replacement lender
shall execute an Assignment and Acceptance pursuant to which it
shall become a party hereto as provided in Section 9.7(c), and
(c) upon compliance with the provisions for assignment provided
in Section 9.7(c) and the payment of amounts referred to in
clause (a), the replacement lender shall constitute a "Lender"
hereunder and the Lender being so replaced shall no longer
constitute a "Lender" hereunder.
ARTICLE 3
CONDITIONS TO BORROWINGS
Section 3.1 Conditions Precedent to Initial Loan and Letter
of Credit. The obligation of each Applicable Lender to make a
Revolving Credit Loan, each Applicable Lender to maintain its
Term Loans or an Issuing Bank to issue a Letter of Credit
hereunder is subject to (x) the receipt by the Administrative
Agent of the following items and (y) the satisfaction (or waiver
by all of the Lenders) of the following conditions:
(a) Notes. A duly completed and executed Note for each
Lender requesting the same in each case dated as of the
Closing Date and made payable to the order of such Lender.
(b) Resolutions and Incumbency Certificates.
(1) certified copies of the resolutions of the
Boards of Directors (or consents of members or
partners, if applicable) of the Company, PM Holdings,
and any of the
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Company's Subsidiaries that are parties to any
Financing Document, dated, as to the Company,
as of the Closing Date, and as to PM Holdings and the
Company's Subsidiaries, as of the Closing Date, and
approving, as appropriate, the Loans, the Notes, this
Agreement and the other Financing Documents, and all
other documents, if any, to which the Company, PM
Holdings or such Subsidiary is a party and evidencing
corporate authorization (or other appropriate legal
authorization) with respect to such documents; and
(2) a certificate of the Secretary or an
Assistant Secretary of the Company, PM Holdings and
any of the Company's Subsidiaries that are parties to
any Financing Document dated as of the Closing Date,
and certifying (A) the name, title and true signature
of each officer of such Person authorized to execute
the Notes, this Agreement, Applications and the other
Financing Documents to which it is a party, (B) the
name, title and true signature of each officer of such
Person authorized to provide the certifications
required pursuant to this Agreement including, but not
limited to, certifications required pursuant to
Section 5.2 and Borrowing Requests, and (C) that
attached thereto are true and complete copies of the
certificates of incorporation and bylaws (or other
applicable organizational documents) of such Person,
as amended to date, and recent good standing and
existence certificates in each jurisdiction where such
Person has operations.
(c) Opinions of Counsel. The following opinions of
counsel, in each case addressed to the Administrative
Agent, the Issuing Banks and the Lenders and covering such
other matters as any Administrative Agent, any Issuing Bank
or the Lenders may reasonably request:
(1) August F. Ottinger, General Counsel of PM
Holdings and the Company dated as of the Closing Date
and substantially in the form of Exhibit E-1 hereto;
(2) Cleary, Gottlieb, Steen & Hamilton, special
New York counsel to PM Holdings, the Company and the
Subsidiary Guarantors dated as of the Closing Date,
substantially in the form of Exhibit E-2; and
(3) Local counsel to the Lenders dated as of the
Closing Date, substantially in the form of Exhibit E-3
and opining as to the laws of the States in which any
of the real Property listed on Schedule 4.25 is
located with such changes, exceptions and assumptions
as are acceptable to the Lenders.
(d) The Security Instruments and PM Holdings Guaranty.
(1) PM Holdings Guaranty dated as of the Closing
Date;
(2) Guarantee and Collateral Agreement dated as
of the Closing Date executed by the Company and each
Subsidiary Guarantor, (a) granting to the
Administrative Agent a first priority security
interest in all personal Property described therein
(including 100% of the Company's and each Subsidiary
Guarantor's directly owned Equity in each Subsidiary
Guarantor and, to the extent not prohibited by
applicable law or by such Person's organizational
documents, in any other Person), as security for the
Lender Indebtedness, and (b) guaranteeing the payment
and performance of the Lender Indebtedness by each
Subsidiary Guarantor;
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(3) PM Holdings Pledge Agreement dated as of the
Closing Date executed by PM Holdings granting to the
Administrative Agent a first priority security
interest in 100% of the Equity of the Company, as
security for the Lender Indebtedness;
(4) Deeds of Trust dated as of the Closing Date
covering the real property listed on Schedule 4.25;
(5) Financing Statements, as appropriate, to
perfect the security interests created by the
instruments delivered under clauses (2) through (4)
above;
(6) Stock certificates and corresponding stock
powers to perfect the Administrative Agent's security
in the stock pledged by the instruments delivered
under clauses (2) and (3) above;
(7) Original promissory notes necessary to
perfect the security interests created by the
Guarantee and Collateral Agreement duly endorsed in
favor of the Administrative Agent;
(8) All Property in which the Administrative
Agent shall, at such time, be entitled to have a Lien
pursuant to this Agreement or any other Financing
Document shall have been physically delivered to the
possession of the Administrative Agent to the extent
that such possession is necessary for the purpose of
perfecting the Administrative Agent's Lien in such
Collateral; and
(9) The Cash Collateral Agreement dated as of the
Closing Date.
(e) Insurance. A certificate of insurance coverage,
dated as of the Closing Date evidencing that the Company
and its Subsidiaries are carrying insurance in accordance
with Section 5.1(e) together with an irrevocable agreement
of Koch Industries providing that Koch Industries will
provide the Administrative Agent 30 days prior written
notice prior to the cancellation of any policies of
insurance required by Section 5.1(e). In addition, the
Administrative Agent shall have received evidence
satisfactory to the Lenders that none of the improved real
estate Collateral is situated in an area that has been
identified by the Director of the Federal Emergency
Management Agency (as to such Collateral located in the
United States of America) or any other Governmental
Authority as an area having special flood hazards. Should
it be determined, however, that any of the real estate
Collateral is situated in an area identified as having
special flood hazards, the Administrative Agent shall have
received a copy of the applicable flood insurance policies
(or policy applications), in form and substance
satisfactory to the Lenders, indicating that the maximum
limits of coverage have been obtained and that the full
premium therefor has been paid in full.
(f) Title Insurance; Surveys. Mortgagee's Policies of
Title Insurance, dated as of the Closing Date, in form and
substance satisfactory to the Lenders insuring the Liens on
the Company's real property granted pursuant to the Deeds
of Trust (current surveys covering such Properties or
surveyor's affidavits regarding prior surveys as required
by the Administrative Agent).
(g) Consummation of Merger. The Merger was consummated
in accordance with the terms of the Merger Agreement and
the Merger Agreement was not amended or modified other than
with express written consent of the Lenders, subject only
to the funding of the Loans. Proceeds of
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the new common equity in PM Holdings equal to at least
$109,500,000 have been received by PM Holdings and net
proceeds of the Senior Subordinated Notes of not less than
$340,000,000 were received by the Company on the terms and
conditions set forth in the Offering Circular related
thereto dated March 6, 1998. All material conditions
precedent to the Merger set forth in the Merger Agreement
were satisfied and were not amended, modified or waived
without the express written consent of the Lenders. All
representations and warranties made by KAC and Acquisition
Co. in the Merger Agreement shall be true and correct as of
the Closing Date in all material respects (and KAC and
Acquisition Co. certified in writing, to the Administrative
Agent, the Issuing Banks and the Lenders) and were not
amended, modified or waived without the express written
consent of the Lenders. All documents, instruments,
agreements, transfers, conveyances and bills of sale
necessary for the Merger were in form reasonably
satisfactory to the Lenders.
(h) Solvency Opinion. A solvency opinion by Valuation
Research Corporation, dated as of the Closing Date,
addressed to the Administrative Agent, the Issuing Banks
and the Lenders, stating that the Company is Solvent,
before and after giving effect to the Merger and the
incurrence of the Indebtedness under the Senior
Subordinated Notes and the Lender Indebtedness.
(i) Lien Searches. Lien searches reflecting no prior
Liens on the Collateral other than Liens set forth on
Schedule 6.3(a).
(j) Repayment of Indebtedness Under Existing Credit
Agreement and Release of Liens. Provision satisfactory to
the Lenders that all Indebtedness under the Existing Credit
Agreement shall have been paid in full and the commitments
described therein shall have been terminated and all Liens
securing the same have been released or documentation
providing for the release of all such Liens shall have been
duly executed by all necessary Persons and provision
satisfactory to the Lenders shall have been made for
delivery thereof to the Administrative Agent upon repayment
of the Indebtedness under the Existing Credit Agreement.
(k) Financial Statements and Projections. The
financial condition of the Company reflected in the
financial information and projections of the Company, PM
Holdings and that were delivered to the Lenders by the
Company under a cover letter dated February 11, 1998, have
not changed in such a way as to materially and adversely
affect the prospects of the Company or otherwise cause or
result in a Material Adverse Effect (after giving effect to
the Merger).
(l) Pro Forma Balance Sheet. The unaudited pro forma
consolidated balance sheet of the Company both immediately
before and after giving effect to the Merger and the
incurrence of Indebtedness under the Senior Subordinated
Notes and the Lender Indebtedness, which projected pro
forma consolidated balance sheet shall be (i) prepared on a
basis consistent with the Financial Statements, and (ii) in
form and substance reasonably satisfactory to the Lenders.
(m) Consent Letter. The Administrative Agent shall
have received a letter from CT Corporation System,
presently located at 1633 Broadway, New York, New York
10019, indicating its consent to its appointment by PM
Holdings, the Company and each of the Subsidiary Guarantors
as its agent to receive service of process as specified in
Section 9.8.
(n) Environmental. (i) Environmental Report dated
February 15, 1998, titled Purina Mills, Inc. Environmental
and Safety Report, prepared by Koch Operating Group and
Koch
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Industries, being an evaluation of the environmental
and safety conditions of the properties and operations of
the Company, and (ii) a reliance letter related thereto
executed by Koch Industries.
(o) Fees and Expenses. The Administrative Agent shall
have received for its own account, or for the account of
the Lenders, as the case may be, all fees, costs and
expenses due and payable pursuant to the Fee Letter and
Sections 2.12 and 9.4.
(p) Existing Senior Subordinated Notes. At least 98%
of the aggregate principal amount of the Existing Senior
Subordinated Notes outstanding as of the date of the tender
offer for such notes shall have been tendered and, upon
funding of the Term Loans hereunder and funding of the
Senior Subordinated Notes, all funds necessary to redeem
the tendered Existing Senior Subordinated Notes (and to pay
all accrued interest thereon) shall have been deposited
with the appropriate paying agent.
(q) Existing PM Holdings Discount Notes. All of the
Existing PM Holdings Discount Notes shall have been
tendered and, upon funding of the Senior Subordinated
Notes, all funds necessary to redeem the Existing PM
Holdings Discount Notes (and to pay all accrued interest
thereon) shall have been received by the Company.
(r) Tax Sharing Agreements. The Tax Sharing
Agreements dated as of the Closing Date.
(s) Documentation. The Administrative Agent shall have
received such other documents as the Administrative Agent
(or any Lender acting through the Administrative Agent) may
reasonably request, all in form and substance reasonably
satisfactory to the Lenders.
Section 3.2 Conditions Precedent to All Loans and Letters
of Credit. At the time of the making by each Lender of each Loan
and the issuance of each Issuing Bank of a Letter of Credit,
including the initial Loan and Letter of Credit but not including
continuations or conversions pursuant to Section 2.11 (before as
well as after giving effect to such Loan and to the proposed use
of the proceeds thereof):
(a) No Default. There shall exist no Default;
(b) Representations and Warranties. All
representations and warranties contained herein and in the
other Financing Documents executed and delivered on or
after the Closing Date shall be true and correct in all
material respects with the same effect as though such
representations and warranties had been made on and as of
the date of such Loan or Letter of Credit (unless such
representation and warranty is expressly limited to an
earlier date); and
(c) Maximum Available Amount. The Aggregate Revolving
Credit Exposure, after giving effect to such proposed Loan
or Letter of Credit, shall not exceed the Maximum Available
Amount then in effect.
Each Borrowing Request submitted by the Company, and the
acceptance by the Company of the proceeds of such Borrowing (but
not including continuations or conversions pursuant to Section
2.11), shall constitute a representation and warranty by the
Company, as of the date of such Borrowing, that the conditions
specified in this Section 3.2 have been satisfied.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this
Agreement, the Company represents and warrants to the Lenders
(which representations and warranties made by the Company as of
the Closing Date, were made assuming that the Merger had occurred
on or before the Closing Date) that:
Section 4.1 Corporate Existence. The Company and each of
its Subsidiaries are duly organized, legally existing and in good
standing under the laws of the jurisdictions in which they are
incorporated or organized and are duly qualified as foreign
entities in all jurisdictions wherein the Property owned or the
business transacted by them makes such qualification necessary,
except where the failure to be so qualified could not reasonably
be expected to have a Material Adverse Effect.
Section 4.2 Corporate Power and Authorization. The Company
is authorized and empowered to create and issue the Notes; the
Company and each of its Subsidiaries are duly authorized and
empowered to execute, deliver and perform the Financing
Documents, including this Agreement, to which they respectively
are parties; and all corporate action on the Company's part
requisite for the due creation and issuance of the Notes on the
Company's and each of its Subsidiaries' respective part requisite
for the due execution, delivery and performance of the Financing
Documents, including this Agreement, to which the Company and
each of its Subsidiaries respectively are parties has been duly
and effectively taken.
Section 4.3 Binding Obligations. This Agreement does, and
the Notes and other material Financing Documents to which the
Company and each of its Subsidiaries respectively are parties
upon their creation, issuance, execution and delivery will, when
issued and delivered under this Agreement, constitute legal,
valid and binding obligations of the Company and each such
Subsidiary that is a party thereto, respectively, and (assuming
due authorization, execution and delivery by the other parties
thereto) will be enforceable against the Company and each such
Subsidiary, as the case may be, in accordance with their
respective terms, subject to (a) bankruptcy, insolvency,
moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, and (b)
general principles of equity (regardless of whether considered in
a proceeding at law or in equity).
Section 4.4 No Legal Bar or Resultant Lien. The execution,
delivery and performance of the Notes and the other Financing
Documents, including this Agreement, to which the Company or any
of its Subsidiaries is a party do not and will not violate or
create a default under any provisions of the articles or
certificate of incorporation or bylaws of the Company or any of
its Subsidiaries, or any contract, agreement, instrument or
Governmental Requirement to which the Company or any of its
Subsidiaries is subject, or result in the creation or imposition
of any Lien upon any Properties of the Company or any of its
Subsidiaries, except for Liens created by the Financing
Documents.
Section 4.5 No Consent. The Company's and each of its
Subsidiaries' respective execution, delivery and performance of
the Notes and the other Financing Documents, including this
Agreement, to which the Company and each such Subsidiary
respectively are parties, and the consummation of the Merger do
not require notice to or filing or registration with, or the
authorization, consent or approval of or other action by any
other Person, including, but not limited to, any Governmental
Authority, except those obtained or made or where the failure to
do so could not reasonably be expected to have a Material Adverse
Effect.
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Section 4.6 Financial Information.
(a) Audited Financial Statements. The audited
consolidated balance sheets of the Company and its Subsidiaries
as of December 31, 1996 and 1997, and the related audited
consolidated statements of income, retained earnings and cash
flows for the years then ended, including in each case the
related schedules and notes, reported on by Deloitte & Touche
LLP, true copies of which have been previously delivered to the
Administrative Agent, fairly present, in all material respects,
the consolidated financial condition of the Company and its
Subsidiaries as of the dates thereof and the consolidated results
of operations for such periods, in accordance with GAAP applied
on a consistent basis (except as may be indicated in the notes
thereto).
(b) No Material Adverse Effect. Since December 31,
1997, there has been no event or occurrence that could reasonably
be expected to have a Material Adverse Effect.
Section 4.7 Investments and Guaranties. Neither the Company
nor any of its Subsidiaries has made investments in or advances
to any Person or entered into any Guarantee Obligation with
respect to any Person, except those permitted by Sections 6.2 or
6.6.
Section 4.8 Litigation. There is no material action, suit
or proceeding, or any material governmental investigation or any
arbitration, in each case pending or, to the knowledge of the
Company, threatened against the Company or any of the Subsidiary
Guarantors or any material Property of any thereof before any
court or arbitrator or any Governmental Authority that, if
adversely determined, could reasonably be expected to have a
Material Adverse Effect. There is no material action, suit or
proceeding, or any material governmental investigation or any
arbitration, in each case pending or, to the knowledge of the
Company, threatened against any Unrestricted Subsidiary or any
material Property of any Unrestricted Subsidiary before any court
or arbitrator or any Governmental Authority that, if adversely
determined, could reasonably be expected to have a Material
Adverse Effect. There is no action, suit or proceeding, or any
governmental investigation or any arbitration, in each case
pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries or any material Property
of any thereof before any court or arbitrator or any Governmental
Authority which challenges the validity of this Agreement, any
Note, any Application, the PM Holdings Guaranty or any of the
other Financing Documents.
Section 4.9 Use of Proceeds. The Company will use the
proceeds of the Loans only for the purposes specified in the
Introductory Statement to this Agreement. The Letters of Credit
will be used only for the purposes provided in Section 2.3.
Neither the Company nor any of its Subsidiaries is engaged princi
pally, or as one of its important activities, in the business of
extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying Margin Stock (within the
meaning of Regulations G, U or X) and no part of the proceeds of
any Loan hereunder will be used to buy or carry any Margin Stock
in violation of Regulation G, U, or X. Neither the Company nor
any Person acting on behalf of the Company has taken or will take
any action which could reasonably be expected to cause the Notes
or any of the Financing Documents, including this Agreement, to
violate Regulations G, U or X or any other regulation of the
Board of Governors of the Federal Reserve System, in each case as
now in effect or as the same may hereinafter be in effect.
Section 4.10 Employee Benefits.
(a) (1) The Company, its Subsidiaries and each ERISA
Affiliate have complied in all material respects with all
applicable laws regarding each Plan; (2) each Plan is, and has
been, maintained
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in substantial compliance with its terms, applicable collective
bargaining agreements, and all applicable laws: (3) no act,
omission or transaction has occurred which could result in
imposition on the Company, any Subsidiary of the Company or any
ERISA Affiliate (whether directly or indirectly) of (A) either a
civil penalty assessed pursuant to subsections (c), (i) or (l) of
section 502 of ERISA or a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code or (B) breach of fiduciary duty liability
damages under section 409 of ERISA, except for instances of
noncompliance, acts, transactions or omissions that could not
reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect.
(b) There exists no outstanding liability of the
Company, any of its Subsidiaries or any ERISA Affiliate with
respect to any Plan that has been terminated, which liability
could reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect. No liability to the PBGC
(other than for the payment of current premiums which are not
past due) by the Company, any Subsidiary of the Company or any
ERISA Affiliate has been or is expected by the Company, any
Subsidiary of the Company or any ERISA Affiliate to be incurred
with respect to any Plan. No ERISA Event with respect to any Plan
has occurred or is reasonably expected to occur that could
reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect.
(c) Full payment when due has been made of all amounts
which the Company, any of its Subsidiaries or any ERISA Affiliate
is required under the terms of each Plan or applicable law to
have paid as contributions to such Plan (excluding any nonpayment
involving an amount that is not material), and no accumulated
funding deficiency (as defined in section 302 of ERISA and
section 412 of the Code), whether or not waived, exists with
respect to any Plan.
(d) The liabilities relating to the Benefit Plans that
are subject to Title IV of ERISA have been prepared in accordance
with GAAP and accurately reflected in the financial statements of
the Company for the last fiscal year of the Company.
(e) Neither the Company, any Subsidiary of the Company
nor any ERISA Affiliate sponsors, maintains or contributes to, or
has at any time during the preceding six-year period sponsored,
maintained or contributed to, any Multiemployer Plan other than
Multiemployer Plans with respect to which the aggregate potential
withdrawal liability that would be incurred upon a complete
withdrawal from such Multiemployer Plans by the Company, its
Subsidiaries and the ERISA Affiliates could not reasonably be
expected to have a Material Adverse Effect. Prior to the
execution of this Agreement, the Company has furnished to the
Administrative Agent (i) a true and complete listing of the
Multiemployer Plans that are contributed to by the Company, its
Subsidiaries and the ERISA Affiliates as of the date of this
Agreement and (ii) true and complete copies of all information
which has been provided to the Company, a Subsidiary of the
Company or any ERISA Affiliate regarding assessed or potential
withdrawal liability with respect to any such Multiemployer Plan.
(f) Neither the Company, any Subsidiary of the Company
nor any ERISA Affiliate is required to provide security under
section 401(a)(29) of the Code.
Section 4.11 Taxes; Governmental Charges. The Company and
its Subsidiaries have filed all tax returns and reports required
to be filed and have paid all taxes, assessments, fees and other
governmental charges levied upon any of them or upon any of their
respective Properties or income which are due and payable,
including interest and penalties, except where failure to so pay
or file would not have a Material Adverse Effect, or have
provided adequate reserves for the payment thereof if required in
accordance with GAAP for the payment thereof, except such
interest and penalties as are being contested
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in good faith by appropriate actions or proceedings and for which
adequate reserves for the payment thereof as required by GAAP
have been provided.
Section 4.12 Titles, etc. Each of the Company and its
Subsidiaries has good title to, or valid leasehold interests in,
all its real and personal Property material to its business,
except for minor title defects in title that do not interfere
with its ability to conduct its business as currently conducted
or to utilize such Properties for their intended purposes.
Section 4.13 Defaults. Neither the Company nor any of its
Subsidiaries is in default nor has any event or circumstance
occurred which, but for the passage of time or the giving of
notice, or both, would constitute a default (in any respect that
could reasonably be expected to have a Material Adverse Effect)
under any loan or credit agreement, indenture, mortgage, deed of
trust, security agreement or other instrument or agreement
evidencing or pertaining to any Indebtedness of the Company or
any of its Subsidiaries, or under any material agreement or
instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is
bound. No Default hereunder has occurred and is continuing.
Section 4.14 Compliance with the Law. The Company and each
of its Subsidiaries is in compliance with all applicable
Governmental Requirements in respect of the conduct of its
business and the ownership of its Property, except as such
noncompliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 4.15 Patents, Licenses, Franchises and Formulas.
The Company and each of its Subsidiaries owns or licenses all
material patents, trademarks, permits, service marks, trade
names, copyrights, licenses, franchises and formulas, or rights
with respect to the foregoing, and has obtained assignments of
all licensors and other rights of whatever nature, reasonably
necessary for the present conduct of its business, without any
known conflict with the other rights of others which, or the
failure to obtain which, as the case may be could reasonably be
expected to have a Material Adverse Effect.
Section 4.16 No Material Misstatements. All factual
information, taken as a whole, in any written exhibit, schedule
or report prepared by or on behalf of the Company and furnished
to the Administrative Agent or the Lenders by or at the direction
of the Company or any of its Subsidiaries in connection with the
negotiation of this Agreement does not contain any material
misstatement of fact or omit to state a material fact necessary
to make the statements contained therein, in light of the
circumstances in which they were made, not misleading, provided,
that the financial information with respect to the Company's
projections contained in the Information Memorandum prepared by
the Administrative Agent dated February, 1998, together with any
supplements to such projections, copies of which have been
furnished to each Lender prior to the Closing Date, were prepared
in good faith on the basis of the assumptions stated therein,
which assumptions were believed by the Company to be reasonable
in all material respects at the time made.
Section 4.17 Investment Company Act. The Company is not an
"investment company" or a company "controlled" by an "investment
company" that is incorporated in or organized under the laws of
the United States or any "State," as those terms are defined in
the Investment Company Act of 1940, as amended. The execution and
delivery by the Company and its Subsidiaries of this Agreement
and the other Financing Documents to which they respectively are
parties and their respective performance of the obligations
provided for therein, will not result in a violation of the
Investment Company Act of 1940, as amended.
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Section 4.18 Public Utility Holding Company Act. The
Company is not a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company," or a "public
utility" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
Section 4.19 Subsidiaries. As of the Closing Date, the
Company has no Subsidiaries except those shown in Schedule 4.19,
which schedule was complete and accurate on such date. As of the
Closing Date, the ownership percentage of the Company and each
Subsidiary in the Subsidiaries is as shown in Schedule 4.19.
Section 4.20 Insurance. All policies of fire, liability,
workmen's compensation, casualty, flood, business interruption
and other forms of insurance owned or held by the Company and
each of its Subsidiaries (or on behalf of the Company and each of
its Subsidiaries by Koch Industries as provided below) are
sufficient for compliance with all requirements of law and of all
agreements to which the Company or any of its Subsidiaries is a
party; are valid, outstanding and enforceable policies; provide
adequate insurance coverage in at least such amounts and against
at least such risks (but including in any event public liability)
as are usually insured against in the same general area by
companies engaged in the same or a similar business for the
assets and operations of the Company and each of its
Subsidiaries; and, except as provided below, will not in any way
be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. All such material
policies are in full force and effect, all premiums with respect
thereto have been paid in accordance with their respective terms,
and no notice of cancellation or termination has been received
with respect to any such policy. The certificate of insurance
delivered to the Lenders pursuant to Section 3.1(e) contains an
accurate and complete description of all material policies of
insurance owned or held by the Company and each of its
Subsidiaries on the Closing Date. Notwithstanding the foregoing,
as of a date certain following the consummation of the Merger (as
of the date hereof, the Company believes such date will be April
1, 1998), the Company and each of its Subsidiaries will be
covered by the insurance policies maintained by Koch Industries
(a summary of which has been provided to the Administrative
Agent). On and after such date, the Company and each of its
Subsidiaries will be covered by policies of insurance applicable
to Koch Industries and its Subsidiaries.
Section 4.21 Environmental Matters.
(a) Environmental Laws, etc. Neither any Property of
the Company or its Subsidiaries nor the operations
conducted thereon violate any applicable order of any court
or Governmental Authority or Environmental Laws, which
violation could reasonably be expected to have a Material
Adverse Effect or which could reasonably be expected to
result in remedial obligations having a Material Adverse
Effect assuming disclosure to the applicable Governmental
Authority of all relevant facts, conditions and
circumstances, if any, pertaining to the relevant Property.
(b) No Litigation. Without limitation of Subsection
4.21(a) above, no Property of the Company or its
Subsidiaries nor the operations currently conducted thereon
or by any prior owner or operator of such Property or
operation, are in violation of or subject to any existing,
pending or threatened action, suit, investigation, inquiry
or proceeding by or before any court or Governmental
Authority or to any remedial obligations under
Environmental Laws, which violation, action, suit,
investigation, inquiry or proceeding could reasonably be
expected to have a Material Adverse Effect or which could
reasonably be expected to result in remedial obligations
having a Material Adverse Effect assuming disclosure to the
applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to the
relevant Property.
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(c) Notices, Permits, etc. All notices, permits,
licenses or similar authorizations, if any, required to be
obtained or filed by the Company or its Subsidiaries in
connection with the operation or use of any and all
Property of the Company or its Subsidiaries, including but
not limited to past or present treatment, storage, disposal
or release of a hazardous substance or solid waste into the
environment, have been duly obtained or filed except to the
extent the failure to obtain or file such notices, permits,
licenses or similar authorizations could not reasonably be
expected to have a Material Adverse Effect or which could
reasonably be expected to result in remedial obligations
having a Material Adverse Effect assuming disclosure to the
applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to the
relevant Property.
(d) Hazardous Substances Carriers. All hazardous
substances or solid waste generated at any and all Property
of the Company or its Subsidiaries have in the past been
transported, treated and disposed of only by carriers
maintaining valid permits under RCRA and any other
Environmental Law, except to the extent the failure to have
such substances or waste transported, treated or disposed
by such carriers could not reasonably be expected to have a
Material Adverse Effect, and only at treatment, storage and
disposal facilities maintaining valid permits under RCRA
and any other Environmental Law, which carriers and
facilities have been and are operating in compliance with
such permits, except to the extent the failure to have such
substances or waste treated, stored or disposed at such
facilities, or the failure of such carriers or facilities
to so operate, could not reasonably be expected to have a
Material Adverse Effect or which could reasonably be
expected to result in remedial obligations having a
Material Adverse Effect assuming disclosure to the
applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to the
relevant Property.
(e) Hazardous Substances Disposal. The Company and its
Subsidiaries have taken all reasonable steps necessary to
determine and have determined that no hazardous substances
or solid waste have been disposed of or otherwise released
and there has been no threatened release of any hazardous
substances on or to any Property of the Company or its
Subsidiaries except in compliance with Environmental Laws,
except to the extent the failure to do so could not
reasonably be expected to have a Material Adverse Effect or
which could reasonably be expected to result in remedial
obligations having a Material Adverse Effect assuming
disclosure to the applicable Governmental Authority of all
relevant facts, conditions and circumstances, if any,
pertaining to the relevant Property.
(f) No Contingent Liability. The Company and its
Subsidiaries have no material contingent liability in
connection with any release or threatened release of any
hazardous substance or solid waste into the environment
other than such contingent liabilities at any one time and
from time to time which could reasonably be expected to
exceed $1,000,000 in excess of applicable insurance
coverage and for which adequate reserves for the payment
thereof as required by GAAP have not been provided, or
which could reasonably be expected to result in remedial
obligations having a Material Adverse Effect assuming
disclosure to the applicable Governmental Authority of all
relevant facts, conditions and circumstances, if any,
pertaining to such release or threatened release.
Section 4.22 Solvency. The Company and its Subsidiaries,
taken as a whole, and the Company and each of its material
Subsidiaries, are Solvent, both before and after taking into
account the Merger.
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Section 4.23 Material Contracts. As of the Closing Date,
each of the Material Contracts is in full force and effect.
Neither the Company nor any of its Subsidiaries is in default
under or in breach of any term or condition of any Material
Contract that would have a Material Adverse Effect, nor is it
aware of any default under or breach of any term or condition of
any Material Contract by any other party thereto that could
reasonably be expected to have a Material Adverse Effect.
Section 4.24 Employee Matters. As of the Closing Date,
except as set forth in Schedule 4.24, none of the Company or the
Subsidiary Guarantors, or any of their respective employees, is
subject to any collective bargaining agreement. There are no
strikes, slowdowns, work stoppages or controversies pending or,
to the best knowledge of the Company, threatened against the
Company or its Subsidiaries, or their respective employees, which
could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect. As of the Closing Date,
except as set forth in Schedule 4.24, none of the Company nor any
of the Subsidiary Guarantors is subject to an employment
contract.
Section 4.25 Mortgaged Property. As of the Closing Date,
based on the Company's good faith estimate, the aggregate EBITDA
Value of the real Properties listed on Schedule 4.25 constitutes
at least 70% of Consolidated EBITDA for the fiscal year ended
December 31, 1997.
Section 4.26 Senior Indebtedness. The Lender Indebtedness
constitutes "Senior Debt" of the Company under and as defined in
the Senior Subordinated Notes Indenture.
Section 4.27 Sales Enhancement Loans and Sales Enhancement
Guarantees. Schedule 4.27 sets forth (a) all Sales Enhancement
Loans existing as of the Closing Date, the names of the lenders
and borrowers parties thereto, the outstanding principal balance
thereof, the maximum principal amount available to be drawn
thereunder and the maturity date thereof, and (b) all Sales
Enhancement Guarantees existing as of the Closing Date, the names
of the guaranteeing party, the guaranteed party and the primary
obligor and the maximum potential liability of the guaranteeing
party thereunder.
Section 4.28 PMI Holding Company. PMI Holding Company is a
wholly-owned, direct Subsidiary of the Company that, as of the
Closing Date, has no assets and conducts no business.
ARTICLE 5
AFFIRMATIVE COVENANTS
Section 5.1 Certain Affirmative Covenants. So long as any
Lender has any Commitment hereunder or any Loan remains unpaid or
any Revolving Credit Exposure remains outstanding, the Company
will at all times comply with the following covenants:
(a) Maintenance and Compliance, etc. The Company will
and will cause each of its material Subsidiaries to (1)
except with respect to Unrestricted Subsidiaries, preserve
and maintain its corporate existence, and (2) except where
failure to do so could not reasonably be expected to have a
Material Adverse Effect, observe and comply with all
Governmental Requirements.
(b) Payment of Taxes and Claims, etc. The Company will
pay, and cause each of its Subsidiaries to pay, (1) all
material taxes, assessments and governmental charges
imposed upon it or upon its Property, and (2) all material
claims (including, but not limited to, claims for labor,
materials, supplies or services) which could reasonably be
expected, if unpaid, to become a Lien upon its Property,
unless, in each case, the validity or amount thereof is
being contested in good faith
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by appropriate action or proceedings and the Company has
established adequate reserves in accordance with GAAP with
respect thereto.
(c) Further Assurances. The Company will and will
cause each of its Subsidiaries to cure promptly any defects
in the creation and issuance of the Notes, and the
execution and delivery of the Financing Documents,
including this Agreement. The Company at its expense will,
as promptly as practical, execute and deliver to the
Administrative Agent or the applicable Issuing Bank upon
reasonable request all such other and further documents,
agreements and instruments (or cause any of its
Subsidiaries to take such action) in compliance with or
performance of the covenants and agreements of the Company
or any of its Subsidiaries in the Financing Documents,
including this Agreement, or to further evidence and more
fully describe the Collateral, or to correct any omissions
in the Financing Documents, or more fully to state the
security obligations set out herein or in any of the
Financing Documents, or to perfect, protect or preserve any
Liens created pursuant to any of the Financing Documents,
or to make any recordings, to file any notices, or obtain
any consents, all as may be necessary or appropriate in
connection therewith.
(d) Performance of Obligations. The Company will pay
the Notes according to the reading, tenor and effect
thereof; and the Company will do and perform every act and
discharge all of the obligations provided to be performed
and discharged by the Company under the Financing
Documents, including this Agreement, at the time or times
and in the manner specified, and cause each of its
Subsidiaries to take such action with respect to their
obligations to be performed and discharged under the
Financing Documents to which they respectively are parties.
(e) Insurance. Either the Company will and will cause
each of its Subsidiaries to, or Koch Industries will on
behalf of the Company and each of its Subsidiaries,
maintain or cause to be maintained, with financially sound
and reputable insurers, insurance with respect to their
respective Properties and business against such
liabilities, casualties, risks and contingencies and in
such types (including business interruption insurance and
flood insurance) and amounts as is customary in the case of
Persons engaged in the same or similar businesses and
similarly situated and in accordance with any Governmental
Requirement. In the case of any fire, accident or other
casualty causing loss or damage to any Properties of the
Company and the Subsidiary Guarantors used in generating
cash flow or required by applicable law, the proceeds of
such policies in excess of $100,000 per occurrence shall be
used to promptly repair or replace any such damaged
Properties as required by applicable law, and otherwise
shall be used in the Company's sole discretion, (1) to
reasonably promptly repair or replace the damaged Property,
(2) to prepay the Term Loans in accordance with Section
2.10(b), or (3) to reinvest in other Properties that, in
the good faith judgment of the Company, meet the Company's
capital investment criteria. The Company will obtain
endorsements to the policies pertaining to all physical
Properties in which the Administrative Agent or the Lenders
shall have a Lien under the Financing Documents, naming the
Administrative Agent as a loss payee/additional insured.
(f) Accounts and Records. The Company will keep and
will cause each of its Subsidiaries to keep proper books of
record and account in accordance with GAAP.
(g) Right of Inspection. The Company will permit and
will cause each of its Subsidiaries to permit any officer,
employee or agent of the Administrative Agent or any Lender
to visit and inspect any of the Properties of the Company
or any of its Subsidiaries, examine the Company's or any
such Subsidiary's books of record and accounts, take copies
and extracts
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therefrom, and discuss the affairs, finances and accounts
of the Company or any of its Subsidiaries with the
Company's or such Subsidiary's officers, accountants and
auditors, as often and all at such reasonable times during
normal business hours as may be reasonably requested by the
Administrative Agent or any of the Lenders.
(h) Operation and Maintenance of Property. The Company
will, and will cause each of its Subsidiaries to, maintain,
preserve, protect and keep its Properties in good repair,
working order and condition, and make necessary and proper
repairs, renewals and replacements so that its business
carried on in connection therewith may be properly
conducted at all times unless the Company determines in
good faith that the continued maintenance of any of its
Properties is no longer economically desirable or unless
the failure to so preserve, maintain, protect and keep its
Properties could not reasonably be expected to have a
Material Adverse Effect.
(i) Additional Subsidiaries; Additional Liens.
(1) If at any time after the Closing Date the
Company or any Subsidiary Guarantor creates or
acquires any one or more additional Subsidiaries
(except for Unrestricted Subsidiaries), or designates
any Unrestricted Subsidiary as a Subsidiary Guarantor
pursuant to Section 6.17, the Company shall, and shall
cause such Subsidiary Guarantor, as applicable, to
execute and deliver to the Administrative Agent, at
the time of creation or acquisition of such Subsidiary
Guarantor, (A) a supplement to the Guarantee and
Collateral Agreement as is necessary to (i) grant to
the Administrative Agent a first priority security
interest in 100% of the Equity in such Subsidiary
Guarantor owned by the Company, and (ii) cause such
Subsidiary Guarantor to become party thereto in
accordance with the terms thereof, and (B) Deeds of
Trust covering such Subsidiary Guarantor's Property,
to the extent required by Section 5.1(i)(2) below.
(2) If at any time after the Closing Date, the
Company or any Subsidiary Guarantor shall acquire any
parcel of real Property having a value in excess of
$5,000,000 (valued at the greater of book or market
value) or the Company or any Subsidiary Guarantor
shall acquire a Subsidiary Guarantor which owns any
parcel of real Property having a value in excess of
$5,000,000 (valued at the greater of book or market
value), the Company shall, or shall cause the
applicable Subsidiary Guarantor to, grant the
Administrative Agent a lien on such real Property
pursuant to a Deed of Trust so that the Administrative
Agent has a first priority lien on such real Property.
(3) In connection with the execution and delivery
of any Security Instrument pursuant to this Section
5.1(i), the Company shall, or shall cause the relevant
Subsidiary to, deliver to the Lenders such corporate
resolutions, certificates, UCC-1 financing statements,
UCC-3 amendments, patent, trademark or copyright
filings, legal opinions and such other related
documents as shall be reasonably requested by the
Required Lenders and consistent with the relevant
forms and types thereof delivered on the Closing Date
or as shall be otherwise reasonably acceptable to the
Required Lenders.
(j) Non-Consolidation of Unrestricted Subsidiaries.
The Company will, and shall cause each of the Subsidiary
Guarantors to, be operated at all times in such a manner
that its assets and liabilities may not be substantively
consolidated with those of any Unrestricted Subsidiary in
the
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event of the bankruptcy or insolvency of such Unrestricted
Subsidiary. In this regard, the Company shall, and shall
cause each of the Subsidiary Guarantors to:
(1) not (A) consolidate or merge with or into any
Unrestricted Subsidiary or (B) sell, lease or
otherwise transfer, directly or indirectly, any
Property to any Unrestricted Subsidiary except as
permitted by Sections 6.4 and 6.6;
(2) subject to Section 6.6, engage only in
investments in Limited Liability Interests and matters
necessarily incident thereto;
(3) maintain corporate records and books of
account separate from each Unrestricted Subsidiary;
(4) maintain its assets separately from the
assets of any Unrestricted Subsidiary (including
through maintenance of a separate bank account);
(5) except as permitted by Section 6.2, not enter
into any Guarantee Obligations with respect to
Indebtedness of any Unrestricted Subsidiary, or
advance funds (other than through purchases of Limited
Liability Interests as permitted by Section 6.6(g) or
loans as permitted by Section 6.6(k)), for the payment
of expenses or otherwise, to any Unrestricted
Subsidiary;
(6) conduct all of its business correspondence
and other communications in its own name and on its
own stationery;
(7) maintain separate financial statements;
(8) maintain a board of directors that is
separate from (but may contain one or more of the same
members as) the boards of directors of all
Unrestricted Subsidiaries;
(9) maintain the requisite legal formalities in
order that the Company and the Subsidiary Guarantors
may each be treated as a legally separate entity from
any Unrestricted Subsidiary; and
(10) cause each Unrestricted Subsidiary, at the
time of its creation or acquisition, to be adequately
capitalized.
(k) Limited Liability Interests. To the extent the
Company or any Subsidiary Guarantor owns any Equity in any
Person (other than a Subsidiary Guarantor) which are not
Limited Liability Interests, the Company shall, and shall
cause each Subsidiary Guarantor to, within 60 days
following the Closing Date, transfer all of such Equity to
an Unrestricted Subsidiary such that on or before the 60th
day following the Closing Date, neither the Company nor any
Subsidiary Guarantor shall own any Equity in any Person
(other than Subsidiary Guarantors) which are not Limited
Liability Interests.
(l) Dissolution of PMI Holding Company. Within 30 days
following the Closing Date, the Company shall either (1)
dissolve or merge into the Company, PMI Holding Company, or
(2) transfer 100% of the Equity of PMI Holding Company to
Koch Industries or to any of its
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Subsidiaries other than the Company or any of its
Subsidiaries. The Company shall deliver to the
Administrative Agent certified copies of the instruments of
dissolution or merger that have been filed with the
Secretary of State of Delaware or provide the
Administrative Agent with evidence of the transfer of the
Equity of PMI in accordance with the foregoing sentence on
or before the expiration of such 30-day period. The Company
shall not make any investments in, or transfer any Property
to, PMI Holding Company, or otherwise permit PMI Holding
Company to conduct any business.
(m) Year 2000 Compatibility. The Company shall take
all actions reasonably necessary to assure that the
Company's computer based systems are able to operate and
effectively process data which includes dates on and after
January 1, 2000. At the request of the Administrative
Agent, the Company shall provide reasonable assurances
satisfactory to the Administrative Agent of the Company's
Year 2000 compatibility.
(n) Real Estate Post Closing Items. The Company shall
take all commercially reasonably actions necessary to
obtain or comply with the items set forth on Schedule
5.1(n) hereto within 60 days following the Closing Date.
Section 5.2 Reporting Covenants. So long as any Lender has
any Commitment hereunder or any Loan remains unpaid or any
Revolving Credit Exposure remains outstanding, the Company will
furnish the following to the Administrative Agent:
(a) Annual Financial Statements. As soon as available
and in any event within 90 days after the end of each
Fiscal Year of the Company, a consolidated balance sheet of
the Company and its Subsidiaries as at the end of such year
and the related consolidated statements of income, retained
earnings and cash flows of the Company and its Subsidiaries
for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year,
all in reasonable detail and accompanied by a report
thereon of independent public accountants of recognized
national standing, which such report shall state that such
consolidated financial statements present fairly, in all
material respects, the consolidated financial condition as
at the end of such Fiscal Year, and the consolidated
results of operations and cash flows for such Fiscal Year,
of the Company and its Subsidiaries in conformity with
GAAP, applied on a consistent basis. At the same time, a
consolidating balance sheet of the Company and its
Subsidiaries as at the end of such year and related
consolidating statements of income for such Fiscal Year (in
each case consolidating on the basis of principal lines of
business of the Company and its Subsidiaries), accompanied
by a certification thereon of a Responsible Officer,
stating that such consolidating financial statements form
the basis of the Company's consolidated financial
statements and are fairly stated in all material respects
when considered in relation thereto.
(b) Quarterly Financial Statements. As soon as
available and in any event within 45 days after the end of
each Fiscal Quarter of the Company (other than the last
Fiscal Quarter of each Fiscal Year), an unaudited
consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income, retained
earnings and cash flows of the Company and its Subsidiaries
for such Fiscal Quarter and for the portion of the
Company's Fiscal Year ended at the end of such quarter,
setting forth in each case in comparative form the figures
for the corresponding quarter and the corresponding portion
of the Company's previous Fiscal Year, all in reasonable
detail and certified by a Responsible Officer that such
financial statements are complete and correct and fairly
present, in all material respects, the
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consolidated financial condition as at the end of such
Fiscal Quarter, and the consolidated results of operations
and cash flows for such Fiscal Quarter and such portion of
the Company's Fiscal Year, of the Company and its
Subsidiaries in conformity with GAAP (subject to normal,
year-end adjustments). At the same time, if prepared by the
Company, a consolidating balance sheet of the Company and
its Subsidiaries at the end of such Fiscal Quarter and
related consolidating statements of income, for the portion
of the Company's Fiscal Year ended at such quarter (in each
case consolidating on the basis of principal lines of
business of the Company and its Subsidiaries), accompanied
by a certification from a Responsible Officer that such
consolidating financial statements form the basis of the
Company's consolidated financial statements and are fairly
stated in all material respects when considered in relation
thereto.
(c) No Default/Compliance Certificate. Together with
the financial statements required pursuant to subsections
5.2(a) and 5.2(b) above, a certificate of the Company,
signed by a Responsible Officer (1) stating that there
exists no Default or Event of Default as of the end of such
Fiscal Quarter or Fiscal Year, or if there shall be a
Default or Event of Default, specifying the nature and
status thereof and the Company's proposed response thereto;
(2) demonstrating in reasonable detail compliance
(including, but not limited to, showing all material
calculations) as at the end of such Fiscal Year or such
Fiscal Quarter with Subsections 6.1(a), 6.1(b) and 6.1(c);
(3) if requested by the Administrative Agent or any Lender,
demonstrating in reasonable detail compliance (including,
but not limited to, showing all material calculations) as
at the end of the Fiscal Year with Sections 6.2, 6.4, 6.5
and 6.6, describing by category (utilizing the same
categories as are used by the Company in its internal
financial reports) any Indebtedness incurred or any sales
of assets, dividends, investments, lease payments, sales or
discounts of receivables and transactions with Affiliates
made by the Company or any Subsidiary as of the end of such
Fiscal Year; and (4) containing or accompanied by such
financial or other details, information and material as the
Administrative Agent may reasonably request to evidence
such compliance.
(d) Events or Circumstances with respect to
Collateral. Promptly after the occurrence of any event or
circumstance concerning or changing any of the Collateral
that would have a Material Adverse Effect, notice of such
event or circumstance in reasonable detail.
(e) Notice of Certain Events. Promptly after the
Company learns of the receipt or occurrence of any of the
following, a certificate of the Company, signed by a
Responsible Officer specifying (1) any official notice of
any violation, possible violation, non-compliance or
possible non-compliance, or claim made by any Governmental
Authority pertaining to all or any part of the Properties
of the Company or any of its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect;
(2) any event which constitutes a Default or Event of
Default, together with a detailed statement specifying the
nature thereof and the steps being taken to cure such
Default or Event of Default; (3) the receipt of any notice
from, or the taking of any other action by, the holder of
any promissory note, debenture or other evidence of
indebtedness in excess of $5,000,000 of the Company or any
of its Subsidiaries with respect to a claimed default,
together with a detailed statement specifying the notice
given or other action taken by such holder and the nature
of the claimed default and what action the Company or its
Subsidiary is taking or proposes to take with respect
thereto; (4) any default or noncompliance of any party to
any of the Financing Documents with any of the terms and
conditions thereof or any notice of termination or other
proceedings or actions which could reasonably be expected
to adversely affect any of the Financing Documents; (5) the
creation, dissolution, merger or acquisition of any
Subsidiary of the Company with material operations; (6) any
event or condition not previously disclosed to the
Administrative Agent, which
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violates any Environmental Law and which could potentially,
in the Company's reasonable judgment, have a Material
Adverse Effect; (7) any material amendment to, termination
of, or material default under a Material Contract or any
execution of, or material amendment to, termination of, or
material default under, any material collective bargaining
agreement, except collective bargaining agreements of
Unrestricted Subsidiaries; (8) the occurrence, with respect
to any of the BP Parties, of any of the events described in
Section 7.8 or the failure of the BP Indemnity to continue
to be in full force and effect; (9) the occurrence, with
respect to any of the Ralston Parties, of any of the events
described in Section 7.8 or the failure of the Ralston
Indemnity to continue to be in full force and effect; or
(10) any event or condition which may reasonably be
expected to have a Material Adverse Effect.
(f) Certain Filings. Promptly upon the mailing,
filing, or making thereof, copies of all registration
statements, periodic reports and other documents (excluding
the related exhibits except to the extent expressly
requested by the Administrative Agent) filed by the Company
with the Securities and Exchange Commission (or any
successor thereto) or any national securities exchange.
(g) Litigation. Promptly after the occurrence thereof,
notice of the institution of or any material adverse
development in any action, suit or proceeding or any
governmental investigation or any arbitration, before any
court or arbitrator or any governmental or administrative
body, agency or official, against the Company, PM Holdings,
or any Subsidiary or any material Property of any thereof,
which could reasonably be expected to have a Material
Adverse Effect.
(h) ERISA. Promptly after (i) the Company's obtaining
knowledge of the occurrence thereof, notice that an ERISA
Event or a "prohibited transaction," as such term is
defined in section 406 of ERISA or section 4975 of the
Code, with respect to any Plan has occurred (which ERISA
Event or prohibited transaction could reasonably be
expected, individually or in the aggregate, to have a
Material Adverse Effect), which notice shall specify the
nature thereof, the Company's proposed response thereto
(and, if appropriate, the proposed response thereto of any
Subsidiary of the Company and of any ERISA Affiliate) and,
when known, any action taken or proposed by the Internal
Revenue Service, the Department of Labor or the PBGC with
respect thereto, (ii) the Company's obtaining knowledge
thereof, copies of any notice of the PBGC's intention to
terminate or to have a trustee appointed to administer any
Plan, (iii) the filing thereof with any Governmental
Authority ( if requested by the Administrative Agent),
copies of each annual and other report (including
applicable schedules) with respect to each Benefit Plan or
any trust created thereunder, (iv) the occurrence thereof,
notice of the agreement by the Company, a Subsidiary of the
Company or any ERISA Affiliate to contribute to, or assume
an obligation to contribute to, a Multiemployer Plan, (v)
the receipt by the Company, any Subsidiary of the Company
or any ERISA Affiliate of an actuarial report for any Plan
or an annual report for any Multiemployer Plan (if
requested by the Administrative Agent), true and complete
copies of each such report, (vi) the receipt by the
Company, any Subsidiary of the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan regarding
the imposition of withdrawal liability, a true and complete
copy of such notice, and (vii) the Company's obtaining
knowledge that a Multiemployer Plan has been terminated,
that the administrator or plan sponsor of a Multiemployer
Plan intends to terminate a Multiemployer Plan, or that the
PBGC has instituted or intends to institute proceedings
under section 4042 of ERISA to terminate a Multiemployer
Plan, notice specifying the nature of such occurrence and
any other information relating thereto requested by the
Administrative Agent.
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(i) Insurance Coverage. Upon request, a summary of the
insurance coverages of the Company and its Subsidiaries in
form and substance reasonably satisfactory to the
Administrative Agent; upon renewal of any such insurance
policy, a copy of an insurance certificate summarizing the
terms of such policy; and upon request of the
Administrative Agent, copies of the applicable policies.
(j) Consolidated Excess Cash Flow Certificate. On or
before each April 15th, commencing on April 15, 1999, the
Company's preliminary calculation of its Consolidated
Excess Cash Flow for the previous Fiscal Year, in
accordance with Section 2.10(b).
(k) Other Information. With reasonable promptness,
such other information about the business and affairs and
financial condition of the Company or its Subsidiaries as
the Administrative Agent may reasonably request from time
to time.
ARTICLE 6
NEGATIVE COVENANTS
So long as any Lender has any Commitment hereunder or any
Loan remains unpaid or any Revolving Credit Exposure outstanding,
the Company will not:
Section 6.1 Financial Covenants. So long as any Lender has
any Commitment hereunder or any Loan remains unpaid or any
Revolving Credit Exposure remains outstanding, the Company will,
at all times.
(a) Consolidated Interest Coverage Ratio. Maintain a
Consolidated Interest Coverage Ratio of not less than the
ratio for each Rolling Period indicated below:
Each Rolling Period Ratio
during the Fiscal
Year ending
December 31, 1998 1.75
Each Rolling Period
thereafter 2.00
(b) Consolidated Fixed Charge Coverage Ratio. Maintain
a Consolidated Fixed Charge Coverage Ratio of not less than
the ratio for each Rolling Period indicated below:
Each Rolling Period Ratio
during the Fiscal
Years ending
December 31, 1998 1.10
December 31, 1999 1.10
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Each Rolling Period
ending
March 31, 2000 1.10
June 30, 2000 1.10
September 30, 2000 1.10
December 31, 2000 1.15
March 31, 2001 1.15
June 30, 2001 1.15
September 30, 2001 1.15
December 31, 2001 1.20
Each Rolling Period
thereafter 1.20
(c) Consolidated Leverage Ratio. Maintain a
Consolidated Leverage Ratio of not greater than the ratio
for each Rolling Period indicated below:
Each Rolling Period
ending Ratio
March 31, 1998 6.00
June 30, 1998 6.00
September 30, 1998 6.00
December 31, 1998 5.75
Each Rolling Period
during the Fiscal
Years ending
December 31, 1999 5.75
December 31, 2000 5.25
December 31, 2001 4.75
December 31, 2002 4.50
December 31, 2003 4.25
December 31, 2004 4.00
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Each Rolling Period
thereafter 3.75
Section 6.2 Indebtedness. Create, incur, assume or suffer
to exist, or permit any of its Subsidiaries to create, incur,
assume or suffer to exist, any Indebtedness, other than:
(a) the Lender Indebtedness in the principal amount
not to exceed the outstanding Term Loans and the Revolving
Credit Commitments less the aggregate amount of permanent
reductions of the Revolving Credit Commitments and payments
or prepayments of the Term Loans;
(b) Indebtedness outstanding on the date hereof which
is set forth on Schedule 6.2(b), provided, that any
Indebtedness indicated on Schedule 6.2(b) as "Indebtedness
to be Repaid" shall have been repaid on or before the date
indicated thereon;
(c) Indebtedness outstanding under the Existing Senior
Subordinated Notes, provided, that at least 98% of such
Indebtedness shall have been repaid on or before 5:00 p.m.
(Houston, Texas time) on the second Business Day
immediately following the Closing Date and the balance
thereof shall constitute Indebtedness permitted pursuant to
6.2(m);
(d) Accounts payable (for the deferred purchase price
of Property or services) from time to time incurred in the
ordinary course of business and guaranties by the Company
or any Subsidiary in the ordinary course of business of any
such obligations incurred by any Subsidiary Guarantor;
(e) Indebtedness owing by (1) any Subsidiary to the
Company or to any Subsidiary Guarantor, or (2) the Company
to any Subsidiary Guarantor;
(f) Obligations for current taxes, assessments and
other governmental charges and taxes, assessments or other
governmental charges which are not yet due or are being
contested in good faith by appropriate action or proceeding
promptly initiated and diligently conducted, if such
reserve as shall be required by GAAP shall have been made
therefor;
(g) So long as no Default or Event of Default exists,
both before and after giving effect (on a pro forma basis)
to the incurrence thereof, purchase-money Indebtedness and
Capital Lease Obligations in an aggregate amount not to
exceed $50,000,000 at any one time outstanding, provided,
that any such purchase-money Indebtedness may not exceed
the lesser of the purchase price paid for the Property
acquired with such Indebtedness and the fair market value
thereof;
(h) Indebtedness evidenced by the Senior Subordinated
Notes in an aggregate principal amount not to exceed
$350,000,000;
(i) Indebtedness owing pursuant to Hedge Agreements
entered into in the ordinary course of business for the
purpose of hedging against fluctuations in interest rates
(on money borrowed by the Company), commodity prices and
foreign exchange rates;
(j) Non-Recourse Debt of an Unrestricted Subsidiary;
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(k) So long as no Default or Event of Default exists,
both before and after giving effect (on a pro forma basis)
to the incurrence thereof, Indebtedness owing pursuant to
Sales Enhancement Guarantees (including those described on
Schedule 4.27), provided, that the aggregate amount of all
Sales Enhancement Guarantees and all Sales Enhancement
Loans at any one time outstanding shall not exceed
$25,000,000, except, in the case of Sales Enhancement
Guarantees, to the extent such obligations are permitted to
be incurred and remain outstanding by virtue of
availability of the basket provided pursuant to Section
6.2(m), and, in the case of Sales Enhancement Loans, (i) to
the extent such loans are permitted to be made and remain
outstanding by virtue of availability of the basket
provided pursuant to Section 6.6(n) and (ii) Other Sales
Enhancement Loans, and, provided, further, that, without
the prior written consent of the Required Lenders, no more
than $5,000,000 in aggregate principal amount of
Indebtedness of any Person and its Affiliates may be either
guaranteed or loaned pursuant to such Sales Enhancement
Guarantees or Sales Enhancement Loans, respectively and
inclusive of one another;
(l) Customary indemnifications and purchase price
adjustments entered into in agreements by the Company or
any Subsidiary Guarantor in connection with permitted
Dispositions and acquisitions, including, but not limited
to Standard Securitization Undertakings; and
(m) So long as no Default or Event of Default exists,
both before and after giving effect (on a pro forma basis)
to the incurrence thereof, Indebtedness not otherwise
permitted pursuant to this Section 6.2 in an aggregate
amount not to exceed $20,000,000 at any one time
outstanding less the amount of Other Sales Enhancement
Loans, provided, that the aggregate amount of such other
Indebtedness permitted pursuant to this Section 6.2(m)
together with such Other Sales Enhancement Loans may not
exceed $20,000,000 at any one time outstanding.
Section 6.3 Liens. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume
or suffer to exist, any Lien on any of its Property now owned or
hereafter acquired to secure any Indebtedness of the Company, any
Subsidiary or any other Person, other than:
(a) Liens existing on the date hereof and set forth on
Schedule 6.3(a), provided, that any Liens indicated on
Schedule 6.3(a) as "Liens to be Released" shall have been
released of record within 10 days after the Closing Date;
(b) Liens securing the Lender Indebtedness;
(c) Liens for taxes, assessments or other governmental
charges or levies not yet due or which are being contested
in good faith by appropriate action or proceedings and with
respect to which adequate reserves are being maintained;
(d) Statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen, repairmen,
workmen, and other Liens imposed by law created in the
ordinary course of business for amounts which are not past
due for more than 30 days or which are being contested in
good faith by appropriate action or proceedings and with
respect to which adequate reserves in accordance with GAAP
are being maintained;
(e) Liens incurred or deposits or pledges made in the
ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of
social security,
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old age or other similar obligations, or to secure the
performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of
borrowed money);
(f) minor irregularities in title, easements,
rights-of-way, restrictions, servitudes, permits,
reservations, exceptions, conditions, covenants and other
similar charges or encumbrances not materially interfering
with the occupation, use and enjoyment by the Company or
any of its Subsidiaries of any of their respective
Properties in the normal course of business or materially
impairing the value thereof;
(g) any obligations or duties affecting any of the
Property of the Company or its Subsidiaries to any
municipality or public authority with respect to any
franchise, grant, license or permit which do not materially
impair the use of such Property for the purposes for which
it is held;
(h) Liens securing Indebtedness permitted pursuant to
Section 6.2(g), provided, that (1) such Lien was created
solely for the purpose of securing such Indebtedness, (2)
the principal amount of such Indebtedness does not exceed
the fair value of such Property at the time of its
acquisition, and (3) such Lien relates only to the Property
being leased or acquired;
(i) Liens resulting from operation of law with respect
to any judgments or orders not constituting an Event of
Default;
(j) Liens on cash held in the Rabobank Cash Collateral
Account used to secure the Rabobank Limited Guaranty to the
extent permitted under Section 6.2(k), provided, that (1)
the maximum amount of cash in such account does not at any
time exceed the lesser of (A) the maximum liability of the
Company pursuant to Rabobank Limited Guaranty and (B)
$12,000,000, (2) such account is not funded with cash that
is at the time subject to a Lien pursuant to any of the
Security Instruments, (3) such account shall only be
established upon the occurrence of the conditions set forth
in Section 20 of the Rabobank Limited Guaranty relating to
a "Cash Collateral Event", and (4) the Borrower shall take
whatever actions are necessary to terminate such account
and to take possession of the cash held therein upon the
termination of the Rabobank Limited Guaranty or upon the
conditions set forth in Section 20 of the Rabobank Limited
Guaranty which require the establishment of such account
ceasing to exist;
(k) Liens in favor of customs and revenue authorities
arising as a matter of laws to secure the payment of
customs duties in connection with the importation of goods;
(l) any Lien existing on Property prior to the
acquisition thereof by the Company or any Subsidiary
Guarantor after the Closing Date, provided, that (1) such
Lien is not created in contemplation of or in connection
with such acquisition, (2) such Lien shall not apply to any
other Property of the Company or any Subsidiary Guarantor,
and (3) such Lien shall secure only those obligations which
it secures on the date of such acquisition;
(m) Uniform Commercial Code protective filings with
respect to personal property permitted to be leased under
the terms of this Agreement and any interest or title of a
lessor under any lease permitted by this Agreement;
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(n) Liens on Property of Unrestricted Subsidiaries to
secure Indebtedness of Unrestricted Subsidiaries permitted
under Section 6.2(j); and
(o) extensions, renewals or replacements of any Lien
referred to in Subsections 6.3(a), 6.3(h), 6.3(j) and
6.3(l), provided, that the principal amount of the
Indebtedness or obligation secured thereby is not increased
and that any such extension, renewal or replacement is
limited to the Property originally encumbered thereby.
Section 6.4 Mergers, Sales, etc. Merge into or with or
consolidate with, or permit any of its Subsidiaries to merge into
or with or consolidate with, any other Person, or Dispose of, or
permit any of its Subsidiaries to Dispose of (whether in one
transaction or in a series of transactions) all or any part of
its Property to any other Person. Notwithstanding the foregoing
limitations:
(a) the Company and the Subsidiary Guarantors may (1)
sell inventory, and other similar assets in the ordinary
course of business, (2) Dispose of personal property in the
ordinary course of business or when, in the reasonable
judgment of the Company, such property is no longer used or
useful in the conduct of its business or the business of
its Subsidiaries, (3) enter into the HQ Sale/Leaseback,
provided, that such sale is for fair market value and that
the Company shall use the Net Proceeds therefrom to prepay
the Term Loans pursuant to Section 2.10(b)(4), (4) enter
into the HQ Sale, provided, that such sale is for fair
market value and that the Company shall use the Net
Proceeds therefrom to either prepay the Term Loans or
reinvest in the Company's business, in either case in
accordance with Section 2.10(b)(3), (5) enter into
Permitted Securitizations, (6) sell notes and accounts
receivable to the extent permitted by Section 6.10, (7)
dispose of the closed plants listed on Schedule 6.4(a),
provided, that such sale is for fair market value and that
the Company shall use the Net Proceeds therefrom to either
prepay the Term Loans or reinvest in the Company's
business, in either case in accordance with Section
2.10(b)(3), and (8) in addition to clauses (1) through (7),
Dispose of up to $5,000,000 in fair-market value of their
Property in the aggregate during any Fiscal Year, provided,
that the Company shall use the Net Proceeds therefrom to
either prepay the Term Loans or reinvest in the Company's
business, in either case in accordance with Section
2.10(b)(3);
(b) (1) any Subsidiary Guarantor may merge into or
with or consolidate with any other Subsidiary Guarantor or
the Company (and, in the case of the Company, so long as
the Company is the surviving entity), and (2) any
Unrestricted Subsidiary may merge into or with or
consolidate with any other Unrestricted Subsidiary;
(c) any Subsidiary may transfer Property to any
Subsidiary Guarantor or to the Company;
(d) the Company or any Subsidiary Guarantor may
contribute Properties to Unrestricted Subsidiaries or to
any other Person in which the Company or a Subsidiary
Guarantor holds Limited Liability Interests to the extent
permitted by Section 6.6(g);
(e) the Company may transfer Property to any
Subsidiary Guarantor; and
(f) any Unrestricted Subsidiary may Dispose of all or
any of its Property to any Person.
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Section 6.5 Dividends, etc. Declare or pay any dividend on
its capital stock or other Equity, make any payment to purchase,
redeem, retire or otherwise acquire any of its capital stock or
other Equity or any option, warrant, or other right to acquire
such capital stock or other Equity, now or hereafter outstanding,
return any capital to its stockholders, make any distribution of
its assets, capital stock or other Equity, warrants, rights,
options, obligations or securities to its stockholders, or permit
any of its Subsidiaries to do so, except that:
(a) the Company may declare and deliver dividends
payable solely in shares of its capital stock or in
options, warrants or rights to purchase shares of capital
stock;
(b) any Subsidiary of the Company may declare and
deliver dividends to the Company or any Subsidiary
Guarantor;
(c) so long as at the time of payment of such dividend
(both before and after giving effect to the payment
thereof) the Company satisfies the conditions precedent to
the making of Loans set forth in Section 3.2, the Company
may pay cash dividends to PM Holdings (or any successor
parent company which is a Subsidiary of KAC) for the
purpose of paying, and so long as all proceeds thereof are
promptly used by PM Holdings (or any successor parent
company which is a Subsidiary of KAC) to pay, (1) operating
expenses incurred in the ordinary course of business and
other corporate overhead costs and expenses in an aggregate
amount not to exceed $1,000,000 in any Fiscal Year of the
Company, and (2) franchise taxes and federal, state and
local income taxes and interest and penalties with respect
thereof, provided, that any refund shall be promptly
returned by PM Holdings (or any successor parent company
which is a Subsidiary of KAC) to the Company;
(d) so long as at the time of payment of such dividend
(both before and after giving effect to the payment
thereof) the Company satisfies the conditions precedent to
the making of Loans set forth in Section 3.2, the Company
may, after payment in full of amounts owing pursuant to
Section 2.10(b)(1), pay cash dividends to PM Holdings in
any Fiscal Year in amount not to exceed 25% of Excess Cash
Flow for the prior Fiscal Year commencing with Excess Cash
Flow attributable to the Fiscal Year ending December 31,
1998;
(e) the Company may pay cash dividends to PM Holdings
in an amount necessary to (1) permit PM Holdings to redeem
the existing PM Holdings Discount Notes, provided, that
such dividend shall be paid on the first Business Day after
the Closing Date, and (2) permit PM Holdings to pay other
amounts in connection with the Merger that are necessary to
consummate the Merger; and
(f) any Unrestricted Subsidiary may declare and
deliver dividends to holders of its Equity, provided, that
such dividends are paid pro-rata to all Equity holders.
Section 6.6 Investments, Loans, etc. Make or permit any
loans to or investments in any Person, or permit any of the
Subsidiary Guarantors to make or permit any loans to or
investments in any Person, other than:
(a) investments, loans or advances, the material
details of which have been set forth on Schedule 6.6(a)
hereto;
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(b) investments in direct obligations of the United
States of America or any agency thereof or, in each case
with maturities of one year or less from the date of
acquisition;
(c) investments in certificates of deposit of
maturities less than one year, issued by commercial banks
in the United States having capital and surplus in excess
of $500,000,000 and having short-term credit ratings of at
least A1 and P1 by Standard & Poor's Ratings Group and
Moody's Investors Service, Inc., respectively;
(d) investments in commercial paper of maturities of
not more than 270 days rated at least A1 and P1 by Standard
& Poor's Ratings Group and Moody's Investors Service, Inc.,
respectively; and
(e) investments in securities that are obligations of
the United States government purchased by the Company or
any Subsidiary of the Company under repurchase agreements
pursuant to which arrangements are made with selling
financial institutions (being a financial institution
having unimpaired capital and surplus of not less than
$500,000,000 and with short-term credit ratings of at least
A1 and P1 by Standard & Poor's Ratings Group and Moody's
Investors Service, Inc., respectively) for such financial
institutions to repurchase such securities within 30 days
from the date of purchase by the Company or such
Subsidiary, and other similar short-term investments made
in connection with the Company's or any of its Subsidiary's
cash management practices, provided, that the Company shall
take possession of all securities purchased by the Company
or any Subsidiary under repurchase agreements and shall
adhere to customary margin and mark-to-market procedures
with respect to fluctuations in value;
(f) investments in any security issued by an
investment company registered under Section 8 of the
Investment Company Act of 1940 (15 U.S.C. 80a-8) that is a
money market fund in compliance with all applicable
requirements of SEC Rule 2a-7 (17 CFR 270.2a-7);
(g) so long as no Default or Event of Default exists,
both before and after giving effect (on a pro forma basis)
to any such purchase or capitalization, the purchase or
capitalization (either with cash or by the contribution of
Properties, other than real Property securing the Lender
Indebtedness) of Limited Liability Interests in
Unrestricted Subsidiaries or other Persons and, provided,
further, that the aggregate amount of such investments
(including investments made with such contributed
Properties) made after the Closing Date shall not exceed
(without duplication) $10,000,000 in the aggregate, except
to the extent such purchases or capitalizations are
permitted to be made and remain outstanding by virtue of
availability of the basket provided pursuant to Section
6.6(n);
(h) investments in, or loans or advances to,
Subsidiary Guarantors and loans to the Company by any
Subsidiary Guarantor, provided, that such loans are
subordinated to the repayment of the Lender Indebtedness on
terms and conditions satisfactory to the Required Lenders;
(i) any acquisition of 100% of the Equity of another
Person or of assets constituting the business unit of
another Person, provided, that (1) after giving pro forma
effect thereto (as certified to the Administrative Agent by
a Responsible Officer no sooner than 5 Business Days, and
no longer than 30 Business Days, prior to such
acquisition), no Default or Event of Default shall have
occurred and be continuing or would result therefrom, (2)
if such acquisition is an acquisition of Equity, the Person
being acquired shall be a Subsidiary Guarantor and all
provisions of Sections
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5.1(i) applicable to such Subsidiary Guarantor shall have
been satisfied, (3) such acquisition shall involve
businesses of the type in which the Company is already
engaged in accordance with Section 6.8, and (4) such
acquisition has been approved by the board of directors or
other governing body of the Person being acquired;
(j) routine loans or advances to employees in the
ordinary course of business in an aggregate amount not to
exceed $1,000,000 at any one time outstanding to any one
employee and $5,000,000 at any time outstanding to all
employees;
(k) so long as no Default or Event of Default exists,
both before and after giving effect (on a pro forma basis)
to the making thereof, (1) Sales Enhancement Loans,
provided, that the aggregate of all Sales Enhancement Loans
and all Sales Enhancement Guarantees at any one time
outstanding shall not exceed $25,000,000, except, in the
case of Sales Enhancement Guarantees, to the extent such
obligations are permitted to be incurred and remain
outstanding by virtue of availability of the basket
provided pursuant to Section 6.2(m), and, in the case of
Sales Enhancement Loans, to the extent such loans are
permitted to be made and remain outstanding by virtue of
availability of the basket provided pursuant to Section
6.6(n), and (2) Other Sales Enhancement Loans, to the
extent such loans are permitted to be made and remain
outstanding by virtue of availability of the basket
provided pursuant to Section 6.2(m). Notwithstanding the
foregoing, without the prior written consent of the
Required Lenders, no more than $5,000,000 in aggregate
principal amount of Indebtedness of any Person and its
Affiliates may be either guaranteed or loaned pursuant to
such Sales Enhancement Guarantees or Sales Enhancement
Loans, respectively and inclusive of one another;
(l) subrogation rights that exist by virtue of
payments made pursuant to obligations under Sales
Enhancement Guarantees;
(m) Limited Liability Interests or obligations
received in settlement of loans to other Persons permitted
hereunder or in satisfaction of judgments; and
(n) so long as no Default or Event of Default exists,
both before and after giving effect (on a pro forma basis)
to the making thereof, other investments, loans, or
advances in an aggregate amount not to exceed $20,000,000
at any one time outstanding, provided, that investments in
other Persons made pursuant to this Section 6.6(n) must be
in the form of Limited Liability Interests.
Section 6.7 Sales and Leasebacks. Except for the HQ
Sale/Leaseback, enter into, or permit any of the Subsidiary
Guarantors to enter into, any arrangement, directly or
indirectly, with any Person whereby the Company or any such
Subsidiary shall sell or transfer any Property, whether now owned
or hereafter acquired, and whereby the Company or any such
Subsidiary shall then or thereafter rent or lease as lessee such
Property or any part thereof or other Property which the Company
or any such Subsidiary intends to use for substantially the same
purpose or purposes as the Property sold or transferred.
Notwithstanding the foregoing, this Section 6.7 shall not
prohibit the Company or its Subsidiaries from leasing a facility
as a headquarters for the Company and its Subsidiaries following
an HQ Sale, provided, that such lease is a bona fide operating
lease and not part of a disguised financing.
Section 6.8 Nature of Business. Enter into, or permit any
Subsidiary to enter into, any business except for those
businesses in which the Company and its Subsidiaries were engaged
on the Closing Date or which are related thereto.
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Section 6.9 ERISA Compliance.
(a) Engage in, or permit a Subsidiary of the Company
or any ERISA Affiliate to engage in, any transaction in
connection with which the Company, a Subsidiary of the
Company or any ERISA Affiliate could be subjected to either
a civil penalty assessed pursuant to subsections (c), (i)
or (l) of section 502 of ERISA or a tax imposed by Chapter
43 of Subtitle D of the Code, which penalty or tax could
reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect;
(b) Terminate, or permit a Subsidiary of the Company
or any ERISA Affiliate to terminate, any Benefit Plan in a
manner, or take any other action with respect to any
Benefit Plan, which could reasonably be expected to result
in any liability of the Company, a Subsidiary of the
Company or any ERISA Affiliate to the PBGC or any other
Governmental Authority in an amount which could reasonably
be expected to have a Material Adverse Effect;
(c) Fail to make, or permit a Subsidiary of the
Company or any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions
of any Plan, agreement relating thereto or applicable law,
the Company, a Subsidiary of the Company or any ERISA
Affiliate is required to pay as contributions thereto
except for any nonpayment that could not reasonably be
expected, individually or in the aggregate, to have a
Material Adverse Effect;
(d) Permit to exist, or allow a Subsidiary of the
Company or any ERISA Affiliate to permit to exist, any
accumulated funding deficiency within the meaning of
section 302 of ERISA or section 412 of the Code, whether or
not waived, with respect to any Benefit Plan in an amount
which could reasonably be expected to have a Material
Adverse Effect;
(e) Fail to pay, or cause to be paid, or allow a
Subsidiary of the Company or any ERISA Affiliate to fail to
pay or cause to be paid, to the PBGC in a timely manner,
and without incurring any late payment or underpayment
charge or penalty, all premiums required pursuant to
Sections 4006 and 4007 of ERISA, except where such failure
could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect;
(f) Amend, or permit a Subsidiary of the Company or
any ERISA Affiliate to amend, a Plan resulting in an
increase in current liability such that the Company, a
Subsidiary of the Company or any ERISA Affiliate is
required to provide security to such Plan under section
401(a)(29) of the Code;
(g) Incur, or permit a Subsidiary of the Company or
any ERISA Affiliate to incur, a material liability to or on
account of a Plan under sections 515, 4062, 4063, 4064,
4201 or 4204 of ERISA;
(h) Permit, or allow a Subsidiary of the Company or
any ERISA Affiliate to permit, the aggregate potential
withdrawal liability with respect to all Multiemployer
Plans contributed to by the Company, its Subsidiaries and
the ERISA Affiliates to be in an amount which could
reasonably be expected to result in a Material Adverse
Effect in the event that the Company, its Subsidiaries and
the ERISA Affiliates, as the case may be, were to
completely withdraw from such Multiemployer Plans; or
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(i) Permit, or allow a Subsidiary of the Company or
any ERISA Affiliate to permit, the actuarial present value
of the benefit liabilities (computed on an accumulated
benefit obligation basis in accordance with GAAP) under all
Plans in the aggregate to exceed the current value of the
assets of all Plans in an amount that could reasonably be
expected to have a Material Adverse Effect.
Section 6.10 Sale or Discount of Receivables. Sell, with or
without recourse, for discount or otherwise, or permit any of the
Subsidiary Guarantors to sell, with or without recourse, for
discount or otherwise, any notes receivable or accounts
receivable. Notwithstanding the foregoing, the Company and the
Subsidiary Guarantors may (a) without recourse (except for
Standard Securitization Undertakings), enter into Permitted
Securitizations, and (b) sell, without recourse (except for
accounts receivable sold with recourse to Northeastern Farm
Credit, A.C.A. in an aggregate face amount not to exceed $300,000
in any Fiscal Year), notes receivable or accounts receivable in
the ordinary course of business of the Company and the Subsidiary
Guarantors (as conducted as of the Closing Date) in an aggregate
face amount not to exceed $750,000 in any Fiscal Year, provided,
that the Net Cash Proceeds from sales pursuant to this subsection
(b) shall be applied to prepay the Term Loans pursuant to Section
2.10(b)(3).
Section 6.11 Negative Pledge Agreements. Create, incur,
assume or suffer to exist, or permit any of the Subsidiary
Guarantors to create, incur, assume or suffer to exist, any
contract, agreement or understanding (other than (a) this
Agreement and the other Financing Documents, (b) the Senior
Subordinated Notes Indenture, and (c) any agreements governing
any purchase money Liens or Capital Lease Obligations otherwise
permitted hereby, provided, that any such prohibition or
limitation is only effective against the Property financed
thereby) which in any way prohibits or restricts the granting,
conveying, creation or imposition of any Lien on any Property of
the Company or the Subsidiary Guarantors, or which requires the
consent of or notice to other Persons in connection therewith.
Section 6.12 Transactions with Affiliates. Enter into any
transaction or series of transactions, or permit any of its
Subsidiaries to enter into any transaction or series of
transactions, with Affiliates of the Company or its Subsidiaries
which involve an outflow of money or other Property from the
Company or its Subsidiaries to an Affiliate of the Company or its
Subsidiaries, including but not limited to repayment of
Indebtedness, management fees, compensation, salaries, asset
purchase payments or any other type of fees or payments similar
in nature, other than on terms and conditions substantially as
favorable to the Company and its Subsidiaries as would be
obtainable by the Company and its Subsidiaries in a reasonably
comparable arm's-length transaction with a Person other than an
Affiliate of the Company or its Subsidiaries. Notwithstanding the
foregoing, the restrictions set forth in this Section 6.12 shall
not apply to: (a) any transaction or series of transactions with
the Company or the Subsidiary Guarantors which involve an outflow
of money or other Property from an Unrestricted Subsidiary to the
Company or a Subsidiary Guarantor, or (b) any transaction or
series of transactions which involve an outflow of money or other
Property from an Unrestricted Subsidiary to another Unrestricted
Subsidiary.
Section 6.13 Unconditional Purchase Obligations. Enter into
or be a party to, or permit any of the Subsidiary Guarantors to
enter into or be a party to, any material contract for the
purchase of materials, supplies or other property or services, if
such contract requires that payment be made by it regardless of
whether or not delivery is ever made of such materials, supplies
or other property or services.
Section 6.14 Stock. Authorize or issue (a) any Equity to
any Person other than PM Holdings, or (b) any preferred stock or
other Equity securities having a mandatory redemption right
existing with regard thereto.
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Section 6.15 Modifications to Senior Subordinated Notes; No
Voluntary Prepayments.
(a) Amend, modify, or waive any covenant contained in
the Senior Subordinated Notes or the Senior Subordinated
Notes Indenture if the effect of such amendment,
modification, or waiver could be to make the terms of the
Senior Subordinated Notes or the Senior Subordinated Notes
Indenture materially more onerous to the Company;
(b) Amend, modify, or waive any provision of the
Senior Subordinated Notes or the Senior Subordinated Notes
Indenture which (1) subjects the Company to any additional
material obligation, (2) increases the principal of or rate
of interest on any Senior Subordinated Note, (3)
accelerates the date fixed for any payment of principal or
interest on any Senior Subordinated Note, (4) would change
the percentage of holders of such Senior Subordinated Notes
required for any such amendment, modification, or waiver
from the percentage required on the Closing Date, or (5)
relates to the subordination provisions thereof; or
(c) Make any voluntary prepayment of, or optionally
redeem, or make any payment in defeasance of, any part of
the Senior Subordinated Notes.
Section 6.16 Intercompany Transactions. Except for (a) any
encumbrance or restriction pursuant to the Senior Subordinated
Notes Indenture, (b) in the case of clause (D) below, any
encumbrance or restriction that restricts in a customary manner
the subletting, assignment or transfer of any Property that is
subject to a lease, license or similar contract, (c) in the case
of clause (D) below, encumbrances or restrictions contained in
security agreements or mortgages permitted under Section 6.3(h)
to the extent such encumbrances or restrictions are limited to
the Property subject to such security agreements or mortgages,
(d) any restriction imposed by applicable law, and (e) customary
encumbrances or restrictions contained in agreements of a Special
Purpose Vehicle created in connection with a Permitted
Securitization that are necessary to effect such Permitted
Securitization, create and will not permit any of the Subsidiary
Guarantors to, create or otherwise cause or permit to exist or
become effective, except as may be expressly permitted or
required by the Financing Documents, any consensual encumbrance
or restriction of any kind on the ability of any such Subsidiary
Guarantor to (A) pay dividends or make any other distribution to
the Company or any Subsidiary Guarantor in respect of such
Subsidiary Guarantor's capital stock or with respect to any other
interest or participation in, or measured by, its profits, (B)
pay any indebtedness owed to the Company or any Subsidiary
Guarantor, (C) make any loan or advance to the Company or any
Subsidiary Guarantor, or (D) sell, lease or transfer any of its
Property to the Company or any Subsidiary Guarantor.
Section 6.17 Reverse Designation of Unrestricted
Subsidiaries. Designate (which designation is approved by the
Board of Directors of the Company) an Unrestricted Subsidiary as
a Subsidiary Guarantor unless Section 5.1(i) is complied with and
unless both before and after giving effect to such reverse
designation (a) no Default or Event of Default shall exist,
including, without limitation, a breach of Section 6.2, Section
6.3 or Section 6.6, (b) no default or event of default shall
exist or be continuing under any agreement, mortgage, indenture
or instrument under which there may be issued or by which there
may be secured or evidenced any Indebtedness for money borrowed
by such Unrestricted Subsidiary, (c) no default or event of
default shall exist or be continuing under the Senior
Subordinated Notes Indenture, and (d) after giving effect to such
redesignation, such Subsidiary will not meet any of the criteria
set forth in the definition of "Unrestricted Subsidiary." Notice
of any such reverse designation by the Company shall be delivered
by the Company to the Administrative Agent together with a copy
of the resolutions of the Board of Directors of the Company
approving such reverse designation and a certificate of a
Responsible Officer certifying that such reverse designation
complies with the requirements of this
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Section 6.17. Such reverse designation shall become effective
upon receipt by the Administrative Agent of the foregoing. Any
reverse designation that fails to comply with the terms of this
Section 6.17 shall be null and void and of no effect whatsoever.
Section 6.18 Rabobank Limited Guaranty. Except to increase
the amount guaranteed thereunder to an amount not in excess of
$12,000,000, amend or modify the terms of the Rabobank Limited
Guaranty in a manner which could adversely affect the Lenders
without the prior written consent of the Required Lenders.
ARTICLE 7
EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of
the following specified events (each an "Event of Default"):
Section 7.1 Payments. (a) The Company shall fail to pay
when due (including, but not limited to, by mandatory prepayment
required pursuant to Section 2.10) any principal of any Loan or
any Note, or any Reimbursement Obligation; or (b) the Company
shall fail to pay when due any interest on any Loan or Note or
any fee or any other amount payable hereunder or under the Fee
Letter or any other Financing Document and, with regard to this
clause (b), such failure to pay shall continue unremedied for a
period of three Business Days.
Section 7.2 Covenants Without Notice. The Company shall
fail to observe or perform any covenant or agreement contained in
Subsections 5.1(a), 5.1(e), 5.1(g), 5.1(i), 5.1(j) and 5.2(e)
Article 6.
Section 7.3 Other Covenants. The Company shall fail to
observe or perform any covenant or agreement contained in this
Agreement, other than those referred to in Sections 7.1 or 7.2,
and, if capable of being remedied, such failure shall remain
unremedied for 30 days after the earlier of (1) the Company's
obtaining knowledge thereof, or (2) written notice thereof shall
have been given to the Company by any Lender, any Issuing Bank or
the Administrative Agent.
Section 7.4 Other Financing Document Obligations. Default
is made in the due observance or performance by PM Holdings, the
Company or any Subsidiary of the Company of any of the covenants
or agreements contained in any Financing Document other than this
Agreement, and such default continues unremedied beyond the
expiration of any applicable grace period which may be expressly
allowed under such Financing Document.
Section 7.5 Representations. Any representation, warranty
or statement made or deemed to be made by PM Holdings, the
Company or any Subsidiary of the Company or any of PM Holdings's,
such Company's, or Subsidiary's officers herein or in any other
Financing Document, or in any certificate, request or other
document furnished pursuant to or under this Agreement or any
other Financing Document, shall have been incorrect in any
material respect as of the date when made or deemed to be made.
Section 7.6 Non-Payments of Other Indebtedness. The Company
or any of its Subsidiaries shall fail to make any payment or
payments of principal of or interest on any Indebtedness of the
Company or such Subsidiary (other than (a) the Lender
Indebtedness and (b) any trade account subject to a bona fide
dispute and the trade creditor has neither filed a lawsuit nor
caused a Lien to be placed upon
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any Property of the Company or such Subsidiary) in excess of
$10,000,000 in the aggregate when due (whether at stated
maturity, by acceleration, on demand or otherwise) after giving
effect to any applicable grace period.
Section 7.7 Defaults Under Other Agreements. The Company or
any of its Subsidiaries shall fail to observe or perform any
covenant or agreement contained in any agreement(s) or
instrument(s) relating to Indebtedness of the Company or such
Subsidiary of $10,000,000 or more in the aggregate within any
applicable grace period, or any other event shall occur, if the
effect of such failure or other event is to accelerate, or, with
respect to the Company and the Subsidiary Guarantors, to permit
the holder of such Indebtedness or any other Person to
accelerate, the maturity of $10,000,000 or more in the aggregate
of such Indebtedness; or $10,000,000 or more in the aggregate of
any such Indebtedness shall be, or if as a result of such failure
or other event may be, required to be prepaid in whole or in part
prior to its stated maturity.
Section 7.8 Bankruptcy. PM Holdings, the Company or any of
its Subsidiaries shall commence a voluntary case concerning
itself under Title 11 of the United States Code entitled
"Bankruptcy" as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against PM Holdings, the Company or any of its
Subsidiaries and the petition is not controverted within 10 days,
or is not stayed or dismissed within 60 days, after commencement
of the case; or a custodian (as defined in the Bankruptcy Code)
is appointed for, or takes charge of, all or any substantial part
of the property of PM Holdings, the Company or any of its
Subsidiaries; or PM Holdings, the Company or any of its
Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction whether now or hereafter in effect relating to
PM Holdings, the Company or such Subsidiary or there is commenced
against PM Holdings, the Company or any of its Subsidiaries any
such proceeding which remains unstayed or undismissed for a
period of 60 days; or PM Holdings, the Company or any of its
Subsidiaries is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is
entered; or PM Holdings, the Company or any of its Subsidiaries
suffers any appointment of any custodian or the like for it or
any substantial part of its Property to continue undischarged or
unstayed for a period of 60 days; or PM Holdings, the Company or
any of its Subsidiaries makes a general assignment for the
benefit of creditors; or PM Holdings, the Company or any of its
Subsidiaries shall fail to pay, or shall state in writing that it
is unable to pay, or shall be unable to pay, its debts generally
as they become due; or PM Holdings, the Company or any of its
Subsidiaries shall by any act or failure to act indicate its
consent to, approval of or acquiescence in any of the foregoing;
or any corporate action is taken by PM Holdings, the Company or
any of its Subsidiaries for the purpose of effecting any of the
foregoing.
Section 7.9 Money Judgment. Judgments or orders for the
payment of money involving in the aggregate at any time a
liability (net of any insurance proceeds or indemnity payments
actually received in respect thereof prior to or within 60 days
from the entry thereof, or to be received in respect thereof in
the event any appeal thereof shall be unsuccessful) of more than
$10,000,000 or that could otherwise have a Material Adverse
Effect shall be rendered against the Company or any of the
Subsidiary Guarantors and such judgment or order shall continue
unsatisfied in accordance with the terms of such judgment or
order (in the case of a money judgment) and in effect for a
period of 60 days during which execution shall not be effectively
stayed or deferred (whether by action of a court, by agreement or
otherwise).
Section 7.10 Financing Documents. Any Material
Provision of any of the Financing Documents after delivery
thereof shall for any reason, except to the extent permitted by
the terms thereof, cease to be in full force and effect and
valid, binding and enforceable (except as enforceability may be
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limited as stated in Section 4.3) in accordance with
its terms, or, in the case of any of the Security Instruments,
cease to create a valid and perfected Lien of the priority
contemplated thereby on any of the collateral purported to be
covered thereby, or the Company or any of its Subsidiaries (or
any other Person who may have granted or purported to grant such
Lien) shall so state in writing. As used in this Section 7.10,
"Material Provision" shall mean (a) with respect to this
Agreement, the Notes, or the PM Holdings Guaranty, any material
term, covenant, or agreement set forth therein, and (b) with
respect to any other Financing Document, any provision if the
validity and enforceability thereof is necessary for such
Financing Document to accomplish its stated, or clearly intended,
purpose or otherwise necessary in order for any Lender to enforce
any material right or remedy under any Financing Document.
Section 7.11 Change of Control. The occurrence of a
Change of Control.
Section 7.12 Merger Agreement Representations and
Warranties. Any representation or warranty made or deemed made by
PM Holdings or Acquisition Co. in the Merger Agreement shall be
or have been incorrect in any material respect as of the Closing
Date.
Section 7.13 Default Under Senior Subordinated Notes. The
Company shall fail to observe or perform any covenant or
agreement contained in the Senior Subordinated Notes or the
Senior Subordinated Notes Indenture within any applicable grace
period, if the effect of such failure or other event is to
accelerate, or to permit the holders of the Senior Subordinated
Notes or any other Person to accelerate, the maturity thereof.
Section 7.14 Senior Indebtedness. The Senior Subordinated
Notes shall cease, for any reason, to be validly subordinated to
the Lender Indebtedness, as provided in the Senior Subordinated
Notes Indenture or the Company, any Affiliate of the Company, the
trustee in respect of the Senior Subordinated Notes or the
holders of at least 25% in aggregate principal amount of the
Senior Subordinated Notes shall so assert in writing.
Section 7.15 BP Indemnity. (a) The occurrence, with respect
to any of the BP Parties, of any of the events described in
Section 7.8 or the failure of the BP Indemnity to continue to be
in full force and effect, (b) the occurrence of any event or the
existence of any condition that would have been covered by the BP
Indemnity, and (c) the existence of (a) and (b), collectively,
could reasonably be expected to have a Material Adverse Effect.
Section 7.16 Ralston Indemnity. (a) The occurrence, with
respect to any of the Ralston Parties, of any of the events
described in Section 7.8 or the failure of the Ralston Indemnity
to continue to be in full force and effect, (b) the occurrence of
any event or the existence of any condition that would have been
covered by the Ralston Indemnity, and (c) the existence of (a)
and (b), collectively, could reasonably be expected to have a
Material Adverse Effect.
Then, and in any such event, and at any time thereafter, if any
Event of Default shall then be continuing, the Administrative
Agent, upon the written or telex request of the Required Lenders,
shall, by written notice to the Company, take any or all of the
following actions, without prejudice to the rights of the
Administrative Agent, any Lender or the holder of any Note, to
enforce its claims against the Company: (a) declare the Revolving
Credit Commitment and other lending obligations, if any,
terminated, whereupon the Revolving Credit Commitment and other
lending obligations, if any, of each Lender shall terminate
immediately; or (b) declare the entire principal amount of and
all accrued interest on all Lender Indebtedness then outstanding
to be, whereupon the same shall become, forthwith due and payable
without presentment,
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demand, protest, notice of protest or dishonor, notice
of acceleration, notice of intent to accelerate or other notice
of any kind, all of which are hereby expressly waived by the
Company, and thereupon take such action as it may deem desirable
under and pursuant to the Financing Documents, provided, that if
an Event of Default specified in Section 7.8 shall occur, the
result which would occur upon the giving of written notice by the
Administrative Agent to the Company, as specified in clauses (a)
and (b) above, shall occur automatically without the giving of
any such notice; or (c) if any Letter of Credit shall then be
outstanding, demand Cover which the Company
shall immediately pay to the Administrative Agent for deposit in
a cash collateral account maintained pursuant to the Cash
Collateral Agreement.
ARTICLE 8
THE AGENTS
Section 8.1 Appointment of Administrative Agent. Each
Lender (and each Secured Affiliate by and through its affiliated
Lender), each Co-Agent and each Issuing Bank hereby designates
Chase Bank of Texas, National Association, as Administrative
Agent to act as herein specified and as specified in the other
Financing Documents. Each Lender (and each Secured Affiliate by
and through its affiliated Lender) and each Issuing Bank hereby
irrevocably authorizes the Administrative Agent to take such
action on its behalf under the provisions of this Agreement, the
Notes, and the other Financing Documents and to exercise such
powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Administrative Agent
by the terms hereof and thereof and such other powers as are
reasonably incidental thereto. The Administrative Agent may
perform any of its duties hereunder by or through its agents or
employees.
Section 8.2 Limitation of Duties of Administrative
Agent. The Administrative Agent shall have no duties or
responsibilities except those expressly set forth with respect to
the Administrative Agent in this Agreement and as specified in
the other Financing Documents. Neither the Administrative Agent
nor any of its officers, directors, employees or agents shall be
liable for any action taken or omitted by it as such hereunder or
in connection herewith, unless caused by its or their gross
negligence or willful misconduct. The duties of the
Administrative Agent shall be mechanical and administrative in
nature; the Administrative Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender; and
nothing in this Agreement, expressed or implied, is intended to
or shall be so construed as to impose upon the Administrative
Agent any obligations in respect of this Agreement except as
expressly set forth herein.
Section 8.3 Lack of Reliance on the Administrative Agent.
(a) Independent Investigation. Independently and
without reliance upon the Administrative Agent, each Lender, to
the extent it deems appropriate, has made and shall continue to
make (1) its own independent investigation of the financial
condition and affairs of the Company in connection with the
taking or not taking of any action in connection herewith, and
(2) its own appraisal of the creditworthiness of the Company,
and, except as expressly provided in this Agreement, and the
other Financing Documents, the Administrative Agent shall have no
duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before
the consummation of the transactions contemplated herein or at
any time or times thereafter.
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(b) Administrative Agent Not Responsible. The
Administrative Agent shall not be responsible to any Lender or
any Issuing Bank for any recitals, statements, information,
representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, priority or sufficiency of this
Agreement, the Notes, the Letters of Credit or the other
Financing Documents or the financial condition of the Company or
be required to make any inquiry concerning either the performance
or observance of any of the terms, provisions or conditions of
this Agreement, the Notes or the other Financing Documents, or
the financial condition of the Company, or the existence or
possible existence of any Default or Event of Default.
Section 8.4 Certain Rights of the Administrative Agent. If
the Administrative Agent shall request instructions from the
Required Lenders with respect to any act or action (including the
failure to act) in connection with this Agreement, the Notes and
the other Financing Documents, the Administrative Agent shall be
entitled to refrain from such act or taking such action unless
and until the Administrative Agent shall have received
instructions from the Required Lenders; and the Administrative
Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Lender shall have
any right of action whatsoever against the Administrative Agent
as a result of the Administrative Agent acting or refraining from
acting under this Agreement, the Notes and the other Financing
Documents in accordance with the instructions of the Required
Lenders, or to the extent required by Section 9.2, all of the
Lenders.
Section 8.5 Reliance by Administrative Agent. The
Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other documentary
teletransmission or telephone message believed by it to be
genuine and correct and to have been signed, sent or made by the
proper Person. The Administrative Agent may consult with legal
counsel (including counsel for the Company), independent public
accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants
or experts.
Section 8.6 INDEMNIFICATION OF ADMINISTRATIVE AGENT. TO THE
EXTENT THE ADMINISTRATIVE AGENT IS NOT REIMBURSED AND INDEMNIFIED
BY THE COMPANY, EACH LENDER WILL REIMBURSE AND INDEMNIFY THE
ADMINISTRATIVE AGENT IN PROPORTION TO ITS TOTAL CREDIT
PERCENTAGE, FOR AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES (INCLUDING REASONABLE COUNSEL FEES AND DISBURSEMENTS) OR
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE
AGENT IN PERFORMING ITS DUTIES HEREUNDER, IN ANY WAY RELATING TO
OR ARISING OUT OF THIS AGREEMENT AND BY REASON OF THE ORDINARY
NEGLIGENCE OF THE ADMINISTRATIVE AGENT, PROVIDED, THAT NO LENDER
SHALL BE LIABLE TO THE ADMINISTRATIVE AGENT FOR ANY PORTION OF
SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS
RESULTING FROM THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.
Section 8.7 The Administrative Agent in its Individual
Capacity. With respect to its obligations under this Agreement,
the Loans made by it and the Notes issued to it, the
Administrative Agent shall have the same rights and powers
hereunder as any other Lender or holder of a Note and may
exercise the same as though it were not performing the duties, if
any, specified herein; and the terms "Lenders," "Required
Lenders," "Revolving Credit Lenders," "Tranche A Term Loan
Lenders," "Tranche B Term Loan Lenders," "holders of Notes" or
any similar terms shall, unless the context clearly otherwise
indicates,
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include the Administrative Agent in its individual
capacity. The Administrative Agent may accept deposits from, lend
money to, and generally engage in any kind of banking, trust,
financial advisory or other business with the Company or any
affiliate of the Company as if it were not performing the duties,
if any, specified herein, and may accept fees and other
consideration from the Company for services in connection with
this Agreement and otherwise without having to account for the
same to the Lenders.
Section 8.8 May Treat Lender as Owner. The Company, the
Administrative Agent and the Issuing Banks may deem and treat
each Lender as the owner of such Lender's Note for all purposes
hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with the Administrative
Agent. Any request, authority or consent of any Person who at the
time of making such request or giving such authority or consent
is the owner of a Note shall be conclusive and binding on any
subsequent owner, transferee or assignee of such Note or any
promissory note or notes issued in exchange therefor.
Section 8.9 Successor Administrative Agent.
(a) Administrative Agent Resignation. The
Administrative Agent may resign at any time by giving written
notice thereof to the Lenders, the Issuing Banks and the Company
and may be removed at any time with or without cause by the
Required Lenders. Upon any such resignation or removal, the
Required Lenders shall have the right, upon five days' notice to
the Company, to appoint a successor Administrative Agent, subject
to the approval of the Company, such approval not to be
unreasonably withheld. If no successor Administrative Agent shall
have been so appointed by the Required Lenders, and shall have
accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the
Required Lenders' removal of the retiring Administrative Agent,
then, upon five days' notice to the Company, the retiring
Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent (subject to approval of the
Company, such approval not to be unreasonably withheld), which
shall be a bank which maintains an office in the United States,
or a commercial bank organized under the laws of the United
States of America or of any State thereof, or any Affiliate of
such bank, having a combined capital and surplus of at least
$250,000,000.
(b) Rights, Powers, etc. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any
retiring Administrative Agent's resignation or removal hereunder
as Administrative Agent, the provisions of this Article 8 shall
inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this
Agreement.
Section 8.10 Co-Agents. No Co-Agent shall have any
duties hereunder in its capacity as such.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including, telecopy or similar teletransmission or writing) and
shall be given to such party at its address or telecopy number
set forth on the signature pages hereof or such other address or
telecopy number as such party may hereafter specify by notice to
the Administrative Agent and the
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Company. Each such notice, request or other communication
shall be effective (a) if given by mail, 72 hours
after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid, or (b) if given by
any other means (including, but not limited to, by air courier),
when delivered at the address specified in this Section,
provided, that notices to the Administrative Agent shall not be
effective until actually and physically received.
Section 9.2 Amendments and Waivers. Neither this Agreement
nor any other Financing Document, nor any terms hereof or
thereof, may be amended, supplemented or modified except in
accordance with the provisions of this Section. The Required
Lenders may, or, with the written consent of the Required
Lenders, the Administrative Agent shall, from time to time, (x)
enter into with the Company, written amendments, supplements or
modifications hereto and to the other Financing Documents for the
purpose of adding any provisions to this Agreement or to the
other Financing Documents or changing in any manner the
rights or obligations of the Lenders or the Company hereunder or
thereunder or (y) waive at the Company's request, on such terms
and conditions as the Required Lenders or the Administrative
Agent, as the case may be, may specify in such instrument, any of
the requirements of this Agreement or the other Financing
Documents or any Default and its consequences; provided, however,
that no such waiver and no such amendment, supplement or
modification shall:
(a) reduce the amount or extend the scheduled date of
maturity of any Loan or any Reimbursement Obligation or of
any scheduled installment thereof or reduce the stated rate
of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof or modify any
provision that provides for the ratable sharing by the
Lenders of any payment or prepayment of Lender Indebtedness
to provide for a non-ratable sharing thereof or the right
of the Term Lenders to decline acceptance of prepayment or
increase the amount or extend the expiration date of the
Revolving Credit Commitments or Term Loan Commitments or
amend, modify or waive any provision of Section 2.19, in
each case without the prior written consent of each Lender
directly affected thereby;
(b) change the currency in which any Loan or
Reimbursement Obligation is payable or amend, modify or
waive any provision of this Section 9.2 or reduce the
percentage specified in the definition of Required Lenders,
in each case without the written consent of all of the
Lenders;
(c) release (1) any Subsidiary Guarantor from its
obligations under the Guarantee and Collateral Agreement,
(2) PM Holdings from its obligations under the PM Holdings
Guaranty or the PM Holdings Pledge Agreement, or (3) all or
substantially all of the Collateral, without the written
consent of all of the Lenders, except as expressly
permitted hereby, provided, that the Administrative Agent
shall and may release (without consent from the Lenders)
any Collateral sold, transferred or otherwise disposed of
as permitted by Section 6.4;
(d) amend, modify or waive any provision of Article 8
without the written consent of the Administrative Agent; or
(e) amend, modify or waive (1) any Letter of Credit
Liability without the written consent of the applicable
Issuing Bank or (2) any Letter of Credit without the
consent of each Revolving Credit Lender if such Letter of
Credit, after giving effect to such amendment, modification
or waiver, would no longer satisfy the requirements hereof
if such Letter of Credit was being issued ab initio at such
time, provided, that in all cases other than clauses (1) or
(2), only the
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consent of the applicable Issuing Bank shall
be required to amend, modify or waive any Letter of Credit.
Any waiver and any amendment, supplement or modification
pursuant to this Section 9.2 shall apply to each of the
Lenders and shall be binding upon the Company, the Lenders,
the Administrative Agent and all future holders of the
Loans. In the case of any waiver, the Company, the Lenders
and the Administrative Agent shall be restored to their
former position and rights hereunder and under the other
Financing Documents, and any Default waived shall be deemed
to be cured and not continuing; but no such waiver shall
extend to any subsequent or other Default, or impair any
right consequent thereon.
Section 9.3 No Waiver; Remedies Cumulative. No failure
or delay on the part of the Company or the Administrative Agent
or any Lender or any holder of any Note in exercising any right
or remedy under this Agreement or any other Financing Document
and no course of dealing between the Company and the
Administrative Agent or any Lender or any holder of any Note
shall operate as a waiver thereof, nor shall any single or
partial exercise of any right or remedy under the Notes, this
Agreement or any other Financing Document preclude any other or
further exercise thereof or the exercise of any other right or
remedy under the Notes, this Agreement or any other Financing
Document. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the
Company, the Administrative Agent or any Lender would otherwise
have. No notice to or demand on the Company not required under
the Notes, this Agreement or any other Financing Document in any
case shall entitle the Company to any other or further notice or
demand in similar or other circumstances or constitute a waiver
of the rights of the Administrative Agent or the Lenders to any
other or further action in any circumstances without notice or
demand.
Section 9.4 Payment of Expenses, Indemnities, etc. The
Company agrees to (and shall be liable for):
(a) Expenses. Whether or not the transactions hereby
contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Administrative
Agent and each Issuing Bank in the administration (both
before and after the execution hereof and including advice
of counsel for the Administrative Agent as to the rights
and duties of the Administrative Agent and the Lenders with
respect thereto) of, and in connection with the
preparation, execution and delivery of, recording or filing
of, preservation of rights under, enforcement of,
refinancing, renegotiation or restructuring of, this
Agreement, the Notes, and the other Financing Documents and
any amendment, waiver or consent relating thereto
(including, but not limited to, the reasonable fees and
disbursements of counsel for the Administrative Agent) and
promptly reimburse the Administrative Agent and the Lenders
for all amounts expended, advanced, or incurred by the
Administrative Agent or the Lenders to satisfy any
obligation of the Company, PM Holdings, or the Subsidiary
Guarantors under this Agreement or any other Financing
Document. After Default, the Company shall also pay all
reasonable out-of-pocket costs and expenses of the Lenders
in connection with the preservation of rights under,
enforcement of, refinancing, renegotiation or restructuring
of, this Agreement, the Notes, and the other Financing
Documents and any amendment, waiver or consent relating
thereto (including, but not limited to, the reasonable fees
and disbursements of counsel for the Lenders);
(b) INDEMNIFICATION. INDEMNIFY THE ADMINISTRATIVE
AGENT, THE ISSUING BANKS AND EACH LENDER, EACH OF THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES,
AGENTS AND AFFILIATES FROM, HOLD EACH OF THEM HARMLESS
AGAINST,
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AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR,
ANY AND ALL ACTIONS, SUITS, PROCEEDINGS (INCLUDING ANY
INVESTIGATIONS, LITIGATION OR INQUIRIES), CLAIMS, COSTS,
LOSSES, LIABILITIES, DAMAGES OR EXPENSES OF ANY KIND OR
NATURE WHATSOEVER WHICH MAY BE INCURRED BY OR ASSERTED
AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM
IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT
OF OR IN ANY WAY RELATED TO (1) ANY ACTUAL OR PROPOSED USE
BY THE COMPANY OR ANY SUBSIDIARY OF THE COMPANY OF THE
PROCEEDS OF ANY OF THE LOANS; OR (2) ANY OTHER ASPECT OF
THIS AGREEMENT, THE MERGER, THE NOTES, AND THE FINANCING
DOCUMENTS, INCLUDING BUT NOT LIMITED TO THE REASONABLE FEES
AND DISBURSEMENTS OF COUNSEL (INCLUDING ALLOCATED COSTS OF
INTERNAL COUNSEL) AND ALL OTHER EXPENSES INCURRED IN
CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO
DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY
INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM, AND
INCLUDING ALL ACTIONS, SUITS, PROCEEDINGS (INCLUDING ANY
INVESTIGATIONS, LITIGATION OR INQUIRIES), CLAIMS, COSTS,
LOSSES, LIABILITIES, DAMAGES OR EXPENSES ARISING BY REASON
OF ORDINARY NEGLIGENCE OF ANY OF THE ADMINISTRATIVE AGENT,
THE ISSUING BANKS AND EACH LENDER, EACH OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS AND
AFFILIATES; PROVIDED, HOWEVER, THE PROVISIONS OF THIS
SECTION 9.4(B) SHALL NOT APPLY TO ANY ACTION, SUITS,
PROCEEDINGS, CLAIMS, COSTS, LOSSES, LIABILITIES, DAMAGES,
OR EXPENSES TO THE EXTENT, BUT ONLY TO THE EXTENT, CAUSED
BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY
SEEKING INDEMNIFICATION;
(c) ENVIRONMENTAL INDEMNIFICATION. INDEMNIFY AND HOLD
HARMLESS FROM TIME TO TIME THE ADMINISTRATIVE AGENT, THE
ISSUING BANKS AND THE LENDERS, EACH PERSON CLAIMING BY,
THROUGH, UNDER OR ON ACCOUNT OF ANY OF THE FOREGOING AND
THE RESPECTIVE DIRECTORS, OFFICERS, COUNSEL, EMPLOYEES,
AGENTS, AFFILIATES, SUCCESSORS AND ASSIGNS OF EACH OF THE
FOREGOING FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST
RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS,
DAMAGES AND LIABILITIES (WHICH RELATE TO OR ARISE AS A
RESULT OF THE LOANS, THE LETTERS OF CREDIT OR ANY FINANCING
DOCUMENT) TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT AND
INCLUDING ANY AND ALL LOSSES, CLAIMS, COST RECOVERY
ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND
LIABILITIES (WHICH RELATE TO OR ARISE AS A RESULT OF THE
LOANS, THE LETTERS OF CREDIT OR ANY FINANCING DOCUMENT)
ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF THE
ADMINISTRATIVE AGENT, THE ISSUING BANKS AND THE LENDERS,
EACH PERSON CLAIMING BY, THROUGH, UNDER OR ON ACCOUNT OF
ANY OF THE FOREGOING AND THE RESPECTIVE DIRECTORS,
OFFICERS, COUNSEL, EMPLOYEES, AGENTS, AFFILIATES,
SUCCESSORS AND ASSIGNS OF EACH OF THE FOREGOING (1) UNDER
ANY ENVIRONMENTAL LAW APPLICABLE TO THE COMPANY OR ANY OF
ITS SUBSIDIARIES OR ANY OF THEIR RESPECTIVE PROPERTIES,
INCLUDING WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL OF
HAZARDOUS SUBSTANCES ON ANY OF THEIR RESPECTIVE PROPERTIES,
(2) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY THE
COMPANY OR ANY OF ITS SUBSIDIARIES WITH ANY ENVIRONMENTAL
LAW APPLICABLE TO THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(3) DUE TO PAST OWNERSHIP BY THE COMPANY OR ANY OF ITS
SUBSIDIARIES OF ANY OF THEIR RESPECTIVE PROPERTIES OR PAST
ACTIVITY ON ANY OF THEIR RESPECTIVE PROPERTIES OR PAST
ACTIVITY ON ANY OF THEIR RESPECTIVE PROPERTIES WHICH,
THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (4) THE PRESENCE, USE,
RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS
SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED
BY THE COMPANY OR ANY OF ITS SUBSIDIARIES, OR (5)
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ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OTHER FINANCING
DOCUMENT; AND
(d) ENVIRONMENTAL WAIVER. WITHOUT LIMITING THE
FOREGOING PROVISIONS, THE COMPANY HEREBY DOES WAIVE,
RELEASE AND COVENANT NOT TO BRING AGAINST ANY OF THE
PERSONS INDEMNIFIED IN THIS SECTION 9.4 ANY DEMAND, CLAIM,
COST RECOVERY ACTION OR LAWSUIT THEY MAY NOW OR HEREAFTER
HAVE OR ACCRUE (WHICH RELATE TO OR ARISE AS A RESULT OF THE
LOANS, THE LETTERS OF CREDIT OR ANY FINANCING DOCUMENT)
ARISING FROM (1) ANY ENVIRONMENTAL LAW NOW OR HEREAFTER
ENACTED (INCLUDING THOSE APPLICABLE TO THE COMPANY OR ANY
OF ITS SUBSIDIARIES), (2) THE PRESENCE, USE, RELEASE,
STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON
OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE
COMPANY OR ANY OF ITS SUBSIDIARIES, OR (3) THE BREACH OR
NONCOMPLIANCE BY THE COMPANY WITH ANY ENVIRONMENTAL LAW OR
ENVIRONMENTAL COVENANT APPLICABLE TO THE COMPANY OR ANY OF
ITS SUBSIDIARIES.
If and to the extent that the obligations of the Company under
this Section are unenforceable for any reason, the Company hereby
agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under
applicable law. The Company's obligations under this Section
shall survive any termination of this Agreement and the payment
of the Notes.
Section 9.5 Right of Setoff. In addition to and not in
limitation of all rights of offset that any Lender or Issuing
Bank may have under applicable law, each Lender or other holder
of a Note, or any other Lender Indebtedness shall, upon the
occurrence of any Event of Default and at any time during the
continuance thereof and whether or not such Lender, such Issuing
Bank or such holder has made any demand or the Company's
obligations are matured, have the right at any time and from time
to time, without notice to the Company (any such notice being
expressly waived by the Company) to set-off and apply any and all
deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing
by any Lender or Issuing Bank to or for the credit or the account
of the Company against any and all of the Lender Indebtedness
owing to such Lender or Issuing Bank then outstanding, subject to
the provisions of Section 2.19.
Section 9.6 Benefit of Agreement. The Notes, this Agreement
and the other Financing Documents shall be binding upon and inure
to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto, provided, that the Company may
not assign or transfer any of its interest hereunder or
thereunder without the prior written consent of the Lenders.
Section 9.7 Successors and Assigns; Participations and
Assignments.
(a) Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time sell
to one or more banks, financial institutions, or investment funds
("Participants") participating interests in any Loan owing to
such Lender, any Note held by such Lender, any Revolving Credit
Commitment of such Lender or any other interest of such Lender
hereunder and under the other Financing 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
(and any Note evidencing such Loan) for all purposes under this
Agreement and the other Financing Documents and the Company and
the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights
and obligations
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under this Agreement and the other Financing Documents. Any
agreement pursuant to which any Lender shall sell any such
participating interest shall provide that such Lender shall
retain the sole right and responsibility to exercise such
Lender's rights and enforce the Company's obligations hereunder,
including the right to consent to any amendment, supplement,
modification or waiver of any provision of this Agreement or any
of the other Financing Documents, provided, that such
participation agreement may provide that such Lender will not
agree to any amendment, supplement, modification or waiver
described in clause (a), (b) or (c) of the proviso to the second
sentence of Section 9.2 without the consent of the Participant.
The Company agrees that each Lender shall be entitled to the
benefits of Sections 2.15, 2.16, 2.18, 2.20 and 9.4 without
regard to whether it has granted any participating interests, and
that all amounts payable to a Lender under such Sections shall be
determined as if such Lender had not granted any such
participating interests. Each Participant shall have the rights
of set-off against the Lender Indebtedness and similar rights or
Liens to the same extent as may be available to the
Administrative Agent or the Lenders.
(b) Any Lender may make, carry or transfer Loans at,
to or for the account of, any of its branch offices or the office
of an Affiliate of such Lender.
(c) Any Lender may, in accordance with applicable law,
at any time and from time to time assign to any Lender or any
Affiliate or Approved Fund thereof, or, with the prior written
consent of the Company and the Administrative Agent (which in
each case shall not be unreasonably withheld), to an additional
bank, financial institution or investment fund (an "Assignee")
all or any part of its rights and obligations under this
Agreement and any Notes, including, without limitation, its
Revolving Credit Commitment, Loans, and Letter of Credit
Liabilities pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit G (each an "Assignment and
Acceptance"), executed by such Assignee, such assigning Lender
(and, in the case of any Assignee that is not then a Lender or an
Affiliate thereof, by the Company and the Administrative Agent)
and delivered to the Administrative Agent for its acceptance and
recording in the Register, provided, that (1) (unless the Company
and the Administrative Agent otherwise consent in writing) no
such transfer to an Assignee (other than a Lender or any
Affiliate or Approved Fund thereof) shall be in a principal
amount less than (A) $5,000,000 for a transfer by a Tranche B
Term Loan Lender, and (B) $10,000,000 in the aggregate for a
transfer by any other Lender (or, if less, the full amount of
such assigning Lender's Term Loans, Revolving Credit Loans,
Letter of Credit Liabilities, and Revolving Credit Commitment),
(2) after giving effect to any such assignments by a Revolving
Credit Lender or a Tranche A Term Loan Lender, the Revolving
Credit Percentage of the assigning Lender and the Assignee must
equal such Person's Tranche A Term Loan Percentage and (3) if any
Lender assigns all or any part of its rights and obligations
under this Agreement to one of its Affiliates in connection with
or in contemplation of the sale or other disposition of its
interest in such Affiliate, the Company's and the Administrative
Agent's prior written consent shall be required for such
assignment, and (4) any consent of the Company otherwise required
under this paragraph shall not be required if a Default has
occurred and is continuing. 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 Revolving Credit
Commitment, Revolving Credit Exposure, and Term Loans, as set
forth therein, and (y) the assigning Lender thereunder shall be
released from its obligations under this Agreement to the extent
that such obligations shall have been expressly assumed by the
Assignee pursuant to such Assignment and Acceptance (and, in the
case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations
under this Agreement, such assigning Lender shall cease to be a
party hereto but shall nevertheless continue to be entitled to
the benefits of Sections 2.16, 2.18, 2.20, and 9.4).
Notwithstanding the foregoing, no Assignee, which as of the date
of any assignment to it pursuant to this Section 9.7(c) would be
entitled to receive any greater payment under Section 2.16 or
2.20
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than the assigning Lender would have been entitled to
receive as of such date under such Sections with respect to the
rights assigned, shall be entitled to receive such payments
unless the Company has expressly consented in writing to waive
the benefit of this provision at the time of the Assignment. The
foregoing sentence shall not preclude any Assignee from receiving
greater payments under Section 2.16 or 2.20 than the assigning
Lender would have been entitled to receive after the date of such
assignment.
(d) The Administrative Agent, on behalf of the
Company, shall maintain at its address referred to in Section 9.1
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 Revolving Credit Commitment and
of, and the principal amount of the Loans and Letter of Credit
Liabilities owing to, and any Notes evidencing such Loans owned
by, each Lender from time to time. Notwithstanding anything in
this Agreement to the contrary, the Company, the Administrative
Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of any Loan, any Notes and
the Revolving Credit Commitments and recorded therein for all
purposes of this Agreement. The Register shall be available for
inspection by the Company or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Notwithstanding anything in this Agreement to the
contrary, no assignment under Section 9.7(c) of any rights or
obligations under or in respect of the Loans, Reimbursement
Obligations or any Notes evidencing such Loans shall be effective
unless and until the Administrative Agent shall have recorded the
assignment in the Register pursuant to this Section 9.7(e). Upon
its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee
that is not then a Lender or an Affiliate thereof, by the Company
and the Administrative Agent), together with payment to the
Administrative Agent of a registration and processing fee of
$3,500 (which fee need not be paid in the case of any assignment
to an Affiliate or Approved Fund of the assigning Lender and
which shall not be a cost subject to reimbursement under Section
9.4 or otherwise hereunder), the Administrative Agent shall (1)
promptly accept such Assignment and Acceptance and (2) on the
effective date determined pursuant thereto record the information
contained therein in the Register and give prompt notice of such
acceptance and recordation to the Lenders and the Company. On or
prior to such effective date, the assigning Lender shall
surrender any outstanding Notes held by it, all or a portion of
which are being assigned, and the Company, shall, upon the
request to the Administrative Agent by the assigning Lender or
the Assignee, as applicable, execute and deliver to the
Administrative Agent (in exchange for the outstanding Notes of
the assigning Lender) a new Revolving Credit Note, Tranche A Term
Note and/or Tranche B Term Note, as the case may be, to the order
of such Assignee in an amount equal to (A) in the case of a
Revolving Credit Note, the greater of (i) the amount of such
Assignee's Revolving Credit Commitment and (ii) the aggregate
principal amount of the Revolving Credit Exposure of such
Assignee, (B) in the case of a Tranche A Term Note, the amount of
such Assignee's Tranche A Term Loans, and (C) in the case of a
Tranche B Term Note, the amount of such Assignee's Tranche B Term
Loans, in each case with respect to the relevant Loan, Letter of
Credit Liability or Revolving Credit Commitment after giving
effect to such Assignment and Acceptance and, if the assigning
Lender has retained a Revolving Credit Commitment, Revolving
Credit Exposure, or Term Loan hereunder, a new Revolving Credit
Note, Tranche A Term Note and/or Tranche B Term Note, as the case
may be, to the order of the assigning Lender in an amount equal
to (i) in the case of a Revolving Credit Note, the greater of a)
the amount of such Lender's Revolving Credit Commitment and b)
the aggregate principal amount of the Revolving Credit Exposure
of such Lender, (ii) in the case of a Tranche A Term Note, the
amount of such Lender's Tranche A Term Loans, and (iii) in the
case of a Tranche B Term Note, the amount of such Lender's
Tranche B Term Loans, in each case with respect to the relevant
Loan, Revolving Credit Exposure or Revolving Credit Commitment
after giving effect to such Assignment and Acceptance. Any such
new Notes shall be dated such effective date and shall otherwise
be in the form of
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the Note replaced thereby. Any Notes surrendered by the assigning
Lender shall be returned by the Administrative Agent to the
Company marked "canceled".
(f) The Company authorizes each Lender to disclose to
any participant or Assignee (each, a "Transferee") and any
prospective Transferee, provided, that any such Transferee or
potential Transferee has signed a confidentiality agreement
substantially similar to the provisions of Section 9.13, any and
all information in such Lender's possession concerning the
Company and its Affiliates which has been delivered to such
Lender by or on behalf of the Company pursuant to this Agreement
or which has been delivered to such Lender by or on behalf of the
Company in connection with such Lender's credit evaluation of the
Company and its Affiliates prior to becoming a party to this
Agreement. No assignment or participation made or purported to be
made to any Transferee shall be effective without the prior
written consent of the Company if it would require it to make any
filing with any Governmental Authority or qualify any Loan or
Note under the laws of any jurisdiction, and the Company shall be
entitled to request and receive such information and assurances
as it may reasonably request from any Lender or any Transferee to
determine whether any such filing or qualification is required or
whether any assignment or participation is otherwise in
accordance with applicable law.
(g) Any Lender may at any time grant, pledge or assign
a security interest in all or a portion of its rights under this
Agreement to secure obligations of such Lender, including any
such grant, pledge or assignment to a Federal Reserve Bank, and
this Section 9.7 shall not apply to any such grant, pledge or
assignment of a security interest, provided, that no such grant,
pledge or assignment of a security interest shall release a
Lender from any of its obligations hereunder or substitute any
such assignee for such Lender as a party hereto.
Section 9.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; ETC.
(A) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND UNDER THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW, OR ANY SIMILAR SUCCESSOR PROVISION
THERETO, BUT EXCLUDING ALL OTHER CONFLICT-OF-LAWS RULES)AND TO
THE EXTENT CONTROLLING, LAWS OF THE UNITED STATES OF AMERICA.
(b) SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE OTHER
FINANCING DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF
NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE COMPANY HEREBY IRREVOCABLY WAIVES
ANY OBJECTION, INCLUDING, BUT NOT LIMITED TO, ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
(c) WAIVER OF CONSEQUENTIAL DAMAGES. TO THE MAXIMUM
EXTENT ALLOWED BY APPLICABLE LAW, EACH OF THE COMPANY, THE
ADMINISTRATIVE AGENT, THE ISSUING BANKS AND THE LENDERS (I)
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN
ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES; (II) CERTIFIES THAT NO PARTY HERETO NOR ANY
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REPRESENTATIVE OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER;
AND (III) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT, THE OTHER FINANCING DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BASED UPON, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION.
(d) Designation of Process Agent. The Company hereby
irrevocably designates CT Corporation System, with an office on
the date hereof at 1633 Broadway, New York, New York, 10019, as
the designee, appointee and process agent of the Company to
receive, for and on behalf of the Company, service of process in
such respective jurisdictions in any legal action or proceeding
with respect to this Agreement, the Notes, or the other Financing
Documents. It is understood that a copy of such process served on
such agent will be promptly forwarded by mail to the Company at
its address set forth opposite its signature below, but the
failure of the Company to receive such copy shall not affect in
any way the service of such process. The Company further
irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail,
postage prepaid, to the Company at its said address, such service
to become effective on the earlier to occur of (i) actual receipt
of such service of process and (ii) 30 days after such mailing.
(e) Service of Process. Nothing herein shall affect
the right of the Administrative Agent or any Lender or any holder
of a Note to serve process in any other manner permitted by law
or to commence legal proceedings or otherwise proceed against the
Company in any other jurisdiction.
Section 9.9 Independent Nature of Lenders' Rights. The
amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and each Lender shall be entitled
to protect and enforce its rights arising out of this Agreement, and it
shall not be necessary for any other Lender to be joined as an
additional party in any proceeding for such purpose.
Section 9.10 Invalidity. In the event that any one or more
of the provisions contained in the Notes, this Agreement or in
any other Financing Document shall, for any reason, be held
invalid, illegal or unenforceable in any respect, (a) the Company
agrees that such invalidity, illegality or unenforceability shall
not affect any other provision of the Notes, this Agreement or
any other Financing Document and (b) the Company and the
Administrative Agent (acting on behalf and at the direction of
the Lenders) will negotiate in good faith to amend such provision
so as to be legal, valid, and enforceable.
Section 9.11 Renewal, Extension or Rearrangement. All
provisions of this Agreement and of any other Financing Documents
relating to the Notes or other Lender Indebtedness shall apply
with equal force and effect to each and all promissory notes
hereafter executed which in whole or in part represent a renewal,
extension for any period, increase or rearrangement of any part
of the Lender Indebtedness originally represented by the Notes,
or of any part of such other Lender Indebtedness.
Section 9.12 Interest. It is the intention of the parties
hereto to conform strictly to usury laws applicable to the
Administrative Agent, the Issuing Banks and the Lenders
(collectively, the "Financing Parties") and the Transactions.
Accordingly, if the Transactions would be usurious as to any
Financing Party under laws applicable to it, then,
notwithstanding anything to the contrary in the Notes, this
Agreement or in any other Financing Document or agreement entered
into in connection with the Transactions or as security for the
Notes, it is agreed as follows: (a) the aggregate of all
consideration which constitutes interest under law applicable to
any Financing Party that is contracted for, taken, reserved,
charged or received by
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such Financing Party under the Notes, this Agreement or under any
of such other Financing Documents or agreements or otherwise in
connection with the Transactions shall under no circumstances
exceed the maximum amount allowed by such applicable law, (b) in
the event that the maturity of the Notes is accelerated for any
reason, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest under law
applicable to any Financing Party may never include more than the
maximum amount allowed by such applicable law, and (c) excess
interest, if any, provided for in this Agreement or otherwise in
connection with the Transactions shall be canceled automatically
by such Financing Party and, if theretofore paid, shall be
credited by such Financing Party on the principal amount of the
Company's Indebtedness to such Financing Party (or, to the extent
that the principal amount of the Company's Indebtedness to such
Financing Party shall have been or would thereby be paid in full,
refunded by such Financing Party to the Company). The right to
accelerate the maturity of the Notes does not include the right
to accelerate any interest which has not otherwise accrued on the
date of such acceleration, and the Financing Parties do not
intend to collect any unearned interest in the event of
acceleration. All sums paid or agreed to be paid to the Financing
Parties for the use, forbearance or detention of sums included in
the Lender Indebtedness shall, to the extent permitted by law
applicable to such Financing Party, be amortized, prorated,
allocated and spread throughout the full term of the Notes until
payment in full so that the rate or amount of interest on account
of the Lender Indebtedness does not exceed the applicable usury
ceiling, if any. As used in this Section, the terms "applicable
law" or "laws applicable to any Financing Party" shall mean the
law of any jurisdiction whose laws may be mandatorily applicable
notwithstanding other provisions of this Agreement, or law of the
United States of America applicable to any Financing Party and
the Transactions which would permit such Financing Party to
contract for, charge, take, reserve or receive a greater amount
of interest than under such jurisdiction's law. To the extent
that Article 5069-1.04 of the Texas Revised Civil Statutes is
relevant to any Financing Party for the purpose of determining
the Highest Lawful Rate, such Financing Party hereby elects to
determine the applicable rate ceiling under such Article by the
indicated (weekly) rate ceiling from time to time in effect,
subject to such Financing Party's right subsequently to change
such method in accordance with applicable law.
Section 9.13 Confidential Information. The Administrative
Agent and each Lender agree that all documentation and other
information made available by the Company to the Administrative
Agent or such Lender under the terms of this Agreement shall
(except to the extent such documentation or other information is
publicly available or hereafter becomes publicly available other
than by action of the Administrative Agent or such Lender, or was
theretofore known or hereinafter becomes known to the
Administrative Agent or such Lender independent of any disclosure
thereto by the Company) be held in the strictest confidence in
accordance with its customary procedures by the Administrative
Agent or such Lender and used solely in the administration and
enforcement of the Loans from time to time outstanding from such
Lender to the Company and in the prosecution of defense of legal
proceedings arising in connection herewith, provided, that (a)
the Administrative Agent or such Lender may disclose
documentation and information to the Administrative Agent and/or
to any other Lender which is a party to this Agreement or any
Affiliates thereof, (b) the Administrative Agent or such Lender
may disclose such documentation or other information to any other
bank or other Person to which such Lender sells or proposes to
make an assignment or sell a participation in its Loans hereunder
if such other bank or Person, prior to such disclosure, agrees in
writing to be bound by the terms of a confidentiality agreement
substantially similar to the provisions of this Section 9.13, and
(c) such Lender may disclose such documentation or other
information to any of its direct or indirect contractual
counterparties in swap agreements or such contractual
counterparty's professional advisor if such contractual
counterparty or professional advisor to such contractual
counterparty agrees in writing to be bound by the terms of a
confidentiality agreement substantially similar to the provision
of this Section 9.13. Notwithstanding the foregoing, nothing
contained herein shall be construed to prevent the Administrative
Agent or a Lender from (1) making disclosure of any
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information (A) if required to do so by applicable law
or regulation, (B) to any governmental agency or regulatory body
(including any self-regulatory agency or body) having or claiming
to have authority to regulate or oversee any aspect of such
Lender's business or that of such Lender's corporate parent or
affiliates in connection with the exercise of such authority or
claimed authority, (C) pursuant to any subpoena or if otherwise
compelled in connection with any litigation or administrative
proceeding, (D) to correct any false or misleading information
which may become public concerning such Person's relationship to
the Company, or (E) to the extent the Administrative Agent or
such Lender or its counsel deems necessary or appropriate to
effect or preserve its security for any Lender Indebtedness or to
enforce any remedy provided in the Financing Documents, the Notes
or this Agreement or otherwise available by law; or (2) making,
on a confidential basis, such disclosures as such Lender
reasonably deems necessary or appropriate to its legal counsel or
accountants (including outside auditors). If the Administrative
Agent or such Lender is compelled to disclose such confidential
information in a proceeding requesting such disclosure, the
Administrative Agent or such Lender shall seek to obtain
assurance that such confidential treatment will be accorded such
information; provided, however, that the Lender shall have no
liability for the failure to obtain such treatment.
Section 9.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
Section 9.15 ENTIRE AGREEMENT. THE NOTES, THIS
AGREEMENT AND THE OTHER FINANCING DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE ADMINISTRATIVE AGENT, THE
ISSUING BANKS OR THE LENDERS AND THE OTHER RESPECTIVE PARTIES
HERETO AND THERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 9.16 Attachments. The exhibits, schedules and
annexes attached to this Agreement are incorporated herein and
shall be considered a part of this Agreement for the purposes
stated herein, except that in the event of any conflict between
any of the provisions of such exhibits and the provisions of this
Agreement, the provisions of this Agreement shall prevail.
Section 9.17 Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original but all of which
shall together constitute one and the same instrument.
Section 9.18 Survival of Indemnities. All covenants,
agreements, representations and warranties made by the Company
herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement shall be considered
to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the
making of any Loans and issuance of any Letters of Credit,
regardless of any investigation made by any such other party or
on its behalf and
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notwithstanding that the Administrative Agent, any Issuing Bank
or any Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect
as long as the principal of or any accrued interest on any Loan
or any fee or any other amount payable under this Agreement is
outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated. The
provisions of Sections 2.16, 2.18, 2.20 and 9.4 shall survive and
remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Loans,
the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision
hereof.
Section 9.19 Headings Descriptive. The headings of the
several sections and subsections of this Agreement, and Table of
Contents are inserted for convenience only and shall not in any
way affect the meaning or construction of any provision of this
Agreement.
Section 9.20 Satisfaction Requirement. If any agreement,
certificate, instrument or other writing, or any action taken or
to be taken, is by the terms of this Agreement required to be
satisfactory to any party, the determination of such satisfaction
shall be made by such party in its sole and exclusive judgment
exercised reasonably and in good faith.
Section 9.21 EXCULPATION PROVISIONS. EACH OF THE
PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ
THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS AND AGREES THAT
IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS
AGREEMENT AND THE OTHER FINANCING DOCUMENTS; THAT IT HAS IN FACT
READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND
KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT;
THAT IT HAS BEEN REPRESENTED BY LEGAL COUNSEL OF ITS CHOICE
THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS
AGREEMENT AND THE OTHER FINANCING DOCUMENTS; AND HAS RECEIVED THE
ADVICE OF ITS ATTORNEYS IN ENTERING INTO THIS AGREEMENT AND THE
OTHER FINANCING DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF
THE TERMS OF THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS
RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME
ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND
COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY
OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER
FINANCING DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR
KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
Section 9.22 Secured Affiliate. For purposes of this
Agreement and all other Financing Documents (other than
applicable Hedge Agreements), if a Secured Affiliate of a Lender
has entered into one or more Hedge Agreements with the Company or
any its Subsidiaries, then to the extent that such Secured
Affiliate has rights or obligations (or if the affiliated Lender,
rather than the Secured Affiliate, were the counter-party to the
applicable Hedge Agreement, such rights or obligations that such
Lender has) hereunder or under any other Financing Document
(other than applicable Hedge Agreements), such affiliated Lender
shall be the agent and attorney-in-fact for such Secured
Affiliate with regard to any such rights and obligations, or
deemed rights and obligations, as if such Lender were the
counter-party to the applicable Hedge Agreement including, but
not limited to, the following: (a) all distributions or payments
in respect of Collateral owing to such Secured Affiliate shall be
distributed or paid to such Lender, (b) all representations,
statements or disclaimers made herein or in any Financing
Document by or to such Lender shall be deemed to have been made
by or to such Secured Affiliate, (c) all obligations incurred by
such Lender that would have been incurred by the Secured
Affiliate if it were a party hereto (including, but not
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limited to, obligations under Section 8.6) shall be the
obligations of such Lender, and such Lender, as the agent and
attorney-in-fact of its Secured Affiliate, will make any and all
payments owing to the Administrative Agent with respect to such
obligations or deemed obligations of its Secured Affiliate. Each
such Lender represents, warrants and covenants to and with the
Administrative Agent that such Lender has, or at all applicable
times will have, full power and authority to act as agent and
attorney-in-fact for its Secured Affiliates. Under no
circumstance shall any Secured Affiliate have any voting rights
hereunder and the voting rights of any affiliated Lender shall
not be increased by virtue of the obligations owing to any such
Secured Affiliate.
Section 9.23 Issuing Banks. For purposes of this Agreement
and all other Financing Documents (other than applicable
Applications), if an affiliate of Chase has issued one or more
Letters of Credit for the account of the Company, then to the
extent that such affiliate has rights or obligations (or if
Chase, rather than the affiliate, were the Issuing Bank, such
rights or obligations that Chase has) hereunder or under any
other Financing Document (other than applicable Applications),
Chase shall be the agent and attorney-in-fact for such affiliate
with regard to any such rights and obligations, or deemed rights
and obligations, as if Chase has issued the applicable Letters of
Credit and were the counterparty to the applicable Application
including, but not limited to, the following: (a) all
distributions or payments in respect of Collateral owing to such
affiliate shall be distributed or paid to Chase, (b) all
representations, statements or disclaimers made herein or in any
Financing Document by or to Chase shall be deemed to have been
made by or to such affiliate, (c) all obligations incurred by
Chase that would have been incurred by the affiliate if it were a
party hereto (including, but not limited to, obligations under
Section 8.6) shall be the obligations of Chase, and Chase, as the
agent and attorney-in-fact of its affiliate, will make any and
all payments owing to the Administrative Agent with respect to
such obligations or deemed obligations of its affiliate. Chase
represents, warrants and covenants to and with the Administrative
Agent that Chase has, or at all applicable times will have, full
power and authority to act as agent and attorney-in-fact for its
affiliates. Under no circumstance shall any affiliate of Chase
issuing a Letter of Credit have any voting rights hereunder and
the voting rights of any such affiliate shall not be increased by
virtue of the obligations owing to such affiliate.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the date first above
written.
COMPANY: PURINA MILLS, INC.
By: /s/ David L. Abbott
--------------------
David L. Abbott
President and Chief
Executive Officer
Address: 1401 South Hanley Road
St. Louis, MO 63144
Attention: Jean LaFond
Telephone: (314) 768-4153
Telecopy: (314) 768-4889
ADMINISTRATIVE AGENT, ISSUING CHASE BANK OF TEXAS, NATIONAL
BANK AND LENDER: ASSOCIATION, as an Issuing Bank,
a Lender and as the
Administrative Agent
By: /s/ D.G. Mills
---------------
D.G. Mills
Vice President
Address: c/o Chase Securities Inc.
600 Travis Street,
20th Floor
Houston, Texas 77002
Attention: Debra Harris
Telephone: (713) 216-5733
Telecopy: (713) 216-4117
[Signature Page to Purina Credit Agreement - Page 1]
<PAGE>
CO-AGENTS AND LENDERS: MERCANTILE BANK NATIONAL
ASSOCIATION, as a Co-Agent
and a Lender
By: /s/ Curtis A. Schrieber
------------------------
Name: Curtis A. Schrieber
Title: AVP
Address: Mercantile Bank National
Association
7th and Washington/
Tram 12-3
St. Louis, Missouri
63101-1643
Attention: Curtis A. Schrieber
Telephone: (314) 425-2817
Telecopy: (314) 418-8430
[Signature Page to Purina Credit Agreement - Page 2]
<PAGE>
BANK OF AMERICA NT & SA, as a
Co-Agent and a Lender
By: /s/ Stephen W. Phillips
------------------------
Name: Stephen W. Phillips
Title: V.P.
Address: Bank of America NT & SA
231 S. LaSalle Street,
11th Floor
Chicago, Illinois 60697
Attention: Laura Ikens
Telephone: (312) 828-6433
Telecopy: (312) 974-1623
[Signature Page to Purina Credit Agreement - Page 3]
<PAGE>
ABN AMRO BANK N.V., as a Co-Agent
and a Lender
By: /s/ Joanna M. Riopelle
-----------------------
Name: Joanna M. Riopelle
Title: Group Vice President
and Director
By: /s/ Arthur N. Traver
---------------------
Name: Arthur N. Traver
Title: Group Vice President
Address: ABN AMRO Bank N.V.
135 South LaSalle
Chicago, Illinois 60603
Attention: Loans Administration
Telephone: (312) 904-2961
Telecopy: (312) 904-1288
[Signature Page to Purina Credit Agreement - Page 4]
<PAGE>
THE BANK OF NOVA SCOTIA, as a
Co-Agent and a Lender
By: /s/ F.C.H. Ashby
-----------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
Address: The Bank of Nova Scotia
600 Peachtree Street, N.E.,
Suite 2700
Atlanta, Georgia 30308
Attention: George Wong
Telephone: (404) 877-1556
Telecopy: (404) 888-8998
[Signature Page to Purina Credit Agreement - Page 5]
<PAGE>
BANK OF SCOTLAND, as a Co-Agent
and a Lender
By: /s/ Annie Chin Tat
--------------------
Name: Annie Chin Tat
Title: Vice President
Address: Bank of Scotland
565 Fifth Avenue
New York, New York 10017
Attention: Karen Workman/
Michelle Iocca
Telephone: (212) 450-0877/0875
Telecopy: (212) 557-9460
[Signature Page to Purina Credit Agreement - Page 6]
<PAGE>
NATIONSBANK, N.A., as a Co-Agent
and a Lender
By: /s/ Thomas J. Butkus
---------------------
Name: Thomas J. Butkus
Title: Vice President
Address: NationsBank, N.A.
901 Main Street,
14th Floor
Dallas, Texas 75202
Attention: Linda Webster
Telephone: (214) 508-2119
Telecopy: (214) 508-0944
[Signature Page to Purina Credit Agreement - Page 7]
<PAGE>
CREDIT LYONNAIS CHICAGO BRANCH,
as a Co-Agent and a Lender
By: /s/ Julie T. Kanak
-------------------
Name: Julie T. Kanak
Title: Vice President
Address: Credit Lyonnais
Chicago Branch
227 W. Monroe Street,
Suite 3800
Chicago, Illinois 60606
Attention: Rosette Liptak
Telephone: (312) 220-7319
Telecopy: (312) 641-5834
[Signature Page to Purina Credit Agreement - Page 8]
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A. "RABOBANK
NEDERLAND," NEW YORK BRANCH,
as a Co-Agent and a Lender
By: /s/ Kevin T. King
------------------
Name: Kevin T. King
Title: VP
By: /s/ Robert B. Benoit
---------------------
Name: Robert B. Benoit
Title: Senior Vice President
Address: Rabobank Nederand,
New York Branch
245 Park Avenue
New York, New York 10167
Attention: Debra Rivers/
Madleine Ricci
Telephone: (212) 961-7845/
(212) 916-7994
Telecopy: (212) 916-7930
[Signature Page to Purina Credit Agreement - Page 9]
<PAGE>
LENDERS: CREDIT AGRICOLE INDOSUEZ,
as a Lender
By: /s/ Dean Balice
----------------
Name: Dean Balice
Title: Senior Vice President
Branch Manager
By: /s/ David Bouhl
----------------
Name: David Bouhl
Title: F.V.P. Head of Corporate
Banking Chicago
Address: Credit Agricole Indosuez
55 East Monroe,
47th Street
Chicago, Illinois 60603
Attention: Kimberly Wilp/
Wilma Persenaire
Telephone: (312) 917-7450/7424
Telecopy: (312) 372-4421
[Signature Page to Purina Credit Agreement - Page 10]
<PAGE>
BANQUE PARIBAS, as a Lender
By: /s/ Christopher S. Goodwin
---------------------------
Name: Christopher S. Goodwin
Title: Authorized
By: /s/ Deanna C. Walker
---------------------
Name: Deanna C. Walker
Title: Assistant Vice President
Address: Banque Paribas
1200 Smith Street,
Suite 3100
Houston, TX 77002
Attention: Leah Evans Webster
Telephone: (713) 659-4811
Telecopy: (713) 659-5305
[Signature Page to Purina Credit Agreement - Page 11]
<PAGE>
[PAGE INTENTIONALLY LEFT BLANK]
[Signature Page to Purina Credit Agreement - Page 12]
<PAGE>
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: /s/ John M. Johnson
--------------------
Name: John M. Johnson
Title: Authorized
Address: Merrill Lynch Senior
Floating Rate Fund,
Inc.
800 Scudders Mill Road,
Area 1B
Plainsboro,
New Jersey 08536
Attention: Colleen Wade
Telephone: (609) 282-3136/
(609) 282-4165
Telecopy: (609) 282-3542
[Signature Page to Purina Credit Agreement - Page 13]
<PAGE>
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc.
as Collateral Manager
By: /s/ Helen Y. Rhee
------------------
Name: Helen Y. Rhee
Title: AVP Portfolio Manager
Address: Archimedes Funding, L.L.C.
c/o ING Capital Advisors, Inc.,
as Collateral Manager
333 S. Grand Avenue,
Suite 4250
Los Angeles, CA 90071
Attention: Lenore Crummey-Benoit
Telephone: (213) 346-3976
Telecopy: (213) 626-6552
[Signature Page to Purina Credit Agreement - Page 14]
<PAGE>
CYPRESS TREE BOSTON PARTNERS
By: /s/ Todd Dahistrom
-------------------
Name: Todd Dahistrom
Title:
Address: Cypress Tree Boston
Partners
c/o BankBoston, N.A.
100 Federal Street,
MS 1-9-2
Boston, MA 02110
Attention: Todd Dahistrom
Telephone: (617) 434-6125
Telecopy: (617) 434-9591
[Signature Page to Purina Credit Agreement - Page 15]
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST
By:PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager
By: /s/ Barry L. Wilson
--------------------
Name: Barry L. Wilson
Title: Assistant Portfolio Manager
Address: Pilgrim America Prime
Rate Trust
Two Renaissance Square
40 North Central Avenue,
Suite 1200
Phoenix, AZ 85004-3444
Attention: Melina Dempsey
Telecopy: (602) 417-8321
With a copy to
Address: State Street Bank
and Trust Company
Alternative Structures Unit
Boston, MA
Attention: Wayne Elpus
Ref: Pilgrim America Prime
Rate Trust
Telecopy: (617) 664-5366/5367/5368
[Signature Page to Purina Credit Agreement - Page 16]
<PAGE>
DEEPROCK & COMPANY
By: EATON VANCE MANAGEMENT, AS
INVESTMENT ADVISOR
By: /s/ Payson F. Swaffield
------------------------
Name: Payson F. Swaffield
Title: Vice President
Address: Deeprock & Company
c/o Eaton Vance Management
24 Federal Street,
6th Floor
Boston, MA 02110
Attention: Juliana M. Riley/Prime
Rate Reserves
Telephone: (617) 348-0115
Telecopy: (617) 695-9594
With a copy to
Address: State Street Bank
& Trust Company
Corporate Trust Division
One Enterprise Drive
North Quincy, MA 02171
Attention:Patrick McEnroe
Telecopy: (617) 664-5367 or
(617) 664-5366
[Signature Page to Purina Credit Agreement - Page 17]
<PAGE>
KZH HOLDING CORPORATION III
By: /s/ Virginia Conway
--------------------
Name: Virginia Conway
Title: Authorized Agent
Address: KZH Holding Corporation III
c/o The Chase Manhattan Bank
Loan & Agency Services
1 Chase Manhattan Plaza
- 8th Floor
New York, New York 10081
Attention: Joseph Nerich
Telephone: (212) 552-7247
Telecopy: (212) 552-5642
With copy to:
Address: KZH Holding Corporation III
c/o The Chase Manhattan Bank
450 West 33rd Street -
15th Floor New York, NY
10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Telecopy: (212) 946-7776
[Signature Page to Purina Credit Agreement - Page 18]
<PAGE>
KZH - SOLEIL-2 CORPORATION
By: /s/ Virginia Conway
--------------------
Name: Virginia Conway
Title: Authorized Agent
Address: KZH Holding Corporation III
c/o The Chase Manhattan Bank
Loan & Agency Services
1 Chase Manhattan Plaza
- 8th Floor
New York, New York 10081
Attention: Joseph Nerich
Telephone: (212) 552-7247
Telecopy: (212) 552-5642
With copy to:
Address: KZH Holding Corporation III
c/o The Chase Manhattan Bank
450 West 33rd Street -
15th Floor New York, NY
10001
Attention: Virginia Conway
Telephone: (212) 946-7575
Telecopy: (212) 946-7776
[Signature Page to Purina Credit Agreement - Page 19]
<PAGE>
ANNEX I
LOANS AND COMMITMENTS
Lender Revolving Tranche A Tranche B Total
Loan Loan Loan Commitment
Commitment Commitment Commitment
- ----------------------------------------------------------------------------
Chase Bank
of Texas $10,000,000 $10,000,000 $45,000,000 $65,000,000
N.A.
- ----------------------------------------------------------------------------
Mercantile
Bank NA $ 9,375,000 $ 9,375,000 $18,750,000
- ----------------------------------------------------------------------------
Bank of
America NT $ 9,375,000 $ 9,375,000 $18,750,000
SA
- ----------------------------------------------------------------------------
ABN Amro
Bank NV $ 9,375,000 $ 9,375,000 $18,750,000
- ----------------------------------------------------------------------------
The Bank
of Nova $ 9,375,000 $ 9,375,000 $18,750,000
Scotia
- ----------------------------------------------------------------------------
Bank of
Scotland $ 9,375,000 $ 9,375,000 $18,750,000
- ----------------------------------------------------------------------------
NationsBank,
N.A. $ 9,375,000 $ 9,375,000 $18,750,000
- ----------------------------------------------------------------------------
Credit Lyonnais
Chicago $9,375,000 $ 9,375,000 $18,750,000
Branch
- ----------------------------------------------------------------------------
Rabobank
Nederland $ 9,375,000 $ 9,375,000 $18,750,000
- ----------------------------------------------------------------------------
Credit
Agricole $ 7,500,000 $ 7,500,000 $15,000,000
Indosuez
- ----------------------------------------------------------------------------
Banque
Paribas $ 7,500,000 $ 7,500,000 $15,000,000
- ----------------------------------------------------------------------------
Merrill
Lynch Senior $5,500,000 $5,500,000
Floating
Rating Fund,
Inc.
- ----------------------------------------------------------------------------
Deeprock &
Company $1,000,000 $1,000,000
- ----------------------------------------------------------------------------
Archimedes
Funding, $10,000,000 $10,000,000
L.L.C.
- ----------------------------------------------------------------------------
KZH Holding $19,500,000 $19,500,000
Corporation III
- ----------------------------------------------------------------------------
Cypress Tree Boston $4,000,000 $4,000,000
Partners
- ----------------------------------------------------------------------------
Pilgrim
America Prime $9,000,000 $9,000,000
Rate Trust
- ----------------------------------------------------------------------------
KZH-Soleil-2
Corporation $6,000,000 $6,000,000
- ----------------------------------------------------------------------------
Total
Commitment $100,000,000 $100,000,000 $100,000,000 $300,000,000
- ----------------------------------------------------------------------------
<PAGE>
EXHIBIT A
---------
FORM OF REVOLVING CREDIT NOTE
-----------------------------
$__________ ___________, 1998
PURINA MILLS, INC., a Delaware corporation (the "Company"),
for value received, promises and agrees to pay to (the "Lender"),
or order, at the Payment Office of CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION (the "Administrative Agent"), at 712 Main Street,
Houston, Texas 77002, the principal sum of
___________________________________ DOLLARS
($___________________), or such lesser amount as shall equal the
aggregate unpaid principal amount of the Revolving Credit Loans
made by Lender hereunder to the Company under the Credit
Agreement, as hereafter defined, in lawful money of the United
States of America and in immediately available funds, on the
dates and in the principal amounts provided in the Credit
Agreement referred to below, and to pay interest on the unpaid
principal amount as provided in the Credit Agreement for such
Revolving Credit Loans made by the Lender to the Company under
the Credit Agreement, at such office, in like money and funds,
for the period commencing on the date of each such Revolving
Credit Loan until such Revolving Credit Loan shall be paid in
full, at the rates per annum and on the dates provided in the
Credit Agreement.
In addition to and cumulative of any payments required to
be made against this note pursuant to the Credit Agreement, this
note, including all principal and accrued interest then unpaid,
shall be due and payable on the Revolving Credit Maturity Date.
All payments shall be applied first to accrued interest and the
balance to principal, except as otherwise expressly provided in
the Credit Agreement. Prepayments on this note shall be applied
in the manner set forth in the Credit Agreement.
This note is one of the Revolving Credit Notes referred to
in the Credit Agreement dated as of the ___________, 1998, by and
among the Company, Chase Bank of Texas, National Association,
individually, as an Issuing Bank and as Administrative Agent, and
financial institutions parties thereto (including the Lender)
(such Credit Agreement, together with all amendments or
supplements thereto, being the "Credit Agreement"). This note
evidences the Revolving Credit Loans made by the Lender
thereunder and shall be governed by the Credit Agreement.
Capitalized terms used but not defined in this note and which are
defined in the Credit Agreement shall have the meanings herein as
are assigned in the Credit Agreement.
The Lender is hereby authorized by the Company to endorse
on Schedule A (or a continuation thereof) attached to this note,
the amount and date of each payment or prepayment of principal of
each Revolving Credit Loan received by the Lender, and interest
rates applicable to each Revolving Credit Loan, provided, that
any failure by the Lender to make any such endorsement shall not
affect the obligations of the Company under the Credit Agreement
or under this note in respect of such Revolving Credit Loans.
Except only for any notices which are specifically required
by the Credit Agreement or the other Financing Documents, the
Company and any and all co-makers, endorsers, guarantors and
sureties severally waive notice (including but not limited to
notice of intent to accelerate and notice of acceleration, notice
of protest and notice of dishonor), demand, presentment for
payment, protest, diligence in collecting and the filing of suit
for the purpose of fixing liability, and consent that the time of
payment hereof may be extended
A-1
<PAGE>
and re-extended from time to time without notice to any of them.
Each such person agrees that his, her or its liability on or with
respect to this note shall not be affected by any release of or
change in any guaranty or security at any time existing or by any
failure to perfect or maintain perfection of any lien against or
security interest in any such security or the partial or complete
enforceability of any guaranty or other surety obligation, in
each case in whole or in part, with or without notice and before
or after maturity.
The Credit Agreement provides for the acceleration of the
maturity of this note upon the occurrence of certain events and
for prepayment of Revolving Credit Loans upon the terms and
conditions specified therein. Reference is made to the Credit
Agreement for all other pertinent purposes.
This note is issued pursuant to and is entitled to the
benefits of the Credit Agreement and is secured by the Security
Instruments.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK AND THE UNITED
STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
PURINA MILLS, INC.
By:_______________________________
Name:
Title:
A-2
<PAGE>
SCHEDULE A
This Note evidences Revolving Credit Loans made by the Lender
under the within-described Credit Agreement to the Company, which
Revolving Credit Loans are in the principal amounts, at the
interest rates (and interest periods), and were made and repaid
or prepaid on the dates set forth below:
Principal
Amount of Type
Date Revolving of Interest Interest
Made Credit Loan Loan Period Rate
- ---- ----------- ---- -------- --------
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
Date of Amount
Maturity Payment or Paid or Balance
Date Prepayment Prepaid Outstanding
- -------- ---------- ------- -----------
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
Schedule A-1
<PAGE>
EXHIBIT B-1
-----------
FORM OF TRANCHE A TERM NOTE
---------------------------
$__________ ______________, 1998
Purina Mills, Inc., a Delaware corporation (the "Company"),
for value received, promises and agrees to pay to (the "Lender"),
or order, at the Payment Office of Chase Bank of Texas, National
Association, at 712 Main Street, Houston, Texas 77002, the
principal sum of ___________________________________ DOLLARS
($___________________), in lawful money of the United States of
America and in immediately available funds, in installments on
the dates and in the principal amounts provided in the Credit
Agreement referred to below, and to pay interest on the unpaid
principal amount of the Tranche A Term Loans made by the Lender
to the Company under the Credit Agreement, at such office, in
like money and funds, for the period commencing on the date of
each such Tranche A Term Loan until such Tranche A Term Loan
shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
In addition to and cumulative of any payment required to be
made against this note pursuant to the Credit Agreement, this
note, including all principal and accrued interest then unpaid
thereon, shall be due and payable on the Tranche A Term Loan
Maturity Date. All payments shall be applied first to accrued
interest and the balance to principal, except as otherwise
expressly provided in the Credit Agreement. Prepayments on this
note shall be applied in the manner set forth in the Credit
Agreement.
This note is one of the Tranche A Term Notes referred to in
the Credit Agreement dated as of the _____________, 1998 by and
among the Company, Chase Bank of Texas, National Association,
individually, as an Issuing Bank, and as Administrative Agent,
and the financial institutions parties thereto (including the
Lender) (such Credit Agreement, together with all amendments or
supplements thereto, being the "Credit Agreement"). This note
evidences the Tranche A Term Loans made by the Lender thereunder
and shall be governed by the Credit Agreement. Capitalized terms
used but not defined in this note and which are defined in the
Credit Agreement shall have the meanings herein as are assigned
in the Credit Agreement.
The Lender is hereby authorized by the Company to endorse
on Schedule A (or a continuation thereof) attached to this note,
the amount and date of each payment or prepayment of principal of
each Tranche A Term Loan received by the Lender and the interest
rates applicable to each Tranche A Term Loan, provided, that any
failure by the Lender to make any such endorsement shall not
affect the obligations of the Company under the Credit Agreement
or under this note in respect of such Tranche A Term Loans.
Except only for any notices which are specifically required
by the Credit Agreement or the other Financing Documents, the
Company and any and all co-makers, endorsers, guarantors and
sureties severally waive notice (including but not limited to
notice of intent to accelerate and notice of acceleration, notice
of protest and notice of dishonor), demand, presentment for
payment, protest, diligence in collecting and the filing of suit
for the purpose of fixing liability, and consent that the time of
payment hereof may be extended and re-extended from time to time
without notice to any of them. Each such person agrees that his,
her or its liability on or with respect to this note shall not be
affected by any release of or change in any guaranty or security
at any time existing or by any failure to perfect or maintain
perfection of any lien against or
B-1-1
<PAGE>
security interest in any such security or the partial or complete
enforceability of any guaranty or other surety obligation, in
each case in whole or in part, with or without notice and before
or after maturity.
The Credit Agreement provides for the acceleration of the
maturity of this note upon the occurrence of certain events and
for prepayment of Tranche A Term Loans upon the terms and
conditions specified therein. Reference is made to the Credit
Agreement for all other pertinent purposes.
This note is issued pursuant to and is entitled to the
benefits of the Credit Agreement and is secured by the Security
Instruments.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK AND THE UNITED
STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
PURINA MILLS, INC.
By:_________________________
Name:
Title:
B-1-2
<PAGE>
SCHEDULE A
----------
This Note evidences Tranche A Term Loans made by the Lender under
the within-described Credit Agreement to the Company, which
Tranche A Term Loans are in the principal amounts, at the
interest rates (and interest periods), and were made and repaid
or prepaid on the dates set forth below:
Principal Type
Date Amount of of Interest Interest
Made Loan Loan Period Rate
- ---- --------- ---- -------- --------
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
Date of Amount
Maturity Payment or Paid or Balance
Date Prepayment Prepaid Outstanding
- -------- ---------- ------- -----------
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
Schedule A-1
<PAGE>
EXHIBIT B-2
-----------
FORM OF TRANCHE B TERM NOTE
---------------------------
$__________ ______________, 1998
Purina Mills, Inc., a Delaware corporation (the "Company"),
for value received, promises and agrees to pay to (the "Lender"),
or order, at the Payment Office of Chase Bank of Texas, National
Association, at 712 Main Street, Houston, Texas 77002, the
principal sum of ___________________________________ DOLLARS
($___________________), in lawful money of the United States of
America and in immediately available funds, in installments on
the dates and in the principal amounts provided in the Credit
Agreement referred to below, and to pay interest on the unpaid
principal amount of the Tranche B Term Loans made by the Lender
to the Company under the Credit Agreement, at such office, in
like money and funds, for the period commencing on the date of
each such Tranche B Term Loan until such Tranche B Term Loan
shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
In addition to and cumulative of any payment required to be
made against this note pursuant to the Credit Agreement, this
note, including all principal and accrued interest then unpaid
thereon, shall be due and payable on the Tranche B Term Loan
Maturity Date. All payments shall be applied first to accrued
interest and the balance to principal, except as otherwise
expressly provided in the Credit Agreement. Prepayments on this
note shall be applied in the manner set forth in the Credit
Agreement.
This note is one of the Tranche B Term Notes referred to in
the Credit Agreement dated as of _______________, 1998, by and
among the Company, Chase Bank of Texas, National Association,
individually, as an Issuing Bank, and as Administrative Agent,
and the financial institutions parties thereto (including the
Lender) (such Credit Agreement, together with all amendments or
supplements thereto, being the "Credit Agreement"). This note
evidences the Tranche B Term Loans made by the Lender thereunder
and shall be governed by the Credit Agreement. Capitalized terms
used but not defined in this note and which are defined in the
Credit Agreement shall have the meanings herein as are assigned
in the Credit Agreement.
The Lender is hereby authorized by the Company to endorse
on Schedule A (or a continuation thereof) attached to this note,
the amount and date of each payment or prepayment of principal of
each Tranche B Term Loan received by the Lender and the interest
rates applicable to each Tranche B Term Loan, provided, that any
failure by the Lender to make any such endorsement shall not
affect the obligations of the Company under the Credit Agreement
or under this note in respect of such Tranche B Term Loans.
Except only for any notices which are specifically required
by the Credit Agreement or the other Financing Documents, the
Company and any and all co-makers, endorsers, guarantors and
sureties severally waive notice (including but not limited to
notice of intent to accelerate and notice of acceleration, notice
of protest and notice of dishonor), demand, presentment for
payment, protest, diligence in collecting and the filing of suit
for the purpose of fixing liability, and consent that the time of
payment hereof may be extended and re-extended from time to time
without notice to any of them. Each such person agrees that his,
her or its liability on or with respect to this note shall not be
affected by any release of or change in any guaranty or security
at any time existing or by any failure to perfect or maintain
perfection of any lien against or
B-2-1
<PAGE>
security interest in any such security or the partial or complete
enforceability of any guaranty or other surety obligation, in
each case in whole or in part, with or without notice and before
or after maturity.
The Credit Agreement provides for the acceleration of the
maturity of this note upon the occurrence of certain events and
for prepayment of Tranche B Term Loans upon the terms and
conditions specified therein. Reference is made to the Credit
Agreement for all other pertinent purposes.
This note is issued pursuant to and is entitled to the
benefits of the Credit Agreement and is secured by the Security
Instruments.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK AND THE UNITED
STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
PURINA MILLS, INC.
By:___________________________
Name:
Title:
B-2-2
<PAGE>
SCHEDULE A
----------
This Note evidences Tranche B Term Loans made by the Lender under
the within-described Credit Agreement to the Company, which Term
Loans are in the principal amounts, at the interest rates (and
interest periods), and were made and repaid or prepaid on the
dates set forth below:
Principal Type
Date Amount of of Interest Interest
Made Loan Loan Period Rate
- ---- --------- ---- -------- --------
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
____ ______ ____ ______ ______
Date of Amount
Maturity Payment or Paid or Balance
Date Prepayment Prepaid Outstanding
- -------- ---------- ------- -----------
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
____ ______ ______ ______
Schedule A-1
<PAGE>
EXHIBIT C
---------
FORM OF TAX SHARING AGREEMENTS
------------------------------
SUB-GROUP TAX SHARING AGREEMENT
and
PARENT TAX SHARING AGREEMENT
C-1
<PAGE>
EXHIBIT D
---------
FORM OF BORROWING REQUEST
-------------------------
____________, 19__
Purina Mills, Inc., a Delaware corporation (the "Company"),
hereby requests a Borrowing on the date and in the amount as
follows:
$_______________ of Revolving Credit Loans, $___________ of
which is requested as a Base Rate Loan and $___________ of
which is requested as a Eurodollar Loan having an Interest
Period of _____ months. Requested funding date:
________________
[$_______________ of Tranche A Term Loans, $___________ of
which is requested as a Base Rate Loan and $___________ of
which is requested as a Eurodollar Loan having an Interest
Period of _____ months. Requested funding date:
________________]*
[$_______________ and Tranche B Term Loans, $___________ of
which is requested as a Base Rate Loan and $___________ of
which is requested as a Eurodollar Loan having an Interest
Period of _____ months. Requested funding date:
________________]*
pursuant to the Credit Agreement dated as of ____________, 1998
(as the same may be amended or supplemented, the "Credit
Agreement") among the Company, Chase Bank of Texas, National
Association, individually, as an Issuing Bank, and as
Administrative Agent, and the financial institutions now or
hereafter parties thereto. The undersigned certifies that they
are the ______________ of the Company, and that as such the
undersigned is authorized to execute this certificate on behalf
of the Company. The undersigned further certifies, represents and
warrants on behalf of the Company that (x) the Company is
entitled to receive the requested Loans under the terms and
conditions of the Credit Agreement, (y) the calculation made on
the date hereof and set forth below is accurate and complete, and
(z) after giving effect to any requested Revolving Credit Loan or
the issuance of any requested Letter of Credit, the aggregate
principal amount of outstanding Revolving Credit Loans and the
outstanding Letter of Credit Liabilities (computed on line (1)
below) will not exceed the Maximum Available Amount (computed on
line (3) below).
1. Principal amount of all Revolving
Credit Loans and Letter of Credit
Liabilities outstanding (after giving
effect to the requested Revolving
Credit Loan or the issuance of any
requested Letter of Credit). $____________(1)
2. Maximum Revolving Credit Loan
Available Amount:
The Aggregate Revolving Credit
Commitments $____________ (2)
Maximum Available Amount
after giving effect $____________ (3)
to the requested Revolving
Credit Loan or the issuance
of any requested Letter of
Credit) (Line 2 minus Line 1)
D-1
<PAGE>
*Term Loan Borrowings are available only on the Closing Date.
D-2
<PAGE>
PURINA MILLS, INC.
By:________________________________
Name:
Title:
D-3
<PAGE>
EXHIBIT E-1
-----------
FORM OF OPINION OF AUGUST F. OTTINGER
-------------------------------------
E-1-1
<PAGE>
EXHIBIT E-2
-----------
FORM OF OPINION OF CLEARY, GOTTLIEB, STEEN & HAMILTON
-----------------------------------------------------
E-2-1
<PAGE>
EXHIBIT E-3
-----------
FORM OF OPINION OF LOCAL COUNSEL
--------------------------------
E-3-1
<PAGE>
EXHIBIT F-1
-----------
FORM OF GUARANTEE AND COLLATERAL AGREEMENT
------------------------------------------
F-1-1
<PAGE>
EXHIBIT F-2
-----------
FORM OF PM HOLDINGS PLEDGE AGREEMENT
------------------------------------
F-2-1
<PAGE>
EXHIBIT F-3
-----------
FORM OF DEED OF TRUST
---------------------
F-3-1
<PAGE>
EXHIBIT F-4
-----------
FORM OF PM HOLDINGS GUARANTY
----------------------------
F-4-1
<PAGE>
EXHIBIT F-5
-----------
FORM OF CASH COLLATERAL ACCOUNT AGREEMENT
-----------------------------------------
F-5-1
<PAGE>
EXHIBIT G
---------
FORM OF ASSIGNMENT AND ACCEPTANCE
---------------------------------
Reference is made to the Credit Agreement, dated as of
_________, 1998 (as amended, supplemented, waived or otherwise
modified from time to time, the "Credit Agreement"), among Purina
Mills, Inc., as the Company, Chase Bank of Texas, National
Association, Individually, as an Issuing Bank, and as
Administrative Agent, and the Lenders now or hereafter parties
thereto. Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.
______________________ (the "Assignor") and _______________
(the "Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns
to the Assignee without recourse to the Assignor, and the
Assignee hereby irrevocably purchases and assumes from the
Assignor without recourse to the Assignor, as of the
Transfer Effective Date (as defined below), a percentage
interest (the "Assigned Interest") as set forth in Schedule
1 in and to the Assignor's rights and obligations under the
Credit Agreement and the other Financing Documents with
respect to those credit facilities provided for in the
Credit Agreement as are set forth on Schedule 1
(individually, an "Assigned Facility"), in a principal
amount for each Assigned Facility as set forth on Schedule
1.
2. The Assignor (a) makes no representation or
warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in
connection with the Credit Agreement, any other Financing
Document or any other instrument or document furnished
pursuant thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the
Credit Agreement, any other Financing Document or any other
instrument or document furnished pursuant thereto, other
than that it has not created any adverse claim upon the
interest being assigned by it hereunder and that such
interest is free and clear of any such adverse claim; (b)
makes no representation or warranty and assumes no
responsibility with respect to the financial condition of
the Company, any of its Subsidiaries or any other obligor
or the performance or observance by the Company, any of its
Subsidiaries or any other obligor of any of their
respective obligations under the Credit Agreement, any
other Financing Document or any other instrument or
document furnished pursuant hereto or thereto; and (c)
attaches the Note(s) held by it evidencing the Assigned
Facilities and requests that the Administrative Agent
exchange such Note(s) for a new Note or Notes payable to
the Assignee and (if the Assignor has retained any interest
in the Assigned Facilities) a new Note or Notes payable to
the Assignor in the respective amounts which reflect the
assignment being made hereby (and after giving effect to
any other assignments which have become effective on the
Transfer Effective Date).1
3. The Assignee (a) represents and warrants that it is
legally authorized to enter into this Assignment and
Acceptance; (b) confirms that it has received a copy of the
Credit Agreement
- ---------------------
1 Notes should only be requested when specifically
required by the Assignee and/or the Assignor, as the case
may be.
G-1
<PAGE>
together with copies of the Financial Statements and/or
such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to
enter into this Assignment and Acceptance; (c) agrees that
it will, independently and without reliance upon the
Assignor, the Administrative 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
decisions in taking or not taking action under the Credit
Agreement, the other Financing Documents or any other
instrument or document furnished pursuant hereto or
thereto; (d) appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to
exercise such power and discretion under the Credit
Agreement, the other Financing Documents or any other
instrument or document furnished pursuant hereto or thereto
as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are incidental
thereto; (e) hereby affirms the acknowledgments of such
Assignee as a Lender contained in Section 8.3 of the Credit
Agreement; and (f) agrees that it will be bound by the
provisions of the Credit Agreement and will perform in
accordance with the terms of the Credit Agreement all the
obligations which by the terms of the Credit Agreement are
required to be performed by it as a Lender, including, but
not limited to, its obligations pursuant to Section 9.13 of
the Credit Agreement, and if it is organized under the laws
of a jurisdiction outside the United States, its
obligations pursuant to subsection 2.20(f) of the Credit
Agreement.
4. The effective date of this Assignment and
Acceptance shall be ____________, ____ (the "Transfer
Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the
Administrative Agent for acceptance by it and recording by
the Administrative Agent pursuant to Section 9.7 of the
Credit Agreement, effective as of the Transfer Effective
Date (which shall not, unless otherwise agreed to by the
Administrative Agent, be earlier than five Business Days
after the date of such acceptance and recording by the
Administrative Agent).
5. Upon such acceptance and recording, from and after
the Transfer Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other
amounts) to the Assignee whether such amounts have accrued
prior to the Transfer Effective Date or accrued subsequent
to the Transfer Effective Date. The Assignor and the
Assignee shall make all appropriate adjustments in payments
by the Administrative Agent for the periods prior to the
Transfer Effective Date or with respect to the making of
this assignment directly between themselves.
6. From and after the Transfer Effective Date, (a) the
Assignee shall be a party to the Credit Agreement and, to
the extent provided in this Assignment and Acceptance, have
the rights and obligations of a Lender thereunder and under
the other Financing Documents and shall be bound by the
provisions thereof and (b) the Assignor shall, to the
extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations
under the Credit Agreement, but shall nevertheless continue
to be entitled to the benefits of Sections 2.16, 2.18, 2.20
and 9.4 thereof.
7. Notwithstanding any other provision hereof, if the
consents of the Company and the Administrative Agent hereto
are required under Section 9.7 of the Credit Agreement,
this Assignment and Acceptance shall not be effective
unless such consents shall have been obtained.
8. This Assignment and Acceptance shall be governed by
and construed in accordance with the laws of the State of
New York without regard to the principles of conflict of
laws thereof.
G-2
<PAGE>
9. This Assignment and Acceptance may be executed in
any number of counterparts all of which taken together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed as of the date first
above written by their respective duly authorized officers on
Schedule 1 hereto.
G-3
<PAGE>
SCHEDULE 1
TO THE ASSIGNMENT AND ACCEPTANCE
Re: Credit Agreement, dated as of ________, 1998, among Purina
Mills, Inc., as the Company, and Chase Bank of Texas, National
Association, Individually, as an Issuing Bank, and as
Administrative Agent and the Lenders Now or Hereafter
parties thereto
Name of Assignor:
Name of Assignee:
Transfer Effective Date of Assignment:
Percentage of
Assignor's
Interest in
Credit Credit Principal
Facility Facility Amount
Assigned Assigned being Assigned
Assigned by Assignor
________% $__________
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By:__________________________ By:__________________________
Name: Name:
Title: Title:
Accepted for recording in the Consented To:
Register:
CHASE BANK OF TEXAS, PURINA MILLS, INC.
NATIONAL ASSOCIATION,
as Administrative Agent
By:__________________________ By:__________________________
Name: Name:
Title: Title:
Schedule 1-1
<PAGE>
Chase Bank of Texas,
National Association, as
Administrative Agent
By:__________________________
Name:
Title:
Schedule 1-2
<PAGE>
EXHIBIT H
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
[Name of Applicable Lender] (the "Lender") hereby
certifies, under penalties of perjury, that it (a) is not a
"bank" under Section 881(c)(3)(A) of the Code, is not subject to
regulatory or other legal requirements as a bank in any
jurisdiction, and has not been treated as a bank for purposes of
any tax, securities law or other filing or submission made to any
Governmental Authority, any application made to a rating agency
or qualification for exemption from tax, securities law or other
legal requirements, (b) is not a 10% shareholder within the
meaning of Section 881(c)(3)(B) of the Code, and (c) is not a
controlled foreign corporation receiving interest from a related
person within the meaning of Section 881(c)(3)(C) of the Code.
The undersigned hereby certifies that he or she is a duly
authorized officer of the Lender, and in such capacity, further
certifies the accuracy of the statements contained in this
certificate.
CERTIFIED THIS ___ day of
_______________, 19__:
[NAME OF APPLICABLE LENDER]
By:__________________________
Name:
Title:
H-1
- -----------------------------------------------------------------
FORM OF
GUARANTEE AND COLLATERAL AGREEMENT
made by
PURINA MILLS, INC.
and certain of its Subsidiaries
in favor of
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
as Administrative Agent
March 12, 1998
- -----------------------------------------------------------------
<PAGE>
Table of Contents
Page
SECTION 1. DEFINED TERMS.........................................1
1.1 Definitions............................................1
1.2 Other Definitional Provisions..........................4
SECTION 2. GUARANTEE.............................................5
2.1 Guarantee..............................................5
2.2 Right of Contribution..................................5
2.3 No Subrogation.........................................5
2.4 Amendments, etc. with respect to the
Company 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..................................8
4.3 Perfected First Priority Liens.........................8
4.4 Chief Executive Office.................................9
4.5 Inventory and Equipment................................9
4.6 Farm Products..........................................9
4.7 Pledged Securities.....................................9
4.8 Undelivered Instruments................................9
SECTION 5. COVENANTS............................................10
5.1 Covenants in Credit Agreement.........................10
5.2 Delivery of Instruments and Chattel Paper.............10
5.3 Insurance.............................................10
5.4 Maintenance of Perfected Security Interest;
Further Documentation.................................10
5.5 Changes in Locations, Name, etc.......................11
5.6 Notices...............................................11
5.7 Pledged Securities....................................11
5.8 Receivables...........................................12
5.9 Intellectual Property.................................12
SECTION 6. REMEDIAL PROVISIONS..................................14
6.1 Certain Matters Relating to Receivables...............14
6.2 Communications with Obligors; Grantors Remain Liable..14
6.3 Pledged Equity........................................15
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<PAGE>
6.4 Proceeds to be Turned Over To Administrative Agent....15
6.5 Application of Proceeds...............................16
6.6 Code and Other Remedies...............................16
6.7 Registration Rights...................................17
6.8 Waiver; Deficiency....................................18
SECTION 7. THE ADMINISTRATIVE AGENT.............................18
7.1 Administrative Agent's Appointment
as Attorney-in-Fact etc...............................18
7.2 Duty of Administrative Agent..........................19
7.3 Execution of Financing Statements.....................20
7.4 Authority of Administrative Agent.....................20
SECTION 8. MISCELLANEOUS........................................20
8.1 Amendments in Writing.................................20
8.2 Notices...............................................20
8.3 No Waiver by Course of Conduct; Cumulative Remedies...20
8.4 Enforcement Expenses; Indemnification.................21
8.5 Successors and Assigns................................21
8.6 Set-Off...............................................21
8.7 Counterparts..........................................21
8.8 Severability..........................................22
8.10 Governing Law; Submission to Jurisdiction; etc........22
8.11 Acknowledgments.......................................23
8.12 Section Headings......................................23
8.13 Additional Grantors...................................23
8.14 Releases..............................................23
ii
<PAGE>
GUARANTEE AND COLLATERAL AGREEMENT, dated as of March
12, 1998, 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 CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as Administrative Agent (in such capacity,
the "Administrative Agent") for the ratable benefit of (a) the
banks and other financial institutions or entities (the
"Lenders") from time to time parties to the Credit Agreement,
dated as of March 12, 1998, (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"),
among PURINA MILLS, INC., a Delaware corporation (the "Company"),
the Lenders and the Administrative Agent, (b) the Issuing Banks
(as defined in the Credit Agreement), and (c) the Secured
Affiliates (as defined in the Credit Agreement).
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 Company upon
the terms and subject to the conditions set forth therein;
WHEREAS, the Company 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 Company to
make valuable transfers to one or more of the other Grantors in
connection with the operation of their respective businesses;
WHEREAS, the Company 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 (a) the obligation
of the Lenders to make their respective extensions of credit to
the Company under the Credit Agreement, (b) the issuance of
Letters of Credit by the Issuing Banks and (c) the entering into
of Hedge Agreements by the Secured Affiliates, that the Grantors
shall have executed and delivered this Agreement;
NOW, THEREFORE, in consideration of the premises and to
induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce (a) the Lenders to make their
respective extensions of credit to the Company thereunder, (b)
the Issuing Banks to issue Letters of Credit thereunder, and (c)
the Secured Affiliates to enter into Hedge Agreements, each
Grantor hereby agrees 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:
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<PAGE>
"Agreement" shall mean this Guarantee and Collateral
Agreement, as the same may be amended, supplemented or otherwise
modified from time to time.
"Code" shall mean the Uniform Commercial Code as from time
to time in effect in the State of New York.
"Collateral" shall have the meaning provided in Section 3.
"Collateral Account" shall mean any collateral account
established by the Administrative Agent as provided in Section
6.1 or 6.4.
"Company Obligations" shall mean the collective reference
to all Lender Indebtedness, including, without limitation, the
unpaid principal of and interest on the Loans and Reimbursement
Obligations and all other obligations and liabilities of the
Company (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 Company, whether or not a claim for
post-filing or post-petition interest is allowed in such
proceeding) to the Administrative Agent, any Issuing Bank or any
Lender (or, in the case of any Hedge Agreement referred to below,
any Secured Affiliate), 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 Financing
Documents, any Letter of Credit or any Hedge Agreement entered
into by the Company with any Lender (or any Secured Affiliate) 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 Administrative Agent or to
the Lenders that are required to be paid by the Company pursuant
to the terms of any of the foregoing agreements).
"Copyrights" shall mean (i) all copyrights, in the United
States or any other country, whether registered or unregistered,
or 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 listed
in Schedule 6, and (ii) the right to obtain all renewals thereof.
"Copyright Licenses" shall mean any agreement, whether
written or oral, providing for the grant by or to any Grantor of
any right under any Copyright, including, without limitation, the
grant of rights to manufacture, distribute, exploit and sell
materials derived from any Copyright and including further,
without limitation, any of the foregoing listed in Schedule 6.
"Equity" shall mean shares of capital stock or a
partnership, profits, capital or member interest, or options,
warrants or any other right to substitute for or otherwise
acquire the capital stock or a partnership, profits, capital or
member interest of any Person.
"General Intangibles" shall mean 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,
2
<PAGE>
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 Equities that
constitute "general intangibles" and (iv) all rights of such
Grantor to perform and to exercise all remedies thereunder.
"Guaranteed Parties" shall mean the collective reference to
the Administrative Agent, each Lender, each Issuing Bank and each
Secured Affiliate.
"Guarantor Obligations" shall mean, with respect to any
Guarantor, the collective reference to (i) the Company
Obligations and (ii) all obligations and liabilities of such
Guarantor which may arise under or in connection with this
Agreement or any other Financing 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
reasonable fees and disbursements of counsel to the
Administrative Agent or to the other Guaranteed Parties that are
required to be paid by such Guarantor pursuant to the terms of
this Agreement or any other Financing Document).
"Guarantors" shall mean the collective reference to each
Grantor other than the Company.
"Intellectual Property" shall mean all rights, priorities
and privileges provided under U.S., multinational and foreign law
relating to intellectual property, 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.
"Issuers" shall mean the collective reference to each
issuer of Pledged Equity.
"Obligations" shall mean (i) in the case of the Company,
the Company Obligations, and (ii) in the case of each Guarantor,
its Guarantor Obligations.
"Patents" shall mean (i) all letters patent of the United
States or any other country and all reissues and extensions
thereof, 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" shall mean 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 Equity" shall mean, without limitation, the shares
or other evidence of or designation of Equity listed on Schedule
2, together with any other shares, stock certificates, options or
rights of any nature whatsoever in respect of the Equity of any
Person that may be issued or granted to, or held by, any Grantor
3
<PAGE>
while this Agreement is in effect to the extent that the pledge
of such Equity of any Person hereunder is not prohibited by
applicable law or by the organizational documents of such Person.
"Pledged Notes" shall mean all 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" shall mean the collective reference to
the Pledged Notes and the Pledged Equity.
"Proceeds" shall mean 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 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.
"Undelivered Instruments" as defined in Section 4.8.
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.
4
<PAGE>
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby,
jointly and severally, unconditionally and irrevocably,
guarantees to the Administrative Agent, for the ratable benefit
of the Guaranteed Parties and their respective successors,
indorsees, transferees and assigns, the prompt and complete
payment and performance by the Company when due (whether at the
stated maturity, by acceleration or otherwise) of the Company
Obligations.
(b) Anything herein or in any other Financing Document to
the contrary notwithstanding, the maximum liability of each
Guarantor hereunder and under the other Financing 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 Company 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 Guaranteed Party hereunder.
(d) The guarantee contained in this Section 2 shall remain
in full force and effect until all the Company 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 have been terminated, notwithstanding that from time to
time during the term of the Credit Agreement the Company may be
free from any Company Obligations.
(e) No payment made by the Company, any of the Guarantors,
any other guarantor or any other Person or received or collected
by the Administrative Agent or any other Guaranteed Party from
the Company, 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 Company 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 Company Obligations or any payment received or
collected from such Guarantor in respect of the Company
Obligations), remain liable for the Company Obligations up to the
maximum liability of such Guarantor hereunder until, subject to
Section 2.6, the Company 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 Administrative Agent and the other Guaranteed Parties, and
each Guarantor shall remain liable to the Administrative Agent
and the other Guaranteed Parties for the full amount guaranteed
by such Guarantor hereunder.
5
<PAGE>
2.3 No Subrogation. Notwithstanding any payment made by
any Guarantor hereunder or any set-off or application of funds of
any Guarantor by the Administrative Agent or any other Guaranteed
Party, no Guarantor shall be entitled to be subrogated to any of
the rights of the Administrative Agent or any other Guaranteed
Party against the Company or any other Guarantor or any
collateral security or guarantee or right of offset held by the
Administrative Agent or any other Guaranteed Party for the
payment of the Company Obligations, nor shall any Guarantor seek
or be entitled to seek any contribution or reimbursement from the
Company or any other Guarantor in respect of payments made by
such Guarantor hereunder, until all amounts owing to the
Administrative Agent and the other Guaranteed Parties by the
Company on account of the CompanyObligations 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
Company Obligations shall not have been paid in full, such amount
shall be held by such Guarantor in trust for the Guaranteed
Parties, segregated from other funds of such Guarantor, and
shall, forthwith upon receipt by such Guarantor, be turned over
to the Administrative 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 Company
Obligations, whether matured or unmatured, in such order as the
Administrative Agent may determine.
2.4 Amendments, etc. with respect to the Company
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 Company
Obligations made by the Administrative Agent or any other
Guaranteed Party may be rescinded by the Administrative Agent or
such Guaranteed Party and any of the Company Obligations
continued, and the Company 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 the Administrative Agent or any other
Guaranteed Party, and the Credit Agreement and the other
Financing 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
Administrative Agent, the Required Lenders, any Issuing Bank, any
Secured Affiliate, 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 the
Administrative Agent or any other Guaranteed Party for the
payment of the Company Obligations may be sold, exchanged,
waived, surrendered or released. No Guaranteed Party shall have
any obligation to protect, secure, perfect or insure any Lien at
any time held by it as security for the Company 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 Company Obligations and notice of or proof
of reliance by the Administrative Agent or any other Guaranteed
Party upon the guarantee contained in this Section 2 or
acceptance of the guarantee contained in this Section 2; the
Company 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 Company
and any of the Guarantors, on the one hand, and any of the
Guaranteed Parties, 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,
notice of intent to accelerate, notice of acceleration and notice
of default or nonpayment to or upon the Company or
6
<PAGE>
any of the Guarantors with respect to the Company
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 Financing Document, any of the
Company 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 the Administrative Agent or any other
Guaranteed Party, (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 Company or any other Person
against the Administrative Agent or any other Guaranteed Party,
or (c) any other circumstance whatsoever (with or without notice
to or knowledge of the Company or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or
legal discharge of the Company for the Company 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, the Administrative Agent or any
other Guaranteed Party 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 Company, any other Guarantor
or any other Person or against any collateral security or
guarantee for the Company Obligations or any right of offset with
respect thereto, and any failure by the Administrative Agent or
any other Guaranteed Party to make any such demand, to pursue
such other rights or remedies or to collect any payments from the
Company, 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 Company, 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 the Administrative Agent or any
other Guaranteed Party 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 Company Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any other
Guaranteed Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company 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 Company
or any Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that
payments hereunder will be paid to the Administrative Agent
without set-off or counterclaim and in immediately available
funds and in Dollars at the Payment Office, not later than 11:00
a.m., Houston time.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the
Administrative Agent, and hereby grants to the Administrative
Agent, for the ratable benefit of the Guaranteed Parties, 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:
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(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment;
(e) all General Intangibles;
(f) all Instruments;
(g) all Intellectual Property;
(h) all Inventory;
(i) all Pledged Securities;
(j) all books and records pertaining to the Collateral; and
(k) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral
security and guarantees given by any Person with respect to any
of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent, the Issuing Banks and
the Lenders to enter into the Credit Agreement and to induce (a)
the Lenders to make their respective extensions of credit to the
Company thereunder, (b) the Issuing Banks to issue Letters of
Credit thereunder, and (c) the Secured Affiliates to enter into
Hedge Agreements, each Grantor hereby represents and warrants to
the Administrative Agent and each other Guaranteed Party that:
4.1 Representations in Credit Agreement. In the case of
each Guarantor, the representations and warranties set forth in
Article 4 of the Credit Agreement as they relate to such
Guarantor or to the Financing Documents to which such Guarantor
is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Administrative Agent and
each other Guaranteed Party shall be entitled to rely on each of
them as if they were fully set forth herein.
4.2 Title; No Other Liens. Except for the security interest
granted to the Administrative Agent for the ratable benefit of
the Guaranteed Parties pursuant to this Agreement and the other
Liens expressly 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. 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
Administrative Agent, for the ratable benefit of the Guaranteed
Parties, pursuant to this Agreement or as are expressly permitted
by the Credit Agreement.
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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 Administrative Agent in
completed and duly executed form) will constitute valid perfected
security interests in all of the Collateral in favor of the
Administrative Agent, for the ratable benefit of the Guaranteed
Parties, 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 subject to (a) bankruptcy,
insolvency, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, and
(b) general principles of equity (regardless of whether
considered in a proceeding at law or in equity), and (b) are
prior to all other Liens on the Collateral in existence on the
date hereof except for unrecorded Liens expressly permitted by
the Credit Agreement which have priority over the Liens on the
Collateral by operation of law.
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 and the Equipment (other than mobile goods) are kept at
the locations listed on Schedule 5.
4.6 Farm Products. None of the Collateral constitutes,
or is the Proceeds of, Farm Products.
4.7 Pledged Securities. (a) The shares of Pledged Equity
pledged by such Grantor hereunder constitute all the issued and
outstanding shares of all classes of the Equity of each Issuer
owned by such Grantor.
(b) All the shares of the Pledged Equity issued by
corporate issuers have been duly and validly issued and, with
respect to all corporate issuers that are wholly owned, directly
or indirectly, by the Company, are fully paid and nonassessable,
and, with respect to all corporate issuers that are not
controlled by the Company, to the best of such Grantor's
knowledge, are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid
and binding obligation of the obligor with respect thereto,
enforceable in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and
has good and marketable title to, the Pledged Securities pledged
by it hereunder, free of any and all Liens or options in favor
of, or claims of, any other Person, except the security interest
created by this Agreement.
4.8 Undelivered Instruments. The aggregate of all amounts
payable to the Grantors under or in connection with any (a)
Pledged Note or (b) Receivable that is evidenced by any
Instrument or Chattel Paper which has not been delivered to the
Administrative Agent (collectively, "Undelivered Instruments")
does not exceed $50,000.
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4.9 Intellectual Property. (a) Schedule 6 lists all
Intellectual Property owned or licensed by such Grantor in its
own name on the date hereof.
(b) All Intellectual Property of such Grantor is on the
date hereof valid, subsisting, unexpired, enforceable, has not
been abandoned, and does not infringe the Intellectual Property
rights of a third party, except where the expiration, abandonment
or infringement could not reasonably be expected to have a
Material Adverse Effect.
(c) Except as set forth in Schedule 6, none of the
Intellectual Property is on the date hereof 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 seeking to limit,
cancel or question the validity, or such Grantor's ownership, of
any Intellectual Property which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
SECTION 5. COVENANTS
Each Grantor covenants and agrees that, from and after the
date of this Agreement until the Obligations shall have been paid
in full, 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 the
aggregate of all amounts payable to the Grantors pursuant to
Undelivered Instruments shall exceed $50,000, such Undelivered
Instruments, to the extent necessary to eliminate such excess,
shall be immediately delivered to the Administrative Agent, duly
indorsed in a manner satisfactory to the Administrative Agent, to
be held as Collateral pursuant to this Agreement.
5.3 Insurance. Each Grantor shall cause each casualty
insurance policy maintained by it to (a) 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 Administrative Agent of written notice thereof,
(b) name the Administrative Agent as insured party or loss payee,
(c) if reasonably requested by the Administrative Agent, include
a breach of warranty clause, and (d) be reasonably satisfactory
in all other respects to the Administrative Agent.
5.4 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
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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 Administrative Agent
and the other Guaranteed Parties from time to time statements and
schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the
Administrative Agent may reasonably request, all in such detail
as the Administrative Agent may reasonably request.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of
such Grantor, such Grantor will promptly and duly execute,
deliver and/or have recorded with appropriate agencies such
further instruments and documents and take such further actions
as the Administrative 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.
5.5 Changes in Locations, Name, etc. Such Grantor will
not, except upon 30 days' prior written notice to the
Administrative Agent and delivery to the Administrative Agent of
all additional executed financing statements and other documents
reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests
provided for herein:
(a) permit any of the Inventory or Equipment (other than
(i) immaterial Inventory and Equipment, and (ii) Inventory and
Equipment in transit in the ordinary course of business) to be
kept at a location other than those listed on Schedule 5;
(b) change the location of its chief executive office or
sole place of business from that referred to in Section 4.4; or
(c) change its name, identity or corporate structure to
such an extent that any financing statement filed by the
Administrative Agent in connection with this Agreement would
become misleading.
5.6 Notices. Such Grantor will advise the Administrative
Agent and the other Guaranteed Parties promptly, in reasonable
detail, of 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
Administrative Agent to exercise any of its remedies hereunder.
5.7 Pledged Securities. (a) If such Grantor shall become
entitled to receive or shall receive any share 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 Equity of any Issuer, whether in
addition to, in substitution of, as a conversion of, or in
exchange for, any shares of the Pledged Equity, or otherwise in
respect thereof, such Grantor shall accept the same as the agent
of the Administrative Agent and the other Guaranteed Parties,
hold the same in trust for the Administrative Agent and the other
Guaranteed Parties and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by
such Grantor to the Administrative Agent, if required, together
with an undated stock power covering such
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certificate duly executed in blank by such Grantor and
with, if the Administrative Agent so requests, signature
guaranteed, to be held by the Administrative Agent, subject to
the terms hereof, as additional collateral security for the
Obligations. If an Event of Default shall have occurred and be
continuing, (i) any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any Issuer
shall be paid over to the Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations,
and (ii) 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 Administrative Agent
for the ratable benefit of the Guaranteed Parties, be delivered
to the Administrative 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 Administrative Agent, hold such money or property in trust
for the Administrative Agent and the other Guaranteed Parties,
segregated from other funds of such Grantor, as additional
collateral security for the Obligations.
(b) Without the prior written consent of the Administrative
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 (except to the extent such stock
or other securities are pledged to the Administrative Agent
hereunder) 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 other Liens permitted by the Credit
Agreement, or (iv) enter into any agreement or undertaking
restricting the right or ability of such Grantor or the
Administrative Agent to Dispose of any of the Pledged Securities
or Proceeds thereof (except, in the case of this clause (iv), in
connection with a Disposition expressly permitted by the Credit
Agreement).
(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 Administrative Agent promptly in
writing of the occurrence of any of the events described in
Section 5.7(a) with respect to the Pledged Securities issued by
it, and (iii) the terms of Sections 6.3 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 or 6.7 with respect to the
Pledged Securities issued by it.
5.8 Receivables. (a) Other than in the ordinary course of
business, such Grantor will not (i) grant any extension of the
time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release,
wholly or partially, any Person liable for the payment of any
Receivable, (iv) allow any credit or discount whatsoever on any
Receivable or (v) amend, supplement or modify any Receivable in
any manner that could adversely affect the value thereof.
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(b) If at any time the aggregate amount owing to the
Grantors on all Accounts as to which a Governmental Authority is
an obligor exceeds 5% of the aggregate amount owing to the
Grantors on all Accounts, the Company shall so notify the
Administrative Agent and, if requested by the Administrative
Agent, at the Grantors' sole cost and expense, from and after the
date on which such aggregate amount first exceeds such
percentage, deliver to the Administrative Agent such assignments,
notices of assignment and other documents or information as shall
be necessary or otherwise reasonably requested by the
Administrative Agent to permit the assignment hereunder of all
Accounts as to which a Governmental Authority is an obligor
pursuant to all applicable Governmental Requirements (including,
without limitation, the Assignment of Claims Act of 1940, as
amended).
5.9 Intellectual Property. (a) Such Grantor (either itself
or through licensees) will (i) continue to use each material
Trademark on each and every trademark class of goods applicable
to its current line as reflected in its then-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 all
notices and legends required by applicable law or regulations,
and (iv) 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) 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) Such Grantor (either itself or through licensees)
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) 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 a third
party.
(e) Such Grantor will notify the Administrative Agent and
the other Guaranteed Parties immediately if it knows, or has
reason to know, that any application or registration relating to
any material Patent, Copyright or Trademark may become 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 any material Patent or material Trademark with the United
States Patent and Trademark Office or any material Copyright in
the U.S. 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 Administrative Agent within five
Business Days after the last day of the fiscal quarter in which
such filing occurs. Upon request of the Administrative Agent,
such Grantor shall execute and deliver, and have
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recorded, any and all agreements, instruments,
documents, and papers as the Administrative Agent may reasonably
request to evidence the Administrative Agent's 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 U.S. Copyright
Office or any similar office or agency in any other country or
any political subdivision thereof, 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, or as
otherwise requested by the Administrative Agent, to protect such
Intellectual Property, and (ii) promptly notify the
Administrative Agent and the other Guaranteed Parties after it
learns thereof.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Receivables. (a) The
Administrative Agent shall have the right to make test
verifications of the Receivables in any manner and through any
medium that it reasonably considers advisable upon prior written
notice and, unless an Event of Default shall exist or be
continuing, no more than once per calendar year, and each Grantor
shall furnish all such assistance and information as the
Administrative Agent may reasonably require in connection with
such test verifications. At any time while an Event of Default
shall have occurred and be continuing, upon the Administrative
Agent's request and at the expense of the relevant Grantor, such
Grantor shall cause independent public accountants or others
satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and
test verifications of, and trial balances for, the Receivables.
(b) The Administrative Agent hereby authorizes each Grantor
to collect such Grantor's Receivables, and the Administrative
Agent may curtail or terminate said authority at any time after
the occurrence and during the continuance of an Event of Default.
If required by the Administrative 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 Administrative Agent if required,
in a Collateral Account maintained under the sole dominion and
control of the Administrative Agent, subject to withdrawal by the
Administrative Agent for the account of the Guaranteed Parties
only as provided in Section 6.5, and (ii) until so turned over,
shall be held by such Grantor in trust for the Administrative
Agent and the other Guaranteed Parties, 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 Administrative Agent's request, each Grantor
shall deliver to the Administrative Agent, and have recorded, all
original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to the then existing
Receivables, including, without limitation, all original orders,
invoices and shipping receipts.
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6.2 Communications with Obligors; Grantors Remain Liable.
(a) The Administrative 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 to verify with them to the Administrative
Agent's reasonable satisfaction the existence, amount and terms
of any Receivables.
(b) Upon the request of the Administrative Agent at any
time after the occurrence and during the continuance of an Event
of Default, each Grantor shall notify obligors on the Receivables
that the Receivables have been assigned to the Administrative
Agent for the ratable benefit of the Guaranteed Parties and that
payments in respect thereof shall be made directly to the
Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables 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. No Guaranteed
Party shall have any obligation or liability under any Receivable
(or any agreement giving rise thereto) by reason of or arising
out of this Agreement or the receipt by the Administrative Agent
or any other Guaranteed Party of any payment relating thereto,
nor shall the Administrative Agent or any other Guaranteed Party
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) 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 Equity. (a) Unless an Event of Default shall
have occurred and be continuing, each Grantor shall be permitted
to receive all cash dividends, payments or other Proceeds paid in
respect of the Pledged Equity and all payments made in respect of
the Pledged Notes, 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 or corporate right exercised or other action
taken which, in the Required Lenders' reasonable judgment, would
impair the Collateral or which would be inconsistent with or
result in any violation of any provision of the Credit Agreement,
this Agreement or any other Financing Document.
(b) If an Event of Default shall occur and be continuing,
(i) the Administrative 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 Administrative Agent may
determine, and (ii) any or all of the Pledged Securities shall be
registered in the name of the Administrative Agent or its
nominee, and the Administrative 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 Administrative 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 Administrative Agent may
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determine), all without liability except to account for property
actually received by it, but the Administrative Agent and the
other Guaranteed Parties shall have no duty to any Grantor to
exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each
Issuer of any Pledged Securities pledged by such Grantor
hereunder to (i) comply with any instruction received by it from
the Administrative 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 Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In
addition to the rights of the Administrative Agent and the other
Guaranteed Parties specified in Section 6.1 with respect to
payments of Receivables, if an Event of Default shall occur and
be continuing, all Proceeds received by any Grantor consisting of
cash, checks and other near-cash items shall be held by such
Grantor in trust for the Administrative Agent and the other
Guaranteed Parties segregated from other funds of such Grantor,
and shall, forthwith upon receipt by such Grantor, be turned over
to the Administrative Agent in the exact form received by such
Grantor (duly indorsed by such Grantor to the Administrative
Agent, if required). All Proceeds received by the Administrative
Agent hereunder shall be held by the Administrative Agent in a
Collateral Account maintained under its sole dominion and
control. All Proceeds while held by the Administrative Agent in a
Collateral Account (or by such Grantor in trust for the
Administrative Agent and the other Guaranteed Parties) 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 any time after the
occurrence and during the continuance of an Event of Default, at
the Administrative Agent's election, the Administrative Agent may
apply all or any part of Proceeds held in any Collateral Account
in payment of the Obligations in such order as the Administrative
Agent may elect, and any part of such funds which the
Administrative Agent elects not so to apply and deems not
required as collateral security for the Obligations shall be paid
over from time to time by the Administrative Agent to the Company
or to whomsoever may be lawfully entitled to receive the same.
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 Company 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 Administrative Agent, on behalf of
the Guaranteed Parties, 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 Code or any other applicable law. Without limiting the
generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest,
advertisement or notice of any kind, including, without
limitation, notice of intent to accelerate or notice of
acceleration, (except any notice 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
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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 the Administrative Agent or any other Guaranteed Party 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. The
Administrative Agent or any other Guaranteed Party 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 Administrative Agent's request, to assemble the
Collateral and make it available to the Administrative Agent at
places which the Administrative Agent shall reasonably select,
whether at such Grantor's premises or elsewhere. The
Administrative 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 Administrative Agent and the other Guaranteed
Parties 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 Administrative
Agent may elect consistent with the terms of the Credit
Agreement, and only after such application and after the payment
by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative 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 the Administrative Agent or any
other Guaranteed Party 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 Administrative Agent
shall determine to exercise its right to sell any or all of the
Pledged Equity pursuant to Section 6.6, and if in the opinion of
the Administrative Agent it is necessary or advisable to have the
Pledged Equity, or that portion thereof to be sold, registered
under the provisions of the Securities Act, the relevant Grantor
will cause, or if the Grantor does not control such Issuer use
its best efforts to 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 Administrative Agent, necessary or advisable to register
the Pledged Equity, 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 Equity, 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 Administrative 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 Administrative Agent shall
designate and to make available to its security holders, as soon
as practicable, an earnings statement (which need not be audited)
which will satisfy the provisions of Section 11(a) of the
Securities Act.
(b) Each Grantor recognizes that the Administrative Agent
may be unable to effect a public sale of any or all the Pledged
Equity, by reason of certain prohibitions contained in the
Securities Act and
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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 Administrative Agent shall be under no
obligation to delay a sale of any of the Pledged Equity 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 best 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 Equity
pursuant to this Section 6.7 valid and binding and in compliance
with any and all other applicable Governmental Requirements. Each
Grantor further agrees that a breach of any of the covenants
contained in this Section 6.7 will cause irreparable injury to
the Administrative Agent and the other Guaranteed Parties, that
the Administrative Agent and the other Guaranteed Parties 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 Code. 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
Administrative Agent or any other Guaranteed Party to collect
such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact
etc. (a) Each Grantor hereby irrevocably constitutes and appoints
the Administrative 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, 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 Administrative 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:
(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 with
respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Administrative Agent
for the purpose of collecting any and all such moneys due
under any Receivable or with respect to any other Collateral
whenever payable:
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(ii) in the case of any Copyright, Patent or
Trademark, execute, deliver and have recorded, any and all
agreements, instruments, documents and papers as the
Administrative Agent may request to evidence the
Administrative Agent's security interest in such Copyright,
Patent or Trademark 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)(l) 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 Administrative
Agent or as the Administrative 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 Administrative 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 Administrative Agent
shall in its reasonable 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
Administrative Agent were the absolute owner thereof for
all purposes, and do, at the Administrative Agent's option
and such Grantor's expense, at any time, or from time to
time, all acts and things which the Administrative Agent
deems necessary to protect, preserve or realize upon the
Collateral and the Administrative Agent's 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 Administrative 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 Administrative 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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(c) The expenses of the Administrative 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 under
the Credit Agreement on past due Tranche B Term Loans that are
Base Rate Loans, from the date of payment by the Administrative
Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Administrative 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 Administrative Agent. The Administrative
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 Code or otherwise, shall be to deal with it
in the same manner as the Administrative Agent deals with similar
property for its own account. None of the Administrative Agent,
any other Guaranteed Party, 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 Administrative Agent and the other
Guaranteed Parties hereunder are solely to protect the
Administrative Agent's and the other Guaranteed Parties'
interests in the Collateral and shall not impose any duty upon
the Administrative Agent or any other Guaranteed Party to
exercise any such powers. The Administrative Agent and the other
Guaranteed Parties 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 Code and any other applicable laws, each Grantor
authorizes the Administrative 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 Administrative
Agent reasonably determines appropriate to perfect the security
interests of the Administrative 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 Administrative Agent. Each Grantor
acknowledges that the rights and responsibilities of the
Administrative Agent under this Agreement with respect to any
action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative 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 Administrative Agent and the other Guaranteed
Parties, 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 Administrative Agent and the
Grantors, the Administrative Agent shall be conclusively presumed
to be acting as agent for the Guaranteed Parties 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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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 Section 9.2 of the
Credit Agreement.
8.2 Notices. All notices, requests and demands to or upon
the Administrative Agent, any other Guaranteed Party, or any
Grantor hereunder shall be effected in the manner provided for in
Section 9.1 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 hereto.
8.3 No Waiver by Course of Conduct; Cumulative Remedies.
Neither the Administrative Agent nor any other Guaranteed Party
shall by any act (except by a written instrument pursuant to
Section 8.1 hereof), 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 the
Administrative Agent or any other Guaranteed Party, 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
the Administrative Agent or any other Guaranteed Party of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the
Administrative Agent or such other Guaranteed Party 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 the Administrative Agent and
each other Guaranteed Party 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 Financing Documents to
which such Guarantor is a party, including, without limitation,
the reasonable fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) to the
Administrative Agent and each other Guaranteed Party.
(b) Each Guarantor agrees to pay, and to save the
Administrative Agent and the other Guaranteed Parties 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
Administrative Agent and the other Guaranteed Parties 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 same extent the Company
would be required to do so pursuant to Section 9.4 of the Credit
Agreement.
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(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 Financing 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 Administrative Agent and the other
Guaranteed Parties 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 Administrative
Agent and the Lenders.
8.6 Set-Off. In addition to any rights and remedies of the
Administrative Agent and the other Guaranteed Parties provided by
law, the Administrative Agent and each other Guaranteed Party
shall have the right, without prior notice to any Grantor, any
such notice being expressly waived by each Grantor to the extent
permitted by applicable law, upon any amount becoming due and
payable by any Grantor hereunder (whether at the stated maturity,
by acceleration or otherwise) to set off and appropriate and
apply against such amount any and all deposits (general or
special, time or demand, provisional or final), in any currency,
and any other credits, indebtedness or claims, in any currency,
in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such
Guaranteed Party or any branch or agency thereof to or for the
credit or the account of such Grantor. The Administrative Agent
and each other Guaranteed Party agrees promptly to notify the
relevant Grantor and (if applicable) the Administrative Agent
after any such setoff and application made by the Administrative
Agent or such other Guaranteed Party, provided that the failure
to give such notice shall not affect the validity of such setoff
and application.
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. A set of the copies of this Agreement signed
by all the parties shall be lodged with the Company and the
Administrative Agent.
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 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER
FINANCING DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING
BETWEEN THE ADMINISTRATIVE AGENT, THE OTHER GUARANTEED PARTIES,
THE GRANTORS AND THE OTHER RESPECTIVE PARTIES HERETO AND THERETO
AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS BETWEEN
SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
8.10 Governing Law; Submission to Jurisdiction; etc.
(a) Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed in
accordance with and be governed by the laws of the State of
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New York (including Section 5-1401 of the New York General
Obligations Law, or any similar successor provision
thereto, but excluding all other conflict-of-laws rules)and
to the extent controlling, laws of the United States of
America.
(b) SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE OTHER
FINANCING DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH GRANTOR
HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH GRANTOR HEREBY IRREVOCABLY WAIVES
ANY OBJECTION, INCLUDING, BUT NOT LIMITED TO, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.
(c) WAIVER OF JURY TRIAL & CONSEQUENTIAL DAMAGES. TO
THE MAXIMUM EXTENT ALLOWED BY APPLICABLE LAW, EACH OF THE
GRANTORS, THE ADMINISTRATIVE AGENT, AND THE OTHER
GUARANTEED PARTIES (I) IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY FINANCING DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (III) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED
THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER; AND (IV) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
FINANCING DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BASED UPON, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
SECTION.
(d) Designation of Process Agent. Each Grantor hereby
irrevocably designates CT Corporation System, with an
office on the date hereof at 1633 Broadway, New York, New
York, 10019, as the designee, appointee and process agent
of such Grantor to receive, for and on behalf of such
Grantor, service of process in such respective
jurisdictions in any legal action or proceeding with
respect to this Agreement or the other Financing Documents.
It is understood that a copy of such process served on such
agent will be promptly forwarded by mail to each Grantor at
its address set forth opposite its signature below, but the
failure of such Grantor to receive such copy shall not
affect in any way the service of such process. Each Grantor
further irrevocably consents to the service of process of
any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to such Grantor at its
said address, such service to become effective on the
earlier to occur of (i) actual receipt of such service of
process and (ii) 30 days after such mailing.
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(e) Service of Process. Nothing herein shall affect
the right of the Administrative Agent or any other
Guaranteed Party to serve process in any other manner
permitted by law or to commence legal proceedings or
otherwise proceed against any Grantor in any other
jurisdiction.
8.11 Acknowledgments. Each Grantor hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other
Financing Documents;
(b) neither the Administrative Agent nor any other
Guaranteed Party has any fiduciary relationship with or
duty to any Grantor arising out of or in connection with
this Agreement or any of the other Financing Documents, and
the relationship between Administrative Agent and the other
Guaranteed Parties, on one hand, and the Grantors, 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
Financing Documents or otherwise exists by virtue of the
transactions contemplated hereby among the Guaranteed
Parties or among the Grantors and the Guaranteed Parties.
8.12 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.
8.13 Additional Grantors. Each Subsidiary of the Company
that is required to become a party to this Agreement pursuant to
Section 5.1(i) 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 I
hereto.
8.14 Releases. (a) At such time as the Loans, the
Reimbursement Obligations and the other Obligations shall have
been paid in full, the Commitments have been terminated and no
Letters of Credit shall be outstanding, the Collateral shall be
released from the Liens created hereby, and this Agreement and
all obligations (other than those expressly stated to survive
such termination) of the Administrative 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
Administrative Agent shall deliver to such Grantor any Collateral
held by the Administrative 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 Administrative 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 Company, a Guarantor shall be released from its
obligations hereunder in the event that all the Equity of such
Guarantor shall be sold, transferred or otherwise disposed of in
a transaction permitted by the Credit Agreement.
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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.
[Attach Formatted Signature Page]
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ACKNOWLEDGMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy
of the Guarantee and Collateral Agreement dated as of March 12,
1998, (the "Agreement"), made by the Grantors parties thereto for
the benefit of Chase Bank of Texas, National Association, as
Administrative Agent. The undersigned agrees for the benefit of
the Administrative Agent and the other Guaranteed Parties as
follows:
1. The undersigned will be bound by the terms of the
Agreement and will comply with such terms insofar as such terms
are applicable to the undersigned.
2. The undersigned will notify the Administrative
Agent promptly in writing of the occurrence of any of the events
described in Section 5.7(a) of the Agreement.
3. The terms of Sections 6.3(a) and 6.7 of the
Agreement shall apply to it, mutatis mutandis, with respect to
all actions that may be required of it pursuant to Section 6.3(a)
or 6.7 of the Agreement.
[___________________________________]
By:______________________________________
Title:
Address for Notices:
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<PAGE>
Annex 1 to
Guarantee and Collateral Agreement
__________________________________
ASSUMPTION AGREEMENT, dated as of ________________,
[199__] [200_], by _________________________________________, a
______________________ corporation (the "Additional Grantor"), in
favor of CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as
Administrative Agent (in such capacity, the "Administrative
Agent") for the banks and other financial institutions (the
"Lenders") parties to the Credit Agreement referred to below. All
capitalized terms not defined herein shall have the meaning
ascribed to them in such Credit Agreement.
W I T N E S S E T H:
WHEREAS, Purina Mills, Inc. (the "Company"), the
Lenders and the Administrative Agent have entered into a Credit
Agreement, dated as of March 12, 1998, (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the
Company and certain of its affiliates (other than the Additional
Grantor) have entered into the Guarantee and Collateral
Agreement, dated as of March 12, 1998 (as amended, supplemented
or otherwise modified from time to time, the "Guarantee and
Collateral Agreement") in favor of the Administrative Agent for
the ratable benefit of the Guaranteed Parties (as defined
therein);
WHEREAS, the Credit Agreement requires the Additional
Grantor to become a party to the Guarantee and Collateral
Agreement; and
WHEREAS, the Additional Grantor has agreed to execute
and deliver this Assumption Agreement in order to become a party
to the Guarantee and Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing
and delivering this Assumption Agreement, the Additional Grantor,
as provided in Section 8.15 of the Guarantee and Collateral
Agreement, hereby becomes a party to the Guarantee and Collateral
Agreement as a Grantor thereunder with the same force and effect
as if originally named therein as a Grantor and, without limiting
the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Grantor thereunder. The
information set forth in Annex l-A hereto is hereby added to the
information set forth in Schedules_____________* to the Guarantee
and Collateral Agreement. The Additional Grantor hereby
represents and warrants that each of the representations and
warranties contained in Section 3 of the Guarantee and Collateral
Agreement is true and correct on and as the date hereof (after
giving effect to this Assumption Agreement) as if made on and as
of such date.
_____________________________
* Refer to each Schedule which needs to be supplemented.
<PAGE>
2. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK (INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, OR ANY SIMILAR SUCCESSOR PROVISION THERETO, BUT
EXCLUDING ALL OTHER CONFLICT-OF-LAWS RULES)AND TO THE EXTENT
CONTROLLING, LAWS OF THE UNITED STATES OF AMERICA.
IN WITNESS WHEREOF, the undersigned has caused this
Assumption Agreement to be duly executed and delivered as of the
date first above written.
[ADDITIONAL GRANTOR]
By:______________________________________
Name:
Title:
ACKNOWLEDGMENT BY THE COMPANY.:
By execution of this Assumption Agreement in the space
provided below, the Company hereby acknowledges and agrees that
the Equity described on Annex I has been issued by the Additional
Grantor identified herein and is held by the Company and
constitutes "Pledged Equity" comprising part of the Pledged
Securities under the Guarantee and Collateral Agreement.
Dated:___________________________________
PURINA MILLS, INC.
By:______________________________________
Name: ___________________________________
Title: __________________________________
<PAGE>
ANNEX 1
-------
Notice Addresses of New Grantors to be added to Schedule 1 to
- -------------------------------------------------------------
Guarantee and Collateral Agreement:
- -----------------------------------
<PAGE>
Description of Pledged Stock to be added to Schedule 2 to
- ---------------------------------------------------------
Guarantee and Collateral Agreement:
- -----------------------------------
Pledgor:
Issuer Class of Stock Stock No. of Shares
------ -------------- ----- -------------
Certificate No.
---------------
<PAGE>
Perfection Filings for the Grantors to be added to Schedule 3 to
- ----------------------------------------------------------------
Guarantee and Collateral Agreement:
- -----------------------------------
Uniform Commercial Code Filings
-------------------------------
[List each office where a financing statement is to be filed]
Copyright, Patent and Trademark Filings
---------------------------------------
[List all filings]
Actions with respect to Pledged Stock
-------------------------------------
<PAGE>
Location of Jurisdiction of Organization and Chief Executive
- ------------------------------------------------------------
Office to be added to Schedule 4 to Guarantee and Collateral
- ------------------------------------------------------------
Agreement:
- ----------
Grantor Jurisdiction of Chief Executive Office
------- --------------- ----------------------
Organization
------------
<PAGE>
Locations of Inventory and Equipment to be added to Schedule 5 to
- -----------------------------------------------------------------
Guarantee and Collateral Agreement:
- -----------------------------------
Grantor Locations
------- ---------
<PAGE>
Information regarding Intellectual Property to be added to
- ----------------------------------------------------------
Schedule 6 to Guarantee and Collateral Agreement:
- -------------------------------------------------
COPYRIGHTS
Nature of Interest Author Copyright Issue Date Country
------------------ ------ --------- ------------------
(e.g., owner, licensee) of Issue
- ----------------------- --------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
COPYRIGHT LICENSES
PATENTS
Nature of Interest Registered Patent Issue Date Country of
------------------ ----------------- ---------- ----------
(e.g., owner, licensee) No. Issue
- ----------------------- --- -----
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
PATENT APPLICATIONS
Nature of Interest Serial No. Filing Date Country of
------------------ ---------- ----------- ----------
(e.g., owner, licensee) Issue
- ----------------------- -----
- -----------------------------------------------------------------
- -----------------------------------------------------------------
PATENT LICENSES
<PAGE>
REGISTERED TRADEMARKS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Goods or
--------
Nature of Interest Registered Registration Int'l.Class Services Date Filed Country of
- ------------------ ---------- ------------ ----------- -------- ---------- ----------
(e.g., owner, Trademark No. Covered Covered Reg.
- ------------- --------- --- ------- ------- ----
licensee)
---------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Goods or
Nature of Interest Registered Registration Int'l. Class Services Date Filed Country of
- ------------------ ----------------------- ------------ -------- ---------- ----------
(e.g., owner Trademark No. Covered Covered Reg.
- ------------ --------- --- ------- ------- ----
licensee)
---------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
TRADEMARK LICENSES
- -----------------------------------------------------------------
SECURITY AGREEMENT
(Pledge--PM Holdings Corporation)
Between
PM HOLDINGS CORPORATION
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Administrative Agent
March 12, 1998
- -----------------------------------------------------------------
<PAGE>
THIS SECURITY AGREEMENT (this "Agreement") is made as of
March 12, 1998, between PM HOLDINGS CORPORATION, a Delaware
corporation with principal offices at 4111 East 37th Street
North, Wichita, Kansas 67226 ("Pledgor"), and CHASE BANK OF
TEXAS, NATIONAL ASSOCIATION, a national banking association with
offices at 712 Main Street, 7th Floor, Houston, Texas 77002, as
Administrative Agent ("Secured Party") for itself, the Issuing
Banks (as defined in the Credit Agreement), such other banks or
lending institutions (collectively, the "Lenders") which are or
hereafter become parties to the Credit Agreement referred to
below and Secured Affiliates (as defined in the Credit
Agreement).
RECITALS
--------
A. On even date herewith, Purina Mills, Inc., a Delaware
corporation (the "Borrower"), the Lenders, Secured Party, and the
Issuing Banks, executed that certain Credit Agreement (said
Credit Agreement, as may from time to time be amended, or
supplemented or modified, including, without limitation,
amendments, supplements and modifications that increase the
indebtedness thereunder, the "Credit Agreement") pursuant to
which, upon the terms and conditions stated therein, the Lenders
agree to make loans to and participate in extensions of credit
for the account of the Borrower.
B. Pledgor owns, beneficially and of record, 100% of the
outstanding capital stock of the Borrower.
C. The Lenders and the Issuing Banks have conditioned their
respective obligations under the Credit Agreement upon the
execution and delivery by Pledgor of this Agreement, and Pledgor
has agreed to enter into this Agreement.
Now therefore, in order to comply with the terms and
conditions of the Credit Agreement and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Pledgor hereby agrees with Secured Party as
follows:
ARTICLE 1
Security Interest
-----------------
Section 1.1 Pledge. Pledgor hereby pledges, assigns, and
grants to Secured Party for the ratable benefit of the Guaranteed
Parties a security interest in and right of set-off against the
assets referred to in Section 1.2 (the "Collateral") to secure
the prompt payment and performance of the "Obligations" (as
defined in Section 2.2) and the performance by Pledgor of this
Agreement.
Section 1.2 Collateral. The Collateral consists of the
following types or items of property:
(a) all shares of capital stock of the Borrower now or
hereafter owned beneficially or of record by the Pledgor,
including, without limitation, the securities described or
referred to in Exhibit A attached hereto and made a part
hereof; and
<PAGE>
(b) (i) the certificates or instruments, if any,
representing such securities, (ii) all dividends (cash,
stock or otherwise), cash, instruments, rights to
subscribe, purchase or sell and all other rights and
property from time to time received, receivable or
otherwise distributed in respect of or in exchange for
any or all of such securities, (iii) all replacements,
additions to and substitutions for any of the property
referred to in this Section 1.2, including, without
limitation, claims against third parties, (iv) the
proceeds, interest, profits and other income of or on any
of the property referred to in this Section 1.2, (v) all
books and records relating to any of the property referred
to in this Section 1.2, and (vi) all other assets, rights
and interests relating to any of the property referred to
in this Section 1.2.
Section 1.3 Transfer of Collateral. All certificates or
instruments representing or evidencing the Pledged Securities
shall be delivered to and held pursuant hereto by Secured Party
or a Person designated by Secured Party and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, or (in
the case of either certificated or uncertificated securities)
Secured Party shall have been provided with (a) evidence that
entries have been made on the books of a clearing corporation to
effect the pledge of the Pledged Securities to Secured Party, as
provided in, and in accordance with, Section 8-321 of the Code,
or (b) evidence that a financial intermediary has identified the
Pledged Securities as having been pledged to Secured Party, as
provided in, and in accordance with, Section 8-313(1)(d) of the
Code, or (c) evidence that the Pledged Securities have been
otherwise transferred to Secured Party in accordance with Section
8-313(1) of the Code, all in form and substance satisfactory to
Secured Party. After the occurrence and continuance of an Event
of Default, Secured Party shall have the right, at any time in
its discretion and without notice to Pledgor, to transfer to or
to register in the name of Secured Party or any of its nominees
any or all of the Pledged Securities, subject only to the
revocable rights specified in Section 6.6, and to exchange
certificates or instruments representing or evidencing Pledged
Securities for certificates or instruments of smaller or larger
denominations.
ARTICLE 2
Definitions
-----------
Section 2.1 Terms Defined Herein or in the Credit Agreement.
As used in this Agreement, the terms defined herein shall have
the meanings respectively assigned to them. Other capitalized
terms which are defined in the Credit Agreement but which are not
defined herein shall have the same meanings as defined in the
Credit Agreement.
Section 2.2 Certain Definitions. As used in this Agreement,
the following terms shall have the following meanings, unless the
context otherwise requires:
"Agreement" shall mean this Security Agreement, as the
same may from time to time be amended or supplemented.
"Code" shall mean the Uniform Commercial Code as
presently in effect in the State of New York; provided that
if by reason of mandatory provisions of law, the perfection
or the effect of perfection or nonperfection of the
assignment and security interest in any Collateral is
governed by the Uniform Commercial Code or similar
legislation as in effect in a jurisdiction other than New
York, "Code" shall mean the Uniform Commercial Code or
similar legislation as in effect in such
-2-
<PAGE>
other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or
nonperfection. Unless otherwise indicated by the context
herein, all uncapitalized terms which are defined in the
Code shall have their respective meanings as used in
Articles 8 and 9 of the Code.
"Event of Default" shall mean any event specified in
Section 6.1.
"Guaranteed Parties" shall mean each of the
Administrative Agent, the Lenders, the Issuing Banks and
the Secured Affiliates as guaranteed parties under that
certain Guaranty Agreement dated as of March 12, 1998, made
by Pledgor in favor of such guaranteed parties.
"Obligations" shall mean (a) all Lender Indebtedness
now or hereafter owing, pursuant to the Credit Agreement,
the Notes, any Letters of Credit, any other Financing
Document or any Hedge Agreement, including, but not limited
to, (i) the unpaid principal of and accrued interest on any
of the foregoing (including interest accruing on or after
the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim
for post-filing or post-petition interest is allowed in
such proceeding), (ii) payment of and performance of any
and all present or future obligations of the Company
according to the terms of any present or future Hedge
Agreement or any option with respect to any such
transaction now existing or hereafter entered into between
the Company and the Administrative Agent or any Lender or
any Secured Affiliate pursuant to, or in connection with,
the Lender Indebtedness or any Financing Document, and
(iii) the obligation of the Company to otherwise reimburse
any Guaranteed Party, whether on account of fees,
indemnities, costs, taxes, expenses (including all taxes,
expenses, and disbursements described in Sections 2.20 or
9.4 of the Credit Agreement) or otherwise, (b) any and all
other sums payable by the Guarantor or the Company or any
of its Subsidiaries under or in respect of any Financing
Document, and (c) any and all renewals, extensions,
rearrangements, replacements, substitutions, increases
and/or modifications of all or any part of the foregoing.
"Obligor" shall mean any Person, other than Pledgor,
liable (whether directly or indirectly, primarily or
secondarily) for the payment or performance of any of the
Obligations whether as maker, co-maker, endorser,
guarantor, accommodation party, general partner or
otherwise.
"Pledged Securities" shall mean all of the securities
and other property (whether or not the same constitutes a
"security" under the Code) referred to in Section 1.2 and
all additional securities (as that term is defined in the
Code), if any, constituting Collateral under this
Agreement.
ARTICLE 3
Representations and Warranties
------------------------------
In order to induce Secured Party to accept this Agreement,
Pledgor represents and warrants to Secured Party (which
representations and warranties will survive the creation and
payment of the Obligations) that:
-3-
<PAGE>
Section 3.1 Corporate Existence. The Pledgor is a corporation
duly organized, legally existing and in good standing under the
laws of the State of Delaware.
Section 3.2 Corporate Power and Authorization. The Pledgor is
duly authorized and empowered to execute, deliver and perform
this Agreement; and all corporate action on the Pledgor's part
requisite for the due execution, delivery and performance of this
Agreement has been duly and effectively taken.
Section 3.3 Binding Obligations. This Agreement
constitutes a legal, valid, and binding obligation of the
Pledgor, and, upon execution and delivery to the Secured Party
for the benefit of Guaranteed Parties, and (assuming due
authorization, execution and delivery by the other parties
thereto) will be enforceable against the Pledgor in accordance
with its terms, subject to (a) bankruptcy, insolvency, moratorium
and other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally, and (b) general principles
of equity (regardless of whether considered in a proceeding at
law or in equity).
Section 3.4 No Legal Bar or Resultant Lien. This Agreement
does not and will not violate or create a default under any
provisions of the certificate of incorporation or bylaws of the
Pledgor, or any contract, agreement, instrument or Governmental
Requirement to which the Pledgor is subject (other than those
violations and defaults that would not affect the Pledgor's use
of such Property or those permitted by this Agreement), or result
in the creation or imposition of any Lien upon any Property of
the Pledgor except as permitted by the Financing Documents.
Section 3.5 Ownership of Collateral; Encumbrances. Pledgor is
the legal and beneficial owner of the Collateral free and clear
of any adverse claim, lien, security interest, option or other
charge or encumbrance except for the security interest created by
this Agreement, and Pledgor has full right, power and authority
to pledge, assign and grant a security interest in the Collateral
to Secured Party.
Section 3.6 No Required Consent. No authorization, consent,
approval or other action by, and no notice to or filing with, any
Governmental Authority is required for (i) the due execution,
delivery and performance by Pledgor of this Agreement, (ii) the
grant by Pledgor of the security interest granted by this
Agreement, (iii) the perfection of such security interest, or
(iv) the exercise by Secured Party of its rights and remedies
under this Agreement.
Section 3.7 Pledged Securities. The Pledged Securities have
been duly authorized and validly issued, and are fully paid and
non-assessable.
Section 3.8 First Priority Security Interest. The pledge of
Pledged Securities (together with physical delivery of the
certificates representing the Pledged Securities) pursuant to
this Agreement creates a valid and perfected first priority
security interest in the Collateral, enforceable against Pledgor
and all third parties and securing payment of the Obligations,
subject to (a) bankruptcy, insolvency, moratorium and other
similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, and (b) general principles of equity
(regardless of whether considered in a proceeding at law or in
equity).
Section 3.9 Collateral. The delivery at any time by Pledgor
to Secured Party of additional Collateral or of additional
descriptions of Collateral shall constitute a representation and
warranty by Pledgor to Secured Party hereunder that the
representations and warranties of this Article 3 are correct
insofar as they would pertain to such Collateral or the
descriptions thereof.
-4-
<PAGE>
Section 3.10 No Material Misstatements. All factual
information, taken as a whole, in any written exhibit, schedule
or report prepared by or on behalf of the Pledgor and furnished
to the Secured Party or the other Guaranteed Parties by or at the
direction of the Pledgor in connection with the negotiation of
this Agreement does not contain any material misstatement of fact
or omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they
were made, not misleading.
Section 3.11 Investment Company Act. The execution and
delivery by the Pledgor of this Agreement and its performance of
the obligations provided for herein, will not result in a
violation of the Investment Company Act of 1940, as amended.
ARTICLE 4
Covenants and Agreements
------------------------
Pledgor will at all times comply with the covenants and
agreements contained in this Article 4, from the date hereof and
for so long as any part of the Obligations are outstanding and
the Commitments have not been terminated.
Section 4.1 Sale, Disposition or Encumbrance of Collateral.
Except as otherwise expressly permitted by the Credit Agreement,
Pledgor will not in any way encumber any of the Collateral (or
permit or suffer any of the Collateral to be encumbered) or sell,
pledge, assign, lend or otherwise dispose of or transfer any of
the Collateral to or in favor of any Person other than Secured
Party.
Section 4.2 Dividends or Distributions. So long as no Event
of Default shall have occurred and be continuing, Pledgor shall
be entitled to receive, retain and transfer any and all dividends
and interest paid in respect of the Collateral, provided,
however, that any and all:
(a) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect
of, or in exchange for (including, without limitation, any
certificate or share purchased or exchanged in connection
with a tender offer or merger agreement), any Collateral;
(b) dividends and other distributions paid or payable
in cash in respect of any Collateral in connection with a
partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or
paid-in surplus, or reclassification; and
(c) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Collateral;
shall be, and shall be forthwith delivered to Secured Party to
hold as, Collateral and shall, if received by Pledgor, be
received in trust for the benefit of Secured Party, be segregated
from the other property or funds of Pledgor, and be forthwith
delivered to Secured Party as Collateral in the same form as so
received (with any necessary endorsement).
Section 4.3 Records and Information. The Pledgor will keep
proper books of record and account in accordance with GAAP. The
Pledgor will permit any officer, employee or agent of the Secured
Party or
-5-
<PAGE>
any other Guaranteed Party to visit and inspect any of
the Properties of the Pledgor, examine the Pledgor's books of
record and accounts, take copies and extracts therefrom, and
discuss the affairs, finances and accounts of the Pledgor with
the Pledgor's officers, accountants and auditors, as often and
all at such reasonable times during normal business hours as may
be reasonably requested by the Secured Party or any of the other
Guaranteed Parties.
Section 4.4 Reimbursement of Expenses. Pledgor agrees
to indemnify and hold Secured Party and the other Guaranteed
Parties harmless from and against and covenants to defend Secured
Party and the other Guaranteed Parties against any and all
losses, damages, claims, costs, penalties, liabilities and
expenses, including, without limitation, court costs and
reasonable attorneys' fees, reasonably incurred because of,
incident to, or with respect to the Collateral (including,
without limitation, any exercise of rights or remedies in
connection therewith); provided, however the provisions of this
Section 4.4 shall not apply to any action, suits, proceedings,
claims, costs, losses, liabilities, damages, or expenses to the
extent, but only to the extent, caused by the gross negligence or
willful misconduct of the party seeking indemnification. All
amounts for which Pledgor is liable pursuant to this Section 4.4
shall be due and payable by Pledgor to Secured Party or such
other Guaranteed Party upon demand. If Pledgor fails to make such
payment upon demand (or if demand is not made due to an
injunction or stay arising from bankruptcy or other proceedings)
and Secured Party or any other Guaranteed Party pays such amount,
the same shall be due and payable by Pledgor to Secured Party or
such other Guaranteed Party, plus interest thereon from the date
that is five (5) days following Secured Party's or such other
Guaranteed Party's demand (or from the date that is five (5) days
following Secured Party's or such other Guaranteed Party's
payment if demand is not made due to such proceedings) at the
rate set forth in Section 2.6(c) of the Credit Agreement
("Default Rate"); provided, however, if an Event of Default has
occurred and is continuing, interest will begin to accrue on such
amount from the date of Secured Party's or such other Guaranteed
Party's demand (or from the date of Secured Party's or such other
Guaranteed Party's payment if demand is not made due to such
proceedings).
Section 4.5 Stock Powers. Pledgor shall furnish to Secured
Party such stock powers and other instruments as may be required
by Secured Party to assure the transferability of the Collateral
pursuant to Section 6.2 when and as often as may be requested by
Secured Party.
Section 4.6 Voting and Other Consensual Rights. Except to the
extent otherwise provided in subsection 6.6(d), Pledgor shall be
entitled to exercise any and all voting and other consensual
rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of this Agreement.
Section 4.7 Pledged Securities Percentage. The Pledged
Securities will at all times constitute 100% of the issued and
outstanding shares of capital stock of the issuer thereof.
Section 4.8 Conduct of Business and Maintenance of Existence.
The Pledgor will preserve, renew and keep in full force and
effect its corporate existence and its rights, privileges and
franchises necessary or desirable in the normal conduct of its
business.
Section 4.9 Further Assurances. The Pledgor will cure
promptly any defects in the execution and delivery of this
Agreement and any other Financing Documents to which the Pledgor
is or becomes a party. The Pledgor at its own expense, as
promptly as practical, will execute and deliver to the Secured
Party and the other Guaranteed Parties upon request all such
instruments and take all such action in order fully to
-6-
<PAGE>
effectuate the purposes of this Agreement and any other
Financing Documents to which the Pledgor is or becomes a party.
Section 4.10 Reporting Covenant. So long as any Loan, any
Commitment, any Revolving Credit Exposure, or other Obligation
remains unpaid or outstanding, the Pledgor will furnish to
Secured Party and each other Guaranteed Party, promptly after the
occurrence of any event or circumstance concerning or changing
any of the Collateral that would have a Material Adverse Effect,
notice of such event or circumstance in reasonable detail.
Section 4.11 Dividend Payments. In the event that the Pledgor
receives any dividend, payment, or distribution of any kind from
the Borrower or any of its Subsidiaries not expressly permitted
by Section 6.5 of the Credit Agreement, the Pledgor shall hold
such dividend, payment, or other distribution in trust for the
benefit of the Secured Party and the other Guaranteed Parties,
and shall immediately pay or deliver the same to the Secured
Party, for the benefit of the Guaranteed Parties.
ARTICLE 5
Rights, Duties, and Powers of Secured Party
-------------------------------------------
The following rights, duties and powers of Secured Party
are applicable irrespective of whether an Event of Default occurs
and is continuing:
Section 5.1 Discharge Encumbrances. Secured Party may, at its
option, discharge any taxes, liens, security interests or other
encumbrances at any time levied or placed on the Collateral, if
Pledgor fails to discharge same within thirty (30) days after
written notice thereof shall have been given to Pledgor by
Secured Party; provided, however, notwithstanding the foregoing,
(a) after the occurrence and during the continuance of an Event
of Default, Secured Party may, at its option, discharge any such
encumbrance, and (b) in any event, Secured Party may, at its
option, discharge any such encumbrance at any time if failure to
do so would have a material adverse effect on all or any part of
the Collateral. Pledgor agrees to reimburse Secured Party upon
demand for any payment so made, plus interest thereon from the
date of Secured Party's demand at the Default Rate.
Section 5.2 Transfer of Collateral. Subject to the provisions
of the Credit Agreement, Secured Party may transfer any or all of
the Obligations, and upon any such transfer Secured Party may
transfer its interest in any or all of the Collateral and shall
be fully discharged thereafter from all liability therefor. Any
transferee of the Collateral shall be vested with all rights,
powers and remedies of Secured Party hereunder.
Section 5.3 Cumulative and Other Rights. The rights, powers
and remedies of Secured Party hereunder are in addition to all
rights, powers and remedies given by law or in equity. The
exercise by Secured Party of any one or more of the rights,
powers and remedies herein shall not be construed as a waiver of
any other rights, powers and remedies, including, without
limitation, any other rights of set-off. If any of the
Obligations are given in renewal, extension for any period or
rearrangement, or applied toward the payment of debt secured by
any lien, Secured Party shall be, and is hereby, subrogated to
all the rights, titles, interests and liens securing the debt so
renewed, extended, rearranged or paid.
-7-
<PAGE>
Section 5.4 Disclaimer of Certain Duties.
(a) The powers conferred upon Secured Party by this
Agreement are to protect its interest in the Collateral and shall
not impose any duty upon Secured Party or any other Guaranteed
Party to exercise any such powers. Pledgor hereby agrees that
Secured Party shall not be liable for, nor shall the indebtedness
evidenced by the Obligations be diminished by, Secured Party's
delay or failure to collect upon, foreclose, sell, take
possession of or otherwise obtain value for the Collateral.
(b) Subject to the provisions of the Credit Agreement,
Secured Party shall be under no duty whatsoever to make or give
any presentment, notice of dishonor, protest, demand for
performance, notice of non-performance, notice of intent to
accelerate, notice of acceleration, or other notice or demand in
connection with any Collateral or the Obligations, or to take any
steps necessary to preserve any rights against any Obligor or
other Person. Pledgor waives any right of marshaling in respect
of any and all Collateral, and waives any right to require
Secured Party or any other Guaranteed Party to proceed against
any Obligor or other Person, exhaust any Collateral or enforce
any other remedy which Secured Party or any other Guaranteed
Party now has or may hereafter have against any Obligor or other
Person.
Section 5.5 Modification of Obligations; Other Security.
Pledgor waives (a) any and all notice of acceptance, creation,
modification, rearrangement, renewal or extension for any period
of any instrument executed by any Obligor in connection with the
Obligations, and (b) any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of
any Obligor or for any other reason. Pledgor authorizes Secured
Party, without notice or demand and without any reservation of
rights against Pledgor and without affecting Pledgor's liability
hereunder, from time to time to (x) take and hold from other
Persons other property, other than the Collateral, as security
for the Obligations, and exchange, enforce, waive and release any
or all of the Collateral, (y) apply the Collateral in the manner
permitted by this Agreement, and (z) renew, extend for any
period, accelerate, amend or modify, supplement, enforce,
compromise, settle, waive or release the obligations of any
Obligor or any instrument or agreement of such other Person with
respect to any or all of the Obligations or Collateral.
Section 5.6 Custody and Preservation of the Collateral.
Secured Party shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially
equal to that which comparable secured parties accord comparable
collateral, it being understood and agreed, however, that neither
Secured Party nor any other Guaranteed Party shall have
responsibility for (a) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not Secured Party
has or is deemed to have knowledge of such matters, or (b) taking
any necessary steps to preserve rights against Persons or
entities with respect to any Collateral.
Section 5.7 Limited Right of Subrogation. Notwithstanding any
payment or payments made by the Pledgor hereunder or any set-off
or application of funds of the Pledgor by the Secured Party or
any other Guaranteed Party, the Pledgor shall not be entitled to
be subrogated to any of the rights of the Secured Party or any
other Guaranteed Party against the Borrower, any Pledgor or any
collateral security or guaranty or right of offset held by any
such Person for the payment of the Obligations, nor shall the
Pledgor seek or be entitled to seek any contribution or
reimbursement from the Borrower or any other guarantor in respect
of payments made by the Pledgor hereunder, until all Obligations
are paid in full and the Commitments are terminated. If any
amount shall be paid to the Pledgor on account of such
subrogation rights at any time when all of the Obligations shall
not have been paid in full, such amount shall be held by the
Pledgor in trust
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<PAGE>
for the Secured Party and the other Guaranteed
Parties, segregated from other funds of the Pledgor, and shall,
forthwith upon receipt by the Pledgor, be turned over to the
Secured Party in the exact form received by the Pledgor (duly
indorsed by the Pledgor to the Secured Party, if required), to be
applied against the Obligations, whether matured or unmatured in
such order as the Secured Party may determine.
Section 5.8 Amendments, etc. with respect to the Obligations;
Waiver of Rights. The Pledgor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Pledgor and without notice to or further assent by the
Pledgor, any demand for payment of any of the Obligations made by
the Secured Party or any other Guaranteed Party may be rescinded
and any of the Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any
collateral security or guaranty 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 the Secured Party or the
other Guaranteed Parties and the Credit Agreement, the Notes, and
any collateral security document or other guaranty or document in
connection therewith (including, without limitation, the other
Financing Documents) may be amended, modified, supplemented, or
terminated, in whole or in part, as the Secured Party and the
other Guaranteed Parties may deem advisable from time to time,
and any collateral security or guaranty or right of offset at any
time held by the Secured Party or the other Guaranteed Parties
for the payment of the Obligations may be sold, exchanged,
waived, surrendered, or released, all without the
necessity of any reservation of rights against the Pledgor and
without notice to or further assent by the Pledgor which will
remain bound hereunder, notwithstanding any such renewal,
extension, modification, acceleration, compromise, amendment,
supplement, termination, sale, exchange, waiver, surrender, or
release. When making any demand hereunder against the Pledgor,
the Secured Party may, but shall be under no obligation to, make
a similar demand on the Borrower or any guarantor, and any
failure by the Secured Party to make any such demand or to
collect any payments from the Borrower or any such other
guarantor, or any release of the Borrower or other guarantor,
shall not relieve the Pledgor of its obligations or liabilities
hereunder, and shall not impair or affect the rights and
remedies, express or implied, or as a matter of law, of the
Secured Party or the other Guaranteed Parties against the
Pledgor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
Section 5.9 Nature of Obligation; Waivers. The Pledgor waives
any and all notice of the creation, renewal, extension, or
accrual of any of the Obligations and notice of or proof of
reliance by the Secured Party or the other Guaranteed Parties
upon this Agreement or acceptance of this Agreement, and the
Obligations (and any of them) shall conclusively be deemed to
have been created, contracted, or incurred and extended, amended,
and waived in reliance upon this Agreement, and all dealings
between the Borrower or the Pledgor and the Secured Party or any
other Guaranteed Party shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Agreement. The
Pledgor waives diligence, presentment, protest, demand for
payment, and notice of default or nonpayment, notice of intention
to accelerate maturity, and notice of acceleration of maturity to
or upon the Borrower or the Pledgor with respect to the
Obligations. The Pledgor understands and agrees that this
Agreement shall be construed as a continuing, absolute,
completed, unconditional pledge, without regard to (a) the
validity, regularity or enforceability of any collateral security
pledged to secure or guaranty the payment or performance of the
Obligations or right of offset with respect thereto at any time
or from time to time held by the Secured Party or the other
Guaranteed Parties, (b) any defense, set-off, or counterclaim
which may at any time be available to or be asserted by the
Borrower or any Person liable for the Obligations against the
Secured Party or the other Guaranteed Parties, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Pledgor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of any
Person liable for the Obligations, or of the Pledgor under this
Agreement, in bankruptcy
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<PAGE>
or in any other instance. When pursuing any of their
rights and remedies against the Pledgor hereunder, the Secured
Party and the other Guaranteed Parties may, but shall be under no
obligation to, pursue such rights and remedies as they may have
against the Borrower or any Person or against any collateral
security or guaranty for the Obligations or any right of offset
with respect thereto, and any failure by the Secured Party or the
other Guaranteed Parties to pursue such other rights or remedies
or to collect any payments from the Borrower or any such Person
or to realize upon any such collateral security or guaranty or to
exercise any such right of offset, or any release of the Borrower
or any such Person or any such collateral security, guaranty or
right of offset, shall not relieve the Pledgor of any liability
hereunder, and shall not impair or affect the rights and
remedies, whether express, implied, or available as a matter of
law, of the Secured Party or any other Guaranteed Party against
the Pledgor. This Agreement shall remain in full force and effect
and be binding in accordance with and to the extent of its terms
upon the Pledgor and its successors and assigns, and shall inure
to the benefit of the Secured Party and the other Guaranteed
Parties, and their respective successors, indorsees, transferees,
and assigns, until all the Obligations and the obligations of the
Pledgor under this Agreement shall have been satisfied by payment
in full.
ARTICLE 6
Events of Default
-----------------
Section 6.1 Events. It shall constitute an Event of Default
under this Agreement if an Event of Default occurs and is
continuing under the Credit Agreement.
Section 6.2 Remedies. Upon the occurrence and during the
continuance of any Event of Default, Secured Party, upon the
written or telex request of the Required Lenders, shall take any
or all of the following actions without notice (except where
expressly required below or in the Credit Agreement) or demand to
Pledgor:
(a) Pursuant to the terms of the Credit Agreement,
declare all or part of the indebtedness pursuant to the
Obligations immediately due and payable and enforce payment
of the same.
(b) Sell, in one or more sales and in one or more
parcels, or otherwise dispose of any or all of the
Collateral in any commercially reasonable manner as Secured
Party may elect, in a public or private transaction, at any
location as deemed reasonable by Secured Party for cash or
for future delivery at such price as Secured Party may deem
fair, and (unless prohibited by the Code, as adopted in any
applicable jurisdiction) Secured Party or any other
Guaranteed Party may be the purchaser of any or all
Collateral so sold and may apply upon the purchase price
therefor any Obligations secured hereby. Any such sale or
transfer by Secured Party either to itself or to any other
Person shall be absolutely free from any claim of right by
Pledgor, including any equity or right of redemption, stay
or appraisal which Pledgor has or may have under any rule
of law, regulation or statute now existing or hereafter
adopted. Upon any such sale or transfer, Secured Party
shall have the right to deliver, assign and transfer to the
purchaser or transferee thereof the Collateral so sold or
transferred. If Secured Party deems it advisable to do so,
it may restrict the bidders or purchasers of any such sale
or transfer to Persons or entities who will represent and
agree that they are purchasing the Collateral for their own
account and not with the view to the distribution or resale
of any of the Collateral. Secured Party may, at its
discretion, provide for a public sale, and any such public
sale shall be held at such time or times within ordinary
business hours and at such
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place or places as Secured Party
may fix in the notice of such sale. Secured Party shall not
be obligated to make any sale pursuant to any such notice.
Secured Party may, without notice or publication, adjourn
any public or private sale by announcement at any time and
place fixed for such sale, and such sale may be made at any
time or place to which the same may be so adjourned. In the
event any sale or transfer hereunder is not completed or is
defective in the opinion of Secured Party, such sale or
transfer shall not exhaust the rights of Secured Party
hereunder, and Secured Party shall have the right to cause
one or more subsequent sales or transfers to be made
hereunder. If only part of the Collateral is sold or
transferred such that the Obligations remain outstanding
(in whole or in part), Secured Party's rights and remedies
hereunder shall not be exhausted, waived or modified, and
Secured Party is specifically empowered to make one or more
successive sales or transfers until all the Collateral
shall be sold or transferred and all the Obligations are
paid. In the event that Secured Party elects not to sell
the Collateral, Secured Party retains its rights to dispose
of or utilize the Collateral or any part or parts thereof
in any manner authorized or permitted by law or in equity,
and to apply the proceeds of the same towards payment of
the Obligations. Each and every method of disposition of
the Collateral described in this subsection or in
subsection (d) shall constitute disposition in a
commercially reasonable manner.
(c) Apply proceeds of the disposition of the
Collateral to the Obligations in any manner elected by
Secured Party and permitted by the Code or otherwise
permitted by law or in equity. Such application may
include, without limitation, the reasonable attorneys' fees
and legal expenses incurred by Secured Party and the other
Guaranteed Parties.
(d) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by
Secured Party of the Collateral.
(e) Receive, change the address for delivery, open and
dispose of mail addressed to Pledgor, and to execute,
assign and endorse negotiable and other instruments for the
payment of money, documents of title, or other evidences of
payment, but only in respect of the Collateral on behalf of
and in the name of Pledgor.
(f) Exercise all other rights and remedies permitted
by law or in equity.
Section 6.3 Attorney-in-Fact. Pledgor hereby irrevocably
appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of
Pledgor or otherwise, from time to time in Secured Party's
discretion upon the occurrence and during the continuance of an
Event of Default, but at Pledgor's cost and expense and without
notice to Pledgor, to take any action and to execute any
assignment, certificate, financing statement, stock power,
notification, document or instrument which Secured Party may deem
necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, endorse and
collect all instruments made payable to Pledgor representing any
dividend, interest payment or other distribution in respect of
the Collateral or any part thereof and to give full discharge for
the same.
Section 6.4 No Liability for Deficiency. Notwithstanding
anything contained herein to contrary, it is expressly agreed
that Secured Party's rights and remedies hereunder are expressly
limited to the Collateral, and Pledgor shall have no personal
liability for the payment of any sums hereunder, except to the
extent of the Collateral. If any claim of the Guaranteed Parties
against the Pledgor shall be asserted under this Agreement, the
Guaranteed Parties' rights in respect of the Obligations shall be
limited to satisfaction
-11-
<PAGE>
out of, and enforcement against, the
Collateral, and, except as hereinafter set forth, the Guaranteed
Parties shall not have the right to proceed directly or
indirectly against the Pledgor or against any of its Properties
(other than the Collateral) for the satisfaction
of any of the Obligations or of any such claim or
liability or for any deficiency judgment (except that the
Guaranteed Parties shall not be deemed by the provisions of this
Section 6.4 to have waived any rights under any applicable law to
the extent enforceable out of the Collateral or against the
Pledgor relating to any dividend or distribution to the Pledgor
in violation of the Credit Agreement or any other Financing
Document). Notwithstanding any of the foregoing, it is expressly
understood and agreed, however, that nothing contained in this
Section 6.4 shall in any manner or way (a) constitute or be
deemed to be a release of the Obligations or any such claim or
liability or the Obligations secured by, or impair the
enforceability of, the Liens and rights created by or arising
from or in connection with the Credit Agreement, this Agreement
and the other Financing Documents or, except as provided in the
preceding sentence, restrict the remedies (including the right to
join the Pledgor in any legal action, claim or proceeding)
available to the Guaranteed Parties to realize upon the
Collateral; (b) affect or diminish any covenant of the Pledgor;
or (c) be deemed to release or in any manner limit the liability
of the Pledgor for its fraudulent actions. The matters set forth
in this Section 6.4 shall survive the termination of this
Agreement.
Section 6.5 Reasonable Notice. If any applicable
provision of any law requires Secured Party or any other
Guaranteed Party to give reasonable notice of any sale or
disposition or other action, Pledgor hereby
agrees that ten days' prior written notice shall constitute
reasonable notice thereof. Such notice, in the case of public
sale, shall state the time and place fixed for such sale and, in
the case of private sale, the time after which such sale is to be
made.
Section 6.6 Pledged Securities. Upon the occurrence and
during the continuance of an Event of Default:
(a) All rights of Pledgor to receive the dividends and
interest payments which it would otherwise be authorized to
receive and retain pursuant to Section 4.2 shall cease, and
all such rights shall thereupon become vested in Secured
Party who shall thereupon have the sole right to receive
and hold as Collateral such dividends and interest
payments, but Secured Party shall have no duty to receive
and hold such dividends and interest payments and shall not
be responsible for any failure to do so or delay in so
doing.
(b) All dividends and interest payments which are
received by Pledgor contrary to the provisions of this
Section 6.6 shall be received in trust for the benefit of
Secured Party, shall be segregated from other funds of
Pledgor and shall be forthwith paid over to Secured Party
as Collateral in the same form as so received (with any
necessary indorsement).
(c) Secured Party may exercise any and all rights of
conversion, exchange, subscription or any other rights,
privileges or options pertaining to any of the 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 readjustment of any issuer of such Pledged Securities
or upon the exercise by any such issuer or Secured Party of
any right, privilege or option pertaining to any of the
Pledged Securities, and in connection therewith, to deposit
and deliver any and all of the Pledged Securities with any
committee, depository, transfer agent, registrar or other
designated agency upon such terms and conditions as it may
determine, all without liability except to account for
property actually received
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<PAGE>
by it, but Secured Party shall have no duty to exercise any
of the aforesaid rights, privileges or options and shall not
be responsible for any failure to do so or delay in so
doing.
(d) If the issuer of any Pledged Securities is the
subject of bankruptcy, insolvency, receivership,
custodianship or other proceedings under the supervision of
any court or governmental agency or instrumentality, then
all rights of Pledgor to exercise the voting and other
consensual rights which Pledgor would otherwise be entitled
to exercise pursuant to Section 4.6 with respect to the
Pledged Securities issued by such issuer shall cease, and
all such rights shall thereupon become vested in Secured
Party who shall thereupon have the sole right to exercise
such voting and other consensual rights, but Secured Party
shall have no duty to exercise any such voting or other
consensual rights and shall not be responsible for any
failure to do so or delay in so doing.
Section 6.7 Non-judicial Enforcement. Secured Party may
enforce its rights hereunder without prior judicial process or
judicial hearing, and to the extent permitted by law Pledgor
expressly waives any and all legal rights which might otherwise
require Secured Party to enforce its rights by judicial process.
ARTICLE 7
Miscellaneous Provisions
------------------------
Section 7.1 Notices. Any notice required or permitted to be
given under or in connection with this Agreement shall be given
in accordance with the notice provisions of the Credit Agreement
to the address of the Pledgor provided in the introductory
paragraph of this Agreement.
Section 7.2 Amendments and Waivers. Secured Party's
acceptance of partial or delinquent payments or any forbearance,
failure or delay by Secured Party in exercising any right, power
or remedy hereunder shall not be deemed a waiver of any
obligation of Pledgor or any Obligor, or of any right, power or
remedy of Secured Party; and no partial exercise of any right,
power or remedy shall preclude any other or further exercise
thereof. Secured Party may remedy any Event of Default hereunder
or in connection with the Obligations without waiving the Event
of Default so remedied. Pledgor hereby agrees that if Secured
Party agrees to a waiver of any provision hereunder, or an
exchange of or release of the Collateral, or the addition or
release of any Obligor or other Person, any such action shall not
constitute a waiver of any of Secured Party's other rights or of
Pledgor's obligations hereunder. This Agreement may be amended
only by an instrument in writing executed jointly by Pledgor and
Secured Party and may be supplemented only by documents delivered
or to be delivered in accordance with the express terms hereof.
Section 7.3 Copy as Financing Statement. A photocopy or other
reproduction of this Agreement may be delivered by Pledgor or
Secured Party to any financial intermediary or other third party
for the purpose of transferring or perfecting any or all of the
Pledged Securities to Secured Party or its designee or assignee.
Section 7.4 Possession of Collateral. Secured Party shall be
deemed to have possession of any Collateral in transit to it or
set apart for it (or, in either case, to or for any of its
agents, affiliates or correspondents).
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<PAGE>
Section 7.5 Redelivery of Collateral. If any sale or transfer
of Collateral by Secured Party results in full satisfaction of
the Obligations, and after such sale or transfer and discharge
there remains a surplus of proceeds, Secured Party will deliver
to Pledgor such excess proceeds in a commercially reasonable
time; provided, however, that neither Secured Party nor any other
Guaranteed Party shall have any liability for any interest, cost
or expense in connection with any reasonable delay in delivering
such proceeds to Pledgor.
Section 7.6 Governing Law; Submission to Jurisdiction; etc.
(a) Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed in
accordance with and be governed by the laws of the State of New
York (including Section 5- 1401 of the New York General
Obligations Law, or any similar successor provision thereto, but
excluding all other conflict-of-laws rules)and to the extent
controlling, laws of the United States of America.
(b) SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE OTHER FINANCING
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING, BUT NOT LIMITED TO, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
(c) WAIVER OF JURY TRIAL & CONSEQUENTIAL DAMAGES. TO THE
MAXIMUM EXTENT ALLOWED BY APPLICABLE LAW, PLEDGOR AND SECURED
PARTY (I) IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
FINANCING DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II)
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN
ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES; (III) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER;
AND (IV) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE OTHER FINANCING DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY BASED UPON, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
(d) Designation of Process Agent. Pledgor hereby
irrevocably designates CT Corporation System, with an office on
the date hereof at 1633 Broadway, New York, New York, 10019, as
the designee, appointee and process agent of Pledgor to receive,
for and on behalf of Pledgor, service of process in such
respective jurisdictions in any legal action or proceeding with
respect to this Agreement or the other Financing Documents. It is
understood that a copy of such process served on such agent will
be promptly forwarded by mail to Pledgor at its address set forth
opposite its signature below, but the failure of Pledgor to
receive such copy shall not affect in any way the service of such
process. Pledgor further irrevocably consents to the service of
process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to Pledgor at its said address,
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<PAGE>
such service to become effective on the earlier to occur of (i)
actual receipt of such service of process and (ii) 30 days after
such mailing.
(e) Service of Process. Nothing herein shall affect the
right of Secured Party to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise
proceed against Pledgor in any other jurisdiction.
Section 7.7 Continuing Security Agreement.
------------------------------
(a) Except as may be expressly applicable pursuant to
Section 9.505 of the Code, no action taken or omission to act by
Secured Party or the other Guaranteed Parties hereunder,
including, without limitation, any exercise of voting or
consensual rights pursuant to Section 4.6 or any other action
taken or inaction pursuant to Section 6.2, shall be deemed to
constitute a retention of the Collateral in satisfaction of the
Obligations or otherwise to be in full satisfaction of the
Obligations, and the Obligations shall remain in full force and
effect, until Secured Party shall have applied payments of
collections from Collateral toward the Obligations or until such
subsequent time as is hereinafter provided in subsection (b)
below.
(b) To the extent that any payments on the Obligations or
proceeds of the Collateral are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be
repaid to a trustee, debtor in possession, receiver or other
Person under any bankruptcy law, common law or equitable cause,
then to such extent the Obligations so satisfied shall be revived
and continue as if such payment or proceeds had not been received
by Secured Party or the other Guaranteed Parties, and Secured
Party's and the other Guaranteed Parties' ratable security
interests, rights, powers and remedies hereunder shall continue
in full force and effect. In such event, this Agreement shall be
automatically reinstated if it shall theretofore have been
terminated pursuant to Section 7.8.
Section 7.8 Termination. The grant of a security interest
hereunder and all of Secured Party's and the other Guaranteed
Parties' rights, powers and remedies in connection therewith
shall remain in full force and effect until Secured Party has (a)
retransferred and delivered all Collateral in its possession to
Pledgor, and (b) executed a written release or termination
statement and reassigned to Pledgor without recourse or warranty
any remaining Collateral and all rights conveyed hereby. Upon (x)
the complete payment of the Obligations, (y) the termination of
the Commitments, and (z) the compliance by Pledgor with all
covenants and agreements hereof, Secured Party, at the written
request and expense of Pledgor, will release, reassign and
transfer the Collateral to Pledgor and declare this Agreement to
be of no further force or effect. Notwithstanding the foregoing,
the reimbursement and indemnification provisions of Section 4.4
and the provisions of subsection 7.7(b) shall survive the
termination of this Agreement.
Section 7.9 Invalidity. In the event that one or more of the
provisions contained in this Agreement shall, for any reason, be
held invalid, illegal or unenforceable in any respect (a) Pledgor
agrees that such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement, and (b) Pledgor
and Secured Party (acting on behalf of and at the direction of
the Guaranteed Parties) will negotiate in good faith to amend
such provision so as to be legal, valid and enforceable.
Section 7.10 Counterparts, Effectiveness. This Agreement may
be executed in two or more counterparts. Each counterpart is
deemed an original, but all such counterparts taken together
constitute one and the same instrument. This Agreement becomes
effective upon the execution hereof by Pledgor and
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<PAGE>
delivery of the same to Secured Party, and it is not
necessary for Secured Party to execute any acceptance hereof or
otherwise signify or express its acceptance hereof.
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<PAGE>
PLEDGOR:
--------
PM HOLDINGS CORPORATION
By: /s/ David L. Abbott
---------------------------------
Name: David L. Abbott
Title: President and Chief
Executive Officer
Address for notice:
1401 South Hanley Road
St. Louis, Missouri 63144
SECURED PARTY:
--------------
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Administrative Agent
By: /s/ D.G. Mills
---------------------------------
Name: D.G. Mills
Title: Vice-President
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EXHIBIT A
PLEDGED SECURITIES
Issuer Class of Stock Certificate Holder No. of Shares
Stock No.
==========================================================================
Purina Mills, Common 4 PM Holdings 1,000
Inc Corporation
- -----------------------------------------------------------------
PM HOLDINGS GUARANTY AGREEMENT
made by
PM HOLDINGS CORPORATION
in favor of
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
Individually, as an Issuing Bank
and as the Administrative Agent
and
FINANCIAL INSTITUTIONS NOW OR HEREAFTER
PARTIES TO THE CREDIT AGREEMENT
March 12, 1998
- -----------------------------------------------------------------
<PAGE>
GUARANTY AGREEMENT, dated as of March 12, 1998 (this
"Guaranty"), by PM HOLDINGS CORPORATION, a Delaware corporation
(the "Guarantor"), in favor of CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, individually, as an Issuing Bank and as the
Administrative Agent (herein the "Administrative Agent"), each of
the other banks or lending institutions (collectively, the
"Lenders") now or hereafter parties to the Credit Agreement (as
defined below), and the Secured Affiliates (as defined in the
Credit Agreement).
RECITALS
A. On even date herewith, the Company, the Administrative
Agent, the Issuing Banks, and the Lenders are executing that
certain Credit Agreement (said Credit Agreement, as the same may
from time to time be amended, supplemented, restated or modified,
the "Credit Agreement") pursuant to which, upon the terms and
conditions stated therein, the Lenders agree to make loans and to
participate in extensions of credit for the account of the
Company.
B. The Guarantor owns, beneficially and of record, 100% of
the outstanding capital stock of the Company.
C. The Lenders have conditioned their respective
obligations under the Credit Agreement upon the execution and
delivery of this Guaranty by the Guarantor, and the Guarantor has
agreed to enter into this Guaranty.
NOW THEREFORE, in order to comply with the terms and
conditions of the Credit Agreement and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor agrees, with and for the
benefit of the Guaranteed Parties (as defined below), as follows:
AGREEMENT
1. Defined Terms. Each capitalized term used herein, and
not otherwise defined herein, shall have the meaning ascribed to
such term in the Credit Agreement. The following capitalized
terms shall have the following meanings:
"Guaranteed Parties" shall mean each of the
Administrative Agent, the Lenders, the Issuing Banks and
the Secured Affiliates.
"Obligations" shall mean (a) all Lender Indebtedness
now or hereafter owing, pursuant to the Credit Agreement,
the Notes, any Letters of Credit, any other Financing
Document or any Hedge Agreement, including, but not limited
to, (i) the unpaid principal of and accrued interest on any
of the foregoing (including interest accruing on or after
the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim
for post-filing or post-petition interest is allowed in
such proceeding), (ii) payment of and performance of any
and all present or future obligations of the Company
according to the terms of any present or future Hedge
Agreement or any option with respect to any such
transaction now existing or hereafter entered into between
the Company and the Administrative Agent or any Lender or
any Secured Affiliate pursuant to, or in connection with,
the Lender Indebtedness or any Financing Document, and
(iii) the obligation of the Company to otherwise
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reimburse any Guaranteed Party, whether on account of fees,
indemnities, costs, taxes, expenses (including all taxes,
expenses, and disbursements described in Sections 2.20 or
9.4 of the Credit Agreement) or otherwise, (b) any and all
other sums payable by the Guarantor or the Company or any
of its Subsidiaries under or in respect of any Financing
Document, and (c) any and all renewals, extensions,
rearrangements, replacements, substitutions, increases
and/or modifications of all or any part of the foregoing.
2. Guarantee.
(a) The Guarantor hereby unconditionally and irrevocably
and jointly and severally with each of the Subsidiary Guarantors,
guarantees to each Guaranteed Party the prompt and complete
payment when due (whether at the stated maturity, by acceleration
or otherwise) of the Obligations, and the Guarantor further
agrees, jointly and severally with each of the Subsidiary
Guarantors, to pay any and all expenses which may be paid or
incurred by any Guaranteed Party in enforcing any rights with
respect to, or collecting, any or all of the Obligations and/or
enforcing any rights with respect to, or collecting against, the
Guarantor under this Guaranty.
(b) No payment or payments made by the Company, the
Guarantor, any Subsidiary Guarantor, any other guarantor or any
other Person, or received or collected by any Guaranteed Party
from the Company, the Guarantor, any Subsidiary Guarantor, 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
Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of the Guarantor hereunder, which
shall, notwithstanding any such payment or payments, other than
payments made by the Guarantor in respect of the Obligations or
payments received or collected from the Guarantor in respect of
the Obligations, remain liable for the Obligations until the
Obligations are paid in full.
(c) The Company and the Guarantor are personally obligated
and liable for the amounts due under the Notes. The Lenders have
the right to sue on the Notes and obtain a personal judgment
against the Company and the Guarantor for satisfaction of the
amounts due under the Notes either before or after a judicial
foreclosure of any Financing Document.
(d) The liability of the Guarantor for the payment of the
Obligations guaranteed hereby shall be primary, and not
secondary, and joint and several with the Subsidiary Guarantors.
3. Right of Set-off. Each Guaranteed Party is hereby
irrevocably authorized upon the occurrence of an Event of Default
without notice to the Guarantor, any such notice being expressly
waived by the Guarantor, to set-off and credit against any
credits, indebtedness, or claims, in any currency, in each case
whether direct or indirect or contingent or matured or unmatured,
at any time held or owing by such Guaranteed Party to or for the
credit or the account of the Guarantor hereunder or under the
Credit Agreement or any other Financing Document, or any part
thereof in such amounts as such Guaranteed Party may elect,
against and on account of the obligations and liabilities of the
Guarantor to the Guaranteed Parties hereunder and claims of every
nature and description of the Guaranteed Parties against the
Guarantor, in any currency, whether arising hereunder or under
the Credit Agreement or any other Financing Document, as the
Guaranteed Parties may elect, whether or not any Guaranteed Party
has made any demand for payment and although such obligations,
liabilities, and claims may be contingent or unmatured. The
Administrative Agent agrees to notify (promptly after receipt of
such notice by the Administrative Agent) the Company and the
Guarantor of any such set-off and the application made by any
Guaranteed Party, provided, that, the failure to give such notice
shall not affect the validity of such set-off and application.
The rights of the Guaranteed Parties under this paragraph are in
addition to other rights and remedies (including, without
limitation, other rights of set-off) which any such Person may
have.
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4. Limited Right of No Subrogation. Notwithstanding any
payment or payments made by the Guarantor hereunder or any
set-off or application of funds of the Guarantor by any
Guaranteed Party, the Guarantor shall not be entitled to be
subrogated to any of the rights of any Guaranteed Party against
the Company, any other Guarantor, or any collateral security or
guaranty or right of offset held by any such Person for the
payment of the Obligations, nor shall the Guarantor seek or be
entitled to seek any contribution or reimbursement from the
Company or any other guarantor in respect of payments made by the
Guarantor hereunder, until all Obligations are paid in full and
the Commitments are terminated. If any amount shall be paid to
the Guarantor on account of such subrogation rights at any time
when all of the Obligations shall not have been paid in full or
the Commitments have not been terminated, such amount shall be
held by the Guarantor in trust for the Guaranteed Parties,
segregated from other funds of the Guarantor, and shall,
forthwith upon receipt by the Guarantor, be turned over to the
Administrative Agent in the exact form received by the Guarantor
(duly indorsed by the Guarantor to the Administrative Agent, if
required), to be applied against the Obligations, whether matured
or unmatured in such order as the Administrative Agent may
determine.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by any Guaranteed Party may be rescinded and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any collateral
security or guaranty 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 the Guaranteed Parties and the Credit
Agreement, the Notes, and any collateral security document or
other guaranty or document in connection therewith (including,
without limitation, the other Financing Documents) may be
amended, modified, supplemented, or terminated, in whole or in
part, as the Guaranteed Parties may deem advisable from time to
time, and any collateral security or guaranty or right of offset
at any time held by the Guaranteed Parties for the payment of the
Obligations may be sold, exchanged, waived, surrendered, or
released, all without the necessity of any reservation of rights
against the Guarantor and without notice to or further assent by
the Guarantor which will remain bound hereunder, notwithstanding
any such renewal, extension, modification, acceleration,
compromise, amendment, supplement, termination, sale, exchange,
waiver, surrender, or release. No Guaranteed Party shall have an
obligation to protect, secure, perfect, or insure any Lien at any
time held as security for the Obligations or this Guaranty or any
Property subject thereto. When making any demand hereunder
against the Guarantor, the Administrative Agent may, but shall be
under no obligation to, make a similar demand on the Company or
any other guarantor, and any failure by the Administrative Agent
to make any such demand or to collect any payments from the
Company or any such other guarantor, or any release of the
Company or other guarantor, shall not relieve the Guarantor of
its obligations or liabilities hereunder, and shall not impair or
affect the rights and remedies, express or implied, or as a
matter of law, of the Guaranteed Parties against the Guarantor.
For the purposes hereof "demand" shall include the commencement
and continuance of any legal proceedings.
6. Guaranty Absolute and Unconditional; Waivers. The
Guarantor waives any and all notice of the creation, renewal,
extension, increase or accrual of any of the Obligations and
notice of or proof of reliance by the Guaranteed Parties upon
this Guaranty or acceptance of this Guaranty, and the Obligations
(and any of them) shall conclusively be deemed to have been
created, contracted, or incurred and extended, amended, and
waived in reliance upon this Guaranty, and all dealings between
the Company or the Guarantor and any Guaranteed Party shall
likewise be conclusively presumed to have been had or consummated
in reliance upon this Guaranty. The Guarantor waives diligence,
presentment, protest, demand for payment, and notice of default
or nonpayment, notice of intention to accelerate maturity, and
notice of acceleration of maturity to or upon the Company or the
Guarantor with respect to the Obligations. The Guarantor
understands and agrees that this Guaranty shall be construed as a
continuing, absolute, completed, unconditional (except as
expressly conditioned pursuant to the terms hereof), and
irrevocable guarantee of
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payment (and not of collection) without regard to (a) the
validity, regularity or enforceability of the Credit Agreement,
the other Financing Documents, any of the Obligations, or any
collateral security or guaranty therefor or right of offset with
respect thereto at any time or from time to time held by the
Guaranteed Parties, (b) any defense, set-off, or counterclaim
which may at any time be available to or be asserted by the
Company or any other Person liable for the Obligations against
the Guaranteed Parties, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Company or the
Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Company or any
other Person liable for the Obligations, or of the Guarantor
under this Guaranty, in bankruptcy or in any other instance. When
pursuing any of their rights and remedies against the Guarantor
hereunder, the Guaranteed Parties may, but shall be under no
obligation to, pursue such rights and remedies as they may have
against the Company or any other Person or against any collateral
security or guaranty for the Obligations or any right of offset
with respect thereto, and any failure by the Guaranteed Parties
to pursue such other rights or remedies or to collect any
payments from the Company or any such other Person or to realize
upon any such collateral security or guaranty or to exercise any
such right of offset, or any release of the Company or any such
other Person or any such collateral security, guaranty or right
of offset, shall not relieve the Guarantor of any liability
hereunder, and shall not impair or affect the rights and
remedies, whether express, implied, or available as a matter of
law, of any Guaranteed Party against the Guarantor. This Guaranty
shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon the Guarantor
and its successors and assigns, and shall inure to the benefit of
the Guaranteed Parties, and their respective successors,
indorsees, transferees, and assigns, until all the Obligations
and the obligations of the Guarantor under this Guaranty shall
have been satisfied by payment in full.
7. Reinstatement. This Guaranty 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 Obligations is
rescinded or must otherwise be restored or returned by any
Guaranteed Party upon the insolvency, bankruptcy, dissolution,
liquidation, or reorganization of the Company or the Guarantor,
or upon or as a result of the appointment of a receiver,
intervenor, or conservator of, or trustee or similar officer for,
the Company or the Guarantor or any substantial part of such
Person's property, or otherwise, all as though such payments had
not been made.
8. Maturity of Obligations; Payment. The Guarantor agrees
that if the maturity of any of the Obligations is accelerated by
bankruptcy or otherwise, such maturity shall also be deemed
accelerated for the purpose of this Guaranty without demand or
notice to the Guarantor, and the Guarantor shall, upon such
acceleration, be obligated to pay to the Administrative Agent the
amount due and unpaid by the Company and guaranteed hereby, which
payment shall be made immediately upon demand thereof by the
Administrative Agent.
9. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid, without set-off or counterclaim and in
immediately available funds and in lawful currency of the United
States of America, to the Administrative Agent in Houston, Texas,
at the Payment Office, not later than 11:00 a.m.
Houston time.
10. Representations and Warranties. The Guarantor hereby
represents and warrants that:
(a) Corporate Existence. The Guarantor is a
corporation duly organized, legally existing and in good
standing under the laws of the State of Delaware.
(b) Corporate Power and Authorization. The Guarantor
is duly authorized and empowered to execute, deliver and
perform this Guaranty; and all corporate action on the
Guarantor's part requisite for the due execution, delivery
and performance of this Guaranty has been duly and
effectively taken.
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(c) Binding Obligations. This Guaranty constitutes a
legal, valid, and binding obligation of the Guarantor, and,
upon execution and delivery to the Administrative Agent on
behalf of the Guaranteed Parties, (assuming due
authorization, execution and delivery by the other parties
thereto) will be enforceable against the Guarantor in
accordance with its terms, subject to (a) bankruptcy,
insolvency, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors'
rights generally, and (b) general principles of equity
(regardless of whether considered in a proceeding at law or
in equity).
(d) No Legal Bar or Resultant Lien. This Guaranty does
not and will not violate or create a default under any
provisions of the certificate of incorporation or bylaws of
the Guarantor, or any contract, agreement, instrument or
Governmental Requirement to which the Guarantor is subject
(other than those violations and defaults that would not
affect the Guarantor's use of such Property or those
permitted by this Guaranty), or result in the creation or
imposition of any Lien upon any Property of the Guarantor.
(e) No Consent. The Guarantor's execution, delivery
and performance of this Guaranty does not require notice to
or filing or registration with, or authorization, consent
or approval of, or other action by any other Person,
including, but not limited to, any Governmental Authority.
(f) Investments and Guaranties. The Guarantor has not
made investments in or advances to any Person, except for
investments in the Company, PI Acquisition Corporation, and
PI Holding Company, or guaranteed the obligations of any
Person, except for the obligations of the Company.
(g) Litigation. There is no action, suit or
proceeding, or any governmental investigation or any
arbitration, in each case pending or, to the knowledge of
the Guarantor, threatened against the Guarantor, the
Company, or any other Property of the Guarantor before any
court or arbitrator or any Governmental Authority which (i)
challenges the validity or enforceability of this Guaranty,
or (ii) if adversely determined could reasonably be
expected to have a Material Adverse Effect.
(i) Taxes; Governmental Charges. The Guarantor has
filed all tax returns and reports required to be filed and
has paid all taxes, assessments, fees and other
governmental charges levied upon it or upon any of the
Guarantor's Properties or income which are due and payable,
including interest and penalties, except where failure to
so pay or file would not have a Material Adverse Effect, or
has provided adequate reserves for the payment thereof if
required in accordance with GAAP for the payment thereof,
except such interest and penalties as are being contested
in good faith by appropriate actions or proceedings and for
which adequate reserves for the payment thereof as required
by GAAP have been provided.
(j) Titles, etc. The Guarantor has good title to, or
valid leasehold interests in, all its real and personal
Property material to its business, except for minor title
defects in title that do not interfere with its ability to
conduct its business as currently conducted or to utilize
such Properties for their intended purposes.
(k) Defaults. The Guarantor is not in default nor has
any event or circumstance occurred which, but for the
passage of time or the giving of notice, or both, would
constitute a default (in any respect that could reasonably
be expected to have a Material Adverse Effect) under any
loan or credit agreement, indenture, mortgage, deed of
trust, security agreement or other instrument or agreement
evidencing or pertaining to any Indebtedness of the
Guarantor, or under any material agreement or instrument to
which the Guarantor is a party or by which the Guarantor is
bound. No Default hereunder has occurred and is continuing.
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(l) No Material Misstatements. All factual
information, taken as a whole, in any written exhibit,
schedule or report prepared by or on behalf of the
Guarantor and furnished to the Guaranteed Parties by or at
the direction of the Guarantor in connection with the
negotiation of this Guaranty does not contain any material
misstatement of fact or omit to state a material fact
necessary to make the statements contained therein, in
light of the circumstances in which they were made, not
misleading.
(m) Investment Company Act. The Guarantor is not an
"investment company" or a company "controlled" by an
"investment company" that is incorporated in or organized
under the laws of the United States or any "State" as those
terms are defined in the Investment Company Act of 1940, as
amended. The execution and delivery by the Guarantor of
this Guaranty and its performance of the obligations
provided for herein, will not result in a violation of the
Investment Company Act of 1940, as amended.
(n) Public Utility Holding Company Act. The Guarantor
is not a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company," or a
"public utility" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(o) Solvency. The Guarantor is solvent, both before
and after taking into account the Merger.
(p) Stock. After the Merger, all of the issued and
outstanding capital stock of the Guarantor will be owned of
record and beneficially by Koch Agriculture Company, free
and clear of any Liens, will be duly authorized, validly
issued and will be fully paid and non-assessable. After the
Merger, no subscription, warrant, option or other right to
purchase or acquire any capital stock of the Guarantor or
securities convertible into such interests will be
authorized or outstanding and there will be no commitment
of the Guarantor to issue any such units, warrants, options
or such other rights or securities.
(q) PI Acquisition Corporation. PI Acquisition
Corporation is a Delaware corporation that is a wholly
owned subsidiary of the Guarantor and such Person has no
assets and is currently conducting no business activities.
PI Holding Company is a Delaware corporation that is a
wholly owned subsidiary of PI Acquisition Corporation. PI
Holding Company has no assets and is currently conducting
no business activities.
10. Covenants. So long as any Loan, Revolving Credit
Exposure or other Obligation remains unpaid or outstanding, the
Guarantor will at all times comply with the following covenants:
(a) Conduct of Business and Maintenance of Existence.
The Guarantor will preserve, renew and keep in full force
and effect its corporate existence and its rights,
privileges and franchises necessary or desirable in the
normal conduct of its business.
(b) Non-Consolidation, Etc.. The Guarantor shall be
operated at all times in such a manner that its assets and
liabilities may not be substantively consolidated with
those of any other Person in the event of the bankruptcy or
insolvency of such Person. In this regard, the Guarantor
shall:
(i) not become involved in the day-to-day
management of any other Person, except as contemplated
herein and matters necessarily incident thereto;
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<PAGE>
(ii) not (A) consolidate or merge with or into
any other Person, or (B) sell, lease or otherwise
transfer, directly or indirectly, all or substantially
all of its assets to any other Person;
(iii) engage only in investments in the Company;
(iv) maintain corporate records, books of
account, and a mailing address separate from each of
its Subsidiaries.
(v) maintain its assets separately from the
assets of any other Person (including through
maintenance of a separate bank account);
(vi) not guarantee the obligations of, or advance
funds for the payment of expenses or otherwise, to any
other Person except the Company;
(vii) conduct all business correspondence of the
Guarantor and other communications in the Guarantor's
own name and on the Guarantor's own stationery;
(viii)maintain separate financial statements;
(ix) not act as agent of any other Person in any capacity;
(x) maintain a board of directors that is
separate from (but may contain one or more of the same
members as) and independent of the boards of directors
of all other Persons;
(xi) create or acquire any Subsidiary other than
the Company, or acquire substantially all of the
assets or a business division of any other Person;
(xii) maintain, and cause its Subsidiaries to
maintain, the requisite legal formalities in order
that the Guarantor and its Subsidiaries may each be
treated as a legally separate entity from other
Persons; and
(xiii)engage in transactions with the Company and
its Subsidiaries only on terms and conditions
comparable to arm's-length transactions with Persons
that are not Affiliates of the Guarantor; provided
that the Guarantor may receive dividends from the
Company as permitted by the Credit Agreement and
transfer such dividends to its stockholder as
permitted by the Financing Documents.
(c) Payment of Taxes and Claims. The Guarantor will
pay (i) all taxes, assessments and governmental charges
imposed upon it or upon its Property; and (ii) all material
claims (including, but not limited to, claims for labor,
materials, supplies or services) which might, if unpaid,
become a Lien upon its Property, unless, in each case, the
validity of amount thereof is being contested in good faith
by appropriate action of proceedings and the Guarantor has
established adequate reserves in accordance with GAAP with
respect thereto.
(d) Further Assurances. The Guarantor will cure
promptly any defects in the execution and delivery of this
Guaranty and any other Financing Documents to which the
Guarantor is or becomes a party. The Guarantor at its own
expense, as promptly as practical, will execute and deliver
to the Guaranteed Parties upon request all such instruments
and take all such action in order
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<PAGE>
fully to effectuate the purposes of this Guaranty and any
other Financing Documents to which the Guarantor is or
becomes a party.
(e) Insurance. The Guarantor will maintain, or cause
to be maintained on its behalf, insurance with respect to
its Properties and business as required by Section 5.1(e)
of Credit Agreement.
(f) Accounts and Records. The Guarantor will keep
proper books of record and account in accordance with GAAP.
(g) Right of Inspection. Upon reasonable notice, the
Guarantor will permit any officer, employee or agent of the
Guaranteed Parties to examine the Guarantor's books of
record and accounts, take copies and extracts therefrom,
and discuss the affairs, finances and accounts of the
Guarantor, as often and all at such reasonable times during
normal business hours as may be reasonably requested by any
Guaranteed Party.
(h) Reporting Covenants. So long as any Loan, any
Commitment, any Revolving Credit Exposure, or other
Obligation remains unpaid or outstanding, the Guarantor
will furnish to each Guaranteed Party:
(i) Events or Circumstances with respect to
Collateral. Promptly after the occurrence of any event
or circumstance concerning or changing any of the
Collateral that could have a Material Adverse Effect,
notice of such event or circumstance in reasonable
detail.
(ii) Shareholder Communications, Filings, Public
Announcements, Etc. Promptly upon the mailing, filing,
or making thereof, copies of all registration
statements, periodic reports and other documents
(excluding the related exhibits except to the extent
expressly requested by the Administrative Agent) filed
by the Guarantor in connection therewith from the
Securities and Exchange Commission (or any successor
thereto) or any national securities exchange.
(iii)Litigation. Promptly after (A) the
occurrence thereof, notice of the institution of or
any material adverse development in any action, suit
or proceeding or any governmental investigation or any
arbitration, before any court or arbitrator or any
governmental or administrative body, agency or
official, against the Company, Guarantor, or any
Subsidiary or any material Property of any thereof; or
(B) actual knowledge thereof, notice of the threat of
any such action, suit, proceeding, investigation or
arbitration, in either case in which the amount
involved is material and is not covered by insurance
or which, if adversely determined, could have a
Material Adverse Effect.
(iv) Other Information. With reasonable
promptness, such other information about the business
and affairs and financial condition of the Guarantor
as any Lender may reasonably request from time to
time.
(i) Stock. Guarantor shall not authorize or issue any
preferred stock or other equity securities having a
mandatory redemption right existing with regard thereto.
(j) Negative Pledge. The Guarantor will not create,
incur, assume, or suffer to exist any Lien upon its
Property now owned or hereafter acquired to secure any
Indebtedness of the
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Guarantor, any subsidiary or any other Person, other than
Liens granted by the Guarantor to secure the Obligations.
(k) Dividend Payments. In the event that the Guarantor
receives any dividend, payment, or distribution of any kind
not expressly permitted by Section 6.5 of the Credit
Agreement, the Guarantor shall hold such dividend, payment,
or other distribution in trust for the benefit of the
Guaranteed Parties, and shall immediately pay or deliver
the same to the Administrative Agent, for the benefit of
the Guaranteed Parties.
(l) Dissolution or Transfer of PI Acquisition
Entities. On or before thirty days after the Closing Date,
the Guarantor shall cause each of PI Acquisition
Corporation and PI Holding Company to be dissolved, merged
into the Guarantor or the ownership thereof transferred to
Koch Industries or an affiliate of Koch Industries that is
not a Subsidiary of the Guarantor. The Guarantor shall
deliver to the Administrative Agent (i) copies of the
instruments of dissolution or merger that have been filed
with the Secretary of State of Delaware on or before the
expiration of such thirty day period or (ii) a certificate
stating that the ownership of such entities has been
transferred and that the Guarantor no longer has an
investment therein.
(m) Redemption of Discount Notes. On the Business Day
immediately following the Closing Date, the Guarantor shall
deposit or cause to be deposited with the appropriate
paying agent all funds necessary to redeem the Existing PM
Holdings Discount Notes, and to pay all accrued interest
thereon, and all premiums applicable thereto, if any.
12. No Waiver: Cumulative Remedies. No Guaranteed Party
shall by any act, 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 or in any breach of
any of the terms and conditions hereof. No failure to exercise
and no delay in exercising, on the part of any Guaranteed Party,
any right, power, or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege preclude any other or further exercise
thereof, or the exercise of any other power, privilege, or right.
A waiver by any Guaranteed Party of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right
or remedy which any such Person would 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 rights or remedies provided by law.
13. Notices. All notices, requests, and other
communications to any party hereunder shall be in writing
(including bank wire, telecopy or similar teletransmission or
writing) and, in the case of the Guarantor, shall be given to the
Guarantor at the address or telecopy number of the Company now or
hereafter provided in the Credit Agreement, and in the case of
any Guaranteed Party, at the address or telecopy number for such
Person now or hereafter provided for in the Credit Agreement.
Each such notice, request, or other communication shall be
effective (i) if given by telecopier during regular business
hours, once such telecopy is transmitted to the telecopy number
specified in the Credit Agreement, (ii) if given by mail,
seventy-two (72) hours after such communication is deposited in
the mails with first class postage prepaid, addressed as
aforesaid, or (iii) if given by any other means (including,
without limitation, by air courier), when delivered at the
address specified in the Credit Agreement; provided, that,
notices to the Administrative Agent shall not be effective until
actually and physically received.
14. Entire Agreement. THIS GUARANTY, THE CREDIT AGREEMENT,
THE SECURITY INSTRUMENTS AND THE OTHER FINANCING DOCUMENTS EMBODY
THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE GUARANTEED
PARTIES AND THE GUARANTOR AND THERETO AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO
THE
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SUBJECT MATTER HEREOF AND THEREOF. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
15. Governing Law; Submission to Jurisdiction, Etc.
(a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND UNDER THE NOTES SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK (INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, OR ANY SIMILAR SUCCESSOR PROVISION THERETO, BUT
EXCLUDING ALL OTHER CONFLICT-OF-LAWS RULES) AND TO THE EXTENT
CONTROLLING, LAWS OF THE UNITED STATES OF AMERICA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY, THE NOTES OR THE OTHER FINANCING DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE
GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING BUT
NOT LIMITED TO, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS.
(c) EACH OF THE GUARANTOR AND THE GUARANTEED PARTIES (i)
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY FINANCING
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT
MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT
SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER; AND (iv) ACKNOWLEDGES THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS GUARANTY, THE OTHER FINANCING
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
BASED UPON, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION.
(d) The Guarantor hereby irrevocably designates CT
Corporation System, with an office on the date hereof at 1633
Broadway, New York, New York 10019, as the designee, appointee,
and process agent of the Guarantor to receive, for and on behalf
of the Guarantor, service of process in such respective
jurisdictions in any legal action or proceeding with respect to
this Guaranty. It is understood that a copy of such process
served on such agent will be promptly forwarded by mail to the
Guarantor at its address set forth opposite its signature below,
but the failure of the Guarantor to receive such copy shall not
affect in any way the service of such process. The Guarantor
further irrevocably consents to the service of process of any of
the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail,
postage prepaid, to the Guarantor at its said address, such
service to become effective on the earlier to occur of (i) actual
receipt of such service of process, and (ii) thirty (30) days
after such mailing.
(e) Nothing herein shall affect the right of any Guaranteed
Party or any holder of a Note to serve process in any other
manner permitted by law or to commence legal proceedings or
otherwise proceed against the Guarantor in any other
jurisdiction.
-10-
<PAGE>
16. Severability. Any provision of this Guaranty 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.
17. Paragraph Headings. The Paragraph headings used in this
Guaranty are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in
the interpretation hereof.
18. Interest. It is the intention of the parties hereto to
conform strictly to usury laws applicable to the Guaranteed
Parties and the Transactions. Accordingly, if the Transactions
would be usurious as to any Guaranteed Party under applicable
law, then, notwithstanding anything to the contrary in the Notes,
this Guaranty or in any other Financing Document, it is agreed as
follows: (i) the aggregate of all consideration which constitutes
interest as to any Guaranteed Party under applicable law that is
contracted for, taken, reserved, charged, or received by such
Person under the Notes, this Guaranty, or under any of the
Financing Documents or agreements or otherwise in connection with
the Transactions shall under no circumstances exceed the maximum
amount allowed by such applicable law, (ii) in the event that the
maturity of the Notes is accelerated for any reason, or in the
event of any required or permitted prepayment, then such
consideration that constitutes interest as to any Person under
applicable law may never include more than the maximum amount
allowed by such applicable law, and (iii) excess interest, if
any, provided for in this Guaranty or otherwise in connection
with the Transactions shall be canceled automatically and, if
theretofore paid, shall be credited by such Person on the
principal amount of the Obligations (or, to the extent that the
principal amount of the Obligations shall have been or would
thereby be paid in full, refunded by such Person to the Company).
The right to accelerate the maturity of the Notes does not
include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and the
Guaranteed Parties do not intend to collect any unearned interest
in the event of acceleration. All sums paid or agreed to be paid
to such Person for the use, forbearance or detention of sums
included in the Obligations shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread
throughout the full term of the Notes until payment in full so
that the rate or amount of interest on account of the Obligations
does not exceed the applicable usury ceiling, if any. As used in
this Section, the term "applicable law" shall mean the laws of
the State of Texas (or of any other jurisdiction whose laws may
be mandatorily applicable notwithstanding other provisions of
this Guaranty) or laws of the United States of America applicable
to such Person and the Transactions, which would permit such
Lender to contract for, charge, take, reserve or receive a
greater amount of interest than under Texas (or such other
jurisdiction's) law. To the extent that Article 5069-1.04 of the
Texas Revised Civil Statutes is relevant to the Guaranteed
Parties for the purpose of determining the Highest Lawful Rate,
each such Person hereby elects to determine the applicable rate
ceiling under such Article by the indicated (weekly) rate ceiling
from time to time in effect, subject to such Person's right
subsequently to change such method in accordance with applicable
law. In no event shall the provisions of Tex. Rev. Civ. Stat.
art. 5069-2.01 through 5069-8.06 or 5069-15.01 through 5069-15.11
be applicable to the Loans evidenced by the Notes.
19. Counterparts. This Guaranty may be executed in any
number of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and
delivered shall be an original but all of which shall together
constitute one and the same instrument.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.]
-11-
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this
Guaranty to be duly executed and delivered by its duly authorized
officer on the day and year first above written.
PM HOLDINGS CORPORATION
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President & Chief
Executive Officer
4111 East 37th Street North
Wichita, Kansas 67226
-12-
EXECUTION COPY
$350,000,000
PURINA MILLS, INC.
9% Senior Subordinated Notes Due 2010
REGISTRATION RIGHTS AGREEMENT
March 12, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
Purina Mills, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Credit Suisse First Boston
Corporation and Chase Securities Inc. (together, the "Initial
Purchasers"), upon the terms set forth in a purchase agreement
dated March 6, 1998 (the "Purchase Agreement"), $350,000,000
aggregate principal amount of its 9% Senior Subordinated Notes
Due 2010 (the "Initial Securities"). The Initial Securities will
be issued pursuant to an Indenture, dated as of March 12, 1998
(the "Indenture"), between the Company and The First National
Bank of Chicago (the "Trustee"). As an inducement to the Initial
Purchasers, the Company agrees with the Initial Purchasers, for
the benefit of the holders of the Initial Securities (including,
without limitation, the Initial Purchasers), the Exchange
Securities (as defined below) and the Private Exchange Securities
(as defined below) (collectively the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its own
cost, after the date of original issue of the Initial Securities
(the "Issue Date"), prepare and, not later than 90 days after (or
if the 90th day is not a business day, the first business day
thereafter) the Issue Date, file with the Securities and Exchange
Commission (the "Commission") a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form
under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to a proposed offer (the "Registered Exchange
Offer") to the Holders of Transfer Restricted Securities (as
defined in Section 6 hereof), who are not prohibited by any law
or policy of the Commission from participating in the Registered
Exchange Offer, to issue and deliver to such Holders, in exchange
for the Initial Securities, a like aggregate principal amount of
debt securities (the "Exchange Securities") of the Company issued
under the Indenture and identical in all material respects to the
Initial Securities (except for the transfer restrictions relating
to the Initial Securities and the provisions relating to the
matters described in Section 6 hereof) that would be registered
under the Securities Act. The Company shall use its best efforts
to cause such Exchange Offer Registration Statement to become
effective under the Securities Act within 150 days (or if the
150th day is not a business day, the first business day
thereafter) after the Issue Date of the Initial Securities and
shall keep the Exchange Offer Registration Statement effective
for not less than 30 days (or longer, if required by applicable
law) after the date notice of the Registered Exchange Offer is
mailed to the Holders (such period being called the "Exchange
Offer Registration Period").
<PAGE>
If the Company effects the Registered Exchange Offer, the
Company will be entitled to close the Registered Exchange Offer
30 days after the commencement thereof provided that the Company
has accepted all the Initial Securities theretofore validly
tendered in accordance with the terms of the Registered Exchange
Offer.
Following the declaration of the effectiveness of the
Exchange Offer Registration Statement, the Company shall promptly
commence the Registered Exchange Offer, it being the objective of
such Registered Exchange Offer to enable each Holder of Transfer
Restricted Securities (as defined in Section 6 hereof) electing
to exchange the Initial Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Company
within the meaning of the Securities Act, acquires the Exchange
Securities in the ordinary course of such Holder's business and
has no arrangements with any person to participate in the
distribution of the Exchange Securities and is not prohibited by
any law or policy of the Commission from participating in the
Registered Exchange Offer) to trade such Exchange Securities from
and after their receipt without any limitations or restrictions
under the Securities Act and without material restrictions under
the securities laws of the several states of the United States.
The Company acknowledges that, pursuant to current
interpretations by the Commission's staff of Section 5 of the
Securities Act, in the absence of an applicable exemption
therefrom, (i) each Holder, including an Initial Purchaser, which
is a broker-dealer electing to exchange Initial Securities,
acquired for its own account as a result of market making
activities or other trading activities, for Exchange Securities
(an "Exchanging Dealer"), is required to deliver a prospectus
containing the information set forth in (a) Annex A hereto on the
cover, (b) Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section, and (c)
Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange
Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer and (ii) an Initial Purchaser that
elects to sell Private Exchange Securities (as defined below)
acquired in exchange for Securities constituting any portion of
an unsold allotment is required to deliver a prospectus
containing the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in
connection with such sale.
The Company shall use its best efforts to keep the Exchange
Offer Registration Statement effective and to amend and
supplement the prospectus contained therein, in order to permit
such prospectus to be lawfully delivered by all persons subject
to the prospectus delivery requirements of the Securities Act for
such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities;
provided, however, that (i) in the case where such prospectus and
any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days
and the date on which all Exchanging Dealers have sold all
Exchange Securities held by them (unless such period is extended
pursuant to Section 3(j) below) and (ii) the Company shall make
such prospectus and any amendment or supplement thereto,
available to any broker-dealer for use in connection with any
resale of any Exchange Securities for a period of not less than
90 days after the consummation of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any
Initial Purchaser holds Initial Securities acquired by it as part
of its initial distribution, the Company, simultaneously with the
delivery of the Exchange Securities pursuant to the Registered
Exchange Offer, shall issue and deliver to such Initial Purchaser
upon the written request of such Initial Purchaser, in exchange
(the "Private Exchange") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of
the Company issued under the Indenture and identical in all
material respects (including the existence of restrictions on
transfer under the Securities Act and the securities laws of the
several states of the United States, but excluding provisions
relating to the matters described in Section 6 hereof) to the
Initial Securities (the "Private Exchange Securities"). The
Initial Securities, the Exchange Securities and the Private
Exchange Securities are herein collectively called the
"Securities".
In connection with the Registered Exchange Offer, the
Company shall:
<PAGE>
(a) mail to each Holder a copy of the prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and
related documents;
(b) keep the Registered Exchange Offer open for
acceptance for not less than 30 days (or longer, if
required by applicable law) after the date notice thereof
is mailed to the Holders;
(c) utilize the services of a depositary for the
Registered Exchange Offer with an address in the Borough of
Manhattan, The City of New York, which may be the Trustee
or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at
any time prior to the close of business, New York time, on
the last business day on which the Registered Exchange
Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered
Exchange Offer or the Private Exchange, as the case may be, the
Company shall:
(x) accept for exchange all the Initial Securities
validly tendered and not validly withdrawn pursuant to the
Registered Exchange Offer and the Private Exchange;
(y) deliver or cause to be delivered, to the Trustee
for cancellation all the Initial Securities so accepted for
exchange; and
(z) cause the Trustee to authenticate and deliver
promptly to each Holder of Initial Securities, Exchange
Securities or Private Exchange Securities, as the case may
be, equal in principal amount to the Initial Securities of
such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities
will not be subject to the transfer restrictions set forth in the
Indenture and that all the Securities will vote and consent
together on all matters as one class and that none of the
Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Security and Private Exchange
Security issued pursuant to the Registered Exchange Offer and in
the Private Exchange will accrue from the last interest payment
date on which interest was paid on the Initial Securities
surrendered in exchange therefor or, if no interest has been paid
on the Initial Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer
shall be required to represent to the Company that at the time of
the consummation of the Registered Exchange Offer (i) any
Exchange Securities received by such Holder will be acquired in
the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in
the distribution of the Initial Securities or the Exchange
Securities within the meaning of the Securities Act, (iii) such
Holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or if it is an affiliate, such
Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (iv)
if such Holder is not a broker-dealer, that it is not engaged in,
and does not intend to engage in, the distribution of the
Exchange Securities and (v) if such Holder is a broker-dealer,
that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of
market-making activities or other trading activities and that it
will be required to acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Securities.
Notwithstanding any other provisions hereof, the Company
will ensure that (i) any Exchange Offer Registration Statement
and any amendment thereto and any prospectus forming part thereof
and any supplement thereto complies in all material respects with
the Securities Act and the rules and regulations
<PAGE>
thereunder, (ii) any Exchange Offer Registration Statement and
any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and
any supplement to such prospectus, does not include an 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 therein, in the light of the circumstances under which
they were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law
or in applicable interpretations thereof by the staff of the
Commission, the Company is not permitted to effect a Registered
Exchange Offer, as contemplated by Section 1 hereof, (ii) the
Registered Exchange Offer is not consummated within 180 days of
the Issue Date, (iii) any Initial Purchaser so requests with
respect to the Initial Securities (or the Private Exchange
Securities) not eligible to be exchanged for Exchange Securities
in the Registered Exchange Offer and held by it following
consummation of the Registered Exchange Offer or (iv) any Holder
(other than an Exchanging Dealer) is not eligible to participate
in the Registered Exchange Offer or, in the case of any Holder
(other than an Exchanging Dealer) that participates in the
Registered Exchange Offer, such Holder does not receive freely
tradeable Exchange Securities on the date of the exchange, the
Company shall take the following actions:
(a) The Company shall, at its cost, as promptly as
practicable (but in no event more than 30 days after so
required or requested pursuant to this Section 2) file with
the Commission and thereafter shall use its best efforts to
cause to be declared effective a registration statement
(the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, a "Registration
Statement") on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted
Securities (as defined in Section 6 hereof) by the Holders
thereof from time to time in accordance with the methods of
distribution set forth in the Shelf Registration Statement
and Rule 415 under the Securities Act (hereinafter, the
"Shelf Registration"); provided, however, that no Holder
(other than an Initial Purchaser) shall be entitled to have
the Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing
to be bound by all the provisions of this Agreement
applicable to such Holder.
(b) The Company shall use its best efforts to keep the
Shelf Registration Statement continuously effective in
order to permit the prospectus included therein to be
lawfully delivered by the Holders of the relevant
Securities, for a period of two years (or for such longer
period if extended pursuant to Section 3(j) below) from the
date of its effectiveness or such shorter period that will
terminate when all the Securities covered by the Shelf
Registration Statement (i) have been sold pursuant thereto
or (ii) are no longer restricted securities (as defined in
Rule 144 under the Securities Act, or any successor rule
thereof). The Company shall be deemed not to have used
its best efforts to keep the Shelf Registration Statement
effective during the requisite period if it voluntarily
takes any action that would result in Holders of Securities
covered thereby not being able to offer and sell such
Securities during that period, unless (I) such action is
required by applicable law or (II) such action is taken by
the Company in good faith and for valid business reasons
involving a material undisclosed event (but not including
the avoidance of the Company's obligations hereunder),
including, without limitation, the acquisition or
divestiture of assets so long as the Company promptly
complies with the requirements of Section 3(j) hereof, if
applicable; provided that in the case of clause (II), such
period shall not exceed 60 days in any 12-month period (a
"Suspension Period") (whereafter Additional Interest (as
defined in Section 6(a)) shall accrue and be payable); and
provided further that the number of days of any actual
Suspension Period shall be added on to the end of the
two-year period specified above. A Suspension Period shall
commence on and include the date that the Company gives
notice that the Shelf Registration Statement is no longer
effective or the prospectus included therein is no longer
usable for offers and sales of Securities and shall end on
the earlier to occur of (1) the date on which each seller
of Securities covered by the Shelf Registration Statement
either receives the copies of the supplemented or amended
prospectus contemplated by Section 3(j) hereof or is
<PAGE>
advised in writing by the Company that the use of the
prospectus may be resumed and (2) the expiration of 60 days
in any 12-month period during which one or more Suspension
Periods has been in effect.
(c) Notwithstanding any other provisions of this
Agreement to the contrary, the Company shall cause the
Shelf Registration Statement and the related prospectus and
any amendment or supplement thereto, as of the effective
date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the
applicable requirements of the Securities Act and the rules
and regulations of the Commission and (ii) not to 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 therein, in light of the
circumstances under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent
applicable, any Registered Exchange Offer contemplated by Section
1 hereof, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial
Purchaser, prior to the filing thereof with the Commission,
a copy of the Registration Statement and each amendment
thereof and each supplement, if any, to the prospectus
included therein and, in the event that an Initial
Purchaser (with respect to any portion of an unsold
allotment from the original offering) is participating in
the Registered Exchange Offer or the Shelf Registration
Statement, the Company shall use its best efforts to
reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchaser
reasonably may propose; (ii) include the information set
forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section and in Annex C hereto in the
"Plan of Distribution" section of the prospectus forming a
part of the Exchange Offer Registration Statement and
include the information set forth in Annex D hereto in the
Letter of Transmittal delivered pursuant to the Registered
Exchange Offer; (iii) if requested by an Initial Purchaser,
include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in
the prospectus forming a part of the Shelf Registration
Statement; (iv) include within the prospectus contained in
the Exchange Offer Registration Statement a section
entitled "Plan of Distribution," reasonably acceptable to
the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the
staff of the Commission with respect to the potential
"underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of Exchange Securities received by such
broker-dealer in the Registered Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of
the Commission or such positions or policies, in the
reasonable judgment of the Initial Purchasers based upon
advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the
Commission; and (v) in the case of a Shelf Registration
Statement, include, to the extent required by Item 507 of
Regulation S-K under the Securities Act, the names of the
Holders who propose to sell Securities pursuant to the
Shelf Registration Statement, as selling securityholders.
(b) The Company shall give written notice to the
Initial Purchasers, the Holders of the Initial Securities
and any Participating Broker-Dealer from whom the Company
has received prior written notice that it will be a
Participating Broker-Dealer in the Registered Exchange
Offer (which notice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to suspend the use
of the prospectus until the requisite changes have been
made) and, in the case of a Shelf Registration Statement,
the Holders of Securities covered thereby:
(i) when the Registration Statement or any
amendment thereto has been filed with the Commission
and when the Registration Statement or any
post-effective amendment thereto has become effective;
<PAGE>
(ii) of any request by the Commission after such
Registration Statement has become initially effective
for amendments or supplements to the Registration
Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the
Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company or its legal
counsel of any notification with respect to the
suspension of the qualification of the Securities for
sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires
the Company to make changes in the Registration
Statement or the prospectus in order that the
Registration Statement or the prospectus do not
contain an untrue statement of a material fact nor
omit to state a material fact required to be stated
therein or necessary to make the statements therein
(in the case of the prospectus, in light of the
circumstances under which they were made) not
misleading.
(c) The Company shall make every reasonable effort to
obtain the withdrawal at the earliest possible time, of any
order suspending the effectiveness of the Registration
Statement.
(d) The Company shall, in the case of a Shelf
Registration, furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without
charge, at least one copy of the Shelf Registration
Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
(e) The Company shall, in the case of a Registered
Exchange Offer, deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests,
without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and,
if any Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by
reference).
(f) The Company shall, during the Shelf Registration
Period, deliver to each Holder of Securities included
within the coverage of the Shelf Registration, without
charge, as many copies of the prospectus (including each
preliminary prospectus) included in the Shelf Registration
Statement and any amendment or supplement thereto as such
Holder may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of
the prospectus or any amendment or supplement thereto by
each of the selling Holders of Securities in connection
with the offering and sale of the Securities covered by the
prospectus, or any amendment or supplement thereto,
included in the Shelf Registration Statement.
(g) The Company shall deliver to each Initial
Purchaser, any Exchanging Dealer, any Participating
Broker-Dealer and such other persons required to deliver a
prospectus following the Registered Exchange Offer, without
charge, as many copies of the final prospectus included in
the Exchange Offer Registration Statement and any amendment
or supplement thereto as such persons may reasonably
request. The Company consents, subject to the provisions of
this Agreement, to the use of the prospectus or any
amendment or supplement thereto by any Initial Purchaser,
if necessary, any Participating Broker-Dealer and such
other persons required to deliver a prospectus following
the Registered Exchange Offer in connection with the
offering and sale of the Exchange Securities covered by the
prospectus, or any amendment or supplement thereto,
included in such Exchange Offer Registration Statement.
<PAGE>
(h) Prior to any public offering of the Securities,
pursuant to any Registration Statement, the Company shall
register or qualify or cooperate with the Holders of the
Securities included therein and their respective counsel in
connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue
sky" laws of such states of the United States as any Holder
of the Securities reasonably requests in writing and do any
and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the
Securities covered by such Registration Statement;
provided, however, that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction
where it is not then so qualified or (ii) take any action
which would subject it to general service of process or to
taxation in any jurisdiction where it is not then so
subject.
(i) The Company shall cooperate with the Holders of
the Securities to facilitate the timely preparation and
delivery of certificates representing the Securities to be
sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and
registered in such names as the Holders may request a
reasonable period of time prior to sales of the Securities
pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by
Section 2(b)(II) or paragraphs (ii) through (v) of Section
3(b) above during the period for which the Company is
required to maintain an effective Registration Statement,
the Company shall promptly prepare and file a post-
effective amendment to the Registration Statement or a
supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will
not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
If the Company notifies the Initial Purchasers, the Holders
of the Securities and any known Participating Broker-Dealer
in accordance with Section 2(b)(II) or paragraphs (ii)
through (v) of Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the prospectus
have been made, then the Initial Purchasers, the Holders of
the Securities and any such Participating Broker-Dealers
shall suspend use of such prospectus, and, if requested by
the Company, will make reasonable efforts to return any
copies of such prospectus in their possession to the
Company at the Company's expense, and the period of
effectiveness of the Shelf Registration Statement provided
for in Section 2(b) above and the Exchange Offer
Registration Statement provided for in Section 1 above
shall each be extended by the number of days from and
including the date of the giving of such notice to and
including the date when the Initial Purchasers, the Holders
of the Securities and any known Participating Broker-Dealer
shall have received such amended or supplemented prospectus
pursuant to this Section 3(j).
(k) Not later than the effective date of the
applicable Registration Statement, the Company will provide
a CUSIP number for the Initial Securities, the Exchange
Securities or the Private Exchange Securities, as the case
may be, and provide the applicable trustee with printed
certificates for the Initial Securities, the Exchange
Securities or the Private Exchange Securities, as the case
may be, in a form eligible for deposit with The Depository
Trust Company.
(l) The Company will comply with all rules and
regulations of the Commission to the extent and so long as
they are applicable to the Registered Exchange Offer or the
Shelf Registration and will make generally available to its
security holders (or otherwise provide in accordance with
Section 11(a) of the Securities Act) an earnings statement
satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal
year) beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the
Registration Statement, which statement shall cover such
12-month period.
(m) The Company shall cause the Indenture to be
qualified under the Trust Indenture Act of 1939, as
amended, in a timely manner and containing such changes, if
any, as shall be
<PAGE>
necessary for such qualification. In the event that such
qualification would require the appointment of a new
trustee under the Indenture, the Company shall appoint a
new trustee thereunder pursuant to the applicable
provisions of the Indenture.
(n) The Company may require each Holder of Securities
to be sold pursuant to the Shelf Registration Statement to
furnish to the Company such information regarding the
Holder and the distribution of the Securities as the
Company may from time to time reasonably require for
inclusion in the Shelf Registration Statement, and the
Company may exclude from such registration the Securities
of any Holder that unreasonably fails to furnish such
information within a reasonable time after receiving such
request.
(o) The Company shall enter into such customary
agreements (including, if requested, an underwriting
agreement in customary form) and take all such other
action, if any, as the managing underwriter or the majority
in principal amount of the Holders of the Securities
covered by such Shelf Registration shall reasonably request
in order to facilitate the disposition of the Securities
pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company
shall (i) make reasonably available for inspection by the
Holders of the Securities, any underwriter participating in
any disposition pursuant to the Shelf Registration
Statement and any attorney, accountant or other agent
retained by the majority in principal amount of the Holders
of the Securities covered by such Shelf Registration or any
such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company
and (ii) cause the Company's officers, directors,
employees, accountants and auditors to supply all relevant
information reasonably requested by the majority in
principal amount of the Holders of the Securities covered
by such Shelf Registration or any such underwriter,
attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be
reasonably necessary to enable such persons, to conduct a
reasonable investigation within the meaning of Section 11
of the Securities Act; provided, however, that the
foregoing inspection and information gathering shall be
coordinated on behalf of the Initial Purchasers by you and
on behalf of the other parties, by one counsel designated
by and on behalf of the majority in principal amount of the
Holders of the Securities covered by such Shelf
Registration Statement; provided, further, however, that
any such records, documents and properties and such
information that is designated in writing by the Company,
in good faith, as confidential at the time of delivery of
such records, documents, properties or information shall be
kept confidential by any such Holder, underwriter,
attorney, accountant or other agent and shall be used only
in connection with such Shelf Registration Statement,
unless disclosure thereof is made in connection with a
court proceeding or required by law, or such information
has become available (not in violation of this agreement)
to the public generally or through a third party without an
accompanying obligation of confidentiality.
(q) In the case of any Shelf Registration, the
Company, if requested by the managing underwriter or the
majority in principal amount of the Holders of Securities
covered thereby, shall cause (i) its counsel to deliver an
opinion and updates thereof relating to the Securities in
customary form addressed to such Holders and the managing
underwriters, if any, thereof and dated, in the case of the
initial opinion, the effective date of such Shelf
Registration Statement (it being agreed that the matters to
be covered by such opinion shall include, without
limitation, the due incorporation and good standing of the
Company and its subsidiaries; the qualification of the
Company and its subsidiaries to transact business as
foreign corporations; the due authorization, execution and
delivery of the relevant agreement of the type referred to
in Section 3(o) hereof; the due authorization, execution,
authentication and issuance, and the validity and
enforceability, of the applicable Securities; the absence
of material legal or governmental proceedings involving the
Company and its subsidiaries; the absence of governmental
approvals required to be obtained in connection with the
Shelf Registration Statement, the offering and sale of the
applicable Securities, or any agreement of the type
referred to in Section 3(o) hereof; the compliance as to
form of such Shelf Registration Statement and any documents
incorporated by
<PAGE>
reference therein and of the Indenture with the
requirements of the Securities Act and the Trust Indenture
Act, respectively; and, as of the date of the opinion and
as of the effective date of the Shelf Registration
Statement or most recent post-effective amendment thereto,
as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein,
as then amended or supplemented, and from any documents
incorporated by reference therein of an untrue statement of
a material fact or the omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such
documents, in the light of the circumstances existing at
the time that such documents were filed with the Commission
under the Exchange Act); (ii) its officers to execute and
deliver all customary documents and certificates and
updates thereof requested by any underwriters of the
applicable Securities and (iii) its independent public
accountants (and the independent public
<PAGE>
accountants with respect to any other entity for which
financial information is provided in the Shelf Registration
Statement) to provide to the selling Holders of the
applicable Securities and any underwriter therefor a
comfort letter in customary form and covering matters of
the type customarily covered in comfort letters in
connection with primary underwritten offerings, subject to
receipt of appropriate documentation as contemplated, and
only if permitted, by Statement of Auditing Standards No.
72.
(r) In the case of the Registered Exchange Offer, if
requested by any Initial Purchaser or any known
Participating Broker-Dealer, the Company shall cause (i)
its counsel to deliver to such Initial Purchaser or such
Participating Broker-Dealer a signed opinion in the form
set forth in Section 6(c) of the Purchase Agreement with
such changes as are customary in connection with the
preparation of a Registration Statement and (ii) its
independent public accountants and the independent public
accountants with respect to any other entity for which
financial information is provided in the Registration
Statement to deliver to such Initial Purchaser or such
Participating Broker-Dealer a comfort letter, in customary
form, meeting the requirements as to the substance thereof
as set forth in Section 6(a) of the Purchase Agreement,
with appropriate date changes.
(s) If a Registered Exchange Offer or a Private
Exchange is to be consummated, upon delivery of the Initial
Securities by Holders to the Company (or to such other
Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as
the case may be, the Company shall mark, or caused to be
marked, on the Initial Securities so exchanged that such
Initial Securities are being canceled in exchange for the
Exchange Securities or the Private Exchange Securities, as
the case may be; in no event shall the Initial Securities
be marked as paid or otherwise satisfied.
(t) The Company will use its best efforts to (a) if
the Initial Securities have been rated prior to the initial
sale of such Initial Securities, confirm such ratings will
apply to the Securities covered by a Registration
Statement, or (b) if the Initial Securities were not
previously rated, cause the Securities covered by a
Registration Statement to be rated with the appropriate
rating agencies, if so requested by Holders of a majority
in aggregate principal amount of Securities covered by such
Registration Statement, or by the managing underwriters, if
any.
(u) In the event that any broker-dealer registered
under the Exchange Act shall underwrite any Securities or
participate as a member of an underwriting syndicate or
selling group or "participate in the distribution" (within
the meaning of the Conduct Rules (the "Rules") of the
National Association of Securities Dealers, Inc. ("NASD"))
thereof, whether as a Holder of such Securities or as an
underwriter, a placement or sales agent or a broker or
dealer in respect thereof, or otherwise, the Company will
assist such broker-dealer in complying with the
requirements of such Rules, including, without limitation,
by (i) if such Rules, including Rule 2720, shall so
require, engaging a "qualified independent underwriter" (as
defined in Rule 2720) to participate in the preparation of
the Registration Statement relating to such Securities, to
exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by
such Registration Statement is an underwritten offering or
is made through a placement or sales agent, to recommend
the yield of such Securities, (ii) indemnifying any such
<PAGE>
qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5
hereof and (iii) providing such information to such
broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules.
(v) The Company shall use its best efforts to take all
other steps necessary to effect the registration of the
Securities covered by a Registration Statement contemplated
hereby.
4. Registration Expenses. The Company shall bear all fees
and expenses incurred in connection with the performance of its
obligations under Sections 1 through 3 hereof, whether or not the
Registered Exchange Offer or a Shelf Registration is filed or
becomes effective, and, in the event of a Shelf Registration,
shall bear or reimburse the Holders of the Securities covered
thereby for the reasonable fees and disbursements of one firm of
counsel designated by the Holders of a majority in principal
amount of the Initial Securities covered thereby to act as
counsel for the Holders of the Initial Securities in connection
therewith.
5. Indemnification. (a) The Company agrees to indemnify and
hold harmless each Holder of the Securities, any Participating
Broker-Dealer and each person, if any, who controls such Holder
or such Participating Broker-Dealer within the meaning of the
Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are
referred to collectively as the "Indemnified Parties") from and
against any losses, claims, damages or liabilities, joint or
several, or any actions in respect thereof (including, but not
limited to, any losses, claims, damages, liabilities or actions
relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement or prospectus or in
any amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration, or arise out of, or
are based upon, the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse,
as incurred, the Indemnified Parties for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that
(i) the Company shall not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of
or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in a Registration Statement
or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration in
reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on
behalf of such Holder specifically for inclusion therein and (ii)
with respect to any untrue statement or omission or alleged
untrue statement or omission made in any preliminary prospectus
relating to a Shelf Registration Statement, the indemnity
agreement contained in this subsection (a) shall not inure to the
benefit of any Holder or Participating Broker-Dealer from whom
the person asserting any such losses, claims, damages or
liabilities purchased the Securities concerned, to the extent
that a prospectus relating to such Securities was required to be
delivered by such Holder or Participating Broker-Dealer under the
Securities Act in connection with such purchase and any such
loss, claim, damage or liability of such Holder or Participating
Broker-Dealer results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of
the sale of such Securities to such person, a copy of the final
prospectus if the Company had previously furnished copies thereof
to such Holder or Participating Broker-Dealer; provided further,
however, that this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters,
their officers and directors and each person who controls such
underwriters within the meaning of the Securities Act or the
Exchange Act to the same extent as provided above with respect to
the indemnification of the Holders of the Securities if requested
by such Holders.
(b) Each Holder of the Securities, severally and not
jointly, will indemnify and hold harmless the Company and
individually its officers and directors and each person, if any,
who controls the Company within the meaning of the Securities Act
or the Exchange Act from and against any losses, claims, damages
or liabilities or any actions in respect thereof, to which the
Company or any such
<PAGE>
controlling person may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement or prospectus or in
any amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration, or arise out of or
are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue
statement or omission or alleged untrue statement or omission was
made in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on
behalf of such Holder specifically for inclusion therein; and,
subject to the limitation set forth immediately preceding this
clause, shall reimburse, as incurred, the Company for any legal
or other expenses reasonably incurred by the Company or any such
controlling person in connection with investigating or defending
any loss, claim, damage, liability or action in respect thereof.
This indemnity agreement will be in addition to any liability
which such Holder may otherwise have to the Company, its officers
and directors or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under
this Section 5 of notice of the commencement of any action or
proceeding (including a governmental investigation), such
indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 5, notify
the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not, in any
event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. In case any such action
is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to
the indemnifying party), and after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof the indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal or other
expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are
the subject matter of such action.
(d) If the indemnification provided for in this Section
5 is unavailable or insufficient to hold harmless an indemnified
party under subsections (a) or (b) above, then each indemnifying
party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified
party on the other from the exchange of the Securities, pursuant
to the Registered Exchange Offer, or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above
but also the relative fault of the indemnifying party or parties
on the one hand and the indemnified party on the other in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect
thereof) as well as any other relevant equitable considerations.
The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by the Company on the one hand or such Holder or such other
indemnified party, as the case may be, on the other, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence
of this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim
which is the subject of this subsection (d). Notwithstanding any
other provision of this Section
<PAGE>
5(d), the Holders of the Securities shall not be
required to contribute any amount in excess of the amount by
which the net proceeds received by such Holders from the sale of
the Securities pursuant to a Registration Statement exceeds the
amount of damages which such Holders have otherwise been required
to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For
purposes of this paragraph (d), each person, if any, who controls
such indemnified party within the meaning of the Securities Act
or the Exchange Act shall have the same rights to contribution as
such indemnified party and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange
Act shall have the same rights to contribution as the Company.
(e) The agreements contained in this Section 5 shall
survive the sale of the Securities pursuant to a Registration
Statement and shall remain in full force and effect, regardless
of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a)
Additional interest (the "Additional Interest") with respect to
the Initial Securities shall be assessed as follows if any of the
following events occur (each such event in clauses (i) through
(iii) below a "Registration Default"):
(i) If by June 10, 1998, neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement
has been filed with the Commission;
(ii) If by September 8, 1998, neither the Registered
Exchange Offer is consummated nor, if required in lieu
thereof, the Shelf Registration Statement is declared
effective by the Commission; or
(iii) If after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared
effective (A) such Registration Statement thereafter ceases
to be effective (other than to the extent permitted by
Section 2(b)(II) or 3(b)(ii)-(v) hereof); or (B) such
Registration Statement or the related prospectus ceases to
be usable (except as permitted in paragraph (b)) in
connection with resales of Transfer Restricted Securities
during the periods specified herein because either (1) any
event occurs as a result of which the related prospectus
forming part of such Registration Statement would include
any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein
in the light of the circumstances under which they were
made not misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the related
prospectus, to comply with the Securities Act or the
Exchange Act or the respective rules thereunder.
Additional Interest shall accrue on the Initial Securities over
and above the interest set forth in the title of the Securities
from and including the date on which any such Registration
Default shall occur to but excluding the date on which all such
Registration Defaults have been cured, at a rate of 0.50% per
annum, increasing by 0.50% per annum at the end of each 90-day period
thereafter, calculated on the principal amount of the Notes as of
the day on which such interest is payable; provided, however,
that in no event shall such Additional Interest exceed 1.00% per
annum. Upon consummation of an Exchange Offer or the
effectiveness of a Shelf Registration Statement, the interest
rate of the Securities will revert to the rates respectively set
forth in the title of the Securities.
(b) A Registration Default referred to in Section
6(a)(iii)(B) hereof shall be deemed not to have occurred and be
continuing in relation to a Shelf Registration Statement or the
related prospectus if (i) such Registration Default has occurred
solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate
annual audited financial information with respect to the Company
where such post-effective amendment is not yet effective and
needs to be declared effective to permit Holders to use the
related prospectus, (y) other material events, with respect to
the Company that would need to be described in such Shelf
Registration Statement or the related prospectus or (z) a
Suspension Period not to exceed 45 days in any 12-month period
pursuant to Section 2(b) and (ii) in the
<PAGE>
case of clause (y), the Company is proceeding promptly
and in good faith to amend or supplement such Shelf Registration
Statement and related prospectus to describe such events;
provided, however, that in any case if such Registration Default
occurs for a continuous period in excess of 30 days, Additional
Interest shall be payable in accordance with the above paragraph
from the day such Registration Default occurs until such
Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to
clause (i), (ii) or (iii) of Section 6(a) above will be payable
in cash on the regular interest payment dates with respect to the
Initial Securities. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate
by the principal amount of the Initial Securities, multiplied by
a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve
30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security
until (i) the date on which an Initial Security has been
exchanged by a person other than a broker-dealer for a freely
transferable Exchange Security in the Registered Exchange Offer,
(ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of a Initial Security for an Exchange Security,
the date on which such Exchange Security is sold to a purchaser
who receives from such broker-dealer on or prior to the date of
such sale a copy of the prospectus contained in the Exchange
Offer Registration Statement, (iii) the date on which such
Initial Security has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Initial
Security is distributed to the public pursuant to Rule 144 under
the Securities Act or is saleable pursuant to Rule 144(k) under
the Securities Act.
7. Rules 144 and 144A. The Company shall use its best
efforts to file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at
any time the Company is not required to file such reports, it
will, upon the request of any Holder of Initial Securities, make
publicly available other information so long as necessary to
permit sales of their securities pursuant to Rules 144 and 144A.
The Company covenants that it will take such further action as
any Holder of Initial Securities may reasonably request, all to
the extent required from time to time to enable such Holder to
sell Initial Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rules 144
and 144A (including the requirements of Rule 144A(d)(4)). The
Company will provide a copy of this Agreement to prospective
purchasers of Initial Securities identified to the Company by the
Initial Purchasers upon request. Upon the request of any Holder
of Initial Securities, the Company shall deliver to such Holder a
written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, nothing in this
Section 7 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer
Restricted Securities covered by any Shelf Registration are to be
sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will administer
the offering ("Managing Underwriters") will be selected by the
Holders of a majority in aggregate principal amount of such
Transfer Restricted Securities to be included in such offering
and reasonably acceptable to the Company.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's
Transfer Restricted Securities on the basis reasonably provided
in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may
not be given,
<PAGE>
except by the Company and the written consent of
the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or
consents.
(b) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand
delivery, first-class mail, facsimile transmission, or air
courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most
current address given by such Holder to the Company.
(2) if to the Initial Purchasers:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
Chase Securities Inc.
270 Park Avenue
New York, NY 10017
Fax No.: (212) 270-7487
Attention: Stephen B. Grant, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Fax No.: (212) 455-2502
Attention: Vincent Pagano, Jr., Esq.
(3) if to the Company, at its address as follows:
Purina Mills, Inc.
1401 South Hanley Road
St. Louis, MO 63144
Attention: August F. Ottinger
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, NY 10006
Fax No.: (212) 225-3999
Attention: Paul J. Shim, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally
delivered; three business days after being deposited in the mail,
postage prepaid, if mailed; when receipt is acknowledged by
recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of
the date hereof, entered into, nor shall it, on or after the date
hereof, enter into, any agreement with respect to its securities
that is
<PAGE>
inconsistent with the rights granted to the Holders
herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding
upon the Company, the Initial Purchasers and their respective
successors and assigns, including, without limitation and without
the need for an express assignment, subsequent holders of the
Initial Securities.
(e) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive
jurisdiction of the Federal and state courts in the Borough of
Manhattan in The City of New York in any suit or proceeding
arising out of or relating to this Agreement or the transactions
contemplated hereby.
(h) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be
affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or
approval of Holders of a specified percentage of principal amount
of Securities is required hereunder, Securities held by the
Company or its affiliates (other than subsequent Holders of
Securities if such subsequent Holders are deemed to be affiliates
solely by reason of their holdings of such Securities) shall not
be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
<PAGE>
If the foregoing is in accordance with your understanding
of our agreement, please sign and return to the Company a
counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement among the several
Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
PURINA MILLS, INC.
By: /s/ August F. Ottinger
----------------------
Name: August F. Ottinger
Title: Vice President,
General Counsel and
Secretary
The foregoing Registration
Rights Agreement is hereby
confirmed and accepted as
of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ John F. Cozzi
-----------------
Name: John F. Cozzi
Title: Managing Director
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for
its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale
of such Exchange Securities. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales
of Exchange Securities received in exchange for Initial
Securities where such Initial Securities were acquired by such
broker-dealer as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of
180 days after the Expiration Date (as defined herein), or such
shorter period which will terminate when such broker-dealers have
completed all resales subject to applicable prospectus delivery
requirements, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for
its own account in exchange for Initial Securities, where such
Initial Securities were acquired by such broker-dealer as a
result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of
Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for
its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale
of such Exchange Securities. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities
received in exchange for Initial Securities where such Initial
Securities were acquired as a result of market-making activities
or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date (as defined herein),
or such shorter period which will terminate when such
broker-dealers have completed all resales subject to applicable
prospectus delivery requirements, it will make this prospectus,
as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until ,
199 , all dealers effecting transactions in the Exchange Securities
may be required to deliver a prospectus.1
The Company will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities
received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer
that resells Exchange Securities that were received by it for its
own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange
Securities may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale
of Exchange Securities and any commission or concessions received
by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date (as
defined herein), or such shorter period which will terminate when
such broker-dealers have completed all resales subject to
applicable prospectus delivery requirements, the Company will
promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer
that requests such documents in the Letter of Transmittal. The
Company has agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the Holders of
the Securities) other than commissions or concessions of any
brokers or dealers and will indemnify the Holders of the
Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
- --------
1 In addition, the legend required by Item 502(e) of
Regulation S-K will appear on the back cover page of the
Exchange Offer prospectus.
<PAGE>
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name: _____________________________________________
Address: ___________________________________________
__________________________________________
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Securities. If the
undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities
that were acquired as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a
prospectus in connection with any resale of such Exchange
Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
Exhibit 5.1
[Letterhead of Cleary, Gottlieb, Steen & Hamilton]
Writer's Direct Dial: (212) 225-2930
May 28, 1998
Purina Mills, Inc.
1401 South Hanley Road
St. Louis, Missouri 63144
Ladies and Gentlemen:
We have acted as your counsel in connection with a
Registration Statement on Form S-4 (the "Registration Statement")
filed today with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended (the "Act"), in respect
of the 9% Senior Subordinated Notes due 2010 (the "Exchange
Notes") of Purina Mills, Inc., a Delaware corporation (the
"Company"), to be offered in exchange for all outstanding 9%
Senior Subordinated Notes due 2010 (the "Old Notes") of the
Company. The Exchange Notes will be issued pursuant to an
indenture, dated as of March 12, 1998 (the "Indenture"), between
the Company and The First National Bank of Chicago, as trustee.
We have participated in the preparation of the
Registration Statement and have reviewed originals or copies
certified or otherwise identified to our satisfaction of such
documents and records of the Company and such other instruments
and other certificates of public officials, officers and
representatives of the Company and such other persons, and we
have made such investigations of law, as we have deemed
appropriate as a basis for the opinions expressed below.
<PAGE>
Purina Mills, Inc. p. 2
In rendering the opinions expressed below, we have
assumed the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents
submitted to us as copies. In addition, we have assumed and have
not verified (i) the accuracy as to factual matters of each
document we have reviewed and (ii) that the Old Notes and the
Exchange Notes conform or will conform to the forms thereof that
we have reviewed and have been or will be duly authenticated in
accordance with their terms and the terms of the Indenture.
Based on the foregoing, and subject to the further
assumptions and qualifications set forth below, it is our opinion
that:
1. When the Exchange Notes have been duly executed and
authenticated in accordance with their terms and the terms of the
Indenture, and duly issued and delivered by the Company in
exchange for an equal principal amount of Old Notes pursuant to
the terms of the Registration Rights Agreement (in the form filed
as an exhibit to the Registration Statement), the Exchange Notes
will constitute the valid, binding and enforceable obligations of
the Company, entitled to the benefits of the Indenture.
2. The Indenture has been duly executed and delivered
by the Company under the law of the State of New York.
Insofar as the foregoing opinions relate to the
validity, binding effect or enforceability of any agreement or
obligation of the Company, (a) we have assumed that each of the
Company and each other party to such agreement or obligation has
satisfied those legal requirements that are applicable to it to
the extent necessary to make such agreement or obligation
enforceable against it (except that no such assumption is made as
to the Company regarding matters of the law of the State of New
York); (b) such opinions are subject to applicable bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally and to general principles of equity;
and (c) we express no opinion as to sections of the Indenture,
the Old Notes and the Exchange Notes which pertain to the defense
of forum non conveniens, submission to jurisdiction, severability
of illegal provisions, waiver of protection under stay, extension
or usury laws or the conclusiveness of calculations or
certifications.
The foregoing opinion is limited to the law of the
State of New York.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to
this firm under the heading "Legal Matters" in the Prospectus
included in the Registration Statement. In giving such consent,
we do not thereby admit that we are "experts" within the meaning
of the Act or the rules and regulations of the Securities and
Exchange Commission issued thereunder with respect to any part of
the Registration Statement, including this exhibit.
<PAGE>
Purina Mills, Inc. p. 3
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By /s/ Paul J. Shim
----------------------------
Paul J. Shim, a Partner
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of
November 18, 1997 is by and between Purina Mills, Inc., a
Delaware corporation ("Company") and David L. Abbott
("Executive").
RECITAL
It is the intent and purpose of the parties to specify in
this Agreement the terms and conditions of Executive's employment
with the Company and the means of using his expertise for the
benefit of the Company.
NOW, THEREFORE, in consideration of the promises and
premises contained herein, the parties agree as follows:
1. Term. Company hereby employs Executive in the capacities
set forth in Section 2. hereof, and Executive hereby
accepts employment with the Company in accordance with the
terms and conditions set forth herein for an initial term
of three (3) years beginning November 18, 1997. Executive's
employment hereunder shall automatically be renewed under
the same terms and conditions for successive terms of two
(2) years unless written notice of intent not to renew is
given by either party to the other not less than ninety
(90) days prior to the expiration of the original term or
any renewal term then in effect. If the Company elects not
to renew or to terminate this Agreement, such action shall
constitute termination without cause as described in
Section 7.
2. Duties and Responsibilities. Executive shall serve as
President and Chief Executive Officer of the Company, with
those powers and duties as set forth in the By-Laws of the
Company as they may from time to time be modified by the
Board of Directors of the Company. Executive shall also
serve as President and Chief Executive Officer of the
Company's parent corporation, PM Holdings Corporation. Upon
the reasonable request of the Company, Executive agrees to
perform in various additional capacities, including
officerships and directorships, in the Company and/or the
Company's "Affiliates" as hereinafter defined. The parties
agree that the services of Executive respecting the
<PAGE>
Company and its Affiliates (including PM Holdings
Corporation) shall be performed on behalf of the Company,
and that for all purposes Executive will be an employee of
the Company alone and that this Agreement alone shall
govern and control any and all employment relationships
between Executive and the Company, its divisions,
subsidiaries, parent corporation or entities under contract
with the Company ("Affiliates").
3. Compensation and Benefits.
3.1. The compensation and other benefits payable to
Executive under this Agreement shall constitute the
minimum consideration to be paid to Executive for all
services to be rendered by him on behalf of the
Company or its affiliates during the term of this
contract or any extension thereof.
3.2. Executive shall be compensated and shall have the
minimum benefit as described in Exhibit A, which shall
not be modified without mutual consent of Executive
and Company. Executive shall also participate in all
incentive programs or option programs that may
subsequently become available so long as he is in this
capacity. Executive's base salary and target annual
bonus shall be reviewed at least annually and may be
increased prospectively by the Board of Directors on
the basis of performance evaluation.
4. Conflicts of Interest. Executive shall, during the term of
this Agreement, devote his full time, attention, energies
and business efforts to his duties hereunder. He shall not
without the express written consent of the Company actively
engage in any other business activity whatsoever or
contract or "self-deal" directly or indirectly with the
Company or its Affiliates.
5. Non-Disclosure and Non-Competition.
5.1. Executive recognizes and acknowledges that he will
have access to certain confidential information and
trade secrets of the Company and its Affiliates
("Confidential Information"). Such
<PAGE>
Confidential Information includes, but is not limited
to: customer names; products purchased by customers;
production capabilities and processes; customer
account and credit data; referral sources; computer
programs and software; information relating to
confidential or secret designs, processes, formulae,
plans, devices or materials; confidential information
and trade secrets relating to the manufacture,
distribution and marketing of products; patents
pending; confidential characteristics of the products;
customer comments; troubleshooting requirements;
product development; market development; manuals;
management, accounting and reporting systems,
procedures and programs; sales employee compensation
information, plans and programs; marketing and
financial analysis, plans, research, programs and
related information and data; forms, agreements and
legal documents; regulatory and supervisory reports;
correspondence; dealer and distribution matters;
information regarding raw materials and supplies;
information regarding present and proposed
investments, joint ventures and acquisitions;
financing and financial matters; dealer financing
information; financial statements; corporate books and
records; and other similar information. Executive
acknowledges and agrees that this Confidential
Information constitutes valuable, special and unique
property of the Company. Executive agrees that he will
not, at any time during or after the term of this
Agreement or his employment with the Company, disclose
any Confidential Information to any person, firm,
corporation, association, limited liability company,
trust or other entity ("Person") for any reason or
purpose, except in furtherance of his responsibility
as Chief Executive. It is further understood that
should Executive no longer be in the employ of the
Company for any reason, he shall not disclose any
Confidential Information as aforementioned except with
written prior approval of the Company.
5.2. Any and all work product of Executive developed within
the scope of Executive's relationship with the Company
and its Affiliates shall constitute the property of
the Company. This includes, but is not limited to, any
copyrightable or patentable
<PAGE>
product or service. Accordingly, Executive shall not
have any interest, proprietary or otherwise, in such
work product. Moreover, Executive shall not avail
himself of personal benefits to the exclusion of the
Company and its Affiliates of any duplication,
modification or extension of said product. With
respect to this clause 5.2 and clause 5.1 above, no
territorial boundaries or temporal limitations shall
apply.
5.3. Executive further agrees that during the term of
Executive's employment hereunder and for a period of
two (2) years immediately following termination of the
Executive's employment hereunder he shall not, for
himself or on behalf of any other person:
5.3.1. solicit, accept, divert, or take away from the
Company or its Affiliates the business of any
Person;
5.3.2. directly or indirectly induce or attempt to
influence any employee of the Company or any of
its Affiliates to terminate his or her
employment with the Company or any of its
Affiliates; or
5.3.3. engage in any commercial or technical activity
in the "Territory" (as defined below) involving
the development, formulation, manufacture,
production, distribution, marketing or sale of
any product or service that the Company or any
of its Affiliates or their respective
predecessors or successors has or may design,
produce, manufacture, distribute, market or
sell during the term of Executive's employment
with the Company or its predecessors or
successors. The "Territory" shall consist of
all of the United States and all other
countries in which the Company or any of its
Affiliates is conducting or may conduct
business prior to the termination of
Executive's employment hereunder.
5.4. Executive understands and acknowledges that, due to
the unique nature of the products and services of the
Company and its
<PAGE>
Affiliates, the limitations as to time and geographic
area contained in this Section 5 are reasonable and
are not unduly onerous to Executive. Executive
therefore agrees that the limitations as to time,
geographic area and scope of activity contained in the
covenants of this Section 5 do not impose a greater
restraint than is necessary to protect the
Confidential Information, goodwill and other business
interests of the Company and its Affiliates. Executive
also agrees that in light of the facts acknowledged
above and the substantial economic damages that the
Company and its Affiliates would suffer if Executive
were to engage in any of the activities described in
this Section 5, the Company's need for the protection
afforded by this Section 5 is greater than any
hardship Executive might experience by complying with
its terms.
6. Termination of Employment Provisions.
6.1. It is understood and agreed that the termination of
employment of Executive for any reason set forth in
this Section 6. or for any other reason shall not in
any way impair, diminish, extinguish or affect in any
manner the rights or obligations of Executive to
render full performance of the Covenants and
Agreements set forth in section 4. and 5. supra.
6.2. Termination for Due Cause. The Company or the
Executive shall have the right to terminate
Executive's services under this Agreement at any time
for "due cause," as herein defined, upon giving
written notice to the other party setting out the
reasons for such termination, such termination to be
effective upon the date of delivery of such notice.
Termination for "due cause" hereunder shall mean:
6.2.1. As to Company's Right of Termination:
i. any act of fraud or dishonesty of
Executive relating to the business,
properties or assets of the Company or any
member of PM Holdings Corporation group;
or
<PAGE>
ii. the willful misconduct of Executive
relating to the business or affairs of the
Company or any member of the PM Holdings
Corporation group; or
iii. Executive's failure or refusal to comply
with either the corporate policies of the
Company or the express lawful directions
of the Board of Directors whether in
writing or orally; or
iv. any material breach by Executive of the
provisions of this Agreement.
6.2.2. As to Executive's Right of Termination: Any
material breach by Company of the provisions of
this Agreement and for those additional reasons
as follows:
i. The assignment of Executive to duties that
are inconsistent with the position held by
the Executive.
ii. The removal of Executive from, or any
failure to elect or reelect Executive to
his current office, except in connection
with Executive's promotion, with his prior
written consent, to a higher office (if
any) with the company.
iii. A reduction by the Company in the amount
of Executive's base salary without the
prior written consent of the Executive.
iv. The discontinuation or reduction by the
Company of Executive's participation in
any bonus or other employee benefit plan,
program, arrangement or policy in which
Executive is a participant without the
prior written consent of the Executive.
<PAGE>
v. The relocation, without Executive's prior
written consent, of the Company's
principal executive offices to a location
outside the county in which such offices
are currently located.
6.2.3. Damages: If there shall be a termination for
"due cause," the party wronged by such
termination shall be entitled to money damages
from the other party in such amount as a court
of law shall determine to be equivalent to the
monetary loss which such wronged party shall
have been caused to sustain by reason thereof.
6.3. Termination by Reason of Death or Disability. This
Agreement shall terminate automatically upon the death
of the Executive. If by reason of illness, physical or
mental disability or other incapacity, Executive shall
become unable or shall fail for a period of 120
consecutive days to render the services to be provided
by him hereunder, such event shall constitute "due
cause" and the Board of Directors of the Company may,
at its option, terminate Executive's services under
this Agreement upon written notice to Executive, such
termination to be effective on the date of delivery of
such notice.
6.4. The Right of Company to Terminate Without Cause.
6.4.1. The Board of Directors of the Company shall
have the right to terminate the employment of
Executive hereunder prior to the expiration of
the term of this Agreement without cause by
delivering to Executive written notice of such
termination not less than (ninety) 90 days
prior to the effective date of such
termination. Upon any termination of the
employment of Executive by Company without due
cause hereunder, Company shall be obligated to
pay to Executive his regular monthly salary
until the date of termination along with
vacation pay due and not taken. In addition,
Company shall pay an amount equal to two (2)
full years of the annual base salary then being
paid to the Executive under this Employment
Agreement, plus the
<PAGE>
target bonus amount awarded for the year in
which termination takes place. This twenty-four
(24) month period shall be computed from the
end of the above mentioned ninety (90) day
notification requirement.
6.4.2. Notwithstanding the foregoing, the Company
shall have the right at the time of such
initial notice of termination, or at any time
within such ninety (90) day period, to again
notify Executive in writing that his
termination shall be effective the date of
receipt of such final notice, in which case the
date of receipt of such final notice shall be
the effective date of termination; provided,
however, that Executive shall nonetheless be
entitled to receive his regular monthly salary
during the aforesaid ninety (90) day period
from initial notice of termination. Subsequent
to the end of the ninety (90) days, Executive's
severance payments as described in 6.4.1. supra
shall begin.
6.4.3. All termination pay under Paragraphs (a) and
(b) above shall be paid to Executive monthly in
arrears less customary withholdings. Company
may, at its own option, agree to spread the
total amount over a period longer than two (2)
years, upon request of the Executive.
7. Effect of Termination. Upon termination of employment of
Executive under this Agreement for any reason, any and all
obligations of the Company under this Agreement shall cease
immediately upon the effective date of such termination,
except for payment of:
7.1. any amounts of salary which may be due at the point of
termination, along with any vacation time accrued to
date of termination; and
7.2. payment of all amounts of salary due under Section 6.
above; and
7.3. payment of any obligations the Company may have to
Executive under any incentive compensation awards or
programs described
<PAGE>
in the Exhibit to this Agreement, and under any stock
option or stock rights programs or other awards also
so described. Stock options and stock rights, in the
event of termination by the Company without cause,
shall be fully vested if in effect at that time.
Executive's individual holdings of Purina securities
are not impacted by this Agreement, and the provisions
of the Purina Registration Rights Agreement shall
govern any disposition of these securities. Company
shall pay Executive an amount equal to any federal or
state income taxes, Social Security taxes or excise
taxes that are due and owing by Executive as a result
of the accelerated vesting of options under Section
7.3 of this Agreement; and
7.4. any obligations the Company may have to Executive
under medical coverage: Executive and his spouse and
eligible dependents shall continue to participate in
Group Executive Medical coverage under the same terms
and conditions as Executive participated in such
coverage as of date of termination; and
7.5. any obligations the Company may have to Executive
under Group Term Life Insurance: During the Salary
Continuation Period, or until Executive is
re-employed, Purina shall continue Executive's Group
Term Life Insurance coverage under the same terms and
conditions as in effect as of date of termination; and
7.6. any obligations the Company may have to Executive
under Disability. During the salary Continuation
Period, or until Executive is re-employed, Executive
shall continue to participate in the Executive Long
Term Disability Option, under the same terms as
Executive participated in such option as in effect as
of date of termination; and
7.7. any obligations the Company may have to Executive
under Executive Post-Retirement Death Benefit.
Beginning on first date of termination, Purina shall
continue Executive's Executive Post-Retirement Death
Benefit coverage under the same terms
<PAGE>
and conditions as in effect on date of termination for
as long as Executive lives, by purchasing a separate,
independent policy to provide such coverage; and
7.8. During the salary continuation period or until
Executive is reemployed, Company shall provide
outplacement assistance to Executive at an agreed-upon
level as he seeks other employment. Such outplacement
assistance shall include reimbursement to Executive
for temporary office space, telephone expenses,
preparation of resumes and mailing expenses and any
other agreed upon outplacement services; and
7.9. in the event of Executive's death, all payments due
Executive hereunder shall be made to Executive's
designated beneficiary.
8. Notices. Any notice, request, reply, instruction or other
communication provided or permitted in this Agreement must
be given in writing (including telex) and may be served:
8.1. by telex; or
8.2. by depositing same in the mail, country of
origination, in certified or registered form, postage
prepaid, addressed to the party or parties to be
notified with return receipt requested; or
8.3. by delivering the notice in person to such party or
parties. Notice given by telex shall be effective when
sent and the appropriate answerback is received.
Notice given by mail shall be effective seventy-two
(72) hours after its deposit in the mails as provided
herein. For purposes of notice, the address of
Executive or any administrator, executor or legal
representative of Executive or his estate, as the case
may be, shall be as follows:
David L. Abbott
#2 Wheaton Point Court
Chesterfield, MO 63005
<PAGE>
The address of the Company shall be:
Purina Mills, Inc.
1401 S. Hanley Road
St. Louis, MO 63144
ATTN: Chairman of the Board
Telephone: 314-768-4100
Facsimile: 314-768-4188
The parties shall have the right, from time to time,
to change their respective addresses by written notice
given ten (10) days prior to the effective date of the
change.
9. Controlling Law. The execution, validity, interpretation
and performance of this Agreement shall be determined and
governed exclusively by the laws of the State of Missouri,
without reference to the principles of conflict of laws.
Jurisdiction with respect to any legal proceeding brought
by the Company or its assignee concerning any subject
matter contained in this Agreement shall rest in the State
of Missouri or in any jurisdiction where Executive resides.
10. Entire Agreement. This Agreement and the agreements
referenced herein contain the entire agreement of the
parties respecting the subject matter hereof and supersede
any prior inconsistent agreements. This Agreement may not
be modified or altered orally but only by an agreement in
writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is
sought.
11. Remedies, Modification and Separability. The parties agree
that Executive's breach of Sections 4. and 5. of this
Agreement will result in irreparable harm to the Company
and that no adequate remedy at law is available. Executive
agrees that upon a breach or violation of any of the
provisions of Sections 4. or 5., the Company shall be
entitled to injunctive relief in any court of competent
jurisdiction. Nothing herein, however, shall be construed
as prohibiting the Company from pursuing any other remedies
at law or in equity available to the Company for the breach
or violation or threatened breach or violation. Should a
court of competent jurisdiction declare
<PAGE>
any of the covenants set forth in Section 4. or 5. to be
unenforceable due to an unreasonable restriction of
duration or geographical area, or otherwise, each of the
parties hereto hereby agrees that the court shall be
empowered to modify or reform such covenants so as to
provide relief reasonably necessary to protect the
interests of the parties and to award injunctive relief, or
damages, or both to which the Company may be entitled. If
any covenant, condition or other provision of this
Agreement is declared by a court of last resort to be
invalid and not binding on the parties, each of the parties
agrees that such declaration shall in no way affect the
validity of the other and remaining covenants, conditions
and provisions of this Agreement. It is also the intention
of the parties that if any provision of this Agreement is
capable of two constructions, one of which would render the
provision void and the other of which would render the
provision valid, then the provision shall have the
construction which renders it valid.
12. Assignments. The Company may assign its rights, duties and
obligations under this Agreement with the approval or
consent of the Executive, which consent will not be
unreasonably withheld as long as it does not materially
change the nature of this Agreement, the obligations or
benefits thereunder. The rights, duties and obligations of
the Executive under this Agreement are personal and,
therefore, shall not be assigned or transferred by the
Executive to another.
13. Effect of Agreement. This Agreement shall be binding upon
the Executive and his heirs, executors, administrators,
legal representatives, successors and assigns and this
Agreement shall be binding upon the Company and its
successors and assigns.
14. Waiver of Breach. The waiver by either party of a breach of
any provision of this Agreement by the other shall not
operate or be construed as a waiver by such party of any
subsequent breach by the breaching party.
15. Headings. The paragraph headings in this Agreement are for
convenience of reference and shall not be used in the
interpretation or construction of this Agreement.
<PAGE>
16. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and
all of which shall constitute but one instrument.
The parties acknowledge that they have read this Agreement,
consulted with their respective attorneys of their choice and
understand this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
David L. Abbott (Executive) Purina Mills, Inc. (Company)
/s/ David L. Abbott
- --------------------
By: /s/ Paul F. Cornelsen
----------------------
Name: Paul F. Cornelsen
Title: Chairman of the Board
<PAGE>
Exhibit A
Current Compensation and Benefits
1. Direct salary of $310,000 per annum, payable monthly, subject
to all appropriate withholdings, and subject to such
increases as may be from time to time approved by the Board
of Directors of the Company.
2. Purina Mills, Inc. Savings Investment Plan.
3. Purina Mills, Inc. Employee Stock Ownership Plan.
4. PM Holdings Corporation Omnibus Stock and Incentive Plan.
5. Purina Mills, Inc. Profit Sharing Plan.
6. Purina Mills, Inc. Capital Accumulation Plan.
7. Purina Mills, Inc. Supplemental Executive Retirement Plan.
8. Purina Mills, Inc. Annual Incentive Plan (Target Bonus of
$150,000 per Annum).
9. Health and welfare benefits generally available to senior
executive officers of the Company.
10. Purina Mills Retirement Plan for Sales, Administrative and
Clerical Employees.
11. Executive Financial Planning Program.
/s/ David L. Abbott
-----------------------
David L. Abbott
November 18, 1997
-----------------------
Date
<PAGE>
March 11, 1998
David L. Abbott
#2 Wheaton Point Court
Chesterfield, Missouri 63005
RE: Employment Agreement
Dear Mr. Abbott:
Reference is made to (i) the Employment Agreement, dated as of
November 18, 1997 (the "Employment Agreement"), between Purina
Mills, Inc. ("Company") and David L. Abbott ("Executive"), and
(ii) the Agreement and Plan of Merger, dated as of January 9,
1998 (the "Merger Agreement"), among Koch Agriculture Company,
Arch Acquisition Corporation and PM Holdings Corporation. Company
and Executive hereby agree to amend the Employment Agreement as
follows:
As of the Effective Time (as defined in the Merger Agreement),
Paragraphs 2-11 (inclusive) of Exhibit A of the Employment
Agreement are deleted in their entirety and replaced with the
benefits set forth in Exhibit A hereof; provided, however, that
Executive's target bonus under the terms of the Employment
Agreement following the Effective Time shall remain no less than
$150,000 per annum administered and calculated in the same manner
as provided for in the Company's Annual Incentive Plan as in
effect as of the date of the Merger Agreement. In addition, as of
the Effective Time, all other references in the Employment
Agreement to employee benefit programs (other than the Capital
Accumulation Plans) will be deemed to be replaced with the
similar benefit provided for in Exhibit A hereof and, if no such
similar benefit is provided, such reference is deleted.
Executive and Company hereby recognize and acknowledge that
Executive is a Participant in the Purina Mills, Inc./PM Holdings
Corporation Severance Program for Key Employees (the "Severance
Program") which provides for certain benefits to key employees of
Company upon termination of their employment under certain
circumstances. Executive and Company hereby agree that, in the
event Executive is entitled to receive benefits under the
Severance Program, Executive shall not receive any benefits under
Sections 4(a)(1) and 4(b)(1) of the Severance Program but shall
otherwise be entitled to any and all other benefits set forth in
the Severance Program to which Executive is entitled pursuant to
the terms of the Severance Program.
<PAGE>
In the event that any amounts payable to Executive under the
Employment Agreement (as amended) would be subject to an excise
tax pursuant to Section 4999 of the Internal Revenue Code of
1986, as amended, then Company and Executive shall endeavor in
good faith to reduce or eliminate the amount of any such excise
tax. If, after such efforts, any excise tax remains to be paid,
Company shall pay to Executive an amount, which after reduction
for any income, excise or employment taxes on such amount, would
equal the amount of such excise tax.
Except as provided above, the Employment Agreement will remain in
full force and effect as of and after the Effective Time. Please
indicate your agreement and consent to the above by signing the
enclosed copy of this letter in the space provided and return the
signed copy to Purina Mills, Inc., 1401 South Hanley Road, St.
Louis, Missouri 63144, Attention: Chairman of the Board.
Very truly yours,
PURINA MILLS, INC.
By: /s/ August F. Ottinger
-----------------------
Name: August F. Ottinger
Title: Vice President, Secretary
and General Counsel
AGREED AND ACCEPTED:
/s/ David L. Abbott
- -------------------
David L. Abbott
<PAGE>
Exhibit A
Benefits
Koch Industries Employee Group Benefit Trust (Medical and Dental)
Koch Industries, Inc. Primary Life Plan
Koch Industries, Inc. Voluntary Life Insurance Plan
Koch Industries, Inc. Dependent Life Insurance Plan
Koch Industries, Inc. Accidental Death & Dismemberment Plan
Koch Industries, Inc. Short Term Disability Plan
Koch Industries, Inc. Long Term Disability Plan
Koch Industries, Inc. Section 125 Plan
Koch Industries, Inc. Health Care Reimbursement Account Plan
Koch Industries, Inc. Dependent Care Reimbursement Account Plan
Koch Industries, Inc. Supplemental Executive Retirement Plan
Koch Industries Employees' Pension Plan
Koch Industries Employees' Savings Plan
Guidelines
Compensation:
Koch's compensation philosophy is to reward employees based their
contribution to Koch's long-term profitability in forms of
compensation that achieve the greatest degree of motivation for
each individual. Based on the foregoing philosophy, Executive is
eligible to participate in several forms of compensation
currently available to Koch executives which compensation may be
given in any of several forms including, but not limited to, base
pay, performance/incentive pay, spot bonuses and/or shadow stock.
Sick Leave:
10 days sick leave accrued per year for each full time employee,
with a maximum accumulation of 30 days.
Holidays:*
New Year's Day Thanksgiving Day
Good Friday Day after Thanksgiving
Memorial Day Christmas Day
Independence Day Day before or after Christmas
Labor Day Floating Holiday (Company choice)
*Due to operational requirements, certain Koch divisions may have
a holiday schedule which differs from the above.
Vacation:
Years of Service Weeks
---------------- -----
1 - 4 2
5 - 9 3
10 - 19 4
20 + 5
Tuition Reimbursement:
Approved by supervisor based on business need-- maximum 75%
reimbursement if "B" or better, 50% if "C"
PURINA MILLS, INC. DISCRETIONARY
CAPITAL ACCUMULATION PLAN
FOR KEY EMPLOYEES
Purina Mills, Inc., (the "Company"), hereby establishes this
Discretionary Capital Accumulation Plan for Key Employees to
secure, retain and motivate certain key employees of the Company
and to provide a long-term performance incentive to those key
employees who make a substantial contribution to the success of
the Company.
ARTICLE I
---------
DEFINITIONS
-----------
1.1 Age or age - solely for the purpose of determining a
Participant's age on the Effective Date of Deferral, shall mean
the chronological age attained by a Participant as of the
birthday nearest to the Effective Date of Deferral.
1.2 Annual Incentive Plan Bonus - shall mean the
compensation with respect to the Service Year payable in the
First Deferral Year which an Employee receives from the Company
pursuant to the provisions of the Purina Mills, Inc.
Annual Incentive Plan.
1.3 Beneficiary - shall mean the person or persons
designated as such in accordance with Article IX hereof to
receive any amount which may be payable under the Plan upon the
death of a Participant.
1.4 Committee - shall mean the Employee Relations Committee
of the Company or any successor to such Committee.
1.5 Committee Representative - shall mean any Employee who
is authorized by the President of the Company to execute
documents on behalf of the Committee.
1.6 Company - shall mean Purina Mills, Inc. or any
successor.
1.7 Deferral - shall mean all or a portion of the Annual
Incentive Plan Bonus that a Participant elects to defer under the
terms of this Plan.
1.8 Deferral Election Date - shall mean the date on which
the Committee accepts and executes a Participant's Deferral
Statement as described in Section 2.3 hereof. Such date shall be
before January 1 of the Service Year for any employee of the
Company on such date. In the case of a new employee, such date
shall be within 30 days after the date such person becomes an
employee.
<PAGE>
1.9 Earliest Retirement Age - shall mean, with respect to a
Participant, age fifty-five (55) or the January 1 following the
Minimum Deferral Period, whichever shall last occur.
1.10 Effective Date of the Deferral - shall mean the first
date of the calendar year following a Service Year, subject to a
valid deferral election, being January 1 of the year following
such Service Year.
1.11 Employee - shall mean any permanent, full-time Employee
of the Company or of any subsidiary of the Company which the
Committee may designate.
1.12 First Deferral Year - shall mean the calendar year
immediately following the Service Year. Under the Annual
Incentive Bonus Plan, this is the year in which the eligible
employee would receive the compensation were it not for the
deferral election.
1.13 Minimum Deferral Period - shall mean the period
beginning with January 1 of the First Deferral Year and ending
with December 31 of the fifth year after the close of the Service
Year.
1.14 Normal Retirement Age - shall mean with respect to a
Participant, age sixty-two (62) or January 1 following the
Minimum Deferral Period whichever shall last occur. However,
Normal Retirement Age shall mean age sixty-five (65) in the event
the Participant attains age sixty-five (65) prior to the close of
Minimum Deferral period.
1.15 Participant - shall mean any Employee selected by the
Committee to participate in the Plan and who elects to make a
Deferral pursuant to the provisions of Section 2.3 hereof.
1.16 Plan - shall mean the Purina Mills, Inc. Capital
Accumulation Plan for Key Employees.
1.17 Plan Year - shall mean the calendar year.
1.18 Prime Rate - shall mean that rate of interest from time
to time announced by The Boatmen's National Bank of St. Louis as
its "Prime Rate", adjusted as of the end of each month.
1.19 Retirement - shall mean a Participant's Termination of
Employment on or after his Earliest Retirement Age.
1.20 Retirement Income Benefit - shall mean the benefit
payable to a Participant pursuant to the provision of Article IV
hereof.
2
<PAGE>
1.21 Service Year - shall mean the calendar year during
which the employee performed the services for which he would be
eligible to receive compensation. This is the year for which the
compensation is payable.
1.22 Survivor Income Benefit - shall mean the benefit
payable to a Participant's Beneficiary pursuant to the provision
of Article VI hereof.
1.23 Termination of Employment - shall mean the Employee's
cessation of employment with the Company for any reason. If a
Participant is on a disability leave of absence from the Company,
he shall not be deemed to have terminated employment.
ARTICLE II
-----------
OPERATION OF THE PLAN
---------------------
2.1 Eligibility to Participate and Selection of
Participants. The Committee shall annually select from those
Employees participating in the Purina Mills, Inc. Annual
Incentive Plan, those Employees who are eligible to participate
in this Plan for such year. Such selection shall be made by the
Committee in its absolute discretion and shall be based on the
goals and criteria determined by the Company in establishing and
maintaining this Plan. The Committee shall notify in writing
those Employees selected by the Committee to participate in this
Plan for such year.
2.2 Eligibility to Make a Deferral - The Committee in its
absolute discretion shall determine if a Participant, one who has
elected to make a deferral under the Plan in a previous year, may
make additional deferrals in subsequent Plan years. Under no
circumstance shall the Committee be constrained or in any way
obligated to declare any Participant eligible to make any
additional deferrals based on eligibility for prior
participation. The Committee shall notify in writing those
Participants of the Plan who are selected as eligible to make a
deferral in any Plan year.
2.3 Making a Deferral. Each selected Employee may elect to
defer all or a portion of the Annual Incentive Plan Bonus that
such Employee may be entitled to receive. The Employee shall make
such election by timely submitting to the Committee a Bonus
Deferral Agreement, substantially in the form of the Bonus
Deferral Agreement attached hereto as Exhibit A and by this
reference made a part hereof. Each such Bonus Deferral Agreement
shall clearly set forth the amount of the selected Employee's
requested Deferral.
The minimum amount of an Employee's Deferral shall be
$2,000.00. The maximum amount of an Employee's Deferral shall be
the amount of such Employee's Annual Incentive Plan Bonus.
3
<PAGE>
The Committee shall approve or disapprove each selected
Employee's request to make a Deferral and the amount thereof.
Each such approval or disapproval shall be evidenced by a
Committee Representative appropriately acknowledging and
executing the Employee's Bonus Deferral Agreement and delivering
a copy of such executed Bonus Deferral Agreement to the Employee.
2.4 Becoming a Participant. A selected Employee shall become
a Participant in the Plan as of the Effective Date of the
Deferral.
2.5 Amendment of a Bonus Deferral Agreement. A Bonus
Deferral Agreement can be modified or amended at any time prior
to January 1 of the Service Year. For an amendment or
modification to be effective, such amendment or modification
shall be made in writing and executed by the Participant and
agreed to in writing by a Committee Representative.
2.6 Confirmation of Bonus Deferral Agreement. Within a
reasonable time after a Participant's actual Deferral is made on
the books and records of the Company, a Committee Representative
shall deliver to such Participant a Confirmation of Deferral
Statement. Such Confirmation of Deferral Statement shall set
forth: (A) the actual amount of the Participant's Deferral; (B)
the Retirement Income Benefit pertaining to the Deferral; and (C)
the Survivor Income Benefit pertaining to the Deferral. The
Confirmation of Deferral Statement shall be substantially in the
form of the Confirmation of Deferral Statement attached hereto as
Exhibit B and by this reference made a part hereof.
ARTICLE III
-----------
ADMINISTRATION OF PLAN
----------------------
3.1 Interpretation of Plan. The construction and
interpretation by the Committee of any provision of the Plan
shall be final and conclusive. Subject only to the other
provisions of the Plan, the Committee shall have the sole and
absolute discretion to determine which Employees shall be
selected to become Participants in the Plan, and to determine and
approve the amount of any Participant's requested Deferral.
3.2 Delegation of Duties. The Committee may, in its sole and
absolute discretion, delegate any or all of its duties pursuant
to the Plan to any other person, who need not be an Employee;
provided, however, the Committee may not delegate its authority
to: (A) determine those Employees selected to become Participants
in the Plan; and (B) approve the amount of a Participant's
requested Deferral.
4
<PAGE>
ARTICLE IV
----------
RETIREMENT INCOME BENEFITS
--------------------------
4.1 Amount of Retirement Income Benefits. The amount of a
Participant's annual Retirement Income Benefit is dependent upon:
(A) the amount of the Participant's Deferral; (B) the
Participant's age on the Effective Date of the Deferral; and (C)
the Participant's age at the time he incurs a Termination of
Employment. The amount or method of calculation of benefits
[based on Deferrals in $10,000 increments] payable under this
Plan at Normal Retirement Age shall be provided to all employees
offered an opportunity to request a deferral prior to their
making such request and, with respect to any deferrals requested
and granted by the Committee, shall be set forth in the written
confirmation of deferral provided for under Section 2.6.
The amount of the Retirement Income Benefit hereunder
shall be provided to each eligible Employee at the time he is
notified by the Committee of his selection to make a Deferral
hereunder. The amount of each Participant's Retirement Income
Benefit (if he should incur a Termination of Employment on or
after his Normal Retirement Age) shall be set forth in such
Participant's Confirmation of Deferral Statement referred to in
Section 2.6 hereof.
In the event a Participant incur a Termination of
Employment on or after his Earliest Retirement Age but prior to
his Normal Retirement Age, the amount of his Retirement Income
Benefit shall be actuarially reduced in accordance with the
reduction factors set forth in Exhibit C attached hereto and by
this reference made a part hereof. The information set forth
in Exhibit C shall also be provided to each selected Employee
at the time he is notified by the Committee of his eligibility
to make a Deferral hereunder and shall be attached to each
Participant's Confirmation of Deferral Statement.
4.2 Entitlement to and Payment of Normal Retirement
Benefit. Each Participant retiring on or after his Normal
Retirement Age shall be entitled to receive his Retirement Income
Benefit payable in equal monthly installments in such amounts as
is set forth in his Confirmation of Deferral Statement. Payment
of a Participant's monthly Retirement Income Benefit shall be
made for the life of the Participant.
Payment of the Participant's monthly Retirement Income
Benefits shall begin as of the first day of the month following
the month in which such Participant's Retirement occurs.
The Participant may submit a written request to the
Committee to have the payments of his Retirement Income Benefit
pursuant to this Section 4.2 commence at a later date. The
approval of such request shall be in the absolute discretion of
the Committee.
5
<PAGE>
4.3 Entitlement to Early Retirement Benefit. A Participant
who incurs a Termination of Employment on or after his Earliest
Retirement Age and prior to his Normal Retirement Age shall be
entitled to receive his Retirement Income Benefit payable in
equal monthly installments during his lifetime, actuarially
reduced in accordance with Exhibit C hereof, as is applicable.
Payment of the Participant's monthly retirement Income
Benefits shall commence as of the first day of the month
following the month in which such Participant's Retirement
occurs.
The Participant may submit a written request to the
Committee to have the payments of his Retirement Income Benefit
pursuant to this Section 4.3 commence at a later date. The
approval of such request shall be in the absolute discretion of
the Committee.
4.4 Participant's Death While Receiving Retirement Income
Benefit Payments. In the event:
(A) of the death of a Participant whose Retirement
Benefits are in pay-status (pursuant to the provisions of
Section 4.2 or 4.3 above); and
(B) such Participant had not yet received one
hundred eighty (180) monthly payments of his Retirement Income
Benefit at the time of his death, then the balance of such one
hundred eighty (180) monthly Retirement Income Benefit payments
shall be paid to the Participant's Beneficiary.
ARTICLE V
---------
TERMINATION OF EMPLOYMENT BEFORE EARLIEST
-----------------------------------------
RETIREMENT AGE
--------------
5.1 Voluntary Termination of Employment Prior to Earliest
Retirement Age. In the event a Participant voluntarily incurs a
Termination of Employment before attaining his Earliest
Retirement Age, such Participant shall be entitled to receive a
lump sum payment equal to: (A) the original amount of his
Deferral; plus (B) interest on the amount of the Deferral from the
Effective Date of deferral to the date of his Termination of
Employment, in an amount equal to the Prime Rate over such time
period.
Such lump sum payment shall be made as of the February
1 of the calendar year following the calendar year in which the
Participant's Termination of Employment occurs, or such other
date as is requested in writing by the Participant and is
approved in writing by the Committee.
6
<PAGE>
The Participant may request in writing, no later than
December 31 of the calendar year in which his Termination of
Employment occurs, that the payment of his benefits pursuant to
this Section 5.1 be made in not more than ten (10) substantially
equal annual installments beginning not later than the February
1 of the calendar year following the calendar year in which his
Termination of Employment occurs.
The approval or disapproval of any Participant's
request provided for in this Section 5.1 shall be in the absolute
discretion of the Committee.
5.2 Involuntary Termination of Employment Prior To Earliest
Retirement Age.
(A) A Participant who is involuntarily terminated prior
to his Earliest Retirement Age shall be entitled to receive
the Retirement Income Benefit which he would have received
pursuant to the provisions of 4.3 hereof as if he had
remained employed by the Company until his Retirement on
or after attaining his Earliest Retirement Age.
Payment of such monthly Retirement Income Benefits
shall commence as of the February 1 of the calendar year
following the calendar year in which the Participant attains
his Earliest Retirement Age, or such other date as is
requested in writing by the Participant and is approved in
writing by the Participant and is approved in writing by
the Committee.
(B) A Participant entitled to benefits pursuant to the
provisions of this Section 5.2 may request in writing, at
any time after his Termination of Employment and prior to
his attainment of his Earliest Retirement Age, that such
benefits due hereunder be paid in the form of a lump sum
payment equal to: (1) the original amount of his Deferral;
plus (2) interest on the amount of the Deferral from the
Effective Date of the Deferral to the date of his
Termination of Employment equal to the Prime Rate over such
time period. Such lump sum payment of benefits shall be in
lieu of payment of such Participant's Retirement Income
Benefit and shall be paid not later than thirty (30) days
following the Committee's written approval, if applicable,
of such request by the Participant.
Notwithstanding the foregoing, the Participant may
submit a written request to the Committee, not later than
the December 31 of the year in which his Termination of
Employment occurs, that in lieu of a lump sum payment to
him pursuant to the provisions of this Section 5.2(B), the
amount of such benefits be paid in not more than ten (10)
substantially equal annual installments beginning not later
than the February 1 of the calendar year following the
calendar year in which his Termination of Employment occurs.
The approval or disapproval of any Participant request
provided for in this Section 5.2 shall be in the absolute
discretion of the Committee.
5.3 Disability. A Participant on disability leave of
absence from the Company shall continue to participate in the
Plan as if the Participant were actively working.
7
<PAGE>
ARTICLE VI
----------
SURVIVOR INCOME BENEFITS
------------------------
6.1 Entitlement to Survivor Income Benefits. In the event
a Participant dies after his Deferral Effective Date and prior to
the time payment of his benefits commence pursuant to the
provisions of Article IV or Article V hereof, the Participant's
Beneficiary shall be entitled to receive the Participant's
Survivor Income Benefit for fifteen (15) years, payable in
equal monthly installments.
Payment of Survivor Income Benefits to a Participant's
Beneficiary shall commence as soon as is practicable following
the date on which the Committee receives the Participant's
certificate of death.
6.2 Amount of Survivor Income Benefits. The amount of the
Survivor Income Benefit is dependent upon: (A) the amount of the
Participant's Deferral; and (B) the Participant's age as of the
Effective Date of the Deferral.
The amount of the Survivor Income Benefit hereunder
shall be provided to each eligible Employee at the time he is
notified by the Committee of his eligibility to make a Deferral
hereunder. The amount of each Participant's Survivor Income
Benefit shall be set forth in such Participant's Confirmation of
Deferral Statement.
6.3 Death Prior to Deferral. In the event that an Employee
dies between the time of the Deferral Election Date and the
Effective Date of the Deferral, no Deferral shall actually be
made by the Company for the benefit of such deceased Employee.
In such an event, the Bonus Deferral Agreement shall be deemed
to have been revoked and the terms of this Plan as it relates to
such deceased Employee shall be of no further force or effect.
ARTICLE VII
-----------
LUMP SUM PAYMENT OPTION
-----------------------
Any Participant or Beneficiary receiving benefits
under this Plan payable in monthly installments may submit a
written request to the Committee to have such benefits be paid
instead in a single lump sum. The approval of such request shall
be in the absolute discretion of the Committee.
The amount of such single lump sum shall be calculated
by subtracting the number of monthly installments already paid
to a Participant or Beneficiary from the number one hundred
eighty (180). The difference shall then be multiplied by the
amount of each monthly installment then being received. The
result shall then be reduced to its present value at the time
of payment of the single lump sum. The rate of interest to be
used in determining such present value shall be the Prime Rate
at the time the determination is made.
8
<PAGE>
Notwithstanding the foregoing, a Participant receiving
payment of his benefits in annual installments pursuant to the
provisions of Section 5.2(B) hereof shall not be eligible to
request a lump sum payment of the remainder of his benefits
pursuant to this Article VII prior to his attainment on his
Earliest Retirement Age.
ARTICLE VII
-----------
COMPETITION WITH THE COMPANY
----------------------------
Notwithstanding anything to the contrary in this Plan,
if at any time after a Participant's Retirement (not including an
involuntary Termination of Employment after age 55 or a voluntary
Termination of Employment before age 55), such Participant,
within two(2) years after he incurs a Termination of Employment,
engages directly or indirectly in competition with the Company, or
discloses or divulges to any other person, firm or entity or uses
for the Participant's own benefit, or the benefit of any business
in competition with the Company, any trade secrets, confidential
information or propriety methods of the Company, then the
Participant shall totally forfeit any rights to a Retirement
Income Benefit under this Plan.
In such an event, the Participation shall receive a lump
sum payment equal to the original amount of his Deferral plus
interest thereon from the Effective Date of the Deferral to the
date of payment of the lump sum, in an amount equal to three
percent (3%) less than the average of the Prime Rate over such
time period. Such lump sum payment shall be made thirty (30) days
following the Committee's determination that the Participant
engaged in competition with the Company.
If a Participant has already begun to receive his
Retirement Income Benefit at the time determination hereunder is
made that he engaged in competition, the amount of benefits which
have already been paid to him shall be deducted from the amount
of the lump sum to be paid to him under the foregoing paragraph.
A determination that a Participant has engaged or is
engaging in competition with the Company shall be made by the
Committee in its sole and absolute discretion. In exercising its
discretion, the Committee shall consider, among other factors,
the nature of the competitive activity, the potential harm to
the Company which may result from the competitive activity and
the Participant's financial need. Upon request, the Committee
shall advise a Participant whether it deems an activity which the
Participant proposes to engage to be a competitive activity.
ARTICLE IX
----------
DESIGNATION OF BENEFICIARY
--------------------------
Each Participant shall file with the Committee a
written designation of the Beneficiary who shall be entitled to
receive the amount, if any, payable under the Plan on or after
such Participant death. A Participant may, from time to time,
revoke or
9
<PAGE>
change such designation without the consent of any
prior Beneficiary by filing a new designation with the Committee.
The last such designation received by the Committee shall be
controlling; provided, however, that no designation or change or
revocation thereof, shall be effective unless and until received
by the Committee prior to the Participant's death.
If no such Beneficiary is designated or if the
designated Beneficiary dies prior to the death of the
Participant, the balance of any amounts payable hereunder shall
be reduced to its present value and paid in a lump sum to the
personal representative, executor or administrator of the estate
of the Participant. The rate of interest to be used in
determining any present value hereunder shall be the Prime Rate.
If the designated Beneficiary dies after the death of
the Participant but prior to the payment of any benefits
hereunder, the balance of any amounts payable hereunder shall be
reduced to its present value and paid in a lump sum to the
personal representative, executor or administrator of the estate
of such designated Beneficiary (unless specified to the contrary
in the Beneficiary designation).
ARTICLE X
---------
OTHER MATTERS
-------------
10.1 Amendment or Termination of Plan. The Company
presently intends to continue this Plan indefinitely but reserves
the right to terminate this Plan at any time. The Company may
amend this Plan at any time. No such termination or amendment
shall adversely affect the rights of any Participant as to any
benefit accrued prior to the date of such termination or
amendment.
10.2 Nonalienation of Benefits. Subject to the provisions
of Article IX hereof, no right to receive payment of benefits
under this Plan shall be subject to anticipation, alienation,
sale, assignment, pledge, encumbrance, charge, mortgage,
attachment, garnishment or hypothecation and any attempt to
anticipate, alienate, sell, assign, pledge, encumber, mortgage,
attach, garnish, hypothecate or create a security interest in or
otherwise encumber or otherwise dispose of the same (by operation
of law or otherwise) shall be null and void. If any Participant
or Beneficiary hereunder should become bankrupt or attempt to
anticipate, alienate, sell, assign, pledge, encumber, mortgage,
hypothecate or charge any benefit, then such benefit shall, in
the discretion of the Committee, cease and terminate and in such
event, the Company may hold or apply the same or any part thereof
for the benefit of the Participant or Beneficiary, his or her
spouse, children, other dependents or any of them, in such
manner and in such proportion as the Committee may deem proper
hereunder (by operation of law or otherwise).
10.3 Withdrawals. A Participant may not obtain a hardship
withdrawal from the Plan while he is still employed by the
Company.
10
<PAGE>
10.4 General Creditor Status. To the extent that any
person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right
of an unsecured general creditor of the Company.
10.5 Unfunded Plan.
(A) The Plan is intended to constitute, for both income
tax and Title I of ERISA purposes, an unfunded deferred
compensation arrangement for a select group of Employees.
(B) In order to assist in meeting its obligations
hereunder, the Company may establish a grantor trust within the
meaning of subpart E, Part 1, subchapter J, Chapter 1, Subtitle A
of the Internal Revenue Code of 1986, as amended, and to
contribute to such trust assets to be held therein until paid to
Plan participants and their beneficiaries, subject to the claims
of the Company's general creditors in the event the Company
becomes Insolvent. For purposes of this Section 10.5, the
Company shall be considered "Insolvent" if (i) the Company is
unable to pay its debts as they become due, or (ii) the Company
is subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
10.6 Taxes. The Company shall deduct from all amounts
paid under the Plan all federal, state, local and other taxes
required by law to be withheld with respect to such payments.
10.7 No Promise of Continued Employment. Nothing in this
Plan shall be construed to limit in any way the Company's right
to terminate the Employee's employment with the Company at any
time nor be evidence of any agreement or understanding that the
Company will employ Employee in any particular position or at
any rate of remuneration.
10.8 Insurance. The Company may insure the lives of any
one, or more or all of the Participants. A Participant whose
Deferral is approved by the Committee shall, as a condition of
his Deferral, cooperate in providing any information or
submitting to any necessary examination that may be requested by
the Company in connection with its application for such insurance
policies. The Company shall be the applicant, owner and
beneficiary of such policies. The Participant shall have no
interest in any policies nor will Participant be able to look to
an insurance carrier for benefits. The Company shall have the
right to assign ownership of any such policy to the trustee of a
trust established by the Company pursuant to Section 10.5 hereof
and to name such trustee as the beneficiary of such policy.
10.9 Severability. In the event that any provision of this
Plan is found to be ineffective, only that provision shall be
ineffective and shall not affect the operation of the rest of the
Agreement.
10.10 Governing Law. This Plan shall be construed in
accordance with and governed by the law of the State of Missouri.
11
<PAGE>
10.11 Binding Effect. This Plan shall be binding upon and
enure to the benefit to the Company, its successors and assigns
and the Employee and his heirs, executors, administrators, and
legal representatives.
10.12 Entire Agreement. This Plan and the Confirmation of
Deferral Statement constitute the entire Agreement between the
Participant and the Company with respect to the Deferral.
10.13 Gender. Except where otherwise clearly stated by
context, the masculine and the neuter shall include the feminine
and the neuter, the singular shall include the plural, and vice-
versa.
10.14 Address of Participant or Beneficiary. Each
Participant shall keep the Company apprised of his current
address and the current address of any Beneficiary at all times
during participation in the Plan. Upon the death of a
Participant, Beneficiaries who are entitled to receive payment
of benefits under the Plan shall keep the Company apprised of
their current address until the entire amount to be distributed
hereunder has been paid.
10.15 Arbitration. Any controversy or claim arising out of
or relating to this Plan shall be settled by arbitration in
accordance with the then prevailing Arbitration Rules of the
American Arbitration Association, and judgement upon the award
rendered by the Arbitrator(s) may be entered in any Court having
jurisdiction thereof.
10.16 No Waiver. None of the provisions contained in this
Plan shall constitute a waiver of any of the terms or conditions
under the Purina Mills, Inc. Annual Incentive Plan.
12
<PAGE>
EXHIBIT A
---------
PURINA MILLS, INC.
DISCRETIONARY CAPITAL ACCUMULATION PLAN
BONUS DEFERRAL AGREEMENT
In response to your memo to me dated _________ ___, __________
regarding the Company's Capital Accumulation Plan, I hereby elect:
_ DEFERRAL
(Please check here and enter a dollar amount below
if you are requesting any deferral of your____ Bonus. Any
part not deferred will be paid.) of $______________(minimum
$2,000.00) of any ____Bonus which may be payable to me.
I understand that the dollar amount elected cannot exceed
the maximum amount of the bonus I may be entitled to under
the Annual Incentive Plan. If my actual bonus is less than
the amount I have elected to defer, my actual deferral will
be 100% of bonus.
Please note that your CAP deferral will be subject to FICA
(Social Security) Withholding taxes unless you notify Human
Resources, in writing, that you do not wish to have FICA
taxes withheld. Your notification must be received by Human
resources by December 31. If you do not wish to have FICA
taxes withheld from your deferral, the applicable taxes will
be withheld from the cash portion of our Bonus. If the cash
portion of your Bonus is not sufficient, taxes will be
withheld from your CAP deferral
_ NO DEFERRAL (Please check here only if you are not
requesting any deferral above)
I understand that any decision regarding any bonus that may be
paid to me this year or deferred for future payment is at the
discretion of the Employee Relations Committee.
SSN:___________ NAME: ____________________
(Type or Print)
DATE:___________ SIGNATURE: ____________________
Purina Mills, Inc. hereby acknowledges the receipt and
agrees to the deferral requested, subject to the terms and
conditions of the Plan.
DATE:___________ SIGNATURE: ____________________
Manager, Compensation
THIS REQUEST MUST BE COMPLETED AND RETURNED BY DECEMBER 31, ____.
Please send to: Human Resources 1-E, St. Louis
13
<PAGE>
EXHIBIT B
---------
PURINA MILLS, INC.
DISCRETIONARY CAPITAL ACCUMULATION PLAN
FOR KEY EMPLOYEES
CONFIRMATION OF DEFERRAL STATEMENT
To:_______________________________ (Name of Participant)
(Type or Print)
From: The Employee Relations Committee of Purina Mills, Inc.
Effective January 1, _____, the amount of $_________
awarded to you under the Purina Mills, Inc. Annual Incentive Plan
shall be deferred for future payment pursuant to the provisions
of the Purina Mills, Inc. Discretionary Capital Accumulation
Plan for Key Employees (the "Plan").
Your "Normal Retirement Age" under the Plan is when you
attain age 62 or January 1, ______, whichever occurs last:
However, " Normal retirement Age" is age 65 if you attain age 65
prior to January 1, _____. If you retire from Purina Mills, Inc.
(the "Company") on or after your Normal Retirement Age, your
Retirement Income Benefit will be $______ a year for life, payable
in monthly installments of approximately $______each.
Your "Earliest Retirement Age" under the Plan is when
you attain age 55 or January 1, ____, whichever occurs last. If
you retire from the Company on or after your Earliest Retirement
Age but before your Normal Retirement Age, your Retirement Income
Benefit will be reduced in accordance with actuarial reduction
factors set forth in the Table attached to this Statement.
If you die before your Retirement Income Benefit
commences, your Designated Beneficiary will receive an annual
Survivor Income Benefit in the amount of $ ____ for 15 years,
payable in 180 monthly installments of approximately $_____ each.
By: ______________________
Title: ___________________
Date: ____________________
14
<PAGE>
RETIREMENT INCOME BENEFIT
ACTUARIAL REDUCTION FACTORS
EXHIBIT B
--------- (continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
% OF MONTHS
BENEFITS
AGE PAID 1 2 3 4 5 6 7 8 9 10 11
65 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
64 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
63 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
62 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
61 89.572 90.441 91.310 92.179 93.048 93.917 94.786 95.655 96.524 97.393 98.262 99.131
60 81.034 81.745 82.457 83.168 83.880 84.591 85.303 86.015 86.726 87.438 88.149 88.861
59 73.300 73.944 74.589 75.233 75.878 76.522 77.167 77.811 78.456 79.100 79.745 80.389
58 66.295 66.879 67.462 68.046 68.630 69.214 69.797 70.381 70.965 71.549 72.132 72.716
57 59.951 60.479 61.008 61.537 62.065 62.594 63.123 63.652 64.180 64.709 65.238 65.766
56 54.204 54.683 55.162 55.641 56.120 56.599 57.078 57.556 58.035 58.514 58.993 59.472
55 50.000 50.350 50.701 51.051 51.401 51.752 52.102 52.453 52.803 53.153 53.504 53.854
</TABLE>
<PAGE>
PURINA MILLS, INC.
DISCRETIONARY CAPITAL ACCUMULATION PLAN
RETIREMENT INCOME ACTUARIAL REDUCTION FACTORS
EXHIBIT C
---------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
% OF MONTHS
BENEFITS
AGE PAID 1 2 3 4 5 6 7 8 9 10 11
65 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
64 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
63 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
62 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
61 89.572 90.441 91.310 92.179 93.048 93.917 94.786 95.655 96.524 97.393 98.262 99.131
60 81.034 81.745 82.457 83.168 83.880 84.591 85.303 86.015 86.726 87.438 88.149 88.861
59 73.300 73.944 74.589 75.233 75.878 76.522 77.167 77.811 78.456 79.100 79.745 80.389
58 66.295 66.879 67.462 68.046 68.630 69.214 69.797 70.381 70.965 71.549 72.132 72.716
57 59.951 60.479 61.008 61.537 62.065 62.594 63.123 63.652 64.180 64.709 65.238 65.766
56 54.204 54.683 55.162 55.641 56.120 56.599 57.078 57.556 58.035 58.514 58.993 59.472
55 50.000 50.350 50.701 51.051 51.401 51.752 52.102 52.453 52.803 53.153 53.504 53.854
</TABLE>
PURINA MILLS,
PM HOLDINGS CORPORATION
SEVERANCE PROGRAM FOR KEY EMPLOYEES
The Board of Directors of Purina Mills, Inc. ("Purina") and
the Board of Directors of PM Holdings Corporation ("PM Holdings")
(collectively, "Boards") have authorized Purina and PM Holdings
(collectively, with any survivors thereto, the "Company") to
explore the possibility of various business combinations. In
light of the distraction to key employees who contribute
materially to the business of the Company that such exploration
of combinations may create, the Boards have determined that it is
in the best interests of Purina, PM Holdings, and their
stockholders to take action intended to ensure that the Company
and its subsidiaries will continue to receive the full,
undistracted attention and dedication of their key employees,
notwithstanding the possibility of such a business combination or
other Change in Control (as defined below). Therefore, in order
to diminish the extent to which the possibility of a Change in
Control would otherwise distract Purina's, PM Holdings' and their
subsidiaries' key employees from the efficient discharge of their
responsibilities to the Company, by providing all of such key
employees with the assurance of financial security for a period
of time in the event of a Change in Control, the Boards have
adopted the Severance Program for Key Employees ("Program")
described below effective as of January 9, 1998.
1. Employees Covered. This Program shall cover only the
following employees: David L, Abbott, Ian R. Alexander, August F.
Ottinger, Duncan M. Highmark, Nile D. Ramsbottom, Rick L. Bowen,
Perry L. Mooneyham, Arnold E. Sumner Jr. and John T. Zerbe.
2. Condition to Benefits Being Payable. No benefits shall be
payable under this Program unless (i) there shall have been a
Change in Control, and (ii) the employee's employment with the
Company and its subsidiaries terminated within the time periods
specified in Section 4 immediately preceding or after the date of
the Change in Control. All payments will be made to employees
less all applicable withholding requirements.
3. Certain Definitions. For purposes of this Program, the
following terms shall have the meanings set forth below:
"Change In Control" shall mean any direct or indirect
transfer, assignment, sale or any other disposition (in each
case, a "Disposition") or series of related Dispositions to any
transferee or related or affiliated transferees of either
substantially all of the assets of Purina or more than forty
percent (40%) of the outstanding shares of the Common Stock of PM
Holdings or Purina on a fully diluted basis (after giving effect
to any then exercisable right to acquire shares of Common Stock).
"Constructive Termination" shall mean upon a Change in
Control, any one or more of the following events has occurred:
<PAGE>
(a) The assignment by the Company of a Participant to
a position that requires skills that are substantially
different than the skills required for the position
held by the Participant at the time of the Change in
Control transaction, without the Participant's prior
written consent; or
(b) A reduction by the Company in the amount of a
Participant's total cash compensation compared to the
calendar year immediately preceding the calendar year
in which the Change in Control occurred; or
(c) The relocation of the Participant's office, without
Participant's prior written consent; or
(d) The requirement of the Participant to perform his
duties outside the Company's principal executive
offices for a period of more than sixty (60)
consecutive days or more than 60% of his time during
the first and second year after the Change in Control,
without the prior written consent of the Participant;
or
(e) The failure of the Company to offer Participant the
opportunity to participate in, or the removal of the
Participant from, compensation programs and benefit
plans generally offered and available to similar level
executives in the Company who perform at similar
levels.
"Non-Voluntary Termination" shall mean the termination of
employment, other than by reason of death or disability, of a
Participant by Purina, PM Holdings or any successor thereto
without cause.
4. Benefits.
(a) A Participant whose employment is terminated on account
of a Constructive Termination or Non-Voluntary Termination within
three (3) months prior to a Change in Control
and such termination is in anticipation of a Change in Control,
or whose employment is terminated on account of a Constructive
Termination or Non-Voluntary Termination within one (1) year
after a Change in Control:
(1) shall receive, within thirty (30) days after the
latest to occur of the date of the Change in
Control, Constructive Termination or Non-Voluntary
Termination, cash from the Company in one lump sum
in an amount equal to the sum of:
(A) two (2) times the Participant's annual base
salary calculated based upon the annualized
annual base salary effective immediately prior
to the Change in Control; and
(B) two (2) times the bonus payments made by the
Company to the Participant for the calendar
year immediately preceding the calendar year in
which the Change in Control occurred; and
2
<PAGE>
(2) shall be paid in one single lump sum payment,
the net present value of the premiums that would be
charged for medical benefits coverage during the
forty two month period (the "Forty Two Month
Period") commencing on the date of the Constructive
Termination or Non-Voluntary Termination under the
medical program of the Company in effect and
applicable to the Participant immediately prior to
the Change in Control, assuming such premiums
remained equal to the premium chargeable at the
first such month of the Forty Two Month Period and
using a discount rate of 7 %. The Participant shall
be covered under the Company's medical program
during the Forty Two Month Period provided such
Participant pays for such coverage, and such
coverage shall be included in the calculation of the
"Period of Coverage" to be provided to the
Participant pursuant to Section 4980(B)(f) of the
Internal Revenue Code of 1986, as amended (the
"Code"); and
(3) shall, during the period commencing on the latest
of the date of Change in Control, Constructive
Termination, or Non-Voluntary Termination and ending
on the second anniversary thereafter, receive the
use of office space and secretarial assistance for
the purpose of finding new employment, and such
other outplacement services as the Company may
provide.
(b) A Participant whose employment is terminated on account
of a Constructive Termination or Non-Voluntary Termination after
one (1) year has elapsed since a Change in Control occurred but
before two (2) years has elapsed since such Change in Control:
(1) shall receive, within thirty (30) days after such
Constructive Termination or Non-Voluntary
Termination, cash from the Company or its
subsidiaries in one lump sum in an amount equal to
the sum of:
(A) one (1) times the Participant's annual base
salary calculated based upon the annualized
annual base salary effective immediately prior to
the Change in Control; and
(B) one (l) times the bonus payments made by the
Company to the Participant for the calendar year
immediately preceding the calendar year in which
the Change in Control occurred; and
(2) shall, be paid in one single lump sum payment, the
net present value of the premiums that would be
charged for medical benefits coverage during the
thirty month period (the "Thirty Month Period")
commencing on the date of the Constructive
Termination or Non-Voluntary Termination under the
medical program of the Company in effect and
applicable to the Participant immediately prior to
the Change in Control, assuming such premiums
remained equal to the premium chargeable at the
first such month of the Thirty Month Period and
using a discount rate of 7 %. The Participant shall
be covered under the Company's medical program
during the Thirty Month
3
<PAGE>
Period provided that such Participant pays for such
coverage, and such coverage shall be included in the
calculation of the "Period of Coverage" to be
provided to the Participant pursuant to Section
(4980(B)(f) of the Code; and
(3) shall, during the period commencing on the date of
the Constructive Termination of Non-Voluntary
Termination and ending on the first anniversary
thereafter, receive the use of office space and
secretarial assistance for the purpose of finding
new employment, and such other outplacement services
as the Company may provide.
(c) The amounts payable under this Section 4 shall be
payable whether or not the Participant secures new employment,
and shall not be reduced or offset in any manner except as
expressly set forth in Section 6.
5. Additional Amounts. In the event that any amounts payable to
the Participant under this Program, or as a result of the
acceleration of the right to exercise options or stock units
would be subject to an excise tax pursuant to Section 4999 of the
Code, then the Company and the affected Participant shall
endeavor in good faith to reduce or eliminate the amount of any
such excise tax. If, after such efforts, any excise tax remains
to be paid, the Company shall pay to the Participant an amount,
which after reduction for any income, excise and employment taxes
on such amount, would equal the amount of such excise tax.
6. Reduction for Other Severance Payments. Benefits provided to
any employee under Section 4 shall be reduced by the amount of
any severance or termination of employment payments made by the
Company or its subsidiaries to such employee otherwise than
pursuant to this Program. Unemployment compensation benefits
shall not be considered to be payments made by the Company or its
subsidiaries.
7. Release. In order to receive the benefits provided herein, a
Participant must sign a Release in the form attached as
Attachment A hereto. No benefits or payments under this Program
shall be provided or made to any Participant prior to the date on
which such Release becomes
irrevocable.
8. Administration.
(a) This Program shall be administered by the Board of
Directors of PM Holdings, and the Board of Directors of PM
Holdings shall be responsible for ensuring that the Company
complies with the provisions hereof.
(b) The Board of Directors of PM Holdings may authorize one
or more of their number or any agent to execute or deliver any
instrument or make any payment in their behalf, and may employ
such clerical personnel as they may require in carrying out the
provisions of this Program.
4
<PAGE>
(c) The Board of Directors of PM Holdings shall have
complete control of the administration of this Program, with all
powers necessary to enable it to properly carry out its duties in
that respect. The Board of Directors of PM Holdings shall be
authorized to interpret this Program and to determine all
questions arising in the administration, construction and
application of this Program. The decision of the Board of
Directors of PM Holdings upon all matters within the scope of its
authority shall be conclusive and binding on all parties,
subject, however, to the provisions of Section 9.
(d) Subject to the limitations of this Section 8, the Board
of Directors of PM Holdings from time to time may establish such
supplemental rules and regulations for the administration of this
Program and the transaction of its business as it deems
necessary.
(e) The Board of Directors of PM Holdings shall be
responsible for the preparation and delivery of all reports,
notices, plan summaries and plan descriptions required to be
filed with any governmental office or to be given to any employee
or beneficiary of any employee covered by this Program.
(f) Upon request of the Board of Directors of PM Holdings,
the Company or any of its subsidiaries shall furnish such
information in its possession as will aid the Board of Directors
of PM Holdings in the performance of its duties hereunder.
9. Claims Procedure.
(a) All claims for benefits shall be in writing and shall be
filed with the Board of Directors of PM Holdings within thirty
(30) days of the date of termination.
(b) If the Board of Directors of PM Holdings wholly or
partially denies a Participant's claim for benefits, the Board of
Directors of PM Holdings shall give the claimant written notice
within sixty (60) days after its receipt of the claim setting
forth:
(i)the specific reason(s) for the denial;
(ii)specific reference to pertinent Program
provisions on which the denial is based;
(iii)a description of any additional material or
information which must be submitted to perfect the
claim, and an explanation of why such material or
information is necessary; and
(iv)an explanation of this Program's review
procedure.
(c) The claimant shall have sixty (60) days after the day on
which such written notice of denial is delivered to him or her by
the Board of Directors of PM Holdings in which to apply (in
person or by authorized representative) in writing to the Board
of Directors of PM Holdings for a full and fair review of the
denial of his or her claim. In connection with such review, the
claimant (or his or her representative) shall be afforded a
reasonable opportunity to review
5
<PAGE>
pertinent documents, and may submit issues and comments in
writing. The Board of Directors of PM Holdings shall arrange to
meet personally with the claimant and/or representative within
thirty (30) days after the PM Holdings Board of Directors'
receipt of such written request for review for the purpose of
hearing the claimant's contentions and receiving such relevant
evidence as the claimant may wish to offer.
(d) The Board of Directors of PM Holdings shall issue its
decision on review within sixty (60) days after meeting with the
claimant or personal representative, unless in the sole
discretion of the Board of Directors of PM Holdings special
circumstances require an extension to not later than one hundred
twenty (120) days after such meeting. The decision shall be in
writing and shall set forth specific reasons for the decision and
specific references to pertinent Program provisions on which the
decision is based.
(e) The Company shall pay all costs and expenses, including,
without limitation, reasonable attorney's fees, incurred by an
employee acting reasonably in seeking to enforce his or her
rights under this Program, to the extent the employee prevails.
10. Employment of Professional Assistance. The Board of Directors
of PM Holdings is empowered, on behalf of this Program, to engage
accountants, legal counsel and such other personnel as it deems
necessary or advisable to assist it in the performance of its
duties under this Program. The functions of any such persons
engaged by the Board of Directors of PM Holdings shall be limited
to the specific services and duties for which they are engaged,
and such persons shall have no other duties, obligations or
responsibilities under this Program. Such persons shall exercise
no discretionary authority or discretionary control respecting
the management of this Program. All reasonable expenses thereof
shall be borne by the Company.
11. Controlling Law. This Program shall be construed and enforced
according to the internal laws of the State of Delaware to the
extent not preempted by Federal Law, which shall otherwise
control.
12. Amendments; Termination. This Program may be amended or
terminated in whole or in part, by action of the Board of
Directors of PM Holdings at any time. Upon and after the date of
a Change in Control, the amendment or termination of this Program
shall not affect the rights or benefits under this Program of any
person employed by the Company prior to such amendment or
termination of this Program.
13. Assignability. This Program shall inure to the benefit of and
be binding upon the Company and its successors and assigns. The
Company shall require any corporation, entity, individual or
other person who is the successor (whether direct or indirect by
purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all the business and/or assets of the
Company to expressly assume and agree to perform, by a written
agreement in form and in substance satisfactory to the Company,
all of the obligations of the Company under this Program. As used
in this Program, the term "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Program by operation of law, written agreement or otherwise.
6
<PAGE>
Adopted and approved by the Board on January 9, 1998.
PURINA MILLS, INC.
/s/ Paul F Cornelsen
--------------------
Paul F. Cornelsen,
Chairman of the Board
PM HOLDINGS CORPORATION
/s/ Paul F. Cornelsen
---------------------
Paul F. Cornelsen,
Chairman of the Board
7
<PAGE>
Attachment A
GENERAL RELEASE AND WAIVER
(a). General Release and Waiver
I, _____________________ HEREBY RELEASE, REMISE, ACQUIT AND
DISCHARGE THE COMPANY, ITS PARENT, SUBSIDIARIES AND AFFILIATES
AND THIER DIVISIONS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES,
CONSULTANTS, INDEPENDENT CONTRACTORS, ATTORNEYS, ADVISERS,
SUCCESS0RS AND ASSIGNS (THE "COMPANY GROUP"), JOINTLY AND
SEVERALLY, FROM ANY AND ALL CLAIMS, KNOWN OR UNKNOWN, WHICH I OR
MY HEIRS, SUCCESSORS, OR ASSIGNS HAVE OR MAY HAVE AGAINST ANY OF
SUCH PARTIES AND ANY AND ALL LIABILITY WHICH ANY OF SUCH PARTIES
MAY HAVE TO ME WHETHER DENOMINATED CLAIMS, DEMANDS, CAUSES OF
ACTION, OBLIGATIONS, DAMAGES OR LIABILITIES ARISING FROM ANY AND
ALL BASES, HOWEVER DENOMINATED, INCLUDING BUT NOT LIMITED TO
CLAIMS OF DISCRIMINATION UNDER THE AGE DISCRIMINATION IN
EMPLOYMENT ACT, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE
FAMILY AND MEDICAL LEAVE ACT OF 1993, TITLE VII OF THE UNITED
STATES CIVIL RIGHTS ACT OF 1964, 42 U.S.C. ss. 1981, (cite
relevant state law) OR ANY OTHER FEDERAL, STATE, OR LOCAL LAW,
ANY WORKERS' COMPENSATION OR DISABILITY CLAIMS UNDER ANY SUCH
LAWS. THIS RELEASE IS FOR ANY RELIEF, NO MATTER HOW DENOMINATED,
INCLUDING, BUT NOT LIMITED TO, WAGES, BACK PAY, FRONT PAY,
COMPENSATORY DAMAGES, OR PUNITIVE DAMAGES. I FURTHER AGREE THAT I
WILL NOT FILE OR PERMIT TO BE FILED ON MY BEHALF ANY SUCH CLAIM,
EXCEPT NOTHING HEREIN IS INTENDED TO INTERFERE WITH MY RIGHT TO
FILE A CHARGE WITH THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION IN
CONNECTION WITH ANY CLAIM I BELIEVE I MAY HAVE AGAINST ANY MEMBER
OF THE COMPANY GROUP. HOWEVER, BY SIGNING THIS RELEASE, I HEREBY
AGREE TO WAIVE THE RIGHT TO RECOVER IN ANY PROCEEDING I MAY BRING
BEFORE THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION (OR ANY STATE
HUMAN RIGHTS COMMISSION) OR IN ANY PROCEEDING BROUGHT BY THE
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION (OR ANY STATE HUMAN
RIGHTS COMMISSION) ON MY BEHALF. THIS RELEASE RELATES TO CLAIMS
ARISING FROM AND DURING MY RELATIONSHIP WITH ANY MEMBER OF THE
COMPANY GROUP OR AS A RESULT OF THE TERMINATION OF SUCH
RELATIONSHIP. THIS RELEASE SHALL NOT APPLY TO THE BENEFITS
PAYABLE TO ME UNDER THE PURINA MILLS, INC. PM HOLDINGS
CORPORATION SEVERANCE PROGRAM FOR KEY EMPLOYEES OR TO THE
OBLIGATION SET FORTH IN THIS RELEASE OR ANY OTHER CLAIMS THAT MAY
ARISE AFTER THE DATE ON WHICH I SIGN THE ACKNOWLEDGMENT COPY OF
THIS RELEASE.
I ACKNOWLEDGE THAT THE BENEFITS THAT I AM RECEIVING UNDER THE
PROGRAM CONSTITUTE CONSIDERATION FOR THE FOREGOING RELEASE THAT IS
8
<PAGE>
IN ADDITION TO ANYTHING OF VALUE TO ME TO WHICH I AM ALREADY
ENTITLED FROM THE COMPANY GROUP.
(b) Forfeiture in Event of Breach
I acknowledge and agree that, notwithstanding any other
provision of this Release, in the event of my breach of any of my
obligations under this Release, I will forfeit the right to
receive the benefits or payments provided for under the Program,
and I agree immediately to reimburse the Company Group for the
amount of such benefits or payments theretofore provided.
(c) Knowing and Voluntary Waiver; Right to Consider and Revoke
(i) I understand that I may consider whether to agree to
the terms contained herein for a period of fifty (50) days after
the date hereof. Accordingly, I may sign and return this Release
by [date 50 days from today], to acknowledge my understanding of
and agreement with the foregoing. I acknowledge that, prior to my
signing this Release, I was advised by the Company to consult
with an attorney.
(ii) This Release will become effective, enforceable and
irrevocable seven days after the date on which I sign it (the
"Effective Date"). During the seven-day period prior to the
Effective Date, I may revoke my agreement to accept the terms
hereof by indicating in writing to the Company my intention to
revoke. If I exercise my right to revoke hereunder, I shall
forfeit my right to receive the benefits provided under the
Program.
(iii) I acknowledge that, by my free and voluntary act of
signing below, I agree to all of the terms of this Release and
intend to be legally bound thereby.
(d) Unless otherwise stated in this Release, all terms used
herein without definition shall have the meanings assigned to
them under the Purina Mills, Inc. Purina Holdings Corporation
Severance Program for Key Employees.
By: _______________________
9
<PAGE>
Acknowledgment
On the ______ day of __________, 19,___, before me
personally came ________________ who, being by me duly sworn, did
depose and say that he resides at _______________________; and
did acknowledge and represent that he has had an opportunity to
consult with attorneys and other advisers of his choosing
regarding the Release attached hereto, that he has reviewed all
of the terms of the Program and that he fully understands all of
its provisions, including, without limitation, the general
release and waiver set forth therein.
_____________________________
Notary Public
Date: _______________________
10
Purina Mills, Inc.
Supplemental Executive
Retirement Plan
<PAGE>
THE PURINA MILLS, INC.
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
ARTICLE I
PURPOSE OF THE PLAN
The purpose of the Plan is to provide a means to attract and
retain officers and other key employees in senior management
positions with Purina Mills, Inc. (the "Company") by providing
compensation in the form of supplemental retirement income in
amounts reasonably related to their compensation and length of
service with the Company to augment the retirement benefits
provided by the Company's normal retirement system.
<PAGE>
ARTICLE II
DEFINITIONS
The following words and phrases as used herein shall have the
following meanings unless a different meaning is plainly intended
by the context.
2.01 "Board of Directors" means the Board of Directors of the
Company.
2.02 "CAP" means the Capital Accumulation Plan.
2.03 "Company" means Purina Mills, Inc. and any successor.
2.04 "Effective Date" means January 1, 1988.
2.05 "Participant" means an employee who participates in the
Plan in accordance with Article III.
2.06 "Plan" means the Purina Mills, Inc.
2.07 "Plan Administrator" means the individual(s) or organiza-
tion appointed by the Board of Directors to administer the Plan
in accordance with Article V.
2.08 "Qualified Plan" means the Purina Mills, Inc. Retirement
Plan for Sales, Administrative and Clerical Employees.
- 2 -
<PAGE>
ARTICLE III
PARTICIPATION
3.01 Present Employees. The following employees shall become
Participants in the Plan:
(a) employees who are participants in CAP; or
(b) employees with income in excess of the limit specified
in Internal Revenue Code Section 401(a)(17); or
(c) employees whose benefit under the Qualified Plan is
limited by Internal Revenue Code Section 415; or
(d) employees who are participants in the deferred bonus
program and have deferred bonuses.
3.02 Other Employees. The Board of Directors in its sole dis-
cretion may designate additional employees as Participants in the
Plan.
- 3 -
<PAGE>
ARTICLE IV
BENEFITS
4.01 Retirement Benefit. A participant who retires under the
Qualified Plan shall be entitled to a lifetime benefit from this
Plan equal to the difference between the amount such Participant
receives from the Qualified Plan and the amount the Participant
would have received from such Qualified Plan, based upon total
compensation, whether or not deferred as shown on the attached
Appendix A, without the imposition of the maximum benefit limit-
ation under Internal Revenue Code Section 415 and the maximum
compensation limitation under Internal Revenue Code Section
401(a)(17). Payments shall be made in the same form and manner
as payments under the Qualified Plan.
4.02 Death Benefit. If an active Participant dies under circum-
stances entitling his surviving spouse to a benefit under the
Qualified Plan, such surviving spouse shall be entitled to a
lifetime benefit from this Plan equal to the difference between
the amount the surviving spouse receives from the Qualified Plan
without the imposition of the limitations described in Section
4.01. Payments shall be made in the same form and manner as pay-
ments under the Qualified Plan.
Any death benefits due on account of the death of a retired
Participant shall depend upon the form of retirement benefit and
shall be paid in accordance with Section 4.01.
- 4 -
<PAGE>
ARTICLE V
ADMINISTRATION
5.01 Administration. The Plan shall be administered by the Plan
Administrator designated by the Board of Directors of the
Company. The Plan Administrator shall have authority and dis-
cretion to interpret the Plan document, to determine the rights
and benefits of Participants in accordance with the Plan, to
establish from time to time regulations for the administration of
the Plan and to make all determinations deemed necessary or ad-
visable for the administration.
5.02 Assignments and Transfers. No right or benefit of a Parti-
cipant under this Plan may be assigned, encumbered, or trans-
ferred in any manner.
5.03 Employee Rights Under the Plan. Neither the Plan or any
action taken thereunder shall be construed as giving any Partici-
pant or any other employee of the Company any right to be re-
tained in the employment of the Company, nor shall it be con-
strued as limiting in any way the right of the Company to dis-
charge any Participant or to treat him without regard to the
effect which such treatment might have upon him as a Participant
in the Plan. Participation in the Plan shall not in any way af-
fect any rights which a Participant herein may have under any
other employee benefit plan of the Company or under any indi-
vidual contractual retirement agreement between such Participant
and the Company.
- 5 -
<PAGE>
5.04 Amendment or Termination. The Board of Directors of the
Company may amend, suspend, or terminate the Plan or any portion
thereof at any time; provided, however, that no amendment, sus-
pension, or termination of the Plan shall materially impair the
rights under the Plan of any Participant therein prior to the
date such amendment, suspension, or termination is adopted or
becomes effective.
5.05 No Fund. There shall not be any Company contributions re-
quired to provide benefits under this Plan nor shall any assets
be required to be set aside by the Copmany in a fund or trust to
provide such benefits. Notwithstanding the preceding sentence,
the Board of Directors may fund the Plan as it believes necessary
and appropriate.
5.06 Governing Law. The Plan shall be governed and construed in
accordance with the laws of the State of Missouri.
- 6 -
<PAGE>
Appendix A
Determination of Total Compensation
Example
Employee A has the following characteristics:
(1) 1988 Salary $100,000
(2) Amount of 1988 Salary deferred under CAP 5,000
(3) Amount of 1987 bonus 40,000
(a) $30,000 of bonus deferred in 1988 to a future time
(b) $10,000 of bonus paid in cash in 1988
A. Qualified Plan Compensation
---------------------------
(1) Base Salary $100,000
(2) CAP deferred 5,000
(3) Bonus received in Cash 10,000
--------
(4) Qualified Plan Compensation
1. - 2. + 3. $105,000
B. Total Compensation
------------------
(1) Qualified Plan Compensation (A.4.) $105,000
(2) CAP deferral 5,000
(3) 1987 Bonus deferred in 1988 30,000
--------
(4) Total Compansation, 1. + 2. + 3. $140,000
<PAGE>
RESOLUTION
At a duly constituted meeting of the Board of Directors of Purina
Mills, Inc. (the "Company"), a corporation organized and doing
business under the laws of the ______________________ held on
____________, 1988, the following votes were unanimously passed:
VOTED: That upon an employee's retirement or death, Purina
Mills, Inc. through this Plan will provide a benefit
to such employee or the surviving spouse of the
employee, who is a participant in the Purina Mills,
Inc. Retirement Plan for Sales, Administrative and
Clerical Employees, and whose benefits from such
Qualified Plan are limited due to (i) the maximum
benefit limitation set forth in Internal Revenue Code
Section 415 (and regulations issued thereunder), (ii)
the maximum compensation limit set forth in Internal
Revenue Code Section 401(a)(17) (and regulations
issued thereunder), or (iii) the exclusion of
deferred bonuses and deferred compensation under said
Qualified Plan. Such benefit shall be equal to the
difference between the amount such employee or
surviving spouse actually receives from the Qualified
Plan and the amount the employee or surviving spouse
would have received from the qualified Plan without
the imposition of such limitations.
VOTED: That ________, ________, be and hereby is authorized
and directed to take on such action as he deems
necessary or desirable to effectuate the foregoing
vote.
ATTEST:
______________________________
A true record
KOCH INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
KOCH INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Table of Contents
Page
PURPOSE 1
ARTICLE I -- DEFINITIONS 1
ARTICLE II-- PARTICIPATION 3
ARTICLE III-- AMOUNT OF BENEFITS 3
ARTICLE IV-- RETIREMENT 4
ARTICLE V -- DEATH
5
Section 5.01. Death Benefits 5
ARTICLE VI-- DISABILITY 5
ARTICLE VII-- SEPARATION FROM SERVICE 6
ARTICLE VIII -- SETTLEMENT OPTIONS, REEMPLOYMENT,
AND BENEFICIARY DESIGNATIONS 6
Section 8.01. Settlement Options 6
Section 8.02. Reemployment 6
Section 8.03. Beneficiary Designations 7
ARTICLE IX-- FORFEITURE 8
Section 9.0 1. Forfeiture of Benefits 8
Section 9.02. Termination for Cause 8
i
<PAGE>
ARTICLE X - SOURCE OF BENEFITS 8
Section 10.01. Benefits Payable
from General Assets 8
Section 10.02. Multiple Employers 9
ARTICLE XI-- ADMINISTRATION OF THIS PLAN 9
Section 11.01. Appointment of Committee 9
Section 11.02. Committee Action 9
Section 11.03. Committee Rules and Plan Powers --
General 9
Section 11.04. Reliance on Certificates, Etc. 10
Section 11.05. Information to the Committee 10
Section 11.06. Interested Committee Member 10
ARTICLE XII -- AMENDMENT AND TERMINATION 10
Section 12.01. Amendment 10
Section 12.02. Termination or Partial Termination 11
ARTICLE XIII -- RESTRICTIONS ON ALIENATION OF BENEFITS 11
ARTICLE XlV-- CLAIMS PROCEDURE 12
ARTICLE XV-- MlSCELLANEOUS 13
Section 15.01. Payments Net of Withholding
and Other Amounts 13
Section 15.02. No Guarantee of Interests 13
Section 15.03. Employer Records 13
Section 15.04. Evidence 13
Section 15.05. Notice 13
Section 15.06. Change of Address 14
Section 15.07. Effect of Provisions 14
Section 15.08. Other Benefits and Agreements 14
Section 15.09. Severability Clause 14
Section 15.10. Minors and Incompetents 14
Section 15.11. No Employment Agreement 14
Section 15.12. Indemnification 15
Section 15.13. Headings 15
Section 15.14. Governing Law 15
ii
<PAGE>
KOCH INDUSTRIES, INC
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PURPOSE
The purpose of the Koch Industries, Inc. Supplemental
Executive Retirement Plan shall be to provide specified benefits
to a select group of management and highly compensated employees
who contribute materially to the success of Koch Industries, Inc.
It is the intention of Koch Industries, Inc. that this program
shall be administered as an unfunded plan of deferred
compensation for income tax purposes and as an unfunded employee
benefit plan established and maintained primarily for a select
group of management and highly compensated employees within the
meaning of Sections 201(2), 301(a)(3) and 401(a)(l) of the
Employee Retirement Income Security Act of 1974, as amended
(ERISA).
ARTICLE I -- DEFINITIONS
For purposes of this Plan, the following phrases or
terms shall have the indicated meanings unless otherwise clearly
apparent from the context:
Affiliated Company(ies) -- means each entity which has
a relationship to Employer as described by Section 414(b) or (c)
of the Code.
Beneficiary -- means the person, persons, entity or
entities entitled to receive any benefits under this Plan
pursuant to the designation of the Participant (or in default of
such designation) as provided in ARTICLE VIII hereof.
Board of Directors -- means the Board of Directors of
Koch Industries, Inc.
Code -- means the Internal Revenue Code of 1986, as
amended.
Committee -- means the Committee described in ARTICLE
XI which is the named fiduciary with respect to this Plan and
which shall manage and administer the provisions of said article
and as otherwise provided in this Plan.
1
<PAGE>
Company -- means Koch Industries, Inc.
Disabled or Disability -- means a determination by the
Committee that a Participant is eligible to receive benefits
under principles similar to that contained in the Employer's
long-term disability plan. In all cases, the Committee has the
right, in the Committee's Sole Discretion, to have independent
qualified medical personnel examine and render an opinion as to
the Disability.
Eligible Employee -- means any person who is in the
employ of Employer, who thereby qualifies as an "employee" under
the common law definition thereof and for participation in this
Plan as set forth in ARTICLE II.
Employer -- means Koch Industries, Inc. and any
Affiliated Company.
Participant -- means a management or highly
compensated Eligible Employee who has been designated by the
Committee as entitled to participate in this Plan in accordance
with ARTICLE II or a former Participant for whom a Supplemental
Benefit is maintained under the Plan.
Pension Plan -- means the Koch Industries Employees'
Pension Plan.
Plan Administrator -- means the person designated,
from time to time by the Committee, to carry out the various
administrative and other duties with respect to the Plan in a
manner consistent with the terms of the Plan and rules and
procedures established by the Committee.
Plan Year -- means the calendar year.
Separation from Service -- means the termination of
employment with the Employer and all Affiliated Companies. The
term includes, but is not limited to, terminations of employment
which arise from the Participant's death, Disability, retirement,
discharge, or voluntary termination. The term shall not include
any temporary absences due to vacation, sickness, or other leaves
of absence granted to the Participant by the Employer. A
Separation from Service shall not be deemed to occur, however,
upon a transfer involving any combination of the Employer and any
Affiliated Company, or during the elimination period contained in
the Employer's long-term disability plan while the Committee is
determining if a Participant is Disabled.
2
<PAGE>
Sole Discretion -- means the right and power to decide
a matter, which matter may be exercised arbitrarily and shall not
be subject to review by any court or otherwise.
ARTICLE II -- PARTICIPATION
The Committee shall have the unrestricted right and
power, which may be exercised in its Sole Discretion, and at any
time and from time to time, to designate Participants who are
eligible to participate in this Plan or who are no longer
eligible to participate in this Plan.
ARTICLE III -- AMOUNT OF BENEFITS
If a Participant is vested under the terms of the
Pension Plan, then the amount of benefits payable to a
Participant (or the Beneficiary of such Participant) under this
Plan, shall be equal to the benefit which would have been payable
to the Participant in the normal form of benefit payment under
the Pension Plan (life and 10-year certain annuity), if the
limitations of Section 415 of the Code and the $150,000
limitation of Section 401(a)(17) of the Code, as amended by the
Omnibus Budget Reconciliation Act of 1993 (without regard to
future changes in such Code Section), had not been imposed upon
such Participant's retirement income under the terms of the
Pension Plan; less such Participant's retirement income, payable
in the same form (life and 10-year certain annuity) under the
terms of the Pension Plan. This Plan is intended to pay only such
benefits as are necessary, when added to the benefit available
under the Pension Plan, to provide the same total amount of
benefit to which the Participant (or the Beneficiary of such
Participant) would have been entitled under the Pension Plan
without regard for the provisions of Section 415 of the Code and
the $150,000 limitation of Section 401(a)(l7) of the Code, as
amended by the Omnibus Budget Reconciliation Act of 1993 (and
without regard to future changes in such Code Section).
As of the date payment is to commence under the terms
of this Plan, a Participant's benefit under this Plan shall be
converted to the form of payment elected hereunder. Such
conversion shall be determined by using the actuarial equivalent
factors and early retirement factors under the then current terms
of the Pension Plan. Under no circumstance shall the total of the
benefit from this Plan and the benefit from the Pension Plan
added together exceed the total amount the Participant (or the
Beneficiary of such Participant) would have received from the
Pension Plan alone without the limitation of Section 401(a)(17)
and 415 and, any other provision of this Plan which may be
construed otherwise shall be
3
<PAGE>
conformed to this limitation. This limitation on the
total of the benefits to be received from this Plan and the
Pension Plan shall be subject to limitations under the Pension
Plan due to the death of Participants prior to retirement
survivor options, early retirement elections or any other
provisions of the Pension Plan.
This benefit is hereinafter sometimes referred to as
the Participant's Supplemental Benefit.
In the event the Committee terminates an individual's
participation in this Plan pursuant to ARTICLE II, such
Participant's Supplemental Benefit shall be computed based on the
amount of benefits accrued to the date such individual ceased to
participate in this Plan.
The Committee shall have full and complete
discretionary authority to interpret the foregoing provisions and
may rely on the terms and provisions of the Pension Plan in
interpreting this Plan.
ARTICLE IV -- RETIREMENT
Subject to ARTICLE IX, a Participant who incurs a
Separation from Service after attaining age 55 (other than by
reason of death or Disability), shall be entitled to the value of
such Participant's Supplemental Benefit. Unless otherwise elected
in accordance with Section 8.01., benefits will be payable in ten
annual installments with the first payment commencing as
soon as administratively practicable following the Participant's
Separation from Service; provided, however, that the Committee in
its Sole Discretion may accelerate any or all of such payments.
The retirement benefits of a Participant who dies
prior to their completion shall be paid to the Participant's
Beneficiary.
4
<PAGE>
ARTICLE V -- DEATH
Section 5.01. Death Benefits. In the event a
Participant has a Separation from Service by reason of death, the
Participant's Supplemental Benefit shall be payable to the
Participant's surviving spouse, if any.
For purposes of determining the death benefit payable
to such spouse, it is the intent hereof that the Participant's
benefit, as determined under the first paragraph of ARTICLE III,
shall be converted to a qualified joint and 50% survivor annuity
under the terms of the Pension Plan and the surviving spouse
shall receive only the survivor portion of said annuity.
Unless otherwise elected in accordance with Section
8.01, benefits shall be payable in ten annual installment
payments, with the first payment commencing as soon as
administratively practicable after the date of the Participant's
death; provided, however, that the Committee in its Sole
Discretion may accelerate any or all of such payments.
ARTICLE VI -- DISABILITY
Subject to ARTICLE IX, a Participant who has a
Separation from Service by reason of a Disability shall be
entitled to receive the value of the Participant's Supplemental
Benefit. Unless otherwise elected in accordance with Section
8.01, benefits will be payable in ten annual installments with
the first payment commencing as soon as administratively
practicable after the Participant ceases to receive disability
benefits under the terms and provisions of the Employer's
long-term disability plan or if later, age 55. In the event a
Participant is not covered under the Employer's long-term
disability plan, the Committee shall make a determination, in its
Sole Discretion, when the Participant's benefits would have
ceased had the Participant been covered by such plan, or if
later, age 55. The Committee may, in its Sole Discretion,
accelerate any or all payments under this ARTICLE VI.
The Supplemental Benefits of a Participant who dies
prior to the completion of their payment to the Participant shall
be paid to the Participant's Beneficiary. If a Participant dies
prior to the commencement of payment, payment shall commence as
soon as administratively practicable after the date the
Participant would have attained age 65 had the Participant lived.
The Committee may, in its Sole Discretion. accelerate any or all
of such payments.
5
<PAGE>
ARTICLE VII -- SEPARATION FROM SERVICE
Subject to ARTICLE IX, a Participant who has a
Separation from Service for a reason other than that described in
ARTICLES IV (Retirement), V (Death) or VI (Disability) shall be
entitled to receive the value of the Participant's Supplemental
Benefit. Unless otherwise elected in accordance with Section
8.01, benefits will be payable in ten annual installments with
the first payment commencing as soon as administratively
practicable after the Participant's 55th birthday. The Committee
may, in its Sole Discretion, accelerate any or all payments
including the possibility of payment prior to the time the
Participant attains age 55.
The benefits of a Participant who dies prior to the
completion of their payment to the Participant shall be paid to
the Participant's Beneficiary. If a Participant dies prior to the
commencement of payment, payment shall commence as soon as
administratively practicable after the date the Participant would
have attained age 55 had Participant lived. The Committee may, in
its Sole Discretion, accelerate any or all of such payments.
ARTICLE VIII -- SETTLEMENT OPTIONS, REEMPLOYMENT,
AND BENEFICIARY DESIGNATIONS
Section 8.01. Settlement Options. A Participant may
elect to receive monthly, quarterly, semi-annual, or annual
installment payments. The period over which installment payments
can be made shall not be less than five years nor more than ten
years. A Participant must elect the period and frequency of
installment payments at least one year prior to incurring a
Separation from Service. The failure to make a timely election
shall require payment to be made over the regular ten-year
period, subject to the right of the Committee to accelerate
payment in its Sole Discretion. The Participant shall make this
election on the form provided by the Committee.
Section 8.02. Reemplovment. The following provisions
shall apply to reemployed Participants:
A. Benefit Suspension. If a Participant is receiving
benefit payments from this Plan, benefits shall
not be suspended (nor adjusted) during his or her
period of reemployment.
6
<PAGE>
B. Participation. The provisions of ARTICLE II shall
be fully applicable to any reemployed individual.
C. Additional Benefits. In the event the Committee
permits a reemployed individual to again
participate in this Plan, the Participant shall
be entitled to receive benefits in accordance
with the foregoing provisions of this Plan upon a
subsequent Separation from Service and any
benefit computed under ARTICLE III shall be
reduced, but not below zero, to reflect any
amount(s) previously credited to the
Participant's Supplemental Benefit under
ARTICLE III.
Section 8.03. Beneficiary Designations. The
Beneficiary or Beneficiaries of a Participant shall be the
person, persons, entity, or entities designated by the
Participant on a Beneficiary designation provided by the
Committee. If more than one Beneficiary is named, the shares
and/or precedence of each Beneficiary shall be indicated. A
Participant shall have the right to change the Beneficiary by
submitting to the Committee a change of Beneficiary on forms
provided by the Committee; provided, however, that no change of
Beneficiary shall be effective until received by the Committee.
If a Participant fails to file a Beneficiary designation with the
Committee (or revokes a designation without providing a new one)
or if the Beneficiary (should only one be designated) predeceases
the Participant or ceases to exist or all Beneficiaries
designated predecease or cease to exist or cannot be found upon
the death of a Participant, then and in such event the amounts
otherwise payable to such Beneficiary or Beneficiaries shall be
paid to the Participant's estate. If the Committee has any doubt
as to the proper Beneficiary to receive payments hereunder, the
Committee shall have the right to withhold such payments until
the matter is finally adjudicated. Any payment made in good faith
and in accordance with the provisions of this Plan and the
Participant's Beneficiary designation form shall fully discharge
the Employer, the Committee, and all Affiliated Companies from
all further obligations with respect to such payments.
ARTICLE IX -- FORFEITURE
Section 9.01. Forfeiture of Benefits. In consideration
of the Employer's agreement to pay benefits to the Participant as
described above, Participant agrees that for a period of ten
years following the Participant's Separation from Service, that
Participant will not, within the United States, without prior
written consent of Employer directly or indirectly own, manage,
operate, be employed by, invest in, participant in, advise, or
consult with, any business competitive with any type of business
engaged in by Employer or Affiliated Company during the term of
Participant employment with Employer or an Affiliated Company. In
the
7
<PAGE>
event Participant breaches the terms of this section, any
amounts owed to a Participant (or Beneficiary thereof) shall be
forfeited and the Participant (or Beneficiary thereof) shall not
be entitled to any further benefits under this Plan. The
determination of whether a Participant has violated the terms of
this Section 9.01 shall be decided by the Board of Directors in
its Sole Discretion.
Section 9.02. Termination or Cause. If Participant's
employment is terminated for cause by the Employer (or an
Affiliated Company), no benefits shall be payable hereunder.
Cause shall be found when the Participant has intentionally or
through gross neglect violated any standard of conduct contained
in the Employer's Standards of Corporate Conduct. The
determination of whether an Participant has been terminated
within the meaning of this Section 9.02 shall be decided by the
Board of Directors in its Sole Discretion.
ARTICLE X -- SOURCE OF BENEFITS
Section 10.0l Benefits Payable from General Assets.
Amounts payable hereunder shall be paid exclusively from the
general assets of the Employer. Employer's obligation under this
Plan shall constitute a mere promise to pay benefits in the
future, and no person entitled to payment hereunder shall have
any claim, right, security interest, or other interest in any
fund, trust, account, insurance contract, or asset of the
Employer which may be looked to for such payment. The Employer is
not obligated to invest in any specific assets or fund, but it
may invest in any asset or assets it deems advisable in order to
provide a means for the payment of any liabilities under this
Plan. Employee shall be an unsecured general creditor of the
Employer and shall have no interest whatsoever in any such assets
or fund. The Employer's liability for the payment of benefits
hereunder shall be evidenced only by this Plan.
Section 10.02. Multiple Employers. In furtherance of
the provisions of Section 10.01, in the event a single
Participant is or has been employed by more than one Employer
while a Participant in this Plan, the liability for payment of
such Participant's benefits under this Plan shall be apportioned
among the Employers based upon a formula that the Committee shall
develop to equitably apportion the cost of the benefits among
each Employer. All Employers shall be bound by the apportionment
so made and, in no event, will the Employers be jointly and
severally liable for any amount. A Participant may only secure
payment of benefits from the Employer to whom the Committee has
apportioned liability for the benefits. Notwithstanding the
foregoing, in the event that a Participant shall consent, the
transferring Employer may transfer to the accepting Employer such
assets as the accepting Employer will require in exchange for the
acceptance by the accepting Employer of the full liability for
8
<PAGE>
payment of the transferred Employee's full benefits and, if such
consent by the Participant is given in writing, thereafter the
Participant shall look solely to the accepting Employer for
payment of all benefits under this Plan (unless and until a
further transfer occurs when the provisions of this Section shall
apply following such transfer).
ARTICLE XI -- ADMINISTRATION OF THIS PLAN
Section 11.01 Appointment of Committee. This Plan
shall be administered by a Committee appointed by the Board of
Directors. All members of the Committee shall serve at the
pleasure of the Board of Directors, which may, from time to time,
remove members from, or add members to, the Committee.
Section 11.02. Committee Action. All acts of a
majority of the members of the Committee attending a meeting at
which a quorum is present, or acts reduced to or approved in
writing by a majority of the members of the Committee, shall be
the valid acts of the Committee.
Section 11.03. Committee Rules and Plan Powers --
General. Subject to the provisions of this Plan, the Committee
shall from time to time establish rules, forms, and procedures
for the administration of the Plan. Except as herein otherwise
expressly provided, the Committee, in its Sole Discretion, shall
have the exclusive right to interpret this Plan and to
decide any and all matters arising thereunder or in connection
with the administration of this Plan. Such decisions, actions,
and records of the Committee shall be conclusive and binding upon
the Company, and each Employer, all employees, and all persons
having or claiming to have any right or interest in or under this
Plan. The Committee shall also have the power to appoint a Plan
Administrator and to employ or solicit assistance from any
individual who, in the opinion of the Committee, is necessary or
helpful in assisting the Committee in the proper administration
of this Plan. In addition, the Committee shall have the power to
delegate to the appropriate officers of the Company such items as
may be necessary or appropriate under the circumstances,
including the computation and certification of the amount and
form of benefits payable to Participants (Beneficiaries) under
the terms of this Plan.
Section 11.04. Reliance on Certificates, Etc.. The
members of the Committee and the officers and directors of the
Company shall be entitled to rely on all certificates and reports
made by any duly appointed accountants on all opinions given by
any duly appointed legal counsel. Such legal counsel may be
counsel for the Company.
9
<PAGE>
Section 11.05. Information to the Committee. To enable
the Committee to perform its functions, the Company and each
Employer shall supply full and timely information to the
Committee on all matters relating to the compensation of all
Participants, their retirements, deaths, or other causes for
termination of employment, and such other pertinent facts as the
Committee may require.
Section 11.06. Interested Committee Member. No
Committee member may decide or determine any matter concerning
his or her own benefit under the Plan.
ARTICLE XII -- AMENDMENT AND TERMINATION
Section 12.01 Amendment. The Board of Directors of the
Company reserves the right (on behalf of all Participating
Employers) to amend this Plan at any time and from time to time;
provided, that, no amendment will reduce the benefit which a
Participant is then entitled to without the express written
consent of the Participant affected. This power to amend shall
include the right to make retroactive any amendments necessary to
keep this Plan an unfunded employee benefit plan described in
Sections 201(2), 301(a)(3) and 401(a)(l) of ERISA.
Section 12.02. Termination or Partial Termination. In
addition to all other rights granted the Company under this Plan
document, the Board of Directors of the Company shall possess the
right to terminate, in whole or in part, this Plan at any time.
Such right to terminate shall be exercised by the Company (and
with Company's prior written consent by any other Employer as to
that Employer's Employees, a partial termination) subject to the
following limitations:
A. No action to terminate or partially terminate this
Plan shall be taken except upon written notice to
each affected Participant, which notice shall be
given not less than five days prior to the
effective date of the termination or partial
termination;
B. Each affected Participant shall be entitled to
benefits at the time of termination or partial
termination, calculated as if the Participant had
separated from service under the Pension Plan
simultaneously with the effective date of this
Plan's termination or partial termination; and
C. In terminating the Plan (or in the event of a
partial termination) the Participant shall be
entitled to receive payment of the Participant's
10
<PAGE>
Supplemental Benefit as if the Participant had
incurred a Separation from Service.
ARTICLE XIII -- RESTRICTIONS ON ALIENATION OF BENEFITS
No right or benefit under this Plan shall be subject
to anticipation, alienation, sale, assignment, transfer, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate,
sell, assign, transfer, pledge, encumber, or charge the same
shall be void. No right or benefit hereunder shall in any manner
be liable for or subject to the debts, contracts, liabilities,
engagements, or torts of the person entitled to such benefit,
and, to the extent permitted by law, the rights of any
Participant or Beneficiary shall not be subject in any manner to
attachment of other legal process for the debts of such
Participant or Beneficiary.
ARTICLE XIV -- CLAIMS PROCEDURE
The Committee shall provide adequate notice in writing
to any Participant or to any Beneficiary ("Claimant") whose claim
for benefits under the Plan has been denied. The Committee's
notice to the Claimant shall set forth:
A. The specific reason for the denial;
B. Specific references to pertinent Plan provisions
on which the denial is based;
C. A description of any additional material and
information needed for the Claimant to perfect his
or her claim and an explanation of why the
material or information is needed; and
D. That any appeal the Claimant wishes to make of the
adverse determination must be in writing to the
Committee within 60 days after receipt of the
Committee's notice of denial of benefits. The
Committee's notice must further advise the
Claimant that Claimant's failure to appeal the
action to the Committee in writing within the
60-day period will render the decision final,
binding and conclusive.
If the Claimant should appeal Claimant, or Claimant's
duly authorized representative, may submit, in writing, whatever
issues and comments Claimant, or Claimant's,
11
<PAGE>
duly authorized representative, feels are pertinent.
The Claimant, or duly authorized representative, may review
pertinent Plan documents. The Committee shall re-examine all
facts related to the appeal and make a final determination as to
whether the denial of benefits is justified under the
circumstances. The Committee shall advise the Claimant of its
decision within 60 days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would
make the rendering of a decision within the 60-day limit
unfeasible, but in no event shall the Committee render a decision
respecting a denial for a claim for benefits later than 120 days
after its receipt of a request for review.
The Committee's notice of denial of benefits shall
identify the name and address of a member of the Committee member
to whom the Claimant may forward an appeal.
In making determinations under this Plan, the
Committee shall have full and complete discretionary authority to
determine eligibility for benefits and to construe the terms of
this Plan in its Sole Discretion.
ARTICLE XV -- MISCELLANEOUS
Section 15.01. Payments Net of Withholding and Other
Amounts. All payments under this Plan shall be net of any amount
sufficient to satisfy all federal, state, and local withholding
tax requirements, and shall also be net of all amounts owed by
the Participant, or the Beneficiary or other recipient, to the
Employer.
Section 15.02. No Guarantee of Interests. Neither the
Employer (or Affiliated Company), the Committee (nor any of its
members) nor Board of Directors (nor any of its members) may
guarantee the payment of any amounts which may be or becomes due
to any person or entity under this Plan. The liability of
Employer to make any payment under this Plan is limited to the
then available assets of the Employer.
Section 15.03. Employer Records. Records of the
Employer as to a Participant's employment, termination of
employment and the reason therefor, reemployment and authorized
leaves of absence and compensation shall be conclusive on all
persons.
Section 15.04. Evidence. Evidence required of anyone
under this Plan may be by certificate, affidavit, document, or
other information which the person or entity acting on it
considers pertinent and reliable, and signed, made, or presented
by the proper party or parties.
Section 15.05. Notice. Any notice which shall be or may
be given under this Plan shall be in writing and shall be mailed
by United States mail, postage prepaid. If notice
12
<PAGE>
is to be given to any Employer, such notice shall be
addressed to Koch Industries, Inc., 4111 East 37th Street North,
P.O. Box 2256, Wichita, Kansas 67201, marked to the attention of
the Committee, Supplemental Executive Retirement Plan or, if
notice to a Participant. addressed to the Participant's last
known address as shown on the books and records of the Employer.
Section 15.06. Change of Address. Any party may, from
time to time, change the address to which notices shall be mailed
by giving written notice of such new address.
Section 15.07. Effect of Provisions. The provisions of
this Plan shall be binding upon the Employer and its successors
and assigns, and upon Participant, his or her Beneficiaries,
assigns, heirs, executors, and administrators.
Section l5.08. Other Benefits and Agreements. The
benefits provided for Participant and his or her Beneficiary
hereunder are in addition to any other benefits available to such
Participant under any other program or plan of the Employer for
its Participants, and, except as may otherwise be expressly
provided for, this Plan shall supplement and shall not supersede,
modify, or amend any other program or plan of any Employer or
Participant.
Section l5.09. Severability Clause. If any provision
of this Plan is held to be invalid or unenforceable, this
determination shall not affect the validity of this Plan or the
other provisions of this Plan. In such event, this Plan shall be
construed and endorsed as if such provision had not been included
therein, provided, that nothing shall increase the Employer's
liability for payment of benefits in any amount beyond the
amounts specified in this Plan.
Section 15.10. Minors and Incompetents. If any person
to whom a benefit is payable by Employer is legally incompetent,
either by reason of age or by reason of mental or physical
Disability, Employer is authorized to cause the payments becoming
due to such person to be made to another for his or her benefit
without responsibility of the Employer, the Committee to see to
the application of such payments. Payments made pursuant to this
authority shall constitute a complete discharge of Employer's and
Committee's duty hereunder.
Section 15.11. No Employment Agreement. Neither the
adoption of this Plan, or any other action in association with
this Plan shall be construed in any manner as entitling
Participant to any employment rights. This Plan shall not in any
way obligate the Employer to continue the employment of
Participant with the Employer or any Affiliated Company nor does
it limit the right of the Employer or any Affiliated Company at
any time, whether with or without cause, to terminate
Participant's employment.
13
<PAGE>
Section 15.12. Indemnification. Each Employer shall
indemnify and save harmless each member of its Board of
Directors, each member of the Committee, and any Employee of the
Corporation (or any Affiliated Employer), from and against losses
resulting from liability which they may be subjected by reason of
any act or conduct (except willful or wanton misconduct) in their
official capacities in the administration of this Plan. Expenses
shall include the amount of any settlement or judgment, costs,
counsel fees, and related charges reasonably incurred in
connection with a claim asserted, or a proceeding brought in
settlement thereof. The foregoing right of indemnification shall
be in addition to any other rights to which any such person may
be entitled as a matter of law. The indemnification provision of
this Section shall not relieve such person of any liability he may
have under ERISA for breech of a fiduciary duty.
Section 15.l3. Headings. The titles and heading of
Articles and Sections are included for convenience of reference
only and are not to be considered in the construction of the
provisions of this Plan.
Section 15.l4. Governing Law. All questions arising
with respect to this Plan shall be determined by reference to the
laws of the State of Kansas to the extent such laws are not
preempted by the laws of the United States of America.
ADOPTED this 9th day of May, l994.
KOCH INDUSTRIES, INC.
By /s/ F. Lynn Markel
----------------------------
Executive Vice President
Its Finance and Administration
----------------------------
ATTEST: /s/ H. Allan Caldwell
-------------------------
"Employer"
14
SUB-GROUP TAX SHARING AGREEMENT
Tax Sharing Agreement ("Agreement") dated this 12th
day of March, 1998, by and among PM Holdings Corporation
("Holdings") and each of the Holdings subsidiaries listed on
Schedule I hereto (each subsidiary being a "Subsidiary").
RECITALS
1. For purposes of applying the provisions of this
Agreement, Holdings and the Subsidiaries shall be treated as the
only members ("Members") of an affiliated group (the "Affiliated
Group"), as defined in Section 1504(a) of the Internal Revenue
Code of 1986 (the "Code"), for the taxable year ending December
31, 1998, of which Holdings is the parent. All references in this
Agreement to provisions of the Code or the Treasury Regulations
promulgated thereunder shall include any corresponding successor
provisions.
2. It is the intent and desire of the parties hereto
that a method be established for allocating the federal and state
consolidated tax liability of the Affiliated Group, as determined
under the Parent Tax Sharing Agreement between Koch Industries,
Inc. and Holdings, among its Members, for reimbursing Holdings
for payment of such tax liability, and to provide for the
allocation and payment of any refund arising from a carry-back of
losses or tax credits from subsequent taxable years.
AGREEMENT
Now, therefore, in consideration of the mutual
covenants and promises contained herein, the parties hereto agree
as follows:
1. Allocation of Tax Liability. Holdings and
Subsidiaries agree that the consolidated tax liability for each
year beginning with the taxable year ending December 31, 1998,
determined in accordance with Treasury Regulations Section
1.1502-2, shall be
<PAGE>
apportioned among them in accordance with the provisions of
Treasury Regulations Sections 1.1552-1(a)(2) and 1.1502-33(d)(2).
Accordingly, the tax liability shall be allocated to the several
Members on the basis of the percentage of the total tax that the
tax of such Member if computed on a separate return would bear to
the total amount of taxes for all Members so computed pursuant to
Section 1552(a)(2) of the Code and Treasury Regulations Section
1.1552- 1(a)(2). If a Member (the "Tax Attribute Member") is
unable to absorb a tax attribute on a separate return basis in
one year but is able to absorb that attribute on a separate
return basis in a subsequent year a portion of the consolidated
tax liability which otherwise would have been allocated to the
Tax Attribute Member in the subsequent year under Treasury
Regulation Section 1.1552-1(a)(2) will instead be reallocated
among the other Members of the Affiliated Group,
using the principles of Treasury Regulations Section
1.1502-33(d)(2). This allocation including the effect of any
reallocation shall be each Member's "Allocated Tax Liability" for
such year. For purposes of this Agreement, the consolidated tax
liability shall include any liability for alternative minimum
tax.
3. Payment of Tax. Each Subsidiary shall pay to
Holdings no later than 10 days before the date on which the
Affiliated Group's consolidated income tax return is required to
be filed (taking account of any extensions thereof) its separate
return tax liability determined under Treasury Regulations
Sections 1.1552-1(a)(2)(ii) and 1.1502-33(d)(2) plus its ratable
share of any interest or penalties shown due on the return
(determined by multiplying such interest or penalties by a
fraction, the numerator of which equals such Member's Allocated
Tax Liability (before interest or penalties) and the denominator
of which equals the Affiliated Group's tax liability (before
interest or penalties)).
2
<PAGE>
4. Carryforward/Carryback of Losses and Credits. If
part or all of an unused loss or tax credit is allocated to a
Member pursuant to Treasury Regulations Sections 1.1502-21T or
1.1502-79, and it is carried back or forward to a year in which
such Member filed a separate return or a consolidated return with
another affiliated group, any refund or reduction in tax
liability arising from the carryback or carryover shall be
retained by such Member. Notwithstanding the foregoing, Holdings
shall determine whether an election shall be made (i) not to
carry back any portion of any such loss arising in a consolidated
return year (including any portion allocated to a Member under
Treasury Regulations Section 1.1502-21T) in accordance with Code
Section 172(b)(3), and (ii) to reattribute to itself any portion
of any loss attributable to the disposition of the stock of a
Subsidiary, to the extent permitted by Treasury Regulations
Section 1.1502-20(g). Each Subsidiary agrees to join with
Holdings in filing any necessary elections under Treasury
Regulations Section 1.1502-20(g).
5. Estimated Tax Payments. If the Affiliated Group is
required to make estimated federal income tax payments (including
(i) payment due at the time any extension of time is sought for
the filing of the Affiliated Group's federal income tax return
and (ii) any estimated tax payments pursuant to any other tax
sharing agreement), each Subsidiary shall, if requested by
Holdings, pay to Holdings, no later than 10 days before the date
each estimated tax payment is to be made by Holdings, that
percentage of the estimated tax payment that equals the
percentage which the estimated Allocated Tax Liability of such
Subsidiary for such year bears to the aggregate of the Affiliated
Group's estimated tax liability for the taxable year. Such
estimates shall be determined by Holdings. Any estimated tax
payments made by a Subsidiary under this paragraph 5 with respect
to any taxable year shall be applied to reduce the amount, if
any, owed by the Subsidiary under paragraph 3 hereof with respect
to such year. Any excess of
3
<PAGE>
such estimated payments by a Subsidiary over the amount described
in paragraph 3 for such year shall be repaid by Holdings to the
Subsidiary no later than 30 days after the date of filing of the
consolidated return for such taxable year or, to the extent such
excess represents all or a part of a tax refund to be received by
the Affiliated Group, no later than 10 days after the receipt of
the refund.
6. Adjustments to Tax Liability. If the consolidated
tax liability is adjusted for any taxable period, whether
pursuant to an amended return, a claim for refund, a tax audit by
the Internal Revenue Service or some other reason, the liability
of each Member shall be recomputed to give effect to such
adjustments, and in the case of a refund, Holdings shall make
payment to each Member for its share of the refund, determined in
the same manner as in paragraph 2 above, within 10 days after the
refund is received by Holdings, including its ratable share of
any interest, and in the case of an increase in tax liability,
each Member shall pay to Holdings its allocable share of such
increased tax liability (including interest and penalties) within
10 days after receiving notice of such liability from Holdings.
The parties recognize that a recomputation of the consolidated
tax liability for any taxable year under this paragraph 6 is not
necessarily the final liability for such year, and such liability
may be recomputed more than once.
7. New Members of Affiliated Group. If during a
consolidated return period Holdings or any Subsidiary acquires or
organizes another corporation that is required to be included in
the Affiliated Group's consolidated return, then such corporation
shall join in and be bound by this Agreement.
8. Termination of Agreement. This Agreement shall
apply to all taxable periods as to which a consolidated return is
filed by Holdings and any Subsidiary unless Holdings and the
Subsidiaries agree in writing to terminate the Agreement, except
that this
4
<PAGE>
Agreement shall be terminated with respect to any Subsidiary that
ceases to be included in the Affiliated Group but continues to be
a corporation subject to federal income tax ("Former Member").
Notwithstanding any such termination, this Agreement shall
continue in effect with respect to all taxable periods prior to
termination, including any payments or refunds relating to such
periods.
9. Post-Consolidated Return Period. Notwithstanding
the termination of this Agreement with respect to one or more
Subsidiaries, Holdings and any Former Member shall furnish each
other with all information and assistance as shall reasonably be
requested (including, without limitation, returns, supporting
schedules, work papers, correspondence and other documents)
relating to the tax liability of the Affiliated Group or such
Former Member for any taxable year in which the Former Member was
included in the Affiliated Group. Moreover, Holdings and the
Former Member shall furnish each other with information and
assistance required, and shall take all steps necessary, to apply
for and obtain the benefit of any carryback of a net operating or
capital loss or any investment, foreign tax or other credit of
the Former Member to a taxable year in which the Former Member
was included in the Affiliated Group and a consolidated federal
income tax return was filed with respect to the income of the
Affiliated Group.
10. Audits and Refund Claims. Holdings and a Former
Member shall also consult and furnish each other with information
concerning the status of any tax audit or tax refund claim
relating to a taxable year in which the Former Member was
included in the Affiliated Group and a consolidated federal
income tax return was filed with respect to the income of the
Affiliated Group. Holdings shall have the right to make the final
determination as to the response of the Affiliated Group to any
audit and shall have the sole right to control, at its
5
<PAGE>
own expense, any contest of any change proposed and any proposed
disallowance of a refund claim by the Internal Revenue Service
through the Appeals Office of the Internal Revenue Service and
the courts in connection with any taxable year for which this
Agreement is in effect.
11. Settlement of Disputes. A dispute or difference
between Holdings and a Former Member with respect to the
operation or interpretation of this Agreement shall be decided by
three arbitrators. Holdings and the Former Member shall each
select one arbitrator and the arbitrators selected by the parties
shall select a third arbitrator. The decision of such arbitrators
shall be final. The fees of such arbitrators shall be borne
equally by Holdings and the Former Member.
12. Elections. Holdings shall have the sole authority
to make any or all elections available under the Code, Treasury
Regulations and any applicable state or local income tax code,
law or statute.
13. State and Local Income Taxes. The principles
underlying the rights and obligations hereunder of the Members in
respect of federal income taxes shall be applied in respect of
any state or local tax (however denominated) based on or measured
by all or any part of the net income or loss of the Affiliated
Group or several of its Members (a "Combined Tax"). All of the
procedural and timing requirements of this Agreement applicable
to federal income taxes shall be equally applicable to any
Combined Tax, with appropriate adjustments thereto to reflect the
differences, if any, in corresponding provisions of the
applicable income tax code, law or statute governing any such
Combined Tax and any administrative provisions relating thereto.
14. Entire Agreement. This Agreement contains the
entire understanding of the parties hereto with respect to the
subject matter contained herein. No alteration, amendment
6
<PAGE>
or modification of any of the terms of this Agreement shall be
valid unless made by an instrument signed in writing by an
authorized officer of each party.
15. Binding Agreement. This Agreement shall be binding
upon and inure to the benefit of each party hereto and its
respective successors and assigns.
16. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of
Delaware.
17. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused
their names to be subscribed and executed by their respective
authorized officers on the date first appearing above.
PM HOLDINGS CORPORATION
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President & C.E.O.
PI ACQUISITION CORPORATION
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President
PI HOLDING COMPANY
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President
7
<PAGE>
PURINA MILLS, INC.
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President & C.E.O.
AMERICAN DAIRY MANAGEMENT
COMPANY, INC.
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President
CAROLINA AGRI-PRODUCTS INC.
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President
COASTAL AG DEVELOPMENT, INC.
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President
COLE GRAIN COMPANY, INC.
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President
8
<PAGE>
PURINA LIVESTOCK MANAGEMENT
SERVICES, INC.
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: Vice-President
PMI NUTRITION, INC.
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President
PMI HOLDING CO.
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President
PMI NUTRITION INTERNATIONAL, INC.
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President
PM NUTRITION COMPANY, INC.
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: Vice-President
9
<PAGE>
Schedule I
Subsidiaries of PM Holdings Corporation
- ---------------------------------------
PI Acquisition Corporation
PI Holding Company
Purina Mills, Inc.
American Dairy Management Company, Inc.
Carolina Agri-Products Inc.
Coastal Ag Development, Inc.
Cole Grain Company, Inc.
Purina Livestock Management Services, Inc.
PMI Nutrition, Inc.
PMI Holding Co.
PMI Nutrition International, Inc.
PM Nutrition Company, Inc.
PARENT TAX SHARING AGREEMENT
Tax Sharing Agreement ("Agreement") dated this 12th
day of March, 1998, by and among Koch Industries, Inc. ("Koch")
and PM Holdings Corporation ("Holdings").
RECITALS
1. Koch, Holdings, and the Holdings subsidiaries
listed on Schedule I hereto (each a "Subsidiary") are members of
an affiliated group (the "Affiliated Group"), as defined in
Section 1504(a) of the Internal Revenue Code of 1986 (the
"Code"), for the taxable year ending December 31, 1998. For
purposes of applying the provisions of this Agreement, Holdings
shall cause to be prepared hypothetical estimated and final
United States federal income tax returns showing the estimated
and final United States federal income tax liability of Holdings
and its Subsidiaries (the "Holdings Sub-Group") calculated as if
Holdings Sub-Group filed a separate consolidated return. All
references in this Agreement to provisions of the Code or the
Treasury Regulations promulgated thereunder shall include any
corresponding successor provisions.
2. It is the intent and desire of the parties hereto
that a method be established for allocating the federal and state
consolidated tax liability of the Affiliated Group among Koch on
the one hand and Holdings Sub-Group on the other, for reimbursing
Koch for payment of such tax liability, and to provide for the
allocation and payment of any refund arising from a carry-back of
losses or tax credits from subsequent taxable years.
AGREEMENT
Now, therefore, in consideration of the mutual
covenants and promises contained herein, the parties hereto agree
as follows:
1. Filing of Returns. A U.S. consolidated income tax
return and estimated tax returns shall be filed by Koch for the
taxable year ending December 31, 1998, and shall be
<PAGE>
filed for each subsequent taxable period in respect of which the
Affiliated Group is required or permitted to file a consolidated
tax return. Holdings shall and shall cause the other members of
Holdings Sub-Group to execute and file such consents, elections,
and other documents as Koch determines are required or
appropriate for the proper filing of such returns and shall
furnish to Koch any and all information reasonably requested by
Koch in order to carry out the provisions of this Agreement.
2. Allocation of Tax Liability. Koch and Holdings
agree that the consolidated tax liability for each year beginning
with the taxable year ending December 31, 1998, determined in
accordance with Treasury Regulations Section 1.1502-2, shall be
apportioned among Koch and Holdings Sub-Group (each a "Member")
in accordance with the provisions of Treasury Regulations
Sections 1.1552-1(a)(2) and 1.1502-33(d)(2). Accordingly, the tax
liability shall be allocated to each of the two Members on the
basis of the percentage of the total tax that the tax of such
Member if computed on a separate return would bear to the total
amount of taxes for both Members so computed pursuant to Section
1552(a)(2) of the Code and Treasury Regulations Section
1.1552-1(a)(2). If a Member (the "Tax Attribute Member") is
unable to absorb a tax attribute on a separate return basis in
one year but is able to absorb that attribute on a separate
return basis in a subsequent year a portion of the consolidated
tax liability which otherwise would have been allocated to the
Tax Attribute Member in the subsequent year under Treasury
Regulation Section 1.1552-1(a)(2) will instead be reallocated to
the other Member of the Affiliated Group using the principles of
Treasury Regulations Section 1.1502- 33(d)(2). This allocation
including the effect of any reallocation shall be each Member's
"Allocated Tax Liability" for such year. For purposes of this
Agreement, the consolidated tax liability shall include any
liability for alternative minimum tax.
2
<PAGE>
3. Payment of Tax. Holdings shall pay to Koch no later
than 10 days before the date on which the Affiliated Group's
consolidated income tax return is required to be filed (taking
account of any extensions thereof) the separate return tax
liability of Holdings Sub-Group determined under Treasury
Regulations Sections 1.1552-1(a)(2)(ii) and 1.1502-33(d)(2) plus
its ratable share of any interest or penalties shown due on the
return (determined by multiplying such interest or penalties by a
fraction, the numerator of which equals Holdings Sub-Group's
Allocated Tax Liability (before interest or penalties) and the
denominator of which equals the Affiliated Group's tax liability
(before interest or penalties)).
4. Carryforward/Carryback of Losses and Credits. If
part or all of an unused loss or tax credit is allocated to a
Member pursuant to Treasury Regulations Sections 1.1502-21T or
1.1502-79, and it is carried back or forward to a year in which
such Member filed a separate return or a consolidated return with
another affiliated group, any refund or reduction in tax
liability arising from the carryback or carryover shall be
retained by such Member. Notwithstanding the foregoing, Koch
shall determine whether an election shall be made (i) not to
carry back any portion of any such loss arising in a consolidated
return year (including any portion allocated to a Member under
Treasury Regulations Section 1.1502-21T) in accordance with Code
Section 172(b)(3), and (ii) to reattribute to itself any portion
of any loss attributable to the disposition of the stock of
Holdings or any Subsidiary, to the extent permitted by Treasury
Regulations Section 1.1502-20(g). Holdings agrees to join with
Koch in filing any necessary elections under Treasury Regulations
Section 1.1502-20(g).
5. Estimated Tax Payments. If the Affiliated Group is
required to make estimated federal income tax payments (including
payment due at the time any extension of time is sought for the
filing of the Affiliated Group's federal income tax return),
Holdings shall, if
3
<PAGE>
requested by Koch, pay to Koch, no later than 10 days before the
date each estimated tax payment is to be made by Koch, that
percentage of the estimated tax payment that equals the
percentage which the estimated Allocated Tax Liability of
Holdings Sub-Group for such year bears to the aggregate estimated
tax liability of the Affiliated Group for the taxable year. Such
estimates shall be determined by Koch. Any estimated tax payments
made by Holdings under this paragraph 5 with respect to any
taxable year shall be applied to reduce the amount, if any, owed
by Holdings under paragraph 3 hereof with respect to such year.
Any excess of such estimated payments made by Holdings over the
amount described in paragraph 3 for such year shall be repaid by
Koch to Holdings no later than 30 days after the date of filing
of the consolidated return for such taxable year or, to the
extent such excess represents all or a part of a tax refund to be
received by the Affiliated Group, no later than 10 days after the
receipt of the refund.
6. Adjustments to Tax Liability. If the consolidated
tax liability is adjusted for any taxable period, whether
pursuant to an amended return, a claim for refund, a tax audit by
the Internal Revenue Service or some other reason, the liability
of each Member shall be recomputed to give effect to such
adjustments, and in the case of a refund, Koch shall make payment
to Holdings for Holdings Sub-Group's share of the refund,
determined in the same manner as in paragraph 2 above, within 10
days after the refund is received by Koch, including Holdings'
share of any interest or penalty rebate received, and in the case
of an increase in tax liability, Holdings shall pay to Koch
Holdings Sub-Group's allocable share of such increased tax
liability (including interest and penalties) within 10 days after
receiving notice of such liability from Koch. The parties
recognize that a recomputation of the consolidated tax liability
for any
4
<PAGE>
taxable year under this paragraph 6 is not necessarily the final
liability for such year, and such liability may be recomputed
more than once.
7. New Members of Affiliated Group. If during a
consolidated return period Koch or Holdings Sub-Group acquires or
organizes another corporation that is required to be included in
the Affiliated Group's consolidated return, then such corporation
shall join in and be bound by this Agreement.
8. Termination of Agreement. This Agreement shall
apply to all taxable periods as to which a consolidated return is
filed by Koch and Holdings Sub-Group unless Koch and Holdings
agree in writing to terminate the Agreement, except that this
Agreement shall be terminated with respect to any Subsidiary that
ceases to be included in the Affiliated Group but continues to be
a corporation subject to federal income tax ("Former Member").
Notwithstanding any such termination, this Agreement shall
continue in effect with respect to all taxable periods prior to
termination, including any payments or refunds relating to such
periods.
9. Post-Consolidated Return Period. Notwithstanding
the termination of this Agreement with respect to one or more
Subsidiaries, Koch and any Former Member shall furnish each other
with all information and assistance as shall reasonably be
requested (including, without limitation, returns, supporting
schedules, work papers, correspondence and other documents)
relating to the tax liability of the Affiliated Group or such
Former Member for any taxable year in which the Former Member was
included in the Affiliated Group. Moreover, Koch and the Former
Member shall furnish each other with information and assistance
required, and shall take all steps necessary, to apply for and
obtain the benefit of any carryback of a net operating or capital
loss or any investment, foreign tax or other credit of the Former
Member to a taxable year in which the Former Member was included
in the Affiliated Group and a
5
<PAGE>
consolidated federal income tax return was filed with respect to
the income of the Affiliated Group.
10. Audits and Refund Claims. Koch and a Former Member
shall also consult and furnish each other with information
concerning the status of any tax audit or tax refund claim
relating to a taxable year in which the Former Member was
included in the Affiliated Group and a consolidated federal
income tax return was filed. Koch shall have the right to make
the final determination as to the response of the Affiliated
Group to any audit and shall have the sole right to control, at
its own expense, any contest of any change proposed and any
proposed disallowance of a refund claim by the Internal Revenue
Service through the Appeals Office of the Internal Revenue
Service and the courts in connection with any taxable year for
which this Agreement is in effect.
11. Settlement of Disputes. A dispute or difference
between Koch and a Former Member with respect to the operation or
interpretation of this Agreement shall be decided by three
arbitrators. Koch and the Former Member shall each select one
arbitrator and the arbitrators selected by the parties shall
select a third arbitrator. The decision of such arbitrators shall
be final. The fees of such arbitrators shall be borne equally by
Koch and the Former Member.
12. Elections. Koch shall have the sole authority to
make any or all elections available under the Code, Treasury
Regulations and any applicable state or local income tax code,
law or statute.
13. State and Local Income Taxes. The principles
underlying the rights and obligations hereunder of the Members in
respect of federal income taxes shall be applied in respect of
any state or local tax (however denominated) based on or measured
by all or any part
6
<PAGE>
of the net income or loss of the Affiliated Group or several of
its Members (a "Combined Tax"). All of the procedural and timing
requirements of this Agreement applicable to federal income taxes
shall be equally applicable to any Combined Tax, with appropriate
adjustments thereto to reflect the differences, if any, in
corresponding provisions of the applicable income tax code, law
or statute governing any such Combined Tax and any administrative
provisions relating thereto.
14. Entire Agreement. This Agreement contains the
entire understanding of the parties hereto with respect to the
subject matter contained herein. No alteration, amendment or
modification of any of the terms of this Agreement shall be valid
unless made by an instrument signed in writing by an authorized
officer of each party.
15. Binding Agreement. This Agreement shall be binding
upon and inure to the benefit of each party hereto and its
respective successors and assigns.
16. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of
Delaware.
17. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
their names to be subscribed and executed by their respective
authorized officers on the date first appearing above.
KOCH INDUSTRIES, INC.
By: /s/ C.J. Nelson
----------------
Name: C.J. Nelson
Title: Vice-President
PM HOLDINGS CORPORATION
By: /s/ David L. Abbott
--------------------
Name: David L. Abbott
Title: President & C.E.O.
8
<PAGE>
Schedule I
Subsidiaries of PM Holdings Corporation
- ---------------------------------------
PI Acquisition Corporation
PI Holding Company
Purina Mills, Inc.
American Dairy Management Company, Inc.
Carolina Agri-Products Inc.
Coastal Ag Development, Inc.
Cole Grain Company, Inc.
Purina Livestock Management Services, Inc.
PMI Nutrition, Inc.
PMI Holding Co.
PMI Nutrition International, Inc.
PM Nutrition Company, Inc.
9
LICENSE AGREEMENT
License Number: 1004 Date: March 12, 1998
LICENSEE:
Purina Mills, Inc.
1401 S. Hanley Road
St. Louis, MO 63144
Koch Feed Technologies Company ("Licensor") is pleased to grant,
pursuant to the restrictions, terms and conditions set forth
herein, a license to use or practice the Textured Drying Process,
a process more fully described in U.S. Patent number 5,596,815
and hereinafter referred to as the "Patent Rights."
ARTICLE I
SPECIFIC LICENSE TERMS
1.1 GEOGRAPHIC RESTRICTIONS: Licensor grants this license to Licensee
without any geographic restriction.
1.2 AUTHORIZED EQUIPMENT: Subject to the restrictions set forth
in paragraph 2.2, Licensee may use or practice the Patent Rights
on any equipment, without any other restriction.
1.3 AUTHORIZED PRODUCTS: Subject to the restrictions set forth in
paragraph 2.2, Licensee may use or practice the Patent Rights to
process any product.
1.4 LENGTH OF TERM: Unless otherwise terminated pursuant to any
provision herein, the term of this License shall be perpetual,
commencing upon execution of this License Agreement.
1.5 LICENSE FEE AND PAYMENT TERMS: The License Fee shall be One
Hundred Dollars ($100.00), payable in immediately available funds
upon execution of this agreement. The License Fee shall be paid
in U.S. Dollars.
ARTICLE II
STANDARD TERMS AND CONDITIONS
In addition to the restrictions, terms and conditions set forth
in Article I, the license granted herein is subject to the
following standard terms and conditions:
2.1 WARRANTY. The Licensor warrants that it is the owner of the
right, title, and interest in and to the Patent Rights and has
the right to grant the within license.
<PAGE>
2.2 LICENSE GRANT
(a) In consideration of the payment of the License Fee as
set forth in paragraph 1.5, and pursuant to the terms,
conditions and restrictions set forth herein, the
Licensor hereby grants to the Licensee, and the
Licensee hereby accepts from the Licensor, a
nonexclusive and nonassignable license to practice the
Patent Rights (i) for the geographic region described
in paragraph 1.1, (ii) on the equipment described in
paragraph 1.2, (iii) for the processing of the products
listed, and only those products listed, in paragraph
1.3, and (iv) for the length of time set forth in
paragraph 1.4. No other, further, or different license
nor any right to transfer, assign or sublicense is
hereby granted or implied. Any attempted transfer,
assignment or sublicensing of this license not
expressly authorized by this agreement shall be void.
Notwithstanding the nonexclusivity of this license, for
so long as Koch Industries, Inc. and its affiliates
directly or indirectly own greater than 50% of the
common stock of Licensee, Licensor shall not grant a
license to the Patent Rights to any commercial feed
producer in the United States which is a direct
competitor of Licensee.
(b) Licensor hereby discloses and Licensee acknowledges
that Licensor has granted an exclusive license to a
party unaffiliated with either Licensor or Licensee to
process inedible eggs within the United States.
Licensee hereby agrees to not use the Patent Rights to
process inedible eggs in the United States. Inedible
eggs, as referred to herein, are defined as "inedible",
"leaker", "loss", "restricted egg" in 21 CFR Title 21 -
Code of Federal Regulations. "Inedible", "leaker",
"loss", and "restricted egg" are defined as and shall
include eggs of the following description: black rots,
yellow rots, white rots, mixed rots (addled eggs), sour
eggs with green whites, eggs with stuck yolks, moldy
eggs, musty eggs, eggs showing blood rings and eggs
containing embryo chicks (at or below the blood ring
stage), egg that has a crack or break in the shell and
shell membranes to the extent that the egg contents are
exposed or are exuding through the shell, egg that is
unfit for human food because it is smashed or broken so
that its contents are leaking or; overheated, frozen or
contaminated, or an incubator reject; or because it
contains a bloody white, large meal spots, a large
quantity of blood, or other foreign material. In
addition to the aforementioned, inedible egg shall also
be defined at AAFCO T9.74 Egg Product but only the
specific egg product classified as inedible for humans
and includes any product when processed with more than
10% solids from inedible egg product contained in the
finished product, which includes egg whites and egg
yolks which are considered not of a quality edible for
human consumption.
2
<PAGE>
2.3 TERMINATION
(a) If the Licensee shall become bankrupt or insolvent,
and/or if the business of the Licensee shall be placed
in the hands of a receiver, assignee, or trustee,
whether by the voluntary act of the Licensee or
otherwise, this license shall immediately terminate.
(b) Upon any breach or default under this license by
Licensee, the Licensor may immediately terminate this
license with written notice by registered mail to the
Licensee. Said notice shall become effective upon
receipt of such notice.
(c) Unless otherwise terminated pursuant to any terms and
conditions hereunder, this License Agreement shall
automatically terminate upon expiration of U.S. Patent
number 5,596,815.
(d) Upon any termination or expiration of this License
Agreement becoming effective, Licensee shall be
relieved of all rights, duties and obligations
hereunder except to pay to the Licensor any accrued
and unpaid license fees.
2.4 LIMITATION OF LIABILITY. IN NO EVENT SHALL LICENSOR BE LIABLE
TO LICENSEE FOR ANY CONSEQUENTIAL, INDIRECT, SPECIAL OR
INCIDENTAL DAMAGES ARISING OUT OF LICENSOR'S PERFORMANCE OR
BREACH UNDER THIS LICENSE AGREEMENT.
2.5 NONUSE OF NAMES. Licensee shall not, in connection with its
activities under this license, use the name of any inventor of
the Patent Rights nor of the Licensor, nor any adaptation of any
of them, in any advertising, promotional, or sales literature,
without prior written consent obtained from Licensor in each
case.
2.6 INFRINGEMENT. Licensee promptly shall give Licensor notice of
any suspected or third party infringement of one or more claims
of U.S. Patent number 5,596,815. Licensor shall have full right
to institute and shall bear the full cost of infringement suits
or other action against potential infringers. Licensee agrees to
fully cooperate in connection with any infringement action
involving U.S. Patent number 5,596,815 if reasonably requested to
do so by Licensor, its successors or assigns.
2.7 CONFIDENTIALITY. Without the prior written consent of the
Licensor, Licensee shall not disclose to any third party the
terms set forth in this License Agreement.
2.8 AMENDMENTS. This License Agreement may be amended, but only
by mutual written agreement of the parties. Either party hereto
may waive any rights to which it is
3
<PAGE>
entitled under this License Agreement at any time, but such
waiver shall be in writing and be strictly limited to the part
waived.
2.9 ENTIRE AGREEMENT. This License Agreement, embodies the entire
agreement and understanding of the parties hereto in respect of
the subject matter contained in this License Agreement; and this
License Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject
matter. There are no restrictions, agreements, promises,
warranties, covenants or undertakings other than those expressly
set forth herein.
2.10 CHOICE OF LAW. The parties agree that this License Agreement
shall be construed and interpreted in accordance with the laws of
the state of Kansas, U.S.A. without regards to its conflict of
law principles.
2.11 RELATIONSHIP OF THE PARTIES. The parties are independent
contractors. Nothing herein shall be deemed or construed as
creating a relationship between the parties of employer/employee,
master/servant, principal/agent, fiduciary, partners or co-
venturers.
2.12 COUNTERPARTS. This License Agreement may be executed in
counterparts. If so, each counterpart shall be deemed to be an
original instrument, and any copy of this executed License
Agreement shall have as full force and effect as an original.
2.13 TERMINATION OF EARLIER LICENSE AGREEMENT. Upon execution of
this License Agreement and payment of all fees associated
therewith, any license to use or practice the Patent Rights
granted to Licensee by Licensor or Licensor's predecessor in
interest pursuant to an agreement of an earlier date is hereby
terminated. Neither Licensee, Licensor nor Licensor's predecessor
in interest have any further rights or obligations thereunder.
The parties so agree on the date first written above.
Licensor: Licensee:
KOCH FEED TECHNOLOGIES COMPANY PURINA MILLS, INC.
/s/ S.E. Deeter /s/ David L. Abbott
- ------------------------------ -----------------------------
Name: S.E. Deeter Name: David L. Abbott
Title: President Title: President & C.E.O.
4
MASTER
PROCUREMENT AGREEMENT
---------------------
Master Procurement Agreement, dated as of March 12, 1998
(this "Agreement"), between Nutrition Supply and Trading, a
division of Koch Agriculture Company (hereinafter "S&T"), with
offices at 4111 East 37th Street North, Wichita, Kansas 67220,
and Purina Mills, Inc., (hereinafter "Purina"), with offices at
1401 South Hanley Road, St. Louis, Missouri 63144.
WHEREAS, S&T and Purina wish to enter into an agreement
under which S&T shall supply Purina with all of Purina's
requirements for feed ingredients and feed additives
(collectively hereinafter referred to as "Feed Ingredients") and
feed packaging materials (collectively hereinafter referred to as
"Packaging") meeting specifications to be determined by Purina
and S&T.
NOW THEREFORE, in consideration of the mutual agreements
contained herein and the performance of the obligations called
for herein, the parties agree as follows:
ARTICLE I
PROCUREMENT TERMS
1.1 Sale and Purchase of Commodities. Unless pursuant to S&T's prior
written consent, during the term of this Agreement, subject to
the terms and conditions set forth herein and subject to the
terms and conditions of the Confirmation Contracts (as
hereinafter defined), S&T shall procure for Purina and Purina
shall purchase from S&T all of Purina's requirements for Feed
Ingredients to be used at all of Purina's feed milling
facilities.
1.2 Confirmation Contracts. Subsequent to the execution of this
Agreement, S&T and Purina shall enter into various contracts
for the purchase of Feed Ingredients on such terms as set
forth on S&T's Purchase and Sale Confirmation (hereinafter
"Confirmation Contracts").
1.3 Quality Standards. The Confirmation Contracts shall set forth the
agreement between S&T and Purina as to the quality and
condition specifications of the Feed Ingredients to be
delivered to Purina pursuant to this Agreement and the
Confirmation Contracts.
1.4 Pricing Terms. The price of (i) Packaging delivered pursuant to
this Agreement, and (ii) Feed Ingredients delivered pursuant
to this Agreement and any Confirmation Contract, in each case
shall be computed in accordance with the following terms:
(a) The price of all Packaging shall be equivalent to S&T's
cost. S&T's cost shall include, but not be limited to,
S&T's out-of-pocket costs to purchase the products and
transportation costs.
(b) For the first year of this Agreement, commencing on the
Commencement Date (as defined paragraph 1.6(a)), S&T
shall sell all Feed Ingredients to Purina at Market
<PAGE>
Value, as defined and limited below, less Three Dollars
and Fifty Cents ($3.50) per ton (the "Discount"). On or
before the conclusion of the first year of this
Agreement, the parties shall negotiate (i) the Discount,
which may be more than, less than or equal to the
Discount applicable during first year of this Agreement,
and (ii) the time period for which the new Discount will
be applicable, which time period may or may not be one
year. The parties agree to negotiate the new Discount and
time period as contemplated by the preceding sentence in
good faith.
(c) For the purposes of paragraph 1.4(b), "Market Value" shall
mean the price at which parties who are dealing at arm's
length and purchasing or selling common quantities of the
commodity would buy or sell the commodity in the spot
market. The parties anticipate that approximately 50% of
the Feed Ingredients purchased by Purina will consist of
corn, wheat middlings and soybean meal (the "Enumerated
Commodities"). The parties agree that Market Value for
the Enumerated Commodities (other than agreements to
purchase and sell an Enumerated Commodity pursuant to an
agreement with a term exceeding thirty (30) days), during
any semi-annual period, shall not exceed the average of
price quotations during the respective period for each
Enumerated Commodity for each Referenced Market as
published in Feedstuffs, pursuant to the table below:
Commodity Feedstuffs Referenced Markets
--------- -----------------------------
Corn Atlanta, Boston, Chicago, Fort Worth, Kansas City,
Los Angeles, Minneapolis/St. Paul
Wheat
Middlings Atlanta, Buffalo, Fort Worth, Kansas City,
Los Angeles
Soybean Meal Atlanta, Buffalo, Chicago, Fort Worth, Kansas City,
Los Angeles
In the event the price for one or more of the Referenced
Markets is not published by Feedstuffs, the parties shall
agree upon a Reference Market that shall be a substitute
for the Reference Market not so published. In the event
there are no price quotations or an insufficient number of
Reference Markets to serve as substitute Reference Markets
for a particular Enumerated Commodity, the parties shall
negotiate a methodology for determining the maximum Market
Value for such Enumerated Commodity.
(d) For the purposes of computing average quotations of the
Referenced Markets, the first semi-annual period referred
to in paragraph 1.4(c) shall be a partial period
beginning on the Commencement Date and concluding on June
30, 1998. Full semi-annual periods shall thereafter begin
on July 1, 1998 and on each January 1 and July 1
thereafter during the term of this Agreement; provided,
however, that the final semi-annual period of this
Agreement may also be a partial period and, in any event,
shall conclude on the date of the termination of this
Agreement.
2
<PAGE>
(e) In the event that, at the end of any semi-annual period,
it is determined that the price charged for an Enumerated
Commodity (without giving effect to the Discount) is
greater than the Market Value of such Enumerated
Commodity for such semi-annual period, S&T shall, within
twenty (20) days of the close of such semi-annual period,
reimburse Purina for such excess amount.
(f) For the limited purpose of computing Market Value, S&T
shall not be deemed to be an arm's length purchaser of
commodities and Market Value shall, therefore, not be
deemed to be S&T's cost.
1.5 Packaging Materials. During the term of this Agreement, S&T shall
procure for Purina and Purina shall purchase from S&T all of
Purina's requirements for Packaging to be used at all of
Purina's feed milling facilities. Purina shall deliver to S&T
a purchase order for the Packaging, specifying the types of
Packaging being ordered. The purchase order shall also state
the expected delivery date of the Packaging.
1.6 Term and Termination.
(a) Term. The primary term of this Agreement shall be five
(5) years, commencing on May 1, 1998 (the "Commencement
Date"), and shall automatically renew for additional one
(1) year terms thereafter, unless either party delivers
notice to the other party of its intent to terminate this
Agreement at least thirty (30) days prior to the close of
the primary or any subsequent term.
(b) Termination By Either Party. Notwithstanding the
provisions of paragraph 1.6(a), either party may terminate
this contract upon the occurrence of the following events:
1. If at any time (i) all or substantially all of the assets
of the Company are sold, leased or transferred in one
or a series of transactions to any person or group
(within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), other
than to Koch Industries, Inc. or any one or more of
its subsidiaries or affiliates (hereinafter referred
to as "KII and Related Parties"), (ii) there occurs
the acquisition of beneficial ownership by any person
or group (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended)
(other than by any of, or by any group comprised of,
KII and Related Parties) of more than 50% of the
voting power of all of the outstanding common stock of
Purina, or (iii) there occurs the consummation of any
transaction or series of transactions the result of
which is that any person or group (within the meaning
of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended), other than KII and Related Parties,
beneficially owns more of the voting power of the
outstanding common stock of Purina than is
beneficially owned, in the aggregate, by KII and
Related Parties.
2. If the parties are unable to negotiate the Discount and
applicable time period pursuant to the terms set forth
in paragraph 1.4(b).
3
<PAGE>
(c) Termination by S&T. Notwithstanding the provisions of
1.6(a), if for any reason, Purina fails to pay, prepay or
repay any amount due pursuant to the terms of this
Agreement and/or any of the Confirmation Contracts, S&T
may terminate this Agreement, provided S&T delivers
notice to Purina at least thirty (30) days prior to
termination and Purina does not cure such default within
such thirty (30) day period.
(d) Termination by Purina. Notwithstanding the provisions of
paragraph 1.6(a), if S&T breaches its obligations to
deliver Feed Ingredients and Packaging to Purina pursuant
to the terms of this Agreement, Purina may terminate this
Agreement, provided Purina. delivers notice to S&T at
least thirty (30) days prior to termination and S&T does
not cure such default within such thirty (30) day period.
(e) Purina's Right to Hire Employees. In the event this
Agreement is terminated for any reason during the initial
5 year period set forth in paragraph 1.6(a), Purina may
initiate discussions with S&T's employees regarding
employment with Purina and S&T shall not object to the
discussions or any subsequent employment by Purina of
S&T's employees.
1.7 Provisions of Confirmation Contracts. The terms and conditions of
each Confirmation Contract entered into pursuant to this
Agreement shall be in the form as set forth on Exhibit "A"
attached hereto.
ARTICLE II
MISCELLANEOUS TERMS
2.0 Entire Agreement. This Agreement constitutes the entire agreement
between the parties concerning procurement of Feed Ingredients
and Packaging except as contemplated herein with respect to
the execution of Confirmation Contracts. Either party hereto
may waive any rights to which it is entitled under this
Agreement at any time, but such waiver shall be in writing and
be strictly limited to the part waived.
2.1 Conflict in Terms. In the event there is a conflict between the
written terms of a Confirmation Contract and of this
Agreement, except where the pricing of the Feed Ingredient
materially varies from the formula set forth in paragraph 1.4,
the terms of the Confirmation Contract shall control.
2.2 Status of Parties. S&T and Purina acknowledge and agree that this
Agreement constitutes a procurement agreement only, that the
parties are independent contractors, and that the relationship
of the parties is not that of master/servant, principal/agent,
partnership/joint venturers or joint enterprisers.
2.3 Assignment. Except as otherwise provided herein, the rights and
duties of either party under this Agreement may not be
assigned without the prior written consent of the other party.
4
<PAGE>
Notwithstanding the foregoing restriction, S&T may assign it
rights and obligations under this contract to KII and Related
Parties without the consent of Purina.
2.4 Choice of Law. Kansas law, both procedural and substantive, but
without regard to its choice of law provisions, shall govern
the interpretation, construction and performance of this
Agreement.
2.5 Descriptive Headings. The headings of the paragraphs and
subparagraphs of this Agreement are inserted for convenience
only and shall not constitute a part hereof.
2.6 Severability. Each portion of this Agreement is intended to be
severable. If any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or
invalidity shall not affect the validity of the remainder of
this Agreement.
IN WITNESS WHEREOF S&T and Purina have entered into this
Agreement as of the day and year above written
PURINA MILLS, INC. NUTRITION SUPPLY AND TRADING,
a division of Koch Agriculture Company
By: /s/David L. Abbott By: /s/ S.E. Deeter
------------------- ----------------
Name: David L. Abbott Name: S.E. Deeter
Title: President & C.E.O. Title: Vice President
5
LICENSE AGREEMENT
This AGREEMENT is made effective this 1st day of
October, 1986 by and among RALSTON PURINA COMPANY, a corporation
organized and existing under the laws of the State of Missouri,
with a principal place of business at Checkerboard Square, St.
Louis, Missouri 63164 (hereinafter referred to as "LICENSOR")
party of the first part and PURINA MILLS, INC., a corporation
organized and existing under the laws of the State of Delaware
with a principal place of business at 800 Chouteau, St. Louis,
Missouri 63164 (hereinafter referred to as "LICENSEE") party of
the second part and BP NUTRITION LIMITED, a limited company
organized and existing under the laws of England, with a
principal place of business at First Chicago House, 90 Long Acre,
London WC2E 9NP (hereinafter referred to as "BP") party of the
third part.
WHEREAS LICENSOR has for many years engaged in the
United States of America in the manufacture and sale of animal
feeds and other products for the farming and related industries
("the feeds business"), the manufacture and sale of foods for
dogs and cats ("the dog and cat food business") as well as the
manufacture and sale of other products ("the other businesses");
WHEREAS LICENSOR has established LICENSEE in order
that LICENSEE may, in a separate and independent manner, operate
the feeds business while LICENSOR operates the dog and cat food
business and the other businesses;
WHEREAS an affiliate of BP is purchasing all of the
shares of LICENSEE;
WHEREAS in the interests of facilitating continuation
of the U.S. domestic feeds business by LICENSEE and the expansion
of that business into other agricultural products and services,
it has been agreed between LICENSOR and BP that certain U.S.
trademark rights
<PAGE>
unique to the feeds business shall be conveyed to LICENSEE and
that certain other marks (the "Licensed Marks" as hereinafter
defined) either used in common in both the feeds business and the
dog and cat foods business and/or other businesses or which are
similar to marks so used shall be licensed by LICENSOR to
LICENSEE,
NOW, THEREFORE, IT IS HEREBY AGREED BETWEEN THE PARTIES AS
FOLLOWS:-
1. DEFINITIONS. For the purposes of this Agreement:-
(a) "Licensed Marks" shall mean those trademarks or
service marks shown in Schedule A hereto together with
such trademarks as may be added from time to time as
agreed in writing between LICENSOR and LICENSEE and to
which the terms and conditions of this Agreement shall
thereafter apply. One such mark shall be referred to
in this Agreement as a "Licensed Mark."
(b) "Licensed Products" shall mean any and all products
and services primarily related to agriculture (whether
the production of plant crops or animals and animal
products) or for use for animals (whether or not owned
for agricultural purposes) and the production of
animals. "Licensed Products" shall, however, not
include dog food, cat food, dog treats, cat treats,
dog chew toys, cat chew toys, and any services
relating to dogs and cats, any food for humans or any
other product, service or business enterprise not
included in the scope of Licensed Products herein
defined. Licensed Products shall include dog and cat
accessories. Licensed Products shall also include
laboratory rations for dogs labeled and packaged in
the style shown in Exhibit C. A product shall not be
considered a Licensed Product if it may be used in
agriculture or for animals but is primarily employed
in other areas. The production of agricultural plant
crops includes,
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<PAGE>
without limitation, genetic research and development,
hybridization and seed production, soil analysis,
planting, propagation, cultivating, harvesting,
treatment and storage. Except as limited hereinabove,
products and services for use for animals and for
production of animals (whether or not for agricultural
purposes) include, without limitation, products and
services for breeding, feeding, health care, shelter,
control, and transportation of animals and extraction,
collection, processing, packaging, and storage of
animal products and animal wastes. Illustrative
products within the range of Licensed Products for
agricultural plant production include: genetic and
chromosomal material and other products of
biotechnology, biology and other sciences, plant
tissue cultures, pure line seeds, planting seeds,
fertilizers, pesticides, insecticides, rodenticides,
fungicides, herbicides, cultivation equipment,
aquaculture, hydroponic and greenhouse equipment,
irrigators, heaters, harvesters, fruit pickers,
driers, trailers, and silos. Only for the purpose of
illustration, some of the products within the range of
Licensed Products for animals are: animal feeds, feed
supplements, feeders, waterers, animal semen, embryos,
live animals, larvae, veterinary instruments,
pharmaceuticals, insecticides, cleaners, pesticides,
collars, marking devices, bedding, tanks, paints,
pens, fencing, groomers, muzzles, leashes, cages,
saddles, tack, milk handling equipment, transporters,
manure collecting and processing equipment.
Licensed Products also include products or services
reflected in Exhibits A and B and products and
services related to the provision of methods, systems
and techniques for the development, production,
application and utilization of the
3
<PAGE>
products described above. Illustrative of such
products and services are: farm and agricultural
management services, farm and agricultural computer
programs and software, farm and agricultural financial
services, soil analysis, non dog-and cat-related
veterinary services, sale, leasing and brokerage
services for agricultural land and equipment,
distributing, wholesaling and retailing Licensed
Products, and publications directly related to
agriculture or animals. Licensed Products are not
limited to products in existence at the date of this
Agreement and will include products not yet invented
or commercialized which fall within the above
definition. In no event will Licensed Products include
products and services not primarily related to
agriculture or for animals. LICENSEE shall send
LICENSOR a notice describing to LICENSOR each Licensed
Product not included In Exhibits A and B no less than
thirty (30) days, or such lesser period as
circumstances may require, under appropriate
safeguards to protect confidential disclosures, before
introducing same and certifying that such Licensed
Product meets all requirements enumerated in Paragraph
3 of this Agreement. New Licensed Products for the
purpose of such notice requirement shall mean Licensed
Products for which LICENSEE distributes new-product
notices or which represent additions to LICENSEE's
product manuals or equivalent product lists.
If the use of a Licensed Mark for a product or service
is finally enjoined in a lawsuit as an infringement or
otherwise in derogation the rights of any third party,
then that product or service shall thereafter cease to
be a Licensed Product for that Licensed Mark. The ini-
tial determination as to whether LICENSEE's use of a
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<PAGE>
Licensed Mark for a product or service not in use by
LICENSEE as of the date of this Agreement infringes or
otherwise conflicts with the rights of a third party
shall be the sole responsibility of LICENSEE.
(c) "Territory" shall mean the whole of the United States
of America, its territories and possessions (excluding
Puerto Rico), and any part thereof.
(d) The terms "trademark," "trade name" and "service mark"
shall have the meanings given them in the Lanham Act.
2. GRANT OF RIGHTS
(a) Except as provided hereinbelow: LICENSOR hereby grants
to LICENSEE the exclusive right to use in the
Territory the Licensed Marks on or in connection with
the Licensed Products subject to the terms and
conditions of this Agreement. LICENSOR shall, in the
Territory, neither itself use any Licensed Mark on or
in connection with any Licensed Product exclusively
licensed to LICENSEE hereunder nor authorize any other
person or entity to do so. Such prohibited use shall
include, without limitation, use of the term "Purina"
or any other Licensed Mark as all or part of the trade
name or corporate name of any business engaged in the
manufacture, distribution or sale of any Licensed
Product. LICENSOR and LICENSEE each shall have the
non-exclusive right to use the Licensed Marks for
consumer lawn and garden products in the Territory.
LICENSOR and LICENSEE shall each have the
non-exclusive right to use the Licensed Marks for
publications in the Territory. LICENSOR shall have no
right to use the Licensed Marks in the Territory for
any foods or other edible products for animals other
than dogs and cats. If LICENSOR manufactures or sells,
in the Territory, any
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<PAGE>
Licensed Product exclusively licensed to LICENSEE
hereunder, it shall conduct its business with respect
to such exclusively-licensed Licensed Product under a
trade name which does not include the term "Purina" or
any other Licensed Mark. LICENSOR shall not in that
business use any such term, as a mark, trade name or
otherwise, on labels, packaging, invoices, checks,
signs, business cards, letterhead, uniforms,
advertising or promotional materials. LICENSOR shall,
however, have the right to refer to its ownership of
such business in its annual reports and in other
contexts in which it is appropriate to impart
information about such ownership. LICENSOR shall not
use the terms "Purina Mills," "Ralston Mills" or
"Ralston Purina Mills" in any manner in the Territory.
LICENSOR shall avoid adopting new trade names
confusingly similar (beyond the common inclusion of
the word "Purina") to names in use by LICENSEE at the
time of such adoption. The exclusivity of the license
granted by this Agreement shall not, however, preclude
LICENSOR's use (either by itself or through affiliates
or licensees) of any of the Licensed Marks in the
Territory (1) with respect to products and/or services
other than the Licensed Products, products and
services promoting the same, as well as with respect
to dog and cat accessories, (2) with respect to
exports of livestock and poultry feed from LICENSOR's
Canadian affiliate to the United States, provided such
exports shall be limited to the geographic areas shown
on the attached Exhibit D and shall terminate within
five years from the date of this Agreement, and (3)
with respect to the manufacturing, labeling and
exporting of dairy-based feeds by LICENSOR's Protein
6
<PAGE>
Technologies Division in the Territory and provided
that LICENSOR, including that division, shall make no
other use of any Licensed Mark in the Territory on or
in connection with such feeds (except by selling them
to LICENSEE). Except to the extent permitted with
respect to sales from Canada provided for in this
paragraph, LICENSOR shall not use, or license others
to use, any Licensed Mark unique to a particular
product exclusively licensed to LICENSEE hereunder,
such as CHEK-R-MYCIN or COW CHOW, in the Territory.
LICENSOR reserves all rights not licensed hereunder in
the Territory and all rights with respect to any
Licensed Mark throughout the rest of the world.
LICENSOR shall not voluntarily (1) cancel any
registration under Section 7(d) of the Lanham Act (or
any successor provision under U.S. law) of any
Licensed Mark for any Licensed Product or (2) grant
any security interest in any Licensed Mark for any
Licensed Product. LICENSOR shall not assert in a
pleading or otherwise assert or admit that any
Licensed Mark is invalid or otherwise unprotectable in
the United States of America for any Licensed Product
unless required truthfully to do so in any
administrative or judicial proceeding.
(b) Subject to the terms and conditions of this Agreement,
LICENSEE shall have the right to use "Purina Mills,
Inc." as its corporate name in the Territory. LICENSEE
shall also have the right, in the Territory, (i) to
use "Purina" or "Purina Mills" as a shortened version
of "Purina Mills, Inc." (ii) to adopt new corporate
names, and to use names for divisions and
subsidiaries, containing "Purina" coupled with a word
or words reflecting the agricultural-related nature of
the business of the entity concerned, provided the use
of such wording is not
7
<PAGE>
likely to cause confusion with a product, service or
business of LICENSOR, or any third party, identified
by wording which is similar (apart from the common
inclusion of the word "Purina") and is in use by
LICENSOR or any third party at the time of the
adoption of the name by LICENSEE, and (iii) to use as
shortened versions of such names the terms "Purina" or
"Purina" coupled with the agricultural-related wording
concerned. LICENSEE shall consult with LICENSOR at the
time any new name incorporating the word "Purina" is
adopted in order to mitigate likely confusion.
LICENSEE shall not otherwise use the term "Purina" or
any other Licensed Mark in its corporate or trade name
without LICENSOR's prior written approval, which will
not be unreasonably withheld.
(c) LICENSEE shall not use any Licensed Mark or the names
"Purina Mills, Inc.," "Purina Mills" or "Purina" as a
mark for or name associated with any product or
service other than a Licensed Product. If LICENSEE
manufactures or sells any other products or renders
any other services, it shall conduct its business with
respect to such products and services not licensed to
it hereunder under a trade name which does not include
the term "Purina" or any other Licensed Mark. LICENSEE
shall not use any such term, as a mark, trade name or
otherwise, on labels, packaging, invoices, checks,
signs, business cards, letterhead, uniforms,
advertising or promotional materials in that business.
LICENSEE shall, however, have the right to refer to
its ownership of such business in its annual reports
and other contexts in which it is appropriate to
impart information about such ownership.
8
<PAGE>
(d) LICENSEE shall not use the term "Checkerboard Square,"
or any term including that term, as its business
address or otherwise. LICENSEE shall not use the term
"Ralston" in any manner. LICENSEE shall not hold
itself out as corporately related or otherwise related
to LICENSOR except as a licensee of the Licensed
Marks. The foregoing shall not, however, prevent
LICENSEE from truthfully and in good faith describing
itself as the same business which has sold the
Licensed Products for many years or as the successor
to LICENSOR's business in the Licensed Products, and
from referring to the history of that business and
products as its own.
(e) Except as expressly provided otherwise in this
Agreement, there shall be no restrictions on
LICENSEE's right to use the Licensed Marks and the
corporate and trade name licensed hereunder. Moreover,
LICENSEE shall not be required to comply with
standards and procedures with respect to the nature
and quality of the Licensed Products other than those
established in this Agreement. LICENSEE shall not;
however, have the right to coin new marks based on any
of those marks or names or on elements of those marks
or names without the LICENSOR's prior written consent
which may be granted or withheld at LICENSOR's sole
discretion. LICENSEE shall, however, have the right as
provided hereinabove to extend the use of existing
marks to new products within the definition of
Licensed Products provided such extension does not
conflict with the rights of LICENSOR or any third
parties.
(f) LICENSOR shall promptly, to the extent it is able, (i)
assign all licenses for marks of others used on
Licensed Products to LICENSEE and (ii) grant
sublicenses to
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<PAGE>
LICENSEE for such marks of others as LICENSOR is
unable to assign. Anything in this Agreement to the
contrary notwithstanding, LICENSOR does not guarantee
LICENSEE's continued right to use marks owned by third
parties as shown on Exhibits A and B (e.g.,
TERRAMYCIN, TRAMISOL, THIABENDAZOLE, SAFE-GUARD,
DURSBAN, DECCOX, RALGRO) it being acknowledged by
LICENSEE that the continued use of such marks shall be
governed by such agreements as LICENSEE may have or
hereafter obtain from the owners of such marks.
(g) Except to the extent LICENSEE may be separately
licensed by LICENSOR in writing to use one or more of
the Licensed Marks or names outside the Territory,
LICENSEE hereby agrees, for itself and for any entity
wholly or partially owned and effectively controlled
by LICENSEE, BP or any affiliate of LICENSEE or BP, to
limit its use of the Licensed Marks or names to the
Territory and not to export Licensed Products. In
order to avoid the export of Licensed Products bearing
Licensed Marks, LICENSEE further agrees, except with
respect to sales to J & L Feed Co., not to package or
label such products especially for foreign sale or to
accept orders for delivery to a ship or other vehicle
whose destination is outside the Territory. LICENSOR
and LICENSEE agree reasonably to cooperate to resolve
conflicts resulting from sales of Licensed Products of
one party into the other party's exclusive
geographical territory upon receipt of notice from the
other party indicating the nature and extent of such
sales, provided such sales are in violation of
third-party rights, or jeopardize trademark rights of
the other party, or contractual obligations of the
other party to third parties in the jurisdiction in
10
<PAGE>
which such sales have been identified, or are
undermining any established business of the other
party or any affiliate of the other party in such
identified market. The territory of the license
granted hereunder shall be deemed to extend on a
non-exclusive basis to the countries identified in
Exhibit E which have been heretofore served by J & L
Feed Co., but only with respect to sales by J & L Feed
Co. LICENSOR shall have no obligations under Sections
6, 9 and 11 of this Agreement with respect to such J &
L sales. LICENSEE agrees to enter into such registered
user-agreements, at LICENSOR's expense, as LICENSOR
may reasonably request to record LICENSEE as
registered user with respect to J & L's sales pursuant
to this Paragraph. LICENSEE shall not be obligated to
notify J & L of the provisions of this Paragraph.
3. QUALITY STANDARD.
The quality of products within the definition of
Licensed Products bearing a Licensed Mark or sold
under any trade name licensed hereunder shall be at
least good and merchantable and in compliance with all
applicable laws and governmental regulations relating
to the nature and quality of the products. If a
Licensed Product contains ingredients, or is made by
methods, which are not generally accepted as
appropriate for the product by independent experts,
but which are accepted as appropriate for the product
by at least three independent experts, then any doubts
as to the quality of the product arising from such
disagreement among experts shall be resolved in favor
of LICENSEE and shall not cause the product to be
deemed of less than good and merchantable quality. If
a Licensed Product contains ingredients, or is made by
methods, which are new or
11
<PAGE>
proprietary, so that independent experts have
insufficient data for evaluating them, then the
product shall be deemed to be of good and merchantable
quality until LICENSOR can reasonably establish the
contrary by substantial objective evidence provided
that LICENSEE submits to LICENSOR a written statement
by an expert reasonably acceptable to LICENSOR to the
effect that the product is of good and merchantable
quality and in compliance with all applicable laws and
governmental regulations. Events unrelated to the
fitness of a Licensed Product for its intended use -
such as controversy about its ecological effects or a
boycott directed at the source of an ingredient of the
product - shall not be considered in determining
whether a Licensed Product is of good and merchantable
quality. A Licensed Product may contain any ingredient
approved for use in such a product by the pertinent
government agency, and shall not be deemed of less
than good and merchantable quality because it contains
such ingredient. The quality of a Licensed Product
shall be deemed to be of greater than good and
merchantable quality if the average quality of the
product meets or exceeds the average quality of (a)
the same product sold by LICENSEE during the period of
July 1,1985 through June 30, 1986, or (b) the three
leading competitive products sold in the Territory.
Nothing in the preceding sentence shall be construed
as requiring the quality of Licensed Products to be
higher than good and merchantable quality, and the
parties recognize that the average quality described
in parts (a) and (b) of the preceding sentence may, in
fact, considerably exceed good and merchantable
quality. Nothing in this Agreement shall, however,
negate LICENSEE's
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<PAGE>
obligation to comply with all applicable laws and
regulations with respect to the nature and quality of
the Licensed Products as required hereinabove. The
quality of services within the definition of Licensed
Products in association with which a Licensed Mark is
used shall be good, fit for the purpose intended and
in compliance with all applicable laws and
governmental regulations relating to the nature and
quality of the services.
4. QUALITY CONTROL.
(a) LICENSOR shall have the right to inspect the places of
manufacture of Licensed Products bearing a Licensed
Mark, and the places where services are rendered under
a Licensed Mark, to determine whether the quality
standards of paragraph 3 of this Agreement are being
met. At such inspections of services, LICENSOR's
representative shall have the right to observe the
rendition of the services concerned. LICENSOR shall
not have the right to inspect a particular place of
manufacture or observe particular services more than
twice per year or to remove more samples or more
volume of a product in any given sample than
reasonably necessary to conduct quality analyses. Such
inspection visits shall be made by appointment at a
time mutually convenient for the parties but in no
event more than five days after LICENSEE's receipt of
a written request therefor. LICENSOR shall not have
the right to request samples in a manner which will
interfere with production of a Licensed Product, such
as by requiring a production line or machine to be
shut down. LICENSOR shall have the right at its own
expense to purchase Licensed Products on the open
market for purposes of analysis and inspections.
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<PAGE>
(b) If LICENSOR is dissatisfied with the quality of a
Licensed Product, LICENSOR shall not serve a notice of
breach of this Agreement on LICENSEE until LICENSOR
has sought to reconcile its view of the quality of the
Licensed Product at issue with that of LICENSEE by
providing to LICENSEE all the evidence and expert
opinion in its possession which supports its view that
the quality of the product is deficient. Should
LICENSEE and LICENSOR be unable to reconcile their
views within forty-five (45) days following LICENSOR's
notification of its dissatisfaction to LICENSEE
stating reasons therefor, LICENSOR shall seek or shall
have sought the opinion, of an independent expert
reasonably acceptable to LICENSEE, on the product or
service concerned. LICENSOR shall provide that expert
with a sample of the product or service that LICENSOR
finds unsatisfactory. LICENSOR shall cause the expert
to discuss the points of dissatisfaction fully with
LICENSEE and review any further samples of the product
or service which LICENSEE may provide from a regular
production run. LICENSOR shall serve a notice of
breach only if the expert, in a written report made
after discussions with LICENSEE, concludes that the
product or service concerned has violated the
requirement to maintain good and merchantable quality
required by Paragraph 3 of this Agreement. LICENSOR
shall include a copy of that written report with the
notice of breach.
5. TRADEMARK USE.
LICENSEE agrees to use the Licensed Marks properly as
trademarks or service marks, for example: (a) using
the "TM" "SM" and o symbols and employing notices
indicating LICENSOR's ownership of the Licensed Marks
and (b) using
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<PAGE>
Licensed Marks as adjectives followed by generic terms
The parties recognize, however, that use of "TM", "SM"
and l symbols and generic terms every time a mark is
used on a particular item may be awkward and is not
necessary in order to make acceptable trademark or
service mark usage. LICENSOR shall have no right of
prior disapproval with respect to packages, labels,
advertising or the like; however, new advertising,
packaging and labeling shall be made available to
LICENSOR from time to time for the purposes of
satisfying LICENSOR of LICENSEE's compliance with this
Agreement.
6. WARRANTIES BY LICENSOR.
LICENSOR hereby warrants that it is current record
owner of the registrations reflected on Schedule A to
this Agreement and that, to LICENSOR's best knowledge,
all the Licensed Marks now used by LICENSEE are
available for use by LICENSEE on or in connection with
each Licensed Product for which such mark is now used
by LICENSEE, as illustrated in Exhibits A and B,
without infringing the rights of any third party;
however, LICENSOR disclaims any warranty of validity,
right to use or right exclusively to use or register
the Licensed Marks or any of them. The foregoing
warranties of LICENSOR shall not apply with respect to
products and/or services first introduced by LICENSEE
after the date of execution of this Agreement.
LICENSOR will at all times indemnify and hold harmless
LICENSEE and its agents and servants from and against
any and all claims, damages, liabilities, costs and
expenses, including legal expenses and reasonable
counsel fees, arising out of any breach by LICENSOR of
any warranty made by LICENSOR in this Agreement.
15
<PAGE>
LICENSEE will notify LICENSOR of any claim for which
indemnification hereunder from LICENSOR may be
available as soon as LICENSEE becomes aware of such
claim, and LICENSOR shall have the right to control
the defense of the claim. LICENSOR may elect to defend
against any such claim without thereby waiving any
objection as to LICENSOR's obligations to indemnify
LICENSEE therefrom. LICENSEE shall have the right to
participate in the defense of the claim through
counsel of its selection at its own expense, provided
LICENSOR shall have the right at all times, in its
sole discretion, to retain or resume its control of
the conduct of the defense.
7. INDEMNITY BY LICENSEE.
LICENSEE will at all times indemnify and hold harmless
LICENSOR and its agents and servants from and against
any and all claims, damages, liabilities, costs and
expenses, including legal expenses and reasonable
counsel fees, arising out of or resulting from
LICENSEE's status as LICENSOR's licensee or arising as
a result of use by LICENSEE or any of its sublicensees
of any Licensed Mark or name, including, but not
limited to, patent or copyright infringement claims,
claims that acts of LICENSEE or any sublicensee
constitute any violation of franchising or other laws,
or constitute improper labeling or advertising or
claims arising out of allegedly-defective products
manufactured or services rendered by LICENSEE or a
sublicensee of LICENSEE or claims that trademarks and
designs that LICENSEE or a sublicensee of LICENSEE
uses in association with a Licensed Mark (except as
reflected in Exhibits A or B) infringe the rights of
third parties. The exception with respect to uses
reflected in Exhibits A or B shall not
16
<PAGE>
apply to sales in breach of this Agreement or to
sales outside the Territory. At all times during
which LICENSEE or a sublicensee of LICENSEE uses
any of the Licensed Marks, LICENSEE will maintain
product-liability insurance, naming LICENSOR as an
additional insured with entitlement to at least
thirty- (30-) days advance written notice of
termination, revocation or diminution of coverage, in
an amount not less than ten million dollars
($10,000,000). LICENSEE shall deliver to LICENSOR
evidence of such insurance within thirty (30) days
following the execution of this Agreement. LICENSOR
will notify LICENSEE of any claim for which it may
seek indemnification from LICENSEE as soon as it
becomes aware of such claim, and LICENSEE shall have
the right to control the defense of the claim.
LICENSOR shall have the right to participate in the
defense of the claim through counsel of its selection
at its own expense, provided LICENSEE shall have the
right at all times, in its sole discretion, to retain
or resume control of the conduct of the defense.
8. LICENSOR'S RIGHTS.
LICENSEE and BP hereby acknowledge that LICENSOR is
and will forever remain the sole and rightful owner of
the Licensed Marks and licensed names in respect of
the Licensed Products and that use of the Licensed
Marks and licensed names by LICENSEE pursuant to this
Agreement shall inure to the benefit of LICENSOR.
LICENSEE and BP agree that during the continuance and
after termination of this Agreement, neither LICENSEE
nor BP will claim any rights in or to the Licensed
Marks and licensed names within or outside the
Territory other than the authorization to use same as
specifically provided herein nor dispute or
17
<PAGE>
assist others to dispute the ownership or validity of
the Licensed Marks and licensed names. LICENSOR
reserves the right to use, and license other parties
to use, the marks included in Schedule A to this
Agreement (a) in the Territory for all products and
services other than the Licensed Products exclusively
licensed to LICENSEE hereunder, and (b) outside the
Territory for all products and services.
9. REGISTRATIONS.
(a) LICENSOR shall use reasonable efforts to maintain
existing U.S. federal registrations of the Licensed
Marks for such of the Licensed Products as LICENSEE
continues to use in the ordinary course of LICENSEE's
business and LICENSOR shall undertake reasonable
efforts to secure and maintain U.S. federal
registration of Licensed Marks not currently
registered for Licensed Products put in use and
maintained in commercial use by LICENSEE pursuant to
this Agreement. LICENSEE shall, at its own cost,
provide such evidence of use and other information or
material as LICENSOR may reasonably require to
undertake the foregoing. LICENSEE shall reimburse
LICENSOR's out-of-pocket costs incurred in obtaining
and maintaining registrations pursuant to this
Paragraph 9 unless LICENSOR elects to include products
or services beyond the Licensed Products in the
application, or continuing-use filing or renewal
concerned. LICENSOR shall not file a new U.S. federal
trademark application to register a Licensed Mark with
a recitation of goods or services covering both
Licensed Products exclusively licensed to LICENSEE and
other products or services without LICENSEE's prior
written consent which consent will not be unreasonably
withheld.
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<PAGE>
(b) LICENSOR shall undertake reasonable efforts at
LICENSEE's expense to secure and thereafter maintain
new U. S. federal trademark registrations covering (a)
PURINA, and (b) the 9-square corporate symbol for the
major categories of Licensed Products described as
generally as possible, such as "animal feeds,
excluding dog food and cat food." Those registrations
shall cover no products or services other than
Licensed Products.
10. TERM AND TERMINATION.
(a) This Agreement shall commence on the date first
above written and shall remain in effect perpetually;
however, LICENSOR shall have no obligations to
LICENSEE under Paragraph 6, 9 and 11 of this Agreement
with respect to any Licensed Mark which has been or
will be abandoned by LICENSEE for all Licensed
Products. Abandonment shall be determined by applying
Lanham Act standards and presumptions.
(b) In the event of a material breach of this Agreement by
LICENSEE with respect to the quality of goods sold or
services rendered under any Licensed Mark. LICENSOR
shall have the right, as further described in this
subparagraph, partially to terminate this Agreement
upon ninety (90) days notice in writing, and such
partial termination shall become effective unless,
within that 90 day period, LICENSEE shall completely
remedy the breach to the reasonable satisfaction of
LICENSOR. Partial termination of this Agreement by
LICENSOR shall mean termination with respect to the
goods or services involved in the uncorrected breach
and such termination shall be limited to the Licensed
Mark and name concerned for those goods or services
only. This Agreement shall continue in
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<PAGE>
effect for the goods and services not involved in the
uncorrected breach and for the Licensed Mark involved
for goods and services not involved. If the
uncorrected breach is occurring only in particular
plants or locations, then the termination shall apply
only to those plants or locations where the breach is
occurring, and the same product may continue to be
made or service rendered under the Licensed Marks at
the other plants or locations provided the product or
service is otherwise in compliance with the Agreement.
(c) In the event of such a partial termination, the rights
concerned shall not revert to LICENSOR and LICENSOR
shall neither grant such rights to any other party nor
use the mark concerned for the product or service
concerned. After such a partial termination, LICENSEE
shall have the right to attempt to correct the breach
concerned and thereby regain the terminated rights. In
order to do so. LICENSEE shall demonstrate to
LICENSOR's reasonable satisfaction that the problem
has been corrected. LICENSOR shall then rescind the
partial termination and restore the terminated rights,
unless an expert consulted in accordance with
Paragraph 4 hereinabove produces a written report,
based on consultations with LICENSEE as well as
LICENSOR, stating that the problem remains
uncorrected.
11. INFRINGEMENTS.
(a) Upon becoming aware of:-
(i) any infringement or suspected infringement of a
Licensed Mark, or of a name which includes the
word "Purina," any application for the
registration of a mark which LICENSEE or LICENSOR
believes should
20
<PAGE>
be opposed, or any federal registration for a
mark which LICENSEE or LICENSEE believes should
be cancelled, or
(ii) any matter or circumstance of whatsoever nature
which in the opinion of LICENSEE or LICENSOR
might affect the interest of the other party, the
party believing the item in question to require
action hereunder shall forthwith notify the other
thereof, and LICENSOR shall, with respect to such
uses of marks on products or services other than
Licensed Products then in use by LICENSEE, assert
such claim, file such action for infringement,
file such opposition or cancellation proceeding,
enter into a settlement or take such other steps
for the protection of the Licensed Marks or
decline to take any action as LICENSOR may
consider advisable in the exercise of its sole
discretion. LICENSEE shall supply such assistance
and information as LICENSOR may reasonably
require in support thereof. With respect to
infringements involving a third-party use of a
mark on any Licensed Product then in use by
LICENSEE: LICENSOR and LICENSEE shall consult
with each other in a good-faith attempt to reach
an agreed-upon course of action. If LICENSOR and
LICENSEE are unable to do so within ten working
days of the commencement of such discussions,
either party shall be free to proceed to assert
its rights at its own expense. In addition,
LICENSEE may elect to join LICENSOR as a party
plaintiff in a legal action against a person who
is using a trademark on, or service mark in
connection with, a Licensed Product in a manner
believed by LICENSEE to be an infringement of the
21
<PAGE>
Licensed Mark provided LICENSEE's belief is
supported by an opinion of counsel from a U.S.
law firm specializing in intellectual property
causes ("Trademark Expert") of LICENSEE's choice
indicating that LICENSOR has a reasonable
likelihood of winning the lawsuit and provided
such opinion is not, within ten working days of
LICENSOR's receipt of such opinion, contradicted
by an opinion of a Trademark Expert of LICENSOR's
choice. In the event the aforementioned Trademark
Experts' opinions are contradictory and LICENSEE
nevertheless wishes to join LICENSOR as a party
plaintiff in such action, LICENSEE may, at its
expense, seek an opinion of counsel from a third
Trademark Expert which regularly represents
neither LICENSOR nor LICENSEE and which is
acceptable to both parties. LICENSOR shall not
unreasonably refuse to accept such a Trademark
Expert proposed by LICENSEE. The opinion of the
third Trademark Expert shall then be substituted
for the opinion of the Trademark Expert of
LICENSOR and the parties shall be bound by such
third opinion.
(b) The reasonable cost (including fees and disbursements
paid to counsel of LICENSOR's choice) of claims,
actions and other proceedings brought or joined in by
LICENSOR at LICENSEE's request shall be paid to
LICENSOR by LICENSEE and any monetary recovery therein
received by LICENSOR shall be paid to LICENSEE.
LICENSOR shall have the right, in consultation with
LICENSEE, reasonably to control the course of such
litigation; however, any settlement of such litigation
shall, to the extent it may adversely impact the
rights
22
<PAGE>
of LICENSEE, be subject to LICENSEE's approval which
approval may not be unreasonably withheld.
(c) LICENSOR and LICENSEE shall each also have the right
after first consulting with the other, independently
and in its own name and at its expense, to assert
claims, file actions, file opposition or cancellation
proceedings or take such other steps in particular
cases of unauthorized use or registration of a mark or
name for a Licensed Product or a product or service
closely related to a Licensed Product as it deems
appropriate for protection of the Licensed Marks.
12. DOG AND CAT ACCESSORIES
Notwithstanding anything to the contrary in this
Agreement,
(a) LICENSOR shall have the right to sell or distribute
non-food dog and cat accessories bearing a Licensed
Mark for ultimate sale in Licensor Trade Channels, as
hereinafter defined, and shall not have the right to
sell or distribute such products for ultimate sale in
Licensee Trade Channels, as hereinafter defined.
(b) LICENSEE shall have the right to sell or distribute
non-food dog and cat accessories bearing a Licensed
Mark for ultimate sale in Licensee Trade Channels, as
hereinafter defined, and shall not have the right to
sell or distribute such products for ultimate sale in
Licensor Trade Channels, as hereinafter defined.
(c) "Licensor Trade Channels" shall mean wholesale or
retail grocery or consumer mass merchandising stores
(including, without limitation, warehouse and similar
outlets) and the military.
23
<PAGE>
(d) "Licensee Trade Channels" shall mean specialized farm
stores, agricultural stores and any other stores for
which livestock and poultry feeds constitute a
substantial portion of sales.
(e) LICENSOR and LICENSEE shall each have the right to
sell or distribute non-food dog and cat accessories
bearing a Licensed Mark for ultimate sale in trade
channels other than Licensor Trade Channels and
Licensee Trade Channels.
13. ROYALTY.
No royalty shall be payable by LICENSEE to LICENSOR in
respect of any rights granted under the terms of this
Agreement.
14. SUBLICENSING.
LICENSEE shall have the right to grant sublicenses for
use of the Licensed Marks for the Licensed Products
other than products for dogs or cats, provided that
the sublicense shall be subject to all terms and
conditions of this Agreement and LICENSEE shall be
responsible for acts pursuant to or in breach of this
Agreement by sublicensees and further provided
LICENSEE gives LICENSOR at least thirty-(30-) days
advance written notice indicating the identity of the
prospective sublicensees and the Licensed Marks and
Licensed Products to be sublicensed accompanied by a
certification that the use of such marks with respect
to such Licensed Products will comply with Paragraph 3
hereinabove. In the event such sublicense shall be
determined to impose franchising-compliance or other
obligations on LICENSOR or constitute an illegal
activity, LICENSOR shall discharge such obligation and
LICENSEE shall reimburse LICENSOR's
24
<PAGE>
total costs resulting from the reasonable discharge of
any such obligation and/or growing out of any such
activity.
15. CONTRACT MANUFACTURING.
LICENSEE shall have the right to use a third-party
manufacturer to produce Licensed Products solely for
resale to LICENSEE.
16. PROMOTIONAL PRODUCTS.
LICENSEE shall have the right to sell or distribute
promotional products, such as, caps, T-shirts, pens,
balloons, mugs, keychains, calendars, pocket knives
and other items not infringing third-party rights,
bearing LICENSEE's trade name and/or one or more
Licensed Marks, for the purpose of developing goodwill
and promoting the Licensed Products. Use of the Licensed
Marks on such products shall be in a prominent manner
consistent with their promotional purpose. Nothing in
this Agreement shall inhibit LICENSOR's right to use
Licensed Marks in the sale or distribution of
promotional products to promote products or services
it is permitted to sell or render under Licensed
Marks.
17. ASSIGNABILITY.
Neither LICENSEE nor LICENSOR shall have the right to
assign its rights and obligations under this Agreement
or any part thereof without the consent of the other;
however, such consent shall not be unreasonably
withheld. It shall not be unreasonable to withhold
consent to the assignment of rights and obligations to
a major competitor of the party whose consent is
sought.
25
<PAGE>
18. REVISIONS TO EXHIBITS A AND B
The parties intend that Exhibits A and B contain all
products, other than FASTART, now being commercially
sold or distributed by LICENSEE under the Licensed
Marks and include drawings of packaging for such
products. To the extent Exhibits A or B do not
accurately reflect LICENSEE's product line reflecting
permissible use of the Licensed Marks as of the date
of execution of this Agreement, the parties will
cooperate reasonably and promptly to revise Exhibits A
and B to reflect such product line.
19. NOTICES.
All notices hereunder given by the parties hereto
shall be in writing and shall be hand delivered or
sent by Registered or Certified Mail, postage prepaid,
return receipt requested, or delivered by a cable
company, toll prepaid, to the addresses indicated
below. The addresses of the parties until further
written notice to the contrary are:-
LICENSOR RALSTON PURINA COMPANY
Checkerboard Square
St. Louis, MO 63164
ATTN: Trademark Counsel
LICENSEE PURINA MILLS, INC.
800 Chouteau
St. Louis, MO 63164
ATTN: Legal Counsel
BP First Chicago House
90 Long Acre
London WC2E 9NP
26
<PAGE>
20. NOVATION.
This Agreement cancels and supercedes the License
Agreement between LICENSOR and LICENSEE dated April 1,
1985.
21. RELATIONSHIP OF THE PARTIES.
This Agreement does not constitute either party the
agent of the other, create a partnership or joint
venture between the parties or any other relationship
other than that of licensor and licensee, nor shall
this Agreement give either party the power to obligate
or bind the other in any manner whatsoever. The
manufacture, distribution, sale, offering for sale,
pricing, trade promotion and marketing of the Licensed
Products shall be accomplished by LICENSEE at
LICENSEE's sole cost and expense.
22. CAPTIONS.
The captions used in connection with the paragraphs
and subparagraphs of this Agreement are inserted only
for the purpose of reference. Such captions shall not
be deemed to govern, limit, modify, or in any other
manner affect the scope, meaning, or intent of the
provisions of this agreement or any part thereof; nor
shall such captions otherwise be given any legal
effect.
23. GOVERNING LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri and
the United States of America applicable to trademark
agreements made and to be performed therein and any
proceeding with respect to the interpretation or
enforcement of this Agreement shall be filed in the
U.S. District Court for the Eastern District of
Missouri.
27
<PAGE>
24. SEVERABILITY.
If any provision of this Agreement should be
determined by a court of competent jurisdiction to be
void or in any measure non-enforceable, the parties
intend that such determination shall amend or modify
this Agreement by eliminating or modifying only those
provisions affected by the determination.
25. MISCELLANEOUS.
(a) This Agreement contains a complete statement of all
the arrangements among the parties with respect to its
subject matter, cannot be changed or terminated
orally, and will be binding upon the parties'
respective successors and assigns, if any. The failure
of a party to insist upon strict adherence to any term
of this Agreement on any occasion will not be
considered a waiver or deprive or limit that party of
the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement in
the particular subsequent instance. Any waiver must be
in writing. In addition to any other legal rights and
remedies any party may have in the event of a breach
of this Agreement by another party, the injured party
shall have the right to seek specific performance of
the breaching party's duties under this Agreement.
(b) Dealer and feed-hauler signs displaying Licensed Marks
shall, for purposes of this Agreement, be considered
forms of advertising.
28
<PAGE>
(c) Neither LICENSOR nor LICENSEE shall use a mark or name
confusingly similar to any mark or name it is
precluded from using pursuant to this Agreement.
RALSTON PURINA COMPANY PURINA MILLS, INC.
By: /s/ F.J. Cornwell, Jr. By: /s/ H.D. McCarty
-------------------------- ----------------------
Name: F.J. Cornwell, Jr. Name: H.D. McCarty
Title: Vice President Title: Vice President
BP NUTRITION LIMITED
By: /s/ P.C. Mostyn
----------------------
Name: P.C. Mostyn
Title: Vice President
29
<PAGE>
SCHEDULE A
----------
I. House marks, which may be used by LICENSEE
for any Licensed Product:
A) PURINA
B) 9-square corporate symbol
C) Checkerboard and checkerband designs consistent with
LICENSEE's customary practices.
II. Marks which may be used by LICENSEE for animal feeds only:
A) CHOW
B) CHOW following the generic name of an animal, such as SHEEP.
30
<PAGE>
III. Marks which may be used by LICENSEE for the Licensed
Products for which they were used at any time during the
Period:
All other marks consisting of or Including the terms CHOW,
CHECKER (and spelling variations), CHECKERBOARD, and "PUR..."
prefixed words and "CHECKER..." prefixed words, to the extent
they were commercially used in good faith by LICENSEE with
LICENSOR's approval at any time during the six-month period (the
"Period") immediately prior to LICENSEE's ceasing to be
LICENSOR's wholly-owned subsidiary in the manner and to the
extent illustrated in Exhibits A and B.
IV. Without limiting the scope of the definitions in Parts I
through III of this SCHEDULE A, U.S. registered marks
listed below, which may be used for the Licensed Products
named therein:
31
<PAGE>
U.S. TRADEMARKS REG. NO.
- --------------- --------
ANIMAL DESIGN 1,386,229
ANIMAL DESIGN 1,393,747
CHECK-R-BOARD 839,742
CHECK-R-LIX 994,966
CHECK-R-MIX 645,816
CHECK-R-MIX SYMBOL 1,069,088
CHECK-R-MOL 1,281,218
CHECKER-ETTS 619,823
CHECKERBOARD 860,245
CHECKERBOARD DESIGN 582,371
(Multi-row Checkerboard band
design - Maximum: Occupying
not more than half of any side,
top or bottom of container;
Minimum: Down to three-row band)
CHECKERBOARD DESIGN 861,540
(25-sq. cluster)
CHECKERBOARD DESIGN 1,278,600
(3-row band)
CHECKERBOARD DESIGN 1,089,999
(3-row band)
CHECKERBOARD DESIGN 1,229,209
(3-row band)
CHECKERBOARD DESIGN 1,278,546
(3-row band)
CHECKERBOARD DESIGN 1,313,018
(3-row band)
CHECKERBOARD DESIGN 773,299
(75-sq. cluster)
CHECKERBOARD DESIGN 523,419
(5-row band or less)
CHECKERBOARD DESIGN 102,844
(2-row vertical band)
CHECKERGRAPH 1,219,117
CHECKERS 715,514
CHEK-R-FURAN 717,443
CHEK-R-MYCIN 1,099,226
CHEK-R-MYCIN 606,295
CHEK-R-TON 527,483
CHICKEN CHOWDER 90,837
CHOW 552,944
CHOW 611,152
CHOW 102,843
CHOWDER 524,635
CHOWS 844,222
CORPORATE SYMBOL (9-SQ.) 1,194,948
CORPORATE SYMBOL (9-SQ.) 1,078,666
CORPORATE SYMBOL (9-SQ.) 930,338
CORPORATE SYMBOL (9-SQ.) 930,356
CORPORATE SYMBOL (9-SQ.) 930,639
CORPORATE SYMBOL (9-SQ.) 930,599
CORPORATE SYMBOL (9-SQ.) 1,279,569
CORPORATE SYMBOL (9-SQ.) 1,279,570
CORPORATE SYMBOL (9-SQ.) 1,279,468
CORPORATE SYMBOL (9-SQ.) 1,132,552
CORPORATE SYMBOL (9-SQ.) 1,229,206
CORPORATE SYMBOL (9-SQ.) 1,225,714
CORPORATE SYMBOL (9-SQ.) 1,094,206
CORPORATE SYMBOL (9-SQ.) 1,207,988
CORPORATE SYMBOL (9-SQ.) 1,041,946
FOUR-SQUARE DESIGN 768,468
FOUR-SQUARE BRAND AND DESIGN 984,057
GOLDEN BULKY 841,709
GOLDEN CHECKERBOARD DAIRY 1,072,839
GOLDEN STEER 1,176,432
LAB CHOWS - THE CONTROL FACTOR LOGO 1,134,264
NEO-PURA-MYCIN 889,263
NURSE CHOW #300 1,327,297
NURSE GRO 936,979
PURA-JECT 1,074,427
PURA-LASSES 880,587
PURA-LYTE 912,483
PURA-MAST 837,007
PURA-MYCIN 666,511
PURATRACIN 916,615
PURE-PRIDE 1,154,125
PURE-PRIDE #300 1,294,772
PURIDINE 1,127,387
PURINA 289,064
PURINA 1,277,697
PURINA 911,996
PURINA 881,965
PURINA 878,052
PURINA 693,137
PURINA 523,420
PURINA 911,996
PURINA 772,457
PURINA 61,064
PURINA 1,225,715
PURINA 1,190,551
PURINA 1,278,602
PURINA 1,278,599
PURINA BALANCED BLEND & DESIGN 1,275,433
PURINA DARIGARD 1,284,051
PURINA FEED CENTER 1,370,852
PURINA FEED CENTER 1,367,996
PURINA HEALTH PRODUCTS SHIELD 862,872
PURINA INSECTI-GARD 1,295,634
PURINA L.E.C. 1,111,580
PURINA MILK GENERATOR 1,232,947
PURINA SELECTATION 1,247,840
PURINA SIX-16 1,236,025
THE CONTROL FACTOR 1,120,675
TROUT CHOW 680,078
Pending U.S. Applications
- -------------------------
SERIAL NUMBER
-------------
PURINA MILLS 614,586
PURINA & CORPORATE SYMBOL DESIGN 620,074
<PAGE>
EXHIBITS A AND B
TO THE LICENSE AGREEMENT
REFER TO THE PURINA PRODUCT MANUAL
AND THE PURINA HEALTH PRODUCTS MANUAL, RESPECTIVELY
<PAGE>
EXHIBIT C
- ---------
Lab Canine Diet
5006
- --------------------------------------------------------------
What It Is--
A constant formula diet supplying complete life cycle nutrition
for reproduction, lactation, growth and maintenance of lab
canines.
Features Benefits
Complete Life - Convenient...
Cycle Formula ...You can use a single diet for
different stages of life
Constant Nutritional - Minimizes Nutritional Variables...
Formula ...A constant diet assures good
nutrition for long-term studies.
High Energy, High - Healthier Dogs...
Protein Diet ...Good nutrition keeps dogs
healthier and helps them withstand
stress.
Highly Palatable - Less Waste...
...There is less waste when animals
readily consume feed.
Highly Digestible - Saves Time and Effort...
...Cleaning up is easier for you
since feed is designed for firm
stools and low fecal volume.
How to Feed--
Due to the variation in dog breeds used for research purposes,
the feeding directions given are for the Beagle. For dogs the
size of Beagles, the feed consumption is normally 1/3 to 1/2
oz. of air-dry Lab Canine Diet per pound body weight. Smaller
breeds consume slightly more in proportion to body weight,
while larger breeds consume slightly less. If fed dry, it can
be offered free-choice in self feeders. If desired, it can be
fed moistened with water, milk or broth. For growing pups, feed
free-choice. Most pups will start to eat solid food at three to
four weeks of age. Sometimes the pups will eat better if the
feed is moistened.
Important Considerations--
1. Always keep plenty of fresh, clean water available.
2. Pups will often eat better if feed is moistened.
3. Smaller breeds consume slightly more in proportion to body
weight, while larger breeds consume slightly less.
4. Rate of feeding must be controlled according to the animal
condition desired.
5. Store in a dry, well-ventilated area free from pests and
insects. Do not use moldy or insect-infested feed.
6. A feeding program is only as effective as the management
practices followed.
Revision 1/83
<PAGE>
Guaranteed Analysis/Ingredients
Crude protein not less than.......................... 25.0%
Crude fat not less than.............................. 9.0%
Crude fiber not more than............................ 4.0%
Moisture not more than............................... 12.0%
Ash not more than.................................... 10.0%
Added minerals not more than......................... 2.0%
Ground yellow corn, soybean meal, meat and bone meal, ground
wheat, corn gluten meal, wheat middlings, animal fat preserved
with BHA, ground beet pulp, dried milk products, wheat germ meal,
brewers' dried yeast, fish meal, dicalcium phosphate, salt,
vitamin A supplement, vitamin B12 supplement, D-activated animal
sterol (source of vitamin D3 ), vitamin E supplement, menadione
sodium bisulfite (source of vitamin K activity), choline
chloride, biotin, folic acid, niacin supplement, calcium
pantothenate, pyridoxine hydrochloride, riboflavin supplement,
thiamin, manganous oxide, ferrous sulfate, copper oxide, cobalt
carbonate, zinc oxide, calcium iodate.
<PAGE>
EXHIBIT C
- ---------
Certified Canine Diet
5007
- ---------------------------------------------------------------
What It Is--
A constant formula diet supplying complete life cycle nutrition
for laboratory dogs; pre-analyzed and certified not to exceed
specified maximum levels of certain contaminants.
Features Benefits
Complete Life Cycle, - Simplifies Feeding...
Constant Diet ...One feed is suitable for
reproduction, growth and
maintenance of laboratory dogs.
- Minimizes Variables...
...Long-term studies have fewer
nutritional variables.
Pre-Analyzed - Saves Effort...
...Good nutrition keeps dogs
healthier and helps them
withstand stress.
- Saves Money...
...You don't have to buy costly
test equipment or arrange for
analysis.
Certified for Contaminant - Helps Fulfill GLP's...
Levels ...Through careful testing, feed
is certified not to exceed
maximum concentrations of
selected contaminants.
Extruded Particle Size - Convenient...
...Bite-size particles are simple
to use.
Palatable - Good Consumption...
...Dogs readily eat feed.
How to Feed--
Due to the variation in dog breeds used for research purposes,
the feeding directions given are for the Beagle. For dogs the
size of Beagles, the feed consumption is normally 1/3 to 1/2
oz. of air-dry Certified Canine Diet #5007 per pound body
weight. Smaller breeds consume slightly more in proportion to
body weight, while larger breeds consume slightly less. If fed
dry, it can be offered free-choice in self feeders. If desired,
it can be fed moistened with water, milk or broth.
For growing pups, feed free-choice. Most pups will start to eat
solid food at three to four weeks of age. Sometimes the pups
will eat better if the feed is moistened.
Important Considerations--
1. Always keep plenty of fresh, clean water available.
2. Pups will often eat better if feed is moistened.
Revision 1/83
<PAGE>
3. Smaller breeds consume slightly more in proportion to
body weight, while larger breeds consume slightly less.
4. Store in a dry, well-ventilated area free from pests and
insects. Do not use moldy or inset-infested feed.
5. A feeding program is only as effective as the management
practices followed.
Guaranteed Analysis/Ingredients
Crude protein not less than............................ 25.0%
Crude fat not less than................................ 9.0%
Crude fiber not more than.............................. 4.0%
Moisture not more than................................. 12.0%
Ash not more than...................................... 10.0%
Added minerals not more than........................... 2.0%
Ground yellow corn, soybean meal, meat and bone meal, ground
wheat, corn gluten meal, wheat middlings, animal fat preserved
with BHA, ground beet pulp, dried milk products, wheat germ meal,
brewers' dried yeast, fish meal, dicalcium phosphate, salt,
vitamin A supplement, vitamin B12 supplement, D-activated animal
sterol (source of vitamin D3 ), vitamin E supplement, menadione
sodium bisulfite (source of vitamin K activity), choline
chloride, biotin, folic acid, niacin supplement, calcium
pantothenate, pyridoxine hydrochloride, riboflavin supplement,
thiamin, manganous oxide, ferrous sulfate, copper oxide, cobalt
carbonate, zinc oxide.
Guaranteed Analysis/Ingredients
Based on analysis of a complete sample, each package contains not
more than these maximum concentrations of the following
substances:
Heavy Metals Max. Concentration
Arsenic................................... 1.0 ppm
Cadmium................................... .5 ppm
Lead...................................... 3.0 ppm
Mercury................................... .2 ppm
Alfatoxin 10 ppb
<PAGE>
Chlorinated Hydrocarbons and PCB
Aldrin.................................... .03 ppm
Dieldrin.................................. .03 ppm
Endrin.................................... .03 ppm
Heptachlor................................ .03 ppm
Heptachlor Epoxide........................ .03 ppm
Lindane................................... .05 ppm
Chlordane................................. .05 ppm
DDT Related Substances.................... .15 ppm
PCB....................................... .15 ppm
Organophosphates
Thimet.................................... .5 ppm
Diazinon.................................. .5 ppm
Disulfaton................................ .5 ppm
Methyl Parathion.......................... .5 ppm
Malathion................................. .5 ppm
Parathion................................. .5 ppm
Tiodan.................................... .5 ppm
Ethion.................................... .5 ppm
Trithion.................................. .5 ppm
Drugs and Estrogens--
This product is manufactured in a plant where antibiotics and
synthetic estrogens are strictly prohibited. Routine monitoring
for over a decade has not shown any detectable levels of these
substances. No drugs or synthetic estrogens are permitted in
manufacturing, storage or warehousing to avoid any
contamination of Law Chow diets.
Other Contaminants--
If additional contaminant assays are needed, these can be
obtained by ordering such analysis prior to product
manufacture. Cost of these additional assays will be charged
based on current analysis rates at time of assay.
<PAGE>
EXHIBIT D
---------
TO LICENSE AGREEMENT
--------------------
Connecticut
Maine
New Hampshire
New York
Rhode Island
Vermont
<PAGE>
EXHIBIT E
---------
Export area with respect to J & L Feed Co.
------------------------------------------
Aruba
Bahamas
Barbados
British Virgin Islands
Cayman
Costa Rica
Netherlands Antilles
Panama
St. Lucia
Turks and Caicos
<PAGE>
AMENDMENT TO LICENSE AGREEMENT
------------------------------
Ralston Purina Company and Purina Mills, Inc., parties to a
certain license agreement dated October 1, 1986, wish to and do
hereby amend the said license agreement to substitute PURINAGRAPH
for THE SALESMAN'S PURINAGRAPH as a Licensed Mark.
Ralston Purina company
By:____________________________
Dated: January 16, 1990
Purina Mills, Inc.
By:____________________________
Dated: 1-18-90
Exhibit 12.1
Ratio of Earnings to Fixed Charges
(Dollars in Million)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Eight Four Pro Forma
Months Months Year Ended December 31, Three
Ended Ended ------------------------------------------------------- Months
Aug. 31, Aug. 31, 1994 1995 1996 Actual Pro Forma Ended Mar.
1993 1993 1997 1997 31, 1998
---------------------------------------------------------------------------------------------------
Income (loss) from con-
tinuing operations before
income taxes and
cumulative effect of
changes in accounting
principles $ 24.8 $ 10.2 $ 11.0 $ 7.1 $ (5.4) $ 12.1 $ (19.3) $ (17.1)
---------------------------------------------------------------------------------------------------
Fixed Charges 4.2 10.6 35.0 38.5 36.8 34.0 50.1 12.5
Earnings $ 29.0 $ 20.8 $ 46.0 $ 45.6 $ 31.4 $ 46.1 $ 30.8 $ (4.6)
----------------------------------------------------------------------------------------------------
Ratio of earnings to
fixed charges 6.90x 1.96x 1.31x 1.18x 0.85x 1.36x 0.61x (0.37)
----------------------------------------------------------------------------------------------------
</TABLE>
For the year ended December 31, 1996 and the Pro Forma year ended
December 31, 1997 and three months ended March 31, 1998 earnings
were insufficient to cover fixed charges by $5.4 million, $19.3
million and $17.1 million, respectively.
For purposes of computing these ratios and amounts, earnings
consisted of income from continuing operations before income
taxes and fixed charges. Fixed charges consist of interest
expense on debt, amortization of financing costs and the portion
(approximately one-third) of rental expense that management
believes is representative of the interest component of rental
expenses.
Exhibit 21.1
SUBSIDIARIES OF PURINA MILLS, INC.
Subsidiary Jurisdiction
- ---------- ------------
American Dairy Management Delaware
Carolina Agri-Products, Inc. Delaware
Coastal Ag-Development. Inc. North Carolina
Cole Grain Company, Inc. Delaware
Purina Livestock Management Services, Inc. Texas
PMI Nutrition, Inc Delaware
PMI Agriculture LLC* Missouri
PMI Nutrition International, Inc. Delaware
PM Nutrition Company, Inc. Delaware
*All of the Subsidiaries listed are 100% owned by Purina Mills,
Inc., with the exception of PMI Agriculture LLC which is 50%
owned by Purina Mills, Inc. and 50% owned by PMI Nutrition
International, Inc.
Exhibit 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of Purina
Mills, Inc. on Form S-4 of our report dated February 9, 1998
(March 16, 1998, as to Note 14), appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the headings
"Summary Historical Financial Data", "Selected Historical
Consolidated Financial Data", and "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
St. Louis, Missouri
May 28, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
----------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(Exact name of trustee as specified in its charter)
A National Banking Association 36-0899825
(I.R.S. employer
identification number)
One First National Plaza, Chicago, Illinois 60670-0126
(Address of principal executive offices) (Zip Code)
The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
Attn: Lynn A. Goldstein, Law Department (312) 732-6919
(Name, address and telephone number of agent for service)
=============================
Purina Mills, Inc.
(Exact name of obligor as specified in its charter)
Delaware 43-1359249
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
1401 S. Hanley Road
St. Louis, Missouri 63144
(Address of principal executive offices) (Zip Code)
Debt Securities
(Title of Indenture Securities)
<PAGE>
Item 1. General Information. Furnish the following
information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of Currency, Washington, D.C., Federal
Deposit Insurance Corporation, Washington, D.C., The
Board of Governors of the Federal Reserve System,
Washington D.C.
(b) Whether it is authorized to exercise
corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations With the Obligor. If the obligor
is an affiliate of the trustee, describe each
such affiliation.
No such affiliation exists with the trustee.
Item 16. List of exhibits. List below all exhibits filed as
a part of this Statement of Eligibility.
1. A copy of the articles of association of the
trustee now in effect.*
2 A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by Section
321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
<PAGE>
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of
1939, as amended, the trustee, The First National Bank of
Chicago, a national banking association organized and existing
under the laws of the United States of America, has duly caused
this Statement of Eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of
Chicago and the State of Illinois, on this 6th day of April,
1998.
The First National Bank of Chicago,
Trustee
By /s/ John R. Prendiville
John R. Prendiville
Vice President
* Exhibit 1, 2, 3 and 4 are herein incorporated by reference to
Exhibits bearing identical numbers in Item 16 of the Form T-1 of
The First National Bank of Chicago, filed as Exhibit 25.1 to the
Registration Statement on Form S-3 of SunAmerica, Inc., filed
with the Securities and Exchange Commission on October 25, 1996
(Registration No. 333-14201).
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
April 6, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of an indenture
between Purina Mills, Inc. and The First National Bank of
Chicago, the undersigned, in accordance with Section 321(b) of
the Trust Indenture Act of 1939, as amended, hereby consents that
the reports of examinations of the undersigned, made by Federal
or State authorities authorized to make such examinations, may be
furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Very truly yours,
The First National Bank of Chicago
By /s/ John R. Prendiville
John R. Prendiville
Vice President
<PAGE>
EXHIBIT 7
Legal Title
of Bank: The First National Bank
of Chicago Call Date: 12/31/97 ST-BK:
Address: One First National 17-1630 FFIEC 031
Plaza, Ste 0303 Page RC-1
City, State
Zip: Chicago, IL 60670
FDIC Certificate
No.: 0/3/6/1/8
---------
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for December 31,1997
All schedules are to be reported in thousands of dollars. Unless
otherwise indicated, report the amount outstanding as of the last
business day of the quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Dollar Amounts
C400 in Thousands RCFD BIL MIL THOU
------------------------------------------------
ASSETS
1. Cash and balances
due from depository
institutions (from Schedule
RC-A):
a. Noninterest-bearing
balances and currency
and coin(1) 0081 4,267,336 1.a.
b. Interest-bearing
balances(2) 0071 6,893,837 1.b.
2. Securities
a. Held-to-maturity
securities(from Schedule
RC-B, column A) 1754 0 2.a.
b. Available-for-sale
securities (from Schedule
RC-B, column D)............ 1773 5,691,722 2.b.
3. Federal funds sold and
securities purchased under
agreements to resell 1350 6,339,940 3.
4. Loans and lease financing
receivables:
a. Loans and leases,
net of unearned income
(from Schedule RC-C) RCFD 2122 25,202,984 4.a.
b. LESS: Allowance
for loan and lease
losses RCFD 3123 419,121 4.b.
c. LESS: Allocated
transfer risk reserve RCFD 3128 0 4.c.
d. Loans and leases,
net of unearned income,
allowance, and reserve
(item 4.a minus 4.b
and 4.c) 2125 24,783,863 4.d.
5. Trading assets (from
Schedule RD-D) 3545 6,703,332 5.
6. Premises and fixed
assets (including
capitalized leases) 2145 743,426 6.
7. Other real estate owned
(from Schedule RC-M) 2150 7,727 7.
8. Investments in
unconsolidated
subsidiaries and
associated companies
(from Schedule RC-M) 2130 134,959 8.
9. Customers' liability
to this bank on
acceptances outstanding 2155 644,340 9.
10. Intangible assets
(from Schedule RC-M) 2143 268,501 10.
11. Other assets (from
Schedule RC-F) 2160 2,004,432 11.
12. Total assets (sum of
items 1 through 11) 2170 58,483,415 12.
- -------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
<PAGE>
Legal Title
of Bank: The First National Bank
of Chicago Call Date: 12/31/97 ST-BK:
Address: One First National 17-1630 FFIEC 031
Plaza, Ste 0303 Page RC-2
City, State
Zip: Chicago, IL 60670
FDIC Certificate
No.: 0/3/6/1/8
---------
Schedule RC-Continued
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Dollar Amounts
C400 in Thousands RCFD BIL MIL THOU
-----------------------------------------------
LIABILITIES
13. Deposits:
a. In domestic offices
(sum of totals of
columns A and C
from Schedule RC-E, part 1) RCON 2200 21,756,846 13.a
(1) Noninterest-bearing(1) RCON 6631 9,197,227 13.a.1
(2) Interest-bearing RCON 6636 559,619 13.a.2
b. In foreign offices,
Edge and Agreement
subsidiaries, and
IBFs (from Schedule
RC-E, part II) RCFN 2200 14,811,410 13.b.
(1) Noninterest bearing RCFN 6631 332,801 13.b.1
(2) Interest-bearing RCFN 6636 14,478,609 13.b.2
14. Federal funds purchased
and securities sold under
agreements
to repurchase: RCFD 2800 4,535,422 14
15. a. Demand notes issued
to the U.S. Treasury RCON 2840 43,763 15.a
b. Trading Liabilities
(from Schedule RC-D)................RCFD 3548 6,523,239 15.b
16. Other borrowed money:
a. With a remaining maturity
of one year or less RCFD 2332 1,360,165 16.a
b. With a remaining maturity
of more than one year through
three years A547 576,492 16.b
. c. With a remaining maturity
of more than three years ........... A548 703,981 16.c
17. Not applicable
18. Bank's liability
on acceptance executed
and outstanding RCFD 2920 644,341 18
19. Subordinated notes and
debentures (2) RCFD 3200 1,700,000 19
20. Other liabilities
(from Schedule RC-G) RCFD 2930 1,322,077 20
21. Total liabilities
(sum of items 13 through 20) RCFD 2948 53,987,736 21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred
stock and related surplus RCFD 3838 0 23
24. Common stock RCFD 3230 200,858 24
25. Surplus (exclude all surplus
related to preferred stock) RCFD 3839 2,999,001 25
26. a. Undivided profits and
capital reserves RCFD 3632 1,273,239 26.a.
b. Net unrealized holding
gains (losses) on available-
for-sale securities RCFD 8434 24,096 26.b.
27. Cumulative foreign currency
translation adjustments RCFD 3284 (1,515) 27
28. Total equity capital
(sum of items 23 through 27) RCFD 3210 4,495,679 28
29. Total liabilities and
equity capital (sum of
items 21 and 28) RCFD 3300 58,483,415 29
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the
statement below that best describes the most
comprehensive level of auditing work performed for
the bank by independent external Number
auditors as of any date during 1996.........RCFD 6724......N/A M.1
1 = Independent audit of the bank conducted in accordance
with generally accepted auditing standards by a certified
public accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company
conducted in accordance with generally accepted auditing
standards by a certified public accounting firm which
submits a report on the consolidated holding company (but
not on the bank separately)
3 = Directors' examination of the bank conducted in accordance
with generally accepted auditing standards by a certified
public accounting firm (may be required by state chartering
authority)
4 = Directors' examination of the bank performed by other external
auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external
auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------------------
(1) Includes total demand deposits and noninterest-bearing time
and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000913437
<NAME> PURINA MILLS INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,145
<SECURITIES> 0
<RECEIVABLES> 48,141
<ALLOWANCES> 6,573
<INVENTORY> 64,571
<CURRENT-ASSETS> 133,363
<PP&E> 268,803
<DEPRECIATION> 1,335
<TOTAL-ASSETS> 791,919
<CURRENT-LIABILITIES> 95,519
<BONDS> 544,695
0
0
<COMMON> 0
<OTHER-SE> 109,414
<TOTAL-LIABILITY-AND-EQUITY> 791,919
<SALES> 267,079
<TOTAL-REVENUES> 267,079
<CGS> 219,530
<TOTAL-COSTS> 219,530
<OTHER-EXPENSES> 51,753
<LOSS-PROVISION> 152
<INTEREST-EXPENSE> 8,980
<INCOME-PRETAX> (13,336)
<INCOME-TAX> (4,966)
<INCOME-CONTINUING> (8,370)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,370)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 99.1
FORM OF LETTER OF TRANSMITTAL
PURINA MILLS, INC.
Offer to Exchange
9% Senior Subordinated Notes due 2010,
which have been registered under the Securities Act of 1933,
as amended,
for any and all Outstanding
9% Senior Subordinated Notes due 2010
Pursuant to the Prospectus, dated _______ __, 1998.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON ___________ __, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON __________ __, 1998.
Delivery to: The First National Bank of Chicago
By Hand
Facsimile or Overnight
By Mail: Transmissions: Delivery:
(Registered or (Eligible The First National
Certified Institutions Bank of Chicago
Mail Recommended) Only) c/o First Chicago
The First National (212) 240-8938 Trust Company
Bank of Chicago of New York
c/o First Chicago 14 Wall Street
Trust Company 8th Floor,
of New York To Confirm Window 2
14 Wall Street by Telephone New York,
8th Floor, Window 2 or for New York 10005
New York, Information Call:
New York 10005 (212) 240-8801
Delivery of this instrument to an address other than
as set forth above, or transmission of instructions via facsimile
other than as set forth above, will not constitute a valid
delivery.
The undersigned acknowledges receipt of the
Prospectus, dated _______ __, 1998 (the "Prospectus"), of Purina
Mills, Inc., a Delaware corporation ("PMI" or the "Company), and
this Letter of Transmittal (this "Letter"), which together
constitute the offer (the "Exchange Offer") to exchange an
aggregate principal amount of up to $350,000,000 of 9% Senior
Subordinated Notes due 2010 (the "New Notes") for an equal
principal amount of the outstanding 9% Senior Subordinated Notes
due 2010 (the "Old Notes"). The First National Bank of Chicago is
the exchange agent for the Exchange Offer (the "Exchange Agent").
Capitalized terms not defined herein are defined in the
Prospectus.
For each Old Note accepted for exchange, the holder of
such Old Note will receive a New Note having a principal amount
at maturity equal to that of the surrendered Old Note. The New
Notes will accrue interest at the applicable per annum rate from
March 15, 1998. Interest on the New Notes is payable on March 15
and September 15 of each year commencing September 15, 1998.
Notwithstanding the foregoing, if (i) by June 10,
1998, neither the Exchange Offer Registration Statement nor the
Shelf Registration Statement has been filed with the Securities
and Exchange Commission (the
<PAGE>
"Commission") covering resales of the Old Notes or the New Notes,
as the case may be; (ii) by September 8, 1998, neither the
Registered Exchange Offer is consummated nor the Shelf
Registration Statement is declared effective; or (iii) after
either the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such Registration
Statement thereafter ceases to be effective or usable (subject to
certain exceptions, including an exception for a period not to
exceed 60 days in any twelve-month period during which the
Company effects a material corporate transaction (a "Suspension
Period" as further defined in the Registration Rights Agreement))
in connection with resales of Old Notes or New Notes in
accordance with and during the periods specified in the
Registration Rights Agreement (each such event referred to in
clause (i) through (iii) being herein called a "Registration
Default"), additional cash interest will accrue on the Old Notes
and the New Notes at the rate of 0.50% per annum (increasing by
0.50% per annum at the end of each 90-day period thereafter) from
and including the date on which any such Registration Default
shall occur to but excluding the date on which all Registration
Defaults have been cured, calculated on the principal amount of
the Old Notes as of the date on which such interest is payable;
provided, however, that in no event shall the aggregate amount of
such additional interest exceed 1.00% per annum. Such interest is
payable in addition to any other interest payable from time to
time with respect to the Old Notes.
The Company reserves the right (i) to delay acceptance
of any Old Notes, to extend the Exchange Offer or to terminate
the Exchange Offer and not permit acceptance of Old Notes not
previously accepted if any of the conditions set forth in "The
Exchange Offer-Conditions" section of the Prospectus shall have
occurred and shall not have been waived by the Company, by giving
oral or written notice of such delay, extension or termination to
the Exchange Agent, or (ii) to amend the terms of the Exchange
Offer in any manner deemed by it to be advantageous to the
holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof to the Exchange
Agent. If the Exchange Offer is amended in a manner determined by
the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Old Notes of such
amendment.
Without limiting the manner in which the Company may
choose to make public announcement of any delay, extension,
amendment or termination of the Exchange Offer, the Company shall
have no obligation to publish, advertise, or otherwise
communicate any such public announcement.
This Letter is to be completed by a holder of Old
Notes either if Old Notes are to be forwarded herewith or if a
tender of Old Notes, if available, is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The
Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in "The Exchange Offer"
section of the Prospectus. Holders of Old Notes whose
certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry
tender of their Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility (a "Book-Entry Confirmation")
and all other documents required by this Letter to the Exchange
Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth
in "The Exchange Offer-Guaranteed Delivery Procedures" section of
the Prospectus. See Instruction 1. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the
Exchange Agent.
The undersigned has completed the appropriate boxes
below and signed this Letter to indicate the action the
undersigned desires to take with respect to the Exchange Offer.
2
<PAGE>
List below the Old Notes to which this Letter relates.
If the space provided below is inadequate, the certificate
numbers and principal amount of Old Notes should be listed on a
separate signed schedule affixed hereto.
- -----------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- -----------------------------------------------------------------
Name(s) and Address(es) Aggregate
of Registered Holder(s) Principal Principal
(Please fill in, Certificate Amount of Amount
if blank) Number(s)* Old Note(s) Tendered**
- -----------------------------------------------------------------
----------------------------------------
----------------------------------------
Total
- -----------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by
book-entry transfer.
** Unless otherwise indicated in this column, a holder will be
deemed to have tendered ALL of the Old Notes represented by
the Old Notes indicated in column 2. See Instruction 2. Old
Notes tendered hereby must be in denominations of principal
amount of $1,000 and any integral multiple thereof. See
Instruction 1.
- -----------------------------------------------------------------
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution_______________________________
Account Number__________ Transaction Code Number___________
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT
TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)_____________________________
Window Ticket Number (if any)_______________________________
Date of Execution of Notice of Guaranteed Delivery__________
Name of Institution which guaranteed delivery_______________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number__________ Transaction Code Number___________
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:_______________________________________________________
Address:____________________________________________________
____________________________________________________________
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the
Exchange Offer, the undersigned hereby tenders to PMI the
aggregate principal amount of Old Notes indicated above. Subject
to, and effective upon, the acceptance for exchange of the Old
Notes tendered hereby, the undersigned hereby sells, assigns and
transfers to, or upon the order of, PMI all right, title and
interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that
the undersigned has full power and authority to tender, sell,
assign and transfer the Old Notes tendered hereby and that PMI
will acquire good and unencumbered title thereto, free and clear
of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim when the same are accepted by PMI.
The undersigned hereby further represents that any New Notes
acquired in exchange for Old Notes tendered hereby will have been
acquired in the ordinary course of business of the person
receiving such New Notes, whether or not such person is the
undersigned, that neither the holder of such Old Notes nor any
such other person is engaged in, or intends to engage in a
distribution of such New Notes, or has an arrangement or
understanding with any person to participate in the distribution
of such New Notes, and that neither the holder of such Old Notes
nor any such other person is an "affiliate," as defined in Rule
405 under the Securities Act of 1933, as amended (the "Securities
Act"), of PMI.
The undersigned also acknowledges that this Exchange
Offer is being made based on PMI's understanding of an
interpretation by the staff of the Commission as set forth in
no-action letters issued to third parties, including Exxon
Capital Holdings Corporation, SEC No-Action Letter (available May
13, 1988), Morgan Stanley & Co. Incorporated, SEC No-Action
Letter (available June 5, 1991) and Shearman & Sterling, SEC
No-Action Letter (available July 2, 1993), that the New Notes
issued in exchange for the Old Notes pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred
by each holder thereof (other than a broker-dealer who acquires
such New Notes directly from PMI for resale pursuant to Rule 144A
under the Securities Act or any other available exemption under
the Securities Act or any such holder that is an "affiliate" of
PMI within the meaning of Rule 405 under the Securities Act),
without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes
are acquired in the ordinary course of such holder's business and
such holder is not engaged in, and does not intend to engage in,
a distribution of such New Notes and has no arrangement with any
person to participate in the distribution of such New Notes. If a
holder of Old Notes is engaged in or intends to engage in a
distribution of the New Notes or has any arrangement or
understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such holder may
not rely on the applicable interpretations of the staff of the
Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with
any secondary resale transaction. If the undersiged is not a
broker-dealer, the undersigned represents that it is not engaged
in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive
New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The undersigned will, upon request, execute and
deliver any additional documents deemed by PMI to be necessary or
desirable to complete the sale, assignment and transfer of the
Old Notes tendered hereby. All authority conferred or agreed to
be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees
4
<PAGE>
in bankruptcy and legal representatives of the undersigned and
shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only
in accordance with the procedures set forth in "The Exchange
Offer-Withdrawal of Tenders" section of the Prospectus.
Unless otherwise indicated herein in the box entitled
"Special Issuance Instructions" below, please deliver the New
Notes (and, if applicable, substitute certificates representing
Old Notes for any Old Notes not exchanged) in the name of the
undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at
the Book-Entry Transfer Facility. Similarly, unless otherwise
indicated under the box entitled "Special Delivery Instructions"
below, please send the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the
box entitled "Description of Old Notes".
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED
"DESCRIPTION OF OLD NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE
DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX
ABOVE.
5
<PAGE>
- ----------------------------- -----------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if To be completed ONLY if
certificates for Old Notes certificates for Old Notes
not exchanged and/or New not exchanged and/or New
Notes are to be issued in Notes are to be sent to
the name of and sent to someone other than the
someone other than the person(s) whose
person(s) whose signature(s) appear(s) on
signature(s) appear(s) on this Letter above or to
this Letter above, or if such person(s) at an
Old Notes delivered by address other than shown in
book-entry transfer which the box entitled
are not accepted for "Description of Old Notes"
exchange are to be returned on this Letter above.
by credit to an account
maintained at the
Book-Entry Transfer
Facility other than the
account indicated above.
Issue New Notes and/or Old
Notes to: Mail New Notes and/or to:
Name(s):_____________________ Name(s):_____________________
(Please Type or Print) (Please Type or Print)
_____________________________ _____________________________
(Please Type or Print) (Please Type or Print)
Address:_____________________ Address:_____________________
_____________________________ _____________________________
(Including Zip Code) (Including Zip Code)
(Complete accompanying
Substitute Form W-9)
Credit unexchanged Old Notes
delivered by book-entry
transfer to the Book-Entry
Transfer Facility account set
forth below.
_____________________________
(Book-Entry Transfer Facility
Account Number, if applicable)
- ----------------------------- -----------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL
OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY)
MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
6
<PAGE>
- -----------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete accompanying Substitute Form W-9)
Dated:___________________________________________________ ,1998
_________________________________________________________x
_________________________________________________________x
(Signature(s) of Owner) (Date)
Area Code and Telephone Number:_______________________
If a holder is tendering any Old Notes, this Letter must
be signed by the registered holder(s) as the name(s) appear(s)
on the certificate(s) for the Old Notes or by any person(s)
authorized to become registered holder(s) by endorsements and
documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person
acting in a fiduciary or representative capacity, please set
forth full title. See Instruction 3.
Name(s):______________________________________________
______________________________________________________
(Please Type or Print)
Capacity:_____________________________________________
Address:______________________________________________
______________________________________________________
(Including Zip Code)
SIGNATURE GUARANTEE
(if required by Instruction 3)
Signature(s)
Guaranteed by
an Eligible
Institution:__________________________________________
(Authorized Signature)
______________________________________________________
(Title)
______________________________________________________
(Name and Firm)
Dated:___________________________________________________ ,1998
- -----------------------------------------------------------------
7
<PAGE>
INSTRUCTIONS
Purina Mills, Inc.
Forming Part of the Terms and Conditions
of the Offer to Exchange
9% Senior Subordinated Notes due 2010, which have
been registered under the Securities Act of 1933,
as amended,
for any and all Outstanding
9% Senior Subordinated Notes due 2010.
1. Delivery of this Letter and Old Notes; Guaranteed Delivery
Procedures.
This Letter is to be completed by holders of Old Notes
either if certificates are to be forwarded herewith or if tenders
are to be made pursuant to the procedures for delivery by
book-entry transfer set forth in "The Exchange Offer-Book-Entry
Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the
case may be, as well as a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and any other
documents required by this Letter, must be received by the
Exchange Agent at the address set forth herein on or prior to the
Expiration Date, or the tendering holder must comply with the
guaranteed delivery procedures set forth below. Old Notes
tendered hereby must be in denominations of principal amount at
maturity of $1,000 and any integral multiple thereof.
Holders of Old Notes whose certificates for Old Notes
are not immediately available or who cannot deliver their
certificates and all other required documents to the Exchange
Agent on or prior to the Expiration Date, or who cannot complete
the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery
procedures set forth in "The Exchange Offer-Guaranteed Delivery
Procedures" section of the Prospectus. Pursuant to such
procedures, (i) such tender must be made through an Eligible
Institution (as defined below), (ii) prior to the Expiration
Date, the Exchange Agent must receive from such Eligible
Institution a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by PMI (by facsimile
transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered
Old Notes, or a Book-Entry Confirmation, as the case may be, and
any other documents required by this Letter will be deposited by
the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Old Notes, in proper
form for transfer, or Book-Entry Confirmation, as the case may
be, and all other documents required by this Letter, are received
by the Exchange Agent within three NYSE trading days after the
date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes
and all other required documents is at the election and risk of
the tendering holders, but the delivery will be deemed made only
when actually received or confirmed by the Exchange Agent. If Old
Notes are sent by mail, it is suggested that the mailing be made
sufficiently in advance of the Expiration Date to permit delivery
to the Exchange Agent prior to 5:00 p.m., New York City time, on
the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
8
<PAGE>
2. Partial Tenders (not applicable to holders of Old Notes who
tender by book-entry transfer).
If less than all of the Old Notes evidenced by a
submitted certificate are to be tendered, the tendering holder(s)
should fill in the aggregate principal amount of Old Notes to be
tendered in the box above entitled "Description of Old
Notes-Principal Amount Tendered." A reissued certificate
representing the balance of nontendered Old Notes will be sent to
such tendering holder, unless otherwise provided in the
appropriate box on this Letter, promptly after the Expiration
Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL
BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED.
3. Signatures of this Letter; Bond Powers and Endorsements;
Guarantee of Signatures.
If this Letter is signed by the registered holder of
the Old Notes tendered hereby, the signature must correspond
exactly with the name as written on the face of the certificates
without any change whatsoever.
If any tendered Old Notes are owned of record by two
or more joint owners, all such owners must sign this Letter.
If any tendered Old Notes are registered in different
names on several certificates, it will be necessary to complete,
sign and submit as many separate copies of this Letter as there
are different registrations of certificates.
When this Letter is signed by the registered holder of
the Old Notes specified herein and tendered hereby, no
endorsements of certificates or separate bond powers are
required. If, however, the New Notes are to be issued, or any
untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates
transmitted hereby or separate bond powers are required.
Signatures on such certificates must be guaranteed by an Eligible
Institution.
If this Letter is signed by a person other than the
registered holder of any certificates specified herein, such
certificates must be endorsed or accompanied by appropriate bond
powers, in either case signed exactly as the name of the
registered holder appears on the certificates and the signatures
on such certificates must be guaranteed by an Eligible
Institution.
If this Letter or any certificates or bond powers are
signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by PMI, proper evidence
satisfactory to PMI of their authority to so act must be
submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR
SIGNATURES ON BOND POWERS REQUIRED BY THIS INSTRUCTION 3 MUST BE
GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED NATIONAL
SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC., BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES OR BY AN
"ELIGIBLE GUARANTOR" INSTITUTION WITHIN THE MEANING OF RULE
17AD-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN
ELIGIBLE INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (I) BY
A REGISTERED HOLDER OF OLD NOTES (WHICH TERM, FOR PURPOSES OF THE
EXCHANGE OFFER, INCLUDES ANY PARTICIPANT IN THE BOOK-ENTRY
TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A SECURITY
POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) TENDERED WHO
HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE
INSTRUCTIONS" OR "SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER,
OR (II) FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION.
9
<PAGE>
4. Special Issuance and Delivery Instructions.
Tendering holders of Old Notes should indicate in the
applicable box the name and address to which New Notes issued
pursuant to the Exchange Offer and/or substitute certificates
evidencing Old Notes not exchanged are to be issued or sent, if
different from the name or address of the person signing this
Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must
also be indicated. A holder of Old Notes tendering Old Notes by
book-entry transfer may request that Old Notes not exchanged be
credited to such account maintained at the Book-Entry Transfer
Facility as such holder of Old Notes may designate hereon. If no
such instructions are given, such Old Notes not exchanged will be
returned to the name or address of the person signing this
Letter.
5. Tax Identification Number.
Federal income tax law generally requires that a
tendering holder whose Old Notes are accepted for exchange must
provide PMI (as payor) with such Holder's correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9 below,
which, in the case of a tendering holder who is an individual, is
his or her social security number. If PMI is not provided with
the current TIN or an adequate basis for an exemption, such
tendering holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, delivery of New Notes to
such tendering holder may be subject to backup withholding in an
amount equal to 31% of all reportable payments made after the
exchange. If withholding results in an overpayment of taxes, a
refund may be obtained.
Exempt holders of Old Notes (including, among others,
all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the
enclosed Guidelines of Certification of Taxpayer Identification
Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder
of Old Notes must provide its correct TIN by completing the
"Substitute Form W-9" set forth below, certifying that the TIN
provided is correct (or that such holder is awaiting a TIN) and
that (i) the holder is exempt from backup withholding, (ii) the
holder has not been notified by the Internal Revenue Service that
such holder is subject to a backup withholding as a result of a
failure to report all interest or dividends or (iii) the Internal
Revenue Service has notified the holder that such holder is no
longer subject to backup withholding. If the tendering holder of
Old Notes is a nonresident alien or foreign entity not subject to
backup withholding, such holder must give PMI a completed Form
W-8, Certificate of Foreign Status. These forms may be obtained
from the Exchange Agent. If the Old Notes are in more than one
name or are not in the name of the actual owner, such holder
should consult the W-9 Guidelines for information on which TIN
to report. If such holder does not have a TIN, such holder should
consult the W-9 Guidelines for instructions on applying for a
TIN, check the box in Part 2 of the Substitute Form W-9 and write
"applied for" in lieu of its TIN. Note: checking this box and
writing "applied for" on the form means that such holder has
already applied for a TIN or that such holder intends to apply
for one in the near future. If such holder does not provide its
TIN to PMI within 60 days, backup withholding will begin and
continue until such holder furnishes its TIN to PMI.
6. Transfer Taxes.
PMI will pay all transfer taxes, if any, applicable to
the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, New Notes and/or substitute Old
Notes not exchanged are to be delivered to, or are to be
registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if
tendered Old Notes are registered in the name of any person other
than the person signing this Letter, or if a transfer tax is
imposed for any reason other than the transfer of Old Notes to
PMI or its order pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on
10
<PAGE>
the registered holder or any other persons) will be payable by
the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such
tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT IS NOT
NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES
SPECIFIED IN THIS LETTER.
7. Waiver of Conditions.
PMI reserves the absolute right to waive satisfaction
of any or all conditions enumerated in the Prospectus.
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent
tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter, shall waive any right to receive notice
of the acceptance of their Old Notes for exchange.
Neither PMI, the Exchange Agent nor any other person
is obligated to give notice of any defect or irregularity with
respect to any tender of Old Notes nor shall any of them incur
any liability for failure to give any such notice.
9. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any holder whose Old Notes have been mutilated, lost,
stolen or destroyed should contact the Exchange Agent at the
address indicated above for further instructions.
10. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as
well as requests for additional copies of the Prospectus and this
Letter, may be directed to the Exchange Agent, at the address and
telephone number indicated above.
11
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: PURINA MILLS, INC.
- ----------------------------------------------------------------------------
SUBSTITUTE Part 1 -- PLEASE PROVIDE
Form W-9 YOUR TIN IN THE BOX AT TIN:_________________________
RIGHT AND CERTIFY BY (Social Security Number
SIGNING AND DATING BELOW. or Employer
Identification Number)
---------------------------------------------------------------
Department Part 2 -- TIN Applied For [ ]
of the
Treasury
---------------------------------------------------------------
Internal CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
Revenue
Service (1) the number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to
be issued to me).
Payor's (2) I am not subject to backup withholding either because:
Request For (a) I am exempt from backup withholding, or (b) I have
Taxpayer not been notified by the Internal Revenue Service (the
Identi- "IRS") that I am subject to backup withholding as a
fication result of a failure to report all interest or dividends,
Number or (c) the IRS has notified me that I am no longer
("TIN") and subject to backup witholding, and
Certifica-
tion (3) any other information provided on this form is true and
correct.
SIGNATURE_________________________ DATE_______________
- ----------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup
withholding.
- ----------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
- ----------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of the exchange, 31 percent of all reportable payments made to me
thereafter will be withheld until I provide a number.
_________________________________________ ____________________________
Signature Date
- ----------------------------------------------------------------------------
12
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Instructions for Determining the Proper Identification
Number to Give the Payer. -- Social Security Numbers have nine
digits separated by two hyphens: i.e. 000-00-0000. Employer
Identification Numbers have nine digits separated by only one
hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- ----------------------------- ------------------------------
Give the Name and
SOCIAL SECURITY
For this type of account: Number of --
- ----------------------------- ------------------------------
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first individual
on the account (1)
3. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)
4. a The usual revocable The grantor-trustee (1)
savings trust account
(grantor is also
trustee)
b So-called trust The actual owner (1)
account that is not
a legal or valid
trust under State
law
5. Sole proprietorship The owner (3)
6. A valid trust, estate, Legal entity (Do not
or pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.) (4)
7. Association, club, The organization
religious, charitable
or other tax-exempt
organization
8. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that received
agricultural program
payments
- ----------------------------- ------------------------------
(1) List first and circle the name of the person whose number
you furnish. If only one person on a joint account has a
Social Security Number, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's Social
Security Number.
(3) You must show your individual name, but you may also enter
your business or "doing business as" name. You may use
either your Social Security Number or your Employer
Identification Number (if you have one).
(4) List first and circle the name of the legal trust, estate,
or pension trust. (Do not furnish the Taxpayer
Identification Number of the personal representative or
trustee unless the legal entity itself is not designated in
the account title.
Note: If no name is circled when there is more than one name
listed, the number will be considered to be that of the
first name listed.
13
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
How to Obtain a TIN
If you do not have a Taxpayer Identification Number or you do not
know your number, obtain Form SS-5 (Application for a Social
Security Number Card) at the local office of the Social Security
Administration or the Internal Revenue Service ("IRS"), Form SS-4
(Application for Employer Identification Number), or Form W-7 ()
and apply for a number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL
payments by the Payer include the following:
- An organization exempt from tax under section 501(a), an
IRA or a custodial account under section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality
thereof.
- A foreign government, a political subdivision of a foreign
government, or any agency or instrumentality thereof. An
international organization or any agency or instrumentality
thereof.
Other payees that may be exempt from backup withholding include:
- A corporation.
- A foreign central bank of issue.
- A registered dealer in securities or commodities registered
in the U.S., the District of Columbia, or a possession of
the U.S.
- A futures commission merchant registered with the Commodity
Futures Trading Commission.
- A real estate investment trust.
- A common trust fund operated by a bank under section
584(a).
- A financial institution.
- An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1).
- An entity registered at all times under the Investment
Company Act of 1940.
- A middleman known in the investment community as a nominee
or who is listed in the most recent publication of the
American Society of Corporate Secretaries, Inc., Nominee
List.
Payments of dividends and patronage dividends not generally
subject to backup withholding include the following:
- Payments to nonresident aliens subject to withholding under
section 1441.
- Payments to partnerships not engaged in a trade or business
in the U.S. and which have at least one nonresident alien
partner.
- Payments of patronage dividends where the amount received
is not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding
include the following:
- Payments of interest on obligations issued by individuals
- Payments of tax-exempt interest (including exempt-interest
dividends under section 852).
- Payments described in section 6049(b)(5) to nonresident
aliens
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
Note: You may be subject to backup withholding if this interest
is $600 or more and is paid in the course of the payer's trade or
business and you have not provided your correct Taxpayer
Identification Number to the payer. Exempt payees described above
should file Substitute Form W-9 to avoid possible erroneous
backup withholding. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM IN PART II, SIGN AND DATE
THE FORM AND RETURN IT TO THE PAYER.
Certain payments, other than interest, dividends, and patronage
dividends that are not subject to information reporting are also
not subject to backup withholding. For details, see sections
6041, 6041(a), 6042, 6044, 6045, 6049, 6050A and 6050N, and their
regulations.
Privacy Act Notice.--Section 6109 requires most recipients of
dividend, interest, or other payments to give their correct
Taxpayer Identification Numbers to payers who must report the
payments to IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of tax returns. The IRS
may also provide this information to the Department of Justice
for civil and criminal litigation and to cities, states and the
District of Columbia to carry out their tax laws. Payers must be
given the numbers whether or not recipients are required to file
tax returns. Payers must generally withhold 31% of taxable
interest, dividend and certain other payments to a payee who does
not furnish a Taxpayer Identification Number to a payer. Certain
penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification
Number.--If you fail to furnish your Taxpayer Identification
Number to a payer, you are subject to a penalty of $50 for each
such failure unless your failure is due to reasonable cause and
not to willful neglect.
(2) Civil Penalty for False Information With Respect to
Withholding.--If you make a false statement with no reasonable
basis which results in no imposition of backup withholding, you
are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.--Willfully
falsifying certifications or affirmations may subject you to
criminal penalties including fines and/or imprisonment.
(4) Misuse of Taxpayer Identification Numbers.--If the
requested discloses or uses Taxpayer Identification Numbers in
violation of federal law, the requester may be subject to civil
and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE
INTERNAL REVENUE SERVICE.
14
Exhibit 99.2
FORM OF NOTICE OF GUARANTEED DELIVERY FOR
PURINA MILLS, INC.
This form or one substantially equivalent hereto must
be used to accept the Exchange Offer of Purina Mills, Inc. ("PMI"
or the "Company") made pursuant to the Prospectus, dated
__________, 1998 (the "Prospectus"), and the enclosed Letter of
Transmittal (the "Letter of Transmittal") if certificates for Old
Notes are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach PMI prior to 5:00
p.m., New York City time, on the Expiration Date of the Exchange
Offer. Such form may be delivered or transmitted by facsimile
transmission, mail or hand delivery to The First National Bank of
Chicago (the "Exchange Agent") as set forth below. In addition,
in order to utilize the guaranteed delivery procedure to tender
Old Notes pursuant to the Exchange Offer, a completed, signed and
dated Letter of Transmittal (or facsimile thereof) must also be
received by the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. Capitalized terms not defined
herein are defined in the Prospectus.
Delivery to: The First National Bank of Chicago, Exchange Agent
By Hand
Facsimile or Overnight
By Mail: Transmissions: Delivery:
(Registered or (Eligible The First National
Certified Institutions Bank of Chicago
Mail Recommended) Only) c/o First Chicago
The First National (212) 240-8938 Trust Company
Bank of Chicago of New York
c/o First Chicago 14 Wall Street
Trust Company 8th Floor,
of New York To Confirm Window 2
14 Wall Street by Telephone New York,
8th Floor, Window 2 or for New York 10005
New York, Information Call:
New York 10005 (212) 240-8801
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID
DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the
Prospectus and the accompanying Letter of Transmittal, the
undersigned hereby tenders to PMI the principal amount of Old
Notes set forth below, pursuant to the guaranteed delivery
procedure described in "The Exchange Offer-Guaranteed Delivery
Procedures" section of the Prospectus.
<PAGE>
Principal Amount of
Old Notes Tendered: Name(s) of Record Holders(s):
$_____________________________
______________________________
Certificate Nos.
(if available): ______________________________
Address(es):
______________________________
______________________________
______________________________
______________________________
If Old Notes will be delivered Area Code and Telephone
by book-entry transfer to Number(s):
The Depository Trust Company,
provide account number.
______________________________
Signature(s):
Account Number________________
______________________________
______________________________
THE ACCOMPANYING GUARANTEE MUST BE COMPLETED.
2
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm that is a member firm of a
registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or
trust company having an office correspondent in the United States
or any "eligible guarantor" institution within the meaning of
Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended,
hereby (a) guarantees to deliver to the Exchange Agent, at one
its address set forth above, the certificates representing all
tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, and any other documents required
by the Letter of Transmittal within three New York Stock Exchange
trading days after the date of execution of this Notice of
Guaranteed Delivery.
Name of
Firm:_________________________ ______________________________
(Authorized Signature)
Address:______________________
______________________________
Area Code and
Telephone Number:_____________
Title:________________________
Name:_________________________
Date:_________________________
Exhibit 99.3
FORM OF LETTER
PURINA MILLS, INC.
Offer to Exchange
9% Senior Subordinated Notes due 2010,
which have been registered under the Securities Act of 1933,
as amended,
for any and all Outstanding
9% Senior Subordinated Notes due 2010
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Upon and subject to the terms and conditions set forth
in the Prospectus, dated ______ __, 1998 (the "Prospectus"), and
the enclosed Letter of Transmittal (the "Letter of Transmittal"),
an offer to exchange (the "Exchange Offer") the registered 9%
Senior Subordinated Notes due 2010 (the "New Notes") for any and
all outstanding 9% Senior Subordinated Notes due 2010 (the "Old
Notes") (CUSIP No. 746275 AA 4) is being made pursuant to such
Prospectus. The Exchange Offer is being made in order to satisfy
certain obligations of Purina Mills, Inc., a Delaware corporation
("PMI" or the "Company"), contained in the Registration Rights
Agreement, dated as of March 12, 1998, between PMI and Credit
Suisse First Boston Corporation and Chase Securities Inc. (as the
Initial Purchasers).
We are requesting that you contact your clients for
whom you hold Old Notes regarding the Exchange Offer. For your
information and for forwarding to your clients for whom you hold
Old Notes registered in your name or in the name of your nominee,
or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated _________ __, 1998;
2. The Letter of Transmittal for your use and for the
information of your clients;
3. A Notice of Guaranteed Delivery to be used to accept
the Exchange Offer if certificates for Old Notes are not
immediately available or time will not permit all required
documents to reach the Exchange Agent prior to the Expiration
Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis; and
4. A form of letter which may be sent to your clients
for whose account you hold Old Notes registered in your name or
the name of your nominee, with space provided for obtaining such
clients' instructions with regard to the Exchange Offer.
Your prompt action is requested. The Exchange Offer
will expire at 5:00 p.m., New York City time, on __________ __,
1998 (the "Expiration Date") (30 calendar days following the
commencement of the Exchange Offer), unless extended by PMI. Old
Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time before the Expiration Date.
<PAGE>
To participate in the Exchange Offer, a duly executed
and properly completed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other
required documents, should be sent to the Exchange Agent and
certificates representing the Old Notes should be delivered to
the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and the Prospectus.
If holders of Old Notes wish to tender, but it is
impracticable for them to forward their certificates for Old
Notes prior to the expiration of the Exchange Offer or to comply
with the book-entry transfer procedures on a timely basis, a
tender may be effected by following the guaranteed delivery
procedures described in the Prospectus under "The Exchange
Offer-Guaranteed Delivery Procedures."
Additional copies of the enclosed material may be
obtained from the Exchange Agent, The First National Bank of
Chicago, 14 Wall Street, New York, New York 10005, Telephone:
(212) 240-8801, Facsimile: (212) 240-8938.
PURINA MILLS, INC.
Exhibit 99.4
FORM OF LETTER
PURINA MILLS, INC.
Offer to Exchange
9% Senior Subordinated Notes due 2010,
which have been registered under the Securities Act of 1933,
as amended,
for any and all Outstanding
9% Senior Subordinated Notes due 2010
To Our Clients:
Enclosed for your consideration is a Prospectus of
Purina Mills, Inc., a Delaware corporation ("PMI" or the
"Company"), dated ______ __, 1998 (the "Prospectus"), and the
enclosed Letter of Transmittal (the "Letter of Transmittal")
relating to the offer to exchange (the "Exchange Offer") of
registered 9% Senior Subordinated Notes due 2010 (the "New
Notes") for any and all outstanding 9% Senior Subordinated Notes
due 2010 (the "Old Notes") (CUSIP No. 746275 AA 4), upon the
terms and subject to the conditions described in the Prospectus.
The Exchange Offer is being made in order to satisfy certain
obligations of PMI contained in the Registration Rights
Agreement, dated as of March 12, 1998, between PMI and Credit
Suisse First Boston Corporation and Chase Securities Inc. (as the
Initial Purchasers).
This material is being forwarded to you as the
beneficial owner of the Old Notes carried by us in your account
but not registered in your name. A TENDER OF SUCH OLD NOTES MAY
ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS.
Accordingly, we request instructions as to whether you
wish us to tender on your behalf the Old Notes held by us for
your account, pursuant to the terms and conditions set forth in
the enclosed Prospectus and Letter of Transmittal. We also
request that you confirm that we may, on your behalf, make the
representations and warranties contained in the Letter of
Transmittal.
Your instructions should be forwarded to us as
promptly as possible in order to permit us to tender the Old
Notes on your behalf in accordance with the provisions of the
Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON __________ __, 1998 (THE "EXPIRATION DATE")
(30 CALENDAR DAYS FOLLOWING THE COMMENCEMENT OF THE EXCHANGE
OFFER), UNLESS EXTENDED BY PMI. ANY OLD NOTES TENDERED PURSUANT
TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE 5:00
P.M., NEW YORK CITY TIME ON THE EXPIRATION DATE.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions
set forth in the Prospectus in the section captioned "The
Exchange Offer-Conditions."
3. Any transfer taxes incident to the transfer of Old
Notes from the holder to PMI will be paid by PMI, except as
otherwise provided in the Instructions in the Letter of
Transmittal.
<PAGE>
4. The Exchange Offer expires at 5:00 p.m., New York
City time, on the Expiration Date unless extended by PMI.
If you wish to have us tender your Old Notes, please
so instruct us by completing, executing and returning to us the
instruction form set forth below. The Letter of Transmittal is
furnished to you for information only and may not be used
directly by you to tender Old Notes.
Instructions with Respect to the Exchange Offer
The undersigned acknowledge(s) receipt of your letter
enclosing the Prospectus, dated ________ __, 1998, of Purina
Mills, Inc., a Delaware corporation, and the related specimen
Letter of Transmittal.
- -----------------------------------------------------------------
This will instruct you to tender the number of Old Notes
indicated below held by you for the account of the undersigned,
pursuant to the terms and conditions set forth in the Prospectus
and the related Letter of Transmittal. (Check one).
Box 1 [ ] Please tender my Old Notes held by you for my
account. If I do not wish to tender all of the Old
Notes held by you for my account, I have identified on
a signed schedule attached hereto the number of Old
Notes that I do not wish tendered.
Box 2 [ ] Please do not tender any Old Notes held by you for
my account.
- -----------------------------------------------------------------
Date_____________, 1998 ___________________________________
Signature(s)
___________________________________
___________________________________
Please print name(s) here
___________________________________
Area Code and Telephone No.
UNLESS A SPECIFIC CONTRARY INSTRUCTION IS GIVEN IN THE
SPACE PROVIDED, YOUR SIGNATURE(S) HEREON SHALL CONSTITUTE AN
INSTRUCTION TO US TO TENDER ALL OLD NOTES.
2
